Comprehensive Study Notes: Charge of GST, Reverse Charge, Classification, and Composition Levy

CONSTITUTIONAL BACKGROUND AND FUNDAMENTAL CONCEPTS OF GST

• Constitutional Authority for GST:

  • Power to levy tax in India is drawn directly from the Constitution of India.
  • The 101st Constitutional Amendment Act, 2016 was enacted to make enabling provisions for levying Goods and Services Tax (GST) on the supply of goods or services or both across India.
  • Key former indirect taxes subsumed into GST include:
  • Central Excise Duty
  • Service Tax
  • State Value Added Tax (VAT)
  • Various State-specific entry taxes, luxury taxes, and local levies.

• Taxable Event in GST:

  • The very foundation for charging tax under any taxing statute is its taxable event (the specific event that triggers tax liability).
  • Under GST, the taxable event is SUPPLY.
  • Tax treatment based on supply classification:
  • Intra-State Supply: Taxed under Central Goods and Services Tax (CGST) and State Goods and Services Tax (SGST) or Union Territory Goods and Services Tax (UTGST).
  • Inter-State Supply: Taxed under Integrated Goods and Services Tax (IGST).

• General Rule for Intra-State vs. Inter-State Supply:

  • Intra-State Supply: Occurs when the location of the supplier and the place of supply of goods or services are within the same State or same Union Territory.
  • Inter-State Supply: Occurs when the location of the supplier and the place of supply are in:
  • Two different States;
  • Two different Union Territories; or
  • A State and a Union Territory.

RELEVANT STATUTORY DEFINITIONS UNDER GST LAWS

• Central Tax [Section 2(21)]: Means the central goods and services tax levied under section 9 of the CGST Act, 2017.

• Integrated Tax [Section 2(58)]: Means the integrated goods and services tax levied under the Integrated Goods and Services Tax Act, 2017.

• State Tax [Section 2(104)]: Means the tax levied under any State Goods and Services Tax Act.

• Goods [Section 2(52)]: Means every kind of movable property other than money and securities; but includes actionable claim, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply.

• Services [Section 2(102)]: Means anything other than goods, money, and securities; but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged.

  • Explanation: It is explicitly clarified that "services" includes facilitating or arranging transactions in securities.

• Aggregate Turnover [Section 2(6)]: Means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis), exempt supplies, exports of goods or services or both, and inter-State supplies of persons having the same Permanent Account Number (PAN), to be computed on an all-India basis, but excludes central tax, State tax, Union territory tax, integrated tax, and cess.

• Customs Frontiers of India [Section 2(4) of the IGST Act]: Means the limits of a customs area. As per Section 2(11) of the Customs Act, 1962, 'Customs Area' is the area of a customs station or a warehouse and includes any area in which imported goods or export goods are ordinarily kept before clearance by Customs Authorities.

• Non-Taxable Online Recipient [Section 2(16) of the IGST Act]: Means any unregistered person receiving online information and database access or retrieval (OIDAR) services located in taxable territory.

  • Explanation: For the purpose of this clause, "unregistered person" includes a person registered solely in terms of Section 24(vi) of the CGST Act, 2017.

• Prescribed [Section 2(87)]: Means prescribed by rules made under this Act on the recommendations of the GST Council.

• Registered Person [Section 2(94)]: Means a person who is registered under Section 25, but does not include a person having a Unique Identity Number (UIN).

• Reverse Charge [Section 2(98)]: Means the liability to pay tax by the recipient of supply of goods or services or both instead of the supplier of such goods or services or both under Section 9(3) or Section 9(4) of the CGST Act, or under Section 5(3) or Section 5(4) of the IGST Act.

• Supplier [Section 2(105)]: In relation to any goods or services or both, means the person supplying the said goods or services or both and includes an agent acting as such on behalf of such supplier in relation to the goods or services or both supplied.

  • Actionable Claims Platform Operators: A person who organizes or arranges, directly or indirectly, the supply of specified actionable claims (including owners, operators, or managers of digital or electronic platforms) is deemed to be the supplier of such actionable claims, regardless of whether consideration is paid in money, money's worth, or virtual digital assets.

