Detailed Agenda Note Volume 1 - 48th GSTCM

Agenda Keyword

Confidential
Agenda for
48th GST Council Meeting
17th
December 2022
Volume – I
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GST Council Secretariat
New Delhi
5
th Floor, Tower-II, Jeevan Bharti Building, New Delhi
25th November, 2022
OFFICE MEMORANDUM
Subject: Notice for the 48th Meeting of the GST Council scheduled to be Convened on 17th
December, 2022
The undersigned is directed to refer to the subject stated above and to convey that the 48th
Meeting of the GST Council will be held on 17th December, 2022 through virtual mode (Video
Conferencing). The schedule of the Meeting is as follows:
• Saturday, 17th December, 2022: 11:00 A.M. onwards
2. In addition, an Officers Meeting will be held on 16th December, 2022 as per the following
schedule:
• Friday, 16th December, 2022: 11: 00 A.M. onwards
3. The agenda item and other details for the 48th Meeting of the GST Council will be
communicated in due course of time.
4. Kindly convey the invitation to Hon’ble Members of the GST Council to attend the Meeting of the
GST Council.

Sd/-
(Tarun Bajaj)
Secretary to the Govt. of India and ex-officio Secretary to the GST Council
Tel:011 23092653
Copy to:
1. PS to the Hon’ble Minister of Finance, Government of India, North Block, New Delhi with the
request to brief Hon’ble Minister about the above said meeting.
2. PS to the Hon’ble Minister of State (Finance), Government of India, North Block, New Delhi
with the request to brief Hon’ble Minister about the above said Meeting.
3. The Chief Secretaries of all the State Governments, Union Territories of Delhi, Puducherry and
Jammu and Kashmir with the request to intimate the Minister in charge of Finance/Taxation or any other
Minister nominated by the State Government as a Member of the GST Council about the above said
meeting.
4. Chairman, CBIC, North block, New Delhi, as a permanent invitee to the proceeding of the
Council.
5. Chairman, GST Network.
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TABLE OF CONTENTS
Agenda
No.
Agenda Item Page No.
1 Confirmation of Minutes of 47th GST Council Meeting held on 28th
& 29th June, 2022
9-146
2 Ratification of the Notifications, Circulars and Orders issued by the
GST Council and decisions of GST Implementation Committee for the
information of the Council
147-189
3
Recommendations of the Fitment Committee for the consideration of
the GST Council
a) Recommendations made by the Fitment Committee for making
changes in GST rates or for issuing clarifications in relation to goods
– Annexure-I
190-203
b) Issues where no change has been proposed by the Fitment
Committee in relation to goods – Annexure-II
204-209
c) Issues deferred by the Fitment Committee for further examination
in relation to goods – Annexure-III
210-211
d) Recommendations made by the Fitment Committee for making
changes in GST rates or for issuing clarifications in relation to
services – Annexure-IV
212-226
e) Issues where no change has been proposed by the Fitment
Committee in relation to services – Annexure-V
227-256
f) Issues deferred by the Fitment Committee for further examination
in relation to services – Annexure-VI
257-260
4 Report of the Committee on Levy of penal interest on delayed
remittances of GST by the Banks to the Government Accounts in RBI
during the initial period of GST implementation.
261-273
5 Performance Report of the NAA (National Anti-profiteering
Authority) for the 1st quarter (April, 2022 to June, 2022) and 2nd
quarter (July,2022 to September, 2022) along with monthly
performance report for the month of October and November 2022
for the information of the Council
274-278
6 Ad-hoc Exemptions Orders issued under Section 25(2) of the
Customs Act, 1962 to be placed before the GST Council for
information
279-285
7 Issues recommended by the Law Committee for the consideration of
the GST Council
i. Amendment in the CGST Rules, 2017 for Aadhaar based
Biometric authentication of the registrants
286-290
ii. Refund to the unregistered persons 291-296
iii. Decriminalization of the CGST Act, 2017 297-303
iv. Amendment in Rule 94 of the CGST Rules, 2017 and
Section 56 of the CGST Act, 2017 to provide for exclusion
of time period of delay in sanction and disbursal of refund
where such delay is attributable to applicant
304-307
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Agenda
No.
Agenda Item Page No.
v. Clarifying the manner of re-determination of demand in
terms of sub-section (2) of Section 75 of the CGST Act,
2017
308-312
vi. Amendment in the CGST Rules, 2017
I. Amendment in sub-rule (3) of Rule 12 313-314
II. Amendment in sub-rule (1) of Rule 37 314-316
III. Insertion of Rule 37A 316-317
IV. Amendment in Rule 46 317-318
V. Amendment in Rule 46A 318-319
VI. Insertion of proviso in sub-rule (8) of Rule 87 319-320
VII. Amendment in Rule 108 and Rule 109 320-323
VIII. Insertion of Rule 109C 324-325
IX. Deletion of clause (d) of sub-rule (14) of Rule 138 326-327
X. Amendment in Entry (5) of Annexure appended to subrule (14) of Rule 138
327-327
XI. Substitution of FORM GST REG-19 328-330
XII. Amendment in FORM GST REG-17 330-331
XIII. Amendment in FORM GST DRC-03 332-334
vii. Supplies by unregistered person and composition dealers
through e-commerce operators
335-343
viii. Amendments in the CGST Act, 2017
A. Amendment in second proviso to Section 16 of the CGST
Act, 2017 to align with GSTR-1/3B
344-344
B. Amendment to Section 23 to provide overriding effect over
Sections 22(1) & 24
344-345
C. Amendments in the CGST Act, 2017 to restrict filing of
returns / statements after completion of specified time in
view of data archival policy
345-346
D. Proposal for amendment of sub-section (6) of Section 54 of
CGST/SGST Act, 2017
346-347
ix. Amendment in the tables of GSTR-1 for reporting ECO
Supplies made under Section 9(5) of the CGST Act, 2017
and attracting TCS under Section 52 of the CGST Act, 2017
347-364
x. Retrospective applicability of para 7, 8(a) and 8(b) of
Schedule III of the CGST Act, 2017
365-373
xi. Mechanism to deal with differences in liabilities between
GSTR-1 and GSTR-3B, along with draft rules and proposed
FORM DRC-01B for implementing the same
374-377
xii. Clarification on various issues in GST
A. Clarification on taxability of No Claim Bonus offered by
Insurance companies
378-379
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Agenda
No.
Agenda Item Page No.
B. Clarification on applicability of e-invoicing w.r.t an entity 380-384
xiii. Clarification regarding treatment of the difference in ITC
availed in GSTR-3B as compared to that available in GSTR2A for FY 2017-18 and 2018-19
385-390
xiv. Clarification regarding the treatment of statutory dues under
GST law in respect of the taxpayers for whom the
proceedings have been finalised under the Insolvency and
Bankruptcy Code, 2016
391-395
xv. Amendment in provisions related to OIDAR Services under
the IGST Act, 2017
396-401
xvi. Amendment in Section 17 of the CGST Act, 2017 regarding
ITC in respect of CSR (Corporate Social Responsibility)
expenditure
402-405
xvii. Issues related to place of supply in terms of the proviso to
Section 12(8) of the IGST Act, 2017
406-411
8 Issues recommended by GSTN :
1. Proposed Changes in HR Policies and Transition
Management from GSTN
412-419
2. Proposal for Changes in the Revenue Model of GSTN and
transition to the new Revenue Model
420-421
3. Waiver of Interest on delayed receipt of Advance User
Charges (AUC) from a few states and CBIC
422-423
4. Data Archival Policy for the GST System 423-423
5. Implementation of facility to Generate Document
Identification Number in GST Back Office for Model 2 States
incompliance with the Supreme Court judgement in W.P 320
of 2022.
423-502
9 Report of Group of Ministers on constitution of Goods and Services
Tax Tribunal
503-519
10 Closure of Group of Ministers (GoM) on levy of Covid Cess on
Pharma and Power in Sikkim
520-520
11 Closure of Group of Ministers (GoM) to examine the feasibility of
implementation of e-way bill requirement for movement of gold and
other precious stones.
521-522
12 GST Data sharing with Ministries and Departments 523-526
13 Review of revenue position under Goods and Services Tax 527-531

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Discussion on Agenda Items
Agenda Item 1: Draft Minutes of the 47th Meeting of GST Council held on 28th & 29th June, 2022
The 47th meeting of the GST Council was held on 28th & 29th June, 2022 at Chandigarh under the
chairpersonship of the Hon’ble Union Finance Minister, Ms. Nirmala Sitharaman. The list of Hon’ble
Members of the Council who attended the meeting is at Annexure-1. The list of the officers of the
Centre, the States, the GST Council Secretariat and the GSTN who attended the meeting is at
Annexure-2.
2. The following agenda items were listed for discussion in the 47th meeting of the GST Council as
stated below:
1
Confirmation of Minutes of GST Council Meetings
i. 45th Meeting of GST Council held on 17th September, 2021
ii. 46th Meeting of GST Council held on 31st December ,2021
2 Ratification of the Notifications, Circulars and Orders issued by the GST Council and
decisions of GST Implementation Committee for the information of the Council
3

Issues recommended by the Law Committee for the consideration of the GST Council
i. Issuance of clarification on issue of claiming refund under inverted duty structure
where the supplier is supplying goods under some concessional Notification
ii. Amendment in formula prescribed in sub-rule (5) of rule 89 of CGST Rules, 2017
for calculation of refund of unutilized Input Tax Credit on account of inverted
duty structure
iii. Authority to issue recurring SCN in case of an enforcement action initiated by the
Central authorities against a taxpayer assigned to State and vice versa
iv. Clarification on various issues relating to applicability of demand and penalty
provisions under the Central Goods and Services Tax Act, 2017 in respect of
transactions involving fake invoices
v. Notifying clause (c) of Section 110 and Section 111 of the Finance Act, 2022
vi. Issuance of clarification on various issues pertaining to GST
vii. Issue of compulsory registration for supplier supplying goods or services through
ECOs under Section 24(ix) of the CGST Act, 2017 and allowing Composition
dealers to use e-Commerce platforms
viii. Refund of unutilized Input Tax Credit on account of Export of Electricity
ix. Annual Returns for FY 2021-22
x. Clarification on mandatory furnishing of correct and proper information of interState supplies and amount of ineligible/blocked Input Tax Credit and reversal
thereof in return in FORM GSTR-3B and statement in FORM GSTR-1
xi. Comprehensive changes/amendments in FORM GSTR-3B
xii. Proposal for amendments to CGST Rules, 2017
xiii. Re-credit of amount in electronic credit ledger after recovery of erroneous refund
xiv. Extension of limitation under Section 168A of the CGST Act, 2017
xv. Waiver of late fee for delay in filing FORM GSTR-4 for FY 2021-22 and
extension of due date for filing FORM GST CMP- 08 for Q1 of FY 2022-23
xvi. Refund of accumulated ITC to Duty-Free Shops
xvii. Exemption from IGST and Cess on imports/domestic procurement of goods by
AA/EPCG/ EOU and for doing away with e-Wallet
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xviii. Amendment in CGST Rules for handling of pending IGST refund claims
xix. Errata
xx. Consent based data sharing for non-GST purposes
4
Issues recommended by the GSTN
i. Development of New Return System
ii. Extension of REAP and LEAP Projects beyond 31.03.22 for FY 2022-23
iii. Status of Establishing Multiple Invoice Registration Portals (IRPs) to cater to the
requirement of extending e-Invoicing to all the Businesses
5
Performance Report of the NAA (National Anti-profiteering Authority) for the 2nd

quarter (July to September, 2021), 3rd quarter (October to December, 2021) and 4th quarter
(January to March, 2022) for the information of the Council










6
Issues recommended by the Fitment Committee
a) Recommendations made by the Fitment Committee for making changes in GST rates or
for issuance of clarification in relation to goods - Annexure I to the Agenda
b) Issues where no change has been proposed by the Fitment Committee in relation to
goods - Annexure II to the Agenda
c) Issues deferred by the Fitment Committee for further examination in relation to goods -
Annexure III to the Agenda
d) Recommendations made by the Fitment Committee for making changes in GST rates or
for issuance of clarification in relation to services - Annexure IV to the Agenda
Recommendations made by the Fitment Committee on issues related to Tour and
Hospitality Sector, and on positive list of services to be specified in Sr. No. 3/3A of
Notification No. 12/2017-CT(R) as given at Annexure-IVA and Annexure-IVB,
respectively to the Agenda
e) Issues where no change has been proposed by the Fitment Committee in relation to
services - Annexure V to the Agenda
f) Issues deferred by the Fitment Committee for further examination in relation to services
-Annexure VI to the Agenda
7 C-PACE Project for Ease of Doing Business in India
8 Review of revenue position under Goods and Services Tax
9 Report of Group of Ministers on feasibility of implementation of e-way bill requirement
for movement of gold and precious stones.
10 Proposal to apportion IGST amount of Rs.27,000 crore for the financial year 2022-23 on
ad hoc basis
11 Amendments to provisions relating to GSTAT in CGST Act, 2017
12 Ad-hoc Exemption Orders issued under Section 25(2) of Customs Act, 1962 for
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information
13 Recommendations of the 16th IT Grievance Redressal Committee for approval/decision of
the GST Council
14 Interim Report of the Group of Ministers (GoM) on Rate Rationalisation for consideration
of the GST Council
15 Report of Group of Ministers (GoM) on GST System Reforms
16 Report of the Group of Ministers (GoM) on Casinos, Race Courses and Online Gaming
Preliminary discussion
3. The Secretary sought the permission of the Chair to initiate the proceedings and welcomed all the
Hon’ble Members of the Council and delegates to the 47th meeting of the GST Council at Chandigarh.
He extended thanks to the Chandigarh Administration, Government of Haryana and Government of
Punjab for hosting the meeting.
3.1 At the outset, on behalf of the Council, he thanked the former Members of the Council i.) Shri
Yumnam Joykumar Singh, ex-Member from Manipur; ii) Shri Manpreet Singh Badal, ex-Member from
Punjab; iii) Shri Subodh Uniyal, ex-Member from Uttarakhand for their contribution in the GST
Council.
3.2 He further extended warm welcome to the incoming Hon’ble Members of GST Council to 47th

meeting of the GST Council.
1. Sh. Sukh Ram Chaudhary, Hon’ble Minister for MPP and Power, Himachal Pradesh;
2. Dr. Sapam Ranjan Singh, Hon’ble Minister for Medical, Health & Family Welfare
Department and Publicity & Information Department, Manipur;
3. Sh. Harpal Singh Cheema, Hon’ble Finance Cum Excise and Taxation Minister,
Punjab;and
4. Sh. Prem Chand Agarwal, Hon’ble Finance Minister of Uttarakhand
3.3 The Secretary stated that the Hon’ble Members of the Council were aware that a GoM was
formed on “feasibility of implementation of e-way bill requirement for movement of Gold and precious
stones” with Sh. K. N. Balagopal, Hon’ble Minister of Finance, Kerala as the Convener and Hon’ble
Members from States of Bihar, West Bengal, Punjab, Gujarat and Karnataka as Members of the GoM.
The GoM had submitted its recommendations in the form of a report which was placed as an agenda
item before the Council. He thanked all the Hon’ble Members of the GoM for their valuable
recommendations.
3.4 The Secretary stated that the GST Council in its 45th meeting at Lucknow, formed a GoM on
GST System Reforms under the Chairmanship of Shri Ajit Pawar, Hon’ble Deputy Chief Minister,
Maharashtra, to analyse, study and come up with ways and means to minimize tax evasion and offer
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other suggestions that can help avoid frauds in GST. The GoM comprised Hon’ble Members from
Haryana, Assam, Tamil Nadu, Delhi, Andhra Pradesh, Chhattisgarh and Odisha. The GoM had
submitted its interim report which was placed before the Council for deliberations in the present agenda.
The Secretary thanked all the Hon’ble Members of this GoM for their valuable recommendations.
3.5 The Secretary also stated that in 45th meeting at Lucknow, a GoM on Rate Rationalization was
formed with Sh. Basavaraj S. Bommai, Hon’ble Chief Minister, Karnataka as Convener and other
Hon’ble Members from Bihar, Goa, Kerala, Rajasthan, Uttar Pradesh and West Bengal as Members. The
GoM had submitted its interim report which was being placed in this Council meeting for deliberations.
He thanked all the Hon’ble Members of this GoM for their valuable recommendations.
3.6 The Secretary further pointed out that the GST Revenue had set new records this year. The gross
GST revenue collected in the month of April, 2022 was Rs.1,67,540 crores which was 20% higher than
the GST revenues in the same month last year. The gross GST revenue collected in the month of May,
2022 was Rs.1,40,885 crores which was 44% higher than the GST revenues in the same month last year.
This trend showed clear improvement in the compliance behaviour due to various measures taken by the
tax administration like nudging taxpayers to file returns timely, and strict enforcement action taken
against errant taxpayers who had been identified based on data analytics and artificial intelligence. He
thanked all the States, UTs and Central formations for their remarkable efforts in GST revenue
augmentation.
3.7 The Secretary stated that he met the officers of the States and UTs on 27th June, 2022 and
discussed all the agenda items with them. He then sought the permission of the chair to proceed with the
agenda items as follows:

Agenda Item 1: Confirmation of the Minutes of the 45th and 46th Meeting of the GST Council
4. The first agenda item pertained to confirmation of the minutes of the 45th GST Council meeting
held on 17th September, 2021 and the 46th meeting of the GST Council held on 31st December, 2021. The
Secretary stated that some comments had been received from few States which were basically editorial
changes and had been carried out.
4.1 The Hon’ble Member from Tamil Nadu stated that the request for incorporation of his written
speech in the draft Minutes of 45th Council Meeting should be considered.
4.2 The Secretary clarified that the Secretariat had received the intimation from Tamil Nadu for
including his speech in Draft Minutes but generally GST Council takes the gist of the speech and not the
speech per se.
4.3 Accordingly, the Council adopted the Minutes of the 45th and 46th meeting of the GST Council along
with the amendments.

Agenda Item 2: Ratification of the Notifications, Circulars and Orders issued by the GST Council
and decisions of the GST Implementation Committee (GIC) for the information of the Council
5 The Secretary stated that the second agenda item pertained to ratification of the Notifications,
Circulars, and Orders issued by the GST Council and the decisions of the GST Implementation
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Committee (GIC) for the information of the Council. He stated that the GIC decisions are also
implemented through Notifications, Circulars, and Orders. The Council took note of the decisions of the
GST Implementation Committee (GIC) and ratified the same. Further, the Notifications, Circulars and
Orders issued by the States which were on the same subject as the above Notifications, Circulars and
Orders were also ratified.

Agenda Item 3: Issues recommended by the Law Committee for the consideration of the GST
Council
6. The Secretary took up the next Agenda on issues recommended by the Law Committee for the
consideration of the GST Council. He informed that these agendas were discussed in detail in the
Officers’ Meeting held on 27th June, 2022 and there was an agreement in the Officers’ meeting on most
of the issues. He further informed that Agenda items 3(iv), (vii) and (xii) may require deliberation of the
GST Council. Thereafter, Principal Commissioner, GST Policy Wing made a detailed presentation
(attached at Annexure-3) giving overview of the recommendations made by the Law Committee on the
said agendas.
Agenda Item 3(i): Issuance of clarification on issue of claiming refund under inverted duty
structure where the supplier is supplying goods under some concessional Notification
7. The Principal Commissioner, GST Policy Wing informed that vide Circular No.135/05/2020-GST
dated 31.03.2020, it had been clarified that refund on account of accumulated ITC in cases of inverted
duty structure would not be applicable in cases where input and output supplies were same. The Council
was informed that representations had been received seeking clarification with regard to the applicability
of para 3.2 of the said Circular in cases where the supplier supplies goods at a lower/nil rate under a
concessional rate notified by the Government.
7.1 It had been recommended by the Law Committee (LC) to clarify that the refund of accumulated
input tax credit on account of inverted duty structure as per sub clause (ii) of the first proviso to Section
54(3) of the CGST Act,2017 is admissible in cases where input and output goods are same and the
accumulation of input tax credit is on account of rate of tax on input supplies being higher than the rate
of tax on output supplies at the same point of time. This applies to cases where the rate differential is due
to concessional rate notified by the government and is not applicable to cases where output supply is
either Nil rated or fully exempted.
The Council agreed with the recommendation of the Law Committee along with the proposed
Circular.

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Agenda Item 3(ii): Amendment in formula prescribed in sub-rule (5) of rule 89 of the CGST
Rules, 2017 for calculation of refund of unutilised Input Tax Credit on account of inverted duty
structure
7.2 The Principal Commissioner, GST Policy Wing informed that the Hon’ble Supreme Court of
India in case of UOI v. M/s VKC Footsteps vide its Order dated 13.09.2021 had upheld the vires of Rule
89(5) of the Central Goods and Services Tax Rules, 2017 but had taken cognizance of the anomalies in
the formula prescribed under Rule 89(5) of CGST Rules, 2017. The Hon’ble Supreme Court had upheld
the exclusion of ITC availed on input services from the computation of Net ITC. However, the Apex
Court had noted that the formula prescribed in Rule 89(5) assumed that the tax payable on inverted rated
supply of goods and services had been paid by utilising input tax credit on inputs only and that there had
been no utilisation of the ITC on input services, such assumption skewed the formula in favour of
revenue. The Apex Court had, therefore, urged the GST Council to reconsider the formula.
7.3 The issue was deliberated by the Law Committee and in the absence of any empirical data, Law
Committee had recommended to consider utilisation of ITC on account of inputs and input services for
payment of output tax in the same ratio in which the ITC has been availed on inputs and input services
during the said tax period and to use this deduction to revise the formula prescribed in rule 89(5) as
suggested by the Hon’ble Supreme Court. Accordingly, Law Committee recommended the following
amendment in formula prescribed in rule 89(5):
Maximum Refund Amount = {(Turnover of inverted rated supply of goods and services) x Net ITC ÷
Adjusted Total Turnover} – {tax payable on such inverted rated supply of goods and services x (Net
ITC÷ ITC availed on inputs and input services)}.
The Council agreed with the recommendation of the Law Committee.
Agenda Item 3(iii): Authority to issue recurring SCN in case of an enforcement action initiated by
the Central authorities against a taxpayer assigned to State and vice versa
7.4 The Principal Commissioner, GST Policy Wing informed that references had been received
regarding diverse practices in the field on the issuance of recurring Show Cause Notices (SCNs) arising
out of investigation initiated and finalized by Central Tax authorities against taxpayers under State
Administration and vice versa. Due to cross-empowerment, an enforcement action against a taxpayer
assigned to State Tax authorities can be initiated by the Central Tax authorities and vice versa.
7.5 The Law Committee recommended that all consequential action relating to such cases like
appeal, review, adjudication, rectification and revision would lie with the authority which had initiated
the enforcement action. However, the refund arising out of such cases may be granted only by the
jurisdictional tax authority.
7.6 Further, the Law Committee recommended that the recurring Show Cause Notices in such cases
may be issued by the concerned jurisdictional tax authority.
7.7 The Hon’ble Member from Andhra Pradesh gave the suggestion that information on
investigation initiated against any taxpayer should be provided on the GSTN portal. Further, he stated
that if investigation was already initiated against a taxpayer by State officials then instead of initiating a
new investigation, information should be passed on by the Centre to the concerned State and vice-versa.
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He stated that this will ensure greater efficiency and would also eliminate parallel investigations and
thus would make the tax administration more taxpayer friendly.
7.8 The Secretary clarified that if investigation is initiated by Centre then any information available
with State will be passed on to Centre and vice versa.
The Council agreed to the proposal of the Law Committee. It was also recommended that the
decision may be communicated to all States, either through a Circular or a communication from
the GST Council Secretariat.
Agenda Item 3(iv): Clarification on various issues relating to applicability of demand and penalty
provisions under the CGST Act, 2017 in respect of transaction involving fake tax invoices
7.9 The Principal Commissioner, GST Policy Wing drew the attention of the Council towards the
Circular proposing clarification on various issues relating to applicability of demand and penalty
provisions under the CGST Act, 2017 in respect of transactions involving fake tax invoices. He
informed that where invoices were issued without corresponding supply of goods/services, there was
confusion regarding issuance of notice for tax demand and invocation of penalty and therefore, it was
proposed to clarify the basic principles and the applicability of the provisions of law in such cases.
7.10 The Hon’ble Member from Kerala expressed his apprehension that the proposed Circular might
promote fake invoicing, that prosecutions were launched after quantifying the duty demand whereas the
proposed Circular stated otherwise, and thus, it would reduce the deterrence for issuance of fake
invoices thereby causing loss to the exchequer of both Centre and States.
7.11 The Principal Commissioner, GST Policy Wing clarified that the proposal did not prohibit
prosecution and the people issuing fake invoices would continue to be liable for penalty and prosecution.
The Circular clarifies the applicability of legal provisions in cases where only fake invoices are issued
without corresponding supply of any goods or services. In such situations, GST cannot be levied as there
is no supply. But simultaneously, it is proposed that penal actions can be taken under Section 122 of the
Act. Further, such person is liable for prosecution under Section 132 where the amount involved is more
than the specified amount under the said provision.
7.12 The Secretary further emphasized that in such scenarios as discussed, there would be no tax
demand but penalty and prosecution provisions would continue to be applicable and that the intention of
the Circular was not to dilute the provisions but to strengthen them.
7.13 The Chairman, CBIC stated that while booking cases where fake invoices were issued without
corresponding supplies, all entities in the value chain were asked to pay tax and penalty due to lack of
clarity as to who was liable to pay tax and against whom prosecution could be undertaken. He stated that
the proposed Circular clarified all such situations.
7.14 The Hon’ble Member from Karnataka welcomed the clarification and stated that the Circular
would help concentrate on the violations and reduce the time taken for prosecution. One concern raised
by the Hon’ble Member was that some companies took registration exclusively for issuing fake invoices
and then closed down. Therefore, such companies need to be watched closely.
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7.15 The Secretary stated that the sequential filing of GSTR-1 and GSTR-3B had been initiated to
check the fake invoices and he informed the Council that more proposals were being made in the
meeting for strengthening the system.
The Council agreed with the said recommendations of the Law Committee along with the
proposed Circular.
Agenda Item 3(v): Notifying clause (c) of Section 110 and Section 111 of the Finance Act, 2022
7.16 The Principal Commissioner, GST Policy Wing informed the Council that Section 110 (c) and
Section 111 of the Finance Act, 2022 needed to be notified with effect from a date as recommended by
the Council.
7.17 He stated that vide Section 110 (c) of the Finance Act, 2022, Section 49 (10) of CGST Act was
substituted to provide for transfer of any balance of CGST/IGST in electronic cash ledger of a registered
person to electronic cash ledger of CGST and IGST of a distinct person. As there is no provision of
transfer of any amount from or to SGST / UTGST electronic cash ledger, the amendment is required to
be notified only by the Centre at the earliest. The relevant changes in Form GST PMT-09 have been
elucidated in the Agenda. Further, to implement the said amendment Law Committee recommended
insertion of a new sub-rule (14) in Rule 87 of CGST Rules to allow for transfer of unutilized balance in
CGST & IGST cash ledger to a distinct person, without going through refund procedure, subject to the
condition that such transfer will not be allowed if unpaid liability exists in the electronic liability register
of the said registered person.
7.18 The Principal Commissioner, GST Policy Wing informed the Council that Section 111 of The
Finance Act, 2022 was regarding the retrospective amendment of interest provisions as per earlier
decision of the Council. Vide the said amendment, Section 50 (3) of the CGST Act, 2017 was proposed
to be amended retrospectively w.e.f. 01.07.2017 in order to clarify that where ITC has been wrongly
availed and utilised, the registered person shall pay interest only on such input tax credit which is
wrongly availed and utilized. Further, the rate of interest chargeable under Section 50(3) of CGST Act
shall be 18% (instead of 24%) with retrospective effect from 01.07.2017. The manner of calculation of
interest as per this provision is to be provided through Rules and the Law Committee recommended
insertion of new Rule 88B for calculation of interest on delayed payment of tax.
7.19 The Principal Commissioner, GST Policy Wing proposed that they may be notified by the Centre
at the earliest. Regarding the rest of the provisions of the Finance Act, 2022 which States are required to
pass, the Council was informed that a tentative date of 01.10.2022 was decided in the Officer’s meeting.
7.20 The Secretary requested the States to notify the provisions of the Finance Act, 2022 by
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The Council agreed to the proposal that -
a. Section 111 and clause (c) of Section 110 of Finance Act, 2022 may
be notified by the Centre at the earliest.
b. new rule 88B with effect from 01.07.2017, may be inserted for
providing for method of calculation of interest [for Section 111].
c. sub-rule 87(14) may be inserted [for clause (c) of Section 110]
d. 01.10.2022 to be date of Notification of the other provisions of
Finance Act 2022
Agenda Item 3(vi): Issuance of clarification on various issues pertaining to GST
7.21 The Principal Commissioner, GST Policy Wing informed that there are different practices about
certain GST related issues and the Law Committee has recommended that these issues may be clarified
by issuance of a Circular.
7.22 Clarification on the issues pertaining to refund claimed by the recipients of supplies regarded as
deemed export
He informed that the first issue was regarding whether ITC availed by the recipient of deemed export
supply for claiming refund of tax paid on such deemed export would be subject to provisions of Section
17 of the CGST Act, 2017. The Law Committee clarified that it would not be subject to Section 17 of
CGST Act. Further, it was clarified that the ITC so availed was not to be included in the Net ITC for
computation of refund of unutilized ITC under Rule 89(4) and Rule 89(5) of the CGST Rules, 2017.
7.23 Clarification on various issues of Section 17(5) of the CGST Act
7.23.1 The second issue pertained to interpretations of Section 17(5). In this regard, one of the issues
was whether proviso at the end of Section 17(5)(b) of the CGST Act is applicable to entire clause (b) or
only to sub-clause (iii) of clause (b). The Law Committee clarified that the proviso after sub clause (iii)
of Section 17(5)(b) is applicable to all the sub clauses under clause (b) of Section 17(5).
7.23.2 The other issue was whether “leasing” referred in sub-clause (i) of clause (b) of subsection(5) of Section 17 refers to leasing of motor vehicles, vessels and aircrafts only and not to leasing
of any other items. The Law Committee clarified that the word leasing referred to leasing of motor
vehicles, vessels and aircrafts only and not to leasing of any other items and accordingly, availment of
ITC was not barred for other items under the said sub clause in case of leasing.
7.23.3 Another issue was whether various perquisites provided by employer to its employees as per
contractual agreement, were liable for GST. The Law Committee clarified that any perquisites provided
by employer to its employees in accordance with the terms of contract were in lieu of services provided
by the employee and as per Schedule III of the CGST Act, the same would not be subjected to GST.
7.24. Clarification on utilisation of the amounts available in the electronic credit ledger and the
electronic cash ledger for payment of tax and other liabilities
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7.24.1 The third issue was regarding utilization of the amounts available in the electronic credit ledger
and the electronic cash ledger for payment of tax and any other liability other than tax. The Law
Committee recommended that amounts available in electronic credit ledger can be used for making
payment of output tax only. It cannot be used for paying any tax under Reverse Charge Mechanism
(RCM) or any interest, penalty, fees or any other amount payable under the said Acts. However, the
amount available in electronic cash ledger may be used for making payment towards tax, interest,
penalty, fees or other amount payable under the GST Law. A draft Circular in the regard was placed
before the Council.
The Council agreed with the said recommendations of the Law Committee along with the
proposed Circular.
Agenda Item 3(vii): Issue of compulsory registration for supplier supplying goods or services
through Electronic Commerce Operators (ECOs) under Section 24(ix) of CGST Act, 2017 and
allowing Composition dealers to use E-commerce platforms
7.25 The Principal Commissioner, GST Policy Wing stated that the issue was regarding compulsory
registration for suppliers supplying goods or services through Electronic Commerce Operators (ECOs)
irrespective of their threshold annual turnover. In offline mode, exemption from registration is given to
suppliers whose threshold is below specified value of aggregate turnover. This disparity between the
online and offline suppliers affects small businessmen who are unable to use Electronic Commerce
Operators (ECOs) as a platform for supply of goods and services. Representation was also received to
allow the composition dealers to supply through Electronic Commerce Operators (ECOs). For supplying
through Electronic Commerce Operators (ECOs), they need to take normal registration instead of using
the option of composition scheme.
7.26 These issues were discussed in the Law Committee and it was observed that the requirement of
mandatory registration was made because registration is required for any inter-state supply, irrespective
of the threshold turnover. Now, inter-state supply is also possible through Electronic Commerce
Operators (ECOs) but it would require mandatory registration. Thus, the proposal was that the suppliers
having turnover less than the threshold limit can be considered for waiver of mandatory registration, if
they are making only intra-state supply. However, they would be required to declare their PAN and
principal place of business so that it can be verified from the PAN that the turnover is less than the
threshold limit. After getting the PAN and place of business declared, a system would be put in place so
as to communicate the same to Electronic Commerce Operators (ECOs) so that they ensure these
suppliers make only intra-state supply. The details of these supplies made by the unregistered persons
through their PAN will be given in the GSTR 8 filed by the Electronic Commerce Operators (ECOs). In
cases where the total supply approaches the threshold limit, it would be flagged to the concerned
supplier to take registration and to officers for information. Further, the suppliers would not be required
to pay any tax upto supplies of specified threshold limits and Electronic Commerce Operators (ECOs)
would not deduct TCS till the suppliers cross the threshold limit. Further, the agenda note also proposes
that composition dealers be allowed to make intra state supplies through Electronic Commerce
Operators (ECOs), which is presently restricted.
7.27 The Principal Commissioner, GST Policy Wing sought in principle approval of the Council
regarding these agendas and stated that post approval, the Law Committee could be authorized to work
out further modalities. Also, corresponding changes in GSTN portal would be required. In the officers’
meeting, it was decided that if the Council approves, 1st January, 2023 would be notified as date of
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implementation. Further, the Law Committee recommended a condition that for each PAN, only one
principal place of business in one State can be declared. There was a view that that an offline person can
carry out business in 2 or 3 states making intrastate supplies within those states and his threshold limit
will be considered by aggregating all places of business.
7.28 The Secretary informed that if the agenda gets approved it would be a significant decision for
small traders. He further informed that MSMEs had been approaching with the request to allow them to
do business online without registration and that post-COVID online mode has become the prevalent
mode for doing business. The change would address the concern of MSMEs and also bring parity
between offline and online suppliers. Regarding the proposal of calculation of threshold turnover of a
person registered in 2 or 3 states by aggregating all his supplies, the Secretary informed that this was not
part of the agenda but requested the Council to consider the same. He informed that a small offline
dealer can give PAN details in different states and can do business without registration provided the
aggregate turnover in all states does not exceed the threshold limit. The Secretary requested the Council
that the same modality may be allowed in online mode as the aggregate turnover can be calculated
through online mechanism provided, they make only intra-state supply. He further informed that
reservations were raised by some officers that this may be done later. The Secretary requested that if
Council agrees, in-principle approval may be given as it would take around 6 months to implement and
to put necessary safeguards in place to prevent any misuse.
7.29 The Hon’ble Member from Kerala welcomed the proposal but raised the concern that even at
present e-commerce traders are not filing proper tax returns and that persons were escaping the tax net
due to peculiar nature of e-commerce transactions. The concern raised was that a big company having a
turnover of more than Rs10 Cr can form smaller units and thereby evade taxes. The Hon’ble Member
stated that the systems are not updated enough to check this and that the requirement of mandatory
registration should continue as their experience shows that taxes are not getting paid even by bigger
companies.
7.30 The Hon’ble Member from Haryana sought clarification of what will happen if a person had a
PAN in Kerala but was doing business in Haryana through Amazon and business in Gujarat through
Flipkart. In such scenarios how would turnover be tracked. Further, what will happen if such person
defaults since the person is unregistered and there is no physical existence in States of Haryana and
Gujarat.The Hon’ble Member from Bihar welcomed the proposal and requested for strict monitoring of
these suppliers.
7.31 The Hon’ble Member from Karnataka stated that this would create a level playing field between
offline and online suppliers. He stated that it is important to have a centralized monitoring system in
such cases. The Principal Commissioner, GST Policy Wing informed that all these unregistered persons
would be required to make a PAN based declaration on the portal along with Mobile No., place of
business etc. before using the Electronic Commerce Operators (ECOs) platform for making supplies.
The Electronic Commerce Operators (ECOs) would ensure that no inter-State supply would be made and
the supply made by unregistered person (PAN wise) would be declared in their monthly GSTR FORM
8. The aggregate of total turnover made through different Electronic Commerce Operators (ECOs)
would be done PAN wise. In online mode, there would be a PAN based trail.
7.32 The Hon’ble Member from Karnataka raised the issue of using multiple PANs by different
members of same household. The Secretary stated that the same situation exists in the offline mode
also. The Hon’ble Member stated that in offline mode, there is a possibility of physical verification
whereas the same doesn’t exist online mode. The Secretary stated that in these cases principal place of
business is declared. Therefore, if different PANs are catering to same principal place of businesses, it
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can be checked. He also requested GSTN to ensure that the principal place of businesses are geo-tagged
while updating the system, so as to address the concerns of Hon’ble Member from Karnataka.
7.33 The Hon’ble Member from West Bengal welcomed the proposal and stated this will encourage
MSME sector. It was further suggested that there was a need for putting in place a centralized
monitoring system along with strengthening of system reforms.
7.34 The Hon’ble Member from Tamil Nadu suggested that for cross-validation, a check could be
made that when they register their principal place of business, the supplier could be asked to make a
self-declaration as to whether they were registering for first/multiple places of business with the same
PAN. And a penalty provision could be made, if it is found later that were having at multiple places of
business which were not registered.
7.35 The Hon’ble Member from Odisha welcomed the proposal and stated that it would encourage
small traders. The Hon’ble Member from Haryana sought clarification on when integration and
verification of supplies through multiple Electronic Commerce Operators (ECOs) could be made. The
Secretary informed that using IT, tracking across multiple ECOs would be done.
7.36 The Hon’ble Chairperson stated that it would encourage the small traders and was a positive
step. She stated that the proposal to enable the unregistered traders to make supplies through Electronic
Commerce Operators (ECOs) may be implemented from 01.01.2023, after ensuring preparedness and
required checks on the system.The Council approved the Agenda item. Council also recommended that
the details of the scheme may be worked out by the Law Committee. The scheme would be tentatively
implemented with effect from 01.01.2023, subject to preparedness on the portal as well as by Electronic
Commerce Operators (ECOs).
Agenda Item 3(viii): Refund of unutilised Input Tax Credit on account of Export of Electricity
7.37 The Principal Commissioner, GST Policy Wing stated that reference had been received from
Ministry of Power wherein they had highlighted the problem faced in filing of refund of unutilised Input
Tax Credit (ITC) on account of export of electricity and has requested to expedite the refund of input tax
credit to the electricity exporters.
7.38 The electricity being an intangible good, the export of electricity is neither covered by any
Shipping Bill/ Bill of export nor is there any requirement of filing EGM in respect of export of
electricity, due to which the exporters of electricity are not able to file the refund claim of unutilized ITC
on the GST Portal.
7.39 It was also mentioned that electricity is exported through transmission lines which are laid either
underground or on pillars attached/fixed to the ground thereby implying that the export of electricity
takes place by land. Further, relevant date in case of export of goods by land, has been specified at
Explanation (2)(a)(ii) under Section 54 of the CGST Act, 2017 as the date on which such goods pass the
frontier. Considering the intangible nature of supply of electricity, it may not be possible to determine
the actual date on which the specific unit of electricity exported can be considered as passing the
frontier. Therefore, as suggested by Ministry of Power, it is proposed to consider the last date of the
month, in which energy has been exported as per monthly Regional Energy Account (REA), as date on
which the electricity exported has passed the frontier. The same may be clarified through a circular.
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7.40 He further stated that to enable the electricity exporter to apply for unutilised ITC, the requisite
amendments were proposed to be made in the Rule 89 of the CGST Rules, 2017 and statement in FORM
GST RFD-01 as detailed in the Agenda note.
7.41 Till the time such statement is developed and deployed on the portal, the exporter of electricity
may be allowed to file refund claim on account of export of electricity in “Any Other category”, in
FORM GST RFD-01 along with details in statement 3B and 3A (in pdf format).
The Law Committee has recommended amendment in Rules as detailed in agenda note and for
issuance of a Circular clarifying the various issues and procedure for filing of refund claim pertaining to
export of electricity.
The GST Council approved the proposal of Law Committee along with the draft Circular.
Agenda Item 3(ix): Annual Returns for FY 2021-22
7.42 The Principal Commissioner, GST Policy Wing presented the Agenda item and stated that
Section 44 of the CGST Act provides for filing of Annual Return (GSTR-9/9A) and Annual
Reconciliation Statement (GSTR-9C) by specified taxpayers for every financial year. Vide Notification
no. 56/2019 –CT dated 14.11.19, the Annual Return GSTR-9 & Annual Reconciliation Statement
GSTR-9C were simplified for the FYs 2017-18 & 2018-19 by making few entries optional. Further, vide
Notification No. 79/2020-CT dated 15.10.2020, said forms were simplified for the FY 2019-20 by
making certain entries/tables optional. Moreover, the said forms for FY 2020-21 were simplified vide
Notification No. 30/2021-CT dated 30.07.2021. Rule 80 of the CGST Rules, 2017 was amended in light
of the amendments in Section 35(5) and Section 44 of the CGST Act.
7.43 The Law Committee examined the changes in Annual Return forms, and suggested that in the
long run, the annual return should cover the features of proposed changes in GSTR-3B. Accordingly, the
annual return forms (GSTR-9 and GSTR-9C) for FY 2021-22 may be notified with minimal changes to
the forms notified for FY 2020-21. The Law Committee examined the relaxations provided in FY 2020-
21 and has recommended modifications / continuation / discontinuation of such relaxations based on
their present relevance as detailed in the said Agenda. Further, the Aggregate Annual Turnover (AATO)
threshold for granting exemption from filing annual return in FORM GSTR-9/9A, which was Rs.2 crore
for FY 2020-21, may be continued for FY 2021-22 also.
The GST Council approved the agenda item and recommended –
a. To continue with most of the relaxations as provided for FY 2020-21,
barring a few as detailed in agenda note, such as seeking HSN details in
Table 17 of GSTR-9, as requirement of reporting HSN in invoices were
changed w.e.f. 01.04.2021.
b. AATO threshold for granting exemption from filing annual return in
FORM GSTR-9/9A, which was Rs. 2 crore for FY 2020-21, may be
continued for FY 2021-22 also
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Agenda Item 3(x): Clarification on mandatory furnishing of correct and proper information of
inter-State supplies and amount of ineligible/blocked Input Tax Credit and reversal thereof in
return in GSTR-3B and statement in GSTR-1
7.44 The Principal Commissioner, GST Policy Wing informed that w.e.f. 12.12.2020, GSTR-3B was
getting auto-generated on the portal by way of auto-population of ITC from GSTR-2B (auto-generated
inward supply statement) and auto-population of liabilities from GSTR-1 (Outward supply statement),
with an editing facility to the registered person. However, some infirmities were observed in the
information furnished by the registered person in relation to inter-State supplies effected to unregistered
person, composition taxable persons and UIN holders. The Law Committee recommended that the issue
regarding information to be furnished by the registered person may be clarified by issuance of a
Circular. It would also require some label changes in GSTR-3B. The Law Committee has further
recommended that Settlement of reversals of ITC and ineligible ITC may be done by Department of
Revenue (DoR) & Goods & Services Tax Network (GSTN) on the basis of Table 4(B)(1) and 4(D)(2) of
FORM GSTR-3B.
The Council agreed with the recommendations of the Law Committee along with the proposed
Circular as detailed in the agenda note read with the errata relating to the said agenda note. The
Council also recommended that Settlement of reversals of ITC and ineligible ITC may be done by
Department of Revenue (DoR) & Goods & Services Tax Network (GSTN) on the basis of Table
4(B)(1) and 4(D)(2) of FORM GSTR-3B.
Agenda Item 3(xi): Comprehensive changes/amendments in FORM GSTR-3B
7.45 A sub-committee of officers were constituted by the Law Committee to deliberate on issues
pertaining to IGST settlement and ITC reversals. The said sub-committee of officers submitted its report
on various data requirement for the purpose of IGST settlement under Section 17 of the IGST Act, 2017.
A note was also received from Gujarat on issues relating to unutilized balance in IGST fund and changes
in format of GSTR-3B required for the purpose of IGST settlement. Amendments in CGST Act were
recommended by the GST Council in its 43rd meeting to align the GST law with the GSTR-1/2B/3B
return filing system. Accordingly, based on the recommendations of GST Council, amendments have
been made in the return related provisions of the CGST Act, through the Finance Act, 2022 and will
come into effect once the said provisions of the Finance Act, 2022 are notified. The proposed changes
ensure that the GSTR1-GSTR 2B linkage remains intact and as far as possible, the GSTR-3B should be
auto-generated consequent to furnishing details in GSTR-1.
The proposal, inter-alia, seeks modification in Table 3 of GSTR-3B for allowing auto-population
of values from GTSR-1 into GSTR-3B in specific rows; modification in Table 4 of GSTR-3B for
capturing line wise reversals for streamlining the process of settlement of IGST revenues; providing for
amendment tables for reporting of various amendments in outward supplies, input supplies liable to
reverse charge and ITC for the previous tax periods; and some amendment in GSTR-1 to capture the
details of supplies made through Electronic Commerce Operators(ECOs) in separate Table 14, 15, 16.
The GST Council recommended that the proposal for comprehensive changes in FORM GSTR-3B
to be placed in public domain for seeking inputs/suggestions of the stakeholders. Thereafter, Law
Committee to examine the suggestions and bring before the GST Council for approval. The
exercise may be done in a time bound manner.
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Agenda Item 3(xii): Proposal for amendments to CGST Rules, 2017
7.46 The Principal Commissioner, GST Policy Wing informed the Council that proposals were made
for amending various provisions of the CGST Rules, 2017. Amendment is proposed in sub-rule (4) of
rule 21A, Explanation 1 after rule 43, rule 46, rule 87, rule 89, FORMS related to amendment in rules,
and in FORM GSTR-3B. The details of various amendments is detailed in Agenda note.
7.46.1 Regarding Rule 21A, it was informed to the Council that there was a provision for centralized
system-based suspension of registration in case of registered persons who had not filed 6 or more returns
and whose turnover was more than Rs.50 lakhs. Further, there would be a large number of people
whose turnover was below the Rs.50 lakhs limit but were not filing the returns and action in this regard
needs to be taken. However, it was considered imperative that that there should be automatic revocation
of suspension when all the returns get filed. Law Committee discussed this and suggested changes in
Rule 21A providing for automatic revocation of suspension in all cases of automatic suspension once all
the returns get filed. After bringing in automatic revocation of suspension, the limit for automatic
suspension is proposed to be lowered to Rs.20 lakhs immediately and then to Rs.5 lakhs after three
months and to NIL after another 3 months. It was stated that this would expedite the return filing and
would also help in cleaning the tax payer base.
7.47 The Secretary clarified that the system automatically suspends such registrations where returns
are not filed for 6 months continuously and after that, if the registrant seeks revocation of suspension,
the same is required to be done manually. Hence, it was thought that as suspension is being done
manually, there should be a system for automatic revocation of suspension once the returns are filed. It
would be a step towards ease of doing business. Further, reducing the mandatory monetary limit from
Rs. 50 lakhs to Rs. 20 lakhs immediately and then to Rs. 5 lakhs would instill financial discipline in
people.
7.48 The Hon’ble Chairperson noted that this will simplify the process of comeback of tax payers.
7.49 The Hon’ble Member from Haryana requested that the financial limit for suspension of
registration should be kept at Rs.50 lakhs till modality was put in place for automatic revocation of
suspension by the system. Also, if suspension is done manually by an officer then it should not be
revoked automatically. The Secretary informed that GSTN is ready with the suspension utility and
revocation utility and that whenever the system is rolled out, the facility would be ready to revoke the
suspension as soon as returns get filed.
7.50 On the point raised by Hon’ble Member from Haryana that automatic revocation be not done in
case of manual suspension of registration, GSTN stated that necessary check would be introduced in
system, if it was already not enabled.
7.51 The Principal Commissioner, GST Policy Wing further clarified that the changes proposed in
Rules were only in respect of cases where registration is cancelled by the system and not by the officer.
He informed that all the amendments were agreed to in the Officer’s meeting. He further informed that
Maharashtra has given a suggestion in respect of rule 46 that specific declaration to be incorporated
under proposed clause (s) of rule 46 and it was agreed to. It was also suggested that changes in GSTR-1
to capture the details of supplies through ECOs may be carried out on priority.
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The Council agreed to the amendments in the CGST Rules as detailed in the agenda note and the
suggestion given by Maharashtra in respect of rule 46. The draft of the amendments to be
finalized in consultation with the Union Ministry of Law & Justice.
The Council also recommended that as regards Centralized suspension for non-compliance in
terms of clause (b) or clause (c) of sub-section(2) of Section 29, the turnover limit may be reduced
to Rs. 20 Lakh immediately, Rs. 5 Lakh after 3 months and to Nil after another 3 months.
Agenda Item 3(xiii): Re-credit of amount in electronic credit ledger after recovery of erroneous
refund
7.52 The Principal Commissioner, GST Policy Wing mentioned that at present Rule 86 of CGST
Rules provides for re-credit of amount in electronic credit ledger (ECL) only in two situations i.e.,
rejection of refund of unutilized ITC and sanction of refund of excess payment of tax. He informed that
in this regard, GSTN has developed a new functionality in FORM GST PMT-03A to make re-credit of
amount in ECL independent of refund process so as to enable tax authorities to re-credit ITC in ECL, on
deposit of amount of erroneous refund by taxpayer in cash. To provide for re-credit of amount in ECL
where the amount of erroneous refund has been paid by the taxpayer, in cases of refund of unutilised
ITC or in cases of refund of IGST in contravention of Rule 96 (10) of the CGST Rules, the Law
Committee recommended for insertion of sub-rule (4B) in Rule 86 of CGST Rules for prescribing that
where a registered person deposits the amount of erroneous refund sanctioned in cash, an amount
equivalent to amount deposited shall be re-credited to the electronic credit ledger. The Law Committee
recommended Notification of FORM GST PMT-03A along with the proposed Circular.
The Council agreed with the recommendations of the Law Committee along with the proposed
Circular and the Form GST PMT-03A.

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Agenda Item 3 (xiv): Note for extension of limitation under Section 168A of the CGST Act, 2017
7.53 The Principal Commissioner, GST Policy Wing mentioned that requests were made to extend the
period of limitation under Sections 73/74 and Sections 54/55 on account of problems being faced by the
taxpayers as well as tax administration in respect of demands and refunds getting time barred due to long
period of lockdown/restrictions. He informed that the issue was deliberated by the Law Committee in its
meeting held on 11.04.2022 and 07.05.2022. The Law Committee observed that Centre as well as State
governments were working with reduced staff, along with staggered timings and exemption to certain
categories of employees from attending offices, from time to time during COVID period. Further, it was
a conscious policy decision not to do enforcement actions in the initial period of implementation of GST
Law, thereby no action for scrutiny, audit etc. could be undertaken during initial period of GST
implementation. Since the due date of filing Annual return for FY 2017-18 was 5th/7th February, 2020,
based on which limitations for demand under the Act are linked, and since the onset of COVID
happened immediately after that, thereby, audit and scrutiny for FY 2017-18 were impeded due to
various restrictions during COVID period. The Law Committee, accordingly, recommended that
limitation under Section 73 for FY 2017-18 for issuance of order in respect of demand linked with due
date of annual return, may be extended till 30th September, 2023 under the powers available under
Section 168A of CGST Act. Law Committee further took a view that no such extension is required for
timelines under Section 74 of the Act, as the Act provides for sufficient limitation time of 5 years in
respect of such cases, i.e. much beyond the period affected by COVID-19.
7.54 Principal Commissioner, GST Policy Wing further informed that Law Committee also observed
that taxpayers may also have faced difficulties in timely filing of the refund claims during the COVID
period. Besides, the tax officers were also hampered in issuing SCN during COVID period, in respect of
erroneous refunds sanctioned. Therefore, Law Committee also recommended that time period from
01.03.2020 to 28.02.2022 may be excluded from the limitation period for filing refund claim by an
applicant under Section 54 and 55 of CGST Act, as well as for issuance of order / demand in respect of
erroneous refunds under Section 73, by exercising power under Section 168A of CGST Act.
The Council agreed with the recommendations of the Law Committee along with the proposed
draft Notification under Section 168A of CGST Act, subject to the vetting by the Law Ministry.
Agenda Item 3 (xv): Waiver of late fee for delay in filing GSTR-4 for FY 2021- 22 and extension of
due date for filing GST CMP-08 for Q1 of FY 2022-23.
7.55 Every registered composition taxpayer is required to furnish a return for every FY in GSTR-4
besides furnishing a quarterly statement containing the details of payment of self-assessed tax in GST
CMP-08. The self-assessed tax paid by the taxpayer and declared in quarterly statements is autopopulated on the portal in table 5 of GSTR-4. If no liability is declared in table 6, it was presumed that
no liability is required to be paid, even though taxpayer may have paid the liability through GST CMP08. In such cases, liability paid through GST CMP-08 was treated as excess tax paid and was moved on
the portal to Negative Liability Statement for utilization of same for subsequent tax period’s liability.
The Law Committee took a view that amount in negative liability statement needs to be debited on the
portal as a remedial action and it was also decided wherever the amount available in negative liability
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statement had been utilized by the taxpayer for paying the liability of subsequent financial year, such
amount needs to be debited from electronic cash ledger (ECL) of the concerned taxpayer. In case the
liability had already been paid through challan or by adding in the liability of the subsequent period, the
same was advised to be claimed as refund.
7.56 The Principal Commissioner, GST Policy Wing mentioned that on account of representations
received from taxpayers stating that they are suddenly facing cash crunch for paying the remaining
amount as per GSTR-4 return by the due date i.e., 30.04.2022 the Law Committee had recommended
that late fee may be waived for delay in filing GSTR-4 for FY 2021-22 for the period 01.05.2022 till
30.06.2022 and this was subsequently approved by the GST Implementation Committee.
7.57 Considering the large number of representations from the taxpayers regarding difficulty being
caused due to negative balance in ECL, the status of issue was placed by GSTN before the Law
Committee. The Law Committee recommended that the negative balance in cash ledger as on date may
be nullified by passing a credit entry of equal amount in the System and that list of all such cases may be
sent to tax authorities for necessary verification and recovery, if any. Also, that where the taxpayer has
paid the liability twice, he may seek refund. GSTN had sought time up to 8.07.2022 for deployment of
the said functionality and therefore, the Law Committee recommended to extend the waiver of late fee
for delay in filing GSTR-4 for FY 2021-22 till 28.07.2022 and also, recommended to extend the due
date for filing of GST CMP-08 for the 1st quarter of FY 2022-23 till 31.07.2022.
The Council agreed with the recommendations of the Law Committee along with the proposed
draft Notifications. GSTN has also been asked to expeditiously resolve the issue of negative
balance in Electronic Cash Ledger being faced by some of the composition taxpayers.
Agenda Item 3 (xvi): Refund of accumulated ITC to Duty-Free Shops(DFS)
7.58 The Principal Commissioner, GST Policy Wing stated that the Hon’ble High Court of Bombay in
the case of M/s Flemingo Travel Retail Limited vs UOI vide order dated 7.10.2019 and Hon’ble High
Court of Kerala in the case of CIAL Duty free and Retail Services Ltd. Vs UOI vide order dated
22.09.2020 have held that supply of goods by Duty Free Shops is in the nature of zero-rated supply and
therefore, refund provisions as mentioned in Section 54(3) of CGST Act, 2017 and Rule 89 of CGST
Rules, 2017 are applicable. However, the legal provisions including Rule 95A of CGST Rules, 2017
which were implemented as per the recommendations of the GST Council, did not consider the supplies
made by Duty Free Shops to international passengers as zero-rated supplies as they were based on the
presumption that in case of sale by Duty Free Shops , it is the passenger who was the exporter and not
the Duty Free Shops. Therefore, there was a legal anomaly between the law pronounced by the Hon’ble
High Court of Bombay and Hon’ble High Court of Kerala (duly accepted by the department) vis-a-vis
the legal provisions. In view of this, there was an imminent need to take suitable policy measures for
correcting this legal anomaly for the period since 01.07.2019, when rule 95A and related Notifications
were brought into effect. It was desirable that rules and Notifications be amended to align them with the
decision of Hon’ble High Courts to treat the supply of goods by Duty Free Shops to international
passengers as zero-rated supply.
7.59 However, for the future period, the issue was placed before the GST Council to consider whether
there was any need to amend the Act/ Rules for restricting the refund to Duty Free Shops on account of
supplies made by them to international passengers either at Arrival Terminal or also in respect of sales
made at Departure Terminal or both. The policy measures/options were discussed by the Law
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Committee and the following recommendations of the Law Committee were placed for deliberations and
approval by the GST Council:
i. To align rules and Notifications with the decision of Hon’ble High Courts to
treat the supply of goods by Duty Free Shops to outgoing international
passengers as zero-rated supply by:-
a. rescinding rule 95A of the CGST Rules, 2017 and Circular No. 106/25/2019-
GST dated 29.06.2019 ab initio;
b. To rescinding Notification No. 10/2019-Integrated Tax (Rate), Notification No.
11/2019-Central Tax (Rate) and Notification No. 11/2019-Union territory Tax
(Rate) all dated 29.06.2019
ii. For future, there is a need to exclude refund in respect of ITC on inputs/ input
services pertaining to Duty Free Shops at Arrival Terminal by amending
Explanation to sub-section(3) of Section 17 of CGST Act by including certain
transactions under paragraph 8(a) of Schedule III of CGST Act in the value of
exempt supply. The Law Committee recommended:-
b. To amend sub-section(3) of Section 17 of CGST Act,2017 by substituting the
existing explanation with the explanation proposed in the Agenda.
c. Post amendment in sub-section(3) of Section 17 of CGST Act, the supplies
from Duty Free Shops at arrival terminal to the incoming passengers to be
prescribed through the Rules so that value of such supply are not excluded for
calculation of “value of exempt supply” for the reversal of ITC.

