INDIRECT TAXATION

Course Code: 22MBAFM406

Dr.UMA K Assistant Professor GSSSIETW, Mysuru
Module-1 (6 hours)
Introduction to Goods and Services Tax (GST): Basic concepts of GST, Features, Taxes
subsumed and not subsumed in GST, Need for GST in India, Benefits and drawbacks of GST,
Dual GST Model-significance, Rates of GST, Structure of GST-CGST Act 2017, SGST Act
2017, UTGST Act 2017 & IGST Act 2017, GST Council-Structure, Recommendations and
functions, Goods and Services Tax Network (GSTN)-Features, functions and services, Goods
and services exempted from GST (Theory)
Module-2 (6 hours)
Registration and Filing of returns: GST Registration-Meaning, Benefits, Types of Registration
& Provisions: Persons liable and not liable for Registration, Compulsory Registration, Voluntary
Registration, Deemed Registration, Suo Motu Registration, Procedure for Registration, GSTIN
(Theory), Computation of aggregate turnover (Simple problems). Returns under GST-Benefits,
features, Modes of filing returns, Furnishing of Returns, First Return, Annual return and Final
return (Theory). Returns under GST-Benefits, features, Modes of filing returns, Furnishing of
Returns, First Return, Annual return and Final return (Theory).
Module-3 (8 hours)
Supply, Levy and Collection of Tax: Supply-Meaning of Goods and Services, Deemed supply,
Classification of supply-Inward & outward supply, One time & Continuous supply, supply on
the basis of taxability & geographical location, Composite and Mixed Supplies, Scope of
supply (Theory) Determination of tax liability on various types of supply (Simple problems)
Levy and Collection, Composition scheme in GST- Eligibility criteria, Conditions for adoption,
Rate of GST of the Composition Levy, (Simple problems on calculation of value of taxable
supply and GST Levy). (Theory and Problems).
Module-4 (8 hours)
Time, Place and Value of Supply -Time of Supply-Key concepts, Determination of time of
supply of goods and services (Simple problems including Change in Rate of Tax in respect of
Supply of Goods or Services), Place of Supply – importance and types. Simple Problems on
identification of Place of supply. Value of Supply. (Simple problems on treatment of discount
in transaction value, Money exchange services, Air travel agent, based on Cost. Value of supply
in case of lottery, betting, gambling and Horse racing) Input tax credit-Meaning, Eligibility for
availing ITC, Conditions to be satisfied for availing ITC. Determination of ITC admissible on
goods and services (Simple problems)
Module-5 (4 hours)
Export-Import Procedure for Customs Act-important definitions, Types of goods, import Export
Route, Types of Cess under Customs, Introduction to Baggage and General Free Allowance.
Provisional Assessment of Duty, Due Dates for Payment of Duty, Penalties under Customs,
Seizure of Goods, Confiscation of Goods. (Theory).
Module-6 (8 hours)
Valuation of Customs Duty: Concept, Meaning of Customs Duty, Circumstances of Levy of
Customs Duties and Types of Duties and Exemption from Customs Duty. Valuation under
customs: Valuation of Imported Goods and Valuation of Export Goods.. (Problems on Valuation
of Imported Goods- calculation of FOB, CIF, AV, BCD, SWS, GST Concession Cess, and
IGST) (Theory and Problems).

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 INDIRECT TAXATION
Course Code: 22MBAFM406
Dr.UMA K Assistant Professor GSSSIETW, Mysuru

Module-1 (6 hours)
Introduction to Goods and Services Tax (GST): Basic concepts of GST, Features, Taxes
subsumed and not subsumed in GST, Need for GST in India, Benefits and drawbacks of GST,
Dual GST Model-significance, Rates of GST, Structure of GST-CGST Act 2017, SGST Act
2017, UTGST Act 2017 & IGST Act 2017, GST Council-Structure, Recommendations and
functions, Goods and Services Tax Network (GSTN)-Features, functions and services, Goods
and services exempted from GST (Theory)
Module-2

Module-1
1. Introduction to Goods and Services Tax (GST)
1. Basic concepts of GST
2. Features
3. Taxes subsumed and not subsumed in GST,
4. Need for GST in India,
5. Benefits and drawbacks of GST
6. Dual GST Model-significance
7. Rates of GST
8.Structure of GST-CGST Act 2017, SGST Act 2017, UTGST Act 2017 & IGST Act 2017
9. GST Council-Structure-Recommendations and functions
10. Goods and Services Tax Network (GSTN)-Features, functions and services
11. Goods and services exempted from GST (Theory)

1. Basic Concepts of GST

Evaluation of GST in India

1. Pre-GST Tax Structure (Before 2000)
 India followed a multi-tier indirect tax system.
 Taxes were levied at:
o Central level – Excise Duty, Service Tax, CVD, SAD
o State level – VAT, CST, Entry Tax, Octroi, Luxury Tax, Entertainment Tax
 These taxes led to:
o Cascading effect (tax on tax)
o Complex compliance
o Economic distortion
Example: A product taxed with Excise at manufacture and VAT on sale — no input credit
between the two.
2. Need for Reform
 Global trend moving towards Value-Added Tax (VAT) and GST models.
 Indian businesses demanded:
o Simplified tax regime
o Uniformity across states
o Seamless input credit mechanism
 Economic reforms in 1991 further triggered tax reform discussions.
3. Initial Steps – VAT Implementation (2005)

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 INDIRECT TAXATION
Course Code: 22MBAFM406
Dr.UMA K Assistant Professor GSSSIETW, Mysuru
 Value Added Tax (VAT) was implemented at the State level.
 Replaced Sales Tax in most states.
 However, CST, Entry Tax, and Central Excise still remained.
 VAT was a precursor to GST, introducing the idea of tax on value addition.
Limitation: VAT credit was not available across states or between central and state taxes.
4. Proposal for GST (2006–2009)
 2006 Budget: Then FM P. Chidambaram officially proposed a unified GST to be
introduced by April 1, 2010.
 Empowered Committee of State Finance Ministers was set up to:
o Develop framework
o Align central and state systems
o Address revenue-sharing concerns
5. Constitutional Amendment and Delays (2010–2015)
 Political disagreements over:
o Compensation to states for revenue loss
o Dual control between Centre and States
o Inclusion of petroleum, alcohol, and electricity
 Multiple discussions between Centre and States led to:
o The Constitution (122nd Amendment) Bill in 2014 in Lok Sabha
o Passed as 101st Constitutional Amendment Act in 2016
6. Formation of GST Council (2016)
 As per Article 279A, the GST Council was constituted.
 Headed by Union Finance Minister, includes all State FMs.
 Responsible for:
o Deciding tax rates
o Setting exemptions
o Designing return filing mechanisms
o Managing disputes
Key Role: Collaborative federalism ensured consensus across political lines.
7. Enactment of GST Laws (2017)
 Key Acts Passed:
o CGST Act, 2017
o SGST Act, 2017 (by all States)
o IGST Act, 2017
o UTGST Act, 2017
 GST launched on July 1, 2017, replacing 17 taxes and 23 cesses.
Milestone: Called “One Nation, One Tax” – biggest tax reform since independence.
8. Key Features Introduced
 Destination-based taxation
 Input Tax Credit (ITC) across the supply chain
 E-filing and e-payment through GSTN
 Four-tier tax slab: 5%, 12%, 18%, 28%
 Composition Scheme for small businesses
9. Post-GST Reforms & Updates (2018–2023)
 2018: Rationalization of GST rates – 28% slab limited to luxury and sin goods.
 2019: GST rate on electric vehicles reduced to 5%.

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 INDIRECT TAXATION
Course Code: 22MBAFM406
Dr.UMA K Assistant Professor GSSSIETW, Mysuru
 2020–2021: Introduction of e-invoicing, QR code, and GSTR-2B.
 2022: GST Appellate Tribunal proposal; reforms in inverted duty structure.
 2023: Further digitalization with biometric Aadhar authentication in high-risk cases.
10. Economic and Business Impact
Positive:
 Improved tax compliance
 Boosted logistics and warehousing efficiency
 Enhanced formalization of MSME sector
 Strengthened digital governance
Challenges:
 Complex return filing (GSTR-1, 3B, annual returns)
 Frequent rate changes causing uncertainty
 Delay in refunds, especially in exports
 High compliance cost for small businesses
11. Industry Examples
 Automobile: Earlier taxes (Excise, VAT, CST) replaced with 28% GST + cess.
 E-commerce: TCS provision and centralized registration for Amazon, Flipkart.
 Real Estate: 5% GST without ITC for affordable housing.
 Logistics: Free movement across India without border checks (removal of entry tax).
12. Future Outlook
 Possible inclusion of:
o Petroleum products
o Electricity
o Alcohol (eventually)
 Simplified return system (single monthly return)
 Expansion of e-invoicing to all businesses
 AI-enabled fraud detection & audit mechanisms
Year Event
2000 VAT proposal initiated
2005 State VAT introduced

2006 GST officially proposed

2014 GST Bill introduced

2016 Constitution Amendment passed

2017 GST launched (1 July 2017)

2018–2023 Reforms, e-invoicing, digital upgrades

1. Definition of GST
 GST (Goods and Services Tax) is a comprehensive, multi-stage, and destination-
based indirect tax levied on the supply of goods and services.

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 INDIRECT TAXATION
Course Code: 22MBAFM406
Dr.UMA K Assistant Professor GSSSIETW, Mysuru
 It replaces multiple indirect taxes (like VAT, Excise, Service Tax) previously levied by
the central and state governments.
Key Term: Indirect tax – the burden is passed on to the end consumer (unlike direct tax like
income tax).
2. Comprehensive Tax
 GST combines various central and state taxes into a single tax structure.
 Applicable on:
o Manufacture
o Sale
o Provision of services
 Uniform structure across India enhances tax transparency and compliance.
Example: A mobile phone manufacturer earlier paid Excise + VAT; now pays GST at a unified
rate.
3. Multi-Stage Tax
 GST is imposed at every stage of the supply chain, i.e.,
o Manufacturer → Wholesaler → Distributor → Retailer → Consumer.
 However, credit is given for tax paid at previous stages via the Input Tax Credit
(ITC) mechanism.
ITC ensures no tax is paid on tax — preventing cascading effect.
4. Destination-Based Tax
 Tax revenue is collected by the state where the goods/services are consumed, not
where they are produced.
 Encourages fair tax distribution among consuming states.
Example: If a product is manufactured in Maharashtra and sold to a consumer in Karnataka,
GST is collected by Karnataka.
5. Value Addition at Each Stage
 GST is levied only on the value added at each stage of production or distribution.
 Value Addition = Sale Price – Purchase Price.
This promotes transparency, cost efficiency, and reduces inflationary impact.
6. One Nation, One Tax
 GST enforces a single unified tax rate across the country for specific goods/services.
 Replaces a complex web of state-specific laws and taxes with a uniform law governed
by the CGST, SGST, IGST Acts.
Industry Example: FMCG Sector – Hindustan Unilever Ltd. (HUL)
 Pre-GST: HUL paid multiple indirect taxes (Excise, VAT, CST) on goods like shampoo
or soap at various stages.
 Post-GST: A shampoo pack manufactured in Uttarakhand and sold in Tamil Nadu
attracts IGST, which is creditable to the buying state.
 HUL now benefits from:
o Seamless movement of goods across states
o Reduced logistics cost
o Input credit on packaging, advertising, distribution
This has made FMCG pricing more competitive and transparent, especially for rural markets.
2. Features of GST

1. Uniform Tax System across India

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 INDIRECT TAXATION
Course Code: 22MBAFM406
Dr.UMA K Assistant Professor GSSSIETW, Mysuru
 GST ensures a standardized tax rate structure for goods and services across all states
and union territories.
 Eliminates state-wide variations in VAT, entry tax, and other levies.
 Promotes free movement of goods without border checks, encouraging a common
national market.
Impact: Businesses no longer need to set up depots in every state to avoid CST or entry tax,
reducing operational complexity.
2. Replacement of Multiple Indirect Taxes
 GST has subsumed various central and state-level taxes like:
o Central: Excise Duty, Service Tax, CVD, SAD
o State: VAT, CST, Entry Tax, Luxury Tax, Entertainment Tax
 This replacement has simplified the tax system, reduced the burden of multiple returns,
and minimized tax evasion.
Before GST, businesses had to deal with over 15 different indirect taxes, each with different
rules.
3. Seamless Input Tax Credit (ITC)
 GST allows businesses to claim credit for taxes paid on inputs (goods/services used in
production or supply).
 ITC reduces the overall tax liability, preventing tax-on-tax (cascading effect).
 Input credit is available throughout the supply chain, from raw materials to final sale.
This improves profit margins, encourages compliance, and ensures transparency.
4. Online Filing and Compliance
 GST is a fully digital system, managed by the Goods and Services Tax Network
(GSTN).
 Key online services:
o GST Registration
o Return filing (GSTR-1, GSTR-3B, etc.)
o Tax payment
o Refund applications
o ITC reconciliation
It promotes real-time data flow between supplier and buyer, reducing tax fraud and manual
errors.
5. Dual Taxation Structure (Central + State)
 GST in India follows a dual model:
o CGST – Central Goods and Services Tax
o SGST – State Goods and Services Tax
o IGST – Integrated GST for inter-state supplies
 Collected simultaneously by Centre and State on intra-state transactions.
Ensures equitable revenue distribution and cooperative federalism.
6. Threshold Limits for Registration
 GST provides exemptions for small businesses:
o ₹40 lakhs for goods suppliers (₹20 lakhs in special category states)
o ₹20 lakhs for service providers
 Composition Scheme available for businesses with turnover up to ₹1.5 crore (goods) and
₹50 lakhs (services).

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 INDIRECT TAXATION
Course Code: 22MBAFM406
Dr.UMA K Assistant Professor GSSSIETW, Mysuru
Promotes ease of doing business for MSMEs and reduces compliance burden for micro-
enterprises.
Industry Example: E-Commerce Sector – Amazon & Flipkart
 Amazon India and Flipkart operate across all Indian states and UTs.
 Under GST:
o They must collect Tax Collected at Source (TCS) on behalf of sellers.
o File returns per state where they operate warehouses.
o Use centralized GSTN portal to register, pay, and file returns.
o Ensure vendors comply with invoice-matching for ITC eligibility.
E-commerce companies benefit from uniform tax laws, but face increased compliance
responsibilities under GST.
3. Taxes Subsumed and Not Subsumed in GST (0.5 Hour)

1. Introduction
 Before GST was implemented (from July 1, 2017), India had a complicated structure of
indirect taxes levied separately by the Central and State Governments.
 GST replaced multiple indirect taxes with a single, unified tax system, thereby
simplifying the tax structure and eliminating the cascading effect.
2. Central Taxes Subsumed under GST
The following Central Government taxes were merged into GST:
a) Central Excise Duty
 Earlier levied on the manufacture of goods.
 Subsumed into Central Goods and Services Tax (CGST).
b) Service Tax
 Levied on provision of services.
 Now taxed under GST with input credit available on goods and services.
c) Additional Customs Duties (CVD and SAD)
 Countervailing Duty (CVD) and Special Additional Duty (SAD) on imports are now
included in IGST.
Impact: Reduced tax burden on imported goods and simplified customs valuation.
3. State Taxes Subsumed under GST
The following State Government taxes were also subsumed into GST:
a) Value Added Tax (VAT)
 Earlier levied by states on intra-state sales of goods.
 Now replaced by SGST + CGST.
b) Central Sales Tax (CST)
 Levied on inter-state sales of goods.
 Replaced by IGST.
c) Entertainment Tax
 On movie tickets, events, amusement parks, etc.
 Except for tax levied by local bodies (e.g., municipal corporations).
d) Luxury Tax
 Tax on hotels, resorts, spas with luxury services.
 Subsumed into GST under appropriate slab (mostly 18% or 28%).
e) Entry Tax / Octroi
 Charged for entry of goods into a local area.