• Taxable Supply [Section 2(108)]: Means a supply of goods and/or services which is leviable to tax under the CGST Act.

• Non-Taxable Supply [Section 2(78)]: Means a supply of goods or services or both which is not leviable to tax under the CGST Act or under the IGST Act.

• Taxable Person [Section 2(107)]: Means a person who is registered or liable to be registered under Section 22 or Section 24 of the CGST Act.

  • Key Distinction: An unregistered person who is liable to be registered is construed as a taxable person. A person who obtains voluntary registration despite not being mandatory to register is also a taxable person.

• Recipient [Section 2(93)]:

  • Where consideration is payable: The person who is liable to pay that consideration.
  • Where no consideration is payable for goods: The person to whom goods are delivered/made available, or to whom possession/use is given.
  • Where no consideration is payable for services: The person to whom the service is rendered.
  • Includes an agent acting as such on behalf of the recipient.

EXTENT AND COMMENCEMENT OF GST LEGISLATIONS

• Central Goods and Services Tax Act, 2017: Extends to the whole of India [Section 1 of CGST Act].
  • Definition of "India" [Section 2(56) of CGST Act]:
  • The territory of India as referred to in Article 1 of the Constitution;
  • Its territorial waters, seabed and sub-soil underlying such waters, continental shelf, exclusive economic zone, or any other maritime zone as referred to in the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976;
  • The air space above its territory and territorial waters.

• Maritime Boundaries Thresholds:

  • Baseline: Coastline baseline.
  • Territorial Waters of India (TWI): Extends up to $12\,\text{NM}$ (Nautical Miles) from the baseline.
  • Contiguous Zone: Extends up to $24\,\text{NM}$ from the baseline.
  • Exclusive Economic Zone (EEZ) & Continental Shelf: Extends up to $200\,\text{NM}$ from the baseline.
  • High Seas: Waters beyond $200\,\text{NM}$.

• State GST (SGST) Acts: Extend to the whole of the respective State or Union Territory with Legislature.

  • States under GST Act: Includes Union Territories with Legislature, namely Delhi, Puducherry, and Jammu & Kashmir [Section 2(103) of CGST Act].

• Integrated Goods and Services Tax Act, 2017: Extends to the whole of India [Section 1 of IGST Act].

• Union Territory Goods and Services Tax Act, 2017: Extends to Union Territories without Legislature [Section 1 of UTGST Act]:

  • (a) Andaman and Nicobar Islands
  • (b) Lakshadweep
  • (c) Dadra and Nagar Haveli and Daman and Diu
  • (d) Ladakh
  • (e) Chandigarh
  • (f) Other Territory
  • Note on Reorganization: Jammu and Kashmir is reorganized into the UT of Jammu and Kashmir (with Legislature) and UT of Ladakh (without Legislature). Dadra and Nagar Haveli and Daman and Diu are merged into a single UT without Legislature.

LEVY AND COLLECTION OF CGST AND IGST (SECTION 9 CGST ACT & SECTION 5 IGST ACT)

• Statutory Provisions under Section 9 of CGST Act, 2017:

  • Section 9(1): Subject to Section 9(2), CGST shall be levied on all intra-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption and un-denatured extra neutral alcohol or rectified spirit used for manufacture of alcoholic liquor for human consumption, on the value determined under Section 15, at rates not exceeding $20\%$, as notified by the Government on recommendations of the GST Council, collected in such manner as prescribed, and paid by the taxable person.
  • Section 9(2): CGST on supply of five petroleum products shall be levied with effect from a date to be notified by the Government on recommendations of the GST Council:
  • Petroleum crude
  • High speed diesel
  • Motor spirit (commonly known as petrol)
  • Natural gas
  • Aviation turbine fuel (ATF)
  • Section 9(3): Government may specify categories of supply of goods or services or both on which tax shall be paid on reverse charge basis by the recipient.
  • Section 9(4): Government may specify a class of registered persons who shall, in respect of supply of specified categories of goods or services or both received from an unregistered supplier, pay tax on reverse charge basis as recipient.