The GST Council approved the proposal of the Law Committee.
Agenda Item 3 (xvii): Proposal for continuing with exemption from IGST and Cess on
imports/domestic procurement of goods by Advance Authorization (AA)/Export Promotion
Capital goods (EPCG)/ Export Oriented unit (EOU) and for doing away with e-Wallet
7.60 The Principal Commissioner, GST Policy Wing stated that the agenda item 3(xvii) was regarding
an earlier decision of the GST Council, as per which in-principle approval was given by the GST
Council to grant exemption from IGST and cess etc. on the imports made under AA/EPCG/EOU
schemes and procurement at concessional rate for merchant exporters. Further, the Council had decided
to implement the e-Wallet scheme for exporters and the implementation of the same had been deferred.
The Council was informed that the technical issues pertaining to its implementation were examined by
Directorate General of Export Promotion, CBIC and they had observed that the implementation of the
scheme would be huge and complex and would require numerous linkages between Directorate General
of Foreign Trade, GSTN, ICES, Customs etc. and this would put extra burden upon compliance
requirement. They have recommended to discontinue the scheme. It was further informed to the Council
that the scheme was suggested to address the issue of capital blockage in the initial phase of GST
implementation and that at present, the issue has been addressed by exemption from tax/concessional
rate available to AA/EPCG/EoU license holders and merchant exporters and by faster refunds both
under IGST route and as well as that pertaining to un-utilized input tax credit on account of zero-rated
supply. The Law Committee recommended that the present Notifications exempting IGST and Cess etc.
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on the imports made under AA/EPCG/EOU schemes may be continued and E-wallet scheme may not be
pursued further.
The Council agreed to the proposal and accordingly recommended thata. Present refund mechanism to exporters have been stabilised and
streamlined, with exporters now being fairly acquainted with the refund
processing under GST. Present Exemption Notifications of IGST and cess
etc. on import of goods under AA/EPCG/EOU scheme may be continued.
b. E-wallet scheme may not be pursued further.
Agenda Item 3 (xviii): Amendment in CGST Rules for handling of pending IGST refund claims
7.61 The Principal Commissioner, GST Policy Wing mentioned that at present, the processing of
refund of IGST paid on account of export of goods under provisions of Section 16(3)(b) of IGST Act is
system based and is done in accordance with Rule 96 of CGST Rules. Rule 96(4) provided for
withholding of refunds only in two specified situations and it does not provide for withholding the
refund on account of exporter having being identified as a risky exporter by the system. The Law
Committee recommended amendment in Rule 96(4) to include this scenario. Further, Rule 96(5)
provided for transmission of intimation of withholding of IGST refunds to the jurisdictional proper
officer, applicant and the common portal only in case where it is withheld under sub- section (10) or (11)
of Section 54 and not in other cases. The Law Committee recommended to omit sub-rule (5) and to
insert new sub-rules to provide for transmission of intimation of all IGST refunds withheld to the
jurisdictional proper officer through common portal. Further, under Rule 96(1) the shipping bill filed by
exporter is deemed to be an application of refund and therefore, any mismatch in the data furnished by
the exporter in GSTR-1 results in the refund getting processed only on rectification of such mistake. In
such cases, the refund claims get pending due to mistake made by exporter. Law Committee
recommended adding a proviso to Rule 96(1) to provide that shipping bill may be deemed to be an
application for refund under this sub-rule only when there are no mismatches in the data furnished in
shipping bill and GSTR-1. Further, it was also recommended by the Law Committee that the proposed
amendments may be carried out retrospectively w.e.f. 01.07.2017.
The Council agreed to the proposal as detailed in the agenda note for making necessary
amendments in Rule 96 of the CGST Rules to provide for transmission of IGST refunds on the
portal in a system generated FORM GST RFD-01 to the jurisdictional GST authorities, which are
suspended/ withheld; and to provide for such refunds to be dealt by jurisdictional GST officer in a
manner similar to refunds filed in FORM GST RFD-01 to enable processing of such pending
refunds. Council also recommended to make such changes retrospectively w.e.f. 01.07.2017.
Agenda Item 3 (IX): Errata for information of the Council.
Agenda Item 3 (xx): Consent based data sharing for non GST purposes
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7.62 Currently, the GST eco-system contains rich data about taxpayers that can be used to provide
various services in a targeted fashion, e.g. making credit available to business entities, especially, the
MSME. Various initiatives including flow based lending based on the invoices issued by the suppliers
are in works, like Trade Receivables Discounting System (TReDS) under the Factoring Regulation Act.
Currently, TReDS accesses invoices through a complex process. With access to invoice based data, the
business flow can be radically simplified for the taxpayers. Similar other initiatives like sharing data
through the system of Account Aggregators brought in place by Reserve Bank of India for consent based
sharing of financial data are in pipeline.
7.63 The proposal of amending the GST Acts to allow sharing of supply data with the consent of the
supplier and the recipient with these systems, was discussed by Law Committee and it suggested that the
“Amendment to be done in CGST/SGST Act to this effect which will incorporate due safeguards for
indemnity and non-liability of GSTN/GST authorities (without prejudice to any action under GST Law).
The proposed amendment to ensure the provision for non-disclosure clause.”
7.64 The Law Committee proposed to insert new Section 158A in the GST Acts to enable sharing.
The exact mode of obtaining consent and sharing of data would be outlined in rules.
7.65 Accordingly, the Agenda item was put up before the Council to seek its approval in order to
carry out the proposed amendments in the respective GST Laws and it was also proposed that in the
meantime, consent based data sharing module may be implemented with appropriate safeguards. This
Agenda item was agreed to in the Officers Meeting held on 27th June 2022.
The Council approved the recommendation of Law Committee.
Agenda Item 4: Issues recommended by GSTN
8. The Secretary requested the CEO, GSTN to explain the Agenda Item 4. The CEO, GSTN
informed that there were three technical items in the agenda. Thereafter, he gave a detailed presentation
on this agenda which is attached as Annexure-4.
Agenda Item 4(i): Development of New Return System.
8.1 First Agenda item related to the Development of New Return System. The CEO, GSTN made a
reference to the briefing made in the year 2020 by Sh. Nandan Nilekani, wherein it was advised that
rather than implementing the New Return System, it was desirable to implement the features of new
return in the present return. He also informed that over the past one year, some new elements to the
present return system were implemented so as to enrich it extremely and align it with the features of
New Return System. He also invited the attention to the table which was placed in the agenda at Page
No.246 & 247, wherein a comparison of the benefits which had accrued due to New Return System was
made. He further emphasized that as the present return was already almost aligned with the features of
New Return System, now there was no need to develop a New Return System as per the design of the
year 2018.
The agenda item was unanimously approved by the Council.
Agenda Item 4(ii): Extension of REAP and LEAP Projects beyond 31.03.2022 for the F.Y 2022-23.
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8.2 The CEO, GSTN mentioned that this proposal is of commercial nature. He informed that GSTN
started working on Time and Material (T & M) model of developing modules about two years ago and
satisfying results had been achieved in this regard as GSTN was able to develop the modules in twothird of the time and at the same cost. He further mentioned that extensions were taken time and again..
He further informed that GSTN had worked for over two years and developed enough expertise in
development of modules under T & M and requested that the decision making for further
implementation of projects on T & M be left to the GSTN Board, headed by the Secretary. He also
proposed that these decisions are commercial in nature and need not come any further to GST Council.
However, the Council will be informed in case there is any major change in strategy, billing or budget.
He further submitted that if GSTN is able to re-model the projects on various modules within the same
budget then that day to day financial decision could be left to the Chairman of GSTN who is also
Secretary.
The agenda item was unanimously approved by the Council.
Agenda Item 4(iii): Status of Establishing Multiple Invoice Registration Portals (IRPs) to cater to the
requirement of extending e-invoicing to all the Businesses.
8.3 The CEO, GSTN informed that Council had given permission to induct 4-5 Members from
private sector for the Invoice Registration Portal (IRP) for e-invoicing and that the selection process for
which had already been completed. He further proposed to bring one more Invoice Registration Portal
(IRP) of NIC. NIC was already running one Invoice Registration Portal. He further submitted that in the
next six months, total six Invoice Registration Portals (IRPs) would be active and proper implementation
of the same with multiple players would ensure that entire B2B invoicing space gets digitized. This
would lead to instant reporting of transactions as IRP captures all the information of the invoice. Further,
GSTN was developing a facility so that the details of e-invoice can be shared both with buyers and
suppliers instantly. The facility of IRP would make the details of invoice available to all including the
administration as well. He further submitted there are other associated benefits of digitization which are
expected to flow in future.
The agenda item was unanimously approved by the Council.

Agenda item 5: The Performance Report of the NAA (National Anti-Profiteering Authority) for
the 2nd quarter (July to September, 2021), 3rd quarter (October 2021 to December, 2021) and 4th
quarter (January, 2022 to March 2022) for the information of the Council.
9. The performance Report of the NAA (National Anti-Profiteering Authority) for the 2nd quarter
(July to September, 2021), 3rd quarter (October 2021 to December, 2021) and 4th quarter (January, 2022
to March, 2022) were put up for the information of the Council. The Council unanimously accepted the
same with the chair reminding the Council that the term of NAA was to come to an end in November,
2022.

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Agenda Item 6: Issues recommended by the Fitment Committee (FC) for the consideration of the
GST Council
10. The Secretary introduced the agenda item relating to the recommendations of the Fitment
Committee. These recommendations had been given in six Annexures where the first three related to
goods and the other three related to services. The first Annexure provided details of the items (goods)
where some tax rate change was being recommended; the second Annexure lists items (goods) where no
tax rate changes were being recommended and the third Annexure contained deferred items (goods)
where the decision would be taken by the Fitment Committee after further deliberations and thereafter
approval of the Council would be sought. Categorization on similar lines had been made in fourth, fifth
and sixth annexures pertaining to services.
10.1 The Secretary to the Council stated that the recommendations of the Fitment Committee were
discussed in detail in Officer’s Meeting on 27.6.2022 and large number of recommendations were
agreed to by all. However, on some of the items, the officers had some suggestions and expressed their
views. The Secretary sought the permission of the chair to mention those items before the Council and
stated that if any Member feels that there were some other items which need to be discussed; the same
could be taken up. He asked Joint Secretary, TRU to take the Council through items numbers 6, 9 and 14
of Annexure I to the Agenda.
10.2 Joint Secretary, TRU started the discussion with item No.6. He stated that there was a request for
limited period exemption from IGST for defense items imported by the private vendors, since the
procurement by Government for defense and defense PSUs were also exempt. He explained that this was
a very small list of specified items and this exemption would be only for a period of five years lapsing in
2024. He clarified that this is an end use- based exemption where Joint Secretary from Ministry of
Defense certifies that these imports are for defense forces and they fall under the specified list.
The Council agreed with the proposal to change the applicable rate of IGST to NIL on specified
defense items imported by private entities/vendors when end user is the Defense forces.
10.3 He further stated that item number 9 is about increasing GST rate from 12% to 18% on Tetra
Pak. He explained that all packaging material falling under corresponding chapter are liable to GST @
18%. Therefore, Tetra Pak as compared to other packaging material was an outlier and also merits the
standard rate. Because of its inputs’ nature and consequences to environment, Fitment Committee
opined that GST on Tetra Pack should be taken to 18% which would also help in correcting inversion on
this item.
The Council recommended the proposal to change the tax rate on Tetra Pak (Aseptic Packaging
Paper) from 12% to 18%.
10.4 Joint Secretary, TRU informed that item number 14 pertained to cut and polished diamonds
whereby the industry had requested for increase in the tax rate from 0.25% to 1.5%. He stated that
earlier GST rate reduction to 0.25% was sought by the industry as cut and polished diamonds were
largely exported so the tax incidence would not be having much impact. Over a period of time, the
inverted duty structure had impacted this sector and hence the request was to increase the duty rate from
0.25% to 1.5%. He pointed out that the issues related to inversion were already before the concerned
Group of Ministers (GoM) and hence, Fitment Committee felt it prudent that this matter should be
deliberated and addressed by the GoM on rate rationalization. However, some concerns were raised by
the state of Gujarat and accordingly, he requested the Hon’ble Member from Gujarat to raise the same
before the Council.
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10.5 Hon’ble Member from Gujarat informed the Council that the diamond industry was a major
sector in Surat providing employment to thousands of people. There was import of services and capital
goods at the rate of 18% which results in the accumulation of ITC. Accordingly, industry had requested
a hike in tax rate from 0.25% to 1.5% and this might be agreed to enable utilizing of ITC which had
accumulated due to the inverted tax structure on diamond industry.
10.6 The Chairperson asked whether both the industry and the state of Gujarat sought to raise the tax
rate to 1.5% to which Member from Gujarat informed in affirmative.
10.7 Hon’ble Member of Karnataka informed the Council that if the state of Gujarat was keen to
increase the tax rate from 0.25% to 1.5% and industry also wanted the take hike, then the same need not
be referred to GoM and the Council could decide the issue.
10.8 The Secretary informed that there was acute inversion in diamonds. So, 1.5% would only correct
the inversion and if the Council agreed, it may not be referred to the GoM.
The Council recommended the proposal to change the tax rate on cut and polished diamonds from
0.25% to 1.5%
10.9 Hon’ble Member from Kerala requested that there was an exemption for orthopedic implants and
he requested to extend the exemption to cochlear implant (Artificial electronic ear) as this was a device
for helping the hearing disabled. Joint Secretary, TRU informed the Council that cochlear implant was
already at the concessional rate. The Fitment Committee had taken up items where there was a confusion
between 5% and 12% and had recommended deserving items to be taken to 5%.
10.10 Hon’ble Member from Madhya Pradesh agreed with the proposal to reduce the tax rate on
ostomy items used regularly in the medical field to 5% and also on all items under Orthopedic implants
(CTH 9021, except hearing aids which attract NIL GST rate) which were important for assisting the
handicapped. He further stated that the Fitment Committee on item number 5 of the agenda, under
Chapter 23 had suggested a tax rate of 5% for items like cattle feed, cottonseed oil cake, rice bran oil etc.
He informed the Council that the animal husbandry is done on a large scale in the state of Madhya
Pradesh. In the 20th national count of the cattle done in 2019, Madhya Pradesh stood at 3rd place in the
whole country. He stated that increasing the rate on cattle feed would burden the people involved in the
animal husbandry and this would increase the price of the dairy items as well. So, he recommended that
the cattle feed items be kept exempted from the GST.
10.11 Joint Secretary, TRU explained that different rates on items of Chapter 23 (animal feed, their
inputs, oil cakes etc.) have led to disputes. He informed the Council that in this chapter head there are
large number of items including manufactured items which entailed large number of inputs and ITC.
Also, there are disputes regarding cattle feed and its inputs; and other items which do not fall in the
category of cattle feed but are inputs in the said chapter. Fitment Committee has opined that 5% nominal
tax rate on this chapter (except dog or cat food falling under CTH 2309) would reduce litigation on these
issues and with 5% tax rate, the manufacturers would get refund of ITC, if they had any accumulated
credit which otherwise, they would not get in exemption. However, Fitment Committee had not
explicitly recommended this rate change but had recommended that GoM on Rate Rationalization may
consider uniform rate of 5 % on entire Chapter 23 (except dog or cat food falling under CTH 2309).
Further, as per the interim report, the GoM had not recommended any increase in the cattle feed in
Chapter 23 at this stage. Hence, the issue raised by Hon’ble Member from Madhya Pradesh stood
addressed. Hon’ble Member of Karnataka also added that GoM had taken this concern into account.
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10.12 Joint Secretary, TRU proceeded to item number 97 in Annexure II to the Agenda relating to
scrap. He stated that genesis of this issue lies in the 45th Council meeting in Lucknow. There also
Fitment Committee had placed this agenda item. He explained that there were two issues involved, one
was that what should be the rate on the scrap particularly on metal scrap because presently it attracts
18% tax rate and request was to reduce it to 5%. Fitment Committee was not in agreement with the
request because of the reason that there is huge import of scrap in the country and the revenue involved
is about 45,000 crores and in fact this had increased subsequently. The Council had opined that because
of this huge revenue implication, bringing down the tax rate from 18% to 5% would not to be desirable.
He reiterated the minutes of the 45th Meeting of the Council where this opinion was expressed.
10.13 He further stated that the other issue involved is of reverse charge on scrap. There is significant
evasion in scrap and scrap traders vanish without paying the taxes on the tax invoice. The manufacturers
complain that they are suffering on this account that their suppliers were not paying the tax and
corresponding ITC became ineligible. So they requested for the reverse charge mechanism on scrap. On
this matter, the Fitment Committee was of the view that the reverse charge mechanism was not possible.
Reverse charge could apply only at the beginning of supply chain. However, it was suggested that a
meeting with the industry could be held for the issue requires re-examination. After the 45th Council
meeting, the Fitment Committee examined this issue in great length over three meetings. The trade
submitted that if Reverse Charge Mechanism (RCM) is there, they would be able to take the credit and it
would not create any additional obligation if suppliers were not filing GST return. So, they would be
absolved of any liability that may arise on account of non-payment of taxes by the scrap dealer.
However, Fitment Committee examined the issue and found that scrap entailed a supply chain with
number of suppliers involved. There was a lot of aggregation which happens in supply chain of scrap. It
was not the case here that only one scrap dealer would supply to one manufacturer but there were
number of scrap dealers collecting scrap and they would give it to the dealer who aggregated and then it
would go to some other dealer for further aggregation. Therefore, there were multiple supply chains
some of which originated from imports. On imports the taxes were paid by the importer. So, if importer
had paid tax of 18% and again if manufacturer would be asked to pay on reverse charge, then this would
lead to a 36% tax on the scrap, out of which on about 18%, ITC would be available but other 18% would
become the absolute cost. So, bringing scrap under reverse charge was not possible. Accordingly, when
this was examined by Fitment Committee, it was ab initio opined that it was not feasible to introduce
reverse charge in case of scrap. Another aspect was that the iron and steel were such items that if scrap
dealers were taken out of this chain then there would issues with ITC in the subsequent supply chain and
the compliance issue would also be there. Continuing with forward charge on scrap has help GST
administration keep a check on supply chain. These were the prime factors on the basis of which the
Fitment Committee had opined that reverse charge on any supply in the chain after the first stage was
not feasible.
10.14 Hon’ble Member from Karnataka stated that issue of scrap dealers should be handled more
stringently since major evasion happens in this item. Trade of scrap had a little complicated supply chain
but if there could be a reverse charge mechanism and a proper detection of the supply chain could be
done, large revenue would be generated. He informed that just because of the complexity there was a
leakage of huge revenue. He stated that there were large number of imports of scrap and there was no
track of the supply chain after imports. Supposing 5000 tones was imported, then it was important to
track as to whom it had been supplied and how much had been converted to other items to be used in
manufacturing. He suggested to do a detailed study on metal scrap, where it was used in manufacturing
and in which industries. If this could be tracked, then there could be a reverse charge leading to
generation of higher revenue. He expressed that this issue was pending for the last five years and
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leading to large amount of tax evasion. He exhorted to the Council to give a serious thought for the
reverse charge mechanism so that the tax evasions on scrap could be checked.
10.15 The representative from Punjab informed that their Vidhan Sabha budget session was ongoing.
Thus, the Hon’ble Member from Punjab would be joining later. He stated that tax evasion on scrap was a
major issue in the state of Punjab because they had a huge scrap market at a place called Mandi
Gobindgarh. They referred to the minutes of the 45th meeting of the Council, where the Hon’ble
Chairperson had stated that this issue could be taken up at the next meeting after due consultation. He
further stated that they were not part of the Fitment Committee and neither they nor the industry had
been consulted on the issue. So, the position of the Punjab is that if this issue of reverse charge could be
deferred now and only after due consultation this issue may be decided.
10.16 The Secretary informed that previous day, he had a small meeting with all his officers and he was
told that the industry had been consulted and even representatives of the industry came and had a
discussion with Chairman, CBIC. However, since Hon’ble Chief Minister of Karnataka and
representative from Punjab had raised this issue of reverse charge, he suggested that the Fitment
Committee could again take up the issue of reverse charge and Punjab could be called to be a part of
deliberations. He informed the Council that the industry had been consulted but Fitment Committee
could interact with industry once again and come up with the solution so that RCM could be looked into.
There was an agreement on all other recommendations made in Annexure I, II and III in the
Fitment Agenda and the Council recommended accordingly.
10.17 Joint Secretary, TRU introduced the next item in the Agenda (Annexure- IV to Agenda) of the
Fitment Committee. He stated that Nepal and Bhutan were landlocked countries, and their imports and
exports took place from the Indian ports and seaports. In the case of imports to Nepal and Bhutan, the
containers moved from the seaport to Nepal and Bhutan and after the cargo had been offloaded, then
empty containers moved out from these countries and came back to the port in India. Here, the issue was
regarding the applicability of GST on activities associated with transit cargo to Nepal and Bhutan. The
exemption Notification exempts the supply of services associated with transit cargo to Nepal and Bhutan
(landlocked countries) but when the empty container come from Nepal after dropping the cargo, services
related to transport of such containers were not being exempted because the Notification wording only
specifies onward cargo to Nepal. However, the intention was to exempt both inward and outward cargo
to Nepal and Bhutan as this was only transiting in India for the purpose of import and export. All the
empty containers which came from Nepal/Bhutan after dropping import consignment and any service
relating to them should not be taxed. He informed the Council that this matter was discussed in Officer’s
meeting and there was in principle agreement, but the issue was raised as to what was transit cargo and
how it was happening. He further informed the Council about the procedure in Custom to deal with the
cargo and it could be looked into, as the issue raised is more of enforcement rather than a policy issue.
10.18 Hon’ble Chairperson asked the states like Assam, Bihar, West Bengal, UP and Sikkim who share
borders with either Nepal or Bhutan, to offer their comments as they were going to be directly impacted
by these recommendations.
10.19 Hon’ble Member from Uttar Pradesh submitted that they did not have any issue with the transit
of cargo and the empty containers coming back but he raised the point to ensure the genuineness of such
cargo through proper verification.
10.20 Hon’ble Member from Bihar also agreed to the concerns of the U.P.
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10.21 Hon’ble Member from Tamil Nadu stated that the concerns of neighbouring states with Nepal
and Bhutan, should be fully addressed before implementing this rather than taking the risk. He submitted
that the mechanism could be in the form of a SOP which explained the process and procedures involved
for the ease of comprehension.
10.22 The Secretary noted the comments of the Hon’ble Members and informed that concerned states
would be informed of the SoP followed by Customs.
10.23 Joint Secretary, TRU proceeded with item number 11 pertaining to Goods Transport Agency
(GTA) services and informed that the previous day some issues were raised about Goods Transport
Agency services. It currently attracted 5% tax rate without Input Tax Credit (ITC) when on reverse
charge and 12% with ITC on forward charge. But when a GTA service provider availed the route of
paying GST with ITC at 12%, he was barred from taking 5% under Reverse Charge Mechanism route
ever again. So, the issue was being raised about providing flexibility to GTA so that in a particular year
if they wanted to shift to 5% tax rate without ITC from the 12% rate, they could do so. This flexibility
was there in other services also. So, the Fitment Committee recommended that this flexibility should be
there in this sector also to facilitate the trade. Fitment Committee had proposed that a GTA can opt both
the routes- to operate under forward charge or under Reverse Charge Mechanism but he had to express
his intention before the beginning of a financial year. A GTA opting to pay GST under forward charge
may be allowed to pay GST@ 12% with ITC on some consignments while simultaneously availing 5%
rate without ITC on the other consignments during a financial year provided he pays GST on forward
charge basis on all its services during that financial year. This modality would provide greater flexibility
to GTAs while not compromising the revenue.
10.24 On item number 19 (Annexure IV to the Agenda), Joint Secretary, TRU informed the Council
about the issue of clarification on the taxability of certain activities. He explained that “agreeing to the
obligation to refrain from an act or to tolerate an act or a situation, or to do an act” has been declared to
be a supply in para 5 (e) of Schedule II of CGST Act, 2017. GST applies on the activities of agreeing to
do something or not agreeing to do something or tolerating something. If a person charged something
for not participating in a bid where others were participating or someone charged for not opening a
restaurant in one area where already another restaurant was operating on non-competing basis, then GST
would apply as this was a supply of service. Similarly, if a train ticket was cancelled, it is a kind of
facilitation service of allowing cancellation against cancellation charges and being a part and parcel of
the main supply of passenger transport, will get the same tax treatment.
Similarly, if someone tolerates an act of someone against consideration under an implied or express
agreement then GST would apply.
However, this provision was being applied in various kinds of situations leading to unwarranted
litigation. Even if some damages were to be paid for breach of contract or an employee, who was under
bond and left a company on payment of bond amount, Show Cause Notices for the recovery of tax on
damages and notice pay had been issued.
10.25 The issues arising out of taxation of activities by way of “agreeing to the obligation to refrain
from an act or to tolerate an act or a situation, or to do an act” were deliberated in detail. It was felt that
the entry was being very widely and at times erroneously interpreted. Fitment Committee recommended
that the issues involved may be clarified by way of the enclosed draft circular. The draft circular is based
on the basic principles of GST law, Indian and international jurisprudence and international VAT/GST
guidelines and practices.
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10.26 Joint Secretary, TRU discussed the agenda regarding the items on Annexure IVA relating to tour
and hospitality sector. The Hon’ble Member from Delhi queried regarding liability of GST by an
employer hiring a vehicle for the employees as to whether it would be under Reverse Charge Mechanism
or otherwise. If a company hired the vehicle for its employee on both time charter and voyage charter
basis, then how will it be differentiated. Joint Secretary, TRU informed that on the previous day he had
explained in the officers’ meeting that the motor vehicle Act did not differentiate between vehicles on
the basis whether they were given on time charter or voyage charter. The same vehicle can be hired for
transport from point A to B or it can be hired for a period of time. Where the contract is for renting a
vehicle for a specified period of time, Reverse charge mechanism would apply. Further, Joint Secretary.
TRU informed that since this was only clarificatory in nature and it shall be circulated among the state
officers before issuance, if they have any input or suggestion, the same can be added.
The Council agreed on this.
10.27 He further explained Annexure IVA to the Agenda related to recommendations of Fitment
Committee on issues related to tour and hospitality sector, which had suffered severely in the Covid
pandemic. He informed that there were 3 proposals before the Council. One is that due to place of
supply provisions in respect of accommodation and other services, ITC is not available to tour operators
and hence GST should be charged to such an extent that is fair and reasonable, and the rate should be
rationalised to that extent. So, in- principle approval of the Council was being sought for Fitment
Committee to engage with the trade and come up with suitable suggestions in the next Council meeting.
The second issue was regarding an Indian tour operator conducting a tour for a foreign tourist partly in
India and partly in neighbouring countries. GST dispensation at present was such that the entire tour
gets taxed in India and hence, the tour operator pays tax even on the component which he was providing
outside India. It was proposed before the Council that GST may be charged only on the domestic
component of such composite tours. To avoid disputes/ misuse, valuation of the foreign and domestic
components of such composite tours could be calculated based on the proportion of the number of nights
for which tour was conducted outside and within India. To ensure that balance remains in favour of
domestic tourism in such composite tours, it may be prescribed that this concession shall be provided for
say maximum of half of the duration of the tour or actual period. The Council agreed with the proposal
for charging GST only on domestic component in the manner as presented by the Fitment. The third
issue was specifically related to Andaman and Nicobar Islands where the travel between two islands by
vessel was exempt if it was by public transport other than predominantly for tourism purpose. Fitment
Committee agreed that transport by vessels is a mode of transport rather than a luxury and approved the
proposed clarification.
10.28 Hon’ble Member from Karnataka praised the margin scheme as this would give a boost to
tourism but stated there were other businesses which were claiming to be categorised under marginal
scheme. So the margin scheme should be very carefully drafted; otherwise, undeserving businesses
would get benefited by such a margin scheme.
10.29 Hon’ble Member from Delhi agreed with the view of the Hon’ble Chief Minister from Karnataka
and asked the Council some time to further study and examine the margin scheme before concluding it
since only in- principle approval had been sought on this.
10.30 Hon’ble Member from Kerala raised the point that destination-based billing concept should not
be diluted.
10.31 Hon’ble Member from Goa also agreed with the view of the Hon’ble Member from Kerala.
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10.32 Hon’ble Member from Uttarakhand stated that they wished to be included in the discussions of
Fitment Committee on this important issue of the place of supply. On which Joint Secretary, TRU
informed the Council that place of supply was not being touched in this issue. The Chairperson directed
that this topic should go back to the Fitment Committee and the States who had raised their concerns
should be invited to speak in the Fitment Committee. Hon’ble Member from J&K also requested to be
part of these consultations. Hon’ble Member from Tamil Nadu suggested to examine case studies in this
regard to which the Council agreed. Accordingly, Council directed that proposal relating to margin
scheme be re-examined by the Fitment Committee comprehensively taking all aspects into account.
10.33 Joint Secretary, TRU proceeded with the recommendations of the Fitment Committee on positive
list of services to be specified in Sr. No. 3/3A of Notification No. 12/2017-CT(R) which were presented
as Agenda in Annexure-IV B. He informed that this agenda flows from the previous GST council
meetings. There were certain exemptions on pure services provided to the State governments, Central
government, UTs or local authorities as their inputs for discharge of functions under the constitutional
provision of Article 243G and 243W. Similarly, on composite supplies of goods and services provided
to Central, State Governments, local authority and Union territories where the goods component was not
more than 25%, similar exemption existed. He further added that in the previous Council meeting it was
directed that inputs from each State should be taken based on which a positive list of services to be
exempted had been drafted. In the relevant Notifications, ‘public authority’ word had been proposed to
be inserted because in certain States, local authorities had been replaced by public authorities.
10.34 Hon’ble Member from Tamil Nadu informed that the services provided by the local bodies may
be the most important services to the citizens, the list in the schedules listed about 29 services for the
panchayats and 18 for the municipalities whereas the present list only had about 6 items. The proposed
list excludes many items which involve manpower outsourcing. This will lead to huge expenditure to
Exchequer. Most of the States were very heavily burdened by pensions and were unable to hire at the
level that they used to do in the past. Tamil Nadu had also given Joint Secretary, TRU a paper stating
that the local bodies provided services to citizens where there is no question of abuse as it is a public
entity and subject to audit and scrutiny. GST on services or composite goods and services purchased by
local bodies would be a huge burden on them and effectively on the State who finances these local
bodies.
10.35 Hon’ble Member from Uttar Pradesh stated that such public services should be exempted, while
commercial activity should be charged to tax. He suggested to bring cattle ponds into exempted list and
added that the electric vehicles in urban areas should also be brought under exemption.
10.36 Hon’ble Member from West Bengal put forth that she agreed with Hon’ble Ministers because
these pure service items were large in number and now it had been reduced to only 6. Further, this move
would be a burden on exchequer as these services were provided by local bodies funded by the
government.
10.37 Hon’ble Member from Haryana suggested to include vocational training in this list.
10.38 Hon’ble Member from Delhi also agreed with the views of the Hon’ble Member from Tamil
Nadu.
10.39 Hon’ble Member from Andhra Pradesh also was of the view that due to burden of committed
expenditure and pensions the local bodies were forced to go for outsourcing. He requested for
exempting the entire outsourcing part of the functioning of local body.
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10.40 Hon’ble Member from Telangana was also of the same opinion.
10.41 Hon’ble Chairperson directed that the proposal be sent back to the Fitment Committee to take the
inputs from all the States which had voiced their concerns.
10.42 The Secretary informed the Council that item 63 in Annexure-V to the Agenda may be kept
pending as some inputs from Gujarat were to be taken into consideration.
10.43 Joint Secretary, TRU explained the issue pertaining to tax rate on ropeways which was discussed
in previous GST Council meeting. It was requested by Himachal Pradesh that ropeway travel should be
brought down to rate of 5%. Himachal Pradesh had made presentation before the Fitment Committee.
The two issues before the Fitment Committee were as to what should be the rate and what category of
services should be taxed at lower rate. If they were to be considered as transport, whether tourism
ropeway should be included or not. On this, the Fitment Committee recommended that like any other
transport services, 5% GST rate with ITC only of input services should be allowed and Himachal
Pradesh also agreed with this proposition because then it brings them on parity with other transport
services. On the other issue of possibility of differentiating between ropeway for public transport versus
ropeway for tourism, Fitment Committee opined that this kind of differentiation would lead to litigation.
10.44 Hon’ble Member from Himachal Pradesh thanked for putting the issue of ropeway in the
Council. He stated that Himachal Pradesh had to go to Hon’ble Supreme Court for the various
approvals for the laying of roads due to forest area issues. Himachal Pradesh had difficult terrain for
example Kinnaur, Lahaul, Spiti, Chamba and other interior areas which were sometimes under cover of
snow due to which even the agriculture produce could not be transported from the orchards. He
emphasised that ropeway was not only important for tourism but crucial for normal transport. It was not
luxury but necessity in a hilly state like Himachal Pradesh. Therefore, he requested the Council that the
ropeway transport should be kept at 5% tax rate with ITC of input services. He further informed that
Solar projects were at 5% GST while Hydro Projects were 18% GST thus making them unviable due to
higher costs. He requested the Council to bring hydro projects to 5% GST rate.
The Council approved the 5% GST rate on transport of goods and passengers by ropeway with
ITC of input services.
The Council agreed with all other items in Annexure IV, V and VI to the Agenda item No.6 and
recommended accordingly.
Agenda item 7: Agenda note on C-PACE Project for Ease of Doing Business in India
11. In respect of agenda note on C-PACE Project for Ease of Doing Business in India, it was stated
by the Secretary that the Ministry of Corporate Affairs was planning to launch a Centre for Accelerated
Exit as a part of Ease of Doing Business for which they had requirement of Nodal Officers from the
Department of Revenue and that two Officers were being nominated for this purpose for which approval
was being sought from the Council who would take care not only of the Centre but also coordinate with
the States towards ease of doing business.
Agenda item 8: Review of revenue position under Goods and Services Tax
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12. Regarding review of revenue position under Goods and Services Tax, the Secretary stated that
the revenue had shown a healthy trend. It had grown at about 30% in the last year while GDP was
growing at the rate of 19.5%. In the current year too, revenue of Rs.1.67 lakh crores were collected in
the first month April 2022 and Rs.1.4 lakh crores in the month of May and that the month of June would
shows a similar trend. He stated that in the Financial Year 2018-19 revenue grew at 9% and then it was
the COVID period but in 2020-21 growth was around 30%. An estimate had been made that if a revenue
of Rs.1.55 lakh crores on average is collected, then growth would be about 25% and in case this average
goes to Rs.1.60 lakh crores then growth would be 28%-29%. If the GDP goes up by 15-17 per cent, the
buoyancy would be very high.
12.1 He observed that all around efforts were made by the States and all formations to increase the
revenue and revenue had gone up.
Agenda Item 9: Report of Group of Ministers (GoM) on feasibility of implementation of e-way bill
requirement for movement of gold and precious stones.
13. The Secretary requested the Hon’ble Member from Kerala to pilot item number - 9 of Volume-2
i.e., the report of Group of Ministers on feasibility of implementation of e-Way bill requirement for
movement of gold and precious stones.
13.1 Hon’ble Member from Kerala thanked the Secretary and informed the Council in the 37th GST
Council meeting held on 20.09.2019, a GoM consisting of Finance Minister of Kerala as the convener,
the Hon’ble Deputy Chief Minister of Bihar, Gujarat, Finance Minister of Punjab, West Bengal and
Minister for Home from Karnataka was constituted by the GST Council Secretariat vide O.M. dated
22.11.2019 and the mandate of the GoM was to examine the feasibility of implementation of e-Way bill
requirement for movement of gold and precious stones or to suggest alternative ways and mechanism for
controlling tax evasion.
13.2 The GoM suggested that states should be allowed to decide about imposition of the requirement
of e-Way bill for intra-state movement of gold and precious stones within their States, with a minimum
threshold of Rs. 2 lakh and the States could decide any amount above that amount as a minimum
threshold and for filling up the e-way bill forms, only part-A of the e-Way bill would be required
without any need for filling part-B of the e-Way bill to ensure security of transportation.
13.3 The Hon’ble Convenor further explained that the reasons of suggesting e-way bill was to enable
the officials of field formation in the city to identify whether the gold being transported was inter-state
or intra-state. Further, the GoM suggested that the E-invoicing should be made mandatory for B2B
transactions by all taxpayers supplying gold/precious stones (goods of HSN 71) and having annual
aggregate turnover above Rs.20 Crore. Further, the issue of levy on GST on reverse charge mechanism
(RCM) basis on purchase of old gold by registered dealers/jewellers from unregistered persons may be
referred to Fitment Committee for detailed examinations.
13.4 The Secretary invited comments from Bihar, West Bengal, Gujarat and Punjab who were the
other Members and further stated that it was being left to the States to implement the eway bill and its
threshold limit and only part-A of the e-way bill would be implemented. The Part-B which discloses the
identity of the person/transporter would not be declared and this would ensure his security.
13.5 Hon’ble Minister from Odisha suggested that prescribing a minimum threshold should be left to
the States. The Secretary clarified that the implementation was being left to the States and the States had
the option to fix the threshold limit at Rs.5 lakhs or Rs.10 lakhs also. He further clarified that Centre was
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giving liberty to the respective States and that it was up to the states to implement or not to implement
the recommendations.
Decision: The GST Council approved the recommendations of the GoM.
Agenda Item 10: Proposal to apportion IGST amount of Rs. 27,000 crores for the financial year
2022-23 on ad-hoc basis
14. The Secretary invited the Joint Secretary (DoR) to present the agenda. Introducing the agenda
item, Joint Secretary (DoR) stated that the normal IGST apportionment is done as per Section 17 of the
IGST Act, 2017 which is based on the cross utilization of credit between IGST, CGST and SGST but it
was observed that every month there was some amount of IGST left un-apportioned which mainly
happened due to not utilization of the IGST credit in that month by the taxpayers. Accordingly, ad-hoc
apportionment of the IGST, which remained in the Consolidated Fund of India, was done on regular
basis. He further apprised the Council that Rs. 27,000 Crores is estimated to be left un-apportioned by
the end of June, 2022. The apportionment will be done on ad-hoc basis, 50% to Centre and 50% to
States/UTs and the proposal is put up before the Council for its approval.
14.1 Hon’ble Member from Delhi stated that the IGST amount should not be left un-apportioned in
Consolidated Fund as had happened before in 2018. The Secretary assured due care would be taken.
14.2 Thereafter, the Hon’ble Chairperson stated that this had happened then because the Council did
not have a formulation on the same at that time. She further stated that she went into depth to understand
why it happened in 2018 and even though the financial year was over, she ensured that the error was
corrected. She stated that there should be a way to share the IGST on real time basis rather than seeking
the approval of the same from the Council every time.
Agenda Item 11: Agenda Note on amendments to provisions relating to GSTAT in CGST Act,
2017
15. The Secretary introduced Agenda item 11 which was a note on amendments to provisions
relating to GSTAT in CGST Act, 2017. He stated that the Courts, the Standing Committee on Finance
and other Committees had emphasised the need to set up the Tribunals. In the absence of Tribunals,
people were being forced to file Writ Petitions and a number of cases had been decided by the High
Courts and by the Hon’ble Supreme Court in place of Tribunals. He further informed that since the GST
Tribunals would decide on matters pertaining to CGST, SGST and IGST which would affect the States
and Centre and therefore, parity had to be maintained in the membership between States and Centre.
The Secretary informed that that process would still take time because the Act needed to be amended
and then the Rules were to be formulated and the process of selection of Members would take place. He
invited JS DoR to make a presentation.
15.1 Joint Secretary, DoR gave a presentation before the Council which is attached as Annexure-5.
15.2 Hon’ble Member from Uttar Pradesh submitted that there should be a time bound exercise and
they would proceed accordingly.
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15.3 Hon’ble Member from Maharashtra could not attend the meeting however he had sent his written
comments on this agenda vide letter dated 27/06/2022. He expressed sincere thanks for the invitation to
Council meeting and placed his remarks on the behalf of the State of Maharashtra on the Agenda Item
No.11 on Amendments to provisions relating to GSTAT in CGST Act, 2017. The letter stated that the
said agenda refers to various important court rulings and the Tribunal Reforms Act, 2021, which require
careful study and extensive examination. However, prima facie, following issues had been noticed and
require careful consideration from the point of view of the States:
a. Section 109(3): The constitution of members of Principal Bench reflects
inadequate representation to the States,
b. Section 109(6): There should be provision of one default Bench in States in the
Law itself (sans Council nod afterwards) with further expansion in Benches
requiring Council recommendation,
c. Section 109(10): Increasing limit of 5 Lakh for a Single member bench.
d. Section 109(12): Transfer to Technical Members (State) by President of PB
should be within the State,
e. Section 110(1) (d) :
i. The qualifying criteria for Technical Member (State) require a relook,
especially with respect to selection from State cadre Group A officers.
ii. Also, States should be given liberty to decide the rank of the candidate
for the purpose of appointment as Technical Member (State). This is
especially because for Technical Member (Centre) no qualifying rank is
specified.
iii. Further, “..or in the field of finance and taxation:” requires relook
because, the word ‘finance’ includes treasury department,
whose inclusion may not be intended. ‘Taxation’ should include VAT
and GST.
f. Section 110(2A): The selection of Technical Members (State) should
mandatorily be from home State.
g. Section 110(3): The balance between appointments of the number of Technical
Members from the Centre and States and their balance at the location, within
State and within country should be maintained from the inception of the
Tribunal.
h. Section 110(4): The Chief Secretary as a member of Search cum Selection
Committee (ScSC), should be from the State of the Bench to which appointment
of Technical Members of that State is being considered,
i. Section 110(5A): Instead of recommendations of Panel of two names for one
post of Technical Members, the ScSC should recommend only one name for
one post of Technical Members,
j. Section 110(9): There should be no reappointment of Technical members, the
reason being that it would not give enough opportunity to others. Moreover,
tenure period of 4-year as a Technical Member is fairly long period.

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15.4 Hon’ble Member from Tamil Nadu recommended for constitution of a Group of Minister (GoM)
to address the issues where legal, council and executive functions are blurred, within a time frame of 2 to
3 months and GoM could come back with a design which keeps the making of the Council in sight. That
the Council represented the elective Members and the Council should not just do that because the court
had ordered.
15.5 Hon’ble Member from Gujarat submitted that as the issue was long pending for the last five
years, the formation of GSTAT should be taken up on priority. There must be State level Tribunal with
High Court Judge. The Member further elaborated that right now the proposition was for the constitution
of a National Tribunal and if they constituted a National Tribunal, there would be a number of issues
regarding replacement, selection of Members as well as its functioning. He suggested that State level
Tribunals should be constituted as all those issues could be addressed and the functioning would be
much better.
15.6 Hon’ble Member from Delhi stated that Council was formed by the GST Law and the spirit of
the GST Law was federal. That everything or any decision that they took, the outcome had to be Federal
and not Central oriented. Regarding the formation of State level benches of Tribunals, he raised few
observations such as whether the Technical Member would be from State or Centre Services, whether
the Technical Member would be transferable from one state to another which appears to be Central not
federal in structure. He also sought clarification regarding re-appointment of the Members. He further
supported the view of the Hon’ble Member from Tamil Nadu to form a GoM which could consider all
aspects specially how to keep the structure and character of the Tribunal Federal rather than Central and
give its report in 3 months’ time.
15.7 Hon’ble Member from Uttarakhand stated that all the Technical Members in the Tribunal in the
State should be of the All India Service Officers of respective state or from the respective State Services
(serving or retired) only.
15.8 The Hon’ble Chairperson stated that that agenda was first discussed in the Law Committee in
which some states were represented. She said that the Law Committee did not intend to centralise that
and that she would go with the suggestion of forming the GoM and that GoM could be given a
reasonable time to submit its report to the Council.
15.9 Hon’ble Members from West Bengal, Karnataka, Andhra Pradesh and Haryana welcomed the
Hon’ble Chairperson’s proposal for setting up a GoM so that all aspects of the matter could be looked
into.
Decision: The GST Council decided to constitute a broad-based Group of Ministers (GoM) to look
into all aspects of the issue and submit its recommendations within a reasonable time.
Agenda item 12: Ad-hoc exemption Orders issued under Section 25(2) of customs Act, 1962
16. In respect of the Ad-hoc exemption orders issued under Section 25(2) of customs Act, 1962 the
Secretary observed that these were items, where approval was taken from the Hon’ble Finance Minister
in specific cases for exemption and were brought before the Council for approval. The same were
unanimously approved by the Council.
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Agenda item 13: Recommendations of the 16th IT Grievance Redressal Committee for
approval/decision of the GST Council
17. The Secretary asked the Joint Secretary, GST Council Secretariat to present the agenda item 13
regarding recommendations of the 16th IT Grievance Redressal Committee before the Council. The Joint
Secretary presented the agenda before the Council .
17.1 The 16th meeting of the IT Grievance Redressal Committee (ITGRC) discussed the following
cases -
17.1.1 Four cases of TRAN-1/TRAN-2 filing forwarded by Nodal Officer: The Committee
recommended that out of the four (04) cases forwarded by the Nodal officers, the committee did not
consider two cases on merit as these were received by the GSTN after the due date i.e. 31.08.2020 and
recommended for rejection as being time barred. The committee rejected the third case on merit and
decided not to consider any case forwarded by the Nodal officers to GSTN after the due date i.e.
31.08.2020. The fourth case was recommended by the committee to resubmit the details as the similar
cases were allowed in the 6th and 9th ITGRC meetings,
17.1.2 Sixteen cases of TRAN-1/TRAN-2 filing pertaining to Court cases: Out of sixteen (16) cases
which came through the court, committee considered five (05) cases falling under Category A1 on merit
as the taxpayer faced the technical glitch and decided to recommend for opening the portal to those five
taxpayers. Regarding the remaining eleven (11) court cases, ITGRC observed that existence or nonexistence of the technical glitch was a matter of fact and technical analysis confirmed that there existed
no technical glitch in those eleven (11) cases. Accordingly, ITGRC decided that those 11 cases were
liable to be rejected on merit.
17.2 Additional Agenda on legal issues (refund issues),
i. M/s Futuristic Offshore Services & Chemical Limited; ITGRC took note of the
data fixes done by the GSTN and recommended the same.
ii. M/s Alstone International: ITGRC took note of the technical analysis done by
GSTN and rejected the case on merit as the taxpayer did not face any technical
glitch.

17.3 Regarding one day late fee waiver for August, 2021 period for GSTR-3B late filing due to
payment issues with RBI, the ITGRC confirmed that there was a technical glitch in that case and
recommended for waiver of penalty and fine only
17.4 Regarding reset of submitted GSTR-1 for M/s Vodafone Idea Ltd.
(GSTIN:10AAACB2100P1ZC), the ITGRC approved the case without any precedent value (as fait
accompli). Further, it was decided that return filing error was not a data fix and GSTN would not do it
unless there was a demonstrated technical glitch and ITGRC had given its prior approval.
17.5 Regarding Technical Issues requiring data fixes by GSTN through back-end utilities, as per the
SOP approved in the 15th ITGRC meeting, GSTN identified ten (10) cases which required data fix of the
processed incorrect data through backend utilities.

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Decision: The recommendations of the 16th meeting of the ITGRC were placed before the 47th
meeting of the GST Council. After considering and due deliberations, The GST Council agreed
with the recommendations of the 16th ITGRC.
Agenda Item 14: Interim Report of the Group of Ministers (GoM) on Rate Rationalisation for
consideration of the GST Council
18. Introducing the Agenda item, the Secretary requested the Hon’ble Chief Minister of Karnataka
and the Convenor of the GoM on Rate Rationalisation to present the Agenda item for further detailed
discussion by the GST Council.
18.1 Presenting the Agenda Item, the Hon’ble Chief Minister of Karnataka and Convenor of GoM in
his opening remarks stated that the GoM was entrusted to give its report on rate rationalization. He
stated that the GST Revenue collection had fallen during successive COVID waves in year 2020 &
2021. This necessitated the need to take steps to augment GST Revenue so that additional mobilization
of resources can be ensured. The GST Council in its 45th Meeting held on 17th September, 2021, at
Lucknow decided to form a Group of Ministers to look into matters related to rate rationalization
including reviewing the exemptions, tax slabs, tax slab structures and correction of inverted duty
structure to enhance GST revenue.
18.2 He further stated that States of Karnataka, Goa, Kerala, Rajasthan, Uttar Pradesh, Bihar and West
Bengal being the Members of the GoM had actively participated and given their views on relevant
subjects. Subsequently, after 46th GST Council Meeting, the GoM was asked to look into the issues of
textile sector inversion also while deferring the increase of rate from 5% to 12%. He stated that inputs on
term of References of the GoM were invited from all the States and UTS where a number of States
provided their view on the matter in written statements; that the Fitment Committee discussed those
issues and placed suggestions before GoM for consideration. He stated that so far three detailed
meetings of the GoM had been held to discuss the proposals and recommendations on review of
exemptions and correction of inverted duty structure were being submitted to the GST Council in the
form of an interim report; that it was decided that further detailed discussions and suggestions were
required for submitting the report on tax rate slabs and slab structuring.
18.3 On the issue of inverted duty Structure, he stated that due to non- availability of refund of
accumulated ITC on services and capital goods in case of inverted duty Structure, such accumulation
increased the cost of supply and cost of entire chain supply went up which made Indian manufactures
and suppliers uncompetitive in relation to imports of goods & services; that it also made Indian goods
uncompetitive in international export market; that ITC blockage also worked as an incentive to evade
taxes; that if the inversion is corrected, domestic manufacturer would be able to utilize the credit of tax
paid on the inputs and no burden will be passed on to the consumer and it will benefit the manufacturers
too. He then stated that three pronged approach was adopted by GoM while recommending the
correction of inverted duty structure; that the first one was retention of rate of tax on certain sensitive
items affecting common man as there were concerns that increasing GST rates on account of such
corrections might impact prices; that the GoM had adopted cautious approach while making suggestions,
for example items like utensils, tractors, some agricultural implements, fertilizers, consumer sensitive
items were left out at this stage; that the second approach was disallowing refund in cases where
inversion is not envisaged like edible oils, coal and other items; that the inverted duty structure
corrections were suggested by increasing or calibrating the rate of tax in other cases. Following this
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approach, suggestions to correct inverted duty structure on certain items had been recommended by the
GoM.
18.4 He further stated that on the issue of works contract services, the GoM observed that there was a
need to correct the inverted duty structure, however, the increase of six percent GST rate on works
contract services provided to the Government may strain on the budget of the States and the GST
Council might take a final view on that issue considering that present rate structure in works contract is
causing inverted duty structure and has compliance issues. On the issue of review of exemptions, he
stated that exemptions on goods and services also led to disruption of credit chain and blockage of ITC
and therefore all the exemptions under GST were examined by the GoM; that exemption on a few items
which had consumer sensitivity viz. bread , tea, coffee, poultry feed etc. were retained; that certain
exemptions on goods and services had been suggested to be rationalized and the proposed rate on such
goods would be the same as applies to the respective HSN code; that one of the majority category of
exemptions reviewed was exemption on unbranded food items including cereals. Currently, only
branded food items attracted tax and revenue from those items had fallen as compared to the pre- GST
regime. Therefore, the GoM was of the view that this could be simplified by replacing the term branded
with ‘pre-packaged and labelled’ and this would be in accordance with the Legal Metrology Act &
Rules; that in other cases, no rate change was being suggested and such items sold loose and unlabelled
would continue to remain exempt and hence majority of consumers buying loose food grains would
remain unaffected.
18.5 He then stated that under GST regime there was a free flow of ITC, hence, pruning of
exemptions on a list of services was also proposed to reduce the disruption in the credit chain; that
exemptions on the services which were mostly B2B supplies viz. common bio medical waste treatment
facilities might be withdrawn; exemptions on services provided by regulators like RBI, SEBI etc. could
be withdrawn so that the business entities consuming those services could avail ITC. He further
mentioned that some exemptions like differential tax based on the value of supply as in case of hotel
accommodation were prone to misuse. He then stated that overall the GoM had taken into consideration
various factors and had recommended to correct rate distortions leading to inversion of duty and
reviewed plethora of exemptions and concessional rate in GST, correcting which would not only have
positive revenue impact but also remove distortions in GST. Concluding his statement, the Hon’ble
Chief Minister of Karnataka and convenor of GoM requested Joint Secretary, TRU/CCT, Karnataka to
make presentation on recommendations of GoM. Thereafter, the presentation (Annexure-6) on the items
on which the corrections had been recommended by GoM was made before the Council for seeking
views of the Hon’ble Members on the same.
18.6 As the presentation concluded, the Secretary opened the floor for discussion on the same.
18.7 Hon’ble Member from Delhi stated that the GoM had presented an excellent report before them
and it also appeared from the report that the Members of the GoM unanimously agreed to the
suggestions presented in the report. He stated that after going through the report minutely he realised
that it was carefully considered. He stated that the report has been so well prepared, considering all
aspects, it would be appropriate that the report of the GoM might be accepted in toto by the GST
Council for its implementation.
18.8 Hon’ble Member from Goa thanked the Convenor of the GoM and all members. Supporting the
proposal given by the Hon’ble Member from Delhi, he stated that the GoM had given such a good report
after due deliberations on the inputs received from the Members, Fitment Committee, officers and that it
may not be prudent to discuss each item as the discussion might turn State specific rather than being
focused on revenue. He mentioned that considering all the aspects, the interim report as proposed would
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help in correcting inversion in rates, rationalisation of exemption and also augmentation of revenue,
though the GoM needed more time to analyse how much increase in revenue would be there. He then
requested the Council to accept the interim report as suggested by GoM.
18.9 The officer from Bihar on behalf of the Hon’ble Member stated that Bihar agreed with the report
and also supported the proposal of increasing the rate on works contract services provided to the
Government from 12% to 18% but as it may have an additional financial burden on the State exchequer,
therefore she requested that proposal might be implemented in a staggered manner.
18.10 Hon’ble Member from Tami Nadu appreciated the report of GoM and stated that he agreed to
most of the proposals, For example, he did not think that the increase of rate on works contract services
from 12% to 18% on supplies to Government/local bodies would be net revenue neutral in the revenue
devolution mechanism as reported in the presentation. He further stated that this proposal would have a
burden on the local bodies. However, since the GoM’s recommendations were to be taken in toto, he
would go by the recommendations of the Council.
18.11 Hon’ble Chief Minister from Karnataka and convenor of the GoM thanked the Hon’ble
Chairperson for supervising major issues like inverted duty structures, exemptions etc. that had been
pending before the GST Council for a long time. He also thanked all the Members of the Council who
had agreed to the corrections and suggestions that the GoM has made so far. He further mentioned that
two other issues were pending before the GoM and sought three months time for finalizing the same. He
also stated that the GoM would take inputs from all the States in writing and would deliberate on them
with realistic approach. He again thanked the Hon’ble Chairperson, Members and all officers for their
contribution.
18.12 Hon’ble Member from Uttar Pradesh specially thanked the Hon’ble Member from Delhi for his
proposal of accepting the report of GoM in toto and also appreciated the decisions taken by the GoM in
its three meetings held so far. He also thanked Hon’ble Member from Tamil Nadu for his positive
remarks for the report.
18.13 Hon’ble Member from Haryana thanked the Hon’ble Chief Minister of Karnataka and convenor
of GoM for giving his detailed presentation on all suggestions recommended by the GoM. However, on
the proposal of withdrawal of exemptions on renting of residential dwelling for residential use [when
supplied to business], he stated that if we tax this supply, the business establishments which provided
house facility to their small employees would stop doing the same and suggested that there might be a
threshold of the house rent amount for taxing; the rent below that threshold limit might be exempted.
18.14 Hon’ble Chief Minister from Karnataka clarified that only the service of renting of residential
dwelling for residential use [when supplied to business] would be taxed as in case of companies which
they provided to their employees. The Hon’ble Member from Haryana explained further that Gurgaon
had a very big market of renting of houses and a company might take many houses on rent for its
employees out of which a few might have higher rent and a few others might have less and further
suggested that a capping might be done on the rent amount to be taxable. The Hon’ble Member from
Karnataka again reiterated that only the service of renting of residential dwelling for residential use
[when supplied to business] was made taxable and renting to the general public for residential purpose
was exempted, however, the issue of capping on the rent might be deliberated further.
18.15 The Joint Secretary, TRU explained that there was a threshold exemption for services also and
the objective to exempt residential dwelling was to exempt the rent paid by the individuals or noncommercial person as there should not be any tax burden on him. He further stated that corporates were
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taking a number of other services for their employees also and were paying tax on the same. There was
no such differentiation there.
18.16 Hon’ble Member from Tamil Nadu stated that after this modification, there might be a possibility
that corporate might change the practice of renting a facility and giving that to employees; that the
corporates might compensate the individual employee for the house rent paid by him and that might
subvert the purpose of the proposed modification.
18.17 The Joint Secretary, TRU stated that while there may be certain such cases but the corporate
usually take accommodations on lease and give them to their employees and taxing that supply was
being covered as per the current proposal.
18.18 Hon’ble Minister of Tamil Nadu stated that there should be an exercise to know every time an
exemption was removed that how much impact it had on the revenue. He stated that this study would
help in understanding the reaction of market when a policy was changed and they would learn from the
experiment.
18.19 Hon’ble Member from Chhattisgarh could not attend the meeting but he had sent his written
comments vide letter dated 28.06.2022. He suggested that tax rate slabs need to be rationalised and there
should not be more than two to three tax rate slabs. He further suggested that revenue realization should
come from efficient tax recovery and plugging evasion rather than increase in tax rates which will
benefit the consumer.
Decision: - For Agenda item 14, the Council accepted all the recommendations made in the Interim
Report of the Group of Ministers (GoM) on Rate Rationalisation and recommended its
implementation.