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 INDIRECT TAXATION
Course Code: 22MBAFM406
Dr.UMA K Assistant Professor GSSSIETW, Mysuru
 Removed to promote free movement of goods across India.
f) Purchase Tax
 Levied by some states on specific commodities like sugarcane or cotton.
 Now included in GST, improving input credit utilization.
4. Taxes Not Subsumed under GST
Certain taxes continue to exist outside the GST framework due to constitutional or political
reasons.
a) Stamp Duty
 Charged on property registration, agreements, legal documents.
 Still collected by State Governments under the Indian Stamp Act.
b) Excise Duty on Alcohol for Human Consumption
 Excluded from GST by constitutional provision.
 States continue to levy their own taxes on liquor.
c) Excise on Petroleum Products (temporarily excluded)
 Petrol, diesel, ATF, natural gas, and crude oil are currently outside GST.
 Still attract central excise and state VAT.
 May be included in GST in the future.
d) Vehicle Tax (Road Tax / Registration Charges)
 Collected by RTOs under the Motor Vehicles Act.
 Based on the type, cost, and capacity of the vehicle.
e) Electricity Duty
 Charged on consumption of electricity.
 Exempted from GST; collected by State Electricity Boards (SEBs).
Industry Example: Automobile Manufacturing Sector
Before GST:
 A car manufactured by Tata Motors attracted:
o Excise Duty at factory gate
o VAT/CST during inter/intra-state sale
o Entry Tax in various states
 Input tax credit was not available across taxes, increasing the final cost.
After GST:
 All major taxes (excise, VAT, CST, entry tax) were merged into GST, levied at 28%
slab (plus cess for luxury cars).
 Full input tax credit available, making the supply chain more efficient.
 Result: Lower compliance cost and tax clarity for auto companies.
Summary
Tax
Subsumed in GST Not Subsumed in GST
Category
Central Excise on alcohol, petroleum
Excise Duty, Service Tax, CVD, SAD
Taxes products
VAT, CST, Luxury Tax, Entry Tax, Stamp Duty, Electricity Duty,
State Taxes
Entertainment Tax Vehicle Tax

4. Need for GST in India

1. Remove Cascading Effect of Taxes (Tax on Tax)

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 INDIRECT TAXATION
Course Code: 22MBAFM406
Dr.UMA K Assistant Professor GSSSIETW, Mysuru
 Under the pre-GST system, no seamless input tax credit was available across different
taxes.
 Example:
o A manufacturer paid Excise Duty and then charged VAT on the selling price that
included the excise — creating a tax on tax.
 GST allows input tax credit across the entire supply chain (for both goods and services),
thereby removing the cascading effect.
Impact: Reduces cost of production, makes pricing more competitive.
2. Create a Unified National Market
 Earlier, state-level taxes (like VAT, CST, Entry Tax) created barriers to the interstate
movement of goods.
 GST has replaced multiple state and central taxes with a single uniform tax, allowing
free movement of goods and services across India.
 Encourages pan-India business expansion, reduces warehousing and logistics costs.
Business Impact: Firms no longer need to set up warehouses in every state to save tax.
3. Improve Tax Compliance and Collection
 GST is technology-driven with mandatory online filing, payment, return, and invoice
matching.
 Each transaction is tracked digitally, reducing the chances of tax evasion.
 It has widened the tax base by bringing more MSMEs and unorganized players into the
formal tax system.
Government Impact: Leads to higher revenue collection and improved transparency in the tax
system.
4. Boost the “Make in India” Initiative
 GST eliminates hidden taxes, makes Indian manufacturing more cost-efficient and
globally competitive.
 Helps reduce tax distortions and logistics bottlenecks, thereby encouraging investment
in Indian industries.
 Promotes domestic value addition and reduces dependence on imports.
Encourages global firms to set up production in India due to uniform and efficient tax systems.
5. Increase Ease of Doing Business
 GST is centrally administered through the GSTN portal, which simplifies:
o Registration
o Tax payment
o Return filing
o Refund processing
 Ensures predictability and standardization, improving investor confidence.
 India jumped significantly in the World Bank's Ease of Doing Business rankings post-
GST introduction.
Particularly beneficial for startups, MSMEs, and service providers operating in multiple
states.
Industry Example: Maruti Suzuki India Ltd.
 Pre-GST:
o Maruti Suzuki faced multiple layers of taxes, state-wise forms, and compliance
hurdles.
o It had to maintain state-specific warehouses to save on CST and entry taxes.

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 INDIRECT TAXATION
Course Code: 22MBAFM406
Dr.UMA K Assistant Professor GSSSIETW, Mysuru
 Post-GST:
o The company consolidated its logistics and warehousing, reducing operational
costs.
o No more CST or entry tax, and a uniform tax rate applies across India.
o Enabled faster inter-state vehicle movement, especially for sales to tier-II and
tier-III cities.
Result: Maruti improved delivery time, reduced costs, and enhanced supply chain efficiency.
Summary
Need Impact of GST
Cascading effect removal Seamless input tax credit; lower product cost
Unified market Eliminated interstate tax barriers; improved logistics
Better tax compliance Digital returns, invoice matching, wider tax base
Support for Make in India Competitive pricing, domestic manufacturing boost
Ease of doing business Simpler compliance, uniform procedures across states
5. Benefits and Drawbacks of GST (0.5 Hour)

A. Benefits of GST
1. Simplified Tax Structure
 GST has replaced 17 indirect taxes and 23 cesses with a single tax.
 There is now a clear distinction between CGST, SGST, and IGST.
 Common national-level rules reduce confusion among businesses operating in multiple
states.
Managerial Advantage: Reduces administrative burden and legal complexity.
2. Elimination of Cascading Effect (Tax on Tax)
 Pre-GST system involved taxes being levied on top of other taxes without credit (Excise
+ VAT).
 GST provides Input Tax Credit (ITC) throughout the supply chain, making the system
tax-neutral.
Businesses now pay GST only on the value addition, not on already-taxed input cost.
3. Transparency and Automation
 Entire system is digitized through the GST Network (GSTN).
 Invoice-matching, e-invoicing, auto-generated returns ensure greater auditability and
reduce tax evasion.
Government can track transactions at every level — creating a more accountable tax
ecosystem.
4. Enhanced Logistics and Supply Chain Efficiency
 Removal of interstate checkpoints (entry tax/octroi) has reduced transportation time
and fuel usage.
 Companies can now consolidate warehouses and optimize inventory levels.
Example: FMCG firms like Dabur and HUL reduced distribution costs and delivery timelines
post-GST.
5. Better Tax Compliance and Accountability
 Automated return filing and payment systems reduce manual errors.
 GST expands the formal economy, making it harder for businesses to evade taxes.

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 INDIRECT TAXATION
Course Code: 22MBAFM406
Dr.UMA K Assistant Professor GSSSIETW, Mysuru
 Businesses with digital compliance records have better access to bank credit.
Encourages small businesses to register and enter the organized sector, improving overall tax
collection.
B. Drawbacks of GST
1. Complex Return System for Small Businesses
 Small traders and MSMEs often find the multi-form return filing system (GSTR-1, 3B,
annual) overwhelming.
 Monthly and quarterly returns require accounting support, increasing compliance costs.
Challenge: Many unregistered or composition dealers need training to adapt.
2. Initial Transition Issues
 At launch in 2017, there was confusion over tax rates, classifications, and registration
requirements.
 Businesses had difficulty integrating new systems and aligning with digital workflows.
Many SMEs faced working capital blockage due to delayed refunds and confusion.
3. T Glitches on GSTN Portal
 In the early stages, the GSTN portal faced:
o Login and filing errors
o System crashes during peak dates
o Errors in invoice matching
 Though improvements have been made, technical glitches still persist occasionally.
This discouraged early adopters and led to compliance delays.
4. Sector-Specific Issues
 Certain industries were hit harder than others due to the unique nature of their supply
chain:
o Real Estate: Input credit disallowed on residential properties post-2019.
o Textiles: Predominantly unorganized; small weavers and artisans lacked
awareness and digital readiness.
o Restaurants: Frequent rate changes and removal of input credit.
Example: In the textile industry, many units in Surat and Tirupur initially struggled as they
were not GST-compliant or lacked the infrastructure to adapt quickly.
Summary
Benefits Drawbacks
Simplified tax structure Complex returns for small businesses
Removal of cascading effect Transition issues in early stages
Transparency through automation IT portal glitches
Logistics and supply chain efficiency Sector-specific compliance challenges
Improved compliance and formalization Higher compliance cost for micro-enterprises
Industry Example: Textile Sector
 Pre-GST: Largely informal, with many small players unregistered and outside the tax
net.
 Post-GST:
o Mandatory registration disrupted the supply chain.
o Lack of digital literacy delayed compliance.
o Input credit not claimed properly due to poor invoice systems.

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 INDIRECT TAXATION
Course Code: 22MBAFM406
Dr.UMA K Assistant Professor GSSSIETW, Mysuru
Over time, larger firms adapted, but small and rural players faced long-lasting hurdles.
6. Dual GST Model – Significance

1. Introduction to Dual GST Model

 India follows a federal structure—with both the Centre and States empowered to levy
and collect taxes.
 To respect this structure, the GST system in India was designed as a Dual GST Model—
a globally unique and cooperative framework.
Key Objective: To ensure revenue autonomy for both levels of government while maintaining
tax uniformity across the country.
2. Components of the Dual GST Model
a) CGST – Central Goods and Services Tax
 Levied and collected by the Central Government on intra-state (within the same state)
supply of goods and services.
 Example: If a retailer in Karnataka sells to a buyer in Karnataka, CGST applies.
b) SGST – State Goods and Services Tax
 Levied and collected by the State Government on the same intra-state supply.
 Runs parallel to CGST on each intra-state transaction.
 Example: For the same sale above, Karnataka Government collects SGST.
Both CGST and SGST are charged simultaneously on the same transaction value (e.g., 9% +
9% = 18%).
c) IGST – Integrated Goods and Services Tax
 Applicable on inter-state transactions or imports.
 Collected by the Central Government, then shared with the destination state (where
the goods/services are consumed).
 Example: A seller in Karnataka shipping goods to Maharashtra will charge IGST.
This ensures a destination-based taxation approach—benefiting the state of consumption
rather than production.
3. Significance of Dual GST Model
a) Federal Balance
 Allows both the Centre and States to retain fiscal powers.
 Encourages cooperative federalism through the GST Council, where decisions are
taken jointly.
b) Transparency in Revenue Sharing
 As IGST is distributed between Centre and consuming state, revenue flows are
traceable and systematic.
 Ensures that taxes follow consumption, making it fairer.
c) Smooth Inter-State Trade
 By replacing CST with IGST, the tax system allows for uninterrupted inter-state
supply.
 No need for entry taxes or form filings like before GST (e.g., Form C, Form F).
d) Uniformity across India
 Same tax rate applies to goods/services across India, whether in CGST + SGST or IGST
form.
 Avoids rate shopping or tax arbitrage between states.
e) Credit Flow and Seamless ITC

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 INDIRECT TAXATION
Course Code: 22MBAFM406
Dr.UMA K Assistant Professor GSSSIETW, Mysuru
 Input Tax Credit (ITC) can be claimed across CGST, SGST, and IGST according to
specific rules.
 Businesses with pan-India operations can offset IGST liability with CGST/SGST
input.
Industry Example: Samsung India Electronics Ltd.
 Samsung has a manufacturing plant in Karnataka and sells air conditioners to a
distributor in Maharashtra.
 Since this is an inter-state transaction, it attracts IGST (say, 18%).
 The Central Government collects the IGST.
 The IGST revenue is later apportioned to Maharashtra, as it is the state of
consumption.
The Dual GST Model ensures Maharashtra gets the tax benefit, even though the goods were
manufactured in Karnataka.
Summary
Component Applicability Collected By Used In
CGST Intra-state supply Central Government Alongside SGST
SGST Intra-state supply State Government Alongside CGST
Inter-state supply & Central Government (shared Cross-border or import
IGST
imports with State) transactions

7. Rates of GST

1. Introduction to GST Rate Structure

 India follows a multi-tier GST rate system to balance:
o Revenue needs of the government
o Progressive taxation, where essentials are taxed less
o Flexibility for the government to adjust based on economic needs
o But also adds a layer of complexity for businesses, especially in classification
o Impact on consumers
o Socio-economic considerations
 GST Council has classified goods and services into four major slabs plus categories for
exempt and special rates.
2. Four Standard GST Slabs
GST
Description Examples
Rate
Essential and basic goods and Edible oils, sugar, life-saving drugs, economy-
5%
services class rail travel
Standard needs (processed or
12% Processed food, mobile phones, toothpaste
value-added)
Most goods and services (default
18% Soaps, shampoos, footwear, electronics
rate)
28% Luxury items and sin goods Cars, tobacco, air-conditioners, white goods

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These slabs are decided based on the nature of consumption (necessity vs. luxury) and impact
on revenue.
3. Exempted and Zero-Rated Items
a) Exempted Goods/Services (0% GST)
 No GST is levied.
 Input tax credit cannot be claimed.
 Examples:
o Fresh fruits and vegetables
o Healthcare and education services
o Milk, curd, natural honey
b) Zero-Rated Supplies
 GST is levied at 0%, but input tax credit is allowed.
 Mainly applies to:
o Exports
o Supplies to SEZ units
Benefit: Ensures exports remain competitive by refunding taxes paid on inputs.
4. Special GST Rates
Certain goods have non-standard GST rates, due to their unique market or value
characteristics:
Product Special GST Rate
Gold 3%
Rough Diamonds 0.25%
Cut & Polished Diamonds 1.5%
These rates are kept low to support the Jewellery industry and reduce smuggling/import tax
evasion
5. GST Rate Classification – Decision Criteria
The GST Council considers the following factors while assigning rates:
 Essentiality of goods/services
 Impact on inflation
 Revenue-neutral rate (RNR)
 Demand elasticity
 Social equity and affordability
Frequent rate reviews are conducted based on economic conditions and industry feedback.
6. Examples by GST Rate
5% Slab
 Edible oils
 Tea and coffee (unbranded)
 Rail and metro tickets (economy class)
12% Slab
 Processed food (packaged snacks)
 Umbrellas
 Mobile phones
18% Slab
 Detergents, soaps, shampoos
 Footwear above ₹1,000

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 Hotel rooms priced between ₹1,000–₹7,500
28% Slab
 Air-conditioners, refrigerators
 Luxury cars
 Pan masala and tobacco products (plus cess)
Industry Example: White Goods Sector (Consumer Durables)
 Companies like LG, Whirlpool, and Voltas initially faced a 28% GST rate on products
like:
o Refrigerators
o Washing machines
o ACs
 Result:
o Increased product prices
o Consumer demand slowed down
o Industry bodies lobbied for rate rationalization
 Outcome:
o Over time, GST on some white goods was reduced to 18% to boost sales.
This shows how GST rates can directly affect industry performance and pricing strategy.
7. Summary
Type Rate Examples
Essential goods 5% Sugar, edible oil, rail travel
Standard goods/services 12% Processed food, mobile phones
Default rate 18% Soaps, footwear, consumer electronics
Luxury/Sin goods 28% (+ cess) Cars, ACs, tobacco
Exempted 0% Milk, education, unbranded food
Zero-rated 0% + ITC Exports, SEZ supplies
Special cases 0.25%–3% Gold, rough diamonds

8. Structure of GST Laws in India

1. Why Multiple GST Laws?
India has a federal structure where taxation powers are shared between the Centre and
States.To accommodate this, GST was implemented through multiple Acts—each addressing a
specific level of governance or geography.This ensures clarity on which authority collects the tax
and how it applies to different types of transactions.
1. CGST Act, 2017 (Central Goods and Services Tax)
 Applies to intra-state supply of goods and services.
 Collected by the Central Government.
 Levied alongside SGST by the state government.
 Covers:
o Rules for registration, invoicing, returns
o Input tax credit (ITC)
o Offenses, penalties, appeals
Example: If Tata Motors sells a car from its Pune showroom to a customer in Pune, both CGST
and SGST are levied.

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2. SGST Act, 2017 (State Goods and Services Tax)
 Also applies to intra-state transactions.
 Levied and collected by the respective State Government.
 Works in tandem with CGST.
 Each state has its own SGST Act, but provisions are uniform across states.
Revenue from SGST goes to the state where the transaction takes place.
3. UTGST Act, 2017 (Union Territory Goods and Services Tax)
 Applicable to Union Territories without legislatures:
o Chandigarh, Andaman & Nicobar Islands, Lakshadweep, Dadra & Nagar Haveli,
Daman & Diu.
 Works alongside CGST.
 In UTs without statehood, UTGST replaces SGST.
Note: For Delhi and Puducherry (which have legislatures), SGST is applicable instead of
UTGST.
4. IGST Act, 2017 (Integrated Goods and Services Tax)
 Applies to:
o Inter-state supply of goods/services
o Imports and exports
o Stock transfers between different states
 Collected by the Central Government, which then shares revenue with the destination
state.
 Allows seamless flow of Input Tax Credit between states.
Ensures that the tax goes to the state where goods/services are consumed, promoting
destination-based taxation.
Industry Example: Tata Motors
 Head Office in Maharashtra and branches in other states like Gujarat, Karnataka, and
Tamil Nadu.
Inter-State Stock Transfer:
 When Tata Motors sends spare parts from Pune (Maharashtra) to its warehouse in
Chennai (Tamil Nadu):
o IGST is applicable
o Collected by the Centre and credited to Tamil Nadu
Intra-State Sales:
 A Tata showroom in Gujarat sells a car to a customer in the same state:
o CGST + SGST are charged
o Central and State Governments both get their share
Understanding the correct Act ensures proper invoicing, tax reporting, and credit utilization.
5. Summary
Law Full Form Applicable To Collected By
Central Goods & Services
CGST Intra-state supply Central Government
Tax Act
State Goods & Services Respective State
SGST Intra-state supply
Tax Act Government
Supply within Union Territories Union Territory
UTGST Union Territory GST Act
(no assembly) Administration

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Law Full Form Applicable To Collected By
Integrated Goods & Inter-state supply, imports, Central Government
IGST
Services Tax Act exports (shared)
6. Importance of Knowing GST Structure (for Managers)
 Ensures legal compliance
 Helps in strategic location planning (warehousing, distribution)
 Enables accurate pricing and billing
 Prevents tax credit mismatches and litigation
Conclusion:India’s dual-GST structure through these four Acts enables:
 Efficient tax collection at both levels
 Transparency in revenue sharing
 A uniform and structured approach to indirect taxation
9. GST Council – Structure, Recommendations and Functions

1. Introduction: Why the GST Council?

 GST is a dual tax (Central + State), so a coordinated body is needed to:
o Harmonize tax rates
o Resolve disputes
o Make policy decisions in the spirit of cooperative federalism
The GST Council acts as the apex decision-making body for all matters related to GST in India.
2. Constitutional Status: Article 279A
 The GST Council is a constitutional body formed under Article 279A of the 101st
Constitutional Amendment Act, 2016.
 It is empowered to make recommendations on various aspects of GST laws to ensure
uniformity across states and the Centre.
Legally binding decisions ensure smooth and synchronized implementation across India.
3. Structure of the GST Council
Position Member
Chairperson Union Finance Minister
Vice-Chairperson (optional) Chosen among State Finance Ministers
Finance/Tax Ministers of all States and UTs with
Members
legislatures
Central Minister of State
Permanent Invitee
(Revenue)
 Every state has equal representation in the Council.
 Union Government has 1/3rd voting power and States collectively have 2/3rd.
This setup ensures balanced federal decision-making.
4. Decision-Making Mechanism
 Decisions are made by 75% majority vote.
o Central Government: 33.33% vote
o All States combined: 66.66% vote
 This structure encourages consensus and cooperative policy-making.
Even a small state has a voice equal to large ones in voting weight among states.
5. Recommendations Made by GST Council