• Statutory Provisions under Section 5 of IGST Act, 2017:

  • Section 5(1): IGST shall be levied on all inter-State supplies of goods or services or both, except alcoholic liquor for human consumption and un-denatured extra neutral alcohol / rectified spirit used for manufacturing alcoholic liquor for human consumption, on Section 15 transaction value, at rates not exceeding $40\%$, paid by the taxable person.
  • Proviso for Imports: Integrated tax on goods imported into India (other than notified goods) shall be levied and collected in accordance with Section 3 of the Customs Tariff Act, 1975 at the point when duties of customs are levied under Section 12 of the Customs Act, 1962.
  • Section 5(2): IGST on the five petroleum products deferred until notified date.
  • Section 5(3): Reverse charge notification for specified categories of goods or services.
  • Section 5(4): Reverse charge notification for supplies from unregistered suppliers to specified class of registered recipients.

• Import of Goods & Special Exception for Online Money Gaming:

  • All imports are treated as inter-State supplies; IGST is levied in addition to Basic Customs Duty (BCD) and GST Compensation Cess (if applicable).
  • For intangible goods where customs frontier crossing isn't physical, Notification No. 03/2023 IT notified online money gaming. Import of specified actionable claim of online money gaming is taxed under IGST directly under Section 5(1) without applicability of customs duty procedures.

REVERSE CHARGE MECHANISM (RCM) PROVISIONS

• Concept of Reverse Charge Mechanism:

  • Under normal circumstances (Forward Charge), statutory liability to collect tax, deposit it with the Government, issue tax invoices, and file returns rests on the supplier.
  • Under Reverse Charge Mechanism (RCM), the statutory compliance liability and tax obligation shifts completely from the supplier to the recipient of goods or services.

• A. Goods Taxable under Reverse Charge [Notification No. 4/2017 IT(R) / Notification No. 4/2017 CT(R)]:

• B. Services Taxable under Reverse Charge [Notification No. 13/2017 CT(R) / Notification No. 10/2017 IT(R)]:

• In-Depth Analysis of Goods Transport Agency (GTA) Services:
  • Tax Rate Options for GTA:
  • $5\%$ Rate ($2.5\%$ CGST + $2.5\%$ SGST or $5\%$ IGST): Available without Input Tax Credit (ITC).
    • If GTA does not opt to pay under forward charge, tax is paid by the Recipient under RCM @ $5\%$.
    • If GTA opts to pay under forward charge, tax is paid by GTA @ $5\%$.
  • $12\%$ Rate ($6\%$ CGST + $6\%$ SGST or $12\%$ IGST): GTA opts to pay under forward charge with full ITC eligibility.
  • RCM Exemption/Non-applicability on GTA:
  • Services provided to Govt Departments, Local Authorities, or Govt Agencies registered solely for TDS under Section 51 are exempt from GST.
  • Services provided to unregistered end-consumers/individuals are exempt.

• In-Depth Analysis of Renting of Motor Vehicles Services:
  • $5\%$ Rate: Supplier gets limited ITC (only input service in same line of business).
  • If Supplier is Non-Body Corporate and Recipient is Body Corporate (and invoice is not issued at $12\%$): RCM applies, Body Corporate pays $5\%$.
  • If Supplier is Body Corporate or Recipient is Non-Body Corporate: Forward Charge applies, Supplier pays $5\%$.
  • $12\%$ Rate: Supplier opts to pay tax at $12\%$ with full ITC. Forward Charge applies in all cases.
  • Clarification: Distinction between "Renting of Motor Vehicle" (renter defines schedule/route over a period) and "Passenger Transport Service" (pre-determined routes and schedules). RCM applies only to renting of motor vehicles.

• In-Depth Analysis of Directors' Remuneration:
  • Independent / Non-Employee Directors: Services outside Schedule III; remuneration taxable under RCM in the hands of the company.
  • Executive / Employee Directors:
  • Salary portion subject to TDS under Section 192 of Income Tax Act: Treated as supply by employee to employer in course of employment (Para 1 of Schedule III) -> NOT TAXABLE.
  • Professional fee portion subject to TDS under Section 194J of Income Tax Act: Treated as consideration for contract for service -> TAXABLE under RCM in hands of the company.
  • Personal Capacity Supplies: Renting immovable property by a director in personal capacity to the company is NOT under RCM under Entry 6; it is covered under regular renting provisions.

