190

CA Inter - IDT (Sept. ‘25/Jan. ‘26)

(updated with amendments relevant for Sept. 2025/Jan. 2025)
Index
No. Topic Page No. No of Pages Rates
1. Introduction to GST 1 – 16 16
2. Definitions 17 - 25 9
3. Supply 26 - 39 14
4A - Charge of GST (CGST Act + IGST Act)
4. 40 – 55 16
4B – IGST Act, 2017 (including Place of Supply provisions)
5. RCM & ECO 56 – 70 15

to
6. Composition Levy 71 – 80 9
7. Exemptions under GST 81 – 108 28
8. Time of Supply 109 – 115 7
9. Value of Supply 116 – 119 4
10. Input Tax Credit (ITC) 120 – 141 22
11. Registration under GST 142 – 167 26
12. Tax Invoice, Credit Note & Debit Note 168 – 178 11
13. Returns under GST 179 – 200 22
14. Payment of Tax 201 – 206 6
15. TDS & TCS 207 – 212 6
16. Accounts & Records 213 – 216 4
17. E-way Bill 217 – 228 12

Notes Compiled by – CA Harish Wadhwani

0 CA Harish Dwarka Wadhwani

1
01. Introduction to GST
Types of Taxes
mu Shivam
Crona
Direct tax Indirect tax
1. The person paying tax to the 1. The person paying tax to the
government directly bears the government collects the same
burden of the tax.
F
from the ultimate consumer.
Thus, burden of the tax is shifted
mashiram

to the other person.

2. Progressive in nature - 2. Regressive in nature –

E
High rate of taxes for people All the consumers equally bear
having higher ability to pay. the burden, irrespective of their
ability to pay.

Burden of tax Burden of tax

borne by the person himself. shifted to another person.

Difference between Direct Taxes and Indirect Taxes

Basis
Meaning
Éf
Direct Taxes
Direct tax is levied on person’s
income and wealth and is paid
directly to the government
Indirect Taxes

7o
Indirect Tax is levied on a person who consumes
the goods and services and is paid indirectly to
the government
Nature Progressive in nature Regressive in nature
Incidence and Falls on the same person. Falls on different person. Tax is recovered from
Impact Assessee, himself bears such the assessee, who passes such burden to another
aim taxes. person.
Tax imposition Imposed on and collected from Imposed on & collected from consumers of goods
& collection the same person & services but paid & deposited by the assessee.
Tax Evasion Tax evasion is possible
shinm J
Croma
Tax evasion is hardly possible because it is
included in the price of the goods and services.
Burden Cannot be shifted Can be shifted
Taxable Event Taxable income of the assessee Supply of goods and services
Example Income Tax GST, Custom Duty

Indirect Tax (IDT) 1 Notes Compiled by - CA Harish Wadhwani

GSTwas introduced in India on
Yoga Introduction to GST (Chapter – 01)
Features of Indirect Taxes cores e
12000Crones ones
24000

Heading
Important
Explanation
Indirect taxes are a major source of tax revenue for Governments worldwide V2
source of
revenue
Is
and continue to grow. In India, indirect taxes contribute more than 50% of the
total tax revenues of Central and State Governments.

Tax on goods It is levied at the time of :

and services  supply or manufacture or purchase or sale or import or export of goods.
O
0
 supply or import or export of services.

Shifting of Burden of indirect tax is shifted from seller to buyer and ultimately borne by
burden consumers of such goods or services. For Example, GST paid by the supplier of
the goods is recovered from the buyer by including the tax in the cost of the
commodity.

No perception Seller (the person on whom indirect tax is levied) does not perceive a direct
of direct pinch pinch of tax as it is recovered by him from the buyer and then paid to the
Government. On the other hand, since it is inbuilt in the price of the goods, the
ultimate payer (i.e., buyer) pays it without knowing that he is paying any tax to
the Government.

o
Inflationary in Cost of goods and services increases due to levy of indirect tax thus indirect
nature taxes promote inflation.

Wider Tax Base Majority of goods and services are liable to indirect tax. Thus, tax base is much
wider in case of indirect tax in compare to direct tax.
8
Regressive in All persons (rich or poor) will bear equal wrath of tax on goods or service
Nature consumed by them irrespective of their ability. In other words, indirect tax does
not create any difference between rich and poor. Poor people are also required
to pay equal percentage of tax on certain goods and service of mass
consumption. Thus, it may increase the disparities between rich and poor.
Jhooth
Promotes social High taxes are imposed on the consumption of harmful goods (also known as
welfare

Daane
e
‘sin goods’) such as alcoholic drinks, tobacco, etc. This not only controls their
consumption but also enables the State to collect substantial revenue from it.
value State Tax
400 By 600 Fatal
Indirect Tax (IDT) 2 Notes Compiled by - CA Harish Wadhwani
II
100
18 100 6016 100
Introduction to GST (Chapter – 01)
0
Salient Features of GST
18 150 State Tax
Heading Explanation
Destination
Based Tax 0mn
GST is a value-added destination-based tax on consumption of goods and
0
services. Benefit of tax (SGST/UTGST) will accrue to the consuming state which
will benefit the poor states.
F
Example 1: If A in Gujarat produces the goods and sells the goods to B in
Rajasthan, then in such case the tax should be levied and collected and should
accrue to the State of Rajasthan and not to the State of Gujarat.