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Dr.UMA K Assistant Professor GSSSIETW, Mysuru
The Council recommends on:
a) Tax Rates and Slabs
 Assigns goods/services to 5%, 12%, 18%, 28% slabs.
 Can revise rates based on industry feedback and economic conditions.
b) Exemptions
 Recommends goods and services that should be exempted from GST.
 Example: Exemption for healthcare and educational services.
c) Threshold Limits for Registration
 Decides the minimum turnover for GST registration.
o ₹40 lakh for goods, ₹20 lakh for services (as per recent updates).
d) Return Filing Procedures
 Suggests formats, deadlines, and IT processes for return filing, invoice matching, and
compliance.
e) Composition Scheme
 Recommends eligibility and conditions for small businesses under this scheme.
f) Dispute Resolution
 Plays an advisory role in inter-governmental GST disputes.
Real-World Example: GST Rate Cut for Electric Vehicles
 In 2019, the GST Council reduced GST on electric vehicles from 12% to 5%.
 Objective: Promote green mobility and make EVs more affordable.
 Beneficiaries:
o Ather Energy (Bengaluru-based EV startup)
o Tata Motors (Nexon EV)
o Ola Electric
This decision aligned with the Make in India and Sustainable Development goals.
6. Importance of the GST Council for Managers and Businesses
 Ensures predictability and uniformity in tax policy
 Keeps businesses informed about upcoming tax changes
 Facilitates cross-state operations with minimal disruption
 Acts as a liaison platform between businesses and government via state-level
representations
7. Summary
Aspect Details
Legal Basis Article 279A, 101st Amendment Act
Chairperson Union Finance Minister
Members State Finance Ministers
Decision Rule 75% majority (Centre: 1/3, States: 2/3)
Key Powers Recommend tax rates, exemptions, processes
Industry Example GST cut on EVs from 12% to 5% (Ather, Tata EV)
Conclusion The GST Council plays a critical role in ensuring that India’s GST system remains:
 Uniform across states
 Responsive to industry and public needs
 Cooperatively managed between Centre and States

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10. Goods and Services Tax Network (GSTN)

1. What is GSTN?
 GSTN stands for Goods and Services Tax Network.
 It is a non-profit, non-government private limited company.
 Formed to provide the shared IT infrastructure and services needed to implement the
GST system in India.
It is the backbone of the entire GST regime, digitally connecting taxpayers, the Centre, States,
and banks.
2. Ownership and Governance
 Initially incorporated in 2013.
 Now owned 100% by the Government of India (earlier, private players held stakes).
 Governed by a Board of Directors from the Central and State Governments, GST
Council, and other stakeholders.
3. Core Objective of GSTN
To provide a robust and secure IT platform for:
 Taxpayer registration
 Return filing
 Tax payment
 Refund processing
 Generation of MIS reports for tax authorities
4. Major Services and Infrastructure Provided by GSTN
a) GST Registration
 GSTN manages the entire registration process online.
 Generates a unique GSTIN (GST Identification Number) for every taxpayer.
b) Return Filing
 Portal supports filing of all returns:
o GSTR-1 (sales)
o GSTR-3B (summary return)
o GSTR-9 (annual return)
o And others
 Used by large enterprises as well as small businesses and MSMEs.
c) Payment Processing
 Facilitates secure online payment of GST via:
o Net banking
o NEFT/RTGS
o Over-the-counter payments
d) Refund Claims
 Automates the refund claim process, reducing manual errors and delays.
 Especially important for exporters and zero-rated supply cases.
5. Key Functions of GSTN
Function Explanation
Interface Management Connects taxpayers with GST system and tax officials
Enables B2B invoice uploading for large taxpayers (now mandatory >
E-invoicing System
₹5 crore)

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Function Explanation
E-Way Bill System Manages generation of transport documents for movement of goods
MIS and Analytics Provides analytical data to GST authorities for compliance and audits
Data Security and
Ensures encrypted and secure storage of taxpayer information
Storage
6. Digital Advantages to Stakeholders
 Taxpayers: Simple, paperless interface for all GST compliance activities.
 Governments: Real-time tax data for improved monitoring and enforcement.
 Professionals (CAs, consultants): Easy access to client records and filings.
Practical Industry Example: MSMEs Using GSTN
 Small Traders or MSMEs in textile, FMCG, or manufacturing:
o File GSTR-1 (sales return) and GSTR-3B (summary return) monthly via the
GSTN portal.
o Use e-invoicing tools integrated with the GSTN for B2B transactions.
o Generate e-way bills for transporting goods above ₹50,000 in value.
The GSTN ensures transparency, compliance, and digital traceability for such businesses
with limited administrative capacity.
7. Role during COVID-19 Pandemic
 GSTN enabled businesses to:
o File returns from home
o Apply for relaxations or late fee waivers
o Access compliance timelines digitally
Showcased the resilience of India’s digital tax infrastructure during economic disruptions.
8. Future Enhancements and Trends
 AI-based analytics for fraud detection
 Expansion of e-invoicing to all businesses with turnover above ₹5 crore (soon for ₹1
crore+)
 Mobile-friendly compliance interface
 Integration with customs (ICEGATE) for export-import businesses
Summary
Feature Details
Entity Type Non-profit, government-owned company
Functions Registration, returns, payments, refunds, e-way bill, e-invoicing
User Base Taxpayers, businesses, MSMEs, consultants, and tax officials
Portal www.gst.gov.in
Industry Impact Enables digital compliance across sectors including SMEs, exporters, e-comm
Conclusion: The GSTN plays a critical role in the success of the GST ecosystem by:
 Bridging taxpayers and authorities
 Promoting digitization and ease of compliance
 Supporting data-driven governance
11. Goods and Services Exempted from GST

1. What is GST Exemption?

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Dr.UMA K Assistant Professor GSSSIETW, Mysuru
 GST exemption means no tax is levied on the supply of certain essential goods and
services.
 Suppliers of exempt goods/services are:
o Not required to register under GST (if dealing exclusively in exempted
goods/services)
o Not eligible to claim Input Tax Credit (ITC) on inputs used for exempt supplies
Exemptions are primarily provided to reduce the burden on the common man, ensure
affordability of essential goods/services, and support public welfare sectors.

2. Categories of Exemptions
a) Absolute Exemptions
 Applies to certain goods/services irrespective of the supplier or recipient.
 Example: Fresh milk or basic healthcare services.
b) Conditional Exemptions
 Apply under specific conditions (e.g., turnover limit, location).
 Example: Educational services provided by non-profit institutions.
3. Exempted Goods – Key Examples
Item Reason for Exemption
Fresh fruits and vegetables Daily essentials, mostly unorganized sector
Milk, curd, eggs Basic nutrition items
Salt and bread Low-income household staples
Printed books Promote education and literacy
Bangles (non-precious metal) Support traditional artisans & cottage industries
These items are 0% rated and do not attract any GST at the point of sale.
4. Exempted Services – Key Examples
Service Justification
Education (non-commercial) Nation-building, affordable knowledge access
Healthcare (in-patient) Public health and welfare priority
Services by RBI, UN, diplomatic bodies Sovereign and international immunity
Religious pilgrimage (facilitated by Govt) Cultural and spiritual exemption
For instance, services provided by hospitals, diagnostic labs, and doctors to in-patients are GST-
exempt.
5. Industry Relevance and Real-World Examples
Educational Institutions
 IIMs, IITs, and other government-recognized bodies are exempt from GST on tuition,
examination fees, and academic services.
 Commercial coaching centers, however, are taxable.
Healthcare Sector
 Apollo Hospitals do not charge GST on in-patient treatment.
 Out-patient diagnostics, cosmetic treatments, or private nursing may still attract GST.
Unorganized Retailers and Cottage Industries
 Vendors selling handlooms, handicrafts, or agricultural produce often remain exempt
due to small turnover and item type.

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6. Implications of Exemption on Businesses
Positive Impact Challenges
Reduces burden on end consumer No input tax credit leads to hidden costs
Supports public welfare and affordability Difficulty in managing partially exempt businesses
Encourages informal sector participation Transition issues when turnover exceeds threshold
Businesses dealing with both exempt and taxable goods must maintain separate records to
calculate ITC eligibility.
Summary
Category Exempt Items Rationale
Goods Milk, curd, fruits, salt, books Essential and mass consumption
Services Education, healthcare, RBI, UN Welfare, non-commercial activities
Industry Example Apollo Hospitals, IIMs, Amul Public health, education, essential goods
Conclusion:GST exemptions are strategic and socio-economically motivated. For MBA
students:
 Understanding exempt goods/services helps in pricing decisions, ITC planning, and
compliance management.
 Encourages awareness of how public policy intersects with business practice.

****

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Module-2 (6 hours)
Registration and Filing of returns: GST Registration-Meaning, Benefits, Types of Registration
& Provisions: Persons liable and not liable for Registration, Compulsory Registration, Voluntary
Registration, Deemed Registration, Suo Motu Registration, Procedure for Registration, GSTIN
(Theory), Computation of aggregate turnover (Simple problems). Returns under GST-Benefits,
features, Modes of filing returns, Furnishing of Returns, First Return, Annual return and Final
return (Theory). Returns under GST-Benefits, features, Modes of filing returns, Furnishing of
Returns, First Return, Annual return and Final return (Theory).

Module-2: GST Registration and Filing of Returns (6 hours)

1. Registration and Filing of returns: GST Registration-Meaning
2. Benefits, Types of Registration & Provisions:
3. Persons liable and not liable for Registration
4. Compulsory Registration
5. Voluntary Registration
6. Deemed Registration
7. Suo Motu Registration
8. Procedure for Registration
9. GSTIN (Theory)
10. Returns under GST-Benefits, features, Modes of filing returns,
11. Furnishing of Returns, First Return, Annual return and Final return (Theory).
12. Computation of aggregate turnover (Simple problems).
1: Introduction to GST Registration

1. Meaning of GST Registration

 Definition: GST registration is the official process by which a business becomes
recognized as a supplier of goods or services under the Goods and Services Tax system.
 Outcome: On successful registration, the business receives a GSTIN (Goods and
Services Tax Identification Number), a 15-digit PAN-based unique code.
 Mandatory Requirement: Businesses must register once they cross the threshold
turnover limit or meet specific criteria (e.g., inter-state supply).
Example: A digital marketing freelancer based in Karnataka with a turnover of ₹22 lakh
must register under GST if the threshold limit for services (₹20 lakh) is crossed.
2. Importance and Legal Requirement of GST Registration
Legal Necessity
 Governed by Section 22 to Section 27 of the CGST Act, 2017.
 Non-registration when liable is a punishable offence under GST law.
Situations When GST Registration is Mandatory:
 When turnover exceeds ₹40 lakh for goods (₹20 lakh in special category states)
 ₹20 lakh for services (₹10 lakh in special category states)
 Inter-state supply of goods
 E-commerce operators and suppliers
 Reverse charge mechanism cases
Consequences of Non-Registration:
 Penalty of 10% of tax due or ₹10,000 (whichever is higher)
 No eligibility to collect tax from customers

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 No input tax credit
3. Benefits of Registration under GST
Benefit Explanation
1. Legal Recognition Legally recognized as a supplier of goods/services
Claim credit for tax paid on purchases/input
2. Input Tax Credit (ITC)
services
3. Inter-State Supply Allowed Enables smooth operations across state borders
Authorized to collect GST from customers and
4. Tax Collection Legality
pass it to government
Increases trust with large buyers, vendors, and
5. Better Credibility
financial institutions
Mandatory requirement for many government
6. Participation in Government Tenders
contracts

Needed to sell on platforms like Amazon, Flipkart,

7. E-commerce Access
etc.

8. GST portal-
New registration tab, Dashboard features, (https://www.gst.gov.in)
Return filing tabs

Topic: “Small Unregistered Kirana Shop vs GST Registered Garment Store”

 Kirana Shop (unregistered):
o Cannot claim ITC
o Cannot expand to inter-state market easily
 Garment Store with ₹45 lakh turnover:
o Must register as it crosses threshold
o Can collect GST and claim ITC
o Has wider reach, credibility, and compliance
Real-World Example:
Example: A garment manufacturer in Delhi with annual turnover of ₹45 lakhs is:
 Mandatorily required to register for GST (threshold limit for goods is ₹40 lakh)
 Once registered:
o Can collect GST @5% or 12% depending on fabric type
o Eligible to claim ITC on yarn, dyes, stitching services
Summary
Topic Key Takeaway
Meaning of GST
Official enrollment of a business under GST regime
Registration
Required if turnover crosses prescribed limit or due to nature of
Legal Need
supply

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Topic Key Takeaway
Benefits ITC, legal recognition, business expansion, e-commerce eligibility

2.1.GST Registration – Types and Provisions

Topics to Cover:
1. Persons liable for registration
2. Persons not liable for registration
3. Types of Registration:
 Compulsory
 Voluntary
 Deemed Registration
 Suo Motu Registration

4. Persons Liable for GST Registration

These are the individuals or businesses that must mandatorily register under GST as per
Section 22 and 24 of the CGST Act, 2017.
Threshold-Based Registration (Section 22):
 Goods: Turnover exceeds ₹40 lakh (₹20 lakh for special category states).
 Services: Turnover exceeds ₹20 lakh (₹10 lakh for special category states). Mandatory
Registration (Section 24), regardless of turnover:
Category Explanation
E.g., a manufacturer in Karnataka supplying to Tamil
Inter-state suppliers
Nadu
E-commerce operators Flipkart, Amazon, etc.
Casual taxable persons No fixed place of business (e.g., trade fair stalls)
Agents of registered suppliers Who make taxable supply on behalf of others
Non-resident taxable persons
Foreign suppliers operating temporarily in India
(NRTP)
Persons liable under reverse charge Where buyer pays tax instead of the supplier
5. Persons Not Liable for Registration
The following are exempted from registration under GST:
Category Explanation
Agriculturists (to the extent of agriculture) Sale of unprocessed produce like wheat, rice
Persons dealing exclusively in exempt E.g., hospitals providing only in-patient
goods/services services
Persons under threshold limit Small businesses below turnover threshold
Example: A coconut seller earning ₹10 lakh annually from raw coconuts (an exempt item) does
not require registration.
Types of GST Registration
4. Compulsory Registration under GST (Section 24 of CGST Act, 2017)
1. Meaning of GST Registration

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GST registration is the process by which a taxpayer gets enrolled under Goods and Services Tax
(GST). Once registered, the entity receives a unique GSTIN (Goods and Services Tax
Identification Number). Businesses must collect and remit GST and can claim Input Tax Credit
(ITC) on purchases only if registered.
2. Compulsory Registration:
Definition Compulsory registration refers to the mandatory requirement for certain businesses
and individuals to register under GST irrespective of their turnover limits. This is governed by
Section 24 of the CGST Act, 2017.
3. List of Persons Liable for Compulsory Registration (Section 24)
The following persons are mandatorily required to register under GST:
1) Inter-State Supplier (Section 24(i))
 Any person making inter-State taxable supply of goods or services must register,
regardless of turnover.
 Example: A manufacturer in Karnataka selling goods to a buyer in Maharashtra.
2) Casual Taxable Person (Section 24(ii))
 A person who occasionally undertakes taxable supply in a territory where they don’t have
a fixed place of business.
 Example: A trader attending an exhibition in another state to sell goods temporarily.
3) Persons Required to Pay Tax under Reverse Charge (Section 24(iii))
 If the recipient of goods/services is liable to pay tax under RCM (Reverse Charge
Mechanism), they must register.
 Example: Services received from unregistered GTA (Goods Transport Agency) or
lawyers.
4) Non-resident Taxable Person (Section 24(iv))
 A person not residing in India but supplying taxable goods/services in India.
 Example: A foreign company supplying software services in India.
5) E-commerce Operators (Section 24(ix))
 Every electronic commerce operator must register.
 Example: Flipkart, Amazon, Zomato.
6) Persons Supplying Through E-commerce Operators (Section 24(x))
 Anyone supplying goods/services through an e-commerce platform.
 Example: A local seller listing products on Amazon must register.
7) TDS Deductors (Section 24(vi))
 Government departments, local authorities, or notified persons required to deduct TDS
under GST must register.
8) Input Service Distributor (ISD) (Section 24(viii))
 An office that distributes input tax credit of services to branches with same PAN must
register as an ISD.
9) Persons Required Collecting TCS (Section 24(x))
 E-commerce operators liable to collect tax at source (TCS) under Section 52 of CGST
Act.
10) Agents of a Supplier (Section 24(vii))
 A person who supplies on behalf of someone else (principal) must register.
 Example: A commission agent selling goods on behalf of the manufacturer.
4. Persons Not Required for Compulsory Registration
 Agriculturists for supply of produce out of cultivation.