• Delhi Development Authority (DDA) Status Clarification:
  • DDA is NOT a local authority under Section 2(69) of CGST Act as it is not an elected self-governing body managing a local/municipal fund (Circular No. 245/02/2025 GST).

CLASSIFICATION OF GOODS AND SERVICES AND APPLICABLE GST RATES

• Classification of Goods:

  • Goods are classified using the Harmonized System of Nomenclature (HSN) code as adapted into the First Schedule of the Customs Tariff Act, 1975.
  • Structure: Section $\rightarrow$ Chapter $\rightarrow$ Heading $\rightarrow$ Sub-heading $\rightarrow$ Tariff Item (extended up to 8 digits in India).
  • Rules for Interpretation of Customs Tariff apply directly to GST classification.

• Classification of Services:

  • Scheme of Classification of Services adapted from UN Central Product Classification.
  • Assigned under Chapter 99 across 5 major sections:
  • Section 5: Construction Services
  • Section 6: Distributive Trade Services; Accommodation, Food & Beverage; Transport; Gas/Electricity Distribution
  • Section 7: Financial, Real Estate, Rental & Leasing Services
  • Section 8: Business & Production Services
  • Section 9: Community, Social, Personal & Miscellaneous Services

• GST Rate Structure:

  • Goods Rate Schedules:
  • CGST Schedules: $0.125\%$, $0.75\%$, $1.5\%$, $2.5\%$, $6\%$, $9\%$, $14\%$.
  • IGST Schedules: $0.25\%$, $1.5\%$, $3\%$, $5\%$, $12\%$, $18\%$, $28\%$.
  • Services Rate Schedules:
  • CGST Rates: $0.75\%$, $2.5\%$, $3.75\%$, $6\%$, $9\%$, $14\%$.
  • IGST Rates: $1.5\%$, $5\%$, $7.5\%$, $12\%$, $18\%$, $28\%$.
  • Highest rate ($28\%$ IGST / $14\%$ CGST + $14\%$ SGST) applies to gambling, casinos, race clubs, and IPL-like entertainment events.

• GST Rates in Real Estate Sector:
  • $1\%$ Effective Rate (without ITC): Construction of affordable houses (area $\le 60\,\text{sqm}$ in metros / $90\,\text{sqm}$ in non-metros and value $\le \text{Rs. } 45\,\text{lakh}$).
  • $5\%$ Effective Rate (without ITC): Non-affordable residential houses and commercial apartments in Residential Real Estate Projects (RREP, where commercial area $\le 15\%$ of total area).
  • Procurement Conditions:
  • Promoters must procure at least $80\%$ of inputs and input services from registered persons.
  • Shortfall below $80\%$ is taxable under RCM u/s 9(4) @ $18\%$.
  • Cement procured from unregistered suppliers is taxable under RCM u/s 9(4) @ $28\%$.
  • Capital goods procured from unregistered suppliers are taxable under RCM u/s 9(4) at applicable rates.

• Levy of GST on Airport Dues (PSF & UDF):
  • Passenger Service Fee (PSF) and User Development Fee (UDF) are charges for airport services provided by airport operators to embarking passengers.
  • Collected by airlines acting as Pure Agents under Rule 33 of CGST Rules.
  • Airport operator is liable to pay GST on PSF and UDF.
  • Registered passengers can claim ITC based on pure agent invoice issued by airlines.

COMPOSITION LEVY SCHEME (SECTION 10 OF CGST ACT)

• Overview and Statutory Objective:

  • Alternative tax payment scheme designed for small taxpayers to lower compliance costs and eliminate complex accounting records.
  • Tax is paid quarterly via Form GST CMP-08 as a fixed percentage of turnover, and an annual return is filed.
  • Taxpayers cannot issue tax invoices, cannot collect tax from recipients, and cannot avail Input Tax Credit (ITC).