Tax on Value It is levied at all stages right from manufacture up to final consumption with
4 additions
O
credit of taxes paid at previous stages available as setoff. Thus, only value
(Value added tax) addition will be taxed and burden of tax is to be borne by the final consumer.
stammer
One Nation One GST is levied on supply of goods and services across India (including Jammu and
Tax
a 0
Kashmir). It is a single tax on the supply of goods and services, right from the
manufacturer to the consumer.

Dual GST Model Centre and states will impose tax on goods and services simultaneously.
a) Intra-State supply of goods and services

Withing
- CGST: Payable to Central Government
- SGST/UTGST: Payable to SG/UT where they are consumed
b) Inter-States Supply of goods and services
- IGST: Payable to Central Government
Centre will levy and administer CGST and IGST while respective States/ UTs
will levy and administer SGST/UTGST

Import and
Export
0
Import will be treated as inter-States supply and IGST will be chargeable along
with basic Customs duty. However, in GST, Export will be treated as ‘Zero rated
supplies’ and no IGST is payable.
a
0
Rates of GST
000000
The rates of GST are 0.5%, 3%, 5%, 12%, 18% and 28%.
In addition, compensation cess will be payable on pan masala, tobacco & tobacco
c
product, coal, lignite, aerated water and motor-cars.

Input Tax A registered person is entitled to take credit (deduction) of input tax paid on
Credit
_to bn
inward supply and adjust against the output tax liability on his outward supplies.
Of_
it EE
E
Indirect Tax (IDT) 3 Notes Compiled by - CA Harish Wadhwani
 Introduction to GST (Chapter – 01)
Free flow of the Under GST regime there is a seamless (without any obstruction) flow of credit

I
credit in case of inter-state supplies, which was not possible in pre-GST period.

0
Earlier, no credit was available for CST paid by the buyer.

Genesis of GST in India

In the year 2000, the

then Prime Minister of Announcement by Union
India introduced the Finance Minister, during The Constitution (101st
concept of GST and set budget of 2006-07 that Amendment) Act was
up a committee to design GST would be introduced enacted.
a GST model for the from 1st April, 2010.
country.

CGST, SGST, UTGST, IGST GST Council Recommends

& GST Compensation Cess CGST, SGST, UTGST, IGST 1st GST Council Meeting.
Act Passed. & GST Compensation Cess.

GST Council Recommends All States except J & K

GST Launched.
all the Rules. passed their SGST Act.

SGST Act Passed by J&K;

Journey thereafter CGST & IGST Ordinances
continues…. promulgated to extend
GST to J & K.

Indirect Tax (IDT) 4 Notes Compiled by - CA Harish Wadhwani

 Introduction to GST (Chapter – 01)
Structure of GST Law in India canter
No. Acts/Legislature Number of Acts Applicability
1.
2.
CGST Act, 2017
SGST Act, 2017
1 Act
31 Acts
All-India se
Separate for all States
o
3.
4.
UTGST Act, 2017
IGST Act, 2017
1 80
1 Act
1 Act
All-India
All-India

I
5. GST Compensation Cess Act, 2017 1 Act All-India

Topic
Q Comparison – Before/After GST
Before GST
ct

After GST
Multiple Acts Many Acts prevailed before GST. There is only 1 Act ie. GST
Cascading Effect Tax was collected on Tax.
_a
Tax paid by a taxable person, can be
utilised as Input Credit by other taxable
person (Except final consumer)
Double Taxation Single Commodity was taxed twice. Single point tax
Multiple Taxable Tax liability arose on different Tax liability arises on “SUPPLY”
0
Event
0
Multiple Tax
events under multiple acts.
Tax was paid under multiple challans
[‘Supply’ as per GST Act]
Tax is paid only under GST Act with one
to different government bodies due date of tax payment (currently,
having multiple due dates. 20th of the next month)
Multiple Multiple returns and documents Only Single set of returns and
Procedure were required to be submitted by documentation is required to be
different acts. submitted in the GST Regime.

Concept of GST
Before we proceed with the finer nuances of Indian GST, let us understand the basic concept of GST.
1. Value Added Tax: GST is a value added tax levied on supply i.e., manufacture or sale of goods
and provision of services.
2. Continuous Chain of Tax Credit: GST offers comprehensive and continuous chain of tax
credits from the producer's point/service provider's point upto the retailer's
level/consumer's level thereby taxing only the value added at each stage of supply chain.
3. Burden Borne by Final Customer: The supplier at each stage is permitted to avail credit of
GST paid on the purchase of goods and/or services and can set off this credit against the GST
payable on the supply of goods and services to be made by him. Thus, only the final consumer
bears the GST charged by the last supplier in the supply chain, with set-off benefits at all
the previous stages.
4. No Cascading effects of Tax: Since, only the value added at each stage is taxed under GST,
there is no tax on tax or cascading of taxes under GST system.