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 Persons making exempt supplies.
 Persons falling within the threshold exemption limit (if not falling under Section 24).
 Persons supplying exclusively non-taxable goods/services.
5. Threshold Exemption Limit (For Voluntary Registration)
Category of Supplier Threshold Limit
Supplier of Goods (Normal Category States) ₹40 Lakhs
Supplier of Goods (Special Category States) ₹20 Lakhs
Supplier of Services (All States) ₹20 Lakhs
Special Category States for Services ₹10 Lakhs
Note: These limits do not apply to persons covered under Compulsory Registration.
6. Penalty for Not Registering (Section 122)
If a person liable to register fails to obtain registration:
 Penalty: ₹10,000 or amount of tax evaded, whichever is higher.
7. Benefits of Timely Registration
 Legal recognition as a supplier of goods/services
 Collection of tax legally and passing of ITC
 Access to larger markets (especially e-commerce)
 Avoidance of penalties and legal action
8. Flowchart: Compulsory Registration Conditions
Is turnover > threshold limit?
|
No | Yes
| | |
Are you covered under Sec. 24? Voluntary Registration
| |
Yes No
| |
Must Register Not Required
9. Practical Examples
Example 1:Mr. A, based in Bangalore, sells goods worth ₹5 lakhs to Chennai.
 Since it's an inter-state supply, he must register compulsorily, despite low turnover.
Example 2:XYZ Ltd sells its goods on Amazon.
 Since it supplies via an e-commerce operator, registration is mandatory.
Example 3:A lawyer provides legal services to a company, and the company pays tax under
RCM.
 The company must register under GST as it is liable to pay tax under Reverse Charge
Mechanism.
10. Conclusion
Compulsory registration ensures that all major business entities contributing to the tax base are
brought under the GST net, especially those involved in inter-state transactions, e-commerce,
agency transactions, or reverse charge scenarios.
Understanding Section 24 is vital for ensuring compliance, avoiding penalties, and ensuring
seamless flow of Input Tax Credit in the supply chain.
5. Voluntary Registration

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 INDIRECT TAXATION
Course Code: 22MBAFM406
Dr.UMA K Assistant Professor GSSSIETW, Mysuru
1. Meaning of Voluntary Registration
Voluntary registration refers to the process where a business not mandatorily required to
register under GST, chooses to register on its own. This means that even if a person’s aggregate
turnover is below the prescribed threshold limit (₹20 lakh for services or ₹40 lakh for goods in
most states), they can opt-in to be a registered taxpayer under the Goods and Services Tax
regime.
2. Legal Provision: Under Section 25(3) of the CGST Act, 2017, any person who is not liable
to be registered may get himself registered voluntarily, and all provisions of this Act shall
apply to such a person as if he is liable to be registered.
3. Eligibility for Voluntary Registration
Any of the following persons can go for voluntary registration under GST:
 Small traders or businesses below the threshold limit
 Freelancers and professionals
 Start-ups and new ventures
 E-commerce sellers (not required to compulsorily register due to turnover)
 Artisans, self-employed service providers
4. Advantages of Voluntary Registration
Advantage Description
Input Tax Credit Once registered, the person can claim ITC on purchases/input services,
(ITC) which reduces the overall cost of production or service delivery.
A GSTIN (GST Identification Number) gives formal recognition and
Legal Recognition
credibility to the business, which helps in business dealings and financing.
Inter-State A voluntarily registered business can undertake inter-state supply of
Operations goods/services, which is not allowed for unregistered suppliers.
Better By becoming part of the tax chain, the business ensures timely compliance
Compliance with tax laws, avoiding penalties for future non-compliance.
Competitive Being registered builds trust with customers and suppliers, especially those
Advantage who are also GST registered. It also helps in B2B transactions.
Participation in Many government and private contracts/tenders require GST registration as
Tenders a prerequisite.
5. Responsibilities after Voluntary Registration
Once a person voluntarily registers under GST, they have to comply with all provisions
applicable to registered persons, such as:
 Regular filing of returns (monthly/quarterly and annual)
 Maintenance of proper books and records
 Issuing tax invoices
 Payment of GST on taxable supplies
 Compliance with invoicing and documentation rules
6. Example Case
Example: A handicraft artisan sells handmade products locally.
 Annual turnover: ₹18 lakh (below threshold for GST registration)
 The artisan voluntarily registers under GST to:
o Claim Input Tax Credit (ITC) on raw materials like cloth, colors, tools
o Sell to large retail chains and government stores who demand GST invoices

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Course Code: 22MBAFM406
Dr.UMA K Assistant Professor GSSSIETW, Mysuru
o Expand business online across states via e-commerce platforms
Benefit: Though not required by law, registration helps reduce cost through ITC
and expands market access.
6. Deemed Registration
Here's the detailed teaching content for MBA students on the topic “Deemed Registration
under GST”, suitable for use in classroom lectures, study materials, or presentations:

6. Deemed Registration under GST

1. Meaning of Deemed Registration

Deemed registration refers to a situation where the application for GST registration is
automatically approved due to inaction by the proper officer within the specified time frame.
When a person applies for GST registration and:
 The tax officer neither approves nor rejects the application,
 Nor seeks clarification within 7 working days (or 15 working days if clarification is
sought),
Then, the registration is automatically deemed to be granted.
This provision ensures timely service delivery and reduces bureaucratic delays in granting
registration under GST.

2. Legal Provision
The concept of deemed registration is governed by:
 Rule 9(5) of the CGST Rules, 2017
 Read with Section 25(10) of the CGST Act, 2017
"If the proper officer fails to take any action—either approval or rejection—within the time
prescribed (7 working days), the registration shall be deemed to have been granted."

3. Timelines under GST Registration Process

Scenario Time Frame Action
Application submitted with all Within 7 working Officer must approve or issue show cause
documents days notice (SCN)
Within 15 working Applicant must respond with required
Clarification asked via SCN
days documents
If officer does not respond
— Registration is deemed approved
within time

4. Purpose of Deemed Registration

 To ensure accountability and transparency in tax administration
 To encourage ease of doing business by limiting bureaucratic discretion
 To provide a time-bound mechanism for processing GST registrations

5. Example Scenario
Example:
A local bakery shop applies for GST registration on 1st June.
 The application is complete and submitted online with all necessary documents.

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 INDIRECT TAXATION
Course Code: 22MBAFM406
Dr.UMA K Assistant Professor GSSSIETW, Mysuru
 By 8th June (7 working days), no communication or action is taken by the GST
officer.
 As per Rule 9(5), from 8th June onwards, the registration is deemed granted
automatically.
 The GST portal auto-generates a GSTIN (GST Identification Number).

6. Key Points for Students to Remember

 Deemed registration is a legal safeguard for taxpayers.
 It ensures timely registration, especially when government officers delay without valid
reason.
 Once registration is deemed granted, the person must start complying with all GST
provisions (invoicing, return filing, tax payment, etc.).
 Deemed registration does not exempt the person from post-verification or cancellation if
any fraud or misstatement is found later.

7. Practical Relevance
 Especially important for start-ups, small businesses, and newly formed enterprises.
 Useful when GST officers are overloaded or slow, ensuring applicants are not left in
uncertainty.
 Boosts business confidence in the GST system.

8. Discussion Points for MBA Students

 What if the officer approves the registration after 7 days — is deemed registration still
valid?
 Can deemed registration be cancelled later? Under what conditions?
 Is deemed registration a loophole for evasion or a right of the taxpayer?

9. Conclusion
Deemed registration under GST is a progressive step that aligns with the government's objective
of promoting Ease of Doing Business. It provides a fair and time-bound process for granting
registration and empowers applicants against administrative delays.

Let me know if you’d like this converted into:

 PowerPoint format
 Quiz/test questions
 A case study scenario for classroom discussion
7 Suo Motu Registration
 Suo Motu = On its own motion
 When a GST officer initiates registration for a person who is liable to be registered
but has failed to apply.
Features:
 Temporary GSTIN issued
 Person must apply for regular registration within 90 days
Example: A restaurant in Mumbai crosses ₹40 lakh turnover but fails to register. Officer issues
suo motu registration after inspection.
Suggested Teaching Aids

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 INDIRECT TAXATION
Course Code: 22MBAFM406
Dr.UMA K Assistant Professor GSSSIETW, Mysuru
Table: Comparison of Registration Types
Type Voluntary Compulsory Deemed Suo Motu
System (on officer's
Initiated by Taxpayer Mandated by law Tax officer
inaction)
Turnover Below Above Any, where delay in Not applied but
criteria threshold threshold/Section 24 processing liable
GSTIN
Yes Yes Yes (automatically) Temporary
issued
After
ITC available Yes Yes Yes
regularization
Classroom Engagement Activities
Case-Based Quiz:Case 1:Ramesh sells handicraft items worth ₹18 lakh in Gujarat. He
voluntarily applies for GST registration.
Q: What type of registration?
Answer: Voluntary Registration
Case 2: A foreign exhibitor supplies goods at an expo in Mumbai without fixed premises.
Q: What type of registration is required?
Answer: Compulsory (as a Casual Taxable Person)
Summary
Point Key Takeaway
Persons liable Based on turnover or Section 24 conditions
Not liable Agriculturists, exempt goods suppliers, low-turnover entities
Compulsory registration Mandated for e-commerce, inter-state suppliers, agents
Voluntary registration Chosen to claim ITC, increase business scope
Deemed registration Auto-approved after 7 working days of inaction by GST officer
Suo Motu registration Initiated by department when person is non-compliant
8: Procedure for Registration & GSTIN
Procedure for GST Registration & GSTIN
1. Step-by-Step Procedure for GST Registration (Online Portal Flow)
All registrations under GST are done online through the GST portal: www.gst.gov.in
Step-by-Step Process:
1. Visit the GST Portal
o Go to www.gst.gov.in
o Click on “Register Now” under the “Taxpayer” tab.
2. Part A – Preliminary Details
o Enter basic details like:
 Legal Name (as per PAN)
 PAN of the business
 Email ID and Mobile Number
o Receive OTPs on mobile and email → Validate OTPs
o Generate Temporary Reference Number (TRN)
3. Part B – Detailed Application Form

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 INDIRECT TAXATION
Course Code: 22MBAFM406
Dr.UMA K Assistant Professor GSSSIETW, Mysuru
o Log in with TRN
o Fill the following details:
 Business address
 Promoter/Partner details
 Authorized signatory
 Primary business activity
 Bank account details
 Upload required documents (see below)
4. Digital Signature (DSC)
o For companies/LLPs, signing via DSC is mandatory
o Others may use e-sign or EVC (OTP-based)
5. ARN Generation
o After submission, you get an Application Reference Number (ARN)
o Used to track application status
6. Processing by GST Officer
o Application is approved within 7 working days
o If any clarification is required, notice is issued in Form GST REG-03
7. GSTIN Issued
o Upon approval, GSTIN and Registration Certificate are issued
8. Documents Required for GST Registration
Category Documents Required
Identity Proof PAN card of proprietor/partners/directors
Address Proof Aadhaar card, passport, driving license, voter ID
Business Address Electricity bill, rent agreement, property tax receipt, NOC from owner if
Proof applicable
Business Constitution Partnership deed / Incorporation certificate / Registration certificate
Bank Details Cancelled cheque, bank statement, or passbook
Photograph Passport size photo of proprietor/partners/directors
Authorization Letter If application is made by authorized signatory
9. What is GSTIN? (Goods and Services Tax Identification Number)
Meaning: GSTIN is a 15-digit unique PAN-based identification number assigned to every
registered taxpayer under GST.
Structure of GSTIN (15 Digits)
Example: 29ABCDE1234F2Z5
Digits Represents Explanation

1–2 State Code E.g., 29 = Karnataka

3–12 PAN of the business Permanent Account Number

13 Entity number under the same PAN For multiple registrations under one PAN

14 Blank or ‘Z’ Reserved for future use

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 INDIRECT TAXATION
Course Code: 22MBAFM406
Dr.UMA K Assistant Professor GSSSIETW, Mysuru
Digits Represents Explanation

15 Checksum character Detects errors in GSTIN

Importance of GSTIN in Compliance
Purpose Explanation

Tax collection Required to collect and remit GST

Input Tax Credit (ITC) Only businesses with GSTIN can avail ITC

Invoice issuance GST-compliant invoices must mention GSTIN

Return filing Needed to log in and file GSTR-1, GSTR-3B, GSTR-9, etc.

Legal and business recognition Enhances credibility and compliance

Summary Table
Topic Key Points

GST Registration Process Online, Part A (basic), Part B (detailed), TRN, ARN

Documents Required PAN, Aadhaar, bank proof, address proof, constitution docs

GSTIN Structure 15-digit unique ID – state, PAN, entity, check digit

Importance of GSTIN Required for ITC, compliance, e-invoicing, return filing

10. GST Returns – Meaning, Types & Filing Methods

1. Meaning and Importance of GST Returns
Meaning: GST Return is an official statement of sales, purchases, tax collected, and tax paid
that a registered taxpayer must file to the GST authorities periodically.
Purpose:
 Declare tax liability
 Claim Input Tax Credit (ITC)
 Comply with GST law
 Ensure transparency in the indirect tax ecosystem
Importance:
Purpose Explanation

Legal Compliance Mandated under the CGST Act, 2017

Seamless ITC Claim ITC claim only possible if returns are filed

Revenue for Government Tax collected from customers is reported and paid

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 INDIRECT TAXATION
Course Code: 22MBAFM406
Dr.UMA K Assistant Professor GSSSIETW, Mysuru
Purpose Explanation

Audit Trail Tracks movement of goods/services and tax liabilities

Avoidance of Penalties Delayed or non-filing leads to late fee and interest

2. Types of Returns under GST
A) First Return (GSTR-3B for the first tax period)
 Filed after GST registration is approved
 Captures outward/inward supply, ITC, and tax liability
 Must be filed before due date to start compliance cycle
Example: A newly registered business files GSTR-3B in the month it crosses turnover threshold.
B) Monthly/Quarterly Returns
Return Type Form Purpose Due Date
Outward 11th of next
GSTR-1 Details of all outward supplies made (sales)
Supplies month
GSTR- Summary of sales, ITC, tax payable, and tax 20th of next
Summary Return
3B paid month
QRMP Scheme (Quarterly Return, Monthly Payment)
 Designed for small taxpayers (turnover ≤ ₹5 crore)
 File GSTR-1 and GSTR-3B quarterly
 Pay tax monthly using PMT-06
 Reduces compliance burden for MSMEs
Example: A MSME in the textile sector with ₹3 crore turnover files GSTR-1 and 3B
quarterly under QRMP Scheme.
C) Annual Return (GSTR-9)
 Filed once a year
 Summary of monthly/quarterly returns
 Mandatory for businesses with turnover > ₹2 crore
 Due by 31st December of the following financial year
Note: GSTR-9C (audit return) was earlier required for turnover > ₹5 crore; now self-certification
is allowed.
D) Final Return (GSTR-10)
 Filed when GST registration is surrendered or cancelled
 Declares closing stock, final liabilities, and tax dues
3. Modes of Filing Returns
A) Online Filing via GST Portal
 Direct access to www.gst.gov.in
 Simple login using GSTIN and password
 Step-by-step form filling and validation
 Return dashboard shows filing status
B) Through GST Suvidha Providers (GSPs)
 Government-authorized third-party platforms
 Offer APIs and automated compliance services
 Useful for large taxpayers and enterprises with multiple registrations

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 INDIRECT TAXATION
Course Code: 22MBAFM406
Dr.UMA K Assistant Professor GSSSIETW, Mysuru
Real-World Example:
Example – MSME Retailer under QRMP:
ABC Retail, a grocery seller in Karnataka with ₹2.4 crore turnover:
o Registers for GST
o Opts for QRMP Scheme
o Pays monthly tax via PMT-06
o Files quarterly GSTR-1 and 3B
o Files annual return in GSTR-9 by December
Summary Table
Return Type Form Frequency Use

First Return GSTR-3B One-time Post-registration initiation

Outward Supplies GSTR-1 Monthly/Q Details of sales

Summary Return GSTR-3B Monthly/Q Tax liability and payment

Annual Return GSTR-9 Yearly Summary of all returns

Final Return GSTR-10 One-time Filed when business closes registration

5: Furnishing Returns & Compliance
1. Due Dates and Frequency of Returns
GST returns must be filed monthly, quarterly, and annually depending on the taxpayer
category.
Return Type Form Due Date Applicable To
Outward Supply 11th of next month (monthly) or last
GSTR-1 All regular taxpayers
Return date of month (QRMP)
20th of next month (monthly) or
Summary Return GSTR-3B All registered taxpayers
22nd/24th (QRMP)
Composition
GSTR-4 30th April of the next FY Composition scheme dealers
Scheme
Registered persons with
Annual Return GSTR-9 31st December of next FY
turnover > ₹2 crore
Final Return GSTR-10 Within 3 months of cancellation For cancelled registrations
Note: Dates may shift in case of government extensions or festivals.
2. Late Fee and Penalty for Non-Filing
Late Fee for Delay:
Form Late Fee (Per Day) Maximum Cap
GSTR-3B ₹50 (₹25 CGST + ₹25 SGST) ₹5,000 per return
Nil Return ₹20 (₹10 CGST + ₹10 SGST) ₹500 per return
Interest:
 18% per annum on delayed tax payment
 Calculated from due date till actual payment