• Turnover Limits for Eligibility:

  • Section 10(1) & 10(2) Scheme (Goods & Restaurant Services):
  • Preceding Financial Year aggregate turnover threshold: $\text{Rs. } 1.5\,\text{crore}$.
  • Special Category States threshold: $\text{Rs. } 75\,\text{lakh}$ for 8 States:
    • Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Uttarakhand.
    • Note: Assam, Himachal Pradesh, and Jammu & Kashmir retain the $\text{Rs. } 1.5\,\text{crore}$ threshold.
  • Section 10(2A) Scheme (Services & Mixed Suppliers):
  • Preceding Financial Year aggregate turnover threshold: $\text{Rs. } 50\,\text{lakh}$.

• Prescribed Rates of Tax under Composition Scheme:

• Computation of Aggregate Turnover [Section 2(6) & Explanation 1 to Section 10]:

  • Includes: Taxable supplies, exempt supplies, exports, inter-State supplies of all entities under same PAN, supplies from April 1st up to registration liability date.
  • Excludes: Inward supplies under RCM, taxes (CGST, SGST, UTGST, IGST, Cess), exempt interest income on loans/deposits/advances.
  • (*Note): Exports and inter-State supplies are included only for evaluating preceding year eligibility. In current year, composition taxpayers cannot make inter-State outward supplies or exports.

• Computation of Turnover in State/UT [Section 2(112) & Explanation 2 to Section 10]:

  • Includes: Taxable and exempt supplies within the State/UT.
  • Excludes: Taxes, inward RCM supplies, supplies from April 1st up to registration liability date, and interest income on loans/deposits/advances.
  • Special Exclusions for Traders: Traders pay tax only on turnover of taxable supplies in State/UT.

• Marginal Supply of Services under Section 10(1) [Second Proviso to Section 10(1)]:

  • Composition suppliers of goods or restaurant services are permitted to supply other services up to:
  • (a) $10\%$ of Turnover in State/UT in preceding FY; or
  • (b) $\text{Rs. } 5\,\text{lakh}$, whichever is higher.
  • Value of exempt service of extending deposits, loans, or advances against interest/discount is excluded from this computation.

• Persons Ineligible for Composition Scheme [Section 10(2) & 10(2A)]:

  • Suppliers of non-taxable goods/services.
  • Suppliers making inter-State outward supplies.
  • Persons supplying goods/services through an Electronic Commerce Operator (ECO) required to collect tax at source u/s 52.
  • Casual Taxable Persons (CTP) or Non-Resident Taxable Persons (NRTP).
  • Manufacturers of Notified Goods:
  1. Ice cream and other edible ice (2105 00 00)
  2. Pan masala (2106 90 20)
  3. Tobacco and manufactured tobacco substitutes (24)
  4. Aerated waters (2202 10 10)
  5. Fly ash bricks, fly ash aggregate, fly ash blocks (6815)
  6. Bricks of fossil meals or similar siliceous earths (6901 00 10)
  7. Building bricks (6904 10 00)
  8. Earthen or roofing tiles (6905 10 00)

• Conditions & Procedural Rules:

  • Must pay tax under RCM on inward supplies.
  • PAN-level uniformity: All business places under same PAN must opt for composition or all under normal scheme.
  • Bill of Supply must contain endorsement: "composition taxable person, not eligible to collect tax on supplies".
  • Business premises signboards must display: "composition taxable person".
  • Intimation via Form GST REG-01 (new registration) or Form GST CMP-02 (prior to start of FY for existing registered persons).
  • Lapses immediately from the exact date current year aggregate turnover crosses threshold ($\text{Rs. } 1.5\,\text{crore}$ / $\text{Rs. } 75\,\text{lakh}$ / $\text{Rs. } 50\,\text{lakh}$).
  • Penalty under Section 10(5) applies for irregular availment.