Agenda Item 15: Report of Group of Ministers (GoM) on GST System Reforms
19. The Hon’ble Secretary observed that the Group of Ministers (GoM) on GST System Reforms
comprised the following States Maharashtra, Haryana, Assam, Tamil Nadu, Delhi, Andhra Pradesh,
Chhattisgarh, and Odisha. As the Deputy Chief Minister of Maharashtra, Convenor of subject GoM was
not present, the Hon’ble Secretary invited the representative officer from Maharashtra to present the
issue. Thereafter, he gave a detailed presentation on the Agenda item which is attached as Annexure-7.
19.1 The officer from Maharashtra stated that the GoM on system reforms was constituted as an
outcome of the 45th meeting of the GST Council, this GoM first met on 24th October 2021 and
deliberated on what should be the strategy for the GoM to focus on various issues. This GoM identified
seven focus areas to work upon and decided to call suggestions from all the States. All the suggestions
were classified into certain groups and based on all these recommendations, sixteen broad suggestions
were identified to be taken up on case to case basis and out of these, six to seven suggestions were
identified for implementation.
19.2 The first issue on the subject was regarding the new registration and the biometric authentication,
second issue was to study the profile of new registrants from the system and compulsory physical
verification of these registrations, third was to check the existing tax payers whether they were doing
fake invoicing or not with the help of the system and take them up for physical verification. Fourth item
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was regarding the Geo-coding of addresses. It was observed that while seeking new registrations many
tax payers were giving non existing addresses/ false addresses. GSTN is proposing to make
arrangements to fetch the meta data from the application such as addresses and make it available to tax
administration to verify online from the relevant utility website. The fifth item was to capture the
electricity bill data. Currently at the time of registration, many users were using the electricity bills
which were tampered with and submitting them as proof of addresses and Dept had no way of verifying
those addresses as that data of electricity bills was not captured in the system. Next was the validation of
the bank accounts. It was observed that some of the bank accounts submitted by the tax payers were not
correct and field level checks required to be sent back to the GSTN for doing better analytics.
19.3 The first step is to improve the registration process through biometric identification of the highrisk applicants. On the basis of additional information, the new applicants would be bifurcated in high
risk and low risk applicants. Some of the high-risk applicants would be selected for the biometric
authentication. The details would be worked out in the Law Committee meeting and Gujarat had agreed
to do a pilot in this regard.
19.4 The second issue identified by the GoM for implementation was to do mandatory physical
verification. Presently whenever a new registration came into the system, it was based on the officer’s
assessment regarding the physical verification. Now based on some data leads, the system would
identify and would red flag certain cases and all those cases would be assigned for physical verification.
19.5 The third was use of artificial intelligence and machine-based interdiction grounded on
suspicious behavior of existing tax payer. Presently, whatever leads were being thrown by the BIFA
system, all those leads would be converted into a task which would be monitored and closely followed
through MIS, so that all the cases were covered.
19.6 The next issue identified by the GoM was the online address verification of the tax payers with
the help of Geocoding. Whenever the tax payer would fill the address in the application form, he would
be prompted by the facility built by GSTN using mapmyindia portal, who had a tie-up with the GSTN,
to verify and Geotag every given address. So whatever address he would be trying to enter into the
system would be matched by the system with the actual address so that there was no chance for him to
fill in an incorrect address. Further, for the existing users, all the addresses that had been filled would be
tallied with the utility. The detailing of that would be done by the Law Committee.
19.7 The fifth item was the electricity bill meter data capture during the registration process. There
was lot of information which was there in the State data bases which was not currently linked with the
GSTN like registration data base, electricity data base or RTO data etc. All these data bases provide a
lot of cursive data which could be linked to the GSTN system and used to do analytics. Many tax payers
were submitting electricity bill as proof of address but by tampering with the name and that could not be
identified because that data was not captured in the system per se in the form of information. One pilot
was being proposed by Maharashtra. All those electricity bill data would be captured at the time of
filling the registration application and then states would be speaking with the data bases of the utility
companies and would be verifying those electricity numbers. Once those numbers were sorted out, that
would be easy to figure out which applicants had been furnishing false data in the electricity bills.
19.8 The second last item was about the use of incorrect bank accounts at the time of registration. It
was observed in almost all the States that many of the bank accounts filled at the time of registration
were incorrect in the sense that the name of the bank accounts did not match with the registrants.
Therefore, it was proposed that GSTN would tie up with the NPCI, so that a check would be done. All
that information would be fetched from the GSTN system and would be submitted to NPCI and they
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would respond for each request and that could be verified how many bank accounts were false. Some
trials had been done by the GSTN and the numbers were quite huge so some kind of methodology had to
be devised.
19.9 The final recommendation of the GoM was regarding the task and case creation and feedback
mechanism in the BIFA office. Currently whatever verification analytics was being done, the results of
that were not being captured back in the BIFA system so neither the officers were able to use them in
effective manner (action taken was not visible on the leads), nor the quality of analytics was improving
for want of feedback. The idea behind that mechanism was that whatever leads which were generated
once verified in the field office, the data would be fed back to the BIFA system. That way would not
only improve the lead generation and success ratio, but the officers would also become more efficient.
19.10 As of now, the GoM had identified six issues to be taken up out of sixteen issues because all
these issues were to be implemented by the GSTN after the approval of the GST Council and GSTN
would also need some time to implement them. There were still ten more recommendations which would
be taken up step by step in the third and fourth meeting of the GoM for implementation.
19.11 The representative officer from Maharashtra referred the matter to CEO, GSTN for his
comments. He informed the Council that GSTN had already started working on the recommendations of
the GoM and if all the approvals were received, they would implement the changes in due course of
time.
19.12 The Hon’ble Deputy Chief Minister from Delhi stated that the intent of the GoM was to clean the
system by using high end technology and progressive steps were finalized after a lot of thought and
deliberations. That steps like mandatory biometric authentication or specially electricity bill verification
or real time validation of bank accounts, the use of BIFA leads in the feedback mechanism were in
themselves quite progressive steps.
19.13 The Deputy chief Minister from Haryana asked to reduce the e-way bill threshold limit to Rs
25000/ from Rs 50000/ and compulsory e-invoicing to be reduced from the existing Rs.20 crore. The
Hon’ble Member further proposed that it may be examined if meter reading could also be recorded in Eway bills to avoid round tripping.
19.14 The Secretary clarified that the Law Committee had discussed the issue but did not agree upon it
as that would be too intrusive and the taxpayer’s reaction also had to be kept in mind while taking such a
decision. Further, he added that reducing the limit of e-invoicing is being done continuously and
regarding limit of Rs.25000/- for E-way bill would be very small.
19.15 The Member from Tamil Nadu stated that the GoM needed to meet more in person actively and
on regular basis. The GoM also should meet the GSTN more frequently as a lot more could be done on
the systems.
19.16 The Deputy Chief Minister of Delhi spoke about sharing the fast tag integration data. The
Secretary stated that regarding fast tag integration, they had an App and requested the Member from
GSTN to explain the App.
19.17 The representative from GSTN stated that for fast tag integration, NIC had done some work and
an App had been given to the officers wherein live data was being shared. Regarding covering a
situation wherein if on the same route, a vehicle had moved multiple times as indicated by the fast tag
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payments, they would look into developing the said analytic and as and when developed, that would be
presented before the Council.
19.18 The Deputy Chief Minister of Delhi stated that there was substantial information in BIFA which
by default issued a Red Alert and that fast tag data could also be an innovative way to add to BIFA
analytics. So that an inspector sitting in his office could also see the links and by default from the fast
tag data, he could do random cross checking.
19.19 The representative from GSTN stated that they were in the process of digesting the fast tag data
and that NIC was developing the App and once the process of digesting the data with the GSTN began,
they expected to deliver two three good use cases using fast tag data within a period of next two to three
months.
19.20 The representative from Tamil Nadu stated that whether the fast tag could be put on the e-waybill
as the App was already in existence, so that they would be able to cross check immediately. The
representative from GSTN stated that it was being attempted.
19.21 The Hon’ble Secretary invited the representative from Karnataka who stated that they had
already synchronized the fast tag data with the vehicle numbers and that they were able to track the
vehicle movements being done on the National Highways but not in the interiors where the vehicle did
not cross any tolls. He stated that there were certain ways in which inter State movement done without
tolls could not be captured. This issue needed to be tackled. However, on the National Highways one
could track the vehicle using the fast tag data.
19.22 The Hon’ble Member from Uttar Pradesh stated that with effect from November 2019, for a
registered tax payer from another State, the availability of downloading data pertaining to e-way bill was
done away with and it could not be shared between two States. The information sharing system between
the Centre and States also needed to be strengthened and if this could be developed, a lot of transparency
could be brought into the system.
19.23 The Hon’ble Finance Minister asked the representative from GSTN to elaborate on the issue. The
GSTN representative replied that data sharing was being done as per the direction of Law Committee
and that there were some issues related to jurisdiction. That they would put the proposal of Hon’ble
Member from Uttar Pradesh before the Law Committee as to how much information pertaining to the
tax payer in respect of e-waybill could be shared between different States. That GSTN was only an
implementing agency and whatever decision was taken by the Law Committee would be implemented
by GSTN.
19.24 The representative from Tamil Nadu stated that since every transaction was being registered in
the GSTN portal, why should the data not be available to the States for cross referencing and matching.
19.25 On this, the Chairperson stated that Tamil Nadu and Uttar Pradesh had given the logic for
sharing the data and if any State could give any logic for not sharing the data. That since no State had
come up with any objection, the chairperson asked GSTN to look towards sharing.
19.26 The Secretary observed that since the Law Committee was subordinate to the Council, they
would take it as a Council decision.
19.27 The representative from GSTN stated that he would start with integrating e-waybill data sharing
and as they moved along, they would take guidance of the GoM on IT, which was a standing GoM and
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whatever was required to be shared, over a period of time, they would develop the module. The
Secretary observed that the Council agreed on the proposal of Tamil Nadu and Uttar Pradesh pertaining
to sharing of e-waybill data.
19.28 The representative from Madhya Pradesh stated that on the direction of the Chief Minister, a task
force was constituted to look into how the GST revenue could be augmented. That one of the briefs
before the task force was how to simplify the Registration procedure as a part of ease of doing business
so that trade could be strengthened. That through the medium of API land records, electricity bill, lease
deed, property ID, and digitized property details available with the Urban Development Authority would
be used to verify the information being furnished at the time of Registration, so as to stop people from
taking bogus Registration. The task force also suggested the use of Artificial intelligence. In order to
start the pilot project in Madhya Pradesh, the Revenue department, the concerned department of GOI
and GSTN had already concluded a meeting and early decision for starting, the pilot project was
solicited.
Decision: The GST Council approved the recommendations of the GoM. The Council also decided
to share the data among the stakeholders for cross referencing and matching. The GST Council
then directed the GSTN to work on this under the guidance of the Law Committee.
Agenda Item 16: Report of the Group of Ministers (GoM) on Casinos, Race Courses and Online
Gaming
20. The Secretary informed that there was a Group of Ministers (GoM) on Casinos, Race Courses
and Online Gaming which had submitted its report. He then, requested the Hon’ble Chief Minister of
Meghalaya, the Chairperson of the Group of Ministers (GoM) on Casinos, Race Courses and Online
Gaming to present the report before the Council.
20.1 Hon’ble Chief Minister from Meghalaya stated that GoM was formed to look into the aspects of
Casino, race courses and online gaming. That the GoM was basically formed to look a few aspects such
as the valuation of services, the taxability of certain transactions specifically in Casinos, changes if
required in legal provisions of administration and valuation provisions. That the GoM discussed those
issues and agreed to defer them because of the complexity of the issues and finally on February, 2022
the GoM was reconstituted.
20.2 He further stated that the GoM had looked into three major aspects.
▪ First was the rate, what rate should be applied to these three different
sectors whether that should be 18% or 28%.
▪ The second issue was whether GST should be charged on the
commission that was charged by the organizers or should that be
charged on the entire value of the stakes.
▪ Third issue was regarding Casino which was a very different game and
a form of betting with multiple factors. That in Casino, the different
activities such as entry fee, fees on the food that one ate inside, the fees
on the chips that one bought and even the transportation of the players
were having different aspects, and the GoM had to deliberate as to how
to tax these different activities within the overall casino activity. Further
online gaming, horse racing and casino were three very different
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activities though all had a sense of betting and gambling but the way
they were run was very different. That GoM needed to find some
uniformity in the rates and valuation while understanding each of those
games.

20.3 He presented a power point presentation (Annexure-8).
20.4 Based on above considerations, the GoM gave the following recommendations:
20.4.1 Imposition of GST on the activities namely, casinos, race courses, online gaming and lottery
should be uniform (in terms of rate and valuation).
20.4.2 For the purpose of levy of GST, no distinction should be made between those activities merely
on the ground that an activity was a game of skill or of chance or both.
20.4.3 GST may be levied at the rate of 28% on all activities namely Casinos, Race Courses and
Online Gaming.
20.4.4 Valuation:
o In case of online gaming, the activities be taxed at 28% on the full value of the
consideration, by whatever name such consideration might be called including contest
entry fee paid by the player for participation in such games without making a distinction
such as games of skill or chance etc.
o In case of Race Courses, GST may continue to be levied at the rate of 28% on the full
value of bets pooled in the totalizator and placed with the bookmakers.
o In case of Casinos, GST be applied at the rate of 28% on full face value of the
chips/coins purchased from the casino by a player.
o In case of casinos, once GST is levied on purchase of chips/coins (on face value), no
further GST to apply on the value of bets placed in each round of betting including those
played with winnings of previous rounds.

20.5 Entry fee to casinos: GST at the rate of 28 % was leviable on the services by way of
access/entry to Casinos on payment of consideration/entry fee which compulsorily included price of one
or more other supplies such as food, beverages etc.; that being a mixed supply. However, optional
supplies made independently of the entry ticket would be taxed at the rates as applicable on such
supplies.
20.6 The Secretary thanked the Hon’ble Chief Minister of Meghalaya for a very crisp and very clear
presentation and opened the floor for discussion.
20.7 Hon’ble Member from Tamil Nadu stated that two things need to discussed extensively. That the
regulation of those activities varied from state to state because gambling sector was under the state
regulatory ambit and all states retained the right to ban that, but taxation was independent of the activity
being allowed or not. That the second was regarding improvement of the infrastructure, the technology,
the data capture and identification models to bring the betting into the light and avoid the likelihood of
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its moving into a grey or black market. He further stated that all the Members sought to maximize
revenue while reducing those types of activities and having compliance to law. That it may not be
relatively exorbitant and there was still some scope of review.
20.8 Hon’ble Minister from West Bengal submitted that Rule 31A had already been upheld by the
Hon’ble Supreme Court. Two judgments were presented by Hon’ble Chief Minister of Meghalaya i.e.
one of M/s Sunrise Associates and other of M/s Skill Lotto; that the Hon’ble Supreme Court had held
that these three activities are actionable claims which could be taxed under GST. Therefore, if they took
into consideration the Skill Lotto case, they could not fix separate system, the principle of valuation or
rates for separate games having different actionable claims. Further, right to participate and right to win
were not separable; that was what Supreme Court had said in M/s Sunrise Associates case, so while
deciding the issues, that principle had to be taken into consideration. She stated that from lottery, west
Bengal received a huge amount of GST and that was almost 4,000 crores. Lottery had already been
decided in M/s Skill Lotto case; so while deciding the issues in case of casino, online gaming etc. that
principal had to be taken into consideration.
20.9 Hon’ble Minister from Goa submitted that Rule 31A had been upheld by the Supreme Court and
if the Council went by the GoM report that would lead to closure of the industry and moving into more
grey areas. He wanted that one had to look at the pre-GST model also while deciding the taxation on
Casino. He stated that if Council were to decide to charge on the total chips that were sold that would
certainly be heading for closure of casino. That he had done a study and looked at the international best
practices elsewhere in the world where casinos existed and they charged tax on the gross gaming
revenue. That the stakeholders were not even asking for a reduction in the tax from 28%to 18% but a
new formula to tax the Casinos instead of what the GoM had recommended. That casinos, horse racing
and online gaming could not be clubbed together as each activity was totally different. That his simple
submission was to rethink as that needed proper inputs, more meetings with the stakeholders and more
information on the table for the GST Council to decide. That let the status-quo be maintained till that
time. The recommendations will hurt Goa which is a small state.
20.10 Hon’ble Chairperson thanked the Minister from Goa for the speech made by him. She stated that
the GST Council did not differentiate between big and small states. That this Council never
differentiated between one state or another and on the contrary put all of them together in trying to see
how best they could come up with solutions. That the Chief Minister of Meghalaya had already briefed
her on particular issue regarding Goa and if that was not up to Goa’s expectations, then the Council
could also permit the GoM to have a relook on Casino only. That the GoM might be given another 15-20
days to look into that and come back again if the arguments of the Minister of Goa had any fresh
evidential or other information. She appealed to the Member from Goa to submit all his documents, new
fresh data and relevant material and participate in the GoM one more time.
20.11 Hon’ble Member from Uttar Pradesh agreed with the Chief Minister, Goa that the nature of all
three activities were different and should not be clubbed together and he welcomed Hon’ble
Chairperson’s suggestion to reopen the discussion on Casino.
20.12 Hon’ble Member from Tamil Nadu stated that there are some profound issues such as
enforcement and movement of the activities into the grey market. The identification of locus is easy in
casino, hard in racing, least in online gaming. That all the three games had that risk. He further
submitted that if the GoM had already submitted a report, like in the earlier case of rate rationalization,
either the Council should look into it entirely all over again or not at all. That there were bigger issues
there but if the GoM was to reopen, that should not be opened for just one of the three industries rather it
should be opened for all the three industries.
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20.13 Hon’ble Member from Delhi appreciated the Chairperson for giving a window to GoM to reexamine on limited issue as raised by Goa regarding casino. He stated that gambling, betting and even
liquor were some of the necessary evils and on the one hand, the society wanted it not to happen but on
the other hand if they existed, then the government desired to collect tax on them. That he wanted the
council to accept the report as whole but respecting the submissions made by Goa, he agreed to the
proposal to re-examine casino issue and that other parts of report might be accepted. He further asked
clarification regarding place of supply of service for online gaming. The Convenor of Fitment
Committee explained that place of supply would be the location of the recipient i.e. the recorded address
of the recipient as in case of B2C supply.
20.14 Member from Delhi further stated that effectively that meant place of supply was the location of
the player and not the location of the online platform. That the council must consider capturing the
address of the person mandatory.
20.15 On behalf of the Finance Minister of Madhya Pradesh, the officer expressed the opinion of the
State that the GoM had proposed GST at rate of 28% on online gaming and the service provider was
expected to collect the tax from the consumer and deposit it in government account. That two
possibilities might exist, one, service provider might register their servers outside taxable territory, but
they should still be liable to pay tax, so there might be no evasion. Second, they would like to flag the
possibility of users accessing online gaming portal through a virtual private network, in such case
consumers who were actually located in India, would access the online gaming portal through a virtual
private network, in which case, it would be impossible to detect the location of the customer since he
should appear to be located outside taxable territory. That it might also be noted that that was a common
practice with online Gamers dealing in high volume high value transactions. That imposition of higher
rate of tax might encourage users to access the online gaming portal through VPN and thereby avoiding
the imposition of tax. That Madhya Pradesh agreed that tax needed to be collected on online gaming but
that the rate should be kept such that minimized the possibility of evasion also. That service providers
should be mandated to track the location of the user of their platform perhaps by tracking the payments
done by the user on the online platform.
20.16 Hon’ble Member from Telangana requested to re-examine all the three issues instead of just one.
That Telangana had horse racing and the taxation as per the recommendations of the GoM would
definitely lead to the closure of industry or that would lead to illegal activity. That in the broader
interest, let all the three issues be re-examined. Hon’ble Chairperson then asked Telangana to submit
papers on that to the GoM.
20.17 Hon’ble Member from Karnataka stated that in principle, he agreed with the recommendations of
the GoM. That enforcement and implementation part were crucial and that let the Law Committee in
consultation with enforcement department, including state enforcement department, come out with the
roadmap.
20.18 Hon’ble Member from Gujarat suggested that place of supply in case of online services was very
important issue and that the address of recipient on record was the key issue, so committee of officers
might look into that as that was very important for taxation purpose. The Chairperson directed Chairman
CBIC to sort out the issue.
20.19 Hon’ble Member from Haryana stated that he totally agreed with what Hon’ble Chief Minister of
Karnataka had said. As regards place of supply he stated that either the address had to be the permanent
address where the player was registered or the place of the transaction or the place of initializing the
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transaction. He further submitted that GoM could have a re-look in case of casino but the Council might
go ahead with the recommendations of GoM on horse racing and online gaming.
20.20 Hon’ble Member from Tamil Nadu further stated that either the GoM’s recommendations were
taken in toto or they were given a chance to be reviewed again in toto.
20.21 The Chairperson stated that the spirit of taking decisions in the Council had always been
consensus in the interest of the country. That some states yielded, some sectors yielded, some industries
yielded and some did not, but eventually, the Council arrived at something which could effectively be
implemented with reasonable surety. That the Council corrected the faults which were observed on
implementation of various provisions. That the clubbing on these activities together was because all the
three games were gaming, betting and gambling and that common thread between the three was betting
and gambling. That the common thread was not contentious at all and that was gambling and therefore,
she would not want anything that undermine the efforts made by the GoM. However, if some Members
had differing views, these may require examination by GoM to assess if there is a need to bring in a
certain calibration into the final recommendations. This may have to be done, taking into account the
point raised more than once by minister of Tamil Nadu such as need for a better regulation, better
technology etc. The Chairperson requested the Convenor of the GoM, and the Chief Minister of
Meghalaya, to elicit the information from Goa, Tamil Nadu, Telangana, for their respective areas
to put everything together and submit the report by 15th of July.
21. State Specific Issue raised by Hon’ble Member from Telangana
21.1 Hon’ble Member from Telangana raised a state specific issue with the permission of the chair.
The Member informed the Council that the issue was concerning place of supply and was a fallback of
bifurcation of the state of Andhra Pradesh. That some of the consumers while mentioning their addresses
had written place as Hyderabad but the state was mentioned as Andhra Pradesh. Due to this, Telangana
is losing revenue and he gave some instances such as in case of Phone Pe, the revenue loss was Rs 120
Crores every year, Paytm, it was Rs. 125 Crores and ICICI Bank, it was 85 crores in the last four years.
The issue was brought to the notice of the Council which allowed negative reporting in the monthly
return (GSTR-3B) to help in stopping the revenue leakage/loss and requested to allow the same in the
new return format also. However, that was prospective and that request was to recover retrospective
revenue loss and sought the help of certain states such as Maharashtra, Karnataka, Delhi and Andhra
Pradesh as there is no specific mechanism to recover old dues.
21.2 The Secretary told that that was a tricky issue and the taxpayer should not be unnecessarily
burdened, however, Hon’ble Member from Telangana clarified that taxpayer would be given refund but
Telangana needs help from the concerned states. The Secretary assured that the officers of the concerned
states such as Telangana, Andhra Pradesh, Maharashtra and Karnataka collectively would see what best
solution could be provided to the issue.
22. General Discussion on Compensation
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22.1 Hon’ble Member from Punjab stated that Punjab was an agrarian State and all the taxes had got
subsumed into GST. That Punjab might lose at least 50% of the revenue after the end of compensation.
Therefore, he requested to extend the compensation for another five years.
22.2 Hon’ble Member from Karnataka stated that the purpose of compensation was to compensate the
States while adjusting to the new tax regime and that GST Council was very active in taking decision
and was a good platform for the States to discuss and put forth their points. He further Stated that the
Revenue collection had fallen during Covid time and he appreciated the bold decision of compensating
the States through loans. He Stated that entire Council should deliberate in a holistic manner and
conduct studies to find ways and means to strengthen the finances of the State. He requested that a
holistic decision on compensation should be taken keeping in mind the financial health of the States.
22.3 Hon’ble Member from Andhra Pradesh stated that Andhra Pradesh had certain concerns
regarding the ceasing of compensation. He emphasized with statistics that Andhra Pradesh had suffered
huge revenue losses after the bifurcation of the State of Andhra Pradesh. Now, the State is basically an
agrarian State and hence, the GST collection has been adversely affected. He requested that extension of
the compensation be considered.
22.4 Hon’ble Member from Rajasthan stated that due to Covid, the finances of the State were affected
adversely and thus requested for extension of compensation for five years. He further stated that
deliberations and wide consultation could be done regarding the decision for increasing tax rates. He
requested to withhold the implementation of the decision for at least one year. The Hon’ble Minister
drew attention towards the delay in release of the compensation amount.
22.5 The Hon’ble Chairperson replied that compensation had been settled to each State from the
Central Consolidated Fund of India in advance and that States had to get a certificate from AG if any
amount is due to be paid. That in the absence of AG Certificate, it was the fault of the State concerned
and not the Centre.
22.6 The Secretary further clarified that Rs.64000/- crore was distributed in advance to help the States
and for any difference in calculation, the State must submit the certificate from AG. That all the
compensation due was paid to the States who had submitted the AG Certificate and that Rajasthan had
not submitted the AG certificate. On submission of such a certificate, the dues would be paid
immediately.
22.7 Hon’ble Member from Delhi stated that their financial situation has been strained due to the
Covid Pandemic and hence, it would be desirable to extend the compensation for another five years. The
restructuring of loans should also be taken to facilitate the continuation of compensation. He further
stated that decisions regarding the enhancement of tax rates should be implemented immediately.
22.8 Hon’ble Member from Uttarakhand stated that the extension of the compensation would be in
interest of the State.
22.9 Hon’ble Member from Kerala stated that compensation may be extended for a further period due
to financial position of the States. He also stated that the ratio of Centre and State should be changed
from 50:50 to 40:60 in favor of the States.
22.10 Hon’ble Member from Goa stated that the out of the box plan of loan scheme helped the States.
He further Stated that theirs being a small State, it did not have many avenues to increase the revenue.
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22.11 Hon’ble Member from West Bengal also requested to extend the compensation in view of the
precarious financial situation of the States. She also drew the attention of the Council to the SC court
judgment in the case of Mohit Minerals.
22.12 Hon’ble Member from Himachal Pradesh first thanked the PM for introducing One Nation One
Tax in the country. That Himachal made substantial efforts to increase the revenue but with less success.
Before the introduction of the GST Law, there used to be excise exemptions to the industries which were
set up in this hill State for a specified period and this had encouraged the industrialization of the State.
He requested to give special status again to the State of Himachal Pradesh. Further, after the introduction
of GST regime, the State of Himachal Pradesh suffered revenue loss as it was not a consuming State.
The main stay of revenue of the State is tourism and this industry had suffered a setback due to Covid.
The compensation of Rs.3600/- Crores was a big amount for a small State such as Himachal Pradesh and
the same may be continued.
22.13 Hon’ble Member from Tamil Nadu stated that though there was an increase in the revenue as
pointed out by the Secretary but the increase was not of 14% of CAGR (Compound annual Growth
Rate) as was anticipated at the outset and that the 2 years of Covid was an exceptional low period. He
further stressed upon looking into the scheme of constituting GoMs which appeared to him inherently
inefficient as the Chief Ministers and Deputy Chief Ministers as Convenors of GoMs may not have
ample time to devote to the GoM. Further, he reiterated the basic principles of the Compensation regime
of compensating those states which lag behind in revenue collection worked well. He requested to
continue the Compensation scheme and the earlier baseline of 14 % of the CAGR could be reset. He also
requested to make fundamental changes in procedures, methodology, usage of analytics, setting up
studies before and after the decisions as certain issues such as Horse Racing, Casinos are unique to some
States. He also requested that the GST council meetings may be held as per the prescribed frequency in
the Procedure and Conduct of Business Regulations of the GST Council.
22.14 The Hon’ble Member from Odisha stated that at the time of introduction of GST, States were
given assurance to take care of their revenue at the annual growth rate of 14% with the baseline of 2015-
16. However, Covid had played spoiler to the original plan. He further stated that there was a significant
short fall in GST revenue as well as in the compensation pool. He thanked the chair for the innovative
idea of compensating the States in the form of loan during Covid period. He said that the gap between
the protected revenue and the actual revenue had increased and if compensation was stopped, that would
lead to huge resource crunch and requested the GST Council to extend compensation for another five
years.
22.15 The Hon’ble Member from Puducherry stated that Puducherry was having the highest gap
between the protected revenue and the actual revenue. He stated that finances of the State were affected
not only due to Covid but also due to other State specific reasons. He gave certain statistics of revenue
gap and stated that Puducherry had yet to finalize the budget for want of compensation. He requested to
continue compensation for another five years from the year 2022.
22.16 Hon’ble Member from Uttar Pradesh stated that introduction of GST had worked well and that
their State had taken steps to control the expenses but the Covid had spoiled the finances of the States.
He submitted to look at the taxation structure on certain items and to devise strategies to achieve the pre
GST revenue on these items. He further stated that though in principle, they did not seek compensation
and wanted to be self-reliant but due to special circumstances, the State requested to continue the
compensation.
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22.17 Hon’ble Member from Gujarat stated that GST is a prime example of cooperative federalism and
the decision making process of the GST Council represents the true federal character of our country. He
further stated that the compensation was one of the key factors of the successful implementation. That
Gujarat was a manufacturing State and had to lose revenue after the introduction of GST. That Gujarat
was a financially disciplined State and their FRBM was within limits. That Covid had affected the State
finances and requested for continuation of the compensation.
22.18 Hon’ble Member from Haryana stressed upon enforcement and proper training of the States’
officers by the central officers. He further stated that Covid period was a set back to the revenue and
compensation for at least two lost years might help the states and requested to increase the compensation
for at least two years.
22.19 Hon’ble Member from Chhattisgarh could not attend the meeting but he had sent his written
comments vide letter dated 27.06.2022. The Hon’ble Member stated that the provision of 14% protected
revenue should be continued for at least 5 years more. He stated that the mining and manufacturing
sector had suffered revenue loss in the State thus compensation is much required. He further suggested
that if compensation is not continued then the 50%-50% share formula of CGST and SGST should be
changed to 80%-70 % SGST and 20%-30% CGST.
23. The Secretary thanked all the Members of the Council for a very fruitful meeting. He stated that
in the last two days, a number of decisions were taken which are going to help both the State and the
Centre in garnering more revenues and also making some concessions to the taxpayers. The Secretary
further stated that both the meeting of the officers and the GST Council meeting were held in a very
conducive environment. He placed on record his heartfelt thanks to all the Members present in the
meeting. He also specially thanked the Convenors of the GoM who had made presentations of their
recommendations and had travelled to Chandigarh despite their very busy schedule. The GoM on
Casinos, race courses and online gaming would also have a look at the issue of taxation of online
gaming, casinos and horse racing once again and give the report in the next 15 days. In this meeting, it
was also decided to set up a GoM on the issue of constitution of Tribunals and if the GoM could also
submit its report by the end of the month, the next Council meeting would be held in the first week of
August on these two items alone so that these important decisions could be taken.
23.1 The Secretary also thanked the administrations of UT Chandigarh, Haryana and Punjab for
hosting the Council meeting at a very short notice. He also thanked all the Union Finance Minister, the
MoS, the Members of the Council, and all the officers who had come from States and Centre and the
officers from Secretariat who had been working overtime to ensure that GST council meeting was
successfully conducted.

Annexures to the Draft Minutes of The 47th Meeting of GST Council
Annexure-1
List of Hon’ble Ministers from States/UTs attending the 47th Meeting of the GST Council on 28th&
29th June, 2022
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S.
No
Centre/States/UTs Name of Hon’ble Minister Charge
1 Govt. of India Smt. Nirmala Sitharaman Union Finance Minister
2 Govt. of India Shri Pankaj Chaudhary Minister of State for Finance
3 Andhra Pradesh Shri BugganaRajendranath
Minister for Finance, Planning,
Commercial Taxes, Skill
Development & Training and
Legislative Affairs
4 Arunachal Pradesh Shri Chowna Mein Deputy Chief Minister-cumFinance Minister
5 Bihar Shri Tarkishore Prasad Deputy Chief Minister
6 Delhi Shri Manish Sisodia Deputy Chief Minister
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7 Goa Shri MauvinGodinho
Minister for Transport and
Panchayat Raj, Housing,
Protocol and Legislative Affairs
8 Gujarat Shri Kanubhai Desai Minister for Finance, Energy &
Petrochemicals
9 Haryana Shri Dushyant Chautala Deputy Chief Minister
10 Himachal Pradesh Shri Sukh Ram Chaudhary Minister for MPP and Power
11 Jammu & Kashmir Shri Rajeev Rai Bhatnagar
Advisor to Hon'ble Lieutenant
Governor, Union Territory of
Jammu and Kashmir
12 Karnataka Shri Basavaraj Bommai Chief Minister of Karnataka
13 Kerala Shri K.N. Balagopal Finance Minister
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14 Madhya Pradesh Shri Jagdish Devda Minister for Commercial Tax,
Finance, Planning & Statistics
15 Manipur Dr. Sapam Ranjan Singh
Minister for Medical, Health &
Family Welfare Department and
Publicity & Information
Department
16 Meghalaya Shri Conard K. Sangma Chief Minister
17 Meghalaya Shri James K.Sangma Finance Minister
18 Odisha Shri Niranjan Pujari Minister for Finance &
Parliamentary Affairs Minister

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19
Puducherry Shri Lakshminarayanan Hon’ble Minister for Public
Works
20 Punjab Shri S. Harpal Singh Cheema Finance Minister
21 Rajasthan Shri Shanti Kumar Dhariwal Minister of Urban Development
& Housing Department
22 Sikkim Shri B. S. Panth
Minister to Tourism & Civil
Aviation and Commerce &
Industries
23 Tamil Nadu Dr. PalanivelThiagaRajan Minister for Finance and Human
Resources Management
24 Telangana Shri T Harish Rao Minister for Finance, Medical
and Health
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25 Tripura Shri Jishnu Dev Varma Deputy Chief Minister
26 Uttarakhand Shri Prem Chand Aggarwal
Minister of Finance, Urban
Development, Housing,
Legislative & Parliamentary
Affairs, Re-organisation and
Census
27 Uttar Pradesh Shri Suresh Kumar Khanna Minister of Finance,
Parliamentary Affairs
28 West Bengal Smt. Chandrima Bhattacharya Minsiter of State (Independent
Charge), Finance Department


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Annexure-2
List of the Officers from the Centre and the States/Union Territories attending the 47th GST
Council Meeting on 28-29 June 2022
S. No Centre/ State/UTs Name of the Officer Designation/Charge
1 Govt. of India Shri Tarun Bajaj Revenue Secretary
2 Govt. of India Shri Vivek Johri Chairman, CBIC
3 Govt. of India Shri D.P. Nagendra Kumar Member (GST), CBIC
4 Govt. of India Shri Sandeep Kumar Member (Tax Policy), CBIC
5 Govt. of India Shri Sanjay Kumar Agarwal Member (Compliance Management),
CBIC
6 Govt. of India Shri Vivek Aggarwal Additional Secretary, DoR& GST
Council Secretariat
7 Govt. of India Shri Rajesh Malhotra DG (Media & Comm.), PIB, MoF
8 Govt. of India Smt. Mamta Varma Addl. Director General, PIB, MoF
9 Govt of India Shri Ritvik Pandey Joint Secretary, DoR
10 Govt of India Shri Sanjay Mangal Principal Commissioner (GST PW),
CBIC
11 Govt. of India Shri G.D. Lohani Joint Secretary, TRU
12 GSTN Shri Manish Kumar Sinha CEO
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13 GSTN Shri Dheeraj Rastogi EVP( Support ) & SVP (Services)
14 Govt. of India Dr. (Smt.) Shankari Murali Pr.CCA, CBIC
15 Govt. of India Smt. Chandan Mishra CCA, CBIC
16 GST Council
Secretariat Ms. Ashima Bansal Joint Secretary
17 Govt. of India Shri S. S. Nakul PS to Minster of Finance and
Corporate Affairs
18 Govt. of India Shri Karma S. Z. Lhasungpa Additional PS to FM
19 Govt. of India Shri Kumar Ravikant Singh PS to MoS (Finance)
20 Govt. of India Shri Rajesh Gupta PA to MOS( Finance)
21 Govt. of India Shri Debashis Chakraborty OSD to Revenue Secretary
22 Govt. of India Shri N. Gandhi Kumar Director (State Tax), DoR
23 Govt. of India Shri Amaresh Kumar Additional Commissioner, GST PW,
CBIC
24 Govt. of India Shri Pramod Kumar Director, TRU
25 Govt. of India Shri Vinay V Nayak Deputy Commissioner, TRU
26 Govt. of India Shri Syed Wasif Haider OSD, TRU
27 Govt. of India Shri Rahul Kumar Deputy Commissioner (TRU)
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28 Govt. of India Shri D. P. Misra OSD to Chairman, CBIC
29 Govt. of India Shri Alok Kumar Additional Commissioner, GST PW,
CBIC
30 Govt of India Ms. Neha Yadav Deputy Commissioner, GST PW,
CBIC
31 Govt of India Shri Amit Samdariya Deputy Commissioner, GST PW,
CBIC
32 GST Council
Secretariat Ms. B. Sumidaa Devi Director
33 GST Council
Secretariat Shri Kshitendra Verma Director
34 GST Council
Secretariat Shri Harish Kumar Deputy Secretarty
35 GST Council
Secretariat Shri S. S. Shardool Deputy Secretarty
36 GST Council
Secretariat Ms. Reshma R Kurup Under Secretary
37 GST Council
Secretariat Shri Joginder Singh Mor Under Secretary
38 GST Council
Secretariat Shri Manish Wadhwa Superintendent
39 GST Council
Secretariat Shri Manoj Kumar Superintendent
40 GST Council
Secretariat Shri Sachin Goel Superintendent
41 GST Council
Secretariat Ms. Priya Sethi Superintendent
42 GST Council
Secretariat Shri Rakesh Joshi Inspector
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43 GST Council
Secretariat Shri Vijay Malik Inspector
44 GST Council
Secretariat Shri Tarun Assistant Section Officer
45 GST Council
Secretariat Shri Padam Singh Inspector
46 Andaman & Nicobar Shri Kuldip Singh Thakur Special Resident Commissioner
47 Andhra Pradesh Shri Gulzar. N Secretary to Government (RM & FP)
& (CT) Finance Department
48 Andhra Pradesh Shri S. Ravi Shankar Narayan Chief Commissioner of State Tax,
Andhra Pradesh
49 Andhra Pradesh Shri K Ravi Shankar Commissioner (GST)
50 Andhra Pradesh Shri S Sekhar Additional Commissioner (IT)
51 Andhra Pradesh Shri L. Chandra Obul Reddy O.S.D to Finance and CT Minister
52 Arunachal Pradesh Shri Kanki Darang Commissioner State Taxes
53 Arunachal Pradesh Shri Tapas Dutta Deputy Commissioner (GST)
54 Arunachal Pradesh Shri Ajay Saring PRO to DCM
55 Assam Shri Jayant Narlikar Commissioner & Secretary to the
Govt of Assam , Finance Department
56 Assam Shri Rakesh Agarwala Principal Commissioner of State Tax
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57 Bihar Dr. Pratima Commissioner cum Secretary,
Commercial Taxes Department
58 Bihar Shri Arun Kumar Mishra Tax Expert, Commercial Taxes
Department
59 Bihar Binod Kumar Jha JCST
60 Chandigarh Shri Vijay NamdeoraoZade
Finance Secretary-cum-Secretary
Excise & Taxation, Excise &
Taxation Department, U.T.,
Chandigarh
61 Chandigarh Shri Vinay Pratap Singh Excise and Taxation Commissioner,
U.T., Chandigarh
62 Chhattisgarh Shri Gaurav Dwivedi Principal Secretary,Commercial
Tax(State Tax)
63 Chhattisgarh Shri KhemrajJharia Additional Commissioner of State
Tax, HQ
64 Delhi Shri Ashish Chandra Verma Principal Secretary Finance
65 Delhi Dr. S.B. Deepak Kumar Commissioner, State Tax
66 Delhi Shri Anand Kumar Tiwari Special Commissioner, State Tax
67 Goa Shri Shashikant Kandolkar P.A to Hon'ble Minister
68 Goa Smt. Ruchika Katyal Commissioner of State Tax
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69 Gujarat Shri J P Gupta Principal Secretary to Government,
Finance Department
70 Gujarat Shri Milind Torawane
Secretary to Government (Economic
Affairs), Finance Department &
Chief Commissioner of State Tax
71 Gujarat Shri Rajendra Kumar Patel PA to Minister of Finance, Energy&
Petrochemicals
72 Gujarat Shri Riddhesh Rawal Joint Commissioner
73 Haryana Shri Simarpal Singh Special Secretary to Deputy CM
74 Haryana Shri Anurag Rastogi
Addl. Chief Secretary to
Government of Haryana, Excise and
Taxation Department
75 Haryana Shri Shekhar Vidyarthi
Excise & Taxation Commissionercum-Secretary to Government,
Haryana
76 Haryana Shri Siddarth Jain Additional Commissioner
77 Himachal Pradesh Shri Subhasish Panda Principal Secretary (STE)
78 Himachal Pradesh Shri Yunus Commissioner of State Taxes &
Excise
79 Himachal Pradesh Shri Rakesh Sharma Advisor to the Hon'ble Member(
Additional Commissioner)
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80 Jammu & Kashmir Shri Vivek Bharadwaj Additional Chief Secretary, Finance
Department, Government of J&K
81 Jammu & Kashmir Dr.Rashmi Singh Commissioner State Taxes
Department, J&K
82 Jharkhand Smt. Aradhana Patnaik Secretary, Commercial Taxes
Department
83 Jharkhand Shri Santosh Kumar Vatsa Commissioner, Commercial Taxes
Department
84 Karnataka Shri Manjunath Prasad Principal Secretary to Hon’ble Chief
Minister
85 Karnataka Shri Rohan Biradar OSD to Hon’ble
Chief Minister
86 Karnataka Smt. C. Shikha Commissioner of Commercial Taxes,
Karnataka
87 Karnataka Dr. M.P. Ravi Prasad Additional Commissioner of
Commercial Taxes, Karnataka
88 Kerala Shri Rajesh Kumar Singh Additional Chief Secretary (Finance
& Taxes Department)
89 Kerala Shri Abraham Renn S. Additional Commissioner-1, State
GST Department
90 Kerala Dr.Shyjan PS to FM
91 Madhya Pradesh Shri Dilipraj Dwivedi OSD to Minister
92 Madhya Pradesh Smt. Deepali Rastogi Pricipal Secretary
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93 Madhya Pradesh Shri Lokesh Kumar Jatav Commissioner, Commercial Taxes
94 Madhya Pradesh Shri Manoj Kumar Choubey JC GST
95 Madhya Pradesh Shri Harish Jain AC, GST
96 Maharashtra Shri Rajeev Kumar Mital Commissioner, State Tax
97 Maharashtra Smt. A. Shaila Govt Nominee and Secretary
(Financial Reforms)
98 Maharashtra Smt. VishakhaBorse Joint Commissioner, State Tax
99 Manipur Smt. Mercina R. Panmei Commissioner of Taxes, Manipur
100 Manipur Shri YumnamIndrakumar Singh Asst. Commissioner of Taxes,
Manipur
101 Meghalaya Smt.S.A.Synrem Commissioner &Secretary,Taxation
ETC Meghalaya
102 Meghalaya Shri.L.Khongsit Additional Commissioner State Tax
Etc, Meghalaya
103 Meghalaya Shri Mukesh Kumar OSD To CM
104 Meghalaya Mr ShanborlangWarjri Under Secretary to CMO
105 Meghalaya Mr. G. Nongrum Communications Executive , CMO
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106 Mizoram Shri R. Zosiamliana Additional Commissioner of State
Tax
107 Mizoram Shri Hrangthanmawia Assistant Commissioner
108 Nagaland Shri WochamoOdyuo Additional Commissioner of State
Taxes
109 Odisha Shri Sushil Kumar Lohani Commissioner of Commercial Taxes
& GST
110 Odisha Shri Nihar Ranjan Nayak Additional Commissioner of
Commercial Taxes & GST
111 Puducherry Shri. L. Kumar Commissioner of State Tax,
Puducherry
112 Puducherry Shri. B. Balamourthy Asst. CTO, Commercial Taxes
Department, Puducherry
113 Punjab Shri KAP Sinha Additional Chief Secretary
(Taxation)
114 Punjab Shri Kamal Kishor Yadav Commissioner of State Taxes
115 Punjab Sh. Ravneet Singh Khurana Additional Commissioner of State
Taxes (Audit)
116 Rajasthan Dr. Ravi Kumar Surpur Chief Commissioner, State Tax
117 Rajasthan Shri Arvind Mishra Additional Commissioner, State Tax
118 Rajasthan Shri Ashok Agarwal PA/PS to Minister
119 Sikkim Shri Manoj Rai Commissioner, Commercial Taxes
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120 Sikkim Shri Keshab Subba Joint Commissioner, Commercial
Taxes
121 Tamil Nadu Shri N. Muruganandama Additional Chief Secretary, Finance
122 Tamil Nadu Shri Dheeraj Kumar Principal Secretary/Commissioner of
Commercial Taxes
123 Tamil Nadu Shri S. Subhash Chardra Bose Joint Commissioner
124 Telangana Shri K Ramakrishna Rao Special Chief Secretary, Finance
125 Telangana Smt. Neetu Prasad Commissioner, Commercial Taxes
126 Telangana Shri N Sai Kishore OSD to Minister (Additional
Commissioner of State Taxes)
127 Tripura Shri Brijesh Pandey Secretary, Finance Department
128 Tripura Ms. Rakhi Biswas TCS-SSG, Chief Commissioner of
State Tax
129 Uttarakhand Smt. Sowjanya Secretary, Finance
130 Uttarakhand Dr. Ahmed Iqbal Commissioner, State Tax
131 Uttarakhand Shri Anurag Mishra Joint Commissioner, State Tax
132 Uttarakhand Shri BhartenduShanker Pandey OSD to the Hon'ble Minister
133 Uttar Pradesh Shri Nitin Ramesh Gokarn Principal Secretary, State Tax, U.P.
134 Uttar Pradesh Ms. Ministhy S Commissioner, State Tax, U.P.
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135 Uttar Pradesh Shri Paritosh Kumar Mishra Deputy Commissioner (GST)
136 Uttar Pradesh Shri Amit Pandey PS to FM
137 West Bengal Dr. Manoj Pant Additional Chief Secretary, Finance
Department
138 West Bengal Shri Khalid Aizaz Anwar Commissioner of State Tax
139 West Bengal Shri Shantanu Naha OSD to Minister

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Agenda Item 2 : Ratification of the Notifications, Circulars and Orders issued by the GST Council
and decisions of GST Implementation Committee for the information of the Council
In the 22nd meeting of the GST Council held at New Delhi on 6thOctober, 2017, it was decided
that the Notifications, Circulars and Orders, which are being issued by the Central Government with the
approval of the competent authority, shall be forwarded to the GST Council Secretariat, through email,
for information and deemed ratification by the GST Council. Accordingly, till the 47thmeeting held on
28th-29thJune 2022, the GST Council had ratified all the Notifications, Circulars and Orders issued up to
18.06.2022.
2. In this respect, the following Notifications and Circulars issued after 18.06.2022 under the GST
laws by the Central Government, as available on www.cbic.gov.in, are placed before the Council for
information and ratification: -
Act/Rules Type Notification / Circular /
Order Nos.
Description/Subject
Notifications
under the
CGST Act,
2017 / CGST
Rules, 2017
Central
Tax
1. Notification No.
09/2022-Central Tax
dated 05.07.2022
Seeks to notify the provisions of clause
(c) of Section 110 and Section 111 of the
Finance Act, 2022
2. Notification No.
10/2022-Central Tax
dated 05.07.2022
Seeks to exempt taxpayers having
AATO upto Rs. 2 crores from the
requirement of furnishing annual
return for FY 2021-22
3. Notification No.
11/2022-Central Tax
dated 05.07.2022
Seeks to extend due date of furnishing
FORM GST CMP-08 for the quarter
ending June, 2022 till 31.07.2022
4. Notification No.
12/2022-Central Tax
dated 05.07.2022
Seeks to extend the waiver of late fee
for delay in filing FORM GSTR-4 for
FY 2021-22
5. Notification No.
13/2022-Central Tax
dated 05.07.2022
Seeks to extend dates of specified
compliances in exercise of powers
under Section 168A of the CGST Act,
2017
6. Notification No.
14/2022-Central Tax
dated 05.07.2022
Seeks to make amendments (First
Amendment, 2022) to the CGST
Rules, 2017
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7. Notification No.
15/2022-Central Tax
dated 13.07.2022
Seeks to amend Notification No.
10/2019- Central Tax
8. Notification No.
16/2022-Central Tax
dated 13.07.2022
Seeks to amend Notification No.
14/2019- Central Tax
9. Notification No.
17/2022-Central Tax
dated 01.08.2022
Seeks to implement e-invoicing for
the taxpayers having aggregate
turnover exceeding Rs. 10 Crore from
1
st October, 2022
10. Notification No.
18/2022-Central Tax
dated 28.09.2022
Seeks to notify 01.10.2022 as the date
on which provisions of Sections 100
to 114, except clause (c) of Section
110 and Section 111 of Finance Act,
2022, shall come into force
11. Notification No.
19/2022-Central Tax
dated 28.09.2022
Seeks to make amendments (Second
Amendment, 2022) to the CGST
Rules, 2017
12. Notification No.
20/2022-Central Tax
dated 28.09.2022,
along with
corrigendum dated
29.09.2022
Seeks to rescind Notification No.
20/2018-Central Tax dated 28th
March, 2018
13. Notification No.
21/2022-Central Tax
dated 21.10.2022
Seeks to extend the due date of filing
FORM GSTR-3B for the month of
September, 2022
14. Notification No.
22/2022-Central Tax
dated 15.11.2022
Seeks to make amendments (Third
Amendment, 2022) to the CGST
Rules, 2017
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15. Notification No.
23/2022-Central Tax
dated 23.11.2022
Seeks to empower the Competition
Commission of India to handle antiprofiteering cases under CGST Act,
2017 with effect from 01.12.2022
16. Notification No.
24/2022-Central Tax
dated 23.11.2022
Seeks to make fourth amendment
(2022) to CGST Rules, 2017 with
effect from 01.12.2022
Central
Tax (Rate)
1. Notification No.
03/2022-Central Tax
(Rate), dated
13.07.2022
Seeks to amend Notification No
11/2017- Central Tax (Rate) dated
28.06.2017
2. Notification No.
04/2022-Central Tax
(Rate), dated
13.07.2022
Seeks to amend Notification No
12/2017- Central Tax (Rate) dated
28.06.2017
3. Notification No.
05/2022-Central Tax
(Rate), dated
13.07.2022
Seeks to amend Notification No
13/2017- Central Tax (Rate) dated
28.06.2017
4. Notification No.
06/2022-Central Tax
(Rate), dated
13.07.2022
Seeks to amend Notification No. 1/2017-
Central Tax (Rate)
5. Notification No.
07/2022-Central Tax
(Rate), dated
13.07.2022
Seeks to amend Notification No. 2/2017-
Central Tax (Rate)
6. Notification No.
08/2022-Central Tax
(Rate), dated
13.07.2022
Seeks to amend Notification No. 3/2017-
Central Tax (Rate)
7. Notification No.
09/2022-Central Tax
(Rate), dated
13.07.2022
Seeks to amend Notification No. 5/2017-
Central Tax (Rate)
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8. Notification No.
10/2022-Central Tax
(Rate), dated
13.07.2022
Seeks to amend Notification No. 2/2022-
Central Tax (Rate)
9. Notification No.
11/2022-Central Tax
(Rate), dated
13.07.2022
Rescinds Notification No. 45/2017-
Central Tax (Rate)
Notificationsu
nder UTGST
Act / UTGST
Rules
Union
Territory
Tax
1. Notification No.
03/2022-Union
Territory tax dated
13.07.2022
Seeks to amend Notification No.
02/2019- Union Territory Tax
2. Notification No.
04/2022-Union
Territory tax dated
13.07.2022
Seeks to amend Notification No.
02/2017- Union Territory Tax
Union
Territory
Tax (Rate)
1. Notification No.
03/2022-Union
Territory tax (rate),
dated 13.07.2022
Seeks to amend Notification No
11/2017- Union territory Tax (Rate)
dated 28.06.2017
2. Notification No.
04/2022-Union
Territory tax (rate),
dated 13.07.2022
Seeks to amend Notification No
12/2017- Union territory Tax (Rate)
dated 28.06.2017
3. Notification No.
05/2022-Union
Territory tax (rate),
dated 13.07.2022
Seeks to amend Notification No
13/2017- Union territory Tax (Rate)
dated 28.06.2017
4. Notification No.
06/2022-Union
Territory tax (rate),
dated 13.07.2022
Seeks to amend Notification No. 1/2017-
Union Territory Tax (Rate)
5. Notification No.
07/2022-Union
Territory tax (rate),
Seeks to amend Notification No. 2/2017-
Union Territory Tax (Rate)
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dated 13.07.2022
6. Notification No.
08/2022-Union
Territory tax (rate),
dated 13.07.2022
Seeks to amend Notification No. 3/2017-
Union Territory Tax (Rate)
7. Notification No.
09/2022-Union
Territory tax (rate),
dated 13.07.2022
Seeks to amend Notification No. 5/2017-
Union Territory Tax (Rate)
8. Notification No.
10/2022-Union
Territory tax (rate),
dated 13.07.2022
Seeks to amend Notification No. 2/2022-
Union Territory Tax (Rate)
9. Notification No.
11/2022-Union
Territory tax (rate),
dated 13.07.2022
Rescinds Notification No. 45/2017-
Union Territory Tax (Rate)
Notifications
under IGST
Act / IGST
Rules, 2017
Integrated
Tax (Rate)
1. Notification No.
03/2022-Integrated
Tax (Rate), dated
13.07.2022
Seeks to amend Notification No 8/2017-
Integrated Tax (Rate) dated 28.06.2017
2. Notification No.
04/2022- Integrated
Tax (Rate), dated
13.07.2022
Seeks to amend Notification No 9/2017-
Integrated Tax (Rate) dated 28.06.2017
3. Notification No.
05/2022- Integrated
Tax (Rate), dated
13.07.2022
Seeks to amend Notification No
10/2017- Integrated Tax (Rate) dated
28.06.2017
4. Notification No.
06/2022- Integrated
Tax (Rate), dated
13.07.2022
Seeks to amend Notification No. 1/2017-
Integrated Tax (Rate)
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5. Notification No.
07/2022- Integrated
Tax (Rate), dated
13.07.2022
Seeks to amend Notification No. 2/2017-
Integrated Tax (Rate)
6. Notification No.
08/2022- Integrated
Tax (Rate), dated
13.07.2022
Seeks to amend Notification No. 3/2017-
Integrated Tax (Rate)
7. Notification No.
09/2022- Integrated
Tax (Rate), dated
13.07.2022
Seeks to amend Notification No. 5/2017-
Integrated Tax (Rate)
8. Notification No.
10/2022- Integrated
Tax (Rate), dated
13.07.2022
Seeks to amend Notification No. 2/2022-
Integrated Tax (Rate)
9. Notification No.
11/2022- Integrated
Tax (Rate), dated
13.07.2022
Rescinds Notification No. 47/2017-
Integrated Tax (Rate)
Circulars under the CGST
Act, 2017
1. Circular No.
170/02/2022-GST
dated 06.07.2022
Mandatory furnishing of correct and
proper information of inter-State supplies
and amount of ineligible/blocked Input
Tax Credit and reversal thereof in return
in FORM GSTR-3B and statement in
FORM GSTR-1
2. Circular No.
171/03/2022-GST
dated 06.07.2022
Clarification on various issues relating
to applicability of demand and penalty
provisions under the Central Goods
and Services Tax Act, 2017 in respect
of transactions involving fake invoices
3. Circular No.
172/04/2022-GST
dated 06.07.2022
Clarification on various issue
pertaining to GST
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4. Circular No.
173/05/2022-GST
dated 06.07.2022
Clarification on issue of claiming
refund under inverted duty structure
where the supplier is supplying goods
under some concessional Notification
5. Circular No.
174/06/2022-GST
dated 06.07.2022
Prescribing manner of re-credit in
electronic credit ledger using FORM
GST PMT-03A
6. Circular No.
175/07/2022-GST
dated 06.07.2022
Manner of filing refund of unutilized
ITC on account of export of electricity
7. Circular No.
176/08/2022-GST
dated 06.07.2022
Withdrawal of Circular No.
106/25/2019-GST dated 29.06.2019
8. Circular No.
177/09/2022-GST
dated 03.08.2022
Clarifications regarding applicable
GST rates & exemptions on certain
services
9. Circular No.
178/10/2022-GST
dated 03.08.2022
GST applicability on liquidated
damages, compensation and penalty
arising out of breach of contract or
other provisions of law
10. Circular No.
179/11/2022-GST
dated 03.08.2022
Clarification regarding GST rates &
classification (goods) based on the
recommendations of the GST Council
in its 47th meeting held on 28th–29th
June, 2022 at Chandigarh
11. Circular No.
180/12/2022-GST
dated 09.09.2022
Guidelines for filing/revising TRAN1/TRAN-2 in terms of order dated
22.07.2022 & 02.09.2022 of Hon’ble
Supreme Court in the case of Union of
India vs. M/s. Filco Trade Centre Pvt.
Ltd
12. Circular No.
181/13/2022-GST
dated 10.11.2022
Clarification on refund related issues
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13. Circular No.
182/14/2022-GST
dated 10.11.2022
Guidelines for verifying the
Transitional Credit in light of the
order of the Hon’ble Supreme Court
in the Union of India vs. M/s. Filco
Trade Centre Pvt. Ltd., SLP(C) No.
32709-32710/2018, order dated
22.07.2022 & 02.09.2022
3. The GST Council may grant ratification to the Notifications and Circulars as detailed in para 2
above.
4. It is further informed that out of the Notifications and Circulars detailed in Para 2 above, certain
Notifications and Circulars have been issued to implement the decisions of the GST Implementation
Committee (GIC) taken during the period since the 47th meeting of the Council. The details of such
decisions and the relevant Notifications and Circulars issued to implement such decisions are enclosed
as Annexure 2A to this Agenda Note.
*****
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Annexure-2A
Decisions of GST Implementation Committee (GIC) for information of the GST Council
I. The GST implementation Committee (GIC) took certain decisions between 47th GST
Council meeting and the upcoming 48th GST Council meeting. Due to the urgency involved,
most of the decisions were taken after obtaining approval by circulation amongst GIC
members. The details of the decisions take are given below:
1. Decision of GIC by Circulation on 21st July, 2022 on rollout of the fifth phase of einvoicing for the taxpayers having aggregate turnover exceeding Rs. 10 Cr.
a. In the agenda note received from GSTPW, CBIC, it was stated that the GST Council, in its 37th

