Background Material on GST Acts and Rules The Institute of Chartered Accountants of India (Set up by an Act of Parliament) New Delhi © The Institute of Chartered Accountants of India All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form, or by any means, electronic, mechanical, photocopying, recording, or otherwise without prior permission, in writing, from the publisher. DISCLAIMER: The views expressed in this book are of the author(s). The Institute of Chartered Accountants of India may not necessarily subscribe to the views expressed by the author(s). The information cited in this book has been drawn primarily from the www.cbec.gov.in and other sources. While every effort has been made to keep the information cited in this book error free, the Institute or any office of the same does not take the responsibility for any typographical or clerical error which may have crept in while compiling the information provided in this book. First Edition : May, 2017 Second Edition : September, 2017 Revised Edition : January 2018 Committee/Department : Indirect Taxes Committee E-mail : [email protected] Website : www.icai.org; www.idtc.icai.org Price : e-publication ISBN : 978-81-8441-869-9 Published by : The Publication Department on behalf of the Institute of Chartered Accountants of India, ICAI Bhawan, Post Box No. 7100, Indraprastha Marg, New Delhi - 110 002. Foreword Implementation of Goods and Services Tax (GST) in India is one of the major economic reforms. GST aims to make India a common market with common tax rates and procedures and remove the economic barriers thus, paving the way for an integrated economy at the national level. The Government of India is taking up various initiatives for smooth implementation of GST and the GST Council is also meeting at regular intervals for taking decisions to resolve the issues being faced by trade & industry. As a partner in nation building, the ICAI also has been providing necessary support to the Government agencies at every stage in addition to the various suggestion on the GST Law submitted for making law simple & transparent. The Institute has also been taking various initiatives for increasing awareness among its members, revenue officers and public at large about GST by making suggestions for enabling GST Implementation, organizing certificate course, virtual certificate course, E-learning on GST, programmes, workshops on GST, releasing monthly E-Newsletter on GST, new publications etc. One of the efforts in this direction is updated edition of Background Material on GST Act & Rules which contains a clause by clause analysis of the GST Law along with FAQ’s & MCQ’s, Flowcharts and illustrations etc. I appreciate the efforts put in by CA. Madhukar N. Hiregange, Chairman, CA. Sushil Kumar Goyal, Vice-Chairman and other members of the Indirect Taxes Committee of ICAI for undertaking this task and revising the material in a short span of time. I welcome the readers for a fruitful and enriching experience. CA. Nilesh S. Vikamsey President ICAI Date: 28.12.2017 Place: New Delhi Preface The GST roll-out on 1st July 2017 has paved the way for realization of the goal of One Nation - One Tax - One Market. GST is expected to benefit Indian economy overall with most tax compliant businesses getting favourably impacted. It should in time reduce the cost of goods & services, giving a boost to the export of products and services. It would also foster ‘Make in India’ initiative. GST promotes the concept of common market with common tax rates & procedures and removal of economic barriers thus improving ease of doing business. The GST roll-out on 1st July 2017 has paved the way for realization of the goal of One Nation - One Tax - One Market. GST is expected to benefit Indian economy overall with most tax compliant businesses getting favourably impacted. It would also foster ‘Make in India’ initiative. GST promotes the concept of common market with common tax rates & procedures and removal of economic barriers thus improving ease of doing business. We are partners in Nation building initiatives have always been supporting Government with our intellectual resources, expertise and efforts to make the GST transition a great success. This Committee prides itself on our role as “Partner in GST Knowledge Dissemination”. To make the knowledge dissemination process smoother. We have updated the 4 editions of “Background Material on GST Acts and Rules”. This Background Material is comprehensive, containing clause by clause analysis of the GST Law along with FAQ’s, MCQ’s, Flowcharts and Illustrations etc. to make the reading and understanding easier. We thank CA. Nilesh Vikamsey, President, CA. Naveen ND Gupta, Vice-President, ICAI for giving us the space to deliver and support for this initiative. We would like to acknowledge the members of the Study Group(s) and Indirect Taxes Committee for their contribution and support in the basic as well as revised edition(s). Special thanks to the untiring effort of CA S. Venkatramani, CA Jatin Christopher and CA. Gaurav Gupta. We also appreciate the Secretariat for their unstinted support and efforts. We welcome the readers to an intellectual learning spree. Interested members may visit website of the Committee www.idtc.icai.org and join the IDT update facility. We also welcome suggestions at [email protected]. CA. Madhukar Narayan Hiregange CA. Sushil Kumar Goyal Chairman Vice-Chairman Indirect Taxes Committee Indirect Taxes Committee Date: 28.12.2017 Place: New Delhi Contents VOLUME 1 I. THE CENTRAL GOODS AND SERVICES TAX ACT, 2017 1-740 CHAPTER I: PRELIMINARY 1-54 1. Short title, extent and commencement 1 2. Definitions 2 CHAPTER II: ADMINISTRATION 55-59 3. Officers under this Act 55 4. Appointment of officers 56 5. Powers of officers 57 6. Authorisation of officers of State tax or Union territory tax as proper officer in certain circumstances 58 CHAPTER III: LEVY AND COLLECTION OF TAX 60-94 7. Scope of supply 60 8. Tax liability on composite and mixed supplies 61 9. Levy and collection 61 10. Composition levy 81 CHAPTER IIIA: CLASSIFICATION & EXEMPTION 95-111 11. Power to grant exemption from tax 104 CHAPTER IV: TIME AND VALUE OF SUPPLY 112-163 12. Time of supply of goods 112 13. Time of supply of services 125 14. Change in rate of tax in respect of supply of goods or services 134 15. Value of taxable supply 136 CHAPTER V: INPUT TAX CREDIT 164-220 16. Eligibility and conditions for taking input tax credit 164 17. Apportionment of credit and blocked credits 173 18. Availability of credit in special circumstances 183 19. Taking input tax credit in respect of inputs and capital goods sent for job-work 197 20. Manner of distribution of credit by Input Service Distributor 203 21. Manner of recovery of credit distributed in excess 218 CHAPTER VI: REGISTRATION 221-245 22. Persons liable for registration 221 23. Persons not liable for registration 225 24. Compulsory registration in certain cases 227 25. Procedure for registration 229 26. Deemed registration 234 27. Special provisions relating to casual taxable person and non-resident taxable person 235 28. Amendment of registration 236 29. Cancellation of registration 237 30. Revocation of cancellation of registration 241 CHAPTER VII: TAX INVOICE, CREDIT AND DEBIT NOTES 246-262 31. Tax invoice 246 32. Prohibition of unauthorised collection of tax 255 33. Amount of tax to be indicated in tax invoice and other documents 256 34. Credit and debit notes 256 CHAPTER VIII: ACCOUNTS AND RECORDS 263-272 35. Accounts and other records 263 36. Period of retention of accounts 270 CHAPTER IX: RETURNS 273-320 37. Furnishing details of outward supplies 273 38. Furnishing details of inward supplies 282 39. Furnishing of Returns 290 40. First return 302 41. Claim of input tax credit and provisional acceptance thereof 302 42. Matching, reversal and reclaim of input tax credit 303 43. Matching, reversal and reclaim of reduction in output tax liability 308 44. Annual return 314 45. Final return 315 46. Notice to return defaulters 316 47. Levy of late fee 316 48. Goods and services tax practitioners 317 CHAPTER X: PAYMENT OF TAX 321-345 49. Payment of tax, interest, penalty and other amounts 321 50. Interest on delayed payment of tax 329 51. Tax deducted at source 333 52. Tax Collected at Source 340 53. Transfer of input tax credit 345 CHAPTER XI: REFUNDS 346-378 54. Refund of tax 346 55. Refund in certain cases 369 56. Interest on delayed refunds 371 57. Consumer Welfare Fund 374 58. Utilisation of Fund 377 CHAPTER XII: ASSESSMENT 379-396 59. Self-assessment 379 60. Provisional assessment 381 61. Scrutiny of Returns 386 62. Assessment of non-filers of returns 389 63. Assessment of unregistered persons 392 64. Summary assessment in certain special cases 394 CHAPTER XIII: AUDIT 397-404 65. Audit by tax authorities 397 66. Special audit 401 CHAPTER XIV: INSPECTION, SEARCH, SEIZURE AND ARREST 405-428 67. Power of inspection, search and seizure 405 68. Inspection of goods in movement 411 69. Power to arrest 419 70. Power to summon persons to give evidence and produce documents 423 71. Access to business premises 424 72. Officers to assist proper officers 427 CHAPTER XV: DEMANDS AND RECOVERY 429-469 73. Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason other than fraud or any wilful misstatement or suppression of facts 429 74. Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised by reason of fraud or any wilful misstatement or suppression of facts 433 75.