PRACTICAL ILLUSTRATIONS AND TEST YOUR KNOWLEDGE PROBLEMS

• Problem 1 (Sponsorship Services RCM):

  • Scenario: Panini Pvt. Ltd., Jaipur pays $\text{Rs. } 5,00,000$ for sports event sponsorship to Pink City Club (non-body corporate).
  • Solution: As per Notification No. 13/2017 CT(R), sponsorship services supplied by any person to a body corporate located in taxable territory are taxable under RCM. Recipient Panini Pvt. Ltd. is liable to pay GST.

• Problem 2 (Director Remuneration & Firm Services):

  • Scenario: Narayan Ltd. pays Arpan Singhania (Executive Director) $\text{Rs. } 25,000$ sitting fees, $\text{Rs. } 1.5\,\text{lakh}$ salary (TDS u/s 192 deducted), and $\text{Rs. } 2\,\text{lakh}$ professional fees to his partnership firm Tapasya & Associates.
  • Solution:
  • Sitting fee ($\text{Rs. } 25,000$): Taxable under RCM; Narayan Ltd. pays GST.
  • Salary ($\text{Rs. } 1.5\,\text{lakh}$ with TDS u/s 192): Schedule III employment supply -> NOT TAXABLE.
  • Professional services by Tapasya & Associates ($\text{Rs. } 2\,\text{lakh}$): Forward Charge; Tapasya & Associates pays GST.

• Problem 3 (Composition Scheme Eligibility & Conversion):

  • Scenario: Mr. Rajbeer (Delhi) sold interior decor goods ($\text{Rs. } 80\,\text{lakh}$ turnover in 2023-24). His son Karan wants to start interior decor services under same firm M/s Rajbeer & Sons in 2024-25.
  • Solution: Rajbeer & Sons is eligible for 10(1) composition in 2024-25 ($80\,\text{lakh} \le 1.5\,\text{crore}$). Converting to partnership creates new entity/PAN; service supply limit for firm in 2024-25 will be higher of $10\%$ of preceding year turnover ($0$) or $\text{Rs. } 5\,\text{lakh}$. Thus, firm can supply services up to $\text{Rs. } 5\,\text{lakh}$ under composition.

• Problem 4 (Architect Firm Section 10(2A) Calculation):

  • Scenario: Partnership firm in Bhopal started April 1st. Turnovers: Apr-Jun $\text{Rs. } 20\,\text{lakh}$, Jul-Sep $\text{Rs. } 30\,\text{lakh}$, Oct-Dec $\text{Rs. } 20\,\text{lakh}$. Registered July 1st under composition. Rates: $9\%$ CGST + $9\%$ SGST.
  • Solution:
  • Apr-Jun: $\text{Rs. } 20\,\text{lakh}$ threshold exemption -> Tax Liability = Nil.
  • Jul-Sep: Taxable under Sec 10(2A) @ $6\%$ ($3\%$ CGST + $3\%$ SGST) on $\text{Rs. } 30\,\text{lakh}$ -> CGST = $\text{Rs. } 90,000$, SGST = $\text{Rs. } 90,000$.
  • Cumulative turnover reaches $\text{Rs. } 50\,\text{lakh}$; option lapses. Oct-Dec taxed at normal $18\%$ ($9\%$ CGST + $9\%$ SGST) on $\text{Rs. } 20\,\text{lakh}$ -> CGST = $\text{Rs. } 1,80,000$, SGST = $\text{Rs. } 1,80,000$.

• Problem 5 (Multiple Independent Composition Cases):

  • (a) Technology Enterprises (Punjab): Aggregate turnover $\text{Rs. } 125\,\text{lakh}$ ($\le 1.5\,\text{crore}$). Can opt for 10(1) in 2024-25 and supply repair services up to $10\% \times 125 = \mathbf{\text{Rs. } 12.5\,\text{lakh}}$.
  • (b) M/s Siddharth & Sons (Delhi): Restaurant turnover $\text{Rs. } 112\,\text{lakh}$ ($\le 1.5\,\text{crore}$). Can start trading juices under 10(1).
  • (c) Sitaram Associates (Sikkim): Turnover $\text{Rs. } 73\,\text{lakh}$. Exclusive service providers cannot opt for 10(1) (Sikkim threshold $\text{Rs. } 75\,\text{lakh}$). Cannot opt for 10(2A) as turnover exceeds $\text{Rs. } 50\,\text{lakh}$.
  • (d) Deepti Services Ltd (Uttarakhand): Hair styling turnover $\text{Rs. } 34\,\text{lakh}$. Ineligible for 10(1), but eligible for 10(2A) ($\le 50\,\text{lakh}$). Same answer if beauty products are added.