meeting held on 20th September, 2019, had recommended the roll out of e-invoicing in a phased
manner. Accordingly, electronic invoicing system was introduced with effect from 01.10.2020
for taxpayers with turnover of more than Rs. 500 crores in any preceding financial year from
2017-18 onwards for B2B transactions and for export invoices. The same was extended for
taxpayers with turnover of more than Rs. 100 crores from 01.01.2021. Vide Notification No.
05/2021-CT dated 08.03.2021, the same has been extended for taxpayers with turnover of more
than Rs. 50 crores from 01.04.2021. Further, vide Notification No. 01/2022-CT dated
24.02.2022, the same has been extended for taxpayers with turnover of more than Rs. 20 crores
from 01.04.2022.
b. It was further stated that data has been received from GSTN vide email dated 12.07.2022 related
to number of taxpayers along with their turnover:
Summary of Slab wise PAN level AATO in any of the previous financial
years (2017-18 to 2021-22)
Turnover slabs Number
Of PANs
Number of GSTINs
Turnover above 500Cr 10,654 79,475
Turnover between 100Cr to
500Cr
43,483 1,16,292
Turnover between 50Cr
to100Cr
59,254 1,02,905
Turnover between 20Cr to 50Cr 1,86,662 2,62,745
Turnover between 10Cr and
20Cr
2,94,982 3,67,941
Turnover between 5Cr and
10Cr
4,89,857 5,73,905
c. It was also stated in the agenda note that e-invoice has been one of the major reforms taken by
the Government which is beneficial for both tax administration as well as trade. It helps the
taxpayers in backward integration and automation of tax relevant processes and in real-time
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updation of data on the GSTN system and thereby, drastically reducing the time taken in filing
the returns. Therefore, it was proposed that next phase of e-invoicing may be rolled out.
Taxpayers with annual turnover of more than Rs. 10 crore in any preceding financial year from
2017-18 onwards may be brought under the ambit of e-invoice for B2B transactions and for
export invoices in the fifth phase as per capacity of GSTN/NIC. Further, sufficient window of 2-
3 months may be provided to taxpayers to make necessary IT changes as well as for NIC to
enable the specified taxpayers on sandbox for testing. Data suggests that approximately 3,67,941
GSTINs have AATO between rupees 10 Cr to 20 Cr who would be impacted by the decision.
d. Accordingly, it was proposed that this provision for lowering threshold for issuance of einvoice to Rs 10 crore may be made applicable with effect from 01.10.2022 to provide sufficient
time to taxpayers as well as NIC to make necessary preparations.
e. Decision: The Members of GIC approved the above proposal regarding rollout of the fifth phase
of e-invoicing for the taxpayers having aggregate turnover exceeding Rs. 10 Cr.
f. Implementation Status: The decision of GIC was implemented by way of issuance of
Notification No. 17/2022 – Central Tax dated 1st August, 2022.
2. Decisions in the 42nd Meeting of the GIC held on 16th August, 2022
2.1 Agenda: GST data sharing with Ministries and Departments
a. In the agenda note, it was mentioned that after introduction of GST, large amount of quality data
was available with the GST system that can be used within Government for various purposes,
including better decision making and better targeting of Government resources. Department of
Revenue and State Tax departments have been receiving requests from different
Ministries/Departments/Agencies, at Central as well as State levels, seeking data related to GST.
These request for data can be broadly classified into three categories as under:
I. Validating GSTIN using GSTN validation API with the following data field.
It was further stated these requests are from those agencies that take the GSTIN from their
clients for their purpose. Examples could include procurement, subsidy and other benefits.
These agencies may like to verify the validity of the GSTIN given by the entity. GSTN has a
publicly available facility on their portal, called "search taxpayer", where the details of the
taxpayer for a given GSTIN is made available, including the legal name, trade name, address,
date of registration, whether it is Aadhaar authenticated, major goods and services that the entity
deals in and even the filing status. While this information is available on the portal, it has to be
accessed through manual intervention for each GSTIN.
It was proposed that since this facility is anyway available publicly, it could be made through
APIs to Government Ministries/Departments/Agencies so that their IT systems can easily access
this information.
II. Aggregated GST data which does not involve disclosure of any personally
identifiable information of a taxpayer etc.
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It was also stated the second set of data sharing request pertain to aggregate information, mainly
for planning and decision-making purposes. For example, aggregate information of e-way bill
can give important insights into movement of goods, that would be useful for National and State
Highway organisation. Details of gross GST collection every month is being widely used for
macro-economic monitoring.
It was proposed that aggregate information as may be available from those fields of various
statements under GST legal framework that are credible and have a system to ensure its
correctness, even if on a risk based system, which do not reveal identity of a taxpayer or an
identifiable set of taxpayer in any way, can be shared with Government
Ministries/Departments/Agencies for planning and better decision making. It can also be
considered that a subset of this information can be made available even in public domain so that
they are available even to industry and research organisations. Currently, details of GST
collection and settlement are put in public domain with a delay as per the decision of the GST
Council.
III. Dis-aggregated data which does not disclose the identity of the taxpayer
In the agenda note, it was mentioned that apart from aggregate data, at times agencies request
for dis-aggregated data but with the identity of taxpayer masked. Such data can include details
relating to individual e- way bills with the GSTIN of the supplier and the recipient removed.
While most of the requirements can be met using aggregate data, many use advance analytics
requiring dis-aggregated data. This would also allow mapping of datasets across IT platforms of
different agencies using identifiers that cannot be traced back to the supplier or the recipient.
It was proposed that this information could be shared with Government
Ministries/Departments/Agencies if they are able to demonstrate that their use case requires disaggregated data and there is value in sharing dis-aggregated data for such a use case.
Any data sharing request that does not fall under the above category should only be done with
specific approval of the GST Council/GST Implementation Committee on a case to case basis. It
may be noted that at previous occasions, data of individual taxpayers has been shared with
Government agencies where the legal framework required providing such data, like with
National Authority Chemical Weapons Convention (NACWC), Cabinet Secretariat, MSME
registration etc. These have been done after approval of the GSTC/GIC. At specific instances,
data is being shared with enforcement agencies for enforcement purposes and where GST data is
required as an evidence.
b. The sharing of data should be subject to following general conditions:
i. The user agency should ensure safety and security of the data received from GST system
and put in place proper IT and administrative mechanisms to ensure safety of data shared.
ii. The user agency should use the data only for the purpose it was shared and not disseminate
the data further to other agencies.
iii. The user agency should not use the raw data for commercial benefits since this data has
been acquired from the compliances furnished by taxpayers. Agencies can, however,
charge for value added services made available based on the data shared.
iv. GST Council reserves the right to revoke access to any data shared with any agency at any
time if it comes to a conclusion that sharing of a set of data with an agency is not in public
interest.
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The GST data is collectively owned by Centre and States and is held by GSTN under the
guidance of GST Council. Decision has to be taken by both Centre and States as to how the GST
data of the taxpayer can be shared with other departments/ministries for their use.
c. A video conference was held on 16.08.2022 to enable the members to share their concerns and
arrive at a consensus on the Agenda Item. The minutes of the VC is placed as Annexure I.
d. Decision: The Members of GIC decided that a detailed agenda note for sharing of data with
Ministries/Govt Depts would be placed in the next GST Council meeting for approval.
3. Decision of GIC by Circulation on 26th August, 2022 on draft Circular for providing
guidelines for the registered persons for filing/revising TRAN-1/TRAN-2 as per
directions of the Hon'ble Supreme Court vide its order dated 22.07.2022 in the case of
Union of India Vs M/s. Filco Trade Centre Pvt. Ltd.
a. In the agenda note, it was stated that the Hon’ble Supreme Court in the case of Union of India
vs. M/s. Filco Trade Centre Pvt. Ltd., SLP(C) No. 32709-32710/2018, vide Order dated
22.07.2022 has issued the following directions:
“1. Goods and Service Tax Network (GSTN) is directed to open common portal for
filing concerned forms for availing Transitional Credit through TRAN-1 and TRAN-2
for two months i.e. w.e.f. 01.09.2022 to 31.10.2022.
2. Considering the judgments of the High Courts on the then prevailing peculiar
circumstances, any aggrieved registered assessee is directed to file the relevant form or
revise the already filed form irrespective of whether the taxpayer has filed writ petition
before the High Court or whether the case of the taxpayer has been decided by
Information Technology Grievance Redressal Committee (ITGRC).
3. GSTN has to ensure that there are no technical glitch during the said time.
4. The concerned officers are given 90 days thereafter to verify the veracity of the
claim/transitional credit and pass appropriate orders thereon on merits after granting
appropriate reasonable opportunity to the parties concerned.
5. Thereafter, the allowed Transitional credit is to be reflected in the Electronic Credit
Ledger.
6. If required GST Council may also issue appropriate guidelines to the field
formations in scrutinizing the claims. The Special Leave Petitions are disposed of
accordingly. Pending applications, if any, also stand disposed of.”
b. It was further stated that the said Order of the Hon’ble Supreme Court was examined and
opinion of the Additional Solicitor General of India (ASG) was sought on for clarification on
various issues arising out of the said judgment. The ASG has opined that the opportunity for
filing/ revising TRAN forms by the Hon’ble Supreme Court during 01.09.2022 to 31.10.2022 is
for all registered taxpayers, who are eligible to file TRAN forms, whether they had filed writ
petition or not, or whether they had filed application before ITGRC or not. The ASG has also
opined that the said decision of the Hon’ble Supreme Court has to be enforced and filing review
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petition would not be desirable. In view of the above opinion of ASG, a time bound action is
required for implementation of the directions of the Hon’ble Supreme Court in the said
judgment.
c. It was also stated in the agenda note that the said matter was discussed by the Law Committee in
its meeting held on 03.08.2022 and 12.08.2022. It was decided by the Law Committee that a
Circular may be drafted at the earliest for providing guidelines for the registered persons for
filing/revising TRAN-1/TRAN-2 in the window provided by the Hon’ble Supreme Court, and
another separate Circular shall be drafted later on for providing guidelines for the jurisdictional
officer for verification of the TRAN-1/TRAN-2 filed/revised by the taxpayers in terms of Order
of the Hon’ble Supreme Court. The draft Circular for providing guidelines for the registered
persons for filing/revising TRAN-1/TRAN-2, as discussed by the Law Committee in its meeting
held on 12.08.2022 and as finalized vide circulation, was placed before the GIC for approval.
d. It was also mentioned that on the request of GSTN, an application/ prayer was being filed before
the Hon’ble Supreme Court for seeking extension of one more month for opening of portal for
enabling the aggrieved registered persons for filing/ revising Tran forms on the portal. Pending a
decision by the Hon’ble Supreme Court on the said application/ prayer, the directions of the
Hon’ble Supreme Court vide Order dated 22.07.2022 for opening common portal for filing
TRAN-1/ TRAN-2 by aggrieved registered persons during 01.09.022 to 31.10.2022 needs to be
implemented in a time bound manner. Accordingly, approval of GIC was sought for issuance
of the draft Circular, as finalized by the Law Committee, for providing guidelines to the
registered persons for filing/revising TRAN-1/TRAN-2 on the portal, so that the said
Circular can be issued in a timely manner before start of the time period provided by the
Hon’ble Supreme Court for filing/ revising Tran forms. It is also mentioned that dates, as to
when the common portal shall be opened for the registered person for filing or revising TRAN1/TRAN-2, and dates for subsequent verification by the concerned officers would be finalized in
the Circular, based on the final directions/ Order of the Hon’ble Supreme Court in response to
the above mentioned affidavit/ application.
e. Decision: The Members of GIC approved the above proposal along with the draft Circular.
f. Implementation Status: In pursuance of GIC decision dated 26.08.2022, Circular
No. 180/12/2022-GST dated 09.09.2022 was issued on "Guidelines for
filing/revising TRAN-1/TRAN-2 in terms of order dated 22.07.2022 & 02.09.2022 of the
Hon’ble Supreme Court in the case of Union of India vs. M/s. Filco Trade Centre Pvt.
Ltd".
4. Decisions in the 43rd Meeting of the GIC held on 22nd September, 2022
4.1 Agenda: Notifying the remaining provisions of Finance Act, 2022 and consequential
amendments in the CGST Rules, 2017
a. In the agenda note, it was stated that various amendments in the provisions of Central Goods
and Services Tax Act, 2017 has been made vide the Finance Act, 2022. Based on the
recommendations of the GST Council in its 47th
meeting held on 28th and 29th June, 2022,
provisions of clause (c) of Section 110 and Section 111 of the Finance Act, 2022 have already
been notified by the Centre vide Notification No. 09/2022-Central Tax, dated 05.07.2022.
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Consequent insertion of Rule 88B and sub-rule 87(14) in the CGST Rules, 2017 has also been
carried out by the Centre vide Notification No. 14/2022-Central Tax, dated 05.07.2022.
b. It was further stated that the GST council has recommended that the other provisions of the
Finance Act, 2022 pertaining to GST may be notified w.e.f. 01.10.2022 by both the Centre and
the States. Once these provisions are notified, corresponding amendments in the CGST Rules,
2017 would also be required to be carried out simultaneously.
c. It was also stated in the agenda note that the Law Committee in its meeting held on 26.08.2022
and 07.09.2022 had accordingly, examined the requisite amendments to be carried out in the
CGST Rules, 2017. The Law Committee recommended carrying out the requisite amendments
to the CGST Rules, 2017 w.e.f. 01.10.2022 consequent to the Notification of the remaining
provisions of the Finance Act, 2022, (except for the rules corresponding to sub-section(2) of
amended Section 41 and corresponding to clause (ba) to sub-section(2) of Section 16, read with
sub-section(2) of Section 38 of CGST Act, 2017 which will require further deliberations by the
Law Committee, in consultation with GSTN, based on the data as well as the feedback to be
provided by GSTN, as the implementation of the said rules may require development of
requisite functionality on the portal by GSTN. The said amendments in the CGST Rules, 2017,
as recommended by the Law Committee were placed before the GIC for approval.
d. As no GST Council meeting was scheduled to be held before 01.10.2022, GST policy wing had
requested that approval of GIC may be urgently obtained through circulation and that a meeting
of GIC through video conferencing may be convened on 22.09.2022 for deliberations by GIC on
this agenda.
e. A meeting of the GIC was held on 22.09.2022 through video conferencing wherein the aforesaid
agenda was taken up for discussion. The detailed minutes of the GIC meeting through VC is
placed as Annexure II.
f. Decision: The Members of the GIC approved the above agenda relating to the amendments
proposed by Law Committee to the CGST Rules, 2017 with effect from 01.10.2022.
g. Implementation Status: In pursuance of GIC decision dated 22.09.2022, Notification No.
18/2022- Central Tax dated 28.09.2022 was issued to notify 01.10.2022 as the date on which
provisions of Sections 100 to 114, except clause (c) of Section 110 and Section 111 of
Finance Act, 2022 shall come into force and Notification No. 19/2022- Central Tax dated
28.09.2022 was issued to make amendments (Second Amendment, 2022) to the CGST
Rules, 2017. Further, Notification No. 20/2022-Central Tax dated 28.09.2022 and
corrigendum to Notification No. 20/2022-CT dated 28.09.2022 was issued to
rescind Notification No. 20/2018-CT dated 28.03.2018.
5. Decision of GIC by Circulation on 15th October, 2022 on proposal to settle IGST
amount of Rs. 22,000 crores for the Financial Year 2022-23 on ad hoc basis.
a. In the agenda note, it was mentioned that depending on the amount of IGST remaining
unapportioned, provisional settlement was done from time to time on an ad-hoc basis as per the
provisions of sub-section(2A) of the Section 17 of the IGST Act, 2017, which reads as under:
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17. Apportionment of tax and settlement of funds.—
(2A).The amount not apportioned under sub-section(1) and sub-section(2) may,
for the time being, on the recommendations of the Council, be apportioned at
the rate of fifty per cent. to the Central Government and fifty per cent. to the
State Governments or the Union territories, as the case may be, on ad-hoc basis
and shall be adjusted against the amount apportioned under the said subsections
b. It was further stated that as per the accounts made available by the Pr. CCA, CBIC, the unsettled
IGST balance net of settlement and refund till September, 2022 is about Rs. 23,983 crore.
Therefore, it is proposed to apportion ₹ 22,000 crore on ad-hoc basis, 50% to Centre and 50% to
States/UTs.
c. Decision: The Members of GIC approved the agenda item regarding proposal to settle IGST
amount of Rs. 22,000 crores for the Financial Year 2022-23 on ad-hoc basis.
6. Decision of GIC by Circulation on 21st October, 2022 on extension of due date of filing
FORM GSTR-3B for the month of September, 2022 due to technical glitches on portal
a. In the agenda note, it was stated that in terms of sub-rule (1) of Rule 61 of the CGST Rules,
2017 every registered person furnishing return under sub-section(1) of Section 39, is required to
furnish FORM GSTR-3B, electronically through the common portal on or before the twentieth
day of the month succeeding such month. Accordingly, the due date of filing of FORM GSTR3B for the monthly filers for month of September, 2022 was 20th October, 2022.
b. It was further stated that the GSTN had informed vide email dated 20.10.2022 that taxpayers
had reported slowness in portal while filing Form GSTR-3B return. The persistence of the issue
had been acknowledged. Technical teams were working to resolve the issue. An incident report
had been sent to CBIC for considering extension in the return filing dates.
c. It was also stated in the agenda note that the as a result of the said technical glitch, taxpayers had
lost crucial time before filing their returns. Thus, it was proposed that the due date of filing
FORM GSTR-3B for the month of September, 2022, by registered person furnishing return
under sub-section(1) of Section 39 of the CGST Act, 2017 be extended from 20th October, 2022
to 21st October, 2022. Accordingly, the draft Notification was proposed to be placed before the
GIC for approval.
d. Accordingly, approval of GIC was sought for extending the due date of filing FORM GSTR-3B
for the month of September, 2022, by registered person furnishing return under sub-section(1) of
Section 39 of the CGST Act, 2017 from 20thOctober, 2022 to 21st October, 2022
e. Decision: The Members of GIC approved the above proposal to extend the due date for filing
FORM GSTR-3B for the month of September, 2022, by registered person furnishing return
under sub-section(1) of Section 39 of the CGST Act, 2017 from 20th October, 2022 to 21st
October, 2022.
f. Implementation Status: In pursuance of GIC decision dated 21.10.2022, Notification No.
21/2022- Central Tax dated 21.10.2022 was issued to extend the due date of filing FORM
GSTR-3B for the month of September, 2022.
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7. Decision of GIC by Circulation on 31st October, 2022
7.1 Agenda 1:Guidelines for verifying the Transitional Credit in light of the Order of the
Hon’ble Supreme Court in the Union of India vs. M/s. Filco Trade Centre Pvt. Ltd.,
SLP(C) No. 32709-32710/2018, Order dated 22.07.2022 & 02.09.2022
a. In the agenda note, it was stated that the Hon’ble Supreme Court in the case of Union of India
vs. M/s. Filco Trade Centre Pvt. Ltd., SLP(C) No. 32709-32710/2018, vide Order dated
22.07.2022 has issued the following directions:
“1. Goods and Service Tax Network (GSTN) is directed to open common portal for
filing concerned forms for availing Transitional Credit through TRAN-1 and TRAN-2
for two months i.e. w.e.f. 01.09.2022 to 31.10.2022.
2. Considering the judgments of the High Courts on the then prevailing peculiar
circumstances, any aggrieved registered assessee is directed to file the relevant form or
revise the already filed form irrespective of whether the taxpayer has filed writ petition
before the High Court or whether the case of the taxpayer has been decided by
Information Technology Grievance Redressal Committee (ITGRC).
3. GSTN has to ensure that there are no technical glitch during the said time.
4. The concerned officers are given 90 days thereafter to verify the veracity of the
claim/transitional credit and pass appropriate orders thereon on merits after granting
appropriate reasonable opportunity to the parties concerned.
5. Thereafter, the allowed Transitional credit is to be reflected in the Electronic Credit
Ledger.
6. If required GST Council may also issue appropriate guidelines to the field
formations in scrutinizing the claims. The Special Leave Petitions are disposed of
accordingly. Pending applications, if any, also stand disposed of.”
Subsequently in Miscellaneous Application No. 1545-1546/2022 in SLP(C) No. 32709-
32710/2018, the Hon’ble Supreme Court vide Order dated 2nd September, 2022 has inter-alia
ordered as follows:
“The time for opening the GST Common Portal is extended for a further period of four
weeks from today.
It is clarified that all questions of law decided by the respective High Courts concerning
Section 140 of the Central Goods and Services Tax Act, 2017 read with the
corresponding Rule/Notification or direction are kept open.”
b. It was further stated that based on the approval of the GIC, Circular No.180/12/2022 dated
09.09.2022 has been issued for providing guidelines for the registered persons for filing/revising
TRAN-1/TRAN-2.
c. It was also stated that Law Committee in its meeting held on 12.10.2022 deliberated and
recommended issuance of a Circular for providing guidelines for the jurisdictional officer for
verification of the TRAN-1/TRAN-2 filed/revised by the taxpayers. Since, GSTN has already
opened the portal for taxpayers to file/revise TRAN-1/TRAN-2 as per Order of the Hon’ble
Supreme Court, it is necessary to issue the said Circular at the earliest so that the jurisdictional
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tax officers can conduct necessary verification of such TRAN-1/TRAN-2 filed/revised in a time
bound manner in accordance with the directions issued by the Hon’ble Supreme Court vide the
above mentioned orders. The draft Circular recommended by the Law Committee was placed
before the GIC for approval.
d. Decision: The Members of GIC approved the agenda item along with the draft Circular.
e. Implementation Status: The recommendation of GIC has been implemented by way of
issuance of Circular No. 182/14/2022-GST dt. 10.11.2022.
7.2 Agenda 2: Clarification regarding the issues relating to refund of unutilised ITC on
account of inverted rated structure
a. In the agenda note, it was stated that the formula for calculation of refund of unutilised ITC on
account of inverted rated structure, prescribed under sub-rule (5) of Rule 89 of the CGST Rules,
2017 has been amended vide Notification No. 14/2022-Central Tax dated 05.07.2022 as under:
“Maximum Refund Amount = {(Turnover of inverted rated supply of goods and
services) x Net ITC ÷ Adjusted Total Turnover} – {tax payable on such inverted rated
supply of goods and services x Net ITC ÷ ITC availed on inputs and input services)}”
b. Further, vide Notification No. 09/2022-Central Tax (Rate) dated 13.07.2022, refund of
unutilised ITC on account of inverted rated structure has been restricted in respect of output
supplies of certain commodities such as oils falling under the chapter heading/ sub-heading 1507
to 1518 and coal, lignite & peat falling under the chapter heading/ sub-heading 2701, 2702 &
2703 respectively w.e.f. 18.07.2022.
c. It was also stated that references have been received from the field formations seeking
clarification regarding the date of applicability of the formula, amended vide Notification No.
14/2022- Central Tax dated 05.07.2022, for calculation of refund of unutilised ITC on account
of inverted rated structure as to whether the amended formula would be applicable to all refund
claims pending as on 05.07.2022 or whether it would be applicable to refund claims filed on or
after 05.07.2022.
d. It was further stated that similar doubts have also been raised about the applicability of the
restriction on refund of unutilised ITC on account of inverted rated structure imposed vide
Notification No. 09/2022-CT (Rate) dated 13.07.2022 as to whether such restriction will apply
to all refund claims pending on 18.07.2022 or will apply to refunds filed on or after 18.07.2022
or will apply to refunds of prospective tax periods only
e. It was also mentioned that the issue was deliberated in the Law Committee in its meeting held
on 21.09.2022 wherein Law Committee recommended the following:
i. The amended formula for calculation of refund of unutilised ITC on account of
inverted rated structure, as per Notification No. 14/2022-CT dated 05.07.2022,
would be applicable to refund claims filed on or after 05.07.2022.
ii. In respect of Notification No. 09/2022-Central Tax (Rate) dated 13.07.2022, the
refund of unutilized ITC on account of inverted rated structure shall not be available
for the supply of the notified commodities in respect of refund claims filed on or
after 18.07.2022.
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iii. The issue may be clarified through a Circular.
f. It was informed that a draft Circular was prepared as per the recommendations of the Law
Committee and placed before the Law Committee in its meeting held on 12.10.2022 wherein the
same was approved.The draft Circular recommended by the Law Committee was placed before
the GIC for approval.
g. Decision:The members of GIC approved the agenda item along with the draft Circular.
h. Implementation Status: The recommendation of GIC has been implemented by way of
issuance of Circular 181/13/2022-GST dt. 10.11.2022.
7.3 Agenda 3: Amendment in the instructions of GSTR-9
a. In the agenda note it was stated that vide Notification No. 18/2022-Central Tax dated
28.09.2022, the Government has appointed 01.10.2022 as the date on which the provisions of
Sections 100 to 114, except clause (c) of Section 110 and Section 111, of the Finance Act, 2022
shall come into force. Thereby, the time limit for the various compliances under Section 16(4),
Section 34(2) Section 37(3), Section 39(9) and Section 52(6) of CGST Act 2017, in respect of a
particular Financial Year, has been extended and fixed as 30th November of the next Financial
Year. In this regard, Government has also issued clarification regarding the applicability of this
amended limitation period vide Press Note issued on 04.10.2022.
b. It was further stated that the instructions to FORM GSTR-9 were amended vide Notification
No. 14/2022-Central Tax dated 05.07.2022 for the Financial Year 2021-22. In the said
Notification, the old limitation period (before amendment of the CGST Act, 2017 as notified
vide Notification No. 18/2022-Central Tax dated 28.09.2022) was mentioned in instructions to
FORM GSTR-9, as the said amendments in the CGST Act, 2017 made vide Finance Act, 2022
was not notified at the time of issuance of said Notification. Accordingly, to align the
instructions of FORM GSTR-9 with the provisions of the Finance Act, 2022, the following
changes may be made in the relevant part of paragraph 7 of instructions to GSTR-9 as under:
(A) The following changes may be made-
“For FY 2021-22, Part V consists of particulars of transactions for the previous financial
year but paid in the FORM GSTR-3Bbetween of April, 2022 to September October,
2022 filed upto 30th November, 2022.”;
(B) in the Table, in second column, -
(I) against serial numbers 10 & 11, the following changes may be made -
“For FY 2021-22, details of additions or amendments to any of the supplies
already declared in the returns of the previous financial year but such
amendments were furnished in Table 9A, Table 9B and Table 9C of FORM
GSTR-1 of April, 2022 to September October, 2022 filed upto 30th November,
2022 shall be declared here.”;
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(II) against serial number 12, the following changes may be made -
“For FY 2021-22, aggregate value of reversal of ITC which was availed in the
previous financial year but reversed in returns filed for the months of April,
2022 to September October, 2022 upto 30th November, 2022 shall be declared
here. Table 4(B) of FORM GSTR-3B may be used for filling up these details.”;
(III) against serial number 13, the following changes may be made –
“For FY 2021-22, details of ITC for goods or services received in the previous
financial year but ITC for the same was availed in returns filed for the months
of April, 2022 to September October, 2022 upto 30th November, 2022 shall be
declared here. Table 4(A) of FORM GSTR-3B may be used for filling up these
details. However, any ITC which was reversed in the FY 2021-22 as per second
proviso to sub-section(2) of Section 16 but was reclaimed in FY 2022-23, the
details of such ITC reclaimed shall be furnished in the annual return for FY
2022-23.;
c. It was further stated that the issue was deliberated in the Law Committee in its meeting held on
12.10.2022. The Law Committee had approved the abovementioned changes in instruction to
FORM GSTR-9. The draft Notification in this regard was placed before GIC for approval.
d. Decision:The Members of GIC approved the agenda item regarding amendment in the
instructions of GSTR-9.
e. Implementation Status: The recommendation of GIC has been implemented by way of
issuance of Notification No. 22/2022 dt. 15.11.2022.
8. Decision of GIC by Circulation on 15th November, 2022 on Authorizing Competition
Commission of India (CCI) to handle Anti-Profiteering Cases and consequential rule
amendments
a. In the agenda note, it was stated that the National Anti-Profiteering Authority (NAA) has been
constituted under Section 171 of the Central Goods and Services Act, 2017 to ensure that the
reduction in tax or the benefits of input tax credit is passed on to the recipient by way of
commensurate reduction in prices. Rule 137 of Central Goods and Service Tax Rules, 2017
prescribes that the tenure of the NAA shall be for 5 years from the date on which Chairman
enters upon his office. Accordingly, the tenure of NAA is ending on 30th November, 2022.
b. It was further stated that the GST Council in its 45th meeting held on 17.09.2021, while
deliberating on the agenda No. 16 on National Anti-profiteering Authority, recommended that
NAA to close down on 30.11.2022 and the work of the NAA can be taken up by Competition
Commission of India (CCI). The relevant extract of the minutes of 45th GST Council meeting is
as follows:
“The Secretary stated that as suggested by the Hon'ble Members, the tenure of
NAA can be extended by one year up to 30.11.2022 after which it will close
down and meanwhile it can be taken up with the CCI for taking up the work of
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NAA. He sought authority from the Council to take up the issue with CCI. The
Council agreed with this arrangement.”
c. It was also stated in the agenda note that the matter was deliberated by the Law Committee for
authorizing Competition Commission of India (CCI) to handle Anti-Profiteering Cases on
expiry of tenure of NAA and for amendments in provisions of the CGST Rules, 2017 to provide
for the same. Law committee in its meeting dated 21.09.2022 recommended that a Notification
under Section 171(2) of CGST Act, 2017 may be issued authorizing CCI to handle AntiProfiteering cases under CGST Act, 2017 with effect from 01.12.2022 and consequent
amendments may also be carried out in Rules 122 to 137 under Chapter XV of the CGST Rules,
2017.
d. Accordingly, approval of GIC was sought for authorizing Competition Commission of India
(CCI) to handle Anti-Profiteering Cases and for making consequential rule amendments in the
CGST Rules, 2017.
e. Decision: The Members of GIC approved the agenda item regarding authorizing Competition
Commission of India (CCI) to handle Anti-Profiteering Cases and for making consequential rule
amendments in the CGST Rules, 2017 along with the draft Notification.
f. Implementation Status: The recommendation of GIC has been implemented by way of
issuance of Notification No.23/2022-Central Tax dt. 23.11.2022 and Notification No.24/2022-
Central Tax dt. 23.11.2022.
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Annexure-I
Minutes of the GST Implementation Committee (GIC) Meeting held on 16th August, 2022
A meeting of GIC was held through Video Conferencing on 16th August, 2022. The list of
attendees for the GIC meeting through video conference is enclosed. A single Agenda item regarding
GST data sharing with Ministries and Department which was shared with all the members through email, was discussed during the meeting.
2. Member (GST), CBIC requested the Joint Secretary, GST Council Secretariat to give a brief
on the Agenda item. The Joint Secretary, GSTCS thereafter gave a brief overview of classification of
four categories of data including the general conditions for sharing the data as stated in Agenda Item
3. Additional Secretary, DoR stated that the consent based sharing of data was approved by GST
Council in last meeting for implementing consent based data sharing module through amendments in
the GST enactments, however, the current agenda item before GIC was regarding sharing of nonpersonal data of the taxpayer and which could be aggregated and could be utilized by any Government
Agency i.e Centre or State for various purposes; that this data sharing would protect the taxpayers’
identity and the data thus shared could not be used for any purpose other than it was sought for.
Accordingly, the proposition was put up before the GIC for its approval in order to form SOP on the
same which could be implemented through GSTN after due approval. He added further that keeping in
view of the points raised by the State of Tamil Nadu and State of West Bengal, it was decided to have
a meeting over the same and take a collective decision.
4. Member (GST), CBIC requested the other members to put forth their views on the Agenda item.
The Commissioner of Commercial Taxes, Tamil Nadu stated that they had given their in-principle
approval for the Agenda item, however, their only concern was that the implementation of this data
sharing should be in line with the proposed amendments in the GST Act in order to avoid any litigation
in future.
5. Commissioner, State Tax, West Bengal stated that the present issue being a major issue need to
be discussed in the GST Council and not in GIC where only a few States were members. He also
invited attention to the final decision of Law Committee taken in its meeting dated 22nd July 2020
regarding putting the general issue of data sharing with Government departments before the GST
Council. He stated that the matter should be put up before the GST Council for further deliberations
and collective decision on the same.
6. Joint Secretary, DoR, stated that if the GIC decided so, the matter might be put up before the
GST Council. He further added that the validation of GSTIN through API to Government departments
and Ministries would be beneficial for the business process of various departments of Centre and
States; that aggregated data viz. e-way bill information could be shared with different departments for
analytical purpose, data based decision making and for their own functional requirements; that this data
sharing would protect the identity of taxpayers and therefore it would be different from consent based
data sharing as per the proposed Section 158A. He stated that the first class of data was the publicly
available information; second set of data was the aggregated information which did not belong to any
taxpayer, and third one where the even disaggregated data was proposed to be shared, the taxpayer
information would not be disclosed.
7. Member (GST), CBIC stated that an agreement could at least be reached on first clause where the
information was already available in public domain and with API validation, it would be more
convenient for any Govt department to access this information. The Commissioner, State Tax , West
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Bengal reiterated his point stating that the decision should be taken by all the States being
stakeholders. Member (GST), CBIC agreed to the suggestion.
8. The CEO, GSTN stated that the API validation would be a basic validation which already
existed in the system. He further stated that GSTN had been getting requests from various States
asking for such validation. Member (GST), CBIC stated that GSTIN validation could be compared
with Aadhar and PAN validation facility which was already being used by authorized agencies.
9. Member (GST), CBIC stated that it should also be clarified that the API validation facility would
be provided to Government Organizations only. The Joint Secretary, DOR stated that the first set of
data already being available in public domain could be shared by GSTN. Second class of data being
the aggregated data having statistical value could also be put in public domain later if it was desired by
many agencies. However, for dis-aggregated data, the sharing would be done for specific purpose.
10. Member (GST), CBIC stated that the concept of providing aggregated data was being used by
Ministry of Commerce through DGFT portal where aggregated information of export and import was
available in public domain and could be accessed by anyone. Accordingly, the ideas on what granular
data needs to be publicly available may concretised. The Joint Secretary, DoR stated that such
information related to GST would be made public only after analyzing the pattern of data requests
from various departments.
11. The Additional Secretary, DoR stated that the issue can be put up before the GST Council in its
next meeting vide an Agenda Note. Member (GST), CBIC stated that as suggested by West Bengal, as
far as for the first set of data sharing was concerned, wider consultation and circulation amongst
States was necessary and for second and third sets of data, the Agenda could be prepared in detail
before taking it to the GST Council. The Additional Secretary also concurred with it.
12. Commissioner, State Tax, West Bengal clarified that they had no objection in proposed sharing of
data, however, the same should be done with wide consultation with all States and with formal
approval of GST Council. The Additional Secretary, DoR stated that the agenda would be put before
the GST Council for formal approval.
Decision: GIC members decided that detailed agenda note for sharing of data with
Ministries/Govt Depts would be placed in the next GST Council meeting for approval.

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List of Attendees to the GIC meeting held on 16th August, 2022
Members (Centre)
1. Member (GST), CBIC
2. Additional Secretary, DoR
3. Principal Director General (Systems), CBIC
4. Principal Chief Commissioner (CGST), Delhi
Members (State)
1. Commissioner, State Taxes, West Bengal
2. Commissioner, State Taxes, Tamil Nadu
Special Invitees
1. CEO, GSTN
2. Joint Secretary, DoR
Others
1. Principal Commissioner (GST Policy Wing), CBIC
2. Joint Secretary, GSTC Secretariat
3. Dy Commisssioner, Excise and Taxation Department, Haryana

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Annexure-II
Minutes of Video Conferencing on GIC Agenda- Notifying the remaining provisions of
Finance Act, 2022 dt. 22.09.2022
1. A meeting of GIC was held through Video Conferencing on 22nd September, 2022 with a single
Agenda item regarding Notifying the remaining provisions of Finance Act, 2022 and
consequential amendments in CGST Rules, 2017 (Annexure-1), was discussed during the
meeting. The list of attendees for the GIC meeting through video conference are attached
alongwith.
2. Joint Secretary, GST Council Secretariat welcomed the newly appointed Member (GST), CBIC
Ms. V. Rama Mathew to the meeting and requested her to chair the meeting. Member (GST),
CBIC requested the Pr. Commissioner, GST Policy Wing to give a brief on the Agenda item.
3. The Pr. Commissioner, GST Policy Wing stated that in the 47th GST Council meeting it was
agreed that several changes made to the CGST Act, 2017 vide Finance Act, 2022 may be notified
w.e.f 01.10.2022 by Centre and States. He added that this would require corresponding changes
to be made in the CGST Rules, 2017 and that the Law Committee in its meetings held on
26.08.2022 and 07.09.2022 proposed carrying out the requisite amendments to the CGST Rules,
2017 w.e.f. 01.10.2022 consequent to the Notification of the remaining provisions of the Finance
Act, 2022. Thereafter, he stated that at present no GST Council meeting is scheduled to be held
before 01.10.2022 and therefore, it was decided to table the proposed amendments as an agenda
in GIC. Accordingly, the amendments proposed by Law Committee to the CGST Rules, 2017
were being taken up for approval in the meeting.
4. The Pr. Commissioner, GST Policy Wing detailed out stated Rule 21 of the CGST Rules, 2017 is
being amended pursuant to amendments made to Section 29 of the CGST Act, 2017. The Rules
36, Rule 37, Rule 38, Rule 42, Rule 43, Rule 60, Rule 83, Rule 85, Rule 96 and Form PCT-05 are
being amended due to omission of Sections 42,43 and Section 43A and to align the said Rules
with the GSTR-1/GSTR2B/3B return filing system. Further, Rules 69 to 77 and Rule 79 are
being omitted so as to do away with two way communication process in return filing. Rule 89 is
amended on account of the proposed amendment to the proviso to sub-section(1) of Section 54 of
the CGST Act, 2017. The FORM GSTR1A, GSTR 2 and GSTR 3 are also being omitted
pursuant to omission of Sections 42,43 and Section 43A. Principal Commissioner GST also
informed that consequent to amendment of Sub-section(2) of Section 54 providing for time of
two years for filing refund claim under Section 55, Notification No. 20/2018-CT dated
28.03.2018 also needs to be rescinded.
5. The amendments proposed by Law Committee to CGST Rules, 2017 with effect from 01.10.2022
as detailed out by the Pr. Commissioner, GST Policy and rescinding Notification No. 20/2018-
CT dated 28.03.2018 was agreed to by the members unanimously.
Decision: GIC members unanimously approved the agenda.
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List of Attendees to the GIC meeting held on 22nd September, 2022
Members- Centre
1. Additional Secretary (Revenue)
2. Member (GST), CBIC
3. Pr. DG, DG Systems, New Delhi, CBIC
4. Chief Commissioner, Delhi, CBIC
Members- States
1. Haryana
2. Gujarat
3. Tamil Nadu
4. West Bengal
Member- GSTC Secretariat
1. Additional Secretary, GSTCS
Others
1.Pr. Commissioner, GSTPW
2. JS, GSTCS

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Annexure-1 (GIC Meeting dated 22.09.2022)
F. No. CBIC-20021/3/2022-GST
Government of India
Ministry of Finance
Department of Revenue
Central Board of Indirect Taxes and Customs
GST Policy Wing
AGENDA NOTE
Subject: Notifying the remaining provisions of Finance Act, 2022 and consequential amendments
to CGST Rules, 2017-reg
Various amendments in the provisions of Central Goods and Services Tax Act, 2017 (“CGST
Act” in short) were made vide the Finance Act, 2022. Based on the recommendations of the GST
Council in its 47th meeting held on 28th and 29th June 2022, provisions of clause (c) of Section 110 and
Section 111 of the Finance Act, 2022 have already been notified by the Centre vide Notification no.
09/2022-Central Tax, dated 05.07.2022. Consequent insertion of Rule 88B and sub-rule 87(14) has also
been carried out by the Centre vide Notification no. 14/2022-Central Tax, dated 05.07.2022.
2. The Council further recommended that the other provisions of the Finance Act, 2022 pertaining
to GST may be notified w.e.f. 01.10.2022 by both the Centre and the States. Once these provisions are
notified, corresponding amendments in the CGST Rules, 2017 may also be required to be carried out
simultaneously.
2.1 Accordingly, Law Committee in its meetings held on 26.08.2022 and 07.09.2022 examined the
requisite amendments to be carried out in the CGST Rules, 2017. The Law Committee recommended
carrying out the requisite amendments to the CGST Rules, 2017 w.e.f. 01.10.2022 consequent to the
Notification of the remaining provisions of the Finance Act, 2022, (except for the rules corresponding to
sub-section(2) of amended Section 41 and corresponding to clause (ba) to sub-section(2) of Section 16,
read with sub-section(2) of Section 38 of CGST Act, 2017 which will require further deliberations by
the Law Committee, in consultation with GSTN, based on the data as well as the feedback to be
provided by GSTN, as the implementation of the said rules may require development of requisite
functionality on the portal by GSTN).
2.2 The said amendments in CGST Rules, 2017, as recommended by the Law Committee, are
enclosed as Annexure-1A to this agenda note.
3. The agenda note is, therefore, placed before the GIC for approval.
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( Annexure-1A )
Proposed amendments in the CGST Rules, 2017 Remarks
21. Registration to be cancelled in certain cases. -
The registration granted to a person is liable to be cancelled, if the said person, -
(a) does not conduct any business from the declared place of business; or
(b) issues invoice or bill without supply of goods or services [or both] in violation of the provisions of this Act, or the rules
made thereunder; or
(c) violates the provisions of Section 171 of the Act or the rules made thereunder
(d) violates the provision of Rule 10A
(e) avails input tax credit in violation of the provisions of Section 16 of the Act or the rules made thereunder; or
(f) furnishes the details of outward supplies in FORM GSTR-1 under Section 37 for one or more tax periods which is in
excess of the outward supplies declared by him in his valid return under Section 39 for the said tax periods; or
(g) violates the provision of rule 86B.
(h) being a registered person, required to file return under sub-section (1) of Section 39 for each month or part thereof, has
not furnished returns for a continuous period of six months.
(i) being a registered person, required to file return under proviso to sub-section (1) of Section 39 for each quarter or part
thereof, has not furnished returns for a continuous period of two tax periods.
Clause (b) and (c) of subsection(2) of Section 29 of the
CGST Act, 2017 are being
amended so as to provide that
the registration of a person is
liable for cancellation, where -
(i) a person paying tax under
Section 10 has not furnished the
return for a financial year
beyond three months from the
due date of furnishing of the
said return;
(ii) a person, other than those
paying tax under Section 10,has
not furnished returns for such
continuous tax period as may be
prescribed.
36. Documentary requirements and conditions for claiming input tax credit.-(1)The input tax credit shall be availed
by a registered person, including the Input Service Distributor, on the basis of any of the following documents, namely,-
Sections 42, 43 and 43A of the
CGST Act, 2017 have been
omitted so as to do away with
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(a) an invoice issued by the supplier of goods or services or both in accordance with the provisions of Section 31;
(b) an invoice issued in accordance with the provisions of clause (f) of sub-section(3) of Section 31, subject to the
payment of tax;
(c) a debit note issued by a supplier in accordance with the provisions of Section 34;
(d) a bill of entry or any similar document prescribed under the Customs Act, 1962 or rules made thereunder for the
assessment of integrated tax on imports;
(e) an Input Service Distributor invoice or Input Service Distributor credit note or any document issued by an Input
Service Distributor in accordance with the provisions of sub-rule (1) of Rule 54 of CGST Rules, 2017.
(2) Input tax credit shall be availed by a registered person only if all the applicable particulars as specified in the
provisions of Chapter VI are contained in the said document., and the relevant information, as contained in the said
document is furnished in FORM GSTR-2 by such person:
Provided that if the said document does not contain all the specified particulars but contains the details of the amount of tax
charged, description of goods or services, total value of supply of goods or services or both, GSTIN of the supplier and
recipient and place of supply in case of inter-State supply, input tax credit may be availed by such registered person.
(3) No input tax credit shall be availed by a registered person in respect of any tax that has been paid in pursuance of any
order where any demand has been confirmed on account of any fraud, willful misstatement or suppression of facts.
(4) No input tax credit shall be availed by a registered person in respect of invoices or debit notes the details of which are
required to be furnished under sub-section (1) of Section 37 unless,-
(a) the details of such invoices or debit notes have been furnished by the supplier in the statement of outward supplies in
FORM GSTR-1 or using the invoice furnishing facility; and
(b) the details of input tax credit in respect of such invoices or debit notes have been communicated to the registered person
in FORM GSTR-2B under sub-rule (7) of Rule 60 of CGST Rules, 2017.
two-way communication
process in return filing. The rule
therefore needs to be aligned
with the GSTR-1/2B/3B return
filing system.
37. Reversal of input tax credit in the case of non-payment of consideration.-(1)A registered person, who has availed of
input tax credit on any inward supply of goods or services or both, other than the supplies on which tax is payable on reverse
charge basis, but fails to pay to the supplier thereof, the amount towards the value of such supply along with the tax payable
thereon, within the time limit specified in the second proviso to sub-section(2) of Section 16, shall furnish the details of such
supply, the amount of value not paid and the amount of input tax credit availed of proportionate to such amount not paid to
the supplier in FORM GSTR-2for the month pay an amount equal to the input tax credit availed in respect of such supply,
along with interest payable thereon under Section 50, while furnishing the return in FORM GSTR-3B for the tax period
immediately following the period of one hundred and eighty days from the date of the issue of the invoice:
Provided that the value of supplies made without consideration as specified in Schedule I of the said Act shall be
Sections 42, 43 and 43A of the
CGST Act, 2017 have been
omitted so as to do away with
two-way communication
process in return filing. The rule
therefore needs to be aligned
with the GSTR-1/2B/3B return
filing system.
Also, a mechanism needs to be
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deemed to have been paid for the purposes of the second proviso to sub-section(2) of Section 16:
Provided further that the value of supplies on account of any amount added in accordance with the provisions of
clause (b) of sub-section(2) of Section 15 shall be deemed to have been paid for the purposes of the second proviso to subsection(2) of Section 16.
(2) The amountof input tax credit referred to in sub-rule (1) shall be added to the output tax liability of the registered person
for the month in which the details are furnished.
(2) Where the said registered person subsequently makes payment of the amount towards the value of such supply along with
tax payable thereon to the supplier thereof, he shall be entitled to re-avail the said input tax credit referred to in sub-rule (1).
(3) The registered person shall be liable to pay interest at the rate notified under sub-section(1) of Section 50 for the period
starting from the date of availing credit on such supplies till the date when the amount added to the output tax liability, as
mentioned in sub-rule (21), is paid.
(4) The time limit specified in sub-section(4) of Section 16 shall not apply to a claim for re-availing of any credit, in
accordance with the provisions of the Act or the provisions of this Chapter, that had been reversed earlier.
provided for re-availment of
ITC reversed earlier upon
payment of the consideration by
the recipient to the supplier.
Further, to align with the GSTR1/2B/3B return filing system, 2nd
and 3rd provisos to Section
16(2) may also be amended as
below:
“Provided further that where a
recipient fails to pay to the
supplier of goods or services or
both, other than the supplies on
which tax is payable on reverse
charge basis, the amount
towards the value of supply
along with tax payable thereon
within a period of one hundred
and eighty days from the date of
issue of invoice by the supplier,
an amount equal to the input tax
credit availed by the recipient
shall be added to his output tax
liability paid by him, along with
interest thereon payable under
Section 50, in such manner as
may be prescribed:
Provided also that the recipient
shall be entitled to avail of the
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credit of input tax on payment
made by him to the supplier of
the amount towards the value of
supply of goods or services or
both along with tax payable
thereon.”
38. Claim of credit by a banking company or a financial institution.-A banking company or a financial institution,
including a non-banking financial company, engaged in the supply of services by way of accepting deposits or extending
loans or advances that chooses not to comply with the provisions of sub-section(2) of Section 17, in accordance with the
option permitted under sub-section(4) of that Section, shall follow the following procedure, namely,-
(a) the said company or institution shall not avail the credit of,-
(i) the tax paid on inputs and input services that are used for non-business purposes; and
(ii)the credit attributable to the supplies specified in sub-section(5) of Section 17, in FORM GSTR-2;
(b) the said company or institution shall avail the credit of tax paid on inputs and input services referred to in the second
proviso to sub-section(4) of Section 17 and not covered under clause (a);
(c) fifty per cent. of the remaining amount of input tax shall be the input tax credit admissible to the company or the
institution and shall be furnished in FORM GSTR-2, and the balance amount of input tax credit shall be reversed in
FORM GSTR-3B;
(d) the amount referred to in clauses (b) and (c) shall, subject to the provisions of Sections 41, 42 and 43, be credited to the
electronic credit ledger of the said company or the institution.
Sections 42, 43 and 43A of the
CGST Act, 2017 have been
omitted so as to do away with
two-way communication
process in return filing. The rule
therefore needs to be aligned
with the GSTR-1/2B/3B return
filing system.
42. Manner of determination of input tax credit in respect of inputs or input services and reversal thereof.-(1) The
input tax credit in respect of inputs or input services, which attract the provisions of sub-section(1) or sub-section(2) of
Section 17, being partly used for the purposes of business and partly for other purposes, or partly used for effecting taxable
supplies including zero rated supplies and partly for effecting exempt supplies, shall be attributed to the purposes of business
or for effecting taxable supplies in the following manner, namely,-
(a) the total input tax involved on inputs and input services in a tax period, be denoted as ‘T’;
………
Sections 42, 43 and 43A of the
CGST Act, 2017 have been
omitted so as to do away with
two-way communication
process in return filing. The rule
therefore needs to be aligned
with the GSTR-1/2B/3B return
filing system.
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(g) ‘T1’, ‘T2’, ‘T3’ and ‘T4’ shall be determined and declared by the registered person at the invoice level in FORM
GSTR-2 and at summary level in FORM GSTR-3B;
………
43. Manner of determination of input tax credit in respect of capital goods and reversal thereof in certain cases.-(1)
Subject to the provisions of sub-section(3) of Section 16, the input tax credit in respect of capital goods, which attract the
provisions of sub-sections (1) and (2) of Section 17, being partly used for the purposes of business and partly for other
purposes, or partly used for effecting taxable supplies including zero rated supplies and partly for effecting exempt supplies,
shall be attributed to the purposes of business or for effecting taxable supplies in the following manner, namely,-
(a) the amount of input tax in respect of capital goods used or intended to be used exclusively for non-business
purposes or used or intended to be used exclusively for effecting exempt supplies shall be indicated in FORM GSTR2 and FORM GSTR-3B and shall not be credited to his electronic credit ledger;
(b) the amount of input tax in respect of capital goods used or intended to be used exclusively for effecting supplies
other than exempted supplies but including zero-rated supplies shall be indicated in FORM GSTR-2 and FORM
GSTR-3B and shall be credited to the electronic credit ledger;
………
Sections 42, 43 and 43A of the
CGST Act, 2017 have been
omitted so as to do away with
two-way communication
process in return filing. The rule
therefore needs to be aligned
with the GSTR-1/2B/3B return
filing system.
60. Form and manner of ascertaining details of inward supplies. -
……..
(7) An auto-drafted auto-generated statement containing the details of input tax credit shall be made available to the
registered person in FORM GSTR-2B, for every month, electronically through the common portal, and shall consist of -
(i) the details of outward supplies furnished by his supplier, other than a supplier required to furnish return for every quarter
under proviso to sub-section(1)of Section 39, in FORM GSTR-1, between the day immediately after the due date of
furnishing of FORM GSTR-1 for the previous month to the due date of furnishing of FORM GSTR-1 for the month;
………
Sections 42, 43 and 43A of the
CGST Act, 2017 have been
omitted so as to do away with
two-way communication
process in return filing. The rule
therefore needs to be aligned
with the GSTR-1/2B/3B return
filing system.
Consequential changes:
1. FORM GSTR-1A, FORM
GSTR-2 & GSTR-3 may
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be omitted.
69. Matching of claim of input tax credit .-The following details relating to the claim ofinput tax credit on inward
supplies including imports, provisionally allowed under Section 41,shall be matched under Section 42 after the due
date for furnishing the return inFORMGSTR-3-
(a) GoodsandServicesTax IdentificationNumberofthesupplier;
(b) GoodsandServicesTaxIdentificationNumberoftherecipient;
(c) invoiceordebit notenumber;
(d) invoice or debit note date; and
(e) tax amount:
Provided that where the time limit for furnishing FORM GSTR-1 specified under Section 37 and
FORM GSTR-2 specified under Section 38 has been extended, the date of matching relating to claim of input taxcredit
shall alsobeextended accordingly:
Provided further that the Commissioner may, on the recommendations of theCouncil, by order, extend
the date of matching relating to claim of input tax credit to such dateas maybespecifiedtherein.
Explanation.-For the purposes of this rule, it is hereby declared that–
(i) The claim of input tax credit in respect of invoices and debit notes in FORM GSTR-2that were accepted by the
recipient on the basis of FORM GSTR-2A without amendment shall be treated as matched if the corresponding
supplier has furnished a valid return;
(ii)The claim of input tax credit shall be considered as matched where the amount of inputtax credit claimed is equal
to or less than the output tax paid on such tax invoice or debit note by the corresponding supplier.
Sections 42, 43 and 43A of the
CGST Act, 2017 have been
omitted so as to do away with
two-way communication
process in return filing. The rule
therefore needs to be aligned
with the GSTR-1/2B/3B return
filing system.
70. Final acceptance of input tax credit and communication thereof.-
(1) The final acceptance of claim of input tax credit in respect of any tax period, specified in sub-section(2) of Section
42, shall be made available electronically to the registered person making such claim in FORMGST MIS-1 through
the common portal.
Sections 42, 43 and 43A of the
CGST Act, 2017 have been
omitted so as to do away with
two-way communication
process in return filing. The rule
therefore needs to be aligned
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(2) The claim of input tax credit in respect of any tax period which had been communicated asmismatched but is found
to be matched after rectification by the supplier or recipient shall befinally accepted and made available electronically to
the person making such claim in FORMGSTMIS-1 through the common portal.
with the GSTR-1/2B/3B return
filing system.
71. Communication and rectification of discrepancy in claim of input tax credit and reversal of claim of input
tax credit.-
(1) Any discrepancy in theclaim of input tax creditin respect of any tax period, specified in sub-section(3) of Section
42 and the details of outputtax liable to be added under sub-section(5) of the said Section on account of continuation of
such discrepancy, shall be made available to the recipient making such claim electronically inFORM GST MIS-1 and
to the supplier electronically in FORM GST MIS-2 through the common portal on or before the last date of the month
in which the matching has been carriedout.
(2) A supplier to whom any discrepancy is made available under sub-rule (1) may make suitable rectifications in the
statement of outward supplies to be furnished for the month in which the discrepancy is made available.
(3) A recipient to whom any discrepancy is made available under sub-rule (1) may make suitable rectifications in
the statement of inward supplies to be furnished for the month in which the discrepancy is made available.
(4) Where the discrepancy is not rectified under sub-rule (2) or sub-rule (3), an amount to the extent of discrepancy
shall be added to the output tax liability of the recipient in his return to be furnished in FORM GSTR-3 for the month
succeeding the month in which the discrepancy is made available.
Explanation.-For the purposes of this rule, it is hereby declared that-
(i) Rectification by a supplier means adding or correcting the details of an outward supplyin his valid return so as to
match the details of corresponding inward supply declared by the recipient;
(ii) Rectification by the recipient means deleting or correcting the details of an inward supply so as to match the
details of corresponding outward supply declared by the supplier.
Sections 42, 43 and 43A of the
CGST Act, 2017 have been
omitted so as to do away with
two-way communication
process in return filing. The rule
therefore needs to be aligned
with the GSTR-1/2B/3B return
filing system.
72. Claim ofinput tax credit on the same invoice more than once.-Duplication of claims of input tax credit in
the details of inward supplies shall be communicated to the registered person in FORM GST MIS-1
electronically through the common portal.
Sections 42, 43 and 43A of the
CGST Act, 2017 have been
omitted so as to do away with
two-way communication
process in return filing. The rule
therefore needs to be aligned
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with the GSTR-1/2B/3B return
filing system.
73. Matching of claim of reduction in the output tax liability.-The following details relating to the claim of
reduction in output tax liability shall be matched under Section 43 after the due date for furnishing the return in
FORM GSTR-3, namely:-
a. Goods and Services Tax Identification Number of the supplier;
b. Goods and Services Tax Identification Number of the recipient;
c. Credit note number;
d. Credit note date; and
e. tax amount:
Provided that where the time limit for furnishing FORM GSTR-1 under Section 37 and FORM GSTR-2 under
Section 38 has been extended, the date of matching of claim of reduction in the output tax liability shall be extended
accordingly:
Provided further that the Commissioner may, on the recommendations of the Council, by order, extend the date
of matching relating to claim of reduction in output tax liability to such date as may be specified therein.
Explanation.-For the purposes of this rule, it is hereby declared that–
(i) the claim of reduction in output tax liability due to issuance of credit notes in FORM GSTR-1 that were
accepted by the corresponding recipient in FORM GSTR-2 without amendment shall be treated as matched if
the said recipient has furnished a valid return.
(ii) the claim of reduction in the output tax liability shall be considered as matched where the amount of output tax
liability after taking into account the reduction claimed is equal to or more than the claim of input tax credit
after taking into account the reduction admitted and discharged on such credit note by the corresponding
recipient in his valid return.
Sections 42, 43 and 43A of the
CGST Act, 2017 have been
omitted so as to do away with
two-way communication
process in return filing. The rule
therefore needs to be aligned
with the GSTR-1/2B/3B return
filing system.
74. Final acceptance of reduction in output tax liability and communication thereof.-
(1) The final acceptance of claim of reduction in output tax liability in respect of any taxperiod, specified in subsection(2) of Section 43, shall be made available electronically to thepersonmakingsuchclaim in FORMGST MIS-1
Sections 42, 43 and 43A of the
CGST Act, 2017 have been
omitted so as to do away with
two-way communication
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throughthecommon portal.
(2) The claim of reduction in output tax liability in respect of any tax period which hadbeencommunicatedasmismatchedbutisfoundtobematchedafterrectificationbythe supplier or recipient shall be finally accepted and made available
electronically to the person making such claim in FORM GST MIS-1 through the common portal.
process in return filing. The rule
therefore needs to be aligned
with the GSTR-1/2B/3B return
filing system.
75. Communicationandrectificationofdiscrepancyinreductioninoutputtaxliability and reversal of claim of
reduction.-
(1) Any discrepancy in claim of reduction inoutput tax liability, specified in sub-section(3) of Section 43, and the
details of output taxliability to be added under sub-section(5) of the said Section on account of continuation of such
discrepancy, shall be made available to the registered person making such claim electronically in FORM GST MIS- 1
and the recipient electronically in FORM GST MIS-2through the common portal on or before the last date of the
month in which the matching hasbeencarried out.
(2) A supplier to whom any discrepancy is made available under sub-rule (1) may make suitable rectifications in the
statement of outward supplies to be furnished for the month in which the discrepancy is made available.
(3) A recipient to whom any discrepancy is made available under sub-rule (1) may make suitable rectifications in
the statement of inward supplies to be furnished for the month in which the discrepancy is made available.
(4) Where the discrepancy is not rectified under sub-rule (2) or sub-rule (3), an amount
totheextentofdiscrepancyshallbeaddedtotheoutputtaxliabilityofthesupplieranddebitedto the electronic liability register
and also shown in his return in FORM GSTR-3 for themonthsucceedingthe month in which the discrepancyis
madeavailable.
Explanation.-Forthepurposes ofthisrule, it is herebydeclared that–
(i) rectification by a supplier means deleting or correcting the details of an outward
supplyinhisvalidreturnsoastomatchthedetailsofcorrespondinginwardsupplydeclaredbythe recipient;
(ii)Rectification by the recipient means adding or correcting the details of an inward supply soas to match thedetails
ofcorrespondingoutward supplydeclaredbythesupplier.
Sections 42, 43 and 43A of the
CGST Act, 2017 have been
omitted so as to do away with
two-way communication
process in return filing. The rule
therefore needs to be aligned
with the GSTR-1/2B/3B return
filing system.
76. Claimofreductioninoutputtaxliabilitymorethanonce.-
Theduplicationofclaimsforreductioninoutputtaxliabilityinthedetailsofoutwardsuppliesshallbecommunicated to
the registered person in FORM GST MIS-1 electronically through thecommonportal.
Sections 42, 43 and 43A of the
CGST Act, 2017 have been
omitted so as to do away with
two-way communication
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process in return filing. The rule
therefore needs to be aligned
with the GSTR-1/2B/3B return
filing system.
77. Refund of interest paid on reclaim of reversals.-The interest to be refunded undersub-section(9) of Section 42
or sub-section(9) of Section 43 shall be claimed by the registeredperson in his return in FORM GSTR-3 and
shall be credited to his electronic cash ledger inFORM GST PMT-05 and the amount credited shall be
available for payment of any futureliability towards interest or the taxable person may claim refund of the
amount under Section54.
Sections 42, 43 and 43A of the
CGST Act, 2017 have been
omitted so as to do away with
two-way communication
process in return filing. The rule
therefore needs to be aligned
with the GSTR-1/2B/3B return
filing system.
79. Communication and rectification of discrepancy in details furnished by the ecommerce operator and the
supplier .-
(1) Any discrepancy in the details furnished by the operator and those declared by the supplier shall be made
available to the supplier electronically in FORM GST MIS-3 and to the e-commerce operator
electronically in FORM GST MIS-4 on the common portal on or before the last date of the month in which
the matching has been carried out.
(2) A supplier to whom any discrepancy is made available under sub-rule (1) may make suitable rectifications
in the statement of outward supplies to be furnished for the month in which the discrepancy is made available.
(3) An operator to whom any discrepancy is made available under sub-rule (1) may make suitable
rectifications in the statement to be furnished for the month in which the discrepancy is made available.
(4) Where the discrepancy is not rectified under sub-rule (2) or sub-rule (3), an amount to the extent of
discrepancy shall be added to the output tax liability of the supplier in his return in FORM GSTR-3 for the
month succeeding the month in which the details of discrepancy are made available and such addition to the
output tax liability and interest payable thereon shall bemade available to the supplier electronically on the
common portal in FORM GST MIS-3 .
Sections 42, 43 and 43A of the
CGST Act, 2017 have been
omitted so as to do away with
two-way communication
process in return filing. The rule
therefore needs to be aligned
with the GSTR-1/2B/3B return
filing system.
83. Provisions relating to a goods and services tax practitioner .- 1. Sections 42, 43 and 43A of
the CGST Act, 2017 have
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“(1) An application in FORM GST PCT-01 may be made electronically through the common portal either directly or
through a Facilitation Centre notified by the Commissioner for enrolment as goods and services tax practitioner by any
person who,
……………………………………………………………….
(8) A goods and services tax practitioner can undertake any or all of the following activities on behalf of a registered
person, if so authorized by him to-
(a) Furnish the details of outward and inwardsupplies;
(b) ………………………………………………………”
been omitted so as to do
away with two-way
communication process in
return filing. The rule
therefore needs to be aligned
with the GSTR-1/2B/3B
return filing system.
2. Consequential
Amendment: FORM GST
PCT-05 needs to be suitably
amended.
85. Electronic Liability Register.-
(1) The electronic liability register specified under sub-section(7) of Section 49 shall be maintained in FORM GST
PMT-01 for each person liable to pay tax, interest, penalty, late fee or any other amount on the common portal and all
amounts payable by him shall be debited to the said register.
(2) The electronic liability register of the person shall be debited by-
(a) the amount payable towards tax, interest, late fee or any other amount payableas perthe return furnished
bythe said person;
(b) the amount of tax, interest, penalty or any other amount payable as determinedby a proper officer in
pursuance of any proceedings under the Act or as ascertained by the said person;
(c) the amount of tax and interest payable as a result of mismatch under Section 42orSection 43 orSection
50;or
(d) any amount of interest that may accrue from time to time.
Sections 42, 43 and 43A of the
CGST Act, 2017 have been
omitted so as to do away with
two-way communication
process in return filing. The rule
therefore needs to be aligned
with the GSTR-1/2B/3B return
filing system.
89. Application for refund of tax, interest, penalty, fees or any other amount.- 1. Proviso to sub-section(1) of
Section 54 of the CGST Act,
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(1) Any person, except the persons covered under Notification issued under Section 55, claiming refund of any balance in
the electronic cash ledger in accordance with the provisions of sub-section(6) of Section 49 or any tax, interest, penalty, fees
or any other amount paid by him, other than refund of integrated tax paid on goods exported out of India, may file subject to
the provisions of rule 10B, an application electronically in FORM GST RFD-01 through the common portal, either directly
or through a Facilitation Centre notified by the Commissioner:
Provided that any claim for refund relating to balance in the electronic cash ledger in accordance with the provisions of
sub-section(6) of Section 49 may be made through the return furnished for the relevant tax period in FORM GSTR3 or FORM GSTR-4 or FORM GSTR-7, as the case may be:
………
2017 is proposed to be
amended vide Section 113 of
the Finance Act, 2022 as
under:
Provided that a registered
person, claiming refund of
any balance in the electronic
cash ledger in accordance
with the provisions of subsection(6) of Section 49, may
claim such refund in the
return furnished under
Section 39in such form
and manner as may be
prescribed.
2. Rule 89 of the CGST Rules
2017 prescribes the manner
of filing application of
refund and documents
required to be submitted
along with such application.
First proviso to sub-rule (1)
of rule 89 of the CGST
Rules, 2017 was earlier
aligned with proviso of subsection(1) of Section 54 as it
provided that the refund of
any balance in excess cash
ledger can be claimed by a
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registered person through the
return filed for the relevant
tax period. Therefore, as
proviso to sub-section(1) of
Section 54 has been
amended to provide for
filing of refund of balance in
cash ledger in such form and
manner as may be
prescribed, there appears no
need for first proviso to the
sub-rule (1) of Rule 89 of
the CGST Rules, 2017.
Further, sub-rule (1) of Rule
89 is also proposed to be
amended to provide for
filing of refund of balance in
electronic cash ledger in
FORM GST RFD-01
electronically through
common portal.
3. Consequential amendment:
Consequent to amendment in
sub-section(2) of Section 54
of CGST Act, 2017
regarding extension of time
period for filing refund
claims under Section 55
from six months to two years
the Notification No.
20/2018-CT dated 28th
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March, 2018 regarding
providing a time period of
eighteen months for filing
such refund claims may be
rescinded.
96. Refund of integrated tax paid on goods 1
[or services] exported out of India.-
………
(3) Upon the receipt of the information regarding the furnishing of a valid return in FORM GSTR-3 7
[or FORM GSTR-3B,
as the case may be;] from the common portal, 8
[the system designated by the Customs or the proper officer of Customs, as
the case may be, shall process the claim of refund in respect of export of goods] and an amount equal to the integrated tax
paid in respect of each shipping bill or bill of export shall be electronically credited to the bank account of the applicant
mentioned in his registration particulars and as intimated to the Customs authorities.
Sections 42, 43 and 43A of the
CGST Act, 2017 have been
omitted so as to do away with
two-way communication
process in return filing. The rule
therefore needs to be aligned
with the GSTR-1/2B/3B return
filing system.
FORM GSTR-1A, GSTR-2 AND GSTR-3 TO BE OMITTED. Sections 42, 43 and 43A of the
CGST Act, 2017 have been
omitted so as to do away with
two-way communication
process in return filing. The
relevant forms therefore needs
to be aligned with the GSTR1/2B/3B return filing system.
FORM GST PCT-05
[See rule 83(6)]
Authorisation / withdrawal of authorisation for Goods and Services Tax Practitioner
Sections 42, 43 and 43A of the
CGST Act, 2017 have been
omitted so as to do away with
two-way communication
process in return filing. The
relevant forms therefore needs
to be aligned with the GSTRAgenda for 48th GSTCM Volume 1