Indirect Tax (IDT) 5 Notes Compiled by - CA Harish Wadhwani

 Introduction to GST (Chapter – 01)
GST Concept Master Illustration

Particulars Manufacturer Distributor Retailer Consumer

Cost 1,00,000 1,20,000 MRP
(+) Value addition 1,00,000 20,000 30,000 (inclusive of
Selling Price (before GST) 1,00,000 1,20,000 1,50,000 GST)
GST @ 18% 18,000 21,600 27,000 1,77,000
Selling Price (incl. GST) 1,18,000 1,41,600 1,77,000

Tax Liability I

Gross GST Liability 18,000 21,600 27,000

(-) ITC Nil (18,000) (21,600) Nil
Paid to Government 18,000 3,600 5,400 27,000

Tax on Value Addition 1,00,000 x 18% 20,000 x 18% 30,000 x 18% Nil
= 18,000 = 3,600 = 5,400

Inter State & Intra State Supply

INTRA-STATE SUPPLY INTER-STATE SUPPLY

Supply within the State Supply outside the State
Meaning Supply from 1 place WITHIN the • Supply to another State/UT
State/UT to another place WITHIN the • Supply to places outside India
same State/UT
Intra/Inter It is called as INTRA-State Supply
It is called as INTER-State Supply
Applicable Tax CGST & SGST/UTGST is charged.
0
IGST is charged. (Combination of
CGST & SGST/UTGST)

0 0
Distribution of Tax Tax is distributed between Central Tax will be distributed by Centre
and State/UT between Central and Destination
State/UT

Indirect Tax (IDT) 6 Notes Compiled by - CA Harish Wadhwani

 Introduction to GST (Chapter – 01)
States UTs & Special Category States
St
Ét
Geography Deemidstate
Union Territories (UT)
Natural
Particulars Deemed State Pure UT

8
States
A UT with legislature A UT without legislature
Earlier in GST 29 2 Deemed States 5 Pure UTs
[29 States and 7 UTs (2 + 5)] States [Delhi & Puducherry]
Demerger of J & K State in 2 UTs (-) 1 (+) 1 Deemed State (+) 1 Pure UT
[J&K and Ladakh]
0 [J&K] [Ladakh]
Merger of 2 Pure UTs into 1
0 0

Peso
- - (-) 1 Pure UT
[Dadra & Nagar Haveli and Daman & Diu]
Total 28 3
0 5
0
FINALLY TOTAL NUMBER OF STATES FOR THE PURPOSE OF GST (Natural and Deemed States) = 31

List of all 8 UTs

UTs with legislature (Deemed State) UTs without legislature (Pure UT)
Jammu & Kashmir (with legislature) Ladakh
Puducherry (with legislature) LADIA Andaman & Nicobar Islands
Delhi (with legislature)
β
Dadra & Nagar Haveli and Daman & Diu
Lakshadweep
Chandigarh
ChandigahD
Special Category States
Arunachal Pradesh Assam Jammu & Kashmir Manipur
Meghalaya Mizoram Nagaland Sikkim
Tripura Uttarakhand Himachal Pradesh
Special threshold limits for registration, composition, exemptions, etc. have been recommended for
some or all of these States. 000

Indirect Tax (IDT) 7 Notes Compiled by - CA Harish Wadhwani

 Introduction to GST (Chapter – 01)
Input Tax Credit & B2B – B2C Transactions

B2B Transaction: Wholesaler Mr. A (of Mumbai) Sold Goods to Retailer Mr. B (of Mumbai)
B2C Transaction: Retailer Mr. B (of Mumbai) Sold Goods to Consumer Mr. C (of Mumbai)
Wholesaler Retailer Consumer
Particulars (₹) Particulars (₹) Particulars (₹)
Sales 50,000 Sales 60,000 Cost to Consumer 70,800
Add: CGST 9% 4,500 Add: CGST 9% 5,400
Add: SGST 9% 4,500 Add: SGST 9% 5,400
Total 59,000 Total 70,800 Amount paid 70,800

Output Tax Liability 9,000 Output Tax Liability 10,800

CGST 4,500 CGST 5,400
SGST 4,500 SGST 5,400
(-) Input Tax Credit Nil Input Tax Credit (9,000)
CGST 4,500
SGST 4,500
GST Payable 9,000 GST Payable 1,800 Total Tax borne 10,800
CGST 900 + SGST 900

Cross Utilisation of ITC under GST Law

Following is the order and priority for ITC utilisation

ITC Order of Utilisation of ITC as per GST Rule Utilisation MatrixMannero
IGST Credit* 1st IGST Liability
2nd CGST/SGST/UTGST Liability C C
CGST Credit 1st CGST Liability
I
IF
2nd IGST Liability I I
SGST Credit 1 SGST Liability
st

2nd IGST Liability S S

UTGST Credit 1 UTGST Liability
st
U U
2nd IGST Liability
* The order of utilisation of IGST Credit post offset to IGST Liability can be in any order or
proportion between CGST & SGST/UTGST but, the only pre-condition is exhausting IGST
completely before using other credits.
Hence, from the above table, it can be concluded that any taxpayer must begin with set-off process
starting with ITC of IGST and utilise it completely before proceeding to utilise the ITC of CGST
or ITC of SGST/UTGST.