• Problem 6 (B & D Company - Threshold Crossing & RCM GTA):

  • Scenario: Wholesaler in Maharashtra. Turnovers: Q1 P=$\text{Rs. } 60\,\text{lakh}$, Q=$\text{Rs. } 17.65\,\text{lakh}$; Q2 P=$\text{Rs. } 50\,\text{lakh}$, Q=$\text{Rs. } 17\,\text{lakh}$. Q3 Oct bills detailed. Paid GTA freight $\text{Rs. } 1,40,000$ over April-Oct ($\text{Rs. } 20,000$/month).
  • Solution:
  • Cumulative turnover through Oct 2nd: $\text{Rs. } 1,44,65,000 + \text{Rs. } 2,03,000 + \text{Rs. } 1,38,250 + \text{Rs. } 1,06,250 = \mathbf{\text{Rs. } 1,49,12,500}$.
  • Bill 2309 on Oct 3rd ($\text{Rs. } 92,500$) pushes aggregate turnover to $\text{Rs. } 1,50,05,000$ (exceeds $\text{Rs. } 1.5\,\text{crore}$). Scheme lapses on Oct 3rd.
  • Trader Composition Tax (1% on Taxable Turnover 'P'):
    • Q1: CGST @ $0.5\% \times 60,00,000 = \mathbf{\text{Rs. } 30,000}$, SGST = $\text{Rs. } 30,000$.
    • Q2: CGST @ $0.5\% \times 50,00,000 = \mathbf{\text{Rs. } 25,000}$, SGST = $\text{Rs. } 25,000$.
    • Q3 (Oct 1-2, P = 4,03,000): CGST @ $0.5\% \times 4,03,000 = \mathbf{\text{Rs. } 2,015}$, SGST = $\text{Rs. } 2,015$.
  • Inward GTA RCM Tax (5%):
    • Q1 GTA = $\text{Rs. } 60,000$ -> CGST @ $2.5\% = \mathbf{\text{Rs. } 1,500}$, SGST = $\text{Rs. } 1,500$.
    • Q2 GTA = $\text{Rs. } 60,000$ -> CGST @ $2.5\% = \mathbf{\text{Rs. } 1,500}$, SGST = $\text{Rs. } 1,500$.

• Problem 7 (Shubhlaxmi Foods Restaurant & FD Interest):

  • Restaurant turnover $\text{Rs. } 140\,\text{lakh}$, FD interest $\text{Rs. } 20\,\text{lakh}$. FD interest is excluded from aggregate turnover -> Aggregate Turnover = $\text{Rs. } 140\,\text{lakh} \le 1.5\,\text{crore}$. Eligible for composition.
  • 2024-25: Restaurant $\text{Rs. } 130\,\text{lakh}$, Farm labor $\text{Rs. } 10\,\text{lakh}$, FD interest $\text{Rs. } 30\,\text{lakh}$. Turnover for tax payment = $\text{Rs. } 140\,\text{lakh}$. Tax @ $5\%$ = $\text{Rs. } 7,00,000$ (CGST $\text{Rs. } 3,50,000$, SGST $\text{Rs. } 3,50,000$).

• Problem 8 (CA Firm Registration & 10(2A)):

  • New CA firm in Jaipur. Apr-Jun $\text{Rs. } 10\,\text{lakh}$, Jul-Sep $\text{Rs. } 20\,\text{lakh}$. Crossed threshold ($\text{Rs. } 20\,\text{lakh}$) on Aug 1st.
  • Apr-Jun: Tax = Nil (below registration threshold).
  • Jul-Sep: Taxable Turnover = $\text{Rs. } 30,00,000 - 20,00,000 = \text{Rs. } 10,00,000$. Tax @ $6\%$ = $\text{Rs. } 60,000$ (CGST $\text{Rs. } 30,000$, SGST $\text{Rs. } 30,000$).