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To
The Authorised Officer
Central Tax/State Tax.
PART-A
Sir/Madam
I/We <Name of the Proprietor/all Partners/Karta/Managing Directors and whole time Director/Members of Managing
Committee of Associations/Board of Trustees etc.) do hereby
1. *solemnly authorise,
2. *withdraw authorisation of
----------- (Name of the Goods and Services Tax Practitioner), bearing Enrolment Number-------- for the purposes of Section
48 read with rule 83 to perform the following activities on behalf of -------- (Legal Name) bearing << GSTIN - >>:
Sr.
No.
List of Activities Check box
1. To furnish details of outward and inward supplies
2. To furnish monthly, quarterly, annual or final return
3. To make deposit for credit into the electronic cash ledger
4. To file an application for claim of refund
1/2B/3B return filing system.
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1
Inserted vide Notf no. 03/2019-CT dt. 29.01.2019wef 01.02.2019
5. To file an application for amendment or cancellation of registration
[6 To furnish information for generation of e-way bill
7 To furnish details of challan in FORM GST ITC-04
8 To file an application for amendment or cancellation of enrolment under
rule 58
9 To file an intimation to pay tax under the composition scheme or
withdraw from the said scheme.]1
2. The consent of the ---------- (Name of Goods and Services Tax Practitioner) is attached herewith*.
*Strike out whichever is not applicable.
Signature of the authorised signatory
Name
Designation/Status
Date
Place
Part -B
Consent of the Goods and Services Tax Practitioner
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I <<(Name of the Goods and Services Tax Practitioner>>< Enrolment Number> do hereby solemnly accord my consent to
act as the Goods and Services Tax Practitioner on behalf of ------ (Legal name), GSTIN ……….. only in respect of the
activities specified by ------ (Legal name), GSTIN ………..
Signature
Name
Date Enrolment No.
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Agenda Item 3: Recommendations of the Fitment Committee for the consideration of the GST
Council
This agenda note deals with proposals regarding GST rates on supply of goods and services. The
proposed changes in GST rates emanate from the recommendations made by the Fitment Committee.
2. Briefly stated, representations/recommendations have been received from various
stakeholders including Ministries and other offices of Centre and States, seeking changes in GST
rates and certain clarifications regarding GST rates applicable on supply of certain goods/services.
3. The Fitment Committee met on 12th & 23rd September, 2022 and 28th October, 2022 and had
detailed discussions on recommendations received from various stakeholders seeking changes in
GST/IGST rates or seeking clarification on supply of goods/services. After examination, the Fitment
Committee has recommended changes in GST rates or issue of clarification, in relation to certain
goods and services. Further, the Fitment Committee has recommended no change in respect of certain
goods and services. On certain issues, Fitment Committee was of the view that further examination
would be required before making any recommendation to the GST Council.
4. Accordingly, Fitment Agenda for consideration of the GST Council is summarised as below:

a) Recommendations made by the Fitment Committee for making changes in GST rates or
for issuing clarifications in relation to goods – Annexure-I
Annexure – I
S. No Description/HSN Present
GST rate
Requested GST
rate
Comments
1. Pencil Sharpener
(Educational
Product)
18% 12%
1. As suggested by GoM on Rate rationalization,
based on the recommendation of 47th GST
Council Meeting, GST rate on Pencil
Sharpeners (falling under CTH 8214) was
increased from 12% to 18%. Accordingly,
entry 188 in Schedule II (12%) was omitted.
8214: Paper Knives, Pencil sharpeners and
blades thereof.
2. However, while examining the current request,
it was seen that Pencil Sharpeners continued to
attract 12% under Sr. No. 180 of Schedule II as
below:
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S. No Description/HSN Present
GST rate
Requested GST
rate
Comments
Product
(CTH)
GST Rate Sr. No. of
Notification No.
1/2017-Central Tax
(Rate)
Pencils
(9608)
12% Sr. No. 233 of
Schedule II
Erasers
(4016)
5% Sr. No. 191 of
Schedule I
Pencil
Sharpeners
(7310 or
7326)
12% Sr. No. 180 of
Schedule II
Pencil
Sharpeners
(8214)
18% Sr. No. 302A of
Schedule III
Pencil Box
including
pencils,
erasers and
sharpeners
12%/18%
(based on
the
classificati
on of
pencil
sharpeners)
Mixed Supply
3. Pencil Sharpeners mentioned at Entry 180 of
Schedule-II (7310 or 7326) still mentioned in
Schedule II (GST rate of 12%) says :
7310 or 7326 : Mathematical boxes,
geometry boxes and colour boxes,
pencil sharpeners
4. According to HSN, Pencil Sharpeners are
mentioned specifically in classification under
HS Code 8214 10 10. (for which rate has been
increased to 18%).
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S. No Description/HSN Present
GST rate
Requested GST
rate
Comments
5. Entry in tariff is 82141010 ---paper knives,
letter openers, erasing knives, pencil
sharpeners
6. While not recommending reduction in rate,
Fitment Committee recommends that the
inconsistency in this regard may be removed
by deleting the entry of Pencil Sharpeners
from Sr. No. 180 ( 7310 or 7326) of Schedule
II of GST Rate Notification No. 1/2017-
Central Tax (Rate).
2. By-products of
milling of
Dal/Pulses like
Khanda, Churi
(also known as
Chuni), Chilka
- Reconsider the
clarification issued
vide Para 8 of
Circular No.
179/11/2022-GST
dated the 3rd
August, 2022.
1. The matter was brought for deliberation in the
Fitment Committee (FC) of Officers meeting,
held before the 47th GST Council Meeting. The
FC had recommended that a suitable
clarification may be issued that by-products of
milling of Dal/ Pulses such as Chilka, Khanda
and Churi are used as cattle feed ingredient and
attract GST at the rate of 5% and that in view of
the prevailing multiple interpretations, recovery
on account of this issue for past periods, may
not be insisted upon.
2. Further, it was deliberated in the said FC
meeting that the differential GST rates on
animal feed ingredients (attract GST as per
specific HS Code and the applicable GST rate
thereof, primarily at 5%) and animal feed
(attracts GST exemption) has been subject to a
lot of litigation (like Fishmeal, Meat cum Bone
Meal, DDGS, etc.) and thus, a uniform rate of
5% on the entire Chapter 23 (except dog or cat
food falling under CTH 2309) may help to
address the issue.
3. In line with this logic, the Fitment Committee
had recommended that the GoM on Rate
Rationalization may consider uniform GST rate
of 5% on all items in Chapter 23 (with
exception of dog or cat food).
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S. No Description/HSN Present
GST rate
Requested GST
rate
Comments
4. In the 47th GST Council Meeting, the
recommendation of FC to the extent of issuance
of clarification, as detailed above, was accepted.
With regards to the proposal regarding rate
rationalization of entire chapter 23 to 5%, as per
its Interim Report, the GoM on Rate
Rationalization had not recommended any
increase in rate on the animal feeds falling under
Chapter 23, at this stage.
5. Now, certain representations have been received
post issuance of the above-mentioned Circular
that these items are also directly used as Cattle
feed and they are covered within the ambit of
the Entry at S. No. 102 of Notification No.
2/2017-Central Tax (Rate), dated the 28th
June,
2017, which inter alia provides GST exemption
to goods with description supplement & husk of
pulses, concentrates & additives, falling under
heading 2302 and 2309.
6. Accordingly, there is dual use of these products
with differential GST rate [that is, Nil-when
supplied as cattle feed and 5%- when supplied
as cattle feed ingredients]. Thus, the
administration of the levy would be difficult and
so would be compliance on the part of the
millers.
7. Till the GoM on Rate Rationalisation takes a
view on the rationalisation of rates under
Chapter 23, in order to have clarity and avoid
confusion amongst the concerned suppliers
regarding the GST rate on the supply of subject
goods and for the ease of administration of the
levy, they may be exempt from GST,
irrespective of its end use. This can be done by
creating an entry for subject goods in the GST
Rate Notifications as the ultimate burden of cost
of cattle feed would fall primarily on farmers,
and it may not be practically possible to
determine the exact proportion of total supply
that goes directly as cattle feed.
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S. No Description/HSN Present
GST rate
Requested GST
rate
Comments
8. Fitment Committee recommends that the
relevant entries in the Notification may be
amended/inserted as under:
Entry/
Notification
No./CTH
Description GST
rate
S. No. 102 of
Notification
No. 2/2017-
Central Tax
(Rate) dated
28.6.2017
(2301,2302,2
308
2309)
Aquatic feed including
shrimp feed and prawn
feed, poultry feed & cattle
feed, including grass, hay
& straw, supplement &
husk of pulses,
concentrates & additives,
wheat bran & de-oiled
cake [other than rice bran]
Nil
S. No. 102 C
of
Notification
No. 2/2017-
Central Tax
(Rate) dated
28.6.2017
2302, 2309
Husk of pulses including
chilka and concentrates
including chuni/churi,
khanda
Nil
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S. No Description/HSN Present
GST rate
Requested GST
rate
Comments
S. No. 103A,
Schedule -I of
Notification
No. 1/2017-
Central Tax
(Rate) dated
28.6.2017
2302
Bran, sharps and other
residues, whether or not
in the form of pellets,
derived from the sifting,
milling or other working
of cereals or of
leguminous plants [other
than i) aquatic feed
including shrimp feed and
prawn feed, ii) poultry
feed and cattle feed,
including grass, hay &
straw, supplement &
additives, iii) husk of
pulses including chilka,
iv) concentrates
including chuni/churi,
khanda, v) wheat bran,
vi) de-oiled cake]
5%
9. Fitment Committee also recommends that a
clarification be issued to regularise the
matter of the intervening period on as is basis
from the date of issuance of last Circular
(that is, consequent to 47th GST Council
Meeting ) on account of genuine doubts.
3. SUV Cars - Clarification on the
rate of GST
compensation cess
applicable on the
supply of SUVs in
the light of
ambiguity between
the Entries in the
Table appended to
the Notification
No. 5/2017-
Compensation Cess
(Rate) dated
11.09.2017 for
HSN 8703 and the
recommendations
of the Goods and
Services Tax
1. The GST Council in its 21st Meeting held in
Sept, 2017 had recommended a higher rate of
compensation cess of 22% for SUVs.
2. The exact extract of the decision is reproduced
as below:
“The Council approved the increase in the
rate of Compensation Cess for the following
categories of motor vehicles:
i. Sports Utility Vehicles (SUVs) (of length
more than 4-metre, engine capacity more
than 1500cc and ground clearance 170 mm):
To increase the rate of cess from the present
15% to 22%.”
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S. No Description/HSN Present
GST rate
Requested GST
rate
Comments
Council, made in
21st GST Council
meeting held on
09.09.2017.
3. After the above recommendation of the GST
Council, the Entry No. 52B of Compensation
Cess rate Notification 1/2017-Compensation
Cess (Rate) dated 28.06.17(as amended) reads
as under:
S.no Heading Description Rate of
compensation
cess
52B 8703 Motor
vehicles of
engine
capacity
exceeding
1500cc,
popularly
called as
Sports Utility
Vehicles
(SUVs)
including
utility
vehicles.
Explanation. –
For the
purposes of
this entry,
SUV includes
a motor
vehicle of
length
exceeding
4000mm and
having ground
clearance of
170mm and
above
22%
4. Briefly by way of background, the levy of
higher excise duty on SUVs was brought in the
Finance Act, 2013, where the basic excise duty
rate was increased for SUVs qualifying some
conditions.
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S. No Description/HSN Present
GST rate
Requested GST
rate
Comments
5. This was done by inserting an Entry No. 284A
in the Central Excise Tariff as below:
S.no Heading Description Rate
284A 8703 Motor vehicles of
engine capacity
exceeding 1500cc,
popularly called as
Sports Utility
Vehicles (SUVs)
including utility
vehicles.
Explanation. – For
the purposes of this
entry, SUV includes
a motor vehicle of
length exceeding
4000mm and
having ground
clearance of
170mm and above
30%
6. Thus, the current entry for Compensation cess in
the GST regime is the same as entry in erstwhile
Central Excise regime. The term SUV has not
been defined, only an explanation has been
provided in the above entries.
7. Thereafter based on request of the industry for
clarification on the category of vehicles that
would be covered by the said entry, the Board
(CBEC) issued Circular No. 972/06/2013/CX
dated 24.07.2013 whereby it has in the context
of Entry 284 A clarified inter alia that a higher
rate of tax is applicable on motor vehicles which
are popularly known as SUVs and which satisfy
all the other three conditions , viz.(i) the engine
capacity exceeds 1500cc,(ii) the length exceeds
4000 mm; and (iii) the ground clearance is 170
mm and above.
8. In the GST regime, a similar issue has arisen as
to whether ALL four conditions viz. engine
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S. No Description/HSN Present
GST rate
Requested GST
rate
Comments
capacity 1500 cc, popularly known as SUV,
length exceeding 4000mm and ground
clearance 170 mm as discussed above need to
be satisfied, for levying higher cess rate as per
Entry 52B, OR the conditions in Explanations
are optional?
9. As the recommendations of the Council (S.N. 2
above) was for levying cess at higher rate for
the vehicles satisfying all conditions, a
clarification may be issued (on similar lines as
done earlier in 2013) to clarify that all four
conditions need to be fulfilled for a motor
vehicle to be eligible for levying a higher
compensation cess rate of 22% as per entry 52B.
10. Fitment Committee recommends that a
clarification may be issued
4. Mentha Oil 1. Mentha namely
Menthol
Mint/Japanese
Mint
(Botanical
Name- Mentha
arvensis) needs
to be included
in the
Notification No
10/2021 CTR
dt 30.09.2021
under HSN
Code
33012590
(Others)
2. Fitment
Committee
may deliberate
on the
necessity of
issuance of
Corrigendum
to Notification
No 10/2021
CTR dt
30.09.2021 to
1. Interim Report of the Group of Ministers (GoM)
on capacity-based taxation and special
composition scheme for certain sectors was
placed before the GST Council in its 45th
Meeting, held on 17.09.2021. One of the
categorical recommendations in the Interim
Report was for introducing the payment of GST
liability under Reverse Charge Mechanism
(RCM) on the supply of Mentha Oil, at the first
stage of the supply, in terms of modalities
worked out by Uttar Pradesh.
2. Accordingly, the RCM was duly notified for
supply made by any unregistered person to any
registered person for the following goods:
HS Code Description of goods
33012400,
33012510,
33012520,
33012530,
33012540
Following essential oils other than
those of citrus fruit namely: -
a)Of peppermint (Mentha
piperita);
b)Of other mints : Spearmint
oil (ex-mentha spicata), Water
mint-oil (ex-mentha aquatic),
Horsemint oil (ex-mentha
sylvestries), Bergament oil
(ex-mentha citrate)
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S. No Description/HSN Present
GST rate
Requested GST
rate
Comments
incorporate
Menthol
Mint/Japanese
Mint
(Botanical
Name- Mentha
arvensis) under
RCM
3. Now, a request has been made to also include
Mentha arvensis, classifiable under HSN Code
3301 25 90, under Reverse Charge Mechanism.
4. Fitment Committee recommends to include
Mentha arvensis, classifiable under HSN
Code 3301 25 90, under Reverse Charge
Mechanism.
5. Fruit Pulp or fruit
juice based drinks
with Carbondioxide added as a
“Preservative /
Additive”
(i) Clarification
on applicable
GST rate and
6/8-digit HS
Code on fruit
Pulp or fruit
juice based
drinks with
Carbon-dioxide
added as a
“Preservative /
Additive”;
(ii) Lower GST
levy for these
beverages may
be considered
given that it
contains at
least 5% fruits
content.
1. In the 45th GST Council meeting, a separate
entry was created for carbonated beverages,
under heading 2202. The goods with description
‘Carbonated Beverages of Fruit Drink’ or
‘Carbonated Beverages with fruit Juice’ are
covered under Sl. No. 12B of Schedule –IV of
Notification No. 1/2017- CT(R) & Entry at Sl.
No. 4B of Notification No. 1/2017- CC(R)
respectively attracting 28% and 12% duty.
Fitment Committee recommended that 2202
99 is the appropriate 6-digit code and that the
request for lower GST rate may not be
accepted.
2. Through representations, it has been brought to
notice that few suppliers are still clearing their
products under “Fruit pulp or fruit juice based
drinks” @ 12% vide entry at Sl. No. 48 of
Schedule –II of Notification No. 1/2017- CT(R)
though they contain carbon dioxide also. The
intention of the GST Council was always to tax
these products at 40% as long as they contain
carbon dioxide irrespective of whether it is used
as a preservative, additive etc.
3. Thus, in order to make it amply clear and
remove any ambiguity Fitment Committee
recommended an exclusion in the entry at Sl.
No. 48 of Schedule –II of Notification No.
1/2017-CT(R) as below:
Fruit pulp or fruit juice based drinks excluding
‘carbonated beverages of fruit drink’ or
‘carbonated beverages with fruit juice’
6. Rab (Rab-Salawat) - To clarify the 1. Under the UP Rab (Movement Control Order)
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S. No Description/HSN Present
GST rate
Requested GST
rate
Comments
classification and
appropriate rate of
Rab (RabSalawat)
1957, rab has been defined as: “rab means
massecuite prepared by concentrating sugar
Juice on open pan furnaces, and includes Rab
Galawat and a Salawat, but does not include
Khandsari molasses or Gur”
2. Under present classification, ‘cane or beet sugar
and chemically pure sucrose, in solid form’ is
classified under 1701.
3. Though a product of sugarcane, Rab(salawat)
being in liquid or semisolid form therefore does
not qualify to be classified under HSN 1701.
4. In addition, the chemical composition of
Rab(salawat) is different from that of Molasses
and hence it is not classifiable under HSN 1703.
5. The Fitment Committee recommended to
clarify that Rab (Rab-Salawat) falls under
HSN 1702 attracting 18% GST.
7. Salted products
manufactured using
the process of
extrusion;
Fried and salted
Fryums (Pellets)
Issuance of
clarification
regarding fryums
manufactured using
the process of
extrusion.
1. The instant classification dispute is between the
following two entries:
Entry and
HSN
Description Rate
(%)
S. No. 46
of
ScheduleII of
Notificatio
n No.
1/2017-
Central
Tax (Rate)
[2106 90]
Namkeens, bhujia,
mixture, chabena and
similar edible
preparations in ready for
consumption form [other
than roasted gram], prepackaged and labelled
12
S. No. 16
of
ScheduleIII of
Notificatio
n No.
1/2017-
Central
Tax (Rate)
[1905]
Pastry, cakes, biscuits and
other bakers’ wares,
whether or not containing
cocoa; communion wafers,
empty cachets of a kind
suitable for pharmaceutical
use, sealing wafers, rice
paper and similar products
[other than pizza bread,
khakhra, plain chapatti or
roti, bread, rusks, toasted
bread and similar toasted
18
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S. No Description/HSN Present
GST rate
Requested GST
rate
Comments
products]
2. CTH 19.05 includes extruded products, savoury
or salted.
3. The Fitment Committee recommended to
clarify that the item fryums manufactured
using the process of extrusion will attract
GST @ 18% (CTH 1905)
8. IGST rate on items
imported for
Petroleum
Operations under
Notification No.
3/2017-Integrated
Tax (Rate)
- Clarification
sought on
applicable IGST
rate on items
imported for
Petroleum
Operations under
Notification No.
3/2017-Integrated
Tax (Rate)
1. The GOM has, in its interim report, taken a
decision to prune the exemptions on
manufactured items under rate rationalization as
it felt that these concessions cause duty
inversion and affect domestic capacity
adversely. It also results in accumulation of
Input Tax Credit and gives rise to refunds.
2. On similar rationale, the 45th Council had
revised the GST rates of new and renewable
energy items like solar panel, solar cell, wind
turbines, hydro plants, waste to energy
equipment. The rate was revised w.e.f.
1.10.2021 from 5% to 12%. Further, inputs
services which constitute major cost for such
exploration attract GST at the rate of 12%.
3. Notification No. 3/2017-Integrated Tax (Rate)
specifically provided concessional rate of GST
@5% for goods of all chapters and as per the list
specified which were imported for petroleum
operations. Based on the GoM report, the said
Notification was amended by Notification No.
8/2022-Integrated Tax (rate), to increase the
IGST rate from 5% to 12%. The intent of such
rate increase was to correct duty inversion to
some extent on those items in the specified list
which attract higher GST rates.
4. However, certain goods in the specified list, by
virtue of their entry in Schedule I of Notification
No. 1/2017-Integrated Tax (Rate) continue to
attract the lower GST rate @5% For eg., certain
dual-use products which are also used for
petroleum operations such as Light-vessels,
fire-floats, dredgers, floating cranes and other
vessels attract 5% GST while other dual-use
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S. No Description/HSN Present
GST rate
Requested GST
rate
Comments
products like organic chemicals attract 18%
GST.
5. Accordingly, exemption Notification No.
3/2017- Integrated Tax (Rate) provides a
concessional rate @12% to those products
which are at higher rate of GST (i.e. 18% in this
case) if these goods are imported for Petroleum
operations.
6. Fitment Committee recommends that a
clarification may be issued that a taxpayer
can claim the lower rate for specific items as
given in the Schedule.
9. Ethyl alcohol
supplied to
refineries for
blending with
motor spirit (petrol)
18% 5% 1. National Policy on Biofuels – 2018, provides an
indicative target of 20% ethanol blending under
the Ethanol Blended Petrol (EBP) Programme
by 2030.
2. Further, during the Budget exercise of 2022-23,
additional Basic Excise Duty @ Rs. 2 per litre
was levied on Unblended Petrol and Unblended
Diesel to promote blending in petrol and diesel
in the country.
3. At present, concessional GST rate of 5% is
available only to Oil Marketing Companies
(OMCs) like IOCL, BPCL and HPCL under
Schedule I of Notification No. 1/2017-Central
Tax (Rate) dated 28.6.2017.
S No. Chapter Description
102A 2207 Ethyl alcohol supplied
to Oil Marketing
Companies for blending
with motor spirit (petrol).
4. Keeping in view of the implementation of the
Ethanol Blending Programme, and since
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S. No Description/HSN Present
GST rate
Requested GST
rate
Comments
concessional GST benefit is already given to
OMCs for blending ethanol with petrol, the
proposal is to provide the same concessional
GST rate of 5% on ethanol supplied to
standalone petroleum refineries as well for
blending with petrol in order to provide a level
playing field.
5. Fitment Committee recommends that the
entry 102A of Schedule I may be amended to
include refineries in addition to Oil
Marketing Companies.

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b) Issues where no change has been proposed by the Fitment Committee in relation to
goods – Annexure-II
Annexure-II
S.
No
Description/HSN
Present
GST
rate
Requested GST rate Comments
1. Water Pump sets 18% 12% 1. Based on the report of Group of Ministers
on Rate Rationalization, the GST Council,
in its 47th meeting, recommended to
increase GST on ‘Submersible & Mono
Block Pumps’ (falling under HS Code
8413) from 12% to 18%, with effect from
18.07.2022, in order to lower the embedded
costs of Input Tax Credits (ITC)
accumulated due to inverted duty structure
prevalent on these goods and thereby to
promote their domestic manufacturing.
2. Fitment Committee recommends that
status quo may be maintained.
2. (a) Milling
Machinery for
cereals (8437)
(b) Kitchen ware
(82119200)
(c) Spoon
(82159900)
18%
18%
5%
(not more than 8%)
12%
1. Based on the report of Group of Ministers on
Rate Rationalization, the GST Council, in its
47th meeting, recommended to increase GST
on :
(a) ‘Machines for cleaning, sorting or grading
seed, grain or dried leguminous vegetables;
Machinery used in milling industry or for
the working of cereals or dried leguminous
vegetables other than farm type
machinery..’ from 5% to 18%,

(b) Kitchen and table ware from 12 to 18%
-with effect from 18.07.2022, in order to lower
the embedded costs of Input Tax Credits (ITC)
accumulated due to inverted duty structure
prevalent on these goods and thereby to
promote their domestic manufacturing.
2. Fitment Committee recommends that status
quo may be maintained.
3. Gold
(7108)
3% Reduce GST 1. GST on Gold (falling under HS Code 7108) and
Silver (7106) has been kept at the lower rate of
3% since the introduction of GST on
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S.
No Description/HSN
Present
GST
rate
Requested GST rate Comments
Silver
(7106)
01.07.2017.
2. Fitment Committee recommends that status
quo may be maintained.
Diamonds
(7102, 7104)
0.25% /
1.5%
Reduce GST 1. GST Council, in its 47th meeting,
recommended to increase GST on Cut &
Polished Diamonds (falling under HS Code
7102 29, 7102 39 10, 7104 91 00) from 0.25%
to 1.5% in order to lower the embedded costs of
Input Tax Credits (ITC) accumulated due to
inverted duty structure prevalent on these
goods.
2. GST on rough diamonds (falling under HS
Code 7102 21, 7102 31 00 & 7104 21 00) has
been kept at lower rate of 0.25%.
3. Fitment Committee recommends that status
quo may be maintained.
4. (a) Printing Paper
by newspaper
agencies
(Newsprint)
[CTH 4801]
(b) Printing paper
for books
(uncoated copier
paper) [CTH
4802]
5%
12%
1. Remove GST on
Printing paper
2. Create
differentiation
between RNI
(Registrar of
Newspaper of
India) registered
and unregistered
agencies at the
time of purchasing
printing papers.
3. Provide incentive
to printing paper
manufacturing
units that
manufacture
quality paper from
cellulose fibres.
1. Newsprint, in rolls or sheets, attract a GST rate
of 5% under S. N. 199, Sch 1 of 1/2017-CT(R)
irrespective of purchase by Registrar of
Newspaper of India (RNI) registered or
unregistered agencies.

2. Uncoated paper and paperboard, of a kind used
for writing, printing or other graphic purposes
etc. attract a GST rate of 12% under S. N. 112,
Sch 2 of 1/2017-CT(R)
3. The GST rate of 5% on newsprint and 12% on
uncoated copier paper was prescribed in the
14th GST Council meeting considering all
factors including pre-GST tax incidence and
consumption base and the rates remain
unchanged since the implementation of GST
from 1st July, 2017.
4. The raw materials for newsprint attract a GST
rate of 12% (different kinds of pulp) or 5%
(waste paper). Thus, a reduction of GST rate to
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S.
No Description/HSN
Present
GST
rate
Requested GST rate Comments
NIL will lead to inverted duty structure in the
industry and may lead to distorting tax
structure.
5. Fitment Committee recommends that Status
quo may be maintained.
5. Components of
Battery Energy
Storage System
(BESS)
1. Li-ion Batteries
(85076000)
2. Lithium Ion
Battery
Module(Li ion)
with BMS &
Racks (8507)
3. Rack Level
BMS (853720)
4. Battery
Container
(73090090)
5. PCS (85044010)
6. LT Power &
Control Cable
7. AC Cable
(85446090)
8. 33 KV Step Up
Inverter Duty
Transformer
(85049090)
9. Aux
Transformer
(85049010)
10. 33 KV
Switchgear
(85351040)
11. DCDB &
ACDB
(85371000)
12. Fire fighting
System
(84241000)
13. HVAC System
Applica
ble rate
5%
concessions shall be
applicable for power
sector till 31st March,
2025 or till
commencement of
production of batteries
under PLI scheme for
advanced chemistry
cell (ACC) Battery
Storage, whichever is
earlier.
1. While the GST rate on batteries/electric
accumulators is 28%, Lithium ion batteries
attract a lower GST rate of 18%.
2. Reducing the GST rate to 5% would lead to
inversion and also potential misclassification
due to excessive rate differential.
3. Items numbered 3 to 13 are general electronic/
electrical items on which application of lower
GST rate would lead to an end-use based
concessional rate.
4. Such end-use based concessional GST rates
lead to distortion and are difficult to monitor.
5. Therefore, in order to avoid inversion and not
create distortions, the GST rate may be left
unchanged for these items.
6. Fitment Committee recommends that GST
rate may be left unchanged for these items.
6. Parts and
accessories of
aircraft and aircraft
engines.
Applica
ble rate
12/18/2
8%
MoCA has requested
for a uniform GST rate
@5% (from the
applicable rate for the
1. As recommended by the GST Council in its
23rd Meeting, 5% IGST rate has been
prescribed for aircraft engines, tyres and seats.
Specific parts (for aircraft) falling under
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S.
No Description/HSN
Present
GST
rate
Requested GST rate Comments
list of 611 parts and
accessories of aircraft
and aircraft engines.
heading 8807 also attract 5% IGST (Sl. No. 245
of Schedule I of IGST Rate Notification).
2. However other parts including consumable
items attract applicable GST (12%-18%).
3. ‘Parts, testing equipment, tools and tool-kits for
MRO activities for aircrafts’ attract Nil BCD
rate when imported by MRO operators
registered with the DGCA. This exemption
from BCD is available on all parts and
equipment (whether designed for exclusive use
with aircrafts or otherwise). However, IGST is
payable on such imports at the applicable rate
as mentioned in para (i) above.
4. An inter-Ministerial meeting was held on 25th

February,2022 to discuss matters related to
aviation industry.
5. Against this backdrop, the Ministry of Civil
Aviation (MoCA) had given a list of more than
30,000 parts for uniform rate of 5% GST rate.
6. This request was examined in the recently held
47th GST Council Meeting and was not
accepted.
7. Thereafter, MoCA has submitted a pruned
down list of 611 high value items.
8. As per MoCA, the total value of imports in FY
2019 and 2020 is approx. USD 1.011 Billion.
Thus, any GST rate reduction would entail
substantial revenue implication.
9. Further, the list of parts has generic items like
Starter, Unit, and Display Unit etc. Giving an
end-use based exemption would has its
implementation issues and also gives impetus to
misclassification tendencies.
10. Additionally, currently domestic industry is not
much engaged in the manufacturing of such
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S.
No Description/HSN
Present
GST
rate
Requested GST rate Comments
parts. So, if concessional IGST at 5% is applied
to such parts, there would be no incentive for
the domestic industry to develop since it would
be cheaper to import such parts rather than
producing them domestically.
11. Fitment Committee recommends that status
quo may be maintained.
7. LD Slag 18% 5% 1. LD slag is used in Cement industry. Cement
attracts GST@ 28%.
2. Cement manufacturers will get ITC for GST
paid on purchase of LD slag.
3. Benefits of lower GST rates on slag will be
garnered by slag producer and the cement
industry will have no major impact.
4. In order to achieve the larger goal of a single
rate GST, it may not be appropriate to tweak
GST rates of goods which are already at 18% or
below and therefore, there is no rationale for
further reduction in rate.
5. Fitment Committee recommends that status
quo may be maintained.
8. FTTH (Fibre To The
Home) equipment
and related services
used for fixed line
internet/broadband
18% Exempt or Reduce
GST to 5%
1. The goods specified by the Department of
Telecommunications as equipment used in
providing FTTH connections are falling under
the Chapter 39, 85 and 90 (viz. CTH 3917,
8517, 8529,8536,8544).
2. The specified goods (around 160 items) are
general electronic items like routers,
connectors, splitters, cables, cords, switches,
adapters, Pole mount kit, hot dipped galvanised
pole, anchoring clamp, cables, plug for duct,
telephone set etc, which can be used for FTTH
and other telecommunication systems as well.
3. Waiving off or prescribing a 5% GST rate on
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S.
No Description/HSN
Present
GST
rate
Requested GST rate Comments
these goods would create an inverted duty
structure.
4. Further, providing a concessional rate for these
items for use in FTTH connections leads to
end-use based exemption which is distortionary
in nature and prone to misuse.
5. Fitment Committee recommends that status
quo may be maintained.

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c) Issues deferred by the Fitment Committee for further examination in relation to goods –
Annexure-III
Annexure-III
S.No. Commodity GST
Rate
Request/
Requested GST Rate
Comments
1 Khari, Cream
Rolls [Bakery
products] (HS
1905)
It is requested to clarify that
Khari and Cream Roll should
get covered under “similar
toasted products”, which
attracts 5% GST rate
1. Currently, concessional GST rate of 5% is
applicable on Rusks, toasted bread and
other toasted products falling under tariff
item 19054000.
2. Bakery products such as Pastry, Cake,
Biscuits, Communion Wafers, etc. [other
than pizza bread, khakhra, plain chapatti or
roti, bread, rusks, toasted bread and similar
toasted products], falling under CTH 1905,
attract GST rate of 18%.
3. Fitment Committee examined the issue
before the 47th GST Council Meeting and
observed that further details regarding the
nature of product, process of preparation is
required before making any suggestions.
Accordingly, the matter was deferred by
the 47th GST Council for further
examination.
4. Maharashtra asked for time to make a
presentation.
The Fitment Committee decided to defer
this matter.
2. Heavy
feedstock,
Vacuum Gas
Oil
(VGS) /
Reformates,
etc [27]
18% Nil (1) The main refinery products namely, petrol,
diesel and ATF are outside purview of
GST, while GST is levied on other refinery
products including intermediate streams
that are shared between refineries.
(2) As informed, feedstock is cheaper than
crude while being a viable option to crude
oil, easy availability of heavy feedstock
will lead to better capacity utilization of
refineries and revenue implication for
OMCs is only around Rs. 321 crores.
(3) Customs duty on these items, including
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S.No. Commodity GST
Rate
Request/
Requested GST Rate
Comments
straight run fuel oil, low sulphur wax
residue, vacuum residue, slurry, vacuum
gas oil, etc was reduced to 2.5% during
Budget in Feb, 2022.
(4) Fitment Committee discussed the issue and
noted that further clarity is needed on the
matter regarding the intended use, capacity
utilization potential and benefits accruing
from the item. It was proposed that
additional inputs may be sought from the
Ministry of Petrol and Natural Gas.
Accordingly, the matter was deferred until
further inputs are provided.
(5) Inputs have been sought from Ministry of
Petroleum and Natural Gas (MoPNG) but
the inputs/comments are awaited.
The Fitment Committee decided to defer
this matter as inputs are still awaited from
MoPNG.

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d) Recommendations made by the Fitment Committee for making changes in GST rates or
for issuing clarifications in relation to services – Annexure-IV
Annexure – IV
Sr.
No.
Proposal Details of Request Discussions in FitCom and its recommendation
1. To extend validity of
GST exemption on
Viability Gap Funding
(VGF) paid to Selected
Airline Operators
(SAOs) for operating
flights under Regional
Connectivity Scheme
(RCS) for further
period.
Ministry of Civil Aviation (MoCA)
has undertaken Policy Reforms and
Financial Relief Measures to SAOs
for RCS -UDAN routes.
Under these reforms, all
concessions available on RCS -
UDAN routes, available to SAOs
for 3 years, were extended for an
additional period during which
operations were suspended due to
COVID under any orders of the
Central or State Government or UT
administration.
With the extension of all the
concessions to SAOs, GST
concession on VGF is also required
to be extended for an additional
period.
Sr. No. 16 of Notification No. 12/2017-CTR
exempts services provided to the Central
Government, by way of transport of passengers,
by air, embarking from or terminating at an RCS
airport, against consideration in the form of VGF.
This exemption is applicable for a period of 3
years from the date of commencement of
operations of the RCS airport notified by MoCA.
This exemption has been carried forward from ST
regime.
However, the exemption has become superfluous
in GST regime as Section 15(2) sub-clause (e)
excludes subsidies provided by Central and State
Government.
Therefore, it may be conveyed to MoCA, that
subsidy in the form of VGF paid by government
to airlines for operating RCS flights is not taxable
in terms of the said provision of CGST Act, 2017.
They may advise airlines accordingly.
2. Omission of the Entry
23A of Notification No.
12/2017-CTR dated
28.06.2017 which
provides exemption to
the service by way of
access to a
road or a bridge on
payment of annuity.
Hon'ble High Court of Karnataka
has set aside Circular
No.150/06/2021-GST dated
1.06.2021 citing that it overrides
the Notifications No.32/2017 -CTR
dated 13.10.2017. It has also
observed that the entry 23A of
Notification No.32/2017 -CTR
dated 13.10.2017 in a way, exempts
services of construction of road,
where the consideration is paid in
the form of annuity.
Entry 23A of Notification No. 12/2017-CTR
dated 28.06.2017 exempts services, by way
of providing access to a road or a bridge, against
consideration in the form of annuity.
Based on recommendations of the 43rd GST
Council, it was clarified vide Circular No.
150/06/2021-GST dated 1.06.2021 that “Entry
23A of Notification No. 12/2017-CT(R)does not
exempt GST on the annuity (deferred payments)
paid for construction of roads.”
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Sr.
No.
Proposal Details of Request Discussions in FitCom and its recommendation
The Hon’ble High Court has held that entry 23A
of Notification No. 12/2017-CT(R) covers
services of construction of road where
consideration is paid in the form of annuity.
Entry 23A is ambiguous and serves no purpose.
Annuity is paid for construction of road and not
for allowing access to road. Access to road or
bridge is allowed against consideration in the form
of toll which is exempt under entry at Sr. No. 23.
Entry 23A may be omitted to prevent its misuse.
The decision of Hon’ble Karnataka High Court
may be challenged in Supreme Court.
3. Whether revenue
apportioned by Indian
Railways (IR) to SPVs
and O&M costs
charged by Indian
Railways from SPVs
attract levy of GST?
It has been submitted that Ministry
of Railways (MoR) has been giving
lot of thrust on expanding its
existing network, through the
private participation including PPP
initiatives. There are presently 10
SPVs, which have become part of
the Indian Railway system on
concession basis mainly for the
first mile and last mile connectivity
and there are many more in the
pipeline.
For any train, originating or
terminating on the lines built by
SPVs, the revenue is collected by
Railways from the customer as
single entity for the whole distance
and proportionate revenue is passed
on to SPVs by
IR. Under the Service Tax regime,
Traffic earnings are subjected to
levy of Service Tax at its
originating stage. Apportionment of
revenue and apportionment of
operation and maintenance charge
on proportionate basis which did
1. Ministry of Railways has stated that Indian
Railways (IR) gets railway projects constructed
through SPVs, which are incorporated as joint
ventures between IR and public/private investors.
2. The SPVs create assets such as new railway
lines, electrification of railways, installation of
signaling equipment etc.

3. SPVs are the owner of the assets created by
them during the concession period. They hand
over the assets to IR after concession period is
over. During the concession period, the assets are
operated by IR. In other words, freight and
passenger services using the assets created by
SPVs are supplied by IR. SPV has no role in it.
The IR collects the entire revenue from the freight
and passenger operations. SPVs are paid on pro
rata basis for the stretch of length of the line
owned by them.
4. The infrastructure/asset created by SPVs is
maintained by IR for which it recovers O&M
expenses from the SPV.
5. Ministry of Railways has requested for
issuance of clarification that both apportioned
revenues paid to SPVs and O& M costs charged
by IR from the SPV do not attract GST.
6. IR and the SPV are distinct persons. Supply
of services by SPV to IR by way of allowing IR to
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Sr.
No.
Proposal Details of Request Discussions in FitCom and its recommendation
not attract any service tax.
A significant portion of the funding
of the Spy project line is through
external sources (in addition to
Indian Railways or its PSEs)
brought in by the partners
comprising both State Government
as well as private entities. Once the
rail infrastructure i.e., Railway line,
Signaling, electrical installations
etc., are developed, the train
operations for
running of passenger and freight
trains is controlled by the Indian
Railways (IR). This includes the
commercial operation of collecting
the freight as per freight tariffs of
Ministry of Railways. The SPV is
not involved in operation of trains.
These SPVs have been created to
fill the gap of Railway's internal
finances for rail infrastructure
projects, thereby contributing in
performing the sovereign function
of the Government.
The GST is collected by the
Railway and deposited in the
Consolidated Fund of India. No
charge is being collected by the
SPV since no service is being
provided by them to the passengers
or freight customers. Therefore,
there is no loss of revenue to the
Government.
The project expenditure incurred by
the SPV is compensated by way of
a return on investment and is
transferred to the SPV from the
use infrastructure built and owned by them during
the concession period against consideration in the
form of pro rata share of revenue is a taxable
supply. GST paid on the said supply of services is
available to IR as ITC.
6.1 It has been stated that SPV is not supplying
any service. It is only contributing in the
performance of sovereign functions by
Government. The revenue stream of SPV is
merely return on investment made by them for
development of rail infrastructure for IR. It is
relevant to mention that even if the SPV and IR
are regarded as constituting an Association of
Persons (AOP), the services supplied by them to
each other will be taxable. Section 7 of the CGST
Act, 2017 provides that the ‘person’ (which has
been defined to include an AOP) and its members
or constituents shall be deemed to be two separate
persons and the supply of activities or
transactions inter se shall be deemed to take place
from one such person to another.
6.2 It has been stressed by IR that the amount
paid to SPVs is only a revenue share. The pro rata
share of revenue paid by IR to SPV is nothing but
consideration paid by IR to SPV for the service of
allowing the use of infrastructure owned by SPV.
The measure of consideration can take any form
as desired by the contracting parties. It can be a
fixed sum paid upfront, or amount paid in
installments or annuities or certain fixed
percentage of the revenue earned from such
project or the pro rata revenue earned from the
project of asset owned by the SPV. The measure
of consideration or the way how it is calculated,
does not affect the taxability of supply for which it
is paid. It is the supply which is taxed and the tax
is levied on the amount paid /payable for that
supply. The manner in which the contracting
parties decide to calculate the consideration
payable for a supply is immaterial in determining
whether the supply is taxable or not.
7. Similarly, services of maintenance supplied by
IR to SPV is a taxable supply. ITC of the same is
available to SPV.
8. Therefore, the GST paid either on the amount
paid by IR to the SPV or by the SPV to IR is not a
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No.
Proposal Details of Request Discussions in FitCom and its recommendation
revenues collected by the IR from
its customers and is transferred net
of O&M expenses to the SPV.
After the concession period, the
project line is transferred back to
the Railway.
In the perspective of above, it is
requested to issue suitable
clarifications that both apportioned
revenue of SPVs and O&M costs
for SPVs does not attract levy of
GST.
cost for them.
9. The court rulings pertaining to service tax era
are not relevant in GST as the provisions of GST
law are different from the existing provisions of
that period.
10. We may clarify to Ministry of Railways
accordingly.
4. To clarify on
applicability of GST on
Air Force Officers
Mess.

The issue arises from 47th GST
Council’s decision regarding levy
of GST at 12% on services of hotel
accommodation below Rs 1000/-
by a hotel, inn, guest house, club or
campsite for residential or lodging
purposes.
Further, it has been informed that
Messes in Armed Forces are
established to cater for requirement
of accommodation and messing for
the personnel of Armed Forces all
across the country which includes
places where there is no habitation.
These are created /established by
using public fund as per the laidout scale and is maintained by the
contribution from individual
officers (members) on no profit no
loss basis. Messes are home for the
living-in officers, a club for livingout officers and a social centre for
the station. Services provided at
Officers Mess are chargeable to
members and its income, if any, is
used for the development of the
All services supplied by the Government to
individuals other than business entities except a
few specified services such as services of postal
department, transportation of goods and
passengers etc. are exempt from GST vide Sl. No.
6 of Notification No. 12/2017 – Central Tax
(Rate) dated 28.06.2017

Therefore, accommodation services provided by
Air Force Mess to Air Force personnel would be
exempt in terms of Sl. No. 6 of Notification No.
12/2017 – Central Tax (Rate) dated 28.06.2017
provided services supplied by Air Force Mess
qualify to be considered as services supplied by
Central Government.
The same may be clarified to the Air Force.
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Sr.
No.
Proposal Details of Request Discussions in FitCom and its recommendation
Mess. Officer Messes charge for
per room per day has been kept @
less than Rs 1000/- for officers
coming on Temporary Duty.
Further, due to the specific object
of the Messes, it is also outside the
ambit of Income Tax under Section
10 of the Income Tax Act, 1961.
Therefore, it has been requested to
give a clarification on the
applicability of GST on Air Force
Officers Mess.
5. To clarify whether GST
is applicable on the
incentive paid by
MEITY to the Banks
under the Scheme for
promotion of RuPay
Debit Cards and low
value BHIM-UPI
transactions. In case
GST is applicable, the
same may be waived as
the purpose of the
scheme is to promote
RuPay debit card and
BHIM-UPI
transactions.
MEITY rolled out a scheme called
the Incentive Scheme for promotion
of RuPay Debit Cards and lowvalue BHIM -UPI transactions
(P2M). The scheme is aimed at
boosting the acquiring banks to
build a robust ecosystem for digital
payments and making the digital
payments accessible to sectors and
population who do not have access
to formal banking facilities.
The incentive is provided as a
percentage of the amount transacted
and is subject to specified caps. The
incentive is given only for
transactions made through RuPay
debit cards and low value BHIM
UPI (< Rs 2000) transactions.
Further, the banks are required to
show a minimum growth rate in the
number of transactions made
through RuPay/BHIM UPI as
prescribed in the Notification to
avail this scheme. Reimbursement
of claims will be done on quarterly
basis and incentive will be shared
by acquiring banks with other
stakeholders as decided by NPCI.
The Payments and Settlements Systems Act, 2007
prohibits banks and system providers from
charging any amount from a person making or
receiving a payment through RuPay debit card or
BHIM UPI. Instead, the Government pays them
an incentive at prescribed rates.
A view may be taken that the service supplied by
the acquiring banks and other participants in the
digital payment system in case of transactions
through RuPay/BHIM UPI is the same as the
service that they provide in case of transactions
through any other card or mode of digital
payment. The only difference is that the
consideration, instead of being paid by the
merchant or the user of the card is paid by the
government in the form of incentives. In this view
of things, the incentive is nothing but a subsidy
directly linked to the price of the service paid by
the central government and the same is not taxable
in view of the provisions of Section 2(31) and
Section 15 of the CGST Act, 2017.
A view may also be taken that the incentive in
question is not a consideration paid by the central
government for service supplied by the acquiring
banks but only an incentive per se as it is paid
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Sr.
No.
Proposal Details of Request Discussions in FitCom and its recommendation
It has been contended that the
incentives given to member banks
is nothing but subsidy received
from the Central Government in
order to promote the use of
specified electronic modes and that
Section 2(31) of the CGST Act,
2017, which defines ‘consideration’
excludes subsidy given by the
Central Government or a State
Government. Further, Section 15 of
the CGST Act, 2017 also excludes
subsidies provided by Central
Government or State Government
from the value of taxable supply.
Therefore, GST is not applicable on
the said incentive and a
clarification to this effect has been
requested.
contingent upon the banks achieving a minimum
yearly growth rate in the number of transactions.
However, even in that case, the incentive will not
be taxable as it is not a consideration paid by the
central government for any service supplied by the
acquiring bank to the Central Government. It is
the core business of the banks to facilitate
monetary transactions between businesses and
individuals. The transactions can be offline or
online. The banks allow people to transact through
digital system not for the Government but for
themselves. Mere fact that the government
encourages them to promote digital transactions
through RuPay/BHIM UPI does not mean that
they are supplying any service to the Central
Government. The Central Government does so to
promote its own policy objectives. Further, there
is no contractual obligation on the banks to
promote such transactions or on the central
government to provide such incentives. The entire
arrangement is voluntary. In other words, not
achieving the yearly growth rates in number of
transactions prescribed for the incentive does not
result in any breach of contract. The incentive
paid to the banks under the scheme can be
considered akin to the export incentives paid by
the government to exporters under various
schemes. The exporters do not export for the
Government but for themselves. Therefore, the
incentives paid by Government to the acquiring
banks for promoting RuPay/ BHIM-UPI
transactions are no more taxable than the
incentives paid to the exporter is. So, in this view
of things also, incentives paid by acquiring banks
under the scheme is not taxable.
In view of the above, it may be clarified by way of
a Circular that incentives paid to banks under the
scheme for promotion of RuPay Debit Cards and
low value BHIM-UPI transactions is not taxable.
6. Whether, GST is
leviable when the
residential dwelling is
The petitioner has stated that she
has taken registration under GST
even though the turnover of her
The department has informed the Hon’ble High
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rented by a person who
is the proprietor of a
proprietorship firm in
his personal capacity
for use as his own
residential dwelling.
business is less than the threshold
turnover of Rs. 20.00 lakh per
annum because of the compulsory
requirement of registration by
businesses supplying goods or
services through ECO irrespective
of their turnover. Since, she is a
registered person under GST, even
though she intends to rent the
residential dwelling for her own use
as residence and not in the course
of or furtherance of business of the
proprietorship firm owned by her,
she would be required to pay GST.
“the language used in the exemption
entry as amended w.e.f. 18th July, 2022 makes it
clear that renting of residential dwelling is
taxable only where the residential dwelling is
rented to a registered business entity. The
exemption on renting of residential dwellings to a
person other than a registered business entity
continues. It is relevant to note in this context that
the term “person” has been defined in the CGST
Act, 2017 to include an individual, an HUF, a
Company, a firm, Government and so on.
Clearly, where the residential dwelling is rented
by a person who is the proprietor of a
proprietorship firm, who rents it in his personal
capacity for use as his own residential dwelling,
(and such renting is not on account of its business,
i.e., not accounted for in the firms account but is
on personal account) the exemption shall continue
to be available to him. Similarly, where the
residential dwelling is rented by a partner of a
partnership firm in his personal capacity for his
own residential use and not accounted for in
business entity account, the exemption will be
available.”
2. However, the Government Counsel has
informed that during the hearing in this matter, the
Hon'ble Court has pointed out that the
Notification did not specify that GST would be
charged only where the registered person was
renting the residential dwelling in course or
furtherance of business.
3. To obviate dispute and litigation in this regard,
it is recommended thata) The Entry at Sr. No. 12 of Notification
No. 12/2017-CTR may be amended as
underSl.
No.
Heading Present
entry
Proposed
amendment
12 Heading
9963 or
Heading
Services by
way of
renting of
residential
dwelling for
Services by
way of renting
of residential
dwelling for
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9972 use as
residence
except
where the
residential
dwelling is
rented to a
registered
person.
use as
residence
except where
the residential
dwelling is
rented to a
registered
person for use
by such
registered
person in the
course or
furtherance of
business.
b) An explanation may be inserted in the
entry in exercise of the power under
Section 11(3) of the CGST Act, 2017 as
under:
Explanation: - Notwithstanding anything stated
above, services by way of renting of residential
dwelling to a registered person where the, –
i. residential dwelling is rented to a
registered person who is a
proprietor of a proprietorship firm
and who rents it in his personal
capacity for use as his own
residence and
ii. such renting is on his own
account and not that of the
proprietorship firm;
shall be exempted from tax.
The same shall apply, mutatis mutandis, where the
residential dwelling is rented to a partner of
partnership firm who rents it in his personal
capacity for use as his own residence.
7. To specify a positive
list of services under
Sr. No. 3 & 3A of
Notification No.
12/2017-Central Tax
(Rate)
Detailed agenda note which was placed before the
47th GST Council meeting is enclosed (Annexure
II)
1. 47th GST Council meeting held on 28th-29th
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June, 2022 had directed that the proposal to
specify a positive list of services under Sr. No. 3
& 3A of Notification No. 12/2017-Central Tax
(Rate) dated 28.06.2017 may be reconsidered by
the Fitment Committee taking into account the
inputs from all the States which had voiced their
concerns in the said council meeting.
2. Accordingly, the States of Telangana, Andhra
Pradesh and Delhi were invited to the Fitment
Committee meeting held on 12.09.2022 to give
their views on the said issue. At the said meeting,
Telangana requested to include Public
Distribution System, Animal Husbandry etc.
under the proposed positive list. Andhra Pradesh
suggested expanding the proposed definition of
Public Authority so as to cover manpower supply
services hired by the state through a state
corporation under exemption.
3. The views given by the states in writing are as
under:
Telangana
The following services may be added to the list of
services to be specified in entry 3/3A of
Notification No. 12/2017-Central Tax (Rate)
dated 28.06.2017
• Public Distribution and the related
activities including Custom Milling and
transportation services
Process of public distribution system
involves large scale procurement of
Custom Milling Services and renting of
vehicles transportation services, without
which the final goal of distribution cannot
be met.
• Minor Irrigation
Telangana has taken up the programme of
restoring the minor irrigation sources
under
the title “Mission Kakatiya”. The services
procured under this programme are
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primarily in the nature of pure services or
services where goods component is less
than 25%.
• Social forestry and Farm forestry
For achieving the objective of increasing
tree cover in the State to 33% of the total
geographical area of the State through the
"Haritha haram".
• Roads and bridges
To improve the connectivity, earth work
(laying of mud roads) is taken up on a
continuous basis in many villages. These
services are generally procured from the
Local people and the involvement of the
goods component in these services is
quite low.
Delhi
The exemption on services mentioned in Article
243 G & 243 W of Constitution of India should be
continued.
4. In view of the above suggestions received
from states, the Fitment Committee went through
the list of activities specified in the 11th and 12th
Schedule to the Constitution and recommended
that the following services may be added to the
positive list of services (placed before the 47th
GST Council) under Sr. No. 3/3A of Notification
No. 12/2017-CTR
• Education, including primary and
secondary schools
• Technical training and vocational
education
• Adult and non-formal education
• Libraries
• Social Forestry and Farm Forestry
• Fire Services
4.1 On the suggestion to include ‘society’ also
in the definition of Public Authority, consensus
was that the phrase ‘any other body’ used in the
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definition of Public Authority proposed in the 47th
GST Council Meeting would include societies,
companies, corporations etc. also.
4.2 As regards, the suggestion of Telangana
to include Minor Irrigation & Roads and Bridges.
GST on specified works contract services (WCS)
supplied to Central Government, State
Government and Local Authorities has recently
been revised from 12% to 18% with effect from
18.07.2022 and on WCS predominantly involving
earthwork from 5% to 12%. Services procured for
minor irrigation and for construction/laying down
of roads & bridges would predominantly be WCS
which the GST Council has recommended to be
taxed at 18%/12%.
4.3 Exempting custom milling will block the
input tax credit (ITC) of the milling units on
capital goods, raw materials (such as packing
material, vitamins and other fortification additives
etc.) and input services. GST payable on customs
milling will in any case flow back to the
Government as revenue.
5. Accordingly the following list of services may
be specified in SI. No. 3 and 3A of Notification
No. 12/2017-CTR as under:
“3. Supply of pure services, or composite supply
of goods and services, in which the value of goods
constitutes not more than 25% of the value of
composite supply, to Central Government, State
Government, Union Territory, a local authority or
a public authority by way of,
1. Water treatment and/or supply;
2. Public Health activities, Sanitation
Conservancy and Solid or Liquid Waste
management;
3. Slum Improvement and Up gradation;
4. Maintenance and operation of street
lights, bus stops, public conveniences,
public parks and gardens, burial ground
and crematorium;
5. Education, including primary and
secondary schools;
6. Technical training and vocational
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education;
7. Adult and non-formal education;
8. Libraries;
9. Social Forestry and Farm Forestry;
10. Fire Services;
11. Renting of motor vehicles for carrying out
functions listed at Sr. No. 1 to 10 above;
12. Supply of manpower services for carrying
out functions listed at Sr. No 1 to 10
above.”
Public authority may be defined as under:
“Public Authority means an authority or a board
or any other body established and controlled by
the Central or State Government to carry out the
functions listed in SI. No. 1 to 10 of the entry."
As explained in Circular No.177/09/2022-TRU
dated 03rd August 2022, issued on the basis of the
recommendations of the 47th GST Council
meeting, exemption under Entry 3 & 3A of
Notification no. 12/2017-CT(R) dated 28.06.2017
has been given on pure services and composite
supplies procured by Central Government, State
Government, Union Territories or local authorities
for performing functions listed in the 11th and 12th

Schedule of the Constitution. If such services are
procured by any Government
Ministry/Department which does not perform any
functions listed in the 11th and 12th Schedule, in
the manner as a local authority does for the
general public, the same are not eligible for
exemption under Sl. No. 3 and 3A of Notification
12/2017- CT(R).
As a consequential change to the proposed
modification in entry 3 and 3A of the said
Notification, an explanation may be inserted in the
modified entry along the lines of the Circular as
under:
“Explanation: The exemption under this entry
applies only to pure services and composite
supplies procured by Central Government, State
Government, Union Territories, local authorities
or a public authority for performing functions
listed in the 11th and 12th Schedule of the
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Constitution. Services procured by any
Central/State Government Ministry/Department
/Union Territory or Public Authority which does
not perform any functions listed in the 11th and
12th Schedule, in the manner as a local authority
does for the general public, are not eligible for
exemption under this entry.”