Indirect Tax (IDT) 8 Notes Compiled by - CA Harish Wadhwani

 Introduction to GST (Chapter – 01)
Taxes Subsumed into GST

Taxes subsumed in GST:

In total 17 different taxes levied by Centre and State are subsumed in GST
Central Taxes to be subsumed State Taxes to be subsumed
1. Central Excise duty State Excise duty (not subsumed)
2. Duties of Excise 1. State VAT
(Medicinal and Toilet Preparations) 2. Central Sales Tax (CST)
3. Additional Duties of Excise 3. Luxury Tax
(Goods of Special Importance) 4. Entry Tax (all forms)
4. Additional Duties of Excise 5. Entertainment and Amusement Tax (except
(Textiles and Textile Products) those levied by local bodies)
5. Additional Duties of Customs (CVD) 6. Taxes on advertisements
6. Special Additional Duty of Customs (SAD) 7. Purchase Tax
7. Service Tax 8. Taxes on lotteries, betting and gambling
8. Central Surcharges and Cesses 9. State Surcharges and Cesses.

Tax not subsumed into the GST: Following taxes are still in effect Post GST
Central Taxes State Taxes Local Body Taxes
1. Basic Customs Duty (Import Duty) 1. State Excise Duty 1. Property Tax
BE
2. Export Duty 2. Stamp Duty 2. Entertainment Tax
3. Research and Development Cess 3. Profession Tax
4. Anti-Dumping Duty 4. Motor Vehicle Tax
5. Safeguard Duty 5. Road Tax
6. Electricity Duty

Current Scenario of Indirect Taxes after advent of GST:

# Particulars Excise + VAT/CST GST
1. 5 Goods Specified u/s. 9 (2)
(i) Petroleum Crude,
(ii) High Speed Diesel,
of Central Excise + VAT/CST X
(iii) Motor Spirit (commonly known as petrol),
(iv) Natural Gas, and
(v) Aviation Turbine Fuel.
2. Alcoholic Liquor for human consumption State Excise + VAT/CST X
3. Tobacco & Tobacco Products Central Excise GST
0
to
4. Other Goods & Services
a
X 000GST

Indirect Tax (IDT) 9 Notes Compiled by - CA Harish Wadhwani

 AT ntt TTI Introduction to GST (Chapter – 01)
Topic Explanation

do
Article 246A Special provision with respect to goods and services tax (GST)

see
1. Notwithstanding anything contained in articles 246 and 254, Parliament, and,
subject to clause (2), the Legislature of every State, have power to make laws

3
with respect to goods and services tax imposed by the Union or by such State.
2. Parliament has exclusive power to make laws with respect to goods and
services tax where the supply of goods, or of services, or both takes place in
the course of inter-State trade or commerce.
(In simple words, for the implementation of GST, Article 246 and 254 has been
overruled)
Explanation:
In respect of GST referred to in Article 279A(5), [5 Specified Goods], the
provisions of this article, shall take effect from the date recommended by the
GST Council
(Earlier
G as per Article 246, power to levy various types of indirect tax was distributed
between CG and SG. Article 246A empowered both the Government to levy GST)
Article 265 No
r tax shall be levied or collected except by the authority of law.
E
The term “authority of law” means that the tax proposed to be levied must be
within the legislative competence of the Legislature imposing the tax.
Article 269A
to
Levy and collection of GST in course of inter-State trade or commerce
GST on supplies in the course of inter-State trade or commerce shall be levied
0
and collected by the Government of India and such tax (ie. IGST) shall be
apportioned between the Union and the States in the manner as may be provided
ooo
0
by Parliament by law on the recommendations of the GST Council.
Explanation:

o
For the purpose of this clause, supply of goods, or of services, or both in the
course of import into the territory of India shall be deemed to be supply of goods,

to
or of services, or both in the course of inter-State trade or commerce.
1. The amount apportioned (as aforesaid) to a State shall not form part of the
o
Is
Consolidated Fund of India.
2. If an amount collected as IGST has been used for payment of the SGST (or
vice versa), such amount shall not form part of the Consolidated Fund of India.