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Dr.UMA K Assistant Professor GSSSIETW, Mysuru
Example: If a taxpayer fails to file GSTR-3B for April, they must pay ₹50 per day until filing is
complete.
For 10 days delay → ₹500 penalty + interest on outstanding GST.
3. Reconciliation of Sales and ITC Using Return Data
Reconciliation ensures the taxpayer’s books match the data submitted to the GST portal and is
essential for Input Tax Credit (ITC) accuracy.
Key Areas of Reconciliation:
What to Match Why It Matters
GSTR-1 vs Books of Accounts Ensure outward supplies are correctly reported
GSTR-3B vs GSTR-2A/2B Claim correct ITC and avoid mismatches
GSTR-1 vs GSTR-3B Confirm tax liability consistency
GSTR-9 vs Monthly Returns Accurate annual reporting, avoid audit issues
Tools Used:
 Excel reconciliation tools
 Accounting software (e.g., Tally, Zoho Books)
4. Importance of Timely Filing
Timely GST return filing is essential for:
 Avoiding penalties and interest
 Claiming full Input Tax Credit (ITC)
 Staying compliant to avoid cancellation of GSTIN
 Enhancing business reputation and ease of doing business
 Smooth vendor/supplier relations due to auto-reflection of invoices
Real Example: A delay in filing GSTR-3B by a wholesaler led to ₹3,000 in penalties and
disruption in claiming ITC for purchases — affecting working capital.
Sample Question: If a taxpayer files GSTR-3B 15 days late and owes ₹10,000 in tax, what is
the penalty and interest?
Answer:
 Late fee = ₹50 × 15 = ₹750
 Interest = ₹10,000 × 18% × (15/365) = ₹74
Summary Table
Aspect Key Details
Due Dates Monthly/Quarterly/Annual depending on return type
Late Fee ₹50/day or ₹20/day (nil return), capped at ₹5,000
Interest on Delay 18% p.a.
Importance of Timely Filing ITC eligibility, legal compliance, no penalties
Reconciliation Purpose Ensure accuracy of data and seamless audit process
12. Computation of Aggregate Turnover (Problems)
Topics to Cover:
17. Meaning of Aggregate Turnover under GST
18. Components included/excluded in turnover
19. Thresholds for registration eligibility
20. Simple numerical problems on computation of turnover
1. Meaning of Aggregate Turnover under GST

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 INDIRECT TAXATION
Course Code: 22MBAFM406
Dr.UMA K Assistant Professor GSSSIETW, Mysuru
 Definition: As per Section 2(6) of the CGST Act, 2017, Aggregate Turnover is the total
value of all outward supplies of goods and/or services made by a person having the
same PAN across India (on an all-India basis), excluding taxes and inward supplies
under reverse charge.
 It includes:
o Taxable supplies (both intra- and inter-state)
o Exempt supplies
o Export of goods/services
o Supplies between branches (distinct persons)
 Purpose:
o To determine the GST registration threshold
o To assess eligibility for composition scheme
o For filing annual returns and reconciliation
2. Components INCLUDED in Aggregate Turnover
Component Description/Examples
Taxable outward supplies Goods/services on which GST is levied
Exempt supplies E.g., milk, healthcare, education
Zero-rated supplies Exports & supplies to SEZ (without GST)
Inter-state branch transfers Between branches of the same PAN in different states
3. Components EXCLUDED from Aggregate Turnover
Component Not Included in Aggregate Turnover
Inward supplies (under reverse charge) E.g., lawyer fees, transport services
Taxes (CGST, SGST, IGST, UTGST) Excluded by law
Non-GST supplies E.g., Alcohol for human consumption
Interest income from loans Not included for NBFCs/Banks as per circulars

4. Format to Compute Aggregate Turnover (For Problem-Solving)

Sl. Amount Included in Aggregate
Particulars
No. (₹) Turnover?
1 Intra-state taxable supplies XXXX Yes
2 Inter-state taxable supplies XXXX Yes
3 Exempt supplies XXXX Yes
4 Export of goods/services (zero-rated) XXXX Yes
Stock transfers to other branches (other
5 XXXX Yes
state)
6 Inward supplies under reverse charge XXXX No
Taxes (CGST, SGST, IGST, Compensation
7 XXXX No
Cess)
8 Non-GST supplies (e.g., petrol, alcohol) XXXX No
Total Aggregate Turnover = Sum of Sl. No. 1 to 5

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 INDIRECT TAXATION
Course Code: 22MBAFM406
Dr.UMA K Assistant Professor GSSSIETW, Mysuru
5. Threshold Limits for GST Registration (as of 2024)
Category Threshold Limit
Goods (normal states) ₹40 lakh
Services ₹20 lakh
Special category states (services) ₹10 lakh
Inter-state supply (goods/services) No threshold – Compulsory registration
6. Illustrative 1
Case: A trader in Karnataka has the following turnover in FY 2023–24:
 Intra-state taxable supply: ₹22 lakh
 Inter-state supply: ₹8 lakh
 Exempt supply: ₹4 lakh
 Exports: ₹6 lakh
 GST collected: ₹3 lakh
 Reverse charge inward supply: ₹2 lakh
Step-by-Step Calculation:
Particulars Amount (₹) Included?
Intra-state taxable supply 22,00,000 Yes
Inter-state supply 8,00,000 Yes
Exempt supply 4,00,000 Yes
Export 6,00,000 Yes
GST collected 3,00,000 No
Inward supply under reverse charge 2,00,000 No
Aggregate Turnover = ₹22L + ₹8L + ₹4L + ₹6L = ₹40, 00,000
→ Registration is mandatory as it reaches the ₹40 lakh threshold for goods.
Example:Compute aggregate turnover for a business selling in 3 states with exempt and taxable
goods
Problem 1: Mixed Supplies with GST & Exempt Goods
Problem Statement:Ms. Priya runs a wholesale business in Tamil Nadu. During FY 2023–24,
she has the following details:
Particulars Amount (₹)
Intra-state taxable sales 25,00,000
Inter-state sales to Kerala 10,00,000
Exempt supplies (milk & fresh vegetables) 6,00,000
Export of goods (zero-rated) 8,00,000
GST collected (CGST+SGST+IGST) 3,50,000
Legal consultancy service availed (RCM) 50,000
Required:Calculate the Aggregate Turnover and determine whether GST registration is
mandatory.
Particulars Amount (₹) Included in Aggregate Turnover?

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 INDIRECT TAXATION
Course Code: 22MBAFM406
Dr.UMA K Assistant Professor GSSSIETW, Mysuru
Particulars Amount (₹) Included in Aggregate Turnover?
Intra-state taxable sales 25,00,000 ✅ Yes
Inter-state sales 10,00,000 ✅ Yes
Exempt supplies 6,00,000 ✅ Yes
Export of goods 8,00,000 ✅ Yes
GST collected 3,50,000 ❌ No
RCM (reverse charge service) 50,000 ❌ No
Aggregate Turnover = ₹25L + ₹10L + ₹6L + ₹8L = ₹49,00,000
Conclusion:Threshold for registration in Tamil Nadu for goods = ₹40 lakh
Since turnover = ₹49 lakh → GST Registration is Compulsory
Problem 2: Service Provider with Mixed Income and RCM
Problem Statement:Mr. Ravi is a freelance graphic designer based in Karnataka. His income
for FY 2023–24 includes:
Particulars Amount (₹)
Design services (domestic clients) 14,00,000
Export of services to UK clients 7,00,000
Renting of residential property 3,00,000
Interest on fixed deposits 2,00,000
Import of software services (RCM) 1,00,000
Required: Compute aggregate turnover and advise on GST registration need.
Particulars Amount (₹) Included?
Domestic service income 14,00,000 ✅ Yes
Export of services (zero-rated) 7,00,000 ✅ Yes
Residential rent (exempt) 3,00,000 ✅ Yes
Interest on FD (not taxable) 2,00,000 ❌ No
Import of services under RCM 1,00,000 ❌ No
Aggregate Turnover = ₹14L + ₹7L + ₹3L = ₹24,00,000
Conclusion: For services, threshold = ₹20 lakh in Karnataka
→ Turnover ₹24L > ₹20L → GST Registration is Mandatory
Problem 3: Trader with Branch Transfers and E-commerce Sales
Problem Statement: Mr. Arjun owns a chain of electronics stores with branches in Delhi and
Mumbai (same PAN). His turnover during FY 2023–24:
Particulars Amount (₹)
Intra-state taxable sales (Delhi) 18,00,000
Stock transfer to Mumbai branch (inter-state) 10,00,000
E-commerce sales (through Amazon) 12,00,000

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Course Code: 22MBAFM406
Dr.UMA K Assistant Professor GSSSIETW, Mysuru
Particulars Amount (₹)
Exempt supply (e.g., printed books) 2,00,000
GST collected on above 5,00,000
Required: Compute aggregate turnover and check GST registration requirement.
Particulars Amount (₹) Included
Intra-state taxable sales 18,00,000 ✅ Yes
Stock transfer (inter-branch) 10,00,000 ✅ Yes
E-commerce sales 12,00,000 ✅ Yes
Exempt supply 2,00,000 ✅ Yes
GST collected 5,00,000 ❌ No
Aggregate Turnover = ₹18L + ₹10L + ₹12L + ₹2L = ₹42,00,000
Conclusion:
Since Aggregate Turnover > ₹40 lakh, Registration is Compulsory
Also, e-commerce operators must mandatorily register, irrespective of turnover.
Summary Table:
Problem Type Industry Key Adjustments Included
Problem 1 Wholesale (Goods) GST collection & RCM service adjustment
Problem 2 Freelance (Service) FD interest excluded, exports included
Problem 3 Retail (E-com) Branch transfer & e-commerce sales considered
2.10.1. Meaning of Returns under GST
 A GST return is a document that a taxpayer is required to file with the tax authorities
containing details of income, purchases, sales, output tax liability, and input tax
credit (ITC).
 These returns help the government assess the tax liability and ensure tax compliance.
2. Benefits of Filing Returns under GST
1. Legal Compliance: Filing returns is mandatory for businesses registered under GST.
2. Claiming Input Tax Credit (ITC): Businesses can claim ITC only when returns are
filed timely.
3. Transparency and Uniformity: Ensures transparency and uniform reporting of
transactions.
4. Assessment and Audit: Assists in accurate assessment and audit by tax authorities.
5. Avoidance of Penalty: Regular filing avoids late fees and penalties.
6. Improved Creditworthiness: A regular return filer gains credibility in the eyes of
financial institutions and suppliers.
3. Features of GST Returns
1. Standardized Format: All GST returns are in a structured format, reducing ambiguity.
2. Auto-Population: Details like GSTR-2A and GSTR-2B are auto-populated based on
counterparty filings.
3. Digital Filing: Returns are filed electronically via the GST portal.
4. PAN-based Registration: Returns are linked with the PAN of the taxpayer.

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 INDIRECT TAXATION
Course Code: 22MBAFM406
Dr.UMA K Assistant Professor GSSSIETW, Mysuru
5. Multiple Return Types: Includes GSTR-1, GSTR-3B, GSTR-4, GSTR-9, GSTR-10,
etc., based on taxpayer category.
6. Reconciliation Feature: Helps in matching input and output to ensure accuracy.
4. Modes of Filing GST Returns
1. Online Filing: Directly through the GST portal (www.gst.gov.in).
2. Offline Utility Tool: Using GST Offline Tool (Excel-based utility provided by GSTN).
3. GST Suvidha Providers (GSPs): Authorized third-party platforms to help in filing.
4. Through ERP Software: Integrated systems like Tally, SAP, Zoho with GST features.
5. Mobile App/Facilitation Centers: Government-approved facilitation centers help small
taxpayers.
5. Furnishing of Returns
1. Registered Persons (excluding Composition Scheme):
o File monthly or quarterly returns depending on their turnover.
o GSTR-1: Details of outward supplies.
o GSTR-3B: Summary return (monthly).
2. Composition Taxpayers:
o CMP-08: Quarterly statement.
o GSTR-4: Annual return.
3. Non-Resident Taxable Persons:
o File GSTR-5 monthly.
4. Input Service Distributors (ISD):
o File GSTR-6 monthly.
5. Tax Deductors (TDS under GST):
o File GSTR-7.
6. Tax Collectors (TCS under GST):
o File GSTR-8.
6. First Return (Section 40 of CGST Act)
1. A person who has obtained registration under GST must file the first return.
2. The first return is to be filed for the period from the date of liability to register till the
date of grant of registration.
3. Enables credit of eligible ITC on stock held prior to registration.
4. Ensures proper initiation of tax compliance under GST regime.
7. Annual Return (GSTR-9)
1. Applicable to all registered taxpayers except:
o Composition scheme dealers
o Input Service Distributors
o Casual taxable persons
o Non-resident taxable persons
2. Filing Due Date: 31st December of the next financial year.
3. Contents:
o Consolidated summary of outward and inward supplies
o ITC claimed
o Tax paid and tax liability
o Details of demand, refunds, and HSN-wise summary
4. Types of Annual Returns:
o GSTR-9: Regular taxpayers

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Dr.UMA K Assistant Professor GSSSIETW, Mysuru
o GSTR-9A: Composition scheme (now waived for several years)
o GSTR-9C: Reconciliation statement and audit certificate (based on turnover
threshold)
8. Final Return (GSTR-10)
1. Filed when a taxpayer surrenders or cancels GST registration.
2. Must be filed within 3 months of:
o Date of cancellation order
o Or date of cancellation (whichever is later)
3. Purpose:
o Declare any pending tax liability.
o Reconcile and settle the accounts with GST authorities.
4. Non-filing of final return may attract a penalty of ₹100 per day (up to a maximum of
₹5,000).
Summary Table:
Return
Who Files Frequency Purpose
Type
GSTR-1 Regular taxpayers Monthly/Quarterly Details of outward supplies
GSTR-3B Regular taxpayers Monthly Summary return with tax payment
CMP-08 Composition scheme Quarterly Payment of tax
Annual return for composition
GSTR-4 Composition scheme Annual
scheme
Non-resident taxable
GSTR-5 Monthly Summary of all transactions
person
GSTR-6 Input Service Distributor Monthly Distribution of input credit
GSTR-7 TDS Deductors Monthly Details of TDS deducted
E-commerce operators
GSTR-8 Monthly Details of TCS collected
(TCS)
GSTR-9 Regular taxpayers Annually Consolidated return
GSTR-9C Large taxpayers Annually Reconciliation statement
GSTR-10 Deregistered taxpayers Once (Final) Closing the tax liability
Exempted Goods under GST Act (Theory)
1. Meaning of Exempted Goods
 Exempted Goods are those goods on which no GST is charged.
 These goods are either specifically mentioned in exemption notifications or fall under
the Nil-rated or non-GST supply category.
 Supply of such goods does not attract output tax, and the supplier cannot claim Input
Tax Credit (ITC) on inputs used.
2. Legal Provisions
 Governed by Section 11 of the CGST Act, 2017 and Section 6 of the IGST Act, 2017.
 The Government, on the recommendation of the GST Council, may exempt goods from
tax wholly or partly.
3. Types of Exemptions

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Course Code: 22MBAFM406
Dr.UMA K Assistant Professor GSSSIETW, Mysuru
1. Absolute Exemption:
o GST is not levied at all, regardless of who supplies or consumes.
o Example: Fresh fruits and vegetables.
2. Conditional Exemption:
o Exemption is available only if certain conditions are fulfilled.
o Example: Services provided by a charitable trust to the public, subject to specific
limits.
3. Partial Exemption:
o Only part of the goods or services are exempt, or exemption is limited by value.
4. Categories of Exempted Goods under GST
Category Examples
Fresh fruits, vegetables, unprocessed cereals (wheat, rice), milk,
Agricultural Products
eggs, meat (not frozen or processed)
Educational Materials Printed books, newspapers
Medical/Healthcare Blood, human organs, contraceptives, vaccines supplied under
Supplies government programs
Essential Food Items Salt, jaggery, flour, puffed rice
Handicrafts and Khadi Products sold by Khadi institutions, handloom products
Fuel and Energy (some
Electricity (no GST levied, regulated separately), firewood
items)
Livestock and Animal
Live animals like cows, goats, poultry (unprocessed)
Products
Water and Natural
Water (except mineral and aerated), natural honey (unprocessed)
Products
Cultural/Religious Goods Puja samagri, rudraksha, religious books
Miscellaneous Bangles (non-precious), hearing aids, sanitary napkins
5. GST Rate Classification Related to Exemption
Category Rate Examples
Nil-Rated Supply 0% Milk, fresh fruits
Exempted Supply Not taxable via Notification Agricultural produce
Non-GST Supply Outside GST Act Petrol, diesel, liquor for human consumption
6. Input Tax Credit (ITC) on Exempted Goods
 Not allowed for exempted goods.
 If a supplier deals exclusively in exempt goods, they are not required to register under
GST.
 Reversal of ITC is mandatory if common inputs are used for both exempt and taxable
goods.
7. Notification for Exemptions
 GST exemptions are notified by the Central Government through notifications.
 Most common notification: Notification No. 2/2017-Central Tax (Rate) for goods.
 Regular updates and amendments are issued as per GST Council recommendations.