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Annexure- II (Sr.No. 07 of Annexure-IV)
(Recommendations of Fitment Committee on positive list of services to be specified in Sr. No.
3/3A of Notification No. 12/2017-CT(R))
By way of background, it is stated that the entries at Sr. No. 3 and 3A of exemption
Notification No. 12/2017-CT(R) dated 28.06.2017 exempt supply of pure services and composite
services (goods component 25% or less) supplied to Government, Local Authority, Governmental
Authority or Government Entity by way of any activity in relation to Municipal or Panchayat
functions.
2. Post the amendments made with effect from 1.1.2022, the entries read as below:
Entry 3 of Notification No. 12/2017- CT(R):
“Pure services (excluding works contract service or other composite supplies involving supply of any
goods) provided to the Central Government, State Government or Union Territory or local authority
by way of any activity in relation to any function entrusted to a Panchayat under Article 243G of the
Constitution or in relation to any function entrusted to a Municipality under Article 243W of the
Constitution.”
Entry 3A of Notification No. 12/2017- CT(R):
“Composite supply of goods and services in which the value of supply of goods constitutes not more
than 25 per cent. of the value of the said composite supply provided to the Central Government, State
Government or Union territory or local authority by way of any activity in relation to any function
entrusted to a Panchayat under Article 243G of the Constitution or in relation to any function
entrusted to a Municipality under Article 243W of the Constitution.”
3. With reference to these entries, the following a proposal placed before the GST Council in the 45th

Council meeting held on 17.09.2021 was that the entries were being interpreted too widely, the issue
as to the scope of the term “in relation to” appearing in the said entries was placed the Fitment
Committee and GST Council. The Fitment Committee recommended that as the scope of the
expression “in relation to” used in the said exemption entries is too wide and prone to interpretation
disputes, a list of services may be specifically notified as exempt under the said entries.
[Agenda No 14, Annexure IV, Sl. Nos. 25 of 45th GST Council may please be seen]
4. In Service Tax regime, since the intent of the exemption was to exempt only the services directly
connected with the functions carried out by Government and local authorities of water supply, public
health, sanitation conservancy, solid waste management or slum improvement and upgradation, the
relevant Entry 25 of Notification No. 25/2012- Service Tax read as:
“Services provided to Government, a local authority or a governmental authority by way of-
(a) water supply, public health, sanitation conservancy, solid waste management or slum improvement
and up-gradation;”
During discussion on this issue, in the 45th meeting Council was of the view that while the approach to
specify a positive list of exempt services was agreed to, the list recommended by Fitment Committee
needs to be pruned and refined. It was agreed that the list of services shall be circulated to all states for
their inputs for refining the list which may be brought before GST Council for approval.
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6. Accordingly, as per the direction of the Council, the List was circulated to States vide email dated
22.11.2022. Comments were received from West Bengal, Bihar and Tamil Nadu.
7. The issue was discussed at length in the Fitment Committee. After long deliberation the Fitment
Committee was of the view that the exemption under said entries should confine to those services
which are directly connected with the functions entrusted to Panchayat or Municipality and not
services remotely or vaguely connected with those functions. Further, it was felt that only few services
constitute bulk of input services by the local authority. Hence the list could be pruned down
significantly while ensuring that major services by these bodies remain exempted. This approach
would ensure that exemption entries are not interpreted widely, local authority continue to have major
relief on supply of input services, and in respect of other general services the normal design of GST
could be applied. Fitment Committee also felt that in respect of purchase of goods no special
concession is allowed to procurement by the Government or Local Authority. They suffer same
incidence on goods as any private person (for example cement, iron and steel, vehicle, furniture etc.).
In service, the special concession crept in as services were taxed differently in pre-GST regime
wherein tax was only imposed by Centre and there was no VAT on services. However, In GST there
should not be any appreciable difference in the approach for goods and services. As is the case in
goods, the Government and Local Authority should also bear the normal rate of GST on input services
barring exceptions. Accordingly, Fitment Committee carved out a positive list of services for
consideration of the Council.
8. With this positive List approach, it was also felt that the authorities constituted by in different states
for such civic work as fall in the proposed positive list should also be included in the ambit of these
exemptions alongside the local authority.
Recommendation of Fitment Committee: -
I. The following list of services may be specified in Sl. No. 3/3A of Notification No. 12/2017-
CT(R)dated 28.06.2017:
Supply of pure services, or composite supply of goods and services, in which the value of goods
constitutes not more than 25% of the value of composite supply, to Central Government, State
Government, Union Territory, a local authority or a public authority by way of, -
1) Water treatment and/or supply
2) Public Health activities, Sanitation Conservancy and Solid or Liquid Waste management
3) Slum Improvement and Up gradation
4) Maintenance and operation of street lights, bus stops, public conveniences, public parks
and gardens, burial ground and crematorium.
5) Renting of motor vehicles for carrying out functions listed at Sr. No. 1 to 4 above.
6) Supply of manpower services for carrying out functions listed at Sr. No 1 to 4 above.
II. Public authority may be defined as under:
“Public Authority” means an authority or a board or any other body established by the Government to
carry out the functions listed in S. No. 1 to 4 of the entry.
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e) Issues where no change has been proposed by the Fitment Committee in relation to
services – Annexure-V
Annexure –V
Sr.
No.
Proposal Details of Request Discussion in FitCom and its
recommendation
1. To extend the validity of
GST exemption on
transport of goods by air
from India to Outside.
This is currently valid
till 30.9.2022.
In order to maintain competitiveness
of Indian exporters vis-a vis their
counterparts, exemption from GST
for air freight exports may be
extended beyond 30.09.2022
Transport of goods by vessel and air from a
place in India to outside India, are presently
exempt from GST [till 30.9.2022] vide entry
No. 19A and 19B of Notification No. 12/2017.
This exemption was given in September, 2017
because online refund mechanism for
exporters had not fully stabilized at that time.
The exemption was initially given for a period
of one year up to 30.9.2018 and then extended
every year.
Last year, though, the online refund process
had stabilized, exemption was given in view of
COVID situation.
Now, since the online refund process is fully
functional and working smoothly, there is a
case for withdrawing this exemption.
GST paid on export freight will not be a cost
for exporters as they will be entitled to take
refund of ITC of the same. The withdrawal of
exemption will also allow shipping lines to use
their ITC. This will also benefit the airlines as
they will not have to reverse ITC.
The validity of GST exemption on transport of
goods by vessel and air from a place in India
to outside India may not be extended beyond
30.09.2022.
2. a. Reduction in GST rate
in respect of under
construction commercial
apartment from 18%
with ITC to 7.5%
(without ITC)
It has been submitted that due higher
rate of GST on under construction
commercial apartments, more and
more buyers are preferring ready to
use apartments, where occupancy
certificate has been issued.
Lowering of GST rate on under construction
commercial apartment will result in
accumulation of ITC. Most of their inputs and
input services attract GST @ 18% (steel,
building blocks, cemented bricks, tar, bitumen,
asphalt, tiles, paints, PVC pipes, manpower
supply etc.) and 28% (cement). It will also act
as a disincentive for procurement of tax paid
input goods and services and result in revenue
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leakage and malpractices such as ITC
diversion.
May not be accepted.
b. Options of rates i.e.,
7.5% (without ITC) or
12% (with ITC) to given
in respect of under
construction residential
apartment other than
affordable residential
apartment.
It has been submitted that in case of
mixed project it become cumbersome
for builders-promoters to utilize the
ITC available to them.
It was a conscious decision of the GST
Council after much deliberation to tax
construction of other than affordable
residential apartments by promoters at the
effective rate of 5% without ITC.
May not be accepted.
c. Uniform rate of 12%
for works contract
supply provided by
contractor in respect of
residential apartments
irrespective of it being
affordable or otherwise.
It has been submitted that higher rate
of GST on works contract supply has
increased price of the residential
apartments.
Lowering GST rate on works contract supply
will result in accumulation of ITC. Most of
their inputs and input services attract GST @
18% (steel, building blocks, cemented bricks,
tar, bitumen, asphalt, tiles, paints, PVC pipes,
manpower supply etc.) and 28% (cement). It
will also act as a disincentive for procurement
of tax-paid input goods and services and result
in revenue leakage and malpractices such as
ITC diversion.
May not be accepted.
d. Computation of
shortfall in receiving
80% of value of
input/input services from
registered supplier
should be done project
wise instead of year
wise.
It has been submitted that due to this
requirement of year wise
computation of shortfall in receiving
80% of value of input/input services
from registered supplier, in the last
year(s) of the project, the builder
receives the higher component of
input and input services from
unregistered supplier relatively and
thereby he has to pay the RCM
component on the same.
The provisions with regard to construction of
residential apartments by the promoters were
introduced after detailed deliberations by the
Council.
May not be accepted.
3. Request of exemption to
Assam Cancer Care
Foundation (ACCF)
from being subjected to
the payment of GST
applicable on works
procured by ACCF for
Assam Cancer Care Foundation
(ACCF) is a pioneer society, striving
hard to facilitate cancer care in the
state, under the patronage of Assam
Government. And they procure a
large number of equipment solely for
the purpose of extending support to
cancer patients, which are taxable
Health Care Services are already exempt.
Request is for end use-based exemption on
inputs and input services used for setting up of
hospital.
End use-based exemptions are difficult to
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recommendation
setting up the
infrastructure and
managing the operations
in the State of Assam.
under GST. monitor and prone to misuse.
Further, request is for a new exemption.
General policy of GST Council has been not to
expand the existing list of exemptions.
May not be accepted.
4. To exempt GST on
leasing/renting/transfer
of right to use the
Energy Storage Systems
(ESS)
India has pledged to achieve 500GW
of non-fossil fuel-based generation
capacity by 2030 at the COP 26
Summit. Out of the 500GW of
required capacity 450GW of capacity
will come from renewable sources.
Electricity from renewable sources is
available only during certain times of
the day, this impacts the reliability
and grid stability.
Energy Storage Systems (ESS) would
overcome the challenges of grid
integration and ensure availability of
round the clock power from
renewable energy sources. ESS
connected to the grid has wide range
of applications such as energy
shifting, energy arbitrage, firming up
of intermittent renewable energy
power, ancillary services and storage
of excess renewable energy
generation.
ESS can be established by a
Generating Company or a
transmission licensee or a distribution
licensee or an ESS developer. The
ESS may be established on a
standalone basis or in conjunction
with Generation, Transmission and
Ministry of Power has stated that there is no
clarity regarding GST on leasing/renting of
Energy Storage Systems (ESS). It may be
conveyed to Ministry of Power that the
Notification No. 11/2017-Central Tax (Rate)
dated 28.6.2017 which prescribe the rates of
GST on supply of services very clearly
provides in Sl. No. 17, Item 7A that leasing or
renting of goods attracts the same rate of tax as
applicable on sale of like goods. Therefore, it
is clear that leasing or renting of ESS will
attract GST @ 18% which is the rate
applicable on sale of ESS.
Supply of electricity is presently exempt from
GST. However, most of the goods and
services used in generation of supply of
electricity such as coal, capital goods, cable,
works contract services, man power supply,
instruments, cement, steel, switches and other
apparatus all attract GST.
Exempting any of the goods or services used
in generation, transmission, distribution or
supply of electricity will amount to zero
rating/partial zero rating of supply of
electricity. Zero rating is done only for
exports and not for domestic use.
There was no exemption on renting of ESS in
Service Tax period also. The general view in
GST Council has been that the existing list of
exemptions should not be expanded.
More importantly any exemption of leasing or
renting of ESS will block ITC of the ESS
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Distribution Systems. The
developer/owner of ESS may
sell/lease/rent out the ESS to a
company engaged in generation,
transmission or distribution of
electricity. In all cases the output is
electricity which is exempt from
GST.
It is apprehended that applicability of
GST on leasing/renting out of ESS
would lead to increased cost of
electricity for consumers.
developers. They will not be able to take ITC
of capital goods, battery and other equipment
required for setting up ESS facilities.
Therefore, the exemption will increase the cost
of ESS developers. It may also encourage
them to procure input goods and services
which have not suffered GST. This will result
in revenue leakage.
May not be accepted.
5. Credit of GST paid on
O&M services used for
metro, monorail etc.,
may be allowed to be
used against other
taxable services offered
by NCRTC and the
remaining unutilized
credit may be allowed to
be refunded.
National Capital region Transport
Corporation (NCRTC) plans to
outsource Operation & Maintenance
(O&M) services as per Metro Rail
Policy, 2017.
However, service of transport of
passengers by metro, monorail or
tramway is exempt under GST.
This results in non-availability of
ITC to NCRTC on O&M services
procured by it.
Therefore, credit of GST paid on
O&M services used for metro,
monorail etc., may be allowed to be
used against other taxable services
offered by NCRTC and the remaining
unutilized credit may be allowed to
be refunded.
ITC is allowed only in respect of goods and
services used in making a taxable supply.
NCRTC is not eligible for taking ITC of GST
paid on any inputs or input services used for
supplying exempt services. Therefore,
question of allowing utilization of such ITC
for payment of GST on other supplies or
refund of unutilized ITC does not arise.
May not be accepted.
6. a. Removal of Proviso
to S1. No. 66 of the
Notification No.
12/2017- Central Tax
(Rate) dated 28th June,
2017 and to consider
reinstating the
exemption similar to the
Mega Exemption
Notification No.
25/2012-Service Tax,
The first proviso to SI. No. 66 of the
Notification No. 12/2017- Central
Tax (Rate) dated 28th June, 2017
restricts the exemption to services
provided to educational institutions
only up to higher secondary school
(or equivalent)' and is not applicable
to higher educational institutions, it is
requested that an exemption similar
to the Mega Exemption Notification
No. 25/2012-Service Tax, dated 20th
The request is for broadening of the existing
exemption entry, which is not desirable in the
wake of initiative taken by the GST Council in
respect of rate rationalisation. Broadening of
existing exemptions is against the objective of
comprehensive taxation of supply of goods
and services at reasonable rates of tax.
May not be accepted.
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Proposal Details of Request Discussion in FitCom and its
recommendation
dated 20th June, 2012 as
applicable till April 2017
b. Expansion of
exemption to other
ancillary services such
as Renting of premises
of educational
institution, General
Insurance Services,
Legal Services, ICT
Enablement Services,
Curriculum
Development Services,
Student Exchange
programme related
services
c. concession be
provided for supply of
all goods and services @
5 to all educational
institutions including
schools, colleges and
universities
June, 2012 as applicable till April 1,
2017, be reinstated.
It has been submitted that the
educational institutions need to
incur expenses at a very high level
on various ancillary services which
are not a part of GST exemption
Notification.
7. Aligning GST rate for
construction of ARHCs
(Affordable Rental
Housing Complexes)
with other PM AWAS
Yojana schemes:
Amendment in
Notification No. 8/2017-
ITR dated 28.06.2017 to
include specific entry for
works contract service at
GST rate of 12% used
for construction of
ARHCs at par with other
PMAY schemes
Amendment under
The ARHC scheme intends on
improving the living conditions of
urban migrants and obviate them
from staying in slums, informal
settlements or peri-urban areas. The
success of the scheme would depend
on making the rental facility
affordable for the beneficiary. Levy
of 18% or 28% GST on pure labour
contract or construction services or
materials procured for construction
would increase the overall cost of
setting up the ARHCs which will
translate to higher rental charges
being collected from the
beneficiaries. Specific GST
exemptions or concessional rate
The request has lost its relevance in the wake
of withdrawal of concessional rate of GST on
works contract services with effect from
18.07.2022.
May not be accepted.
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Heading 9954, Sl. No.11
in Notification No.
09/2017- ITR dated
28.06.2017 to include
ARHCs as part of
PMAY.
benefits would reduce the cost of the
project and decrease the rental burden
on the beneficiaries of the ARHCs.
A number of existing affordable
housing schemes under PMAY
already draw the benefit of
exemptions/ concessional rates of
GST as mentioned above, as the
objective is to provide affordable
housing to the needful. Even though
the intention of ARHC Scheme is
the same - i.e., to provide affordable
housing to the needful, ARHC
Scheme currently doesn't have any
exemption or concessional GST
rates available to other PMA Y
schemes.
Exempting the construction cost of
the ARHC from GST would greatly
increase the success rate of the
ARHC scheme and is likely to
increase its popularity.
8. Request to bring parity
in applicable GST rate
between supply of goods
and services being
consumed in the entire
value chain of Petroleum
operations at the rate of
5%.

Notification No. 03/2017-IGST(R)
dated 28.06.2017 provides for 5%
GST on supply of specified goods
required to be used in petroleum
operations.
Notification No. 11/2017-CT(R)
dated 28.06.2017 provides for GST
of 12% on other professional,
technical and business services
relating to exploration, mining or
drilling of petroleum crude or natural
gas or both attract GST of 12%.
Since the major part of capital
expenditures in petroleum operations
are in the form of services i.e drilling,
fracturing, cementing, logging,
perforation , workover operations,
related manpower operations ,
professional/technical services etc,
This is a request for expansion/deepening of
lower rate.
May not be accepted.
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the request is to bring parity in
applicable GST rate between supply
of goods and services being
consumed in the entire value chain of
Petroleum operations at the rate of
5%.
This measure will motivate operators
to enhance their capital expenditure
which will help in boosting domestic
production and thereby reduce
imports.
9. To extend GST
exemption to service
provided by subcontractor to main
contractor providing
services to run electrical
vehicles (buses) for
Local Authorities or
State Transport
Undertakings.
While the Ministry of Finance has
exempted GST levy on service
provided by main contractors
providing services to run electrical
vehicles (buses) to local authorities
and State transport undertakings, the
same is not being extended to
services provided by sub-contractors
(e.g., Operation, maintenance, drivers
etc.) to the main contractor
This is a request for deepening of exemption.
It will amount to zero rating which is done
only for exports.
May not be accepted.
10. The tax regime
applicable to the travel
and tourism sector may
be reviewed holistically.
1. The 313th Report by the Rajya
Sabha Secretariat Department-related
Parliamentary Standing Committee
on Transport, Tourism and Culture
has observed that one of the major
reasons for India’s Inbound Tourism
remaining grossly under-utilized has
been the high rates and multiplicity
of taxes that deter Inbound Tourism
and have led to tourist packages
being outpriced vis-à-vis those in
competing tourist destinations of
other countries. The tax structure
applicable to hotel accommodation,
air travel, food and beverages
consumption, etc., not only leads to
tourist packages being overpriced but
also obstructs seamless flow of
tourists to our historical sites. The
Committee notes that despite Inbound
Tourism being a major foreign
Issues relating to the tax regimes on travel and
tourism sector were holistically reviewed by
47th GST Council in its meeting held on 28th
-
29th June, 2022.
The 47th GST Council recommended that in
case of tours conducted for foreign tourists
partially in India and partially outside India,
proportionate value of the foreign component
of the tour may be excluded from the value for
the purposes of payment of GST. This
recommendation has been brought into effect
w.e.f 18.07.2022 vide Notification No.
04/2022 -Central Tax (Rate) dated 13.07.2022.
Further, the GST Council also recommended
for issuing a clarification that exemption at Sr.
No 17 (d) of Notification No. 12/2017-CTR
dated 28.06.2017 [which exempts
“transportation of passengers by public
transport, other than predominantly for
tourism purpose, in a vessel between places
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exchange earner with foreign
exchange earnings of Rs.2,11,661/-
crore in 2019, the taxes levied on
Inbound Tourism are among the
highest in the country. The
Committee, therefore, recommends
that the tax regime applicable to the
travel and tourism sector be
reviewed holistically so that with
suitable amendments India can
convert its comparative natural and
economic advantages into
competitive advantages for the
tourism sector. The Committee
desires to be kept apprised of the
steps taken and the result achieved in
this regard.”
2. The Committee has observed that
the current rates are high and that
there exists multiplicity of taxes in
the travel and tourism sector, leading
to tourist packages being overpriced
and also outpriced vis-à-vis
competing tourist destinations in
other countries. Further, the
Committee recommends for a
holistic review of the tax regime
applicable on the travel and tourism
sector so that India can convert its
comparative natural and economic
advantages into competitive
advantages for the tourism sector.
located in India] would apply on tickets
purchased for transportation from one point to
another irrespective of whether the ferry is
owned or operated by a private sector
enterprise or by a PSU/government and the
expression ‘public transport’ used in the
exemption Notification only means that the
transport should be open to public and can be
privately or publicly owned. This
recommendation has also been implemented
vide Circular No. 177/09/2022-TRU dated
03.08.2022.
Tour operator service attracts GST in the
lowest slab of 5%. Restaurant and catering
service also attracts GST @ 5%.
Transportation by rail (AC), road, air
(economy class) attracts GST @ 5%.
Transportation by rail (other than AC), nonair-conditioned stage carriage/contract carriage
are exempt from GST. Accommodation
services attract GST @ 12% upto tariff of
Rs7500/day and 18% on tariff above
Rs7500/day. Therefore, the travel and tourism
sector presently attracts GST in the lower rate
slabs of nil/5%/12%. Moreover, with the
implementation of GST, various indirect taxes
such as VAT, entertainment tax, luxury tax
etc, have been subsumed under GST. This has
done away with not only multiplicity of
indirect taxes but also the cascading of taxes
which resulted in a much higher tax incidence
in pre-GST tax regime.
Therefore, the observation of the Committee
that the current rates are high and that there
exists multiplicity of taxes in the travel and
tourism sector does not appear to be correct.
11. Proposal for granting
exemption to the
services supplied by
electricity
transmission utilities by
It has been submitted that the
principal activity of TRANSCO is
transmission of electricity. Apart
from this, it regularly engages in
works involving construction,
erection, modification,
The exemption has been sought by the
transmission utility for construction of
transmission lines upto the pump houses
constructed under Lift irrigation Scheme on
the ground that services supplied by
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way of construction and
erection of transmission
assets for providing
power supply to the
pump houses which are
constructed under a Lift
Irrigation Scheme (LIS).
commissioning & installation of
various transmission assets such
as transmission towers, bays, lines,
sub-stations which are used in the
course of transmission of electricity.
Unless the transmission utilities (TS
TRANSCO) provide such services
for transmission of electricity, the
distribution utilities cannot provide
the service of distribution of
electricity. Transmission utilities are
providing the exact same services as
the distribution utilities for the
agricultural activity of the farmers,
Therefore, it should also be the
beneficiary of GST exemption vide
entry 10A of Notification No.
12/2017 dated 28.06.2017. This
would rationalise all types of
construction and commissioning
projects for agricultural purposes
undertaken by Transmission utilities
as well as Distribution utilities.
When a distribution utility provides
services of construction, erection etc.,
for distribution of electricity to the
farmers for agricultural purpose, such
services are exempt from GST vide
entry 10A of Notification No.
12/2017 dated 28.06.2017.
Irrigation and Command Area
Development Department of
Government of Telangana (I&CAD)
during the course of constructing new
dams under Lift Irrigation Scheme
constructs pump-houses through
which the water in these dams is
pumped to the farmers’ fields. These
pump-houses need power supply to
undertake the said function. As TS
TRANS CO is designated state
transmission utility for the state of
Telangana it is engaged by I&CAD
to build new transmission assets in
order to provide power supply to the
said pump-houses. It is for these
services that TS TRANSCO seeks
exemption from GST.
In view of the above, it has been
electricity distribution utilities by way of
construction, erection, commissioning, or
installation of infrastructure for extending
electricity distribution network upto the tube
well of the farmer or agriculturalist for
agricultural use are exempt from GST (vide
Entry 10A of the Notification No. 12/2017-
CTR dated 28.06.2017).
There is no parallel between the two services.
While electricity distribution utilities supply
services to farmers, the electricity transmission
utilities supply service to command area
development authority or state governments
and not to farmers directly.
This is a request for new exemption. May not
be accepted.


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requested to make appropriate
amendment in the entry 10A of
Notification No. 12/2017 dated
28.06.2017 with retrospective effect
to grant exemption to the services
supplied by electricity
transmission utilities by way of
Construction and erection of
transmission assets for providing
power supply to the pump houses
which are constructed under a Lift
Irrigation Scheme (LIS).
12. Request to remove
exemption limits of
renting of premises as
provided at Sl. no. 13 for
entities registered
under12(AA) of the
Income-tax Act, 1961, or
a trust or an institution
registered under subclause (v) of clause
(23C) of Section 10 of
the Income-tax Act.
OR
Request to exempt
renting by one 12(AA)
entity to another 12(AA)
entity registered under
the Income Tax Act,
1961, who are engaged
in activities of relief to
poor, education,
healthcare, environment
protection, spread of
religion, spirituality,
yoga related activities
etc.
BAPS, a charitable trust provide
following services:
Renting of Immoveable Properties by
individual trusts, whose focus is on
social service, like education, health
care, and publications related to
religion and spirituality and herbal
medicines etc.
Certain other independent trusts carry
out various social welfare activities
from the premises leased / rented out
by main trust; the BAPS charges rent
from the service specific trust for the
usage of property at reasonable rates.
Till introduction of GST, renting of
premises by a religious trust was
exempt from Service Tax. But in
GST, this exemption has been
curtailed by prescribing limits on
amount charged for these services.
The issue was discussed in the 47th GST
Council meeting and was deferred.
There is no merit in the request to reduce the
existing limit of exemption towards renting of
precincts of a religious place or completely
exempt the renting activity.
Internal transactions between individual 12AA
entities are taxable if such transaction value
exceeds the exemption limit provided under
Sl. No. 13 of the Notification No. 12/2017-
Central Tax (Rate). Exemption to such internal
transactions may not be granted.
Similar request from Auroville Foundation
was not been accepted by GST Council in the
28th Meeting held on 21st July, 2018.
May not be accepted.
13. In principle approval of
GST Council was
obtained for formulating
a Margin Scheme for
The agenda note where in-principle approval
for a margin scheme for tour operators was
sought from the GST Council in the 47th
meeting, is enclosed (Annexure I).
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Tour Operators. The
scheme shall be worked
out by Fitment
Committee after
consultation with
stakeholders.
Inputs from States on Tour Operator
Margin Scheme
47th GST Council meeting held on 28th-29th
June, 2022 had directed that the proposal
regarding margin scheme for tour operator
services may be reconsidered by the Fitment
Committee taking into account inputs from all
States which had voiced their concerns in the
said council meeting.
2. Accordingly, the States of Himachal
Pradesh, Kerala, Uttarakhand, Jammu &
Kashmir, Delhi and Goa were invited to the
Fitment Committee meeting held on
12.09.2022 to give their views on the said
issue. The written inputs/ comments of these
States are as under:
Himachal Pradesh:
Analysis shows that any reduction of GST on
tour operator services will affect the income of
the State adversely. The State is therefore in
favour of continuing with the existing rate
structure on tour operators. Comments of
Himanchal Pradesh are annexed as Annexure
A.
Kerala:
Kerala State is a popular destination for
inbound domestic as well as foreign tourists
and the tourism sector significantly contributes
to the economy of the State. The existing
provisions under GST with respect to place of
supply are beneficial to all the States that are
dependent on tourism. No changes which will
adversely affect GST revenue of the State
should be made to the place of supply
provisions. Further, any change that is
proposed to be made in this sector may be
brought only after conducting a detailed study
on the financial implications of the states
where tourism is a predominant contributor to
the economy. Comments of Kerala are
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annexed as Annexure B.
Uttarakhand:
Marginal scheme is against the concept of
indirect tax which is a tax on transactions
relating to manufacture, sales or supply of
goods or services. During the period of more
than 100 years of indirect tax history in India,
a tax rate has not been fixed based on the
profit margin in respect of any goods or
service sector. Indirect tax has to be collected
and paid and therefore cannot have any
relevance to income or profit or margin of the
assessee. Any conceptual change may result in
opening of Pandora’s box.
If marginal scheme is allowed in tour operator
services, it will further deteriorate revenues in
the sector and will not be conducive to the
finances of the State. The tax base will
decrease compared to the current practice of
levying 5% GST without ITC on the entire
tour package cost. It is impractical to prescribe
the same margin for all the tour operators as
some would be operating at higher margin and
others at lower margin. People with higher
margin (say more than 10%) will benefit the
most while those with the lower margin will
be at a loss. Detailed comments of
Uttarakhand are annexed as Annexure C.
Jammu & Kashmir:
As of now J&K is in favour of existing scheme
of things dealing with the tour operators.
However, if the margin scheme is to be
considered, certain safeguards/ suggestions
may be incorporated. Some of the important
safeguards/suggestions made by J&K are as
under:
(i) Concept of Agent and Principal
should be well defined in the
scheme.
(ii) Where normal commercial
practice is to remit payments to
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suppliers, for example hotels, on a
periodic basis, the concept of selfbilling needs to be incorporated.
(iii)If a holiday includes components
that are provided from own
resources, one must include in
costs, the equivalent cost of that
component if one had to buy it in.
(iv) Where the components of a
holiday are bought from suppliers
which are not registered for GST,
the components may be treated in
the calculation according to
whether the supply would bear
GST if the suppliers were
registered.
Detailed comments of J&K are annexed as
Annexure D.
Delhi:
Delhi is in favour of its implementation so as
to maintain a fine balance between the tax
collection from this sector without being
prejudicial to interest of the tour operators.
The comments of Delhi are annexed as
Annexure E.
Goa:
Goa has identified a modus operandi among
the industry players especially the tour
operators / travel agents who are defeating the
basic purpose of the said provision by using
the IGST settlement mechanism to transfer
ITC out of the state thereby depriving the state
of legitimate revenue generating out of
immovable properties, cruises etc. in the state.
Further, it is incorrect to claim that the tour
operators are not taking the ITC credit of the
hotel accommodation services. A study of top
35 tour operators / travel agents suggested that
34 out of 35 dealers are taking ITC credit for
the same by undertaking IGST billing.
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Therefore, the State of Goa supports the
formulation of the margin scheme for the tour
operators without ITC. However, the scheme
should cover the tour operators and travel
agents both along with withdrawal of the
option of paying taxation with ITC. The rates
however may be decided in discussion with
industry experts from the relevant ministry,
inputs from the stakeholders or as deemed fit
by the committee.
Since the revenue of the state is primarily
based on the tourism industry, if such leakages
are not stopped through intervention from all
levels, it will adversely affect the revenue
collection of the state. In case required, the
issue may be referred to the Law Committee
as well and Goa be allowed to be a part of
discussions for the same, as required. Detailed
comments of Goa are annexed as Annexure F.
3. It was observed by the Fitment
Committee that most of the concerns raised by
Goa pertain to interpretation of law which Goa
may take up with Law Committee.
4. Keeping in view the concerns of states
that any change to the taxation dispensation
for tour operators may have an adverse impact
on revenue of the state and also that the
proposed margin scheme for tour operators
may invite similar requests from other sectors,
it was decided that status quo may continue.
The tour operators in any case are paying GST
in the lowest slab of 5%.
14. GST on economy class
fare may be increased to
12% and on business
class to 18% provided
ATF is brought under
ambit of GST.
Aviation turbine fuel may be
included under GST subject to
following conditions:
For domestic travel:
• Output tax on economy class
tickets may be fixed at 12%
and on business class tickets
at 18%;
At present there is no proposal to bring ATF
under ambit of GST, therefore, status quo may
be maintained.
Having different GST rates on domestic and
international air travel is not feasible. It will
distort tax structure and make it more
complex.
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• GST on ATF may be fixed at
no more than 18% (without
application of any cess);
• Full ITC may be provided on
all goods and services to
airlines
For international travel
• The current status quo may
be maintained;
• Output tax may be retained at
5% on economy class and
12% on business class;
No taxes may be applied on ATF.
Any increase in output tax on
international travel will greatly
disadvantage the Indian carriers that
seek to compete with foreign carriers.
15. To bring parity between
express and transport
sector.
The express industry has been a
major enabler for the growth of ecommerce industry in the economy.
Express services are subject to GST
@ 18%, whereas transportation
services with credit are taxed @ 12%.
The Place of Supply for
transportation by air and ocean are
different from the one applicable to
express service.
With respect to export shipments,
ocean freight is zero-rated, while air
freight is exempted. In case of import
shipments, ocean freight is taxable
whereas air freight is exempt.
But express service for both imports
and export shipments are subject to
GST.
This is contributing to increase in the
overall logistics cost in India.
Postal and courier services attract GST at the
rate of 18% and transport of goods by
road/rail/vessel attract GST at the rate of 5%
with either no ITC or restricted ITC of input
services. The two are distinct services.
In Service Tax period also Postal and Courier
services attracted service tax at the standard
rate of 15% and transport of goods by
road/rail/vessel attract service tax at the rate of
4.5% with either no ITC or restricted ITC of
input services.
No merit in the request.
16. To exempt GST on All
India Permit fee paid for
grant of authorization or
Ministry of Road Transport and
Highways has notified All India
Tourist Vehicles (Authorization or
The GST Council while recommending the
exemption on National Permit Fee for goods
carriages observed that National Permit Fee is
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permit for plying Tourist
Vehicles throughout
India w.e.f 1.04.2021
Permit) Rules, 2021 effective from
1.04.2021.
These rules provide for submission of
application with prescribed for grant
of authorization to enable the
passenger vehicles operator/owner to
ply passenger vehicles throughout the
territory of India.
The All India Tourist Vehicles
(Authorization or Permit) Rules,
2021 are similar to the rules
governing the issue of National
Permit for goods carriages. In both
cases, the fee paid is for issue of
Authorization or permit for plying
Goods Carriages and Passenger
vehicles throughout India.
Since National Permit Fee is exempt
from GST, the authorization fee, airconditioned permit fee and non airconditioned permit fee paid for All
India Tourist Permit may also be
exempted from GST.
not a tax but a fee or consideration for a
service supplied by the Government in the
form of grant of national permits for plying of
vehicles.
Expanding the scope of the exemption to
include other types of fees which are also in
nature of consideration for services supplied
by Government may not be accepted.

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Annexure I (Sr. No.13 of Annexure- V)
Agenda note on issues related to Tour and hospitality Sector
A Existing rate structure and place of supply provisions
(I) On tour operators
a. GST rate
5% without ITC (but ITC of input services in the same line of business is allowed)
subject to the condition that the amount charged for the tour operator services must
include charges for accommodation and transportation both.
Or
18% with ITC
[Refer S. No. 23 of Notification No. 11/2017-CT(R)]
b. Place of supply of service of tour operator:
For domestic supplies: Location of recipient [ default rule]-Section 12 of the IGST
Act, 2017.
For international supplies:
(i) The location where services are actually performed (location of physical
presence)-Section 13(3)(b) of the IGST Act, 2017.
(ii) If service is provided both in taxable and non-taxable territory (say a
composite tour of India and Nepal) the place of supply of service is India for whole
service by virtue of Section 13(6) of the IGST Act, 2017.
(II) Hotel accommodation services:
a. GST rate:
Nil upto a rent of Rs 1000 per day
12% (Rent> Rs 1000 , <=7500)
18% (Rent> Rs 7500)
[Refer S. No. 7 of Notification No. 11/2017-CT(R), and S. No. 14 of Notification
No.12/2017- CT(R))
b. Place of Supply of service: Location of hotel [ in all scenarios - domestic as well
as international supplies- (Section 12(3) and 13(4) of the IGST Act, 2017 refers)

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(III) Restaurant services:
a. GST rate:
5% without ITC in all cases except restaurants within hotels where room tariff is
higher than Rs 7500.
18% - specified premises (retaurants within hotels where room tariff is higher than
Rs 7500)
[Refer S. No. 7 of Notification No. 11/2017-CT(R)]

b. Place of Supply of service: Location where services are actually performed, i.e.
location of the restuarants [Section 12(4) and 13(3)(b) of the IGST Act, 2017
refers]
(IV) Passenger Transport services:
a. GST rate:
By road 5% without ITC (except ITC of input
service in the same line of business);
12% (with ITC)
By rail (AC or First Class) 5% (with ITC of input services)
Exempt
other than AC or first class
By Air Economy 5% (with ITC of input
services)
Business 12% (with ITC)
Exempt
To or from NE States and RCS airports
By inland waterways Exempt
By sea including cruise ships 18%
[Refer S. No. 8 of Notification No. 11/2017-CT(R), and S. No. 15, 16 and 17 of
Notification No.12/2017- CT(R))
b. Place of Supply of service:
For domestic supplies:
(i) Supply to registered person – location of such person
(ii) For unregistered person – place where the passenger embarks on the
conveyance for a continuous journey.
(Section 12(9) of the IGST Act, 2017 refers)
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For international supplies:
Place where the passenger embarks on the conveyance for a continuous journey.
(Section 13(10) of the IGST Act, 2017 refers)
B. Issues and request by tour operators
The rate structure and place of supply as above leads to a situation that 18% with ITC is not a
viable option and hence most tour operators pay GST at the rate of 5% without ITC. The tour
operators have been arguing that effective GST tax rate on tour operators is very high. The
issues raised are discussed below.
(a) Issue
PoS of hotel accommodation is the location of the hotel. As a result, tour operators are not
able to take ITC of GST paid on hotel accommodation in the outside their States. Similarly
they may not be able to take ITC of transport services and restaurant services in many
instances in view of place of supply thereof. The tour operators have requested that they
should be facilitated ITC of all goods and input services including the hotel accommodation
service if standard rate is to apply.
Request
For this purpose, PoS of hotel accommodation service may be suitably changed.
Alternatively,
They may be charged GST @ 1.8% without ITC on the gross value charged by them. Tour
operators have stated that they work on a margin of 10%. Hence GST @18% on 10%.
(b) Issue:
Services supplied by tour operators to foreign tourists in India against payment in foreign
exchange do not qualify as exports and attract GST. This is because PoS of tour operator
service is the place where the service is performed.
The 288th Report of the Department Related Parliament Standing Committee on Transport,
Tourism and Culture on demands for grants (2021-22) has recommended that “in order to
enhance export competitiveness of Indian tourism as also to provide relief to the tourism and
hospitality sector, the payments received by all the tourism and hospitality entities in
convertible foreign exchange be considered as deemed export and be exempted from GST and
the concept of zero-rating also be applied to tourism foreign exchange earnings”.
The tax charged on tour operator services by competing countries like Thailand, Singapore,
Maldives and other South East Asian countries is much lower as compared to India. This
makes the Indian tour packages less competitive as compared to tour packages in countries
like Thailand and Singapore where the GST rates are lower at 7%. Industry has requested that
the tour operator services supplied to the foreign tourists in India may be treated as
exports/deemed exports.
Request:
Service provided to a foreign tourist be treated as exports [ at least where it is against foreign
exchange receipt]
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(c) Issue:
Tours having a foreign component and an Indian component are taxed as if the entire tour
happened in India in view of the PoS provisions.
Request:
Foreign component may be exempted.
(d) Issue
Reduce GST on private ferry tickets at Andamans:
The industry has represented that presently GST @ 18% is applicable on private ferry tickets
in Andamans as per cruise GST rate. The ferry is not luxury ferry or cruise but it is a means of
transport. These are normal AC transport ferries. There is no other way of transportation to
reach from one island to another island and is the only source of connectivity between small
islands and Port Blair.
C Facts and Analysis
• The PoS of hotel accommodation service is the State where the hotel is located. As a
result, a tour operator, say registered in Delhi is not able to take ITC of Maharashtra
State GST paid on hotel accommodation in Maharashtra. This PoS provision in the
Indian GST law is not in harmony with the international practice. As per International
VAT/GST guidelines, 2015 brought out by OECD in the context of cross-border
trade, place of B2B supply of hotel accommodation service is the location of the
recipient.
• The PoS of tour operator service is the place where the tour is performed (Section 13
(3) of IGST Act, 2017 refers). This PoS provision is in harmony with the
international practice. In Singapore, Australia, EU etc the PoS of B2C supply of tour
operator service is the place where the tour is conducted. Accordingly, these
countries do not treat tour operator services supplied to a foreign tourist as zero rated.
• GST charged on tour operator services by Thailand and Singapore is 7%. They are
major competitors of India in tourism sector.
• The Travel and Tourism Competitive Index, 2019 places India at an overall rank of 34
but at a much lower rank of 118 when evaluated on the basis of total taxes paid by this
sector [Travel and Tourism Competitive Index, 2019 published by
World Economic Forum, https://reports.weforum.org/travel-and-tourismcompetitiveness-report-2019/rankings]
• The proposal to change PoS of B2B supply of hotel accommodation service was taken
to the GST Council. However, the same was not agreed to in view of competing
arguments of revenue to states where services are performed.

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D Options available for resolving the above issues
1. PoS of hotel accommodation service
• Change PoS of B2B supply of hotel accommodation service, transport services and
restaurant services from the exiting rule to the default rule ( location of recipient).
This would require change in law and hence a long process.
Alternatively,
• Allow tour operators a margin scheme, as an alternative option, under which they
may pay GST on value arrived at on deemed basis [ certain % of gross tour cost] that
represent their fair competitive margin no ITC is availed on any input and input
services. Margin scheme would be allowed where tour is all inclusive or includes
either the hotel accommodation or transport. This will make the tax incidence on tour
operator competitive.
2. Tours conducted partially in India and partially outside India
• The POS provision in Section 13(6) of IGST Act, 2017, as far as tour operator service
is concerned, maybe aligned with Explanation to Section 12(7) of IGST Act, 2017. Or
• Considering the genuineness of the issue, and also taking into account that foreign
component is actually performed outside India, for excluding the proportionate value
of the foreign component of the tour.
• To avoid disputes/ misuse, we may prescribe valuation of the foreign and domestic
components of such composite tours based on the proportion of the number of nights
for which tour was conducted outside and within India. To ensure that balance
remains in favour of domestic tourism in such composite tours, we may prescribe that
this concession shall be provided for say maximum of half of the duration of the tour
or actual period whichever is less.
3. GST on private ferry tickets at Andamans:
Sr. No 17 (d) of said Notification No. 12/2017-CTR dated 28.06.2017 exempts “transportation
of passengers by public transport, other than predominantly for tourism purpose, in a vessel
between places located in India”.
We may clarify that this exemption would apply on tickets purchased for transportation from
one point to another irrespective of whether the ferry is owned or operated by a private sector
enterprise or by a PSU/government. The expression ‘public transport’ used in the exemption
Notification only means that the transport should be open to public. It can be privately or
publicly owned. Only exclusion is on transportation which is predominantly for tourism, such
as services which may combine with transportation, sightseeing, food and beverages, music,
accommodation such as in shikara, cruise etc.

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4. Export status to tour operator service supplied to foreign tourists against foreign exchange
by way of tours conducted in India.
Such services are not treated as exports internationally. Margin scheme would address the
concern of tour operators. A reasonable margin scheme will reduce the burden of tour
operators.
Recommendation of Fitment Committee:
1. In principle approval of GST Council may be obtained for formulating a Margin
Scheme for Tour Operators. Once approval is given by the Council, the scheme shall be
worked out by Fitment Committee after consultation with stakeholders.

2. In principle the Council may approve that in case of tours conducted for foreign tourists
partially in India and partially outside India, proportionate value of the foreign
component of the tour may be excluded from the value for the purposes of payment of
GST. To ensure that balance remains in favour of domestic tourism in such composite tours,
we may prescribe that this concession shall be provided for say maximum of half of the
duration of the tour or actual whichever is less. Once in principle approval is given, the exact
methodology would be worked out by Fitment Committee after consultation with tour
operators.
3. It may be clarified by way of Circular that exemption at Sr. No 17 (d) of Notification No.
12/2017-CTR dated 28.06.2017 [which exempts “transportation of passengers by public
transport, other than predominantly for tourism purpose, in a vessel between places located
in India] would apply on tickets purchased for transportation from one point to another
irrespective of whether the ferry is owned or operated by a private sector enterprise or
by a PSU/Government. The expression ‘public transport’ used in the exemption
Notification only means that the transport should be open to public. It can be privately
or publicly owned. Only exclusion is on transportation which is predominantly for tourism,
such as services which may combine with transportation, sightseeing, food and beverages,
music, accommodation such as in shikara, cruise etc.