Foot
Article 366 - Clause (12A) - “goods and services tax” means any tax on supply of goods, or

It
3 New Clauses services or both except taxes on the supply of the alcoholic liquor for human
consumption
Clause (26A) – “Services” means anything other than goods.

on
Gone
Clause (26B) – “State” with reference to articles 246A, 268, 269, 269A and article
279A includes a UT with Legislature

Indirect Tax (IDT) 14 Notes Compiled by - CA Harish Wadhwani

 Introduction to GST (Chapter – 01)
GST Council (Article 279A)

1) Constitution of GST Council & its Members

1. The GST Council which will be a joint forum of the Centre and the States, shall consist of the
following members:
The Union Finance Minister Chairperson (1)
The Union Minister of State, in-charge of Revenue of finance Member (1)
The Minister In-charge of finance or taxation or any other Minister
nominated by each State Government. Members (31)
2. The Members of the GST Council shall choose 1 amongst themselves to be the Vice-
o
Chairperson of the Council for such period as they may decide.

o2) GST Council’s Recommendations:

The GST Council shall make recommendations to the Union and the States on various matters:
Imp As per Article 279A (4) –
→ The Council will make recommendations to the Union and the States on various important

for issues related to GST, like the goods & services that may be subjected to GST or exempted
from GST, model GST laws, the threshold limit of turnover, principles that govern the

end E
place of supply, rates including floor rates with bands, special rates for raise additional
resources during natural calamities/disasters, special provisions for certain States, etc.
→ Provisions of Article 279A (4) Clause (g) is about recommendation to be made for special
category states: special provision with respect to the States of Arunachal Pradesh,
Assam, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura,
Himachal Pradesh and Uttarakhand.

3) Certain Commodities to be taxed after GST Council Recommendation:

The GST Council shall recommend the date on which GST shall be levied on petroleum crude, high
speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel.

4) Voting & Quorum at the GST Council Meeting:

1. Every decision of the GST Council shall be taken at a meeting, by a majority of not less than

00
3/4th (75%) of the weighted votes of the members PRESENT AND VOTING, in accordance with
the following principles, namely:

0
a) the vote of the CG shall have a weightage of 1/3rd of the total votes cast, and
b) the votes of all the SGs taken together shall have a weightage of 2/3rd of the total
votes cast, 0
in that meeting.
2. 50% of the total number of Members of the GST Council shall constitute the quorum at its
meetings .

Indirect Tax (IDT) 15 Notes Compiled by - CA Harish Wadhwani

 Introduction to GST (Chapter – 01)
3. Example:
Total Vote Cast Central Government State Government Total % Passed
CG and 22 1 x 100 x 1 Weight 22 x 100 x 2 Weight
States agreed 1 3rd 31 3rd 80.64%
on the proposal = 33.33% = 47.31%
CG and 15 1 x 100 x 1 Weight 15 x 100 x 2 Weight
States agreed 1 3rd 31 3rd 65.58% X
on the proposal = 33.33% = 32.25%

GST Compensation Cess

1. GST (Compensation to States) Act, 2017 was enacted:

o_O
• to levy Compensation cess
• for providing compensation to the States for the loss of revenue arising on account of
implementation of the GST with effect from 01.07.2017 (the date from which was brought
into force), for a period of 5 years or for such period as may be prescribed*
*[Extended upto 31.03.2026]

me
2. Taxable persons selling notified goods are liable to collect and pay GST Cess. Notified goods are:
a) Pan masala,
b) Tobacco & tobacco product,
I c) Cigarettes, cigar
d) Coal, lignite,
e) Aerated water; and
f) Motor-cars
3. Cess shall be computed on the value of taxable supply.

co
of inter-state sales including import of goods.
O
4. Cess is levied in addition to CGST + SGST/UTGST in case of intra-state sales and IGST in case
O
5. Taxpayer can use ITC of Cess for payment of Cess liability on outward supply made by him. He
cannot use ITC of Cess for payment of output CGST, SGST or IGST
6. Where a taxpayer is registered under composition levy, Cess is not applicable on outward supplies
made by him.
7. Cess is not levied on export made from India. The exporter can claim a refund of the ITC of cess
paid on purchases.

Indirect Tax (IDT) 16 Notes Compiled by - CA Harish Wadhwani

 Definitions (Chapter – 02)
Person
Term Definition
“person" Includes -
a) an individual;
b) a Hindu Undivided Family;
c) a company;
d) a firm;
e) a Limited Liability Partnership;
f) an AOP/BOI, whether incorporated or not, in India or outside India;
g) any corporation established by or under any Central Act, State Act or
Provincial Act or a Government company as defined in clause (45) of
section 2 of the Companies Act, 2013;
h) any body corporate incorporated by or under the laws of a country
outside India;
i) a co-operative society registered under any law relating to co-
operative societies;
j) a local authority;
k) Central Government or a State Government;
l) society as defined under the Societies Registration Act, 1860 ;
m) trust; and
n) every artificial juridical person, not falling within any of the above;
[Sec. 2(84)]