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Dr.UMA K Assistant Professor GSSSIETW, Mysuru
8. Example List of Common Exempted Goods
Sl.No Goods Remarks
1 Fresh Milk Exempt
2 Fresh Fruits & Vegetables Exempt
3 Khadi sold by Khadi Institutions Exempt
4 Unbranded Atta, Maida, Besan Exempt
5 Human Blood & Organs Exempt
6 Educational Textbooks Exempt
7 Sanitary Napkins Exempt
8 Firewood Exempt
9 Handmade Products by Local Artisans Exempt
10 Non-branded salt, gur, grains Exempt
9. Implications for Businesses
 Businesses dealing only in exempt goods:
o Do not require GST registration.
o Cannot charge GST on their invoices.
o Cannot claim ITC on purchases.
 Must maintain clear documentation to justify exemptions during audits.
10. Conclusion
 Exempted goods under GST ensure that basic necessities and socially beneficial items
remain affordable.
 While they offer relief to consumers, businesses must be cautious about non-eligibility
for ITC and compliance with conditions to avoid penalties.
Exempted Services under GST Act (Theory)
1. Meaning of Exempted Services
 Exempted services are those services on which no Goods and Services Tax (GST) is
levied.
 These are specified under notification or fall under Nil-rated or non-GST services.
 A person supplying only exempt services is not liable to register under GST and
cannot claim Input Tax Credit (ITC).
2. Legal Basis
 Governed under Section 11 of the CGST Act, 2017 and Section 6 of the IGST Act,
2017.
 Government can exempt certain services via notification, based on GST Council
recommendations.
 Most exemptions are provided through Notification No. 12/2017 – Central Tax (Rate),
dated 28th June 2017.
3. Types of Exemptions
Type Description Example
Absolute Available to all suppliers regardless of
Services by RBI
Exemption turnover or conditions
Conditional Applicable only if certain conditions are Renting by charitable trusts

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Course Code: 22MBAFM406
Dr.UMA K Assistant Professor GSSSIETW, Mysuru
Type Description Example
Exemption met below a limit
Applies to a portion of the supply value or Educational services with
Partial Exemption
turnover optional courses
4. Categories of Exempted Services under GST
a) Educational Services
 Services provided by:
o Pre-schools and schools (up to higher secondary)
o Colleges and universities (recognized by law)
 Includes:
o Tuition fees
o Transport by educational institutions
o Conduct of exams by educational boards
b) Healthcare Services
 Services by a clinical establishment, authorized medical practitioner, or paramedics.
 Includes:
o Diagnostics
o Medical treatment
o Blood bank services
c) Government Services
 Services by the Central/State Government or Local Authorities like:
o Issuing passports, visas
o Police, defence, jails
o Municipal services
o Electricity distribution
d) Religious Services
 Services by charitable/religious trusts:
o Conducting prayers, rituals
o Renting premises for public religious functions
o Distribution of prasad or food (free of cost)
e) Agricultural Services
 Services related to:
o Cultivation
o Harvesting, threshing, loading
o Supply of farm labor
o Renting of agro machinery
f) Financial Services
 Services by:
o RBI
o Interest on loans and deposits (savings, FDs)
o Services by NBFCs related to interest (interest itself exempt)
g) Transportation Services
 Transport of:
o Agricultural produce
o Milk, salt, food grains

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Course Code: 22MBAFM406
Dr.UMA K Assistant Professor GSSSIETW, Mysuru
o Relief materials
 Services by:
o Auto rickshaws (non-AC)
o Metro rail, public buses
o Inland waterways
h) Charitable Activities
 Services by a registered charitable trust:
o Advancing religion or spirituality
o Free medical or educational aid
o Relief to the poor
i) Employment-Related Services
 Services by:
o Employees to employers (e.g., salary)
o Labour contract not exceeding limit in charitable institutions
o Recruitment services to foreign employers
5. Input Tax Credit (ITC) on Exempt Services
 Not available for exempted services.
 Suppliers of exempt services must:
o Refrain from charging GST
o Cannot claim ITC on inputs or input services
o Maintain separate records if both taxable and exempt services are offered
6. List of Common Exempted Services (with Examples)
S.No Service Exemption Reason
1 School education Public welfare
2 Healthcare (hospital, doctor) Essential social service
3 Services by RBI Sovereign function
4 Religious events (by registered trust) Cultural preservation
5 Renting to temples (below ₹10,000/month) Charitable purpose
6 Agricultural land leasing Farmer support
7 Public transport by metro/bus Mass transit
8 Interest on loans Financial stability
9 Burial and cremation services Public necessity
10 Services by UN or foreign diplomatic missions International treaties

7. Services Covered under “Nil Rated”

 Nil-rated services are those at 0% GST, such as certain essential goods transportation
and education-related services.
 While these are taxable, the rate is zero, and suppliers may or may not claim ITC based
on the context.
8. Non-GST Services
 Services outside the scope of GST:
o Salaries and wages (employee-employer relationship)
o Services of MPs/MLAs

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Course Code: 22MBAFM406
Dr.UMA K Assistant Professor GSSSIETW, Mysuru
o Petroleum and Alcohol services (until brought under GST
9. Compliance Requirements
 No GST Registration required if:
o Exclusive supply of exempt services.
 If supplying both exempt and taxable services:
o Maintain separate accounts for ITC and service records.
10. Conclusion
 Exempted services under GST are aimed at protecting vulnerable sectors, encouraging
education, health, and agriculture, and reducing compliance burden for non-
commercial entities.
 Understanding exemptions is essential for both tax compliance and financial planning.

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Course Code: 22MBAFM406
Dr.UMA K Assistant Professor GSSSIETW, Mysuru
Module-3 (8 hours)
Supply, Levy and Collection of Tax: Supply-Meaning of Goods and Services, Deemed supply,
Classification of supply-Inward & outward supply, One time & Continuous supply, supply on
the basis of taxability & geographical location, Composite and Mixed Supplies, Scope of
supply (Theory) Determination of tax liability on various types of supply (Simple problems)
Levy and Collection, Composition scheme in GST- Eligibility criteria, Conditions for adoption,
Rate of GST of the Composition Levy, (Simple problems on calculation of value of taxable
supply and GST Levy). (Theory and Problems).

1. Meaning of ‘Supply’ Under GST (Section 7 of CGST Act, 2017)

Definition: As per Section 7(1) of the Central Goods and Services Tax (CGST) Act, 2017,
"supply" includes all forms of supply of goods or services or both, such as:
 Sale
 Transfer
 Barter
 Exchange
 License
 Rental
 Lease
 Disposal
These activities should be:
 For a consideration, and
 In the course or furtherance of business.
Key Elements of Supply:
a) Presence of Goods or Services:
 Supply must involve either goods, services, or both.
b) Involvement of Consideration:
 Generally, supply must involve a monetary/non-monetary consideration (payment,
exchange, etc.).
 Exception: Certain activities listed in Schedule I are considered supply even without
consideration.
c) Course or Furtherance of Business:
 Activities should relate to or support the main business (e.g., trading, manufacturing,
providing services).
d) Import of Services:
 Import of services is considered supply if consideration is involved, even if the
importer is not in business.
 If import is by a related person without consideration, it will still be considered supply
if used for business purposes (Schedule I).
Inclusions under Section 7:
Schedule I – Supply without Consideration (Deemed Supply):
Includes activities treated as supply even without consideration, such as:
 Permanent transfer/disposal of business assets.
 Supplies between related/distinct persons (branches in different states).
 Employer gifting employee above ₹50,000.
 Import of services by related persons for business.

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Dr.UMA K Assistant Professor GSSSIETW, Mysuru
Schedule II – Classification of Supply:
Clarifies whether a particular supply is treated as a supply of goods or supply of services.
Examples:
 Transfer of title in goods → supply of goods.
 Renting immovable property → supply of services.
Schedule III – Neither Goods nor Services (No Supply):
Activities which are outside GST scope, such as:
 Services by employee to employer in the course of employment.
 Functions of MPs, judges, courts.
 Sale of land or completed buildings.
 Actionable claims (except lottery, betting, gambling).
Example Scenarios:
Activity Supply Reason
Sale of goods for ₹1,000 Yes Consideration & business purpose
Free sample to customer No* No consideration, unless covered in Schedule I
Import of service from US with payment Yes Import + consideration
Salary paid to employee No Covered under Schedule III
Branch transfer (Karnataka to Kerala) Yes Supply between distinct persons (Schedule I)
2. Meaning of Goods and Services
a) Goods (Section 2(52) of CGST Act)
Definition: “Goods” means every kind of movable property other than:
 Money, and
 Securities.
Includes:
 Actionable claims (excluding lottery, betting, gambling)
 Growing crops, grass
 Things attached to or forming part of the land, which are agreed to be severed
before supply.
Examples of Goods:
 Furniture, machinery
 Mobile phones, computers
 Agricultural produce (wheat, rice)
 Actionable claims (like insurance claims)
 Water bottles, packaged goods
Not Considered Goods:
 Land, buildings
 Money (coins, currency)
 Shares, bonds, debentures (securities)
b) Services (Section 2(102) of CGST Act)
Definition: “Services” means anything other than goods, money and securities.
Includes: Activities relating to use of money or conversion of money for which a separate
consideration is charged.
Examples of Services:
 Legal consulting

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Dr.UMA K Assistant Professor GSSSIETW, Mysuru
 Hotel accommodation
 Renting immovable property
 Transportation services
 Financial services (loan processing, brokerage)
Problem 6: Supply of Services vs. Goods
Question:Mr. Ravi, a freelancer, offers website designing services for ₹1,00,000 to a client in
the same state. Classify the type of supply and applicable GST.
Solution:
It is a supply of service (website design = service)
Intra-state supply (same state) → CGST + SGST
GST @ 18% = ₹18,000
CGST = ₹9,000, SGST = ₹9,000
Not Considered Services:
 Sale of goods
 Transactions in money (unless there is a separate charge)
 Buying or selling shares/securities (no GST on principal amount)
Comparison Table: Goods vs Services
Feature Goods Services
Movable property (excluding money, Anything other than goods, money,
Definition
securities) securities
Tangibility Tangible (physical form) Intangible (no physical form)
Examples Pen, Mobile, Rice, Machinery Insurance, Banking, Transport, Rent
Place of Supply Based on location of
Based on movement of goods
Rule recipient/supplier
3. Deemed Supply (Schedule I of CGST Act, 2017)
Definition: ‘Deemed Supply’ refers to certain activities that are treated as supply even if made
without consideration (i.e., free of cost), under Schedule I of the CGST Act.
Key Provisions of Schedule I:
The following are treated as supply even if made without consideration:
a) Permanent Transfer or Disposal of Business Assets
 When a business asset on which input tax credit (ITC) has been availed is permanently
transferred or disposed of without consideration.
 Example: Giving away company-owned laptops for free to outsiders.
b) Supply Between Related Persons or Distinct Persons
 Supply of goods/services between:
o Related persons (family, employer-employee, etc.).
o Distinct persons (branches of the same company registered in different states).
 Even if made without consideration, it's treated as supply.
 Example: A company transferring goods from its Karnataka branch to Maharashtra
branch.
c) Gifts by Employer to Employee Exceeding ₹50,000
 If the total value of gifts given by an employer to an employee exceeds ₹50,000 in a
financial year, then the excess is treated as a supply.
 Note: Gifts below ₹50,000 are not taxed.

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Dr.UMA K Assistant Professor GSSSIETW, Mysuru
d) Import of Services by a Taxable Person from a Related Person or from Own
Establishment Outside India (for Business Use)
 Even without consideration, if a registered person imports services from:
o A related person (e.g., parent company), or
o Their own branch/head office located outside India,
o And the services are used for business → it is treated as a deemed supply.
Deemed Supplies
GST
Deemed Supply Condition Taxable?
Applicable?
Permanent transfer of ITC-claimed assets without payment Yes Yes
Transfer of goods to own branch in another state (distinct
Yes Yes
person)
Yes
Employer gives ₹70,000 gift to employee Yes
(₹20,000)
Free legal advice from parent company abroad Yes Yes (RCM)
Problem 4: Deemed Supply
Question:ABC Ltd. provides a machinery to its branch in another state without consideration. Is
it a supply under GST?
Solution:
Yes. As per Schedule I of CGST Act, supply between distinct persons (branches in different
states) is considered Deemed Supply even if made without consideration.
Taxable as Inter-State Supply
IGST is applicable on the value of machinery.
Problem 4: Deemed Supply between Branches
Question: ABC Ltd. transfers goods worth ₹5,00,000 from its Karnataka branch to its
Maharashtra branch (both registered).
Solution:
 Inter-branch supply in different states = Deemed Supply
 Treated as Inter-State Supply → IGST applicable
Particulars Value (₹) GST Rate Tax Type Tax Payable
Branch Transfer 5,00,000 18% IGST ₹90,000
GST Payable: ₹90,000
4. Classification of Supply
Under GST, classification of supply helps determine tax applicability, rate, and place of
supply. Supplies are classified on various bases:
a) Inward Supply
 Definition: As per Section 2(67) of CGST Act – Receipt of goods/services by a
registered person.
 Includes:
o Purchases
o Imports
o Services received from vendors
 Example: Purchase of raw materials by a manufacturer.
b) Outward Supply

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Dr.UMA K Assistant Professor GSSSIETW, Mysuru
 Definition: As per Section 2(83) – Supply of goods/services by a registered person in the
course of business.
 Includes:
o Sale of finished goods
o Providing consultancy services
 Example: A retailer selling goods to customers.
c) Classification Based on Frequency
i) One-time Supply
 A single, isolated supply of goods or services.
 Example: Selling used company car, one-time event management service.
ii) Continuous Supply
 Supply provided on a recurring basis, under a contract, and billed periodically.
 Continuous Supply of Goods (Sec 2(32)): Requires successive statements or payments.
 Continuous Supply of Services (Sec 2(33)): Involves uninterrupted service.
 Examples:
o Internet service
o Electricity supply
o Rent agreements
d) Classification Based on Taxability
i) Taxable Supply
 Supplies on which GST is levied.
 Includes regular goods and services like electronics, clothing, food in restaurants.
ii) Exempt Supply (Section 2(47))
 Supplies attracting 0% tax or listed in exemption notifications.
 No GST charged; ITC not allowed.
 Examples:
o Unbranded fruits and vegetables
o Educational services
o Healthcare services
Problem 5: Exempt vs. Taxable Supply
Question: M/s HealthPlus provides the following services:
(a) Yoga classes – ₹30,000
(b) Gym services – ₹50,000
(c) Health consultation – ₹20,000
 Identify which are taxable/exempt supplies and compute total taxable supply.
 Solution:
Service Amount GST Status
Yoga classes ₹30,000 Exempt (under Notification)
Gym services ₹50,000 Taxable (18%)
Health consultation ₹20,000 Exempt (if by registered medical practitioner)
 Total Taxable Supply = ₹50,000 (only Gym)
 GST = ₹50,000 × 18% = ₹9,000
Problem 5: Mixed Transaction – Exempt + Taxable
Question:M/s City Care provides the following services in a month:
 Hospital services (exempt): ₹2,00,000

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Course Code: 22MBAFM406
Dr.UMA K Assistant Professor GSSSIETW, Mysuru
 Beauty treatment (taxable @18%): ₹1,50,000
 Yoga classes (exempt): ₹50,000
Calculate total GST liability.
Solution:
Service Type Amount (₹) GST Rate Taxable? GST Payable
Hospital services 2,00,000 0% No ₹0
Beauty treatment 1,50,000 18% Yes ₹27,000
Yoga classes 50,000 0% No ₹0
Total GST Liability = ₹27,000
iii) Nil-rated Supply
 Supplies taxed at 0% rate.
 Falls under GST but attracts zero tax.
 Examples:
o Salt
o Grains (wheat, rice)
 ITC is not available.
iv) Non-taxable Supply
 Supplies not covered under GST law.
 Example:
o Alcohol for human consumption
o Petroleum products (temporarily excluded)
 GST not applicable, ITC not allowed.
e) Classification Based on Geographical Location
i) Intra-State Supply
 Seller and buyer are located in the same state or Union Territory.
 Taxes levied: CGST + SGST.
 Example: Selling goods from Bangalore to Mysore.
ii) Inter-State Supply
 Supplier and recipient are in different states.
 Also includes:
o Supply to SEZ units
o Imports/Exports
 Tax levied: IGST
 Example: Selling goods from Karnataka to Tamil Nadu.
 Problem 1: Intra-State vs. Inter-State Supply
 Question:
M/s Galaxy Traders (registered in Karnataka) made the following supplies during April
2024:
Particulars Value (₹) Supply Type
Sale to dealer in Tamil Nadu 3,00,000 Inter-State
Sale to dealer in Karnataka 2,00,000 Intra-State
Sale of exempted agricultural produce 1,00,000 Exempt
 Applicable GST Rate: 18%

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Dr.UMA K Assistant Professor GSSSIETW, Mysuru
 Solution:
 Step 1: Calculate Taxable Value
Supply Type Value (₹) GST Rate Tax Type GST Payable
Inter-State Supply 3,00,000 18% IGST ₹54,000
Intra-State Supply 2,00,000 18% CGST + SGST ₹18,000 + ₹18,000 = ₹36,000
Exempt Supply 1,00,000 0% No GST ₹0
 Total GST Payable = ₹54,000 (IGST) + ₹36,000 (CGST+SGST)
Exempt supply not included in tax liability
iii) Import and Export
 Import of Goods/Services:
o Treated as inter-state supply.
o IGST applicable under Reverse Charge.
 Export of Goods/Services:
o Treated as Zero-Rated Supply.
o Exporter can claim refund of ITC or export without payment of tax under bond.
Type Description GST Applicable?
Inward Supply Purchases/receipts by registered person May be eligible for ITC
Outward Supply Sales made by registered person Output GST applicable
One-time Supply Single transaction Yes
Continuous Supply Ongoing/contractual supply Yes
Taxable Supply GST is charged Yes
Exempt Supply Exempted by law or notification No GST; No ITC
Nil-rated Supply GST rate = 0% No GST; No ITC
Non-taxable Supply Outside GST scope (e.g., alcohol) No GST
Intra-State Supply Within the same state CGST + SGST
Inter-State Supply Between different states IGST
Import of Goods/Services From outside India IGST (under RCM)
Export of Goods/Services To outside India Zero-rated (Refund eligible)

Example 1: Intra-State Supply (within Karnataka)

 Sale within Karnataka

 Invoice Value: ₹1,00,000
 GST Rate: 18%

Particulars Amount (₹) Rate (%) Tax Amount (₹)

Taxable Value (Invoice Value) 1,00,000 – –
CGST 1,00,000 9% 9,000
SGST 1,00,000 9% 9,000

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Course Code: 22MBAFM406
Dr.UMA K Assistant Professor GSSSIETW, Mysuru
Particulars Amount (₹) Rate (%) Tax Amount (₹)
Total GST – 18% 18,000
Total Invoice Amount – – 1,18,000

Example 2: Inter-State Supply (Karnataka to Maharashtra)

 Supplier in Karnataka, buyer in Maharashtra

 Invoice Value: ₹2,00,000
 GST Rate: 12%

Particulars Amount (₹) Rate (%) Tax Amount (₹)

Taxable Value (Invoice Value) 2,00,000 – –
IGST 2,00,000 12% 24,000
Total GST – 12% 24,000
Total Invoice Amount – – 2,24,000
5. Composite and Mixed Supply Goods or services are sometimes sold in combinations. The
GST law clearly differentiates these combinations as Composite Supply or Mixed Supply, and
each has different tax implications.
a) Composite Supply – Section 2(30) of CGST Act
Definition: A Composite Supply refers to: A supply made by a taxable person consisting of two
or more taxable supplies of goods or services or both, which are naturally bundled and supplied
in conjunction with each other in the ordinary course of business, where one is a principal
supply.
Key Characteristics:
 At least two or more supplies involved.
 Naturally bundled — they are usually offered together.
 Principal supply is the main element, others are secondary.
 Tax rate of principal supply applies to the whole bundle.
Example:Hotel Room with Complimentary Breakfast
 Room is the principal supply.
 Breakfast is ancillary.
 Entire supply taxed at the rate applicable to the room.
Another Example:Air travel with onboard meal – Meal is incidental; the air travel is the
principal supply.
Tax Treatment:
 Entire transaction is taxed at the rate of the principal supply.
b) Mixed Supply – Section 2(74) of CGST Act
Definition:A Mixed Supply means: Two or more individual supplies of goods or services or any
combination thereof, made together for a single price, which are not naturally bundled and can
be supplied separately.
Key Characteristics:
 Multiple independent supplies sold together.
 Supplies are not naturally bundled.

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Dr.UMA K Assistant Professor GSSSIETW, Mysuru
 Can be sold separately in normal business.
 Supplied for a single price.
Example:Diwali Gift Hamper containing:
 Chocolates (18%)
 Wine (28%)
 Toys (12%)
Since these are not naturally bundled, it is a mixed supply.
Tax Treatment:
 Highest tax rate among the items in the bundle applies to the entire supply.
 In the above example, GST will be applied at 28% on the total price of the hamper.
Comparison Table: Composite vs Mixed Supply
Basis Composite Supply Mixed Supply
Bundling Naturally bundled Not naturally bundled
Principal
One item is the main (principal) No principal supply
Supply
Generally sold together in ordinary
Sold Together Sold together for convenience
course
Highest rate among all supplies
Tax Rate Rate of principal supply applies
applies
Example Hotel room with breakfast Gift pack (toys + chocolates + wine)

Problem 2: Composite Supply

Question:M/s Fast Tech sells a mobile phone for ₹20,000 and charges ₹500 for delivery. The
invoice is issued as a single price. Identify the type of supply.
Solution:
Principal Supply = Mobile phone (goods)
Delivery is ancillary.
Composite Supply → One supply is principal; others are naturally bundled and supplied
together.
Entire supply taxed as mobile phone supply (e.g., 18% GST on ₹20,500).
Problem 3: Mixed Supply
Question:M/s Rainbow Mart sells a Diwali gift hamper for ₹1,000 containing chocolates (5%),
toys (12%), and perfumes (18%). Identify the type of supply and tax rate.
Solution:
Items are not naturally bundled, can be sold separately.
Mixed Supply → Highest rate applies.
GST Rate = 18% on ₹1,000 = ₹180
Total invoice = ₹1,180

Problem 2: Composite Supply

Question: A dealer supplies a water purifier (taxable @18%) along with installation service
(normally taxable @18%) for a single price of ₹25,000.
Solution:
Since goods and services are bundled and naturally supplied together:

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Dr.UMA K Assistant Professor GSSSIETW, Mysuru
 It is a composite supply
 Principal supply = Water purifier
Entire amount taxable at 18%
Tax Liability:
Particulars Value (₹) Rate Tax Liability
Composite Supply ₹25,000 18% ₹4,500
Problem 3: Mixed Supply
Question: A gift pack sold for ₹2,000 includes chocolates (5%), soft drink (12%), and perfume
(18%). Identify type and calculate GST.
Solution:
 Not naturally bundled
 It is a mixed supply
 Highest rate (perfume @18%) applies on total
Tax Calculation:
Item Group Value (₹) Rate Tax
Entire Package 2,000 18% ₹360
GST Payable = ₹360 (under Mixed Supply rules)

6. Scope of Supply (Schedule I, II, and III of CGST Act)

The “Scope of Supply” under GST is defined and explained through three Schedules:
Schedule I – Activities Treated as Supply Even Without Consideration
This includes “Deemed Supplies” and has already been explained in detail earlier.
Examples:
 Transfer of business assets without consideration (if ITC claimed).
 Supply between related/distinct persons.
 Gifts by employer to employee above ₹50,000/year.
 Import of services from related persons for business use.
Taxable even if there is no payment.
Schedule II – Classification: Supply of Goods or Services
Schedule II clarifies whether a transaction is a supply of goods or services — this is important
because:
 GST rate, valuation, and place of supply rules depend on this classification.
Activities Treated as Supply of Goods:
 Transfer of title in goods.
 Transfer of business assets for a consideration.
 Supply of goods by unincorporated association to members.
Activities Treated as Supply of Services:
 Renting of immovable property.
 Construction of building (except if entire payment is after completion).
 Works contract.
 Temporary transfer or permitting use of IPR.
 Lease or letting out of goods.
This schedule helps reduce confusion in bundled transactions.
Schedule III – Activities or Transactions Which Are Not Supply

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Dr.UMA K Assistant Professor GSSSIETW, Mysuru
These activities are neither a supply of goods nor a supply of services, hence outside the
scope of GST.
Examples:
 Services by employee to employer in the course of employment.
 Functions by MPs, MLAs, Panchayats, Courts, etc.
 Sale of land and completed buildings.
 Actionable claims (except lottery, betting, gambling).
 Duties performed by constitutional bodies.
These are non-taxable under GST.
Summary Table – Schedule I, II, III
Schedule Purpose Examples GST Impact
Supply without consideration Gifts > ₹50,000, Branch
Schedule I Taxable
treated as supply transfer
Schedule Classification as supply of goods Renting = Service; Transfer Helps apply
II or services of title = Goods correct GST
Schedule Salary, Sale of land, Court
Activities outside GST scope Not Taxable
III decisions
7. Determination of Tax Liability on Various Supplies
This topic helps students understand how to compute GST payable, including how to:
 Identify the type of supply (intra/inter-state)
 Apply the correct tax rate
 Calculate the value of supply
 Compute output GST (CGST/SGST/IGST)
Key Steps in Determining Tax Liability:
1. Identify Place of Supply:
o Same state → Intra-State → CGST + SGST
o Different states → Inter-State → IGST
2. Determine Value of Taxable Supply:
o Consider transaction value (price actually paid or payable)
o Deduct discounts if conditions are met
o Add taxes (other than GST), packing, transport, etc., if not included in price
3. Apply Correct GST Rate:
o Based on product/service classification (e.g., 5%, 12%, 18%, 28%)
4. Calculate Tax:
o Intra-State:CGST = (Rate ÷ 2), SGST = (Rate ÷ 2)
o Inter-State:IGST = Full GST Rate

Sample Problem 1: CGST + SGST Calculation (Intra-State)

Problem:Mr. A (Karnataka) sold goods worth ₹1,00,000 to Mr. B (Karnataka). GST Rate =
18%.
Solution:
Particulars Amount (₹)
Value of Supply 1,00,000
CGST @ 9% 9,000

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Dr.UMA K Assistant Professor GSSSIETW, Mysuru
Particulars Amount (₹)
SGST @ 9% 9,000
Total GST Payable 18,000
This is an Intra-State supply → GST is split into CGST + SGST.
Sample Problem 2: IGST Calculation (Inter-State)
Problem: A dealer in Tamil Nadu sells goods worth ₹2,00,000 to a customer in Maharashtra.
GST Rate = 12%.
Solution:
Particulars Amount (₹)
Value of Supply 2,00,000
IGST @ 12% 24,000
Total GST Payable 24,000
This is an Inter-State supply → Only IGST is charged.
Sample Problem 3: Discount Adjustment
Problem:Invoice value of ₹50,000 given with a 10% discount before supply. GST Rate = 18%,
same state transaction.
Solution:
Particulars Amount (₹)
Invoice Price 50,000
Less: 10% Discount (5,000)
Value of Supply 45,000
CGST @ 9% 4,050
SGST @ 9% 4,050
Total GST Payable 8,100
Discount offered before or at the time of supply is deductible.
Types of Supply and GST Implications:
Type of Supply Tax Type Applicable Tax
Intra-State CGST + SGST Equally split tax rate
Inter-State IGST Full tax rate
Export (Zero-rated) None (refund of ITC) Zero tax or refund available
Import IGST under RCM Importer pays IGST
8. Levy and Collection of Tax (Section 9 of CGST Act)
Meaning of ‘Levy’ and ‘Collection’:
 Levy means imposing or charging tax by law.
 Collection refers to the actual payment of the tax by the registered person.
Key Provisions under Section 9 of CGST Act:
1. Tax is Levied on All Intra-State Supplies:
o Both goods and services, except alcohol for human consumption.
o Tax is payable by the supplier of goods/services.

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Dr.UMA K Assistant Professor GSSSIETW, Mysuru
2. Type of Tax on Intra-State Supply:
o CGST (Central GST) + SGST (State GST)
3. Tax is Levied on Inter-State Supplies Under IGST Act:
o Controlled by Section 5 of the IGST Act, 2017
o Tax is IGST (Integrated GST)
4. Maximum Rate of Tax:
o Cannot exceed 20% each for CGST and SGST, i.e., total 40% for goods or
services.
o Current slabs: 0%, 5%, 12%, 18%, 28%
5. Reverse Charge Mechanism (RCM):
o In certain notified supplies, tax is payable by the recipient, not the supplier.
Example of Levy and Collection:
Tax Collected
Transaction Supply Type Tax Levied
From
Customer (via
Local sale in Karnataka Intra-State CGST + SGST
supplier)
Sale from Karnataka to Customer (via
Inter-State IGST
Delhi supplier)
Inter-State
Import of goods from USA IGST under RCM Importer
(Deemed)
GTA service to a business RCM → CGST +
Notified RCM Recipient
entity SGST/IGST
Summary Table – Section 9 Provisions
Aspect Details
Governing Section Section 9 of CGST Act
Applicability Intra-state supply of goods/services
Type of Tax CGST + SGST
Maximum Tax Rate (each) 20% (as per law)
Current GST Rate Slabs 0%, 5%, 12%, 18%, 28%
RCM Applicable? Yes, on notified goods/services
Special cases Alcohol excluded; petroleum not yet under GST
9. Reverse Charge Mechanism (RCM) under GST
Meaning of Reverse Charge:
 In normal cases under GST, supplier of goods/services collects tax and deposits it with
the government.
 Under Reverse Charge Mechanism (RCM), the recipient (buyer) of goods or services
is liable to pay GST, not the supplier.
Legal Provisions:
 Section 9(3)&9(4) of CGST Act, 2017
 Section 5(3)&5(4) of IGST Act, 2017
Types of Reverse Charge Situations:
Section Type of Transaction Who Pays Tax?

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Section Type of Transaction Who Pays Tax?
Section 9(3) Supply of Notified Goods/Services Recipient
Section 9(4) Supply from Unregistered Supplier to Registered Recipient

When is RCM Applicable?

1. Notified Goods or Services [Section 9(3)]
These are notified by the government (via Notification). Some examples:
Service Supplier Recipient (Liable under RCM)
Goods Transport Agency
GTA (transporter) Business registered under GST
(GTA)
Legal Services Advocate or Law Firm Business Entity
Services of Director Director (individual) Company or Body Corporate
Government
Rent from Government Business Entity
Department
Registered business (non-body
Security Services Security Agency
corporate)
2. Supply by Unregistered Persons to Registered Persons [Section 9(4)]
 RCM is applicable when a registered person purchases goods/services from an
unregistered person, under specific conditions.
Note: This provision is now applicable only to specific cases like construction services, not for
all unregistered supplies.
Conditions for RCM:
 Recipient must be registered under GST.
 Payment of GST must be made directly by the recipient.
 Recipient is also eligible to claim Input Tax Credit (ITC) (if used for business).
 The tax must be paid in cash (not using ITC).
Example 1 – RCM on Legal Services (Section 9(3))
Scenario:ABC Ltd. (Registered) takes professional legal services from Mr. X, an advocate
(Unregistered).
Tax Implication:
 RCM is applicable.
 ABC Ltd. is liable to pay GST on the legal service received.
 Mr. X has no GST liability.
Example 2 – RCM on GTA Services
Scenario:A transporter (GTA) provides transport service to MNO Ltd. (Registered company).
Value of freight = ₹1,00,000; GST rate = 5% (under RCM).
Solution:
 RCM applies.
 GST Payable = 5% of ₹1,00,000 = ₹5,000
 MNO Ltd. must pay ₹5,000 to the government under RCM and can claim ITC if used for
business.
Example 3 – RCM on Unregistered Supplier (Section 9(4))

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Dr.UMA K Assistant Professor GSSSIETW, Mysuru
Scenario:XYZ Ltd. (Registered under GST) buys raw material worth ₹50,000 from a local
unregistered trader.
Implication: If this case falls under notified scenarios (e.g., real estate sector), XYZ Ltd. must
pay GST on ₹50,000 under RCM.
Accounting Entries under RCM:
Particulars Debit (₹) Credit (₹)
Expense A/c (e.g., Legal fees) ₹50,000
Input CGST A/c ₹4,500
Input SGST A/c ₹4,500
To Vendor/Bank A/c ₹59,000
To CGST Payable A/c ₹4,500
To SGST Payable A/c ₹4,500
Key Points to Remember:
1. RCM shifts tax liability from supplier to recipient.
2. Recipient must be registered under GST.
3. Payment must be made in cash, not through ITC.
4. Input Tax Credit (ITC) is available on tax paid under RCM, subject to conditions.
5. RCM compliance requires proper accounting, reporting in GSTR-3B and GSTR-1.
Impact of RCM on Businesses:
Positive Impact Negative Impact
Enables ITC claim for tax paid Increases compliance burden
Ensures tax coverage of unregulated suppliers Requires cash outflow before credit is claimed
Conclusion: RCM under GST is a significant provision to ensure tax collection from the
recipient, especially where the supplier is not in the tax net. It promotes compliance, curbs tax
evasion, and widens the tax base. For businesses, understanding RCM is essential for proper
accounting and avoiding penalties.
10. Composition Scheme in GST
1. Meaning of Composition Scheme:
 A simplified scheme for small taxpayers to reduce compliance burden.
 Instead of monthly GST returns and complex records, eligible businesses pay tax at a
fixed rate on turnover and file quarterly returns.
 Designed under Section 10 of the CGST Act, 2017.
2. Objective of the Scheme:
 To ease the compliance process for small businesses.
 To encourage voluntary registration and tax compliance.
 To provide lower tax rates and fewer formalities.
3. Who Can opt for Composition Scheme? (Eligibility Criteria)
Eligible Persons Ineligible Persons
Manufacturers Suppliers of non-taxable goods
Traders Inter-State suppliers
Restaurants (not serving alcohol) E-commerce operators

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Eligible Persons Ineligible Persons
Service providers (within limits) Input Service Distributors (ISD)
Mixed suppliers of goods/services (subject to limits) Casual taxable persons & non-residents
4. Turnover Limit (as per latest updates):
Region Annual Aggregate Turnover Limit
For most states ₹1.5 Crores
For NE States + Uttarakhand ₹75 Lakhs
Aggregate turnover includes all taxable, exempt, export, and inter-state supplies on all India
Under Section 10 of the CGST Act, 2017, the threshold limit for opting into the Composition
Levy Scheme differs based on the type of state — regular states vs special category states.
Threshold Limit for Special Category States (under Composition Scheme):
Special Category States:
As per the GST law, the following are treated as special category states for Composition Scheme
purposes:
1. Arunachal Pradesh
2. Manipur
3. Meghalaya
4. Mizoram
5. Nagaland
6. Sikkim
7. Tripura
8. Uttarakhand
Note: Jammu & Kashmir, Assam, and Himachal Pradesh were earlier treated as special category
states but now follow the ₹1.5 crore limit.
5. Conditions to Avail Composition Scheme:
 No inter-state outward supplies.
 Not supplying through e-commerce platforms.
 Cannot claim Input Tax Credit (ITC).
 “Composition taxable person” must be mentioned on every invoice.
 Bill of supply must be issued instead of tax invoice.
6. GST Rates under Composition Scheme:
Type of Taxpayer GST Rate on Turnover
Manufacturers (other than ice cream, etc.) 1% (0.5% CGST + 0.5% SGST)
Traders (dealers) 1% (0.5% CGST + 0.5% SGST)
Restaurants (not serving alcohol) 5% (2.5% CGST + 2.5% SGST)
Service Providers (under notified scheme) 6% (3% CGST + 3% SGST)
7. Advantages of Composition Scheme:
Simple tax structure Lower tax rate
Limited compliance burden No detailed records needed
Quarterly returns only Encourages small businesses
8. Disadvantages / Limitations:

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Dr.UMA K Assistant Professor GSSSIETW, Mysuru
No ITC available Not allowed for inter-state supply
Not applicable to e-commerce Must pay tax on exempted sales too
Cannot issue tax invoice Restricted for specific services
9. Compliance Requirements:
 File CMP-08 (Quarterly Statement of Self-Assessed Tax).
 File GSTR-4 annually.
 Maintain limited records.
 Mention “Composition Taxable Person” on all bills.
10. Example Problem – Simple Calculation under Composition Scheme:
Scenario: A trader in Karnataka has a turnover of ₹80,00,000 in a financial year. He is eligible
under the Composition Scheme.
Applicable Rate: 1% (0.5% CGST + 0.5% SGST)
Solution:
Particulars Amount (₹)
Turnover ₹80,00,000
Composition Tax (1%) ₹80,000
CGST (0.5%) ₹40,000
SGST (0.5%) ₹40,000
Total Tax Payable ₹80,000
The trader has to pay ₹80,000 as tax under Composition Scheme and cannot collect GST from
customers.
11. Switching from Composition to Regular Scheme:
 Can switch voluntarily if eligible.
 Must pay normal GST from the date of switch.
 Must file intimation in Form GST CMP-04.
 Reverse ITC on inputs held in stock.
12. Penalty for Wrongful Availment:
 If found ineligible but still opted:
o Liable to pay differential tax with interest and penalty under Section 73 or 74.
10. Composition Scheme under GST (Section 10 of CGST Act, 2017)
The Composition Scheme is a simple and hassle-free compliance mechanism for small
taxpayers. It allows them to pay GST at a fixed rate of turnover and file fewer returns, without
claiming input tax credit (ITC).
a) Eligibility Criteria
1. Aggregate Turnover Limit:
o Should not exceed ₹1.5 crore in the previous financial year.
o For Special Category States (like Manipur, Mizoram, Tripura, Nagaland), the
limit is ₹75 lakhs..Service Providers: Turnover should not exceed ₹50 lakh in
the previous financial year.
2. Type of Business Allowed:
o Manufacturer (except notified items like ice cream, tobacco, etc.)
o Traders and retailers.
o Restaurants not serving alcohol.