• Problem 9 (Restaurant Food Delivery):

  • Restaurant turnover $\text{Rs. } 120\,\text{lakh}$. Service limit under 10(1) = $10\% \times 120 = \mathbf{\text{Rs. } 12\,\text{lakh}}$. Estimated food delivery turnover is $\text{Rs. } 5\,\text{lakh}$ ($\le 12\,\text{lakh}$). Eligible for composition scheme.

• Problem 10 (Manufacturer vs. Trader Composition Tax):

  • Taxable turnover $\text{Rs. } 15\,\text{lakh}$, Exempt turnover $\text{Rs. } 17\,\text{lakh}$. Total = $\text{Rs. } 32\,\text{lakh}$.
  • (i) Manufacturer: Tax @ $1\%$ on Total Turnover ($\text{Rs. } 32\,\text{lakh}$) = $\text{Rs. } 32,000$ (CGST $\text{Rs. } 16,000$, SGST $\text{Rs. } 16,000$).
  • (ii) Trader: Tax @ $1\%$ on Taxable Turnover ($\text{Rs. } 15\,\text{lakh}$) = $\text{Rs. } 15,000$ (CGST $\text{Rs. } 7,500$, SGST $\text{Rs. } 7,500$).

• Problem 11 (M/s All-in-One Monthly Liability):

  • (i) DSA service to Y Bank Ltd (Partnership firm): Forward Charge @ $18\%$ on $4,00,000 \rightarrow$ CGST = $\text{Rs. } 36,000$, SGST = $\text{Rs. } 36,000$.
  • (ii) Security services to ABC P. Ltd (Registered person): RCM applies -> Liability = 0.
  • (iii) Security services to PSR Trust (Unregistered): Forward Charge @ $18\%$ on $1,00,000 \rightarrow$ CGST = $\text{Rs. } 9,000$, SGST = $\text{Rs. } 9,000$.
  • (iv) Renting motor vehicle to Amaze Tours Ltd (Body corporate, fuel included): RCM applies -> Liability = 0.
  • (v) Renting motor vehicle to Priti & Co (Non-body corporate): Forward Charge @ $5\%$ on $40,000 \rightarrow$ CGST = $\text{Rs. } 1,000$, SGST = $\text{Rs. } 1,000$.
  • (vi) Inward Legal services from PB & Co: Exempt as preceding year turnover was zero -> Liability = 0.
  • Total Outward GST Liability: CGST = $\text{Rs. } 46,000$, SGST = $\text{Rs. } 46,000$.

• Problem 12 (Same PAN Multiple Places of Business):

  • MN Ltd. cannot opt for composition levy for one place of business and normal scheme for another under the same PAN. Proviso to Section 10(2) mandates uniform adoption across all units under the same PAN.

• Problem 13 (Inter-State Outward Supply Penalty):

  • Ranveer Industries made inter-State outward supplies of garments. Inter-State suppliers are strictly barred from composition levy under Section 10(2)(c). Action of proper officer levying penalty u/s 10(5) is valid.

• Problem 14 (Manufacturer vs Trader First Year Calculation):

  • Mr. Yash (Kerala) started April. Q1 turnover $\text{Rs. } 20\,\text{lakh}$, Q2 $\text{Rs. } 100\,\text{lakh}$ ($25\%$ exempt). Opted for composition July 1st.
  • Turnover prior to registration ($\text{Rs. } 20\,\text{lakh}$) excluded from Turnover in State.
  • (i) Manufacturer: Tax @ $1\%$ on Q2 total turnover ($\text{Rs. } 100\,\text{lakh}$) = $\text{Rs. } 1,00,000$ (CGST $\text{Rs. } 50,000$, SGST $\text{Rs. } 50,000$).
  • (ii) Trader: Tax @ $1\%$ on Q2 taxable turnover ($\text{Rs. } 75\,\text{lakh}$) = $\text{Rs. } 75,000$ (CGST $\text{Rs. } 37,500$, SGST $\text{Rs. } 37,500$).