O
"taxable person" means a person who is registered or liable to be registered u/s. 22 or u/s. 24;
[Sec. 2(107)]

"registered means a person who is registered u/s. 25 but does not include a person having

o
person" (RP)

"casual taxable
a Unique Identity Number (UIN); [Sec. 2(94)]

means a person who occasionally undertakes transactions involving supply of

person" (CTP) goods or services or both in the course or furtherance of business, whether as
principal, agent or in any other capacity, in a State/UT where he HAS NO FIXED
PLACE OF BUSINESS; [Sec. 2(20)]

"non-resident means any person who occasionally undertakes transactions involving supply
taxable person" of goods or services or both, whether as principal or agent or in any other
(NRTP) capacity, but who HAS NO FIXED PLACE OF BUSINESS OR RESIDENCE IN INDIA;
[Sec. 2(77)]

Indirect Tax (IDT) 22 Notes Compiled by - CA Harish Wadhwani

Sec
26 7
03. Supply
Section 7 (1)
Scope of Supply

SEC.7 (1)
0
SUPPLY INCLUDES : 0

oafs
all forms of supply of goods or services or both such as sale, transfer, barter,
exchange, licence, rental, lease or disposal made or agreed to be made:
7 (1) (a)
- for a consideration by a person,

Foff
- in the course or furtherance of business
the activities or transactions,
- by a person, other than an individual,
0
7 (1) (aa) - to its members or constituents or vice-versa,
- for cash, deferred payment or other valuable consideration.
[(Clause (aa) inserted retrospectively by FA, 2021 w.e.f. 01.07.2017]
importation of services,
7 (1) (b) - for a consideration
- whether or not in the course or furtherance of business.
the activities specified in Schedule I, made or agreed to be made:
7 (1) (c)
- without a consideration

Section 7 (1) (a)

1) Definition:
GOODS SERVICES
MEANS Every kind of movable property Anything other than goods
EXCLUDES Money and securities Money and securities
00
(i) Actionable claim Activities relating to:
(ii) Growing crops, grass and (i) Use of money** or Interest Consideration
things attached to or
4
(ii) Conversion of money by cash/ by any

INCLUDES
forming part of the land

which are agreed to be

e
other mode, from one form/ currency/
denomination, to another, for which a
separate consideration is charged.
croissant
severed before supply or (iii) Facilitating or arranging transactions
cut 0
under a contract of supply. in securities
BrokerageConsideration

2) Significance of “Consideration:”
(i) Scope: An activity/transaction would be treated as “Supply” under GST only if it is
made by a person for a “consideration.” [except if covered u/s. 7 (1) (c)]
(ii) Form of consideration: Consideration does not always cover money; it may be in
money or may be in kind.
o
Indirect Tax (IDT) 26 Notes Compiled by - CA Harish Wadhwani
 Supply (Chapter – 03)
(iii) Deposit as a consideration: Deposit is considered as payment ONLY when the supplier

Ieee
applies such deposit as consideration for the said supply.
(iv) Inclusions & Exclusions from consideration:

O
- Consideration shall not include any subsidy given by the CG/SG
O
- However, in respect of supply of goods or services or both, consideration includes:
a) any payment made or to be made, and whether by the recipient 0
E
b) monetary value of any act or forbearance

3) Meaning of “in the course or furtherance of business:”

or by any other person.

(i) Scope: GST is essentially a tax on commercial transactions. Hence, only those
supplies which are ‘in the course or furtherance of business’ will qualify as supply
under GST. Resultantly, any supplies made by an individual in his personal capacity
does not fall within the ambit of GST, unless it falls within the definition of business.
For Eg.: Vinay buys a car for his personal use and after a year sells it to a car dealer. Sale
of car by Vinay to car dealer is not a supply under GST because said supply is not made by
Vinay in the course or furtherance of business
(ii) Vocation: Business includes vocation, therefore sale of goods or service as a vocation
is also a supply under GST
(iii) Incidental activity: Business also includes any activity/transaction which is
incidental or ancillary to any trade, commerce, manufacture, etc
(iv) Other requirements: Frequency, volume, continuity/ regularity of a transaction is
not a pre-requisite, to qualify as business. To

4) Relevant Circular: Donations received by charitable institutions from individual donors,

without quid pro quo (Circular No. 116/35/2019):
1. Case A: Donations received by the charitable organisations are treated as consideration
Imf only if there exists, quid pro quo. In other words, if there is an obligation on the part
of the recipient (donee) to provide something in return / to do anything for the donor,
then,
(i) fulfilment of such obligation will be treated as “supply of service” by the
charitable institution, and
(ii) such donation (by the donor) will be treated as “a consideration” for the supply
of service.
I

2. Case B: If any person gives donation to the charitable institution & the name of such
donor is displayed in recipient institution’s premises, in such a manner, which:
- can be said to be an “expression of gratitude” and
- is not aimed at giving publicity to the donor or advertising/promoting his
business,
then, it can be said that there is no supply of service for a consideration.

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 Supply (Chapter – 03)
Section 7 (1) (b)
Importation of Services for a COnsideration ISCO

1) Supply includes importation of services,

- for a consideration
- “whether or not in the course or furtherance of business.”
Thus, this becomes an exceptional case wherein a transaction (ie. import of service) would
be treated as supply even though it is not in course or furtherance of business; provided it
is for a consideration.
2) Example : Mr. Kaustubh, a proprietor, has received the architect services for his house from an architect
located in New York at an agreed consideration of $ 5,000. The import of services by Mr. Kaustubh is
“supply” u/s. 7(1)(b) even though it is not in course or furtherance of business.

Section 7 (1) (c)

1) Supply includes the activities specified in Schedule I, made or agreed to be made without a
consideration. 00
As per Schedule I, in the following four cases,
activities made without consideration will be treated as supply u/s 7:
SCHEDULE I
PARA
ACTIVITIES TO BE TREATED AS SUPPLY EVEN IF MADE WITHOUT CONSIDERATION
Permanent transfer or disposal of:
1
01 - business assets “where input tax credit has been availed on such assets.”
Supply of goods or services or both:
I
- between related persons/between distinct persons as specified in Sec. 25,
2 - when made in the course or furtherance of business.
Provided that gifts “upto ₹50,000” in value “in a financial year” by an employer to

a
Supply of goods —
1
an employee shall not be treated as supply of goods or services or both.

a) by a principal to his agent where the agent undertakes to supply such goods
3 on behalf of the principal; (such agent who issues invoice in his own name) or
b) by an agent to his principal where the agent undertakes to receive such
goods on behalf of the principal (such agent who issues invoice in his own name)
Import of Services by a person
- in the course or furtherance of B usiness ISCO

L
4
- from a Related person or any of his other establishments BRO
Outside India.

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 Supply (Chapter – 03)
2) Related Persons [Explanation to Section 15]:
Persons including legal persons shall be deemed to be “related persons” if:
(i) Such persons are officers/directors of one another’s business
(ii) Such persons are legally recognised partners in business
(iii) Such persons are employer & employee
(iv) A third person controls (directly/indirectly) or own/holds ≥ 25% voting stock or
shares of both of them
(v) One of them controls the other (directly/indirectly)
(vi) A third person controls both of them (directly/indirectly)
(vii) Such persons together control a third person (directly/indirectly)
(viii) Such persons are members of the same “family”
Definition of “Family”
Family means:
a) the spouse and children of the person, and
b) the parents, grand-parents, brothers and sisters of the person if they are
wholly or mainly “dependant” on the said person [Section 2(49)]
(ix) One of them is the sole agent/sole distributor/sole concessionaire of the other .

3) Meaning of “Distinct Person:”

a) A person who has obtained/is required to obtain more than one registration, whether in
one State/UT or more than one State/UT shall be treated as distinct persons, in respect
of each such registration. [Sec. 25 (4)]
b) If a person who has obtained/is required to obtain registration in a State/UT in respect
of an establishment, has an establishment in another State/UT, then, such
establishments shall be treated as establishments of distinct persons. [Sec. 25 (5)]

Section 7 (1) (aa)

1) The following clause has been specifically included in the term “Supply,” so as to remove
the prevailing ambiguities in the market:
Sec. 7 (1)(aa): Supply includes the activities or transactions:
- by a person, other than an individual, to its members or constituents or vice-versa,
- for cash, deferred payment or other valuable consideration.
Explanation to Sec. 7 (1)(aa): For the purposes of this clause, it is hereby clarified that,
notwithstanding anything contained in:- any other law for the time being in force, or
any judgment/order of any Court, tribunal, or authority
(i) the person & its members/constituents shall be deemed to be two separate persons and
(ii) the supply of activities or transactions inter se shall be deemed to take place from
one such person to another.

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 Supply (Chapter – 03)
Examples on Schedule I Transactions :

1. Para 1: ‘Mishra Ji’ gives old laptops being used in his business to his friend free of cost. This will
qualify as supply provided ITC has been availed by ‘Mishra Ji’ on such laptops.

2. Para 2: Tan-Zeb Fabrics transfers 1000 shirts from its factory located in Delhi to its retail
showroom in Mumbai so that the same can be sold from there. The factory and retail showroom of
Tan-Zeb Fabrics are registered in the States where they are located. Although no consideration is
charged, supply of goods from factory to showroom constitutes supply.

3. Para 3: Anmol appoints Bholu to procure certain goods from the market. Bholu asks the supplier
(Golu) to send the goods and issue the invoice directly to Anmol. In this scenario, Bholu is only
acting as the procurement agent, and has in no way involved himself in the supply or receipt of
the goods. Hence, in accordance with the provisions of this Act, Bholu is not an agent of Anmol
for supply of goods in terms of Para 3 of Schedule I.

4. Para 3: Gautam, an artist, appoints Gambhir (auctioneer) to auction his painting. Gambhir
arranges for the auction and identifies the potential bidders. The highest bid is accepted and the
painting is sold to the highest bidder. The invoice for the supply of the p ainting is issued by
Gambhir on the behalf of Gautam but in his own name and the painting is delivered to the successful
bidder. This scenario is covered under Para 3 of Schedule I, since the agent issues invoice in his
own name.

5. Para 4: Baloo Associates received legal consultancy services from its head office located in
Australia. The HO has rendered such services free of cost to its branch office. Since Baloo
Associates and the HO are related persons, services received by Baloo Associates will qualify as
supply even though the HO has not charged anything from it .

Indirect Tax (IDT) 30 Notes Compiled by - CA Harish Wadhwani

 Supply (Chapter – 03)
Section 7 (2) NOT A Supply
Negative List

transactions specified in Schedule III shall be treated:

o
1) Section 7(2)(a): Notwithstanding anything contained in Section 7 (1), activities or
neither as a supply of goods,
nor as a supply of services.
Section 7(2)(a) read with Schedule III
Non-supplies under GST
ACTIVITIES OR TRANSACTIONS WHICH SHALL BE TREATED
PARA
NEITHER AS A SUPPLY OF GOODS NOR A SUPPLY OF SERVICES
Services by an employee to the employer in the course of or in relation to his
1
r employment.
2 Services by any Court/Tribunal established under any law for the time being in force.
a) Functions performed by Members of Parliament, Members of State
Legislature, Members of Panchayats, Members of Municipalities & Members
of other local authorities;
b) Duties performed by any person who holds any post in pursuance of the
3 provisions of the Constitution in that capacity; or
c) Duties performed by any person as a Chairperson or a Member or a Director
in a body established by the Central Government or a State Government or
local authority and who is not deemed as an employee before the
commencement of this clause.
Services of funeral, burial, crematorium or mortuary including transportation of
4
the deceased.
5 Sale of land and, subject to paragraph 5(b) of Schedule II, sale of building.
ci e.d
Actionable claims, other than lottery, betting and gambling specified actionable
claims.
6 Note: "Specified actionable claim" means the actionable claim involved in or by way of betting,
casinos, gambling, horse racing, lottery or online money gaming [Sec. 2(102A)]. The applicable GST
rate on “Specified actionable claim” is 28%.
Supply of goods from a place in the non-taxable territory, to another place in the
7
non-taxable territory WITHOUT SUCH GOODS ENTERING INTO INDIA.
a) Supply of warehoused goods to any person BEFORE CLEARANCE FOR HOME
CONSUMPTION.
b) Supply of goods by the consignee to any other person, by endorsement of
8
documents of title to the goods, after the goods have been dispatched from
the port of origin located outside India but BEFORE CLEARANCE FOR HOME
CONSUMPTION.

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 Supply (Chapter – 03)
2) Section 7(2)(b) : Notwithstanding anything contained in Section 7 (1), notified activities
or transactions undertaken by the CG/SG or any local authority in which they are engaged
as public authorities, shall be treated: neither as supply of goods,
nor as supply of services.
Following two activities have been notified :
1. Activity in relation to Panchayat/Municipality functions:
Services by way of any activity in relation to a function entrusted:
a) to a Panchayat under article 243G of the Constitution, or
b) to a Municipality under article 243W of the Constitution
are treated neither as a supply of goods nor as a supply of service [by NN 14/2017 CT (R)]
2. Grant of alcoholic liquor licence:
(i) Services by way of grant of alcoholic liquor licence by the State Governments,
against consideration in the form of licence fee or application fee or by whatever
name it is called.
[NN 20/2019 CT (R) made applicable retrospectively w.e.f. 01.07.2017, vide FA, 2022]

(ii) This special dispensation is applicable only to supply of service by way of grant
of liquor licenses by the State Governments as an agreement between the Centre
and States. Hence, this is not applicable in relation to grant of other licenses and
privileges, where GST is payable.
[Circular No. 121/40/2019 GST, dated 20.09.2019]

3) Relevant Circulars:
Perquisites provided by employer to employees
Issue: Whether “perquisites provided by employer to employees as per contractual
agreement” are liable to GST ?
Clarification:
a) Any perquisites provided by the employer to its employees in terms of contractual
agreement entered into between the employer and the employee are in lieu of the
services provided by employee to the employer in relation to his employment.
b) It follows therefrom that perquisites provided by the employer to the employee in
terms of contractual agreement entered into between the employer and the
employee, will not be subjected to GST when the same are provided in terms of the
contract between the employer & employee.
[Circular No. 172/04/2022 – GST, dated 06.07.2022]

Sale of land after levelling, etc.

Issue: Whether “sale of land after levelling, laying down of drainage lines etc.,” is
taxable under GST?
Clarification:
Indirect Tax (IDT) 34 Notes Compiled by - CA Harish Wadhwani