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3. Ineligible Businesses:
o Service providers (except restaurant services).
➤However, service providers can opt into a special scheme under Notification
No. 2/2019-Central Tax (Rate) and pay at 6% up to ₹50 lakh turnover.

a)Ineligible Persons:

 Inter-state suppliers (cannot supply outside the home state).

 E-commerce operators or those supplying through e-commerce platforms (like Amazon,
Flipkart).
 Manufacturers of notified goods such as ice cream, pan masala, or tobacco.

Example: A Kirana store in Karnataka has a turnover of ₹85 lakhs (only within the state) and
sells taxable goods.
It is eligible for the Composition Scheme.
b) Conditions for Availing Composition Scheme
1. No Input Tax Credit (ITC):
o Cannot claim ITC on purchases.
o Cannot issue tax invoices — only a “bill of supply.”
2. Display Requirements:
o Must mention: “Composition taxable person, not eligible to collect tax on
supplies” on every bill.
3. No Collection of GST:
o Cannot collect GST from customers.
4. Uniform Scheme:
o All businesses registered under the same PAN must opt in together.
Example: Mr. Ravi runs a stationery shop in Bangalore and also owns a textile shop in Chennai.
To opt for composition for one, he must opt for both — or none.
c) Rates of Composition Levy (Tax)
Category Rate Break-up
Traders (goods resellers) 1% of turnover 0.5% CGST + 0.5% SGST
Manufacturers (other than notified) 1% of turnover 0.5% CGST + 0.5% SGST
Restaurants (non-alcohol) 5% of turnover 2.5% CGST + 2.5% SGST
Service Providers (optional scheme) 6% of turnover (up to ₹50L) 3% CGST + 3% SGST
Examples:
1. A restaurant (not serving alcohol) with ₹40 lakhs turnover will pay:
o 5% of ₹40 lakhs = ₹2 lakhs (GST under composition).
2. A trader in Assam with turnover of ₹60 lakhs:
o 1% of ₹60 lakhs = ₹60,000 (Composition levy).
d) Returns & Compliance
 Quarterly Return: CMP-08 (tax payment).
 Annual Return: GSTR-4 (summary of yearly turnover and tax).
e) Benefits of Composition Scheme
 Lower tax liability.

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 Simple tax payment.
 Lesser compliance burden (quarterly payment, annual return).
 Better suited for small businesses and shops.
f) Limitations
 Cannot do interstate sales.
 Not suitable for B2B businesses (no ITC to buyers).
 Cannot sell through e-commerce platforms.
Conclusion: The Composition Scheme is designed to reduce the tax burden and compliance for
small businesses. However, the trade-off is the loss of ITC and restrictions on sales and
services.

Example 4: Manufacturer

 M/s Prakash Industries, a small-scale manufacturer in Telangana, has a turnover of ₹90 lakhs.
 Opts for Composition Scheme:
o GST = ₹90,00,000 × 1% = ₹90,000
o No ITC, No tax collection on invoice.

Example 5: Restaurant

 Tasty Bites Café in Karnataka has ₹60 lakh turnover.

 Opts for Composition Scheme:
o GST = ₹60,00,000 × 5% = ₹3,00,000
o Cannot collect GST from customers.

Example 6: Service Provider

 Ms. Renu, a freelance interior designer, earns ₹45 lakhs annually.

 She opts for the composition scheme for service providers:
o GST = ₹45,00,000 × 6% = ₹2,70,000

Concept 1: Composite vs. Mixed Supply (with GST Rate Application)

Problem 1:
A hotel provides a room stay with complimentary breakfast. Room tariff: ₹4,000/night; Breakfast
value: ₹500. GST on room: 12%, on food: 5%. Identify supply type and compute GST.
Solution:
 Nature: Composite Supply (naturally bundled).
 Principal supply: Room.
 GST @ 12% on ₹4,500 = ₹540
👉Answer: GST = ₹540
Problem 2:A Diwali gift pack contains dry fruits (5%), sweets (12%), and a small Bluetooth
speaker (18%). Total pack price: ₹1,000. Identify supply type and calculate GST.
Solution:
 Nature: Mixed Supply (not naturally bundled).

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Dr.UMA K Assistant Professor GSSSIETW, Mysuru
 Highest rate: 18%
 GST = ₹1,000 × 18% = ₹180
Answer: GST = ₹180
Problem 3:A company offers a combo: air conditioner + stabilizer at ₹35,000 (market value:
₹30,000 + ₹6,000). AC GST: 12%; stabilizer: 18%. Is this composite or mixed?
Solution:
 Sold together but not naturally bundled → Mixed Supply
 Highest rate = 18%
 GST = ₹35,000 × 18% = ₹6,300
Answer: GST = ₹6,300
Problem 4:Printer sold with installation and 1-year maintenance contract: Total ₹50,000. GST
on printer = 18%, service = 18%. Identify supply and calculate GST.
Solution:
 Naturally bundled → Composite Supply
 GST on principal = 18%
 GST = ₹50,000 × 18% = ₹9,000
Answer: GST = ₹9,000
Problem 5:A toy seller offers a ‘Back-to-School’ pack of toys (12%) and chocolate bars (5%) at
₹2,000. Identify type and calculate tax.
Solution:
 Not naturally bundled → Mixed Supply
 Highest rate: 12%
 GST = ₹2,000 × 12% = ₹240
Answer: GST = ₹240
Concept 2: Intra-State vs Inter-State Supply
Problem 1:Mr. Raj (Bangalore) sells goods worth ₹50,000 to a buyer in Delhi. GST rate: 18%.
Solution:
 Inter-State Supply → IGST applicable
 IGST = ₹50,000 × 18% = ₹9,000
Answer: IGST = ₹9,000
Problem 2:XYZ Ltd. (Mumbai) supplies goods worth ₹80,000 to a buyer in Pune. GST rate:
12%.
Solution:
 Intra-State Supply → CGST + SGST
 CGST = ₹80,000 × 6% = ₹4,800
 SGST = ₹80,000 × 6% = ₹4,800
Answer: ₹4,800 CGST + ₹4,800 SGST
Problem 3:A Chennai-based supplier sells goods worth ₹1,00,000 to a customer in Sri Lanka
(export). GST rate = 18%.
Solution:
 Export = Zero-Rated
 No GST payable if done with LUT or refund claim
Answer: GST = ₹0
Problem 4:Kolkata-based business imports services from UK consultant worth ₹1,50,000. GST
= 18%.
Solution:

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 Import of services = Inter-State → IGST under RCM
 IGST = ₹1,50,000 × 18% = ₹27,000
Answer: IGST under RCM = ₹27,000
Problem 5:Dealer in Hyderabad sells goods worth ₹90,000 to another dealer in Telangana. GST
rate = 5%.
Solution:
 Intra-State Supply
 CGST = ₹90,000 × 2.5% = ₹2,250
 SGST = ₹90,000 × 2.5% = ₹2,250
Answer: ₹2,250 CGST + ₹2,250 SGST
Concept 3: Value of Supply after Trade Discounts
Problem 1:Invoice Value: ₹1,00,000; Trade Discount: 10%; GST rate: 18%.
Solution:
 Net Value = ₹90,000
 GST = ₹90,000 × 18% = ₹16,200
Answer: GST = ₹16,200
Problem 2:MRP: ₹50,000; Pre-supply discount: 15%; GST: 12%.
Solution:
 Value after discount = ₹42,500
 GST = ₹42,500 × 12% = ₹5,100
Answer: GST = ₹5,100
Problem 3:Invoice: ₹1,20,000 with post-supply discount of ₹20,000 not linked to invoice. GST
= 5%.
Solution:
 Post-supply discount not allowed unless per agreement
 Taxable Value = ₹1,20,000
 GST = ₹1,20,000 × 5% = ₹6,000
Answer: GST = ₹6,000
Problem 4:Sale value = ₹75,000; Discount (shown in invoice) = ₹5,000; GST = 18%.
Solution:
 Taxable value = ₹70,000
 GST = ₹12,600
Answer: GST = ₹12,600
Problem 5:
List Price = ₹2,00,000; Discount 20%; GST = 12%.
Solution:
 Taxable value = ₹1,60,000
 GST = ₹19,200
Answer: GST = ₹19,200
Concept 4: Tax Liability under Composition Scheme
Problem 1:
A trader in Karnataka opts for Composition Scheme. Turnover = ₹80 lakhs. Rate = 1%.
Solution:
 GST = ₹80,00,000 × 1% = ₹80,000
Answer: GST = ₹80,000 (0.5% CGST + 0.5% SGST)
Problem 2:

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 INDIRECT TAXATION
Course Code: 22MBAFM406
Dr.UMA K Assistant Professor GSSSIETW, Mysuru
A restaurant (no alcohol) in Delhi earns ₹50 lakhs. Rate = 5%.
Solution:
 GST = ₹50,00,000 × 5% = ₹2,50,000
👉Answer: GST = ₹2,50,000 (2.5% CGST + 2.5% SGST)
Problem 3:
A manufacturer in Uttarakhand has turnover ₹70 lakhs. Rate = 1%.
Solution:
 GST = ₹70,00,000 × 1% = ₹70,000
Answer: ₹70,000 (0.5% + 0.5%)
Problem 4:
A trader in Nagaland under Composition Scheme has turnover ₹60 lakhs.
Solution:
 GST = ₹60,00,000 × 1% = ₹60,000
Answer: GST = ₹60,000
Problem 5:
A service provider opts for optional composition scheme. Turnover = ₹40 lakhs. Rate = 6%.
Solution:
 GST = ₹40,00,000 × 6% = ₹2,40,000
Answer: GST = ₹2,40,000 (3% + 3%)
Composition Levy Scheme vs. Normal GST Scheme, suitable for MBA final exams:
Problem: Mr. Ramesh is a trader in Karnataka selling electronic goods. He has a total turnover
of ₹80,00,000 during the financial year 2024–25. He is evaluating whether to opt for the
Composition Scheme or Regular GST Scheme.The details are as follows:
 Purchase from registered dealers (intra-state): ₹60,00,000 (with 18% GST paid on
purchases)
 Sale Price (inclusive of profit margin): ₹80,00,000
 GST Rate on Sales under Normal Scheme: 18%
 GST Rate under Composition Scheme: 1% (0.5% CGST + 0.5% SGST)
 All purchases and sales are intra-state.
Calculate and compare the tax liability under both schemes and advise which is more
beneficial.
Solution:
Particulars Composition Scheme Regular GST Scheme
Turnover ₹80,00,000 ₹80,00,000
GST Rate 1% (0.5% CGST + 0.5% SGST) 18% (9% CGST + 9% SGST)
Output Tax Liability ₹80,00,000 × 1% = ₹80,000 ₹80,00,000 × 18% = ₹14,40,000
Input Tax Credit (ITC) Not Allowed ₹60,00,000 × 18% = ₹10,80,000
Net GST Payable ₹80,000 ₹14,40,000 – ₹10,80,000 = ₹3,60,000
Analysis & Conclusion:
 Under the Composition Scheme, Mr. Ramesh pays a flat ₹80,000 as GST, but cannot
claim ITC.
 Under the Normal Scheme, though the output tax is higher (₹14,40,000), he can claim
₹10,80,000 as ITC, resulting in net liability of ₹3,60,000.

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 INDIRECT TAXATION
Course Code: 22MBAFM406
Dr.UMA K Assistant Professor GSSSIETW, Mysuru
Conclusion:
 If Mr. Ramesh's buyers are not concerned with GST invoices (like retail customers),
and compliance simplicity is preferred, Composition Scheme is better.
 However, in terms of lower tax liability, the Regular Scheme with ITC benefit is more
advantageous.
Recommendation: Choose Regular GST Scheme to save ₹3,60,000 – ₹80,000 = ₹2,80,000,
assuming ITC is fully utilizable.
Problem 2: Service Provider (Restaurant)
Mr. Anil runs a pure vegetarian restaurant in Bengaluru. His annual turnover for FY 2024–
25 is ₹50,00,000. He is deciding between the Composition Scheme and the Regular GST
Scheme.
Details:
 Purchase of raw materials from registered dealers: ₹35,00,000 (with 5% GST).
 All supplies are intra-state.
 Composition Scheme rate: 5% (2.5% CGST + 2.5% SGST)
 Normal GST rate: 5%, but ITC not available on food services.
Solution:
Particulars Composition Scheme Regular GST Scheme
Turnover ₹50,00,000 ₹50,00,000
GST Rate 5% 5%
Output GST Payable ₹50,00,000 × 5% = ₹2,50,000 ₹50,00,000 × 5% = ₹2,50,000
Input Tax Credit (ITC) Not Allowed Not Allowed on food services
Net GST Payable ₹2,50,000 ₹2,50,000
Conclusion: Since ITC is not allowed in both cases, either scheme is equal in tax liability. But
Composition Scheme offers simpler compliance, so it is preferable.
Problem 3: Manufacturer with Higher ITC
Ms. Kavya manufactures plastic items in Telangana. Her turnover in FY 2024–25 is
₹1,20,00,000.
Details:
 Purchase from registered dealers: ₹85,00,000 (18% GST applicable)
 Output GST under normal scheme: 18%
 Composition scheme rate: 1% (0.5% CGST + 0.5% SGST)
 All transactions are intra-state
Solution:
Particulars Composition Scheme Regular GST Scheme
Turnover ₹1,20,00,000 ₹1,20,00,000
GST Rate 1% 18%
Output GST Payable ₹1,20,000 ₹21,60,000
Input Tax Credit Not Allowed ₹85,00,000 × 18% = ₹15,30,000
Net GST Payable ₹1,20,000 ₹6,30,000

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 INDIRECT TAXATION
Course Code: 22MBAFM406
Dr.UMA K Assistant Professor GSSSIETW, Mysuru
Conclusion: The Composition Scheme results in lower tax, but if customers demand GST
invoices and ITC matters in the supply chain, Regular Scheme may be better despite higher net
liability.
Problem 4: Trader Supplying Inter-State
Mr. Yusuf, a trader in Maharashtra, deals in cosmetic products and has turnover of ₹90,00,000.
Details:
 80% of sales are intra-state and 20% inter-state.
 Purchases from registered suppliers: ₹60,00,000 (GST @18%)
 GST on sales under regular scheme: 18%
 Not eligible for Composition Scheme (due to inter-state sales)
Solution:
Particulars Composition Scheme Regular GST Scheme
Eligibility ❌ Not Eligible (inter-state) ✅ Eligible
Output GST – ₹90,00,000 × 18% = ₹16,20,000
Input Tax Credit – ₹60,00,000 × 18% = ₹10,80,000
Net Tax Payable – ₹5,40,000
Conclusion: Mr. Yusuf must opt for the Regular GST Scheme. He cannot avail Composition
Scheme due to inter-state supplies.
Problem 5: Composition Scheme vs. Normal Scheme (Service Provider under New 6%
Optional Scheme)
Ms. Sneha, a freelance designer in Karnataka, earned ₹30,00,000 in FY 2024–25.
Details:
 Her service qualifies under the optional composition scheme for service providers at
6% (3% + 3%)
 GST rate under normal scheme: 18%
 Expenses incurred: ₹15,00,000 (GST @18%)
Solution:
Particulars Composition Scheme Regular GST Scheme
Turnover ₹30,00,000 ₹30,00,000
GST Rate 6% 18%
Output GST ₹30,00,000 × 6% = ₹1,80,000 ₹30,00,000 × 18% = ₹5,40,000
Input Tax Credit Not Allowed ₹15,00,000 × 18% = ₹2,70,000
Net GST Payable ₹1,80,000 ₹5,40,000 – ₹2,70,000 = ₹2,70,000
Conclusion: Composition Scheme is more cost-effective by ₹90,000. It is preferable for Sneha
unless she deals with B2B clients requiring ITC.

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