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Annexure A
Detailed Comments of Himachal Pradesh:
Any reduction of GST on tour operator services will affect the income of the State adversely. The
State is therefore in favour of continuing with the existing rate structure on tour operators.
****

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Annexure B
Detailed Comments of Kerala:
Kerala is a popular destination for inbound domestic as well as foreign tourists and the tourism sector
significantly contributes to the State’s economy. The existing provisions under the GST with respect
to the place of supply are beneficial to all the States that are dependent on tourism. No changes which
will adversely affect the GST revenue of the State should be made to the place of supply provisions.
Further, any changes that is proposed to be made in this sector shall be brought only after conducting a
detailed study on the financial implications of the states where tourism is a predominant contributor to
the economy.
****

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Annexure C
Detailed Comments of Uttarakhand:
1. Marginal scheme is against the concept of indirect tax which is a tax on transactions relating to
manufacture, sales or supply of goods or services. During the period of more than 100 years of
indirect tax history in India, such a tax rate has not been fixed based on the profit margin in respect of
any goods or service sector. Indirect tax has to be collected and paid and therefore cannot have any
relevance to income or profit or margin of the assessee. Any conceptual change may result in a
situation like the opening of Pandora’s Box.
2. It may be noted that there was an abatement scheme in Central Excise and Service Tax. However, in
Central Excise it was introduced to simplify valuation process and avoid litigation in the case of goods
which are required to have MRP predetermined and in Service Tax, to ensure that the service tax is
levied only on the Service portion and not on the Goods part. It did not have any relation with
margins.
3. If the marginal scheme is allowed in tour operator services, it will further deteriorate the revenues in
the sector and will not be conducive to the finances of the State. The tax base will decrease compared
to the current practice of levying 5% GST without ITC on the entire tour package cost.
4. The place of supply being the location of recipients for domestic supplies in the tour operator sector
has already adversely affected the revenue of the State which is almost to the tune of Rs.196 crore for
the year 2021-22.
5. It is impractical to determine the same margin for all the tour operators as some would be operating
at higher margin and others at lower margin. The people with higher margin (say more than 10%) will
benefit the most while one with the lower margin will be at loss.
6. Margins are usual and common across all the businesses, so the deviation from the fundamental
tenets of GST may connive others also to put forward the demand to be taxed marginally.
****

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Annexure D
Detailed Comments of Jammu & Kashmir:
1. Concept of Agent and Principal should be well defined in the scheme.
The treatments for GST vary depending on whether one is acting as an agent or principal. A
business may be an agent for some of the sales it makes, and a principal for others. One is acting as a
principal if one buys in components of a holiday, such as accommodation, travel, tours and car hire, or
provide these from the resources of own business, and sell the components in his own name, either
individually or as a package. One is acting as an agent if one do not buy in the components of a
holiday but sell them, or the package, on behalf of another business.
Normally this is in return for a commission, although one is acting as an agent even if one do
not take a commission. For example, one may include a component supplied by someone else in a
package you put together, without taking a commission, because it makes the overall package more
attractive to potential customers.
There is also a concept of an 'undisclosed agent' behaving as if they are principal. One is
acting as an undisclosed agent when the customer is not aware that someone else, and not you, is
making the supply. So, while formulating a scheme these aspects need to be considered.
2. The scheme should clearly define Supplies as a principal
Where someone is acting as principal, GST may be calculated on holiday packages that one
sell as a principal in one of two ways:
• the package basis, or
• the components basis
The package basis: When a package that includes both standard and zero-rated components, the
proportion of the value of supply that is taxable at GST standard rate is equal to the proportion of the
costs of the components of the holiday that are standard-rated.
Buying in components of a holiday: Where package is purchased on component basis GST shall be
charged on the component supplied by a supplier and it is a standard-rated supply.
3. Self -billing
Where normal commercial practice is to remit payments to suppliers, for example hotels, on a
periodic basis, the concept of self-billing needs to be incorporated. This enables the customer to create
the supplier’s sales invoice, sending a copy to them.
4. Components of a holiday provided from own resources
If a holiday includes components that are provided from own resources, one must include in
costs, the equivalent cost of that component if one had to buy it in. For example, if accommodation is
provided in a hotel that is part of GST registration, the cost of that component to be included in the
calculation is the rate for the room(s) if not sold as part of a holiday package.
5. Components of a holiday provided by suppliers not registered for GST
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Where the components of a holiday are bought from suppliers that are not registered for GST,
the components are treated in the calculation according to whether the supply would bear GST if the
supplier were registered. For example, a taxi service may not be provided by a GSTregistered
business, but if it is used that taxi service for airport transfers as part of the holiday package, the cost
should be included in the standard-rated costs. Examples of other such components may include: pony
trekking, bike or car hire, guided walks and meals.
Further, Vaishno Devi and Amarnath Tour Packages are Managed both by the private tour
operators as well as by Government and Includes Darshan, pony rides as well as helicopter rides as
such needs to be considered in this context. Similarly, Amaranth Yatra is managed through
Government by registration and issuance of Yatra Permit (YP).
6. Supplies as an agent
Where the supplies of a holiday are made as an agent for a commission, the liability of supply
follows that of the main supply of the holiday. If one acts as an agent for no commission, one is not
making a supply for GST. Therefore, the concept of agent should be clear with the ones working as
commission agents.
As of now J&K is in favour of existing scheme of things dealing with the tour operators
however if the margin scheme is considered the above observations made may kindly be
considered.
****

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Annexure E
Detailed Comments of Delhi:
Delhi is in favour of its implementation so as to maintain a fine balance between the tax collections
from this sector without being prejudicial to interest of the tour operators.
****

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Annexure F
Detailed Comments of Goa:
1. Issue and request by Tour Operators as mentioned in the agenda
Following is the excerpt of the issue raised by tour operators from the agenda as placed in the
47th GST Council meeting:
The rate structure and place of supply leads to a situation that 18% with ITC is not a viable
option and most tour operators pay GST @ 5% without ITC. The tour operators have been arguing
that the effective GST tax rate on tour operators is very high i.e. 5 % without ITC. It has been stated
by the tour operators that the PoS of hotel accommodation is location of hotel and therefore they are
not able to take ITC of GST paid on hotel accommodation in the outside their states and therefore they
are seeking the formulation of margin scheme at a lesser rate than 5 % which is the rate as prescribed
for taxation without ITC.
2. Issue in brief for the state of Goa
Section 12 of the IGST Act provides for “Place of supply of services where location of
supplier and recipient is in India” and sub-section (3) of the said section provides for Place of Supply
(PoS) in case of immovable property or boat or vessel.
It is known that the primary intent of said provision is that the tax revenue generated
from an immovable property in any state is retained in that state by mandating the taxpayer to
charge local tax i.e SGST and CGST.
However, this office has identified a modus operandi among the industry players especially
the tour operators/travel agents who are defeating the basic purpose of the said provision by using the
IGST settlement mechanism to transfer ITC out of the state thereby depriving the state of legitimate
revenue generating out of immovable properties, cruises etc. in the state. The Modus Operandi is
explained below with an example:
Example: Tour Operator ‘A’ in ‘XYZ’ state books hotel accommodation for its customer
residents of ‘XYZ’ state through a tour operator ‘B’ in the state ‘ABC’, who in turn books the hotel
accommodation with a hotel ‘C’ located in the state ‘ABC’. Thus, the taxpayer ‘C’ (Hotelier) bills ‘B’
as intra-state supply as per the provisions of section 12(3) of IGST Act and charges CGST and SGST.
However, tour operator ‘B’ bills taxpayer ‘A’ as inter-state supply and charges IGST for having
provided the support services and not a supply covered by section 12(3) of IGST Act.
Thus, the actual tax intended to be retained in the state where the immovable property is situated is
transferred out of the state using IGST settlement mechanism.
Further, there remains ambiguity with regards to Section 12(3)(d), which provides that “Any services
ancillary to the services referred to in clause (a), (b) and (c)”. For hotel accommodation services, the
tour operators / travel agents claim that they do not fall within the purview of Section 12(3)(d) since
the principal supplier of hotel accommodation services is the hotel and not the travel agent / tour
operator.
Thus, in a nutshell the following submissions, being connected to the issue at hand with the fitment
committee, be taken into account for resolution.
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(i) It is incorrect to claim that the tour operators are not taking the ITC credit of the hotel
accommodation services. A study of top 35 tour operators / travel agents suggested that 34
out of 35 dealers are taking ITC credit for the same by undertaking IGST billing.
(ii) The dealers providing the room accommodation services by sourcing them from hotels
claim that they are out of the definition of tour operators since tour operators as per
definition provided should be supplying both accommodation and transport services.
(iii) It is stated that the billing of IGST is being done amongst travel agents / tour operators as
mentioned above and therefore the claim that they are not taking ITC is incorrect.
(iv) It is, however, stated that in this entire process the provisions relating to Place of supply
are being defied.
3. Proposed resolution of the issue
a. The state of Goa supports the formulation of the margin scheme for the tour operators without
ITC. However, the scheme should cover the tour operators and travel agents both along with
withdrawal of the option of paying taxation with ITC. The rates however may be decided in
discussion with industry experts from the relevant ministry, inputs from the stakeholders or as
deemed fit by the committee.
b. Another course of action would be the suggestion that the billing by such tour operators / travel
agents be allowed on a commission basis chargeable at the rate of 18% on the commission amount
only.
c. Further, it is proposed that any support services provided by the facilitator, where the primary
services are in relation to immovable property and having place of supply as provided in section
12(3) of IGST Act, should be treated as services provided at the location of the immovable
property or boat or vessel. It is proposed that a clarification may be issued, to specify that any
services whether ancillary or support service when supplied in relation to the principal supply or
supply which are actually performed at the location of immovable property, boat or vessel shall be
treated as supply in relation to immovable property and the place of supply in such cases shall be
the location of the immovable property or boat or vessel. Therefore, while billing such services
either by principal supplier to customer or tour operator or travel agent or any other facilitator or
by one facilitator to another, either for intrastate or interstate transactions, the place of supply of
such services should be the location of immovable property (i.e., place where the primary service
is performed).
The above course of action shall resolve the issue being faced by tour operators as well as the
tourism centric states.
4. Request to list the issue in next meeting
Since the revenue of the state is primarily based on the tourism industry, if such leakages are not
stopped through intervention from all levels, it will adversely affect the revenue collection of the
state. In case required, the issue may be referred to the Law Committee as well and Goa be
allowed to be a part of discussions for the same, as required. Therefore, it is humbly requested that
the issue be placed before the fitment committee for appropriate recommendation on the issue to
be placed before the GST Council for consideration.
****
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f) Issues deferred by the Fitment Committee for further examination in relation to services
– Annexure-VI
Annexure – VI
Sr.
No.
Proposal Details of Request Discussions in FitCom and its
recommendations
1. a. To notify a
mechanism for
availment of ITC in
cases where passenger
transportation services
by AC buses are
supplied through an ecommerce operator
(ECO).
b. To shift the onus of
discharging GST on the
registered bus operators
providing passenger
transportation service
through ECOs
The applicant hires AC buses from
bus owners. The bus owners charge
GST from the applicant.
Thereafter, the applicant provides
passenger transport services wherein
the ticket price charged from
customers includes the cost of fuel.
Passenger transport services attract
GST @ 5% with ITC of services in
same line of business.
Earlier, the applicant was discharging
GST on outward supply of passenger
transport services by utilizing ITC of
input service that is, leasing/renting
of buses.
However, w.e.f 1.1.2022, ECOs were
made liable to pay tax under Section
9(5) of CGST Act, 2017 in respect of
services by way of transportation of
passengers by any motor vehicle.
Therefore, the liability to pay tax in
respect of passenger transportation
services provided by AC buses
shifted from applicant to ECO.
The issue which has arisen due to the
aforesaid change is that ITC of input
services is getting accumulated with
the applicant as there is no
mechanism on GST portal to transfer
ITC to ECO for payment of tax.
The ECO, thus has to discharge the
entire GST liability in cash despite
significant ITC accumulation with
The issue was discussed in the 47th GST
Council Meeting and was deferred for
gathering more data to understand
ramifications of the issue.
So far request to allow registered bus
operators to discharge GST instead of
ECOs has been received only from two
entities. One of them has filed a writ
petition in the Hon’ble Delhi High Court.
As regards pricing of tickets pre and post
shifting of liability to pay GST on ECOs, it
has been informed that there is no change in
the price of tickets sold before 1.1.2022 and
tickets sold after 1.1.2022 as dynamic
pricing system is followed for fixing the
price of tickets.
With regard to details of other bus operators
facing issue of credit accumulation and
industry data about number of bus operators
paying GST @ 5% and 12%, no
information has been received.
The matter may be deferred.
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Sr.
No.
Proposal Details of Request Discussions in FitCom and its
recommendations
the service provider.
The applicant has requested that (a)
the GST portal be suitably amended
so that the ITC available to actual
service provider is reflected in
electronic credit ledger of ECO or (b)
a facility should be made available to
actual service provider so that he may
transfer the ITC available in his
electronic credit ledger to the ECO.
Alternatively, the onus to discharge
GST on sale of tickets for passenger
transport service through ECO may
be shifted to the registered bus
operators.
2. To clarify the nature and
taxability of various
supplies in relation to
crypto eco-system.
Crypto industry in India has been
facing various challenges, concerns
and skepticism like any new industry.
The Virtual Digital Assets (VDA)
industry has seen astronomical
growth despite ambiguities around
regulations.
Two unicorns have come into
existence.
Finance Bill provision of 1% TDS
(Direct Tax) on all VDA transactions
and disallowing set off is expected to
adversely affect the sector.
Any additional tax, such as GST will
further pose a challenge to this
industry.
The issue was discussed in the 47th GST
Council Meeting and was deferred because
it was felt that issues involved in crypto
ecosystem need deeper study.
Crypto assets refer to algorithm based
decentralized convertible virtual asset
protected by crypto-graphy.
Crypto ecosystem involves various
activities including mining, exchange
services, wallet services, payment
processing, barter system, and other
different transactions etc.
Officers from Haryana and Karnataka were
requested by the Fitment Committee to
identify all relevant issues in GST
associated with crypto-ecosystem and
possible solutions for the same. The report
is awaited.
3. To clarify that GST is
not applicable on flying
training courses by the
flying training institutes.
It has been submitted by National
Flying Training Institute Private
Limited that it is approved by DGCA
to conduct flying training to pilots.
DGCA fully controls such training
Services supplied by educational
institutions to students are exempt from
GST vide entry 66 of the Notification No.
12/2017-CT(Rate), dated 28th June, 2017.
“Educational Institution” means an
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Sr.
No.
Proposal Details of Request Discussions in FitCom and its
recommendations
institutes by prescribing syllabus,
number of seats per session, conduct
of examination. It issues a Course
completion certificate and on job
training certificate to candidate.
Course completion certificate is
approved by DGCA.
2. Thus, it should be considered as
educational institution and the
educational courses and certificates
issued by it for obtaining commercial
pilot license can be considered as
education recognized under law.
Further, Circular No. 117/36/2019-
GST dated 11.10.2019 has been
referred wherein it has been clarified
that Maritime Institutes are
educational institutions under GST
Law and the courses conducted by
them are exempt from levy of GST.
institution providing services by way of:
i. Pre-school education and
education up to higher
secondary school or equivalent,
ii. Education as a part of a
curriculum for obtaining a
qualification recognized by any
law for the time being in force,
iii. Education as a part of an
approved vocational education
course.
2. Based on the recommendation of GST
Council in its 37th Meeting held on 20th
September, 2019, it has been clarified vide
Circular No. 117/36/2019-GST dated 11.
10.2019 that the maritime training institutes
are educational institutions and the courses
conducted by them are exempt from levy of
GST.
3. Flying training institutes have also
requested for a similar clarification in
respect of flying training imparted by them.
4. However, it was observed that the
education imparted by maritime training
institutes and flying training institutes is
vocational in nature. The vocational
education should therefore, meet the criteria
of ‘approved vocational course’ prescribed
in sub-para (iii) of the definition of
‘Educational Institution’ mentioned above
to be eligible for exemption under Sl. No 66
of the Notification No. 12/2017-CT(Rate),
dated 28th June, 2017 and not clause (ii) of
the said definition which covers “Education
as a part of a curriculum for obtaining a
qualification recognized by law”.
5. In view of the above, question arose
whether maritime training institutes and
flying training institutes should meet the
criteria of ‘approved vocational education
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Sr.
No.
Proposal Details of Request Discussions in FitCom and its
recommendations
course’ prescribed in sub-para(iii) of the
definition of ‘educational institution’ to be
eligible for exemption under Sl. No 66 of
the Notification No. 12/2017-CT(Rate),
dated 28th June, 2017 and whether Circular
No. 117/36/2019-GST dated 11. 10.2019
needs to be revisited.
6. It was decided that the issue may be
referred to GoM on rate rationalisation for
taking a comprehensive view on definition
of educational institutions.
4. Request for bringing
renting of residential
dwellings transactions
by registered persons to
registered persons under
forward charge
mechanism.
It has been submitted that there are
various registered persons like body
corporates who are engaged in the
business of renting of residential
dwellings to other registered persons
like body corporates who further give
these dwellings on rent to their
employees for residence. Taxing such
supplies under RCM would adversely
affect such registered persons since
the ITC on the input services would
not be available to them. This would
not only affect the business of such
registered persons but will also
increase the cost of rent in the hands
of the employee to whom this
residential dwelling is ultimately
rented if the rent is recovered from
the employee.
It was felt that the change has been made
very recently. It may need detailed
examination before any change is made.
May be deferred.
5. The proposals, as contained in para 4 above are placed before the GST Council for consideration.
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Agenda Item 04: Report of the Committee on Levy of penal interest on delayed remittances of
GST by the banks to the Government Accounts in RBI during the initial period of GST
implementation.
1.1 Principal Chief Controller of Accounts, CBIC designated as Chief Accounting Authority
(CAA) for the purpose of accounting & reporting of Goods & Services Tax (GST) has formulated a
SOP (Standard Operating Procedure) to monitor the delays in remittances by the agency Banks to the
Government Account with RBI and levy the penal interest on Agency Banks. The same SoP was
made applicable post implementation of GST and was duly documented in the form of BARM
(Banking Authorization Reference Model) which served as a benchmark for authorization of Agency
Banks in the GST regime.
1.2 As part of the regular exercise, the Pr. CCA, CBIC issued demand letters for penal interest on
delayed remittances of GST collection against 23 banks for the period from lst July, 2017 to 31st
December, 2017. In response to the demand letter, most of the banks requested for waiver of penal
interest on account of technical glitches, validation failure at RBI, CBS problem, etc. faced by the
banks during the initial period of GST implementation. To examine the requests of the Banks
regarding levy of penal interest during the initial period of GST on merit, a Committee was constituted
vide O.M dated 08.02.2019 (copy enclosed as Annexure ‘A') under the chairmanship of Pr. CCA,
CBIC.
1.3 The committee submitted its report on 21.08.2020 (copy enclosed as Annexure 'B') and
recommended the following points: -
1.3.1 Various banks had given reasons and justifications for the delay in remittance of GST
collections to the Central/State Government Accounts in RBI. Members of the committee representing
SBI, Bank of Baroda and PNB had cited the changes made in the integration and file exchange
processes in the initial six months of GST implementation, because of which Banks could not remit
the Govt. funds timely. Other Banks in their representations had also cited that it took time for
understanding and implementing the changes/modifications in the IT processes to meet out the
requirements of GST portal, as the reasons for not making timely remittance of funds.
1.3.2. In the first few months of the introduction of GST, the IT Systems and Applications could not
be properly tested before GST implementation because of the time constraint and non-availability of
actual data. Those IT applications and integration processes were only tested on the basis of some
expected and anticipated test cases and scenarios. But there were many scenarios that were unexpected
and were encountered only after the actual roll out of the system from July 1st, 2017.

1.3.3. Failure of many receipt transactions from Banks at GSTN portal resulted into various course
corrections on the basis of analysis of errors. Those course corrections were necessitated in the interest
of the tax payers to credit their electronic cash ledgers on GST portal, enabling them to discharge their
tax liability without difficulty. Those cases were discussed with banks in multiple meetings organized
periodically by GSTN in its premises and also through video/call conferences. There were other
channels like email and Google groups, through which GSTN officials were communicating with
authorized banks to resolve the issue of failed transactions. In one of such email, GSTN directed all
authorized banks to complete the reconciliation process on daily basis at the end of day, before
remitting the funds to RBI. This direction was contrary to the prescribed guidelines of T + 1 day for
settlement of receipts transactions. The impression taken by the banks to handle failure cases and fully
reconcile the transactions with GSTN before remitting the funds to RBI, remained for some time
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resulting into change of priority. The confusion among the banks in that regard contributed to irregular
compliance of the prescribed guidelines for settlement of receipt transactions on T + 1 basis.
1.3.4 RBI on its part clarified that it had never given any permission to any agency bank to upload
luggage file for settlement of receipt transactions after T + 1 day. It was also clarified that there was
no case on record where agency bank had approached RBI for exemption from being penalized for
delayed uploading of luggage file on a particular day. Therefore, it was concluded from those facts
that the agency banks, whenever not remitting the funds on T + 1 day to RBI during the initial period
of GST implementation was not because of any rejections by RBI system but because of issues in the
reconciliation between banks and GST portal of GSTN and also due to IT issues like up-gradation of
banking software, and technical glitches.
1.3.5. The data for the said period (July-December 2017) was analysed and it showed that about 80%
of the total delayed transactions were having one to three days of delay. This pattern was being seen in
all the six months of transaction, across all 25 banks. There were, however, many transactions which
were delayed beyond 3 days, but those were pertaining to few banks only and did not form any pattern
as well. Therefore, the committee was of the view that during initial months of GST implementation,
there were many transaction failures while being transmitted by banks to GSTN, because of
unforeseen errors and IT glitches. While those transactions were successful at the bank' s end after
debiting the taxpayer's account, however, they were not reported on real time to GSTN to credit the
tax payer's electronic cash ledger. The thrust, therefore, during those months was on the reconciliation
of such transactions between GSTN and Banks.
1.3.6. On the basis of analysis of data for the said period for all banks, the committee, therefore
recommended a relaxation of 3 days for remittance of GST receipt by agency banks to Govt. account
in RBI beyond T+l for the CINs generated from 1st July to 31st October, 2017 and a relaxation of 1
day for the CIN s generated from 1st November to 31st December, 2017. The actual delay beyond T+l
day might be adjusted by the recommended period of 3 days or 1 day. If a transaction was delayed for
more than 3 days/1 day, (as the case may be), then the interest on delayed remittance might be charged
after adjustment of recommended days.
1.4 Controller General of Accounts forwarded the report to the GST Council Secretariat to seek
the views of the States/UTs on the recommendation of the committee. The report was circulated
among all the states vide this office letter dated 09.03.2021 for their comments. Only fourteen states
gave their comments of which ten states agreed with the recommendations of the committee. The
comments of the states are annexed as Annexure ‘C’.
1.5 Under GST regime, CIN (digitally signed Challan from banks) was a composite challan
containing Central & State Taxes and in order to have uniform process in Central and States/UTs,
applicability of the recommendations of the Committee might also be considered for SGST
component of GST. Hence, the report of the committee is placed before the GST Council for decision.
Annexure ‘A’
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Annexure ‘B’
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Annexure ‘ C’
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Summary of Reply received from States
S.No. Name of the States letter No. Dated Remark/Comments given by the Sates
1 Rajasthan 17(105-Part-VI)
ACCT/GST/2019/663 (Pg-44) 18.03.2021
They want Bank Rate+2% Penal Interest
for the period 01.07.2017 to 31.12.2017.
It appears that they did not agree with
report of Committee
2 Meghalaya No. CTA-12/2020/43 (pg-42) 24.03.2021 Agreed with recommendation of the
committee
3 Nagaland
No.
CT/LEG/GSTC/1/17(PT)/191(Pg43)
25.03.2021 Agreed with recommendation of the
committee
4 Tamil Nadu 3451/B1/2021(Page45) 25.03.2021 Agreed with recommendation of the
committee
5 Gujarat email dated 26.03.2021( Pg-37) 26.03.2021 various suggestion have been given
which are being re produced below*
6 Himachal Pradesh 12-12/2017-18(512)-EXN-GST9692 (pg-41) 19.04.2021
They are agreement with the proposal of
CBIC for levy of penal interest on Banks
for delaying the payment T+1 days
7 Odisha FIN-CTI-Tax-0017-2021(Pg-36) 28.04.2021 Agreed with recommendation of the
committee
8 Uttar Pradesh Email dated 23.06.2021( Page 50) 23.06.2021
The State of Uttar Pradesh would like to
convey its approval to the
recommendations of the committee
constituted for examination of levy of
penal interest on delayed remittance
by the banks. However we are of the
opinion that the SGST Component of the
penal interest charged from the Banks
after the adjustment of the recommended
3 Days/1 Day (as the case maybe) shall be
transferred to the respective states.
9 Punjab No. Accountants-2-2021/241 dated
06.12.2021 ( Page No.66) 06.12.2021
No relaxation may be given, in the penal
interest to be levied on the banks, due to
late transfer of the amount of GST by
bank to the RBI account, and the state
share of penal interest should be paid to
the state Government." ( Not Agreed)
10 Chhattisgarh letter No. 6670 ( Page No. 56) 27.07.2021 Accepted the recommendations of the
committee.
11 Manipur
Letter No. TAX/CO-101/1/2022-
TAXES-TAXATION dated
05.08.2022 (Pg No. 74)
05.08.2022 Accepted the recommendations of the
committee.
12 West Bengal Email dated 19.09.22 19.09.2022
The report of the committee may be
placed before the GST Council for
deliberation
13 Assam CT/GST-28/2019/106 20.09.2022 Agreed with recommendation of the
committee
14 Goa No.CCT/26-10/RBI-Penal
Interest/2022-23/2480
23.11.2022 Agreed with recommendation of the
committee
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Agenda Item 05: Performance Report of the NAA (National Anti-Profiteering Authority) for the
1st quarter (April, 2022 to June, 2022) and 2nd quarter (July,2022 to September, 2022) along
with monthly performance report for the month of October and November 2022 for the
information of the Council

The performance report of Anti-Profiteering for the 1st quarter (April to June 2022) and 2nd quarter
(July to September 2022) at various levels is as under:
1.1. Performance of National Anti-Profiteering Authority:

Opening
Balance
No. of
Investigation
Reports
received
from DGAP
during the
quarter
Disposal of Cases (during Quarter) Closing
Total Disposal Balance
during quarter
No. of
cases
Where
Profiteering
established
No. of cases
Where
Profiteering
not
established
No. of
cases
referred
back to
DGAP
Quarter 1 (April – June 2022)
208 8 37 26 6 5 179
Quarter 2 (July – September 2022)
179 11 70 43 5 22 120
October 2022*
120 5 0 0 0 0 125
November 2022*
125 3 0 0 0 0 128
* National Anti-Profiteering Authority (NAA) has also submitted month wise reports for the months
of October 2022 and November 2022 as the tenure of NAA has ended on 30th November, 2022. Now,
the work related to NAA has been shifted to Competition Commission of India (CCI) vide
Notification No. 23/2022-Central tax dated 23.11.2022.
1.2 Performance of DG (Anti-Profiteering):
Opening
Balance (No.
of cases)
Receipt Disposal Mode of disposal of cases Closing Balance
(No. of cases)as
on 30.06.2022
Report to NAA
confirming
profiteering
Report to
NAA for
closure action
Quarter 1 (April – June 2022)
29 17 7 6 1 39
Quarter 2 (July – September 2022)
39 36 10 5 5 65*
*Out of these 65 cases, 21 cases have been stayed by various Hon’ble High Courts
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• One case has been held up as per direction by NAA.
• Actual pendency of cases in which Investigation is under Process, are 43 only.
1.3 Performance report of the Standing Committee on Anti-profiteering:

Opening Balance (No.
of cases)
Receipt Disposal Closing Balance
(No. of cases)as
on 30.06.2022
Quarter 1 (April – June 2022)
30 38 26 42
Quarter 2 (July – September 2022)
42 48 19 71
1.4 Performance report from the State Level Screening Committee:

Opening Balance
(No.of cases)
Receipt Disposal Closing
Balance
(No. of
cases)
Cases referred to
Standing Committee
Cases Rejected
Quarter 1 (April – June 2022)
64* 123 20 11 156
Quarter 2 (July- September 2022)
156 95 23 133 95

Last quarter data of F.Y. 2021-22 (January to March 2022) for reference
101 66 7 92 68
*The Closing Balance of the quarter ending March 2022 doesn’t match with the Opening Balance of
the quarter ending June 2022 since the report from Karnataka SLSC for the quarter ending June 2022
was not received so the total Closing Balance of Quarter ending March 2022 and Opening Balance of
quarter ending June 2022 differs by no of 4 cases. The SLSC report for the quarter ending September
2022, does not include the report from Chhattisgarh, Himachal Pradesh, Karnataka and Kerala as
these States have not submitted their reports.
2. During the above mentioned quarters NAA has undertaken the following activities/initiativesFor the quarter April-June 2022:-
i. The quorum in the Authority was restored w.e.f 23.02.2022 after joining of two new
Technical Members i.e, Shri P.K. Singh and Shri Hitesh Shah and thereafter the Authority has
started working with full vigor and passed 37 Orders involving profiteering of an amount of
Rs. 244 Crores. The NAA, till date has passed 310 orders since its inception establishing
profiteering of Rs.1945 Cr. (Approx.) out of which an amount of Rs. 562.5 Cr. (Approx.) has
either been passed on to the buyers or deposited in the Consumer Welfare Funds or deposited
with the High Courts.
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ii. Total no of 179 cases were pending for completion of proceedings at the level of Authority.
iii. The Authority has taken a landmark decision by removing the practice of pre-verification of
passing of the ITC benefit to home/flat/shop buyers and replaced the same with postverification of passing of the ITC benefit by the Jurisdictional CGST/SGST Commissioners. It
has helped in speedier resolution of cases before the Authority. In this respect, an
advertisement of appropriate size (large enough to be noticed by the reader) would be
published in minimum of two local Newspapers/ vernacular press in Hindi/English/local
language with the details i.e Name of builder (Respondent) and Project, its Location and
profiteered amount so that the concerned customers/ flat buyers/ recipients can claim the
benefit of ITC. This would help buyers in ascertaining the amount of ITC benefit due to them
from the builders. The Authority has also started this practice in respect of cases of tax
reduction where consumers are identifiable.
iv. The performance of DGAP was reviewed by the Authority periodically with the last such
review on 23.06.2022. Various issues like pending investigations, Court cases, complaints,
non-submission of Monthly/Quarterly reports by the State Screening Committees of certain
states etc. were discussed in detail.
v. The Chairman, NAA held Review Meeting with the Members of the Standing Committee on
Anti-Profiteering wherein various pending issues like speedier resolution of grievances/
complaints, rejection of complaints etc. were discussed in detail.
vi. The Chairman, NAA held a Review Meeting with the Members of Delhi State Screening
Committee on Anti-Profiteering on 26.04.2022 regarding various pending issues including the
details of the disposal of the complaints received by the Screening Committee and pendency
of complaints.
vii. 140 Writ Petitions filed before various High Courts of India are being continuously monitored
by the Authority. The Counsels are being regularly briefed about all cases listed before
Hon’ble High Courts by the Authority with active assistance of the Legal Consultant. The
Hon’ble High Court of Delhi has reported and fixed hearings in 81 clubbed anti-profiteering
cases on 12th, 13th and 14th July, 2022 respectively wherein arguments are being heard on
constitutionality of Section 171 of the CGST Act, 2017 and the Rules framed under it. The
Hon’ble High Court is likely to pass judgement on these cases shortly. It is noteworthy that
none of the decisions of the NAA has been set aside by any High Court till date.
viii. 33 complaints were received by the Authority during the quarter via NAA portal, e-mails and
post. The complaints relating to profiteering in terms of Section 171 of the CGST Act, 2017
were forwarded to the respective Screening Committee/ Standing Committee for further
action/examination thereof. While 13 complaints related to other GST/enforcement issues
were forwarded to the Jurisdictional State and Central GST Commissioners for necessary
action.
For the quarter July-September 2022:-
ix. During the quarter ending September 2022, the Authority has passed 70 orders involving
profiteered amount of Rs. 621 Crores. Therefore, the NAA has passed 380 orders since its
inception establishing profiteering of Rs. 2563 Crores (Approx.) and out of which an amount
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of Rs. 563 Cr. (Approx.) has either been passed on to the buyers or deposited in the Consumer
Welfare Funds or deposited with the High Courts.
x. 120 cases (including 11 received from the DGAP during the quarter) were pending for
completion of proceedings at the level of the Authority. The proceedings were being held
expeditiously to dispose of the pending cases at the earliest.
xi. 117 hearings were held during the quarter ending September 2022 thereby 280 hearings have
been held till the quarter ending September 2022 since reconstitution of the Authority w.e.f
23.02.2022 and regular proceedings are being held by the Authority since 23.02.2022.
xii. In compliance of Department of Revenue’s Order No. 51/2022 dated 03.02.2022, Sh. Mahesh
Kumar Rustogi, IRS, (C & CE) had joined in the Authority on 16.08.2022 as Fourth Technical
Member.
xiii. The performance of DGAP is being monitored by the Authority periodically. The last review
meeting was held on 29.09.2022. Various issues like pending investigations, Court cases,
Complaints, non-submission of Monthly/Quarterly reports by State Screening Committees of
certain states etc. have been discussed in detail.
xiv. The Chairman, NAA has held the Review Meeting with the Members of Maharashtra State
Screening Committee on Anti-profiteering on 16.09.2022 regarding various pending issues
including the details of the disposal of the complaints received by the Screening Committee
and pendency of complaints.
xv. 150 Writ Petitions filed before various High Courts of India are being continuously monitored
by the Authority. The counsels are being regularly briefed about all cases listed before
Hon’ble High Courts by the Authority with active assistance of the Legal Consultant. The
Assistant Solicitor General and empanelled councils were briefed about 82 clubbed antiprofiteering cases wherein the hearings were held on 12th, 13th, 14th, 30th and 31st August 2022
before the Hon’ble Delhi High Court and arguments were heard on constitutionality of Section
171 of The CSGT Act, 2017 and the Rules framed under it. The Hon’ble High Court of Delhi
has fixed the next hearing on 19th October in these cases and is likely to decide on these cases
shortly. It is noteworthy that none of the decisions of the NAA has been set aside by any High
Court till date and recently in one of the judgements in case of M/s L’Oreal India Pvt. Ltd., the
Hon’ble Delhi High Court has passed a detailed speaking order and directed M/s L’Oreal
India Pvt. Ltd. to deposit the principal profiteered amount of Rs. 186 Cr. which is a landmark
victory for the anti-profiteering efforts of the Authority.
xvi. Four cases viz. M/s K.V. Developers, M/s Umang Realtech, M/s Supertech and M/s Logix
City Developers are pending for resolution before NCLT which have been kept in abeyance
for time being by the Authority.
xvii. 49 complaints were received by the Authority during the quarter ending September 2022 via
NAA portal, e-mails and post. 30 complaints relating to profiteering in terms of Section 171 of
the CGST Act 2017 were forwarded to the respective Screening Committees/ Standing
Committee for further action/examination thereof. While 20 complaints that related to other
GST/ enforcement issues were forwarded to the jurisdictional State and Central GST
Commissioners/ Chief Commissioners for necessary action.
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For the period October 2022 to November 2022:-
xviii. During the month of October and November 2022, no order could be passed by the Authority
due to lack of quorum as the tenure of the Chairman expired on 02.10.2022. The NAA has
passed 380 orders since its inception establishing profiteering of Rs. 2563 Cr. (Approx) out of
which an amount of Rs. 563 Cr. (Approx.) has either been passed on to the buyers or
deposited in the Consumer Welfare Funds or deposited with the High Courts.
xix. Total 128 cases were pending for completion of proceedings at the level of the Authority.
xx. 10 complaints were received by the Authority during the month of October, 2022 via NAA
portal, e-mails and post. 7 Complaints relating to profiteering in terms of Section 171 of the
CGST Act, 2017 were forwarded to the respective Screening Committees/ Standing
Committee for further action/examination thereof. While 3 complaints that related to other
GST/enforcement issues were forwarded to the Jurisdictional State & Central GST
Commissioners/Chief Commissioners for necessary action.
xxi. 21 complaints were received by the Authority during the month via NAA portal, e-mails and
post. 17 Complaints relating to profiteering in terms of Section 171 of the CGST Act, 2017
were forwarded to the respective Screening Committees/ Standing Committee for further
action/examination thereof. While 3 complaints that related to other GST/enforcement issues
were forwarded to the Jurisdictional State & Central GST Commissioners/Chief
Commissioners for necessary action.
3. In addition to the two quarterly reports (i.e. April-June 2022 and July-September 2022), the
National Anti-profiteering Authority has also submitted the reports for the months of October
2022 and November 2022 as the tenure of NAA has ended on 30th November, 2022. Now, the
work related to NAA has been shifted to CCI vide Notification No. 23/2022-Central tax dated
23.11.2022.
4. Department of Revenue (State Taxes-I), Ministry of Finance vide OM dated 30.11.2022
issued vide F. No.S-34011/37/2021-ST-I-DoR has directed that all the officers/staff
subordinate to Chairman and Members of NAA shall continue to work on an as-is where-is
basis and will provide necessary assistance to CCI for a period of six months from 01.12.2022
till 31.05.2023 or until further orders, whichever is earlier. It also provided that the DGAP
shall continue to investigate anti-profiteering matters even in the amended framework.
5. Accordingly, the quarterly performance reports for two quarters i.e. April-June 2022 and JulySeptember 2022 of the National Anti-profiteering Authority, State-level screening, Standing
committees and Directorate General of Anti-Profiteering (DGAP) along with NAA's reports
for the months of October and November 2022 are placed before the GST Council.
****

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Agenda Item 06: Ad-hoc Exemptions Orders issued under Section 25(2) of the Customs Act,
1962 to be placed before the GST Council for information
In the 26th GST Council meeting held on 10th March, 2018, it was decided that all ad hoc exemption
orders issued with the approval of Hon’ble Finance Minister as per the guidelines contained in
Circular No. 09/2014-Customs dated 19th August, 2014, as was the case prior to the implementation of
GST, shall be placed before the GST Council for information.
2. The details of the ad hoc exemption orders issued recently are as follows:
Order No. Date Remarks
AEO No. 02 of
2022
16th September, 2022 Request for ad-hoc exemption for import of
cheetahs as donation by the National Tiger
Conservation Authority, Ministry of Environment,
Forest & Climate Change, Government of India
(order copy enclosed).
AEO No. 03 of
2022
30th September, 2022 Request for ad-hoc exemption from customs duties
and other taxes for import of goods for 90th
Interpol
General Assembly in New Delhi (order copy
enclosed)
AEO No. 04 of
2022
13th October, 2022 Request from Shri T.N Hari for exemption from
payment of customs duty under Section 25(2) of
Customs Act, 1962 on import of drug Inj. Anakinra
(order copy enclosed)
3. This is placed for the information of GST Council.

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Agenda Item 7: Issues recommended by the Law Committee for the consideration of the GST
Council
Agenda Item 7(i): Amendment in the CGST Rules, 2017 for Aadhaar based Biometric
authentication of the registrants
A. Biometric-based Aadhaar authentication and physical verification for new registration
Sub-rule (4A) was inserted in Rule 8 of the CGST Rules, 2017, vide Notification No.
94/2020-Central Tax dated 22.12.2020 to provide for biometric-based Aadhaar authentication w.e.f. a
date to be notified, as follows: -
“(4A) Every application made under Rule (4) shall be followed by—
(a) biometric-based Aadhaar authentication and taking photograph, unless exempted
under sub-section (6D) of Section 25, if he has opted for authentication of Aadhaar
number; or
(b) taking biometric information, photograph and verification of such other KYC
documents, as notified, unless the applicant is exempted under sub-section (6D) of
Section 25, if he has opted not to get Aadhaar authentication done,
of the applicant where the applicant is an individual or of such individuals in relation to the
applicant as notified under sub-section (6C) of Section 25 where the applicant is not an
individual, along with the verification of the original copy of the documents uploaded with the
application in FORM GST REG-01 at one of the Facilitation Centres notified by the
Commissioner for the purpose of this sub-rule and the application shall be deemed to be
complete only after completion of the process laid down under this sub-rule.”
1.2 However, the said provision has not yet been notified.
2 The Group of Ministers on GST System Reforms in its first report inter alia approved the
proposal to improve the registration process by using mandatory biometric authentication for high-risk
applicants for registration under GST and the pilot for the same is proposed to be conducted by the
State of Gujarat.
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3 The GoM recommended mandatory physical verification for High-risk applicants only, even
where the Aadhaar authentication was not opted or failed. However, the same was discussed in law
committee meeting held on 26.08.2022 and it was recommended to mandate physical verification in
all cases where Aadhaar authentication is not opted or fails. The corresponding provision is already
there in Rule 9, and therefore no Rule amendment is required for this.
4.1 The Law Committee in its meetings held on 26.08.2022 and 07.09.2022 examined the issues
relating to biometric-based Aadhaar authentication, and recommended that:
(i) to mandate biometric-based Aadhaar authentication for high-risk applicants who opt for
authentication of Aadhaar number, sub-rule (4A) of Rule 8 may be substituted as under:
“(4A) Every application made under sub-rule (4) by a person, other than a person
notified under sub-section (6D) of Section 25, who has opted for authentication of
Aadhaar number and is identified on the common portal, based on data analysis and
risk parameters, shall be followed by biometric-based Aadhaar authentication and
taking photograph of the applicant where the applicant is an individual or of such
individuals in relation to the applicant as notified under sub-section (6C) of Section
25 where the applicant is not an individual, along with the verification of the original
copy of the documents uploaded with the application in FORM GST REG-01 at one
of the Facilitation Centres notified by the Commissioner for the purpose of this subrule and the application shall be deemed to be complete only after completion of the
process laid down under this sub-rule.”
(ii) to provide for exemption from biometric-based Aadhaar authentication in States / UTs
where the pilot is not being undertaken, sub-rule (4B) may be inserted in Rule 8 of the CGST
Rules, 2017, as under:
“(4B) The Government may, on the recommendations of the Council, by notification
specify the States and/ or Union Territories wherein the provisions of sub-rule (4A)
shall not apply.”
(iii) to provide that acknowledgement shall be issued to the applicant only after completion of
biometric-based Aadhaar authentication, sub-rule (5) of Rule 8 may be amended as under:
“(5) On receipt of an application under sub-rule (4) or sub-rule (4A), as the case
maybe, an acknowledgement shall be issued electronically to the applicant in FORM
GST REG-02.”
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(iv) To provide for mandatory physical verification of an applicant who has undergone
biometric-based Aadhaar authentication and is identified on the common portal, based on data
analysis and risk parameters, for carrying out such physical verification of places of business,
Rule 9 may be amended as under:
“(1) The application shall be forwarded to the proper officer who shall examine the
application and the accompanying documents and if the same are found to be in
order, approve the grant of registration to the applicant within a period of seven
working days from the date of submission of the application:
Provided that where –
(a) a person, other than a person notified under sub-section (6D) of Section
25, fails to undergo authentication of Aadhaar number as specified in subrule (4A) of Rule 8 or does not opt for authentication of Aadhaar number; or
(aa) a person, who has undergone authentication of Aadhaar number as
specified in sub-rule (4A) of Rule 8, is identified on the common portal, based
on data analysis and risk parameters, for carrying out physical verification of
places of business; or
(b) the proper officer, with the approval of an officer authorised by the
Commissioner not below the rank of Assistant Commissioner, deems it fit to
carry out physical verification of places of business,
the registration shall be granted within thirty days of submission of application, after
physical verification of the place of business in the presence of the said person, in the
manner provided under Rule 25 and verification of such documents as the proper
officer may deem fit;
(2) Where the application submitted under Rule 8 is found to be deficient, either in
terms of any information or any document required to be furnished under the said
Rule, or where the proper officer requires any clarification with regard to any
information provided in the application or documents furnished therewith, he may
issue a notice to the applicant electronically in FORM GST REG-03 within a period
of seven working days from the date of submission of the application and the
applicant shall furnish such clarification, information or documents electronically,
in FORM GST REG-04, within a period of seven working days from the date of the
receipt of such notice.
Provided that where –
(a) a person, other than a person notified under sub-section (6D) of Section
25, fails to undergo authentication of Aadhaar number as specified in subrule (4A) of Rule 8 or does not opt for authentication of Aadhaar number; or
(aa)a person, who has undergone authentication of Aadhaar number as
specified in sub-rule (4A) of Rule 8, is identified on the common portal, based
on data analysis and risk parameters, for carrying out physical verification of
places of business; or
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(b) the proper officer, with the approval of an officer authorised by the
Commissioner not below the rank of Assistant Commissioner, deems it fit to
carry out physical verification of places of business,
the notice in FORM GST REG-03 may be issued not later than thirty days from the
date of submission of the application.
…”
4.2 As it has been proposed to conduct a pilot in the State of Gujarat for such biometric
authentication during registration process, it is proposed that:
(i) the above amendments in Rule 8(4A), 8(5) and Rule 9 may be made at present only in
Gujarat SGST Rules and in the CGST Rules, 2017 but not in the SGST / UTGST Rules, 2017
of other States / UTs at present.
(ii) Rule 8(4B) may be introduced in the CGST Rules, 2017 only. Subsequently, a notification
will be required to be issued by the Centre under Rule 8(4B) for specifying all States and UTs,
except Gujarat, where provisions of Rule 8(4A) will not apply.
B. Incorporation of details of electricity bill and property registration in FORM GST REG-01
5 The Group of Ministers on GST System Reforms in its first report also approved the proposal
for inclusion of Electricity Bill meta data (CA No.) as a data field during registration by new
taxpayers. CA Number shall be verified to improve the quality of registered addresses in GST System.
The State of Maharashtra agreed to carry out the pilot project in this regard. The State of Madhya
Pradesh also volunteered for the same as well as for the validation of property registration details from
Land Revenue Department.
6 Accordingly, the Law Committee on 07.09.2022 recommended as under:
(i) Details of electricity consumer account number (CA Number) and Property registration
may be sought under State Specific Information at Sl. No. 24 of FORM GST REG-01.
(ii) Details of electricity CA Number may be notified under Sl. No. 24 by the State of
Maharashtra.
(iii) Details of electricity CA Number and Property registration may be notified under Sl. No.
24 by the State of Madhya Pradesh.
C. Enhancement in GST Registration to restrict misuse of PAN
7 GST Registration is PAN-based. Currently, OTP-based verification in Part-A of FORM GST
REG-01 is done to verify only the mobile number and email address provided by the authorised
signatory. However, no intimation is sent to the PAN holder when a GST registration is applied. This
communication gap may result into misuse of PAN of a person without his knowledge by
unscrupulous elements.
8 To address this, the Law Committee in its meeting held on 03.08.2022 recommended:
(i) PAN-linked mobile number and email address (fetched from CBDT database) may be
captured and recorded in FORM GST REG-01.
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(ii) OTP based Verification of PAN-linked mobile and email address in Part-A of FORM
GST REG-01 be made mandatory, instead of verification of authorised signatory’s selfdeclared mobile number and email address.
(iii) Accordingly, Part-A of FORM GST REG-01 may be amended as below:
(i) Legal name of the business
(ii) Permanent Account Number
(iii) Email address(Authorised signatory)
(iv) Mobile number(Authorised signatory)
(iii) Email address (PAN linked) <Auto>
(iv) Mobile Number (PAN linked) <Auto>
(v) Sub-rule (1) of Rule 8 may be amended to omit the requirement of declaration of mobile
number and e-mail address in Part A of FORM REG-01
(vi) Clauses (b) and (c) to sub-rule (2) of Rule 8 be omitted to do away with the verification
of authorised signatory’s self-declared mobile number and email address.
(vii) Clause (a) to sub-rule (2) of Rule 8 be amended to provide for OTP-based verification of
PAN-linked mobile number and email address, as below:
“(a) The Permanent Account Number shall be validated online by the common portal
from the database maintained by the Central Board of Direct Taxes and shall also be
verified through separate one-time passwords sent to the mobile number and email
address linked to the Permanent Account Number.”
9 Accordingly, the proposals at paras 4, 6 and 8 are placed before the GST Council for
deliberation and approval.

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Agenda Item 7(ii): Refund to the unregistered persons.
Instances have been brought to the notice where the unregistered buyers, who had entered into
an agreement/ contract with a builder for supply of services of construction of flats/ building, etc. and
had paid the amount towards consideration for such service, either fully or partially, along with
applicable tax, had to get the said contract/ agreement cancelled subsequently due to non-completion
or delay in construction activity in time or any other reasons. In a number of such cases, the period for
issuance of credit note on account of such cancellation of service under the provisions of Section 34 of
the Central Goods and Service Tax Act, 2017 (hereinafter referred to as ‘The CGST Act, 2017’) may
already have got expired by that time. In such cases, the supplier may refund the amount to the buyer,
after deducting the amount of tax collected by him from the buyer.
1.2 Similar situation may arise in cases of long-term insurance policies where premium for the
entire period of term of policy is paid upfront along with applicable GST and the policy is
subsequently required to be terminated prematurely due to some reasons. In some cases, the time
period for issuing credit note under the provisions of Section 34 of the CGST, 2017 may have already
expired and therefore, the insurance companies may refund only the proportionate premium net off
GST.
1.3 Representations have been received requesting for providing a facility to such unregistered
buyers/ recipients for claiming refund of amount of tax borne by them in the event of cancellation of
the contract/agreement for supply of service of construction of flats/ building or on termination of
long-term insurance policy.
2.1 In this regard, reference is made to sub-section (1) of Section 54 of the CGST Act, 2017,
which provides for filing an application of refund by any person. Sub-section (1) of Section 54 is
reproduced as under:
“(1) Any person claiming refund of any tax and interest, if any, paid on such tax or any other
amount paid by him, may make an application before the expiry of two years from the relevant
date in such form and manner as may be prescribed:”
2.2 In view of the above, as the term used is ‘any person’ and not ‘registered person’, therefore, it
can be stated that there is no restriction under GST Law which restricts any unregistered person from
claiming refund under GST.
3. Further, clause (e) of sub-section (8) of Section 54 of the CGST Act, 2017 provides that the
refundable amount would be paid to the applicant instead of being credited to Consumer Welfare Fund
(CWF), where such amount relates to the tax and interest, if any, or any other amount paid by the
applicant, if he had not passed on the incidence of such tax and interest to any other person. In cases,
where the amount of tax paid and charged from the unregistered person by the supplier has not been
refunded to such unregistered person by the supplier, the unregistered person may have borne the
incidence of such tax paid without passing on the incidence to any other person. Therefore, the
unregistered person may be eligible for refund to be paid to him, instead of being credited to CWF,
under the provisions of clause (e) of sub-section (8) of Section 54.
4. In order to enable such a unregistered person to file application for refund under sub-section
(1) of Section 54, GSTN has recently introduced a new functionality on the common portal that allows
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unregistered persons to take a temporary registration and apply for refund under the category ‘Refund
for Unregistered person’.
5. As regards the relevant date in respect of such refund claims, clause (g) in Explanation (2)
under Section 54 appears to be applicable in cases of refund by unregistered persons, being the
recipient. Clause (g) in Explanation (2) under Section 54 is reproduced below:
(g) in the case of a person, other than the supplier, the date of receipt of goods or services or
both by such person; and
5.1 In view of the above, the relevant date in case of refund by unregistered persons would be
the date of receipt of goods or services. However, in respect of cases where the supplier and the
unregistered person (recipient) have entered into a long-term contract/ agreement for the supply, with
the provision of making payment in advance or in installments, for example- construction of flats or
long-term insurance policies, if the contract is cancelled/ terminated before completion of service for
any reason, there may be no date of receipt of service, to the extent supply has not been made/
rendered. Therefore, in such type of cases, it is proposed that for the purpose of determining
relevant date in terms of clause (g) of Explanation (2) under Section 54 of the CGST Act, 2017,
date of issuance of letter of cancellation of the contract/ agreement for supply by the supplier
may be considered as the date of receipt of the services by the applicant.
6. In addition, an amendment would be required in sub-rule (2) of Rule 89 of the CGST Rules,
2017, to prescribe the documents which would be required to be furnished along with the refund claim
in order to establish that refund is due to the applicant. Accordingly, the proposal for amendment in
the CGST Rules, 2017 for refund to unregistered persons is attached as Annexure ‘A’.
7. Further, it is proposed to issue a Circular clarifying the procedure for filing application of
refund by the unregistered persons and processing of such refunds thereof. Accordingly, a draft
Circular for the same is attached as Annexure-B.
8. The aforesaid proposal has been deliberated in the Law Committee in its meeting held on
26.08.2022 and 07.09.2022 wherein it was approved.
9. In view of the above, the agenda is placed before the GST Council for deliberation and
approval.

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ANNEXURE- A
Proposal for amendment in the CGST Rules, 2017:
(a) Insertion of following clauses after clause (k) of sub-rule (2) of Rule 89:
(ka) a statement containing the details of invoices viz. number, date, value, tax paid and
details of payment, in respect of which refund is being claimed along with copy of such
invoices, proof of making such payment to the supplier, the copy of agreement/registered
agreement/contract, as applicable, entered with the supplier for supply of service, the letter
issued by the supplier for cancellation/ termination of agreement/contract for supply of
service, details of payment received from the supplier against cancellation/ termination of
such agreement along with proof thereof, in a case where the refund is claimed by an
unregistered person where the agreement/ contract for supply of service has been cancelled/
terminated;
(kb) a certificate issued by the supplier to the effect that he has paid tax in respect of the
invoices on which refund is being claimed by the applicant; that he has not adjusted the tax
amount involved in these invoices against his tax liability by issuing credit note; and also,
that he has not claimed and will not claim refund of the amount of tax involved in respect of
these invoices, in a case where the refund is claimed by an unregistered person where the
agreement/ contract for supply of service has been cancelled/ terminated;
(b) Insertion of proviso under clause (m) of sub-rule (2) of Rule 89:
Provided further that a certificate is not required to be furnished in cases where refund is
claimed by an unregistered person who has borne the incidence of tax;
(c) Insertion of a statement 8 in FORM GST RFD-01as per proposed clause (ka) of Rule 89(2):
Statement-8 [Rule 89(2)(ka)]
Refund Type: Refund for unregistered persons
Sl.
No
.
GS
TIN
of
sup
plie
r
Document/Invoice Details Tax Paid Details of
payment of
invoice value
to the
supplier
Details of
payment
received
against
cancellation/
termination
Refund
Amount
Claimed
(I+C+S
+Cess)
Type
of
docu
ment
No. Dat
e
Taxa
ble
Valu
e
Inte
gra
ted
Tax
Cent
ral
Tax
State
/
UT
Tax
Ces
s
Dat
e
Amoun
t
Date Amoun
t
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

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ANNEXURE B
DRAFT CIRCULAR
F. No. CBIC-20023/3/2021-GST
Government of India
Ministry of Finance
Department of Revenue
Central Board of Indirect Taxes and Customs
GST Policy Wing
****
New Delhi, Dated the , 2022
To,
The Principal Chief Commissioners / Chief Commissioners / Principal Commissioners /
Commissioners of Central Tax (All)
The Principal Directors General / Directors General (All)
Madam/Sir,
Subject: Prescribing manner of filing an application for refund by unregistered persons.
Instances have been brought to the notice where the unregistered buyers, who had entered into
an agreement/ contract with a builder for supply of services of construction of flats/ building, etc. and
had paid the amount towards consideration for such service, either fully or partially, along with
applicable tax, had to get the said contract/ agreement cancelled subsequently due to non-completion
or delay in construction activity in time or any other reasons. In a number of such cases, the period for
issuance of credit note on account of such cancellation of service under the provisions of Section 34 of
the Central Goods and Service Tax Act, 2017 (hereinafter referred to as ‘The CGST Act, 2017’) may
already have got expired by that time. In such cases, the supplier may refund the amount to the buyer,
after deducting the amount of tax collected by him from the buyer.
1.2 Similar situation may arise in cases of long-term insurance policies where premium for the
entire period of term of policy is paid upfront along with applicable GST and the policy is
subsequently required to be terminated prematurely due to some reasons. In some cases, the time
period for issuing credit note under the provisions of Section 34 of the CGST, 2017 may have already
expired and therefore, the insurance companies may refund only the proportionate premium net off
GST.
1.3 Representations have been received requesting for providing a facility to such unregistered
buyers/ recipients for claiming refund of amount of tax borne by them in the event of cancellation of
the contract/agreement for supply of service of construction of flats/ building or on termination of
long-term insurance policy.
2. It would be pertinent to mention that sub-section (1) of Section 54 of the CGST Act, 2017
already provides that any person can claim refund of any tax and interest, if any, paid on such tax or
any other amount paid by him, by making an application before the expiry of two years from the
relevant date in such form and manner as may be prescribed. Further, in terms of clause (e) of subsection (8) of Section 54 of the CGST Act, 2017, in cases where the unregistered person has borne the
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incidence of tax and not passed on the same to any other person, the said refund shall be paid to him
instead of being credited to Consumer Welfare Fund (CWF).
2.1 In order to enable such unregistered person to file application for refund under sub-section (1)
of Section 54, a new functionality has been made available on the common portal which allows
unregistered persons to take a temporary registration and apply for refund under the category ‘Refund
for Unregistered person’. Further, the CGST Rules, 2017, (hereinafter referred to as ‘The CGST
Rules, 2017’) have been amended to provide for the documents required to be furnished with the
refund by the unregistered persons and the statement to be uploaded along with the refund application
vide Notification No. XX/2022-CT dated xx.xx.2022.
3. In order to ensure uniformity in the implementation of the above provisions of the law across
field formations, the Board, in exercise of its powers conferred by Section 168(1) of the CGST Act,
2017, hereby clarifies the following:
3. Filing of refund application
3.1 The unregistered person, who wants to file an application for refund under sub-section (1) of
Section 54 of the CGST Act, 2017, shall obtain a temporary registration on the common portal using
his Permanent Account Number (PAN). While doing so, the unregistered person shall select the same
state/UT where his/her supplier, in respect of whose invoice refund is to be claimed, is registered.
Thereafter, the unregistered person would be required to undergo Aadhaar authentication in terms of
provisions of Rule 10B of the CGST Rules, 2017. Further, the unregistered person would be required
to enter his bank account details in which he seeks to obtain the refund of the amount claimed. The
applicant shall provide the details of the bank account which is in his name and has been obtained on
his PAN.
3.2 The application for refund shall be filed in FORM GST RFD-01 on the common portal under
the category ‘Refund for unregistered person’. The applicant shall upload the statement 8 (in pdf
format) and all the requisite documents as per the provisions of sub-rule (2) of Rule 89 of the CGST
Rules, 2017. The refund amount claimed shall not exceed the total amount of tax declared on the
invoices in respect of which refund is being claimed. Further, the applicant shall also upload the
certificate issued by the supplier in terms of clause (kb) of sub-rule (2) of Rule 89 of the CGST Rules,
2017 along with his refund application. The applicant shall also upload any other document(s) to
support his claim that he has paid and borne the incidence of tax and that the said amount is
refundable to him.
3.3 Separate applications for refund has to be filed in respect of invoices issued by different
suppliers. Further, where the suppliers in respect of whose invoices refund is to be claimed are
registered in different States/UTs, the applicant shall obtain temporary registration in the each of the
concerned States/UTs where the said supplier are registered.
3.4 Where the time period for issuance of credit note under Section 34 of the CGST Act, 2017 has
not expired at the time of cancellation/termination of agreement/contract for supply of services, the
concerned suppliers can issue credit note to the unregistered person. In such cases, the supplier would
be in a position to also pay back the amount of tax collected by him from the unregistered person and
therefore, there will be no need for filing refund claim by the unregistered persons in these cases.
Accordingly, the refund claim can be filed by the unregistered persons only in those cases where at the
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time of cancellation/termination of agreement/contract for supply of services, the time period for
issuance of credit note under Section 34 of the CGST Act, 2017 has already been expired.
4. Relevant date for filing of refund:
4.1 As per sub-section (1) of Section 54 of the CGST Act, 2017, time period of two years from
the relevant date has been specified for filing an application of refund. Further, the relevant date in
respect of cases of refund by a person other than supplier is the date of receipt of goods or services or
both by such person in terms of provisions of clause (g) in Explanation (2) under Section 54 of the
CGST Act, 2017. However, in respect of cases where the supplier and the unregistered person
(recipient) have entered into a long-term contract/ agreement for the supply, with the provision of
making payment in advance or in installments, for example- construction of flats or long-term
insurance policies, if the contract is cancelled/ terminated before completion of service for any reason,
there may be no date of receipt of service, to the extent supply has not been made/ rendered.
Therefore, in such type of cases, it has been decided that for the purpose of determining relevant date
in terms of clause (g) of Explanation (2) under Section 54 of the CGST Act, 2017, date of issuance of
letter of cancellation of the contract/ agreement for supply by the supplier will be considered as
the date of receipt of the services by the applicant.
5. Minimum refund amount
5.1 Sub-section (14) of Section 54 of the CGST Act, 2017 provides that no refund under subsection (5) or sub-section (6) shall be paid to an applicant, if amount is less than one thousand rupees.
Therefore, no refund shall be claimed if the amount is less than one thousand rupees.
6. The proper officer shall process the refund claim filed by the unregistered person in a
manner similar to other FORM RFD-01 claims. The proper officer shall scrutinize the application with
respect to completeness and eligibility of the refund claim to his satisfaction and issue the refund
sanction order in FORM GST RFD-06 accordingly. The proper officer shall also upload a detailed
speaking order along with the refund sanction order in FORM GST RFD-06.
6.1 In cases where the amount paid back by the supplier to the unregistered person on
cancellation/termination of agreement/contract for supply of services is less than amount paid by such
unregistered person to the supplier, only the proportionate amount of tax involved in such amount paid
back shall be refunded to the unregistered person.
7. It is requested that suitable trade notices may be issued to publicize the contents of this Circular.
8. Difficulty, if any, in the implementation of this Circular may be brought to the notice of the
Board. Hindi version will follow.
(Sanjay Mangal)
Principal Commissioner (GST)
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Agenda Item 7 (iii): Decriminalization of the CGST Act, 2017
The issue of decriminalization of various laws, including GST law, to reduce compliance
burden on the taxpayers, was discussed in the meeting of Committee of Secretaries (CoS) on
Decriminalization of existing Acts/Rules. It was discussed that the provisions of prosecution under
various laws need to be reviewed, so as to decriminalize some of the minor offences. It was also
deliberated that there is a need to examine whether any enhancement is required in the threshold for
prosecution of offences under Section 132 of the Central Goods and Services Tax Act, 2017
(hereinafter referred to as CGST Act, 2017, 2017). Besides, it was also desired that there is a need to
make the provisions of compounding of offences more attractive to the taxpayers so that more and
more taxpayers can avail the benefit of these provisions.
2. Accordingly, Law Committee in its meeting held on 07.09.2022 deliberated on the various
provisions pertaining to prosecution and compounding in the CGST Act, 2017, so as to rationalize the
same and to remove ambiguity, if any, and also to make compounding provisions more attractive in
GST for the taxpayers.
3. After detailed deliberations, Law Committee recommended the following amendments in
GST Law with the aim to decriminalize various provisions of the GST Act:
3.1 Decriminalization of minor offences in the CGST Act, 2017,:
3.1.1 Offences specified in clause (g), (j) and (k) of sub-section (1) of Section 132 are in nature of
pure criminal offences. Maximum punishment is six months in case of offences under clause (g) and
(j) whereas in case of clause (k), punishment depends on tax amount. The offences covered under the
said clauses are as follows :-
(a) obstructs or prevents any officer in the discharge of his duties under this Act.
[clause (g) of sub-section (1) of Section 132]
(b) tampers with or destroys any material evidence or documents. [clause (j) of
sub-section (1) of Section 132]
(c) fails to supply any information which he is required to supply under this Act
or the Rules made thereunder or (unless with a reasonable belief, the burden
of proving which shall be upon him, that the information supplied by him is
true) supplies false information. [clause (k) of sub-section (1) of Section
132]
3.1.2 Further, under Section 122 of the CGST Act, 2017, these types of offences are liable to
penalty of ten thousand rupees only, if not linked to tax amount. However, minor offences specified
in clause (g) and (j) even when not linked to tax amount, if committed, would remain liable for
punishment of imprisonment up to six months.
3.1.3 All the offences under clause (g), (j) and (k) are specifically covered in detail and punishable
under Indian Penal Code. The comparison of minor offences under the CGST Act, 2017, with
corresponding provisions in Indian Penal Code, 1860 for same offence is as below:

