CA > Inter > Paper 3 – Skim Notes

Chapter 3 : Charge of GST

Overview

  • Understanding the scopes and provisions of CGST, IGST, SGST, and UTGST Act.
  • Key definitions and concepts related to GST and taxable supplies.
  • Analysis of intra-State and inter-State supply classifications.
  • Examination of GST levy and collection mechanisms as per the CGST Act and IGST Act.
  • Overview of reverse charge mechanism and composition levy under GST.

Key Topics

Extent and Commencement of GST Law

  • The CGST Act, 2017 extends to the whole of India as defined in Section 1.
  • State GST laws apply within their respective states or Union Territories with legislature.
  • Integrated Tax (IGST) Act, 2017 applies to all inter-State supplies within India.
  • Union Territory Goods and Services Tax Act, 2017 applies to Union Territories without legislature.
  • The 101st Constitution Amendment provided the foundation for these GST laws.

Deep Dive

  • The transition from prior tax systems to GST and its implications on tax collection.
  • The role of the GST Council in advising the government on rates and regulations.
  • Historical context of amendments leading to the current GST framework.

Levy and Collection of CGST and IGST

  • CGST is applicable on intra-State supplies while IGST is levied on inter-State supplies.
  • Levy as per Section 9 of the CGST Act which specifies situations exempt from GST (e.g. liquor).
  • Transaction value as per Section 15 is the basis for determining the value of goods/services for tax.
  • Maximum GST rates: CGST not exceeding 20% and IGST not exceeding 40%.
  • Reverse charge mechanisms detailed in sections impacting the recipient of services.

Deep Dive

  • Significance of transaction value vs. market value in tax assessment.
  • The impact of notified categories in reverse charge applications under Section 9.
  • The administrative challenges faced in collecting GST across state borders.

Reverse Charge Mechanism

  • Under RCM, the recipient pays GST instead of the supplier in specific notified situations.
  • Applicable to services like transportation provided by unregistered dealers to registered ones.
  • Detailed conditions under which reverse charge applies are outlined in Section 9.
  • Supplies involving unregistered suppliers may lead to increased compliance requirements.
  • Major sectors impacted include e-commerce and essential goods/services.

Deep Dive

  • Effects of RCM on small suppliers and their operations.
  • Comparative analysis of RCM with standard GST charging methodologies.
  • Review of case studies demonstrating RCM’s implications in real business situations.

Composition Levy Eligibility

  • The composition scheme allows small taxpayers with suggestively lower turnovers to pay tax at fixed rates.
  • Eligibility defined under Section 10 of the CGST Act, with specific exclusions for service types rented, etc.
  • Rates vary: 1% for manufacturers, specific rates for restaurant services, and 6% for certain service providers.
  • Certain limits apply, such as a turnover threshold generally capped at ₹1.5 crore.
  • Conditions under which this scheme can be opted are clearly defined, ensuring simplicity.

Deep Dive

  • The rationale for allowing a composition scheme in economic terms.
  • Effects of composition scheme on compliance costs for small businesses.
  • Empirical analysis of revenue impacts from various taxpayer categories under this scheme.

Key Definitions and Concepts in GST

  • Definitions set forth in Section 2 of the CGST Act are foundational (e.g., goods, services, taxable person).
  • Electronic Commerce and its implications in GST operations as detailed in GST laws.
  • Exempt supplies and non-taxable supply concepts significantly affect compliance needs.
  • The role of the term ‘consideration’ in defining taxable and non-taxable events under GST.
  • The meaning of aggregate turnover and its implications for thresholds.

Deep Dive

  • Comparison of definitions under GST with other indirect tax structures.
  • Exploration of the efficiency of e-commerce models under the current tax regulations.
  • The evolving interpretative elements of definitions as new cases and businesses emerge.

Summary

Chapter 3 provides a comprehensive understanding of the Charge of GST under the CGST, IGST, SGST, and UTGST Acts. Starting from the foundational aspects of the legislation, it addresses the extent and commencement of the laws, defines essential terms, elaborates on the levy and collection mechanisms, and discusses crucial concepts like the reverse charge mechanism and composition levy. This detailed overview complements a deeper exploration into compliance, impacts on small businesses, and the evolving landscape of GST in India, reflecting the dynamic nature of tax regulation in response to economic activities.