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Sl.
No.
Offence clause under the
CGST Act, 2017
Offence under Indian Penal Code
1. obstructs or prevents any
officer in the discharge of his
duties under this Act.[clause
(g) of sub-section (1) of
Section 132]
186. Obstructing public servant in discharge of public
functions.—Whoever voluntarily obstructs any public
servant in the discharge of his public functions, shall
be punished with imprisonment of either description
for a term which may extend to three months, or with
fine which may extend to five hundred rupees, or
with both.
Non-cognizable& bailable;
Who can try: any magistrate
2. tampers with or destroys any
material evidence or
documents. [clause (j) of subsection(1) of Section 132]
Chapter XI of IPC
(OF FALSE EVIDENCE AND OFFENCES
AGAINST PUBLIC JUSTICE)
204. Destruction of document to prevent its
production as evidence.—Whoever secretes or
destroys any [document and electronic record] which
he may be lawfully compelled to produce as evidence
in a Court of Justice, or in any proceeding lawfully
held before a public servant, as such, or obliterates
or renders illegible the whole or any part of such
[document or electronic record] with the intention of
preventing the same from being produced or used as
evidence before such Court or public servant as
aforesaid, or after he shall have been lawfully
summoned or required to produce the same for that
purpose, shall be punished with imprisonment of
either description for a term which may extend to two
years, or with fine, or with both
Non-cognizable & bailable offence;
Who can try: any magistrate
3. fails to supply any information
which he is required to supply
under this Act or the Rules
made thereunder or (unless
with a reasonable belief, the
burden of proving which shall
be upon him, that the
information supplied by him is
true) supplies false
information;
CHAPTER X of IPC
{OF CONTEMPTS OF THE LAWFUL
AUTHORITY OF PUBLIC SERVANTS}
176. Omission to give notice or information to
public servant by person legally bound to give it.
Non-cognizable & Bailable offence;
Who can try: The Court in which the offence is
committed, subject to provisions of Chapter XXVI;
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[clause (k) of sub-section(1)
of Section 132]
or, if not committed in a Court, any magistrate
3.1.4 Law Committee recommended that to avoid duplication, it may be desirable that these types
of offences may be excluded from the CGST Act, 2017 as they are already covered under IPC, which
is a complete code for these type of criminal offences.
3.1.5 Proposed Amendment:
In view of above, the following amendments are proposed in sub-section (1) of Section
132:
(a) Deletion of the clause (g), (j) and (k) of sub-section (1) of Section 132:
(g) obstructs or prevents any officer in the discharge of his duties under this Act;
(j) tampers with or destroys any material evidence or documents;
(k) fails to supply any information which he is required to supply under this Act
or the Rules made thereunder or (unless with a reasonable belief, the burden of
proving which shall be upon him, that the information supplied by him is true)
supplies false information; or
(b) Amendment in clause (l) of sub-section (1) of Section 132:
“(l) attempts to commit, or abets the commission of any of the offences mentioned in
clauses (a) to (i) (k) of this Section,”
(c) Amendment in clause (iv) of sub-section (1) of Section 132:
“(iv) in cases where he commits or abets the commission of an offence specified in
clause (f) or clause (g) or clause (j), he shall be punishable with imprisonment for a
term which may extend to six months or with fine or with both.”
3.2 Align the prosecution threshold with arrest threshold
3.2.1 It is mentioned that minimum threshold for launching prosecution in respect of the offences
punishable under clause (iii) of sub-section (1) of Section 132 of the CGST Act, 2017, is Rs. one
crore. However, as per Section 69 of the CGST Act, 2017, arrest for specified offences of subsection (1) of Section 132 can be made only in cases involving minimum amount of tax evaded of
Rs. two crore.
3.2.2 Feedback received from the field formations depicts that hardly any prosecution case has
been filed under the clause (iii) of sub-section (1) of Section 132 which provides for prosecution in
cases involving amount between Rs one crore and Rs two crore. Moreover, limited manpower is
available in field formations for filing prosecution in such large number of cases where tax amount is
more than rupees one crore but less than two crore rupees. Prosecution complaint also requires
sustained efforts on the part of department right from investigation to the conclusion of case before
all judicial forums. In view of above, it may be desirable to file prosecution only in suitable cases,
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having significant revenue implications. Therefore, Law Committee recommended to delete
clause (iii) of sub-section (1), so that the monetary limit for prosecution is raised to Rs two
crore from the current Rs one crore.
Proposed amendment:
(A) The minimum threshold for launching prosecution may be increased to two crore rupees and
the clause (iii) of sub-section (1) of Section 132 may be deleted.
“(iii) in the case of any other offence where the amount of tax evaded or the amount of
input tax credit wrongly availed or utilised or the amount of refund wrongly taken exceeds
one hundred lakh rupees but does not exceed two hundred lakh rupees, with imprisonment
for a term which may extend to one year and with fine;”
(B) Amendment in Section 132 (3): In view of increase threshold for prosecution, the sub-section
(3) of Section 132 also requires deletion of reference to clause (iii).
“(3) The imprisonment referred to in clauses (i), (ii) and (ii) (iii) of sub-section (1) and subsection (2) shall, in the absence of special and adequate reasons to the contrary to be recorded
in the judgment of the Court, be for a term not less than six months.”
3.3 Rationalization of compounding provisions to make them more attractive:
I. Making Compounding provisions more attractive to taxpayers:
Sub-section (2) of Section 138 of The CGST Act, 2017 provides for range of monetary limit for
compounding which is currently between 50% (minimum) to 150% (maximum) of tax amount
involved. This range for compounding amount is very high due to which persons eligible for
compounding of offences may be dissuaded to come forward for compounding their offence. In this
regard, data received from field formations for usage of compounding provisions by trade in field
shows that almost no one has applied to take the benefit of these provisions even after 5 years of
implementation of GST. Therefore, rationalization of such compounding amount is needed so
that accused persons can take benefit of compounding provisions and litigation costs to
Government are minimized. This will require amendment in sub-section (2) of Section 138 of the
CGST Act, 2017.
Further, the phrase ‘not being less than’ used in sub-section (2) of Section 138 for higher limit is
not conveying proper meaning as it leads to a misleading conclusion that maximum amount has to be
more than the higher of Rs 30,000 or 150% of Tax, which means that the maximum amount is
limitless. Instead, the phrase should have been ‘not being more than’. Moreover, with deletion of
minor offences clauses (g), (j) and (k) of sub-section (1) of Section 132, there will practically not be
any case in which compounding amount can fall between Rs. Ten thousand and Rs. Thirty thousand.
Therefore, reference to these amounts in sub-section (2) of Section 138 is also required to be deleted.
Hence, an amendment in Section 138 (2) has been recommended by the Law Committee.
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Proposed Amendment:
The range of compounding amount is proposed to be reduced suitably to minimum of 25% of
the tax amount to maximum of 100% of tax amount in the CGST Act, 2017, to make compounding
provisions attractive and to promote the trade to utilize the same, by amending sub-section (2) of
Section 138, as below:
“(2) The amount for compounding of offences under this Section shall be such as may
be prescribed, subject to the minimum amount not being less than ten thousand rupees or fifty
per cent. twenty five per cent. of the tax involved,whichever is higher, and the maximum
amount not being more than less than thirty thousand rupees or one hundred and fifty one
hundred per cent. of the tax involved,whichever is higher.”
II. Anomaly in clause (c) of proviso to Section 138 (1) and 2nd proviso to Section 138 (1):
One of the conditions mentioned at clause (c) of proviso to sub-section (1) of Section 138 of the
CGST Act, 2017 is that the compounding provisions are not applicable to a person, who has been
accused of committing an offence under the CGST Act, 2017 which is also an offence under any
other law in force. On the other hand, 2nd proviso to Section 138 (1) of the CGST Act, 2017,
mentions that “Provided further that any compounding allowed under the provisions of this Section
shall not affect the proceedings, if any, instituted under any other law”. Therefore, joint reading of
clause (c) of proviso to Section 138(1) and 2nd proviso to Section 138(1) creates an ambiguity that
when the compounding provisions are not applicable to the persons who have committed an offence
which is also punishable under any other law in force at time being, then what is the need of second
proviso to Section 138(1), as no such situation can arise, when the compounding under the CGST Act,
2017 cannot be done in such cases as per provisions of 2nd proviso of Section 138(1) of the CGST Act,
2017. Further, clause (c) of Section 138(1) of the CGST Act, 2017, stipulates a situation where the
proper officer will have to exclude the category of person from taking benefits of compounding
provisions in case such person is accused of committing an offence under this Act which is also an
offence under any other law for the time being in force. The practical issue while implementing this
sub-clause is that, it may not be possible for a tax officer to have complete knowledge of all the other
laws of land and what will be the mechanism to found out whether the offence committed by accused
person is also an offence under any other law. Also, who would be the competent authority to decide
whether the said person has committed an offence under any other law except the CGST Act, 2017, or
whether the person has not breached provisions of any other law. Therefore, clause (c) of proviso to
sub-section (1) of Section 138 of the CGST Act, 2017 needs to be deleted.
Also, it is to be noted that to curb the menace of fake invoice and to control passing of ITC by
such fake/ non-existent units, it is imperative that mastermind of such a crime is not afforded any
opportunity to compound their offence by using benefits of these provisions under Section 138 of the
CGST Act, 2017. The compounding provisions are to minimize the legal proceedings with genuine
and existing traders who have committed the offence but are ready for cleaning up their actions and to
further do their business as per law and nowhere, the intent of compounding provisions can be to
provide an opportunity to masterminds creating fake entities and perpetrating economic frauds
deliberately to escape prosecution. Hence, Law Committee recommended excluding such class of
persons from the compounding provisions by inserting a clause to this effect in sub-section (1) of
Section 138.
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Proposed Amendment:
It is proposed to substitute clause (c) of sub-section 1 of Section 138:
(c) a person who has been accused of committing an offence under this Act which is
also an offence under any other law for the time being in force
“(c) person who has retained the benefit of a transaction covered under clause (ii) of
sub-section (1) of Section 122 and at whose instance such transaction has
conducted.”
III. Complex language of clause (a) and (b) of first proviso to sub-section (1) of Section 138:
Clause (a) of the first proviso to sub-section (1) of Section 138 provides that compounding provisions
will not be applicable to a person who has been allowed to compound once in respect of any of the
offences specified in clauses (a) to (f) of sub-section (1) of Section 132 and the offences specified in
clause (l) which are relatable to offences specified in clauses (a) to (f) of the said sub-section. It is to
be seen that once clauses (g), (j) and (k) of sub-section (1) of Section 132 are deleted, there will be no
need to make a reference to (a) to (f) and excluding the remaining sub-clauses. It is therefore,
proposed to make this clause simpler by amending to the effect that a person who has been
allowed to compound once in respect of any of the offences specified in any clauses of sub-section
(1) of Section 132, compounding provisions will be not applicable.
Further, clause (b) of the first proviso to sub-section (1) of Section 138 provides that
compounding provisions will not be applicable to a person who has been allowed to compound once
in respect of any offence, under the CGST Act, 2017 or under the provisions of any State Goods and
Services Tax Act or the Union Territory Goods and Services Tax Act or the Integrated Goods and
Services Tax Act, in respect of supplies of value exceeding one crore rupees. Law Committee
recommended that this clause may be deleted as it becomes duplicate and redundant subsequent to
deletion of clauses (g), (j) and (k) of sub-section (1) of Section 132 and simplification of clause (a) of
first proviso to sub-section (1) of Section 138, as discussed in para above.
Proposed amendment:
Clauses (a) and (b) of the first proviso to sub-section (1) of Section 138 of the CGST Act,
2017 are proposed to be amended as below:
“(a) a person who has been allowed to compound once in respect of any of the offences
specified in clauses (a) to (l) of sub-section (1) of Section 132 and the offences specified
in clause (l) which are relatable to offences specified in clauses (a) to (f) of the said subsection;
(b) a person who has been allowed to compound once in respect of any offence, other
than those in clause (a), under this Act or under the provisions of any State Goods and
Services Tax Act or the Union Territory Goods and Services Tax Act or the Integrated
Goods and Services Tax Act in respect of supplies of value exceeding one crore rupees;”
IV. Consequential Amendment due to deletion of minor offences from Section 132:
Clause (e) of the first proviso to sub-section (1) of Section 138 is proposed to be deleted in
view of proposed amendment in Section 132 with respect to deletion of minor offences.
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(e) a person who has been accused of committing an offence specified in clause (g) or
clause (j) or clause (k) of sub-section (1) of Section 132; and
Therefore, after all the above amendments, the first proviso to sub-section (1) of Section 138
shall be as follows:
“Provided that nothing contained in this Section shall apply to—
(a) a person who has been allowed to compound once in respect of any of the offences
specified in clauses (a) to (l) (a) to(f) of sub-section (1) of Section 132 and the offences
specified in clause (l) which are relatable to offences specified in clauses (a) to (f) of
the said sub-section;
(b) a person who has been allowed to compound once in respect of any offence, other
than those in clause (a), under this Act or under the provisions of any State Goods and
Services Tax Act or the Union Territory Goods and Services Tax Act or the Integrated
Goods and Services Tax Act in respect of supplies of value exceeding one crore rupees;
(c) a person who has been accused of committing an offence under this Act which is also
an offence under any other law for the time being in force
(c) person who has retained the benefit of a transaction covered under clause (ii) of subsection (1) of Section 122 and at whose instance such transaction has conducted;
(d) a person who has been convicted for an offence under this Act by a court;
(e) a person who has been accused of committing an offence specified in clause (g) or
clause (j) or clause (k) of sub-section (1) of Section 132; and
(f) any other class of persons or offences as may be prescribed:”
4. Law Committee also recommended that subsequent to the amendment in Section 138 of the
CGST Act, 2017, as per the above recommendations, corresponding amendments will also be required
to be made in the CGST Rules, 2017, inter alia providing for different amount of compounding for
different type of offences. The same will be deliberated by the Law Committee in due course of time.
5. Accordingly, the agenda is placed before the GST Council for deliberation and approval.

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Agenda Item 7 (iv): Amendment in Rule 94 of the CGST Rules, 2017 and Section 56 of the
CGST Act, 2017 to provide for exclusion of time period of delay in sanction and disbursal of
refund where such delay is attributable to applicant.
Section 56 of the CGST Act, 2017 provides that if the tax ordered to be refunded is not paid to
the applicant within 60 days of the receipt of the refund application, interest shall be paid to the
applicant from the date immediately after expiry of sixty days till the date of refund. Section 56 is
reproduced as under:
“If any tax ordered to be refunded under sub-section (5) of Section 54 to any applicant is not
refunded within sixty days from the date of receipt of application under sub-section (1) of that
Section, interest at such rate not exceeding six per cent. as may be specified in the notification
issued by the Government on the recommendations of the Council shall be payable in respect
of such refund from the date immediately after the expiry of sixty days from the date of receipt
of application under the said sub-section till the date of refund of such tax:
Provided that where any claim of refund arises from an order passed by an adjudicating
authority or Appellate Authority or Appellate Tribunal or court which has attained finality
and the same is not refunded within sixty days from the date of receipt of application filed
consequent to such order, interest at such rate not exceeding nine per cent. as may be notified
by the Government on the recommendations of the Council shall be payable in respect of such
refund from the date immediately after the expiry of sixty days from the date of receipt of
application till the date of refund.
Explanation.-For the purposes of this Section, where any order of refund is made by an
Appellate Authority, Appellate Tribunal or any court against an order of the proper officer
under sub-section (5) of Section 54, the order passed by the Appellate Authority, Appellate
Tribunal or by the court shall be deemed to be an order passed under the said sub-section
(5).”
1.2 Further, Rule 94 of the CGST Rules, 2017 provides for order sanctioning interest on delayed
refunds. The same is reproduced below:
“Where any interest is due and payable to the applicant under Section 56, the proper officer shall
make an order along with a payment order in FORM GST RFD-05 , specifying therein the
amount of refund which is delayed, the period of delay for which interest is payable and the
amount of interest payable, and such amount of interest shall be electronically credited to any of
the bank accounts of the applicant mentioned in his registration particulars and as specified in
the application for refund.”
2. Reference is also invited to para 34 of the Master Circular No. 125/44/2019-GST dated
18.11.2019 on refunds wherein tax authorities have been advised to issue the refund sanction order
within 45 days so that the refund is disbursed to the applicant within 60 days. Para 34 of the Circular
No. 125/44/2019-GST dated 18.11.2019 reads as below:
“34.Section 56 of the CGST Act, 2017 clearly states that if any tax ordered to be refunded is
not refunded within 60 days of the date of receipt of application, interest at the rate of 6 per
cent (notified vide notification No. 13/2017-Central Tax dated 28.06.2017) on the refund
amount starting from the date immediately after the expiry of sixty days from the date of
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receipt of application (ARN) till the date of refund of such tax shall have to be paid to the
applicant. It may be noted that any tax shall be considered to have been refunded only when
the amount has been credited to the bank account of the applicant. Therefore, interest will be
calculated starting from the date immediately after the expiry of sixty days from the date of
receipt of the application till the date on which the amount is credited to the bank account of
the applicant. Accordingly, all tax authorities are advised to issue the final sanction order in
FORM GST RFD-06 and the payment order in FORM GST RFD-05 within 45 days of the
date of generation of ARN, so that the disbursement is completed within 60 days.”
3. In this regard, it is worth mentioning that different steps in the refund processing, along with
the time period within which such step is to be carried out, have been clearly prescribed in the CGST
Rules, 2017. The timelines prescribed for various refund processing steps are mentioned below:
i. Issuance of Deficiency Memo in FORM GST RFD-03/Acknowledgement in Form GST RFD02 - within 15 days from the date of filing of application in FORM GST RFD-01
ii. Issuance of Provisional refund in FORM GST RFD-04 – within 7 days from date of
acknowledgement
iii. Submission of Reply to notice in FORM GST RFD-09 – within 15 days from date of receipt
of notice in FORM GST RFD-08
3.1 No time period has been prescribed for issuance of notice in FORM GST RFD-08 or that of
passing an order after examination of reply to notice furnished by the applicant in FORM GST RFD06. However, it has to be noted that the refund sanction order in FORM GST RFD-06 has to be issued
within 60 days from the date of receipt of the application, in terms of the provisions of sub-section (7)
of Section 54 of the CGST Act, 2017.
4. As stated above, in terms of Section 56 of the CGST Act, 2017, the sanctioned refund amount
is required to be credited to the bank account of the applicant within 60 days from the date of receipt
of application, which is complete in all aspects, failing which interest @ 6% p.a. has to be paid to the
applicant on such delayed refund till such delay continues. Therefore, the officer has to not only
ensure that the refund is sanctioned within 60 days but also to ensure that the said sanctioned amount
is paid to the applicant within 60 days.
5. It is observed that there are a number of cases, where the applicant does not file reply to the
notice in FORM RFD-08 within the prescribed time of 15 days and seeks additional time for filing
reply, or for providing additional documents/ reply, or for personal hearing. In such cases, it may not
be possible for the officers to stick to the timeline of 60 days for sanction and disbursal of refunds.
However, the present provisions in the CGST Act, 2017 and Rules do not provide for any exceptions
from payment of interest in cases of such delayed refunds, where the delay is attributable to the
applicant.
6. There are also cases where though the refund is sanctioned to the applicant within time but the
refund could not be credited to the bank account of the applicant within 60 days due to PFMS bank
account validation error, on account of wrong details of bank account being submitted by the
applicant. In such cases, the responsibility of correctly furnishing the details of the bank account, in
which the refund is being sought, lies with the applicant. However, as stated above, the present
provisions in the CGST Act, 2017 and Rules do not provide for any exceptions from payment of
interest in cases of such delayed refunds, where the delay is attributable to the applicant.
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7. In this regard, it is felt that the where the delay in sanction or payment of refund is attributable
to the applicant, there should be no liability on the department for payment of interest on account of
delayed refund, to the extent the delay is attributable to the applicant. Therefore, there is a need to
make provisions in the Act/ Rules to provide for exclusion of time period taken by the applicant in
excess of 15 days in replying to notice in FORM GST RFD-08, any additional time sought by the
applicant for submitting additional documents/ reply and the period taken for providing correct bank
account details in case of PFMS bank account validation error and removal of such error thereof, for
computation of time period of 60 days for sanction and disbursal of refund and calculation of interest
on delayed refunds thereof.
8. Here, it would be pertinent to mention that CAG has also made the said recommendation in its
report No. 5 of 2022 which has been laid before the Parliament on 08.08.2022, which is reproduced
below:
“The provisions regarding payment of interest on delayed refunds need to be amended to
exclude the period of delays that is attributable to the taxpayers such as delay in reply to SCN
or incorrect bank details for payment.”
9. The said issue was deliberated by the Law Committee in its meetings held on 21.09.2022 and
23.11.2022. The Law Committee recommended making the following amendment in Rule 94 of the
CGST Rules, 2017:
“(1) Where any interest is due and payable to the applicant under Section 56, the proper
officer shall make an order along with a payment order in FORM GST RFD-05 , specifying
therein the amount of refund which is delayed, the period of delay for which interest is
payable and the amount of interest payable, and such amount of interest shall be
electronically credited to any of the bank accounts of the applicant mentioned in his
registration particulars and as specified in the application for refund.
(2) The following periods shall not be included in the period of delay under sub-rule (1):
(a) any period of time beyond fifteen days of receipt of notice in FORM GST RFD-08 under
sub-rule (3) of Rule 92, that the applicant takes:
i. to furnish a reply in FORM GST RFD-09, or
ii. for submitting additional documents or reply, on the request of the applicant;
and
(b) any period of time taken either by the applicant for furnishing the correct details of the
bank account to which the refund is to be credited or for validating the details of the bank
account so furnished, where the amount of refund sanctioned could not be credited to the
bank account furnished by the applicant.”
10. The Law Committee also felt that as Section 56 of the CGST Act, 2017 does not contain any
provision empowering government to prescribe any Rules for computation of period of delay under
the CGST Rules, 2017, there is also a need to provide enabling provision in Section 56 of the CGST
Act, 2017 to provide for prescribing the manner of computation of period of delay for purpose of
calculation of interest payable on delayed refund in the CGST Rules, 2017. Accordingly, the Law
Committee recommended that in addition to making amendment in Rule 94 of the CGST Rules, 2017,
as proposed in Para 9 above, an amendment may also be made in Section 56 of the CGST Act, 2017 as
below:
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Section 56 Interest on delayed refunds.-
If any tax ordered to be refunded under sub-section (5) of Section 54 to any applicant is not
refunded within sixty days from the date of receipt of application under sub-section (1) of that
Section, interest at such rate not exceeding six per cent. as may be specified in the notification
issued by the Government on the recommendations of the Council shall be payable in respect
of such refund for such period of delay beyond from the date immediately after the expiry of
sixty days from the date of receipt of application under the said sub-section till the date of
refund of such tax, to be computed in such manner and subject to such conditions and
restrictions as may be prescribed:
11. Accordingly, the agenda for amendment in Section 56 of the CGST Act, 2017 and Rule 94 of
the CGST Rules, 2017, as recommended by the Law Committee, is placed before GST Council for
deliberation and approval.

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Agenda Item 7 (v): Clarifying the manner of re-determination of demand in terms of subsection (2) of Section 75 of the CGST Act, 2017.
Section 75(2) of the CGST Act, 2017 provides that in cases where the appellate authority or
appellate tribunal or court concludes that the notice issued by proper officer under sub-section (1) of
Section 74 is not sustainable for reason that the charges of fraud or any wilful-misstatement or
suppression of facts to evade tax have not been established against the person to whom such notice
was issued (hereinafter called as “noticee”), then the proper officer shall determine the tax payable by
the noticee, deeming as if the notice was issued under sub-section (1) of Section 73. Doubts have been
raised by the field formations seeking clarification regarding the time limit within which the proper
officer is required to re-determine the amount of tax payable considering notice to be issued under
sub-section (1) of Section 73, specially in cases where time limit for issuance of order as per subsection (10) of Section 73 has already been over. Doubts have also been expressed regarding the
methodology for computation of such amount payable by the noticee, deeming the notice to be issued
under sub-section (1) of Section 73.
2. The issue was deliberated by the Law Committee in its meeting held on 12.10.2022. The Law
Committee recommended for clarifying the doubts by way of issuing a circular. The draft Circular as
approved by Law Committee is attached as Annexure-A.
3. Accordingly, the agenda is placed before the GST Council for deliberation and approval.

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Annexure-A
Circular No. XXX/YY/2022-GST
CBEC-20/06/04/2020-GST
Government of India
Ministry of Finance
Department of Revenue
Central Board of Indirect Taxes and Customs
GST Policy Wing
Dated the xxth December, 2022
To,

The Principal Chief Commissioners / Chief Commissioners / Principal Commissioners
/Commissioners of Central Tax (All)
Subject: Clarification with regard to applicability of provisions of Section 75(2) of CGST Act,
2017 and its effect on limitation -reg.
Madam/Sir,
Attention is invited to sub-section (2) of Section 75 of CGST Act, 2017 which provides that in
cases where the appellate authority or appellate tribunal or court concludes that the notice issued by
proper officer under sub-section (1) of Section 74 is not sustainable for reason that the charges of
fraud or any willful-misstatement or suppression of facts to evade tax have not been established
against the person to whom such notice was issued (hereinafter called as “noticee”), then the proper
officer shall determine the tax payable by the noticee, deeming as if the notice was issued under subsection (1) of Section 73.
2. Doubts have been raised by the field formations seeking clarification regarding the time limit
within which the proper officer is required to re-determine the amount of tax payable considering
notice to be issued under sub-section (1) of Section 73, specially in cases where time limit for issuance
of order as per sub-section (10) of Section 73 has already been over. Further doubts have also been
expressed regarding the methodology for computation of such amount payable by the noticee,
deeming the notice to be issued under sub-section (1) of Section 73.
3. In order to clarify the issue and to ensure uniformity in the implementation of the
provisions of law across the field formations, the Board, in exercise of its powers conferred by Section
168 (1) of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as “CGST
Act”), hereby clarifies the issues as under:

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S.No. Issue Clarification
1. In some of the cases where the show
cause notice has been issued by the
proper officer to a notice under subsection (1) of Section 74 for demand of
tax not paid/ short paid or erroneous
refund or input tax credit wrongly
availed or utilized, the appellate
authority or appellate tribunal or the
court concludes that the said notice is
not sustainable under sub-section (1)
of Section 74 for the reason that the
charges of fraud or any willfulmisstatement or suppression of facts to
evade tax have not been established
against the noticee and directs the
proper officer to re-determine the
amount of tax payable by the noticee,
deeming the notice to have been issued
under sub-section (1) of Section 73, in
accordance with the provisions of subsection (2) of Section 75. What would
be the time period for re-determination
of the tax, interest and penalty payable
by the noticee in such cases?
• Sub-section (3) of Section 75 provides that an
order required to be issued in pursuance of the
directions of the appellate authority or appellate
tribunal or the court has to be issued within two
years from the date of communication of the said
direction.
• Accordingly, in cases where any direction is
issued by the appellate authority or appellate
tribunal or the court to re-determine the amount
of tax payable by the noticee by deeming the
notice to have been issued under sub-section (1)
of Section 73 in accordance with the provisions
of sub-section (2) of Section 75, the proper
officer is required to issue the order of
redetermination of tax, interest and penalty
payable within the time limit as specified in
under sub-section (3) of Section 75, i.e. within a
period of two years from the date of
communication of the said direction by
appellate authority or appellate tribunal or the
court, as the case may be.
2. How the amount payable by the
noticee, deeming the notice to have
been issued under sub-section (1) of
Section 73, shall be re-computed/ redetermined by the proper officer as per
provisions of sub-section (2) of
Section 75?
• In cases where the amount of tax, interest and
penalty payable by the noticee is required to be
re-determined by the proper officer in terms of
sub-section (2) of Section 75 of CGST Act, 2017
the demand would have to be re-determined
keeping in consideration the provisions of subsection (2) of Section 73, read with sub-section
(10) of Section 73.
• Sub-section (1) of Section 73 provides for
issuance of a show cause notice by the proper
officer for tax not paid or short paid or
erroneously refunded, or where input tax credit
has been wrongly availed or utilized, in cases
which do not involve fraud or wilful
misstatement or suppression of facts to evade tax.
Sub-section (2) of Section 73 provides that such
show cause notice shall be issued at least 3
months prior to the time limit specified in subsection 10 of Section 73 for issuance of order. As
per sub-section (9) of Section 73, the proper
officer is required to determine the tax, interest
and penalty due from the noticee and issue an
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order. As per sub-section (10) of Section 73, an
order under sub-section (9) of Section 73 has to
be issued by the proper officer within three
years from the due date for furnishing of annual
return for the financial year in respect of which
tax has not been paid or short paid or input tax
credit has been wrongly availed or utilized or
from the date of erroneous refund.
• It transpires from a combined reading of these
provisions that in cases which do not involve
fraud or wilful-misstatement or suppression of
facts to evade payment of tax, the show cause
notice in terms of sub-section (1) of Section 73
has to be issued within 2 years and 9 months
from the due date of furnishing of annual
return for the financial year to which such tax
not paid or short paid or input tax credit wrongly
availed or utilized relates, or within 2 years and
9 months from the date of erroneous refund.
• Therefore, in cases where the proper officer has
to re-determine the amount of tax, interest and
penalty payable deeming the notice to have been
issued under sub-section (1) of Section 73 in
terms of sub-section (2) of Section 75, the same
can be re-determined for so much amount of tax
short paid or not paid, or input tax credit wrongly
availed or utilized or that of erroneous refund, in
respect of which show cause notice was issued
within the time limit as specified under subsection (2) of Section 73 read with sub-section
(10) of Section 73. Thus, only the amount of tax
short paid or not paid, or input tax credit wrongly
availed or utilized along with interest and penalty
payable in terms of Section 73 relating to such
financial years can be re-determined, where
show cause notice was issued within 2 years
and 9 months from the due date of furnishing
of annual return for the respective financial
year. Similarly, the amount of tax payable on
account of erroneous refund along with interest
and penalty payable can be re-determined only
where show cause notice was issued within 2
years and 9 months from the date of erroneous
refund.
• In case, where the show cause notice under subsection (1) of Section 74 was issued for tax
short paid or tax not paid or wrongly availed
or utilized input tax credit beyond a period of
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2 years and 9 months from the due date of
furnishing of the annual return for the financial
year to which such demand relates to, and the
appellate authority concludes that the notice is
not sustainable under sub-section (1) of Section
74 thereby deeming the notice to have been
issued under sub-section (1) of Section 73, the
entire proceeding shall have to be dropped,
being hit by the limitation of time as specified
in Section 73. Similarly, where show cause
notice under sub-section (1) of Section 74 was
issued for erroneous refund beyond a period of 2
years and 9 months from the date of erroneous
refund, the entire proceeding shall have to be
dropped.
• In cases, where the show cause in terms of subsection (1) of Section 74 was issued for tax short
paid or not paid tax or wrongly availed or utilized
input tax credit or on account of erroneous refund
within 2 years and 9 months from the due date
of furnishing of the annual return for the said
financial year, to which such demand relates to,
or from the date of erroneous refund, as the
case may be, the entire amount of the said
demand in the show cause notice would be
covered under re-determined amount.
• Where the show cause notice under sub-section
(1) of Section 74 was issued for multiple
Financial Years, and where notice had been
issued before the expiry of the time period as per
sub-section (2) of Section 73 for one financial
year but after the expiry of the said due date for
the other financial years, then the amount payable
in terms of Section 73 shall be re-determined
only in respect of that Financial Year for
which show cause notice was issued before the
expiry of the time period as specified in subsection (2) of Section 73.
It is requested that suitable trade notices may be issued to publicize the contents of this Circular.
5. Difficulty, if any, in implementation of this Circular may please be brought to the notice of the
Board. Hindi version would follow.
(Sanjay Mangal)
Principal Commissioner (GST)
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Agenda Item 7 (vi): Amendment in the CGST Rules, 2017.
Law Committee, in its various meetings, has deliberated upon several issues and has
recommended changes in some of the provisions of the Central Goods and Services Tax Rules, 2017
(hereinafter referred to as “the CGST Rules”). In addition to the changes in the CGST Rules, some
changes in the FORMS have also been recommended by the Law Committee. These changes are
discussed below:
I. Amendment in sub-rule (3) of Rule 12
1.1 References have been received from the trade that there is no option available presently for an
e-commerce operator having TCS registration to apply for cancellation of TCS registration in case of
the closure of the operations of e-commerce operator. It has been requested to provide an option to
cancel TCS registration. Similarly, there is also no option presently for a TDS registrant to apply for
cancellation of TDS registration. The following paras examine this issue in detail.
1.2 Electronic commerce operator who is required to collect tax at source under Section 52 of the
CGST Act, 2017 is required to be compulsorily registered in terms of clause (x) of Section 24 of the
said Act. Similarly, persons who are required to deduct tax under Section 51, whether or not
separately registered, are required to be compulsorily registered in terms of clause (vi) of Section 24.
1.3 Section 29 of the CGST Act,2017 provides that the proper officer may, either on his own
motion or on an application filed by the registered person or by his legal heirs, in case of death of such
person, cancel the registration, in such manner and within such period as may be prescribed, having
regard to the circumstances where,-
(a) the business has been discontinued, transferred fully for any reason including death of the
proprietor, amalgamated with other legal entity, demerged or otherwise disposed of; or
(b) there is any change in the constitution of the business; or
(c) the taxable person is no longer liable to be registered under Section 22 or Section 24 or
intends to opt out of the registration voluntarily made under sub-section (3) of Section 25.
1.4 Rule 20 of CGST Rules provides for application for cancellation of registration by a registered
person, other than a person to whom a registration has been granted under Rule 12 or a person to
whom a Unique Identity Number has been granted under Rule 17, seeking cancellation of his
registration under sub-section (1) of Section 29. Such person is required to electronically submit an
application in FORM GST REG-16 within a period of thirty days of the occurrence of the event
warranting the cancellation. However, the said Rule specifically excludes a person to whom a
registration has been granted under Rule 12.
1.5 It may be noted that Rule 12 deals with grant of registration to persons required to deduct
tax at source or to collect tax at source. Accordingly, TDS deductors and TCS collectors are not
covered within the ambit of Rule 20 and as such, there is no procedure prescribed under Rule 20 for
such persons to apply for cancellation of registration.
1.6 Cancellation of such registration by proper officer is provided under Rule 12(3), but there is
no mechanism for the said person to apply for cancellation himself. Rule 12(3) provides for
cancellation of registration as under:
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(3) Where, upon an enquiry or pursuant to any other proceeding under the Act, the proper
officer is satisfied that a person to whom a certificate of registration in FORM GST REG-06
has been issued is no longer liable to deduct tax at source under Section 51 or collect tax at
source under Section 52, the said officer may cancel the registration issued under sub-rule (2)
and such cancellation shall be communicated to the said person electronically in FORM GST
REG-08:
Provided that the proper officer shall follow the procedure as provided in Rule 22 for the
cancellation of registration.
7. The issue was deliberated by the Law Committee in its meeting held on 23.11.2022, wherein
Law Committee recommended for amendment in sub-rule (3) of Rule 12 to provide an option to the
TCS and TDS operators to apply for cancellation of their registration. The proposed amendment in
sub-rule (3) of Rule 12 is shown, in red color, as below:
Sub-rule (3) of Rule 12
(3) Where, on a request made in writing by a person to whom a registration has been granted under
sub-rule (2) or upon an enquiry or pursuant to any other proceeding under the Act, the proper officer
is satisfied that a person to whom a certificate of registration in FORM GST REG-06 has been
issued is no longer liable to deduct tax at source under Section 51 or collect tax at source under
Section 52, the said officer may cancel the registration issued under sub-rule (2) and such
cancellation shall be communicated to the said person electronically in FORM GST REG-08:
Provided that the proper officer shall follow the procedure as provided in Rule 22 for the cancellation
of registration.
II. Amendment in sub-rule (1) of Rule 37
2.1 2nd proviso to Section 16(2) of the CGST Act provides for the cases where a recipient fails to
pay to the supplier the amount towards the value of supply along with tax payable thereon within a
period of 180 days. The same reads as under:
Provided further that where a recipient fails to pay to the supplier of goods or services or both,
other than the supplies on which tax is payable on reverse charge basis, the amount towards the
value of supply along with tax payable thereon within a period of one hundred and eighty days
from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed by
the recipient shall be added to his output tax liability, along with interest thereon, in such manner
as may be prescribed:
2.2 It may be noted that to align with the GSTR-1/2B/3B return filing system, 2nd and 3rd provisos
to Section 16(2) have separately been recommended to be amended as below:
Provided further that where a recipient fails to pay to the supplier of goods or services or
both, other than the supplies on which tax is payable on reverse charge basis, the amount
towards the value of supply along with tax payable thereon within a period of one hundred
and eighty days from the date of issue of invoice by the supplier, an amount equal to the input
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tax credit availed by the recipient shall be added to his output tax liabilitypaid by him, along
with interest thereonpayable under Section 50, in such manner as may be prescribed:
Provided also that the recipient shall be entitled to avail of the credit of input tax on payment
made by him to the supplier of the amount towards the value of supply of goods or services or
both along with tax payable thereon.
2.3 The said manner to be followed by such a recipient is prescribed in Rule 37(1) of the CGST
Rules. However, to align with the GSTR-1/2B/3B return filing system, FORM GSTR-2 and FORM
GSTR-3 in CGST Rules, 2017 have been omitted and the Rule 37(1) of CGST Rules, 2017 has been
amended with effect from 01.10.2022 vide Notification No. 19/2022 - CT dated 28.09.2022, as under:
(1) A registered person, who has availed of input tax credit on any inward supply of goods or
services or both, other than the supplies on which tax is payable on reverse charge basis, but
fails to pay to the supplier thereof, the amount towards the value of such supply along with the
tax payable thereon, within the time limit specified in the second proviso to sub-section (2) of
Section 16, shall furnish the details of such supply, the amount of value not paid and the
amount of input tax credit availed of proportionate to such amount not paid to the supplier in
FORM GSTR-2 for the month pay an amount equal to the input tax credit availed in respect
of such supply, along with interest payable thereon under Section 50, while furnishing the
return in FORM GSTR-3B for the tax period immediately following the period of one
hundred and eighty days from the date of the issue of the invoice:
2.4 It is observed that, before the said amendments, sub-rule (1) of Rule 37 required the recipient
to furnish the details of “the amount of input tax credit availed of proportionate to such amount not
paid to the supplier” and under sub-rule (2) of Rule 37, the amount of such input tax credit was to be
added to the output tax liability of the said recipient for the month in which the details were furnished.
Resultantly, only amount of ITC proportionate to the amount of payment withheld vis-à-vis the value
of supply was to be added to the output tax liability.
2.5 However, the amended Rule 37(1) requires the said recipient to pay an amount equal to the
input tax credit availed in respect of such supply. It gives an impression that the whole of ITC
pertaining to such supply is to be reversed even though a part of the payment may have been made by
the recipient to the supplier. This appears to be an inadvertent departure from the principle of
proportionate reversal under the original Rule.
2.6 In view of the above, the Law Committee in its meeting held on 05.11.2022 deliberated on a
proposal to address this anomaly and recommended that sub-rule (1) of Rule 37 may be amended
retrospectively with effect from 01.10.2022. The proposed amendment insub-rule (1) of Rule 37 is
shown, in red color, as below:
Sub-rule (1) of Rule 37
(1) A registered person, who has availed of input tax credit on any inward supply of goods or services
or both, other than the supplies on which tax is payable on reverse charge basis, but fails to pay to the
supplier thereof, the amount towards the value of such supply,whether wholly or partly,along with the
tax payable thereon, within the time limit specified in the second proviso to sub-section(2) of Section
16, shall pay or reverse an amount equal toinput tax credit availed in respect of such supply,
proportionate to the amount not paid to the supplier, along with interest payable thereon under
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Section 50, while furnishing the return in FORM GSTR-3B for the tax period immediately following
the period of one hundred and eighty days from the date of the issue of the invoice:
III. Insertion of Rule 37A
3.1 Section 106 of the Finance Act, 2022 has been notified w.e.f. 1st October, 2022 vide
Notification No. 18/2022 – CT to substitute Section 41 of the CGST Act, 2017. Sub-section (2) of
Section 41 provides as under:
(2) The credit of input tax availed by a registered person under sub-section (1) in respect of
such supplies of goods or services or both, the tax payable whereon has not been paid by the
supplier, shall be reversed along with applicable interest, by the said person in such manner
as may be prescribed:
Provided that where the said supplier makes payment of the tax payable in respect of the
aforesaid supplies, the said registered person may re-avail the amount of credit reversed by
him in such manner as may be prescribed.
3.2 The Law Committee in its meetings held on 26.08.2022, 07.09.2022 and 05.11.2022
deliberated the manner in which such ITC may be reversed and re-availed. Considering various
practical issues in the implementation of the said provision and for ease of doing business, the Law
Committee recommended the following mechanism for such reversal of credit and re-availment
thereof:
(i) Recipient may avail credit in the return in FORM GSTR-3B based on amount available as
per his FORM GSTR-2B in a tax period (as he may not be aware of return filing status of
supplier at the time of filing his return in FORM GSTR-3B as the due date of filing return for
both the supplier and recipient is the same).
(ii) Where the supplier of the registered person has furnished details of a supply in his FORM
GSTR-1 or using IFF for a tax period, but the corresponding return in FORM GSTR-3B is not
furnished by the said supplier till 30th September following the end of corresponding financial
year, the ITC in respect of such supplies shall be reversed by the registered person.
(iii) The reversal shall be made by the registered person while furnishing a return in FORM
GSTR-3B on or before 30th November following the end of such financial year, during which
such input tax credit has been availed.
(iv) Where the said ITC is not reversed by the registered person in a return in FORM GSTR3B on or before 30th November following the end of the financial year, during which such
input tax credit has been availed, such amount shall be payable along with interest under
Section 50. Therefore, no interest burden lies on the taxpayer if reversal is done upto the
specified time period and the interest liability arises only if reversal is done after that.
(v) The registered person can re-avail the said credit in a subsequent return in FORM GSTR3B when the concerned supplier files his return in FORM GSTR-3B for the corresponding tax
period of the said invoice.
3.3 Therefore, the Law Committee recommended insertion of Rule 37A to the CGST Rules. The
proposed Rule 37A is shown in red color below:
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Rule 37A
37A. Reversal of input tax credit in the case of non-payment of tax by the supplier and reavailment thereof.- Where input tax credit has been availed by a registered person in the return in
FORM GSTR-3B for a tax period in respect of such invoice or debit note, the details of which have
been furnished by the supplier in the statement of outward supplies in FORM GSTR-1 or using the
invoice furnishing facility, but the return in FORM GSTR-3B for the tax period corresponding to
the said statement of outward supplies has not been furnished by such supplier till the 30th day of
September following the end of financial year in which the input tax credit in respect of such invoice
or debit note has been availed, the said amount of input tax credit shall be reversed by the said
registered person, while furnishing a return in FORM GSTR-3B on or before the 30th day of
November following the end of such financial year:
Provided that where the said amount of input tax credit is not reversed by the registered person in a
return in FORM GSTR-3Bon or before the 30th day of November following the end of such
financial year during which such input tax credit has been availed, such amount shall be payable by
the said person along with interest thereon under Section 50.
Provided further that where the said supplier subsequently furnishes the return in FORM GSTR3B for the said tax period, the said registered person may re-avail the amount of such credit in the
return in FORM GSTR-3B for a tax period thereafter.
IV. Amendment in Rule 46
4.1 Clause (e) of Rule 46 of the CGST Rules, 2017 provides that a tax invoice issued by a
registered person shall contain the name and address of the recipient and the address of delivery, along
with the name of the State and its code, if such recipient is unregistered and where the value of taxable
supply is fifty thousand rupees or more. Further, clause (f) of Rule 46 provides that a tax invoice
issued by a registered person shall contain the name and address of the recipient and the address of
delivery, along with the name of the State and its code, if such recipient is unregistered and the value
of taxable supply is less than fifty thousand rupees but where the recipient requests that such details be
recorded in the tax invoice.
4.2 General provisions relating to place of supply of services as provided in sub-section (2) of
Section 12 of the IGST Act, 2017 provide that the place of supply of services made to an unregistered
person shall be the location of the recipient, where the address on record exists, and the location of the
supplier of services, in other cases. Location of the recipient of service is the usual place of residence
in case of an unregistered person in accordance with clause (d) of sub-section (70) of Section 2 of the
CGST Act. Hence, it becomes imperative to capture the proper address of the recipient in the invoice
in case of supply of service to ensure flow of revenue to the appropriate consuming State.
4.3 The issue was deliberated by the Law Committee in its meeting held on 26.08.2022 and
07.09.2022. Law Committee observed that in case of supply of services to unregistered persons
through online platforms, in particular, recipients’ addresses are not properly captured, which affects
flow of revenue to the appropriate destination states. Law Committee recommended insertion of a
proviso to clause (f) of Rule 46 to ensure mandatory recording of address of unregistered recipients of
service along with the PIN code when the said services are provided through the online platform by a
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registered person even if the value of taxable supply is less than fifty thousand rupees. The LC
recommended insertion (shown in red color) of proviso in clause (f) of Rule 46 as below:
Rule 46
Rule 46. Tax invoice.-Subject to Rule 54, a tax invoice referred to in Section 31 shall be issued
by the registered person containing the following particulars, namely,-
(a) …..
(b) …..
(c) …..
(d) …..
(e) …..
(f) name and address of the recipient and the address of delivery, along with the name of the
State and its code, if such recipient is un-registered and where the value of the taxable supply
is less than fifty thousand rupees and the recipient requests that such details be recorded in the
tax invoice; :
Provided that where any taxable service is supplied by or through an electronic commerce
operator or by a supplier of online information and database access or retrieval services to a
recipient who is un-registered, irrespective of the value of such supply, a tax invoice issued
by the registered person shall contain the name and address of the recipient along with its PIN
code and the name of the State and the said address shall be deemed to be the address on
record of the recipient.
(g) …..
V. Amendment in Rule 46A
5.1 Rule 46 of the CGST/SGST Rules, 2017 prescribes the particulars that a tax invoice
issued by a registered person shall contain. Rule 49 of the said Rules prescribes the particulars
that a bill of supply issued by a supplier shall contain. Rule 54 of the said Rules further prescribes
the particulars in respect of tax invoices issued in special cases.
5.2 Rule 46A of the CGST/SGST Rules, 2017 provides that, notwithstanding anything
contained in Rule 46 or Rule 49 or Rule 54, a registered person supplying taxable as well as
exempted goods or services or both to an unregistered person may issue a single “invoice-cumbill of supply” for all such supplies. It may be observed in this regard that, the non-obstante
clause in Rule 46A actually removes the obligation on the part of a registered person who is
supplying taxable as well as exempted goods or services or both to an unregistered person to
include the particulars as prescribed in Rule 46 or Rule 49 or Rule 54, as applicable, while issuing
the single “invoice-cum-bill of supply”. Hence, it was felt by Law Committee that Rule 46A is
required to be amended accordingly to make it obligatory on the part of a registered person, who
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is supplying taxable as well as exempted goods or services or both to an unregistered person, to
include the relevant particulars as prescribed in Rule 46 or Rule 49 or Rule 54, as applicable,
while issuing the single “invoice-cum-bill of supply”.
5.3 Accordingly, the Law Committee in its meeting dated 26.08.2022 and 07.09.2022
recommended insertion of a proviso (shown in red color) in Rule 46A as below:
Rule 46A
Rule 46A. Invoice-cum-bill of supply.- Notwithstanding anything contained in Rule 46 or
Rule 49 or Rule 54, where a registered person is supplying taxable as well as exempted
goods or services or both to an unregistered person, a single “invoice-cum-bill of supply”
may be issued for all such supplies. :
Provided that the said single “invoice-cum-bill of supply” shall contain the particulars as
prescribed under Rule 46 or Rule 54, as the case may be, and Rule 49.
VI. Insertion of proviso in sub-rule (8) of Rule 87
6.1 GST System enables taxpayers paying their taxes through e-payment mode on real-time
basis. As per the Joint Committee Report on GST Payment Process, GST System generates CPIN
at the time of creating Challan and the banks on realizing payment from the taxpayers’ account
generate CIN against each CPIN and send to GST System. Based on the signed CIN received
from the banks, the GST System updates payment in Electronic Cash Ledger (ECL) of the
taxpayer.
6.2 However, in certain cases, where the bank fails to communicate the signed CIN details to
GST system, two API calls are made by GST System automatically at the interval of 5 minutes to
the concern banks for sharing signed CIN of transactions. Subsequently, taxpayers may also
trigger on call demand of such payment transactions from GST System to the bank in case
payments are not updated in their ECL even after the above API calls.
6.3 It has been learnt that even after all these efforts, the bank fails to share CIN details with
GST System in few cases and payments are not integrated with the ECLs,whereas, banks share
the CIN details and payment of such transaction with RBI subsequently. RBI after reconciliation
of payment with CINs received from the banks, share such transaction details with GST System
next day in the RBI e-Scroll file.
6.4 Since RBI e-Scroll contains the successful payment made against the CINs, and Para 112
and 113(i) of the Joint Committee Report on GST Payment Process also requires integration of
Payments on the basis of RBI e-Scroll file, the ECL of such taxpayers are updated by GST
Systembased on e-Scroll of RBI received next day. It has also been specified under Para 113 of
the Joint Committee Report that the Accounting Authority shall carry out the accounting based on
Scroll data received from RBI.As on 31.03.2022, a total of 2953 transactions have been
updatedby GST System in ECL on the basis of RBI e-Scrolls which is 0.00128 percent of total
23.05 Crore payment transactions.
6.5 CAG has raised a Para on this process of ECL update. Though, they don’t have objection
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hoc process, the DoRshould set a right process by taking a decision to ensure proper accounting
and reconciliation.
6.6 Therefore, a process may be prescribed under the law to allow ECL updates on the basis
of e-Scroll of RBI in such cases, where banks fail to provide signed CIN to GST System but take
the payment from taxpayers successfully and share such payments with RBI. Since payment is
debited from the taxpayers account and RBI has transferred such payment to Government, the
accounting/ reconciliation may be made by the Pr. CCA based on the RBI e-Scroll in such cases.
6.7 The matter was deliberated by the Law Committee to regularize the process of updating
ECL on the basis of e-Scroll data received from the RBI (the account aggregator on behalf of
Government of India and State Governments) in the cases where payment has been received
successfully but bank fails to share the signed CIN with GST System, with a view to protect
taxpayers’ genuine interest and mitigate the hardships faced due to such technical challenges.
Considering this miniscule volume, payments of which are caught in unavoidable
technicalproblems and the hardship of the taxpayers, Law committee in its meeting dated
07.09.2022 recommended for amendment of Rule 87 of CGST Rules by inserting a new proviso
(shown in red color) to sub-rule (8) of Rule 87 of the CGST Rules, 2017, as below:
Sub-rule (8) of Rule 87
(8) Where the bank account of the person concerned, or the person making the deposit on
his behalf, is debited but no Challan Identification Number is generated or generated but not
communicated to the common portal, the said person may represent electronically in FORM
GST PMT-07 through the common portal to the bank or electronic gateway through which the
deposit was initiated .:
Provided that where the bank fails to communicate details of Challan Identification Number to
the Common Portal, the Electronic Cash Ledger may be updated on the basis of e-Scroll of the
RBI in cases where the details of the said e-Scroll are in conformity with the details in challan
generated in FORM GST PMT-06 on the Common Portal.
VII. Amendment in Rule 108 and Rule 109
7.1 In terms of sub-section (1) of Section 107 of the CGST Act, 2017, any person aggrieved
by any decision or order passed by an adjudicating authority may appeal to the concerned
appellate authority within three months from the date of communication of the said decision or
order to such person. Similar provision exists under sub-section (2) of Section 107 of the CGST
Act, 2017 to provide for filing appeal by an officer authorised by the Commissioner to the
appellate authority within six months from the date of communication of the said decision or
order.
7.2 In terms of sub-rule (3) of Rule 108 of the CGST Rules, 2017 in respect of an appeal filed
in terms of the provisions of sub-section (1) of Section 107 of CGST Act, 2017 a certified copy of
the decision or order appealed against is required to be submitted within seven days of filing the
appeal in FORM GST APL-01 under sub-rule (1) of Rule 108. On receipt of such certified copy,
the appellate authority is required to issue a final acknowledgment in Form GST APL-02. It has
also been provided that the date of issuance of the provisional acknowledgment is considered as
the date of filing of appeal in case the certified copy is submitted with seven days of filing of
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Form GST APL 01; however, in case the same is not furnished within the aforesaid period of
seven days, the date of submission of the certified copy is considered as the date of filing appeal.
Hence, submission of the certified copy of the decision or order appealed against is mandated for
issuance of final acknowledgment of appeal or its admissibility.
7.3 Similarly, sub-rule (2) of Rule 109 of CGST Rules, 2017 provides for requirement of
submission of certified copy of the order appealed against within seven days of filing application
in FORM GST APL-03 in terms of sub-section (2) of Section 107 of CGST Act, 2017.
7.4 In GST regime, when an order, which is appealed against, is issued or uploaded by the
adjudicating authority on the common portal, the same can be viewed by the appellate authority.
Further, certification of a document serves the purpose of vouching for the authenticity of its
content. Accordingly, the requirement of submission by the appellant of a certified copy of
such an uploaded order to vouch for its authenticity, pales into insignificance considering
that, the order has been uploaded by the adjudicating authority using his Digital Signature
Certificate and the same is available for viewing or downloading by the appellate authority
on the portal.
7.5 However, in cases where the decision or order has been passed manually and has not been
uploaded on the common portal, the same is not available to the Appellate Authority on the
common portal. In such cases, non-submission of the certified copy by the appellant restricts the
Appellate Authority in entertaining the same. Doubts are being raised on the requirement of
submission of a certified copy of the decision or order appealed against for admissibility of appeal
by an Appellate Authority.
7.6 The issue was deliberated by the Law Committee. The Law Committee in its meeting
held on 05.11.2022 and 23.11.2022 recommended that to provide clarity on the requirement of
submission of certified copy of the order appealed against and the issuance of final
acknowledgment by the appellate authority, an amendment may be made in sub-rule (3) of Rule
108 and in Rule 109 of the CGST Rules, 2017.
7.7 The Law Committee also observed that on the common portal, the procedure of filing
of appeal in accordance with Rule 109 of the CGST Rules, 2017 by the Department is
similar to the procedure of filing of appeal in accordance with Rule 108 of the CGST Rules,
2017, i.e. once an appeal is filed by the Department in FORM GST APL-03, a provisional
acknowledgement is issued immediately by the system, subsequent to which the final
acknowledgment in FORM GST APL-02 is issued by the Appellate Authority. Accordingly, the
Law Committee recommended that Rule 109 of the CGST Rules, 2017 may be re-drafted in the
similar manner as Rule 108 of the CGST Rules, 2017. Subsequent to the amendment in Rule 108
and 109, label changes would be required in FORM GST APL-02.
7.8 The proposed amendment in Rule 108, Rule 109 and FORM GST APL-02 are shown in
red color, as below:
Rule 108
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Rule 108. Appeal to the Appellate Authority.-
(1) ….
(2) ….
(3) Where the decision or order appealed against is uploaded on the common portal, a final
acknowledgment, indicating appeal number, shall be issued in FORM GST APL-02 by the
Appellate Authority or an officer authorised by him in this behalf and the date of issue of the
provisional acknowledgment shall be considered as the date of filing of appeal:
Provided that where the decision or order appealed against is not uploaded on the common
portal, the appellant shall submit a self-certified copy of the said decision or order within a
period of seven days from the date of filing of FORM GST APL-01 and a final acknowledgment,
indicating appeal number, shall be issued in FORM GST APL-02 by the Appellate Authority or
an officer authorised by him in this behalf, and the date of issue of the provisional
acknowledgment shall be considered as the date of filing of appeal:
Provided further that where the said self-certified copy of the decision or order is not submitted
within a period of seven days from the date of filing of FORM GST APL-01, the date of
submission of such copy shall be considered as the date of filing of appeal.
Explanation. -…..
Rule 109
Rule 109. Application to the Appellate Authority.-
(1) An application to the Appellate Authority under sub-section (2) of Section 107 shall be filed
in FORM GST APL-03, along with the relevant documents, either electronically or otherwise as
may be notified by the Commissioner and a provisional acknowledgment shall be issued to the
appellant immediately.
(2) Where the decision or order appealed against is uploaded on the common portal, a final
acknowledgment, indicating appeal number, shall be issued in FORM GST APL-02 by the
Appellate Authority or an officer authorised by him in this behalf and the date of issue of the
provisional acknowledgment shall be considered as the date of filing of appeal under sub-rule
(1):
Provided that where the decision or order appealed against is not uploaded on the common
portal, the appellant shall submit a self-certified copy of the said decision or order within a
period of seven days from the date of filing of FORM GST APL-03 and a final acknowledgment,
indicating appeal number, shall be issued in FORM GST APL-02 by the Appellate Authority or
an officer authorised by him in this behalf, and the date of issue of the provisional
acknowledgment shall be considered as the date of filing of appeal:
Provided further that where the said self-certified copy of the decision or order is not submitted
within a period of seven days from the date of filing of FORM GST APL-03, the date of
submission of such copy shall be considered as the date of filing of appeal.
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FORM GST APL – 02
[See Rule 108(3) & 109(2)]
Acknowledgment for submission of appeal
<Name of applicant><GSTIN/Temp ID/UIN/Reference Number with date >
Your appeal has been successfully filed against < Application Reference Number >

1. Reference Number2. Date of filing3. Time of filing4. Place of filing5. Name of the person filing the appeal6. Amount of pre-deposit7. Date of acceptance/rejection of appeal8. Date of appearance- Date: Time:
9. Court Number/ Bench Court: Bench:

Place:
Date: Signature>

Name:
Designation:
On behalf of Appellate Authority/Appellate
Tribunal/Commissioner / Additional or Joint Commissioner
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VIII. Insertion of Rule 109C
8.1 Sub-section (1) of Section 107 of CGST Act, 2017 provides for filing of appeal by any
aggrieved person before first appellate authority against any decision or order passed by the
adjudicating authority. Similarly, sub-section (2) of Section 107 of CGST Act, 2017 provides for
the appeal to be filed by an authorised officer with the first appellate authority against any
decision or order of an adjudicating authority. However, no provision in CGST Act or CGST
Rules presently provides for withdrawal of such an appeal application either by the aggrieved
person or by the authorised officer. The issue was deliberated by the Law Committee and it was
felt that an option of withdrawal of Appeal application upto a specified stage before the issuance
of Order-in-Appeal needs to be made available to the taxpayer and tax officer.
8.2 Accordingly, GSTN has developed functionality for withdrawal of the appeal application
by taxpayer as well by the tax officer. For enabling such functionality, requisite changes are
required to be carried out in CGST Rules, 2017 and a new form for withdrawal of appeal
application is also required to be introduced.
8.3 The issue was deliberated by the Law Committee in its meeting held on 03.08.2022,
which recommended insertion of Rule 109C in CGST Rules 2017 to provide for withdrawal of
appeal as below. Further, Law Committee in its meeting held on 12.10.2022 recommended
introduction of FORM GST APL-01/03W in CGST Rules, 2017, to enable the appellant to file
application for withdrawal of appeal application. The proposed Rule 109C and FORM GST APL01/03W is shown, in red color, as below:
Rule 109C
109C. Withdrawal of Appeal.-
The appellant may, at any time, before issuance of show cause notice under sub-section (11) of
Section 107 or before issuance of the order under the said sub-section, whichever is earlier, in
respect of any appeal filed in FORM GST APL-01, file an application for withdrawal of the
said appeal by filing an application in FORM GST APL-01W:
Provided that where the final acknowledgment in FORMGST APL-02 has beenissued, the
withdrawalof the said appeal would be subject to the approval of the appellateauthority and
such application for withdrawal of the appeal shall be decided by the appellate authority
within 7 days of filing of such application:
Provided further that any fresh appeal filed by the appellant pursuant to such withdrawal
shall be filed within the time limit specified in sub-section (1) or sub-section (2) of Section 107,
as the case may be.
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FORM GST APL-01/03 W
[Refer Rule 109C]
Application for Withdrawal of Appeal Application
1. GSTIN:
2. Name of Business (Legal) (in case appeal is filed under sub-section (1) of Section 107)
3. Name and designation of the appellant (in case appeal is filed under sub-section (2) of
Section 107):
4. Order No.& Date:
5. ARN of the Appeal & Date:
6. Reasons for Withdrawal:
i. Acceptance of order of the adjudicating authority.
ii. Acceptance of order of an Higher Appellate Authority/ Court on similar subject
matter
iii. Need to file appeal again after rectification of mistakes/omission in the filed
appeal
iv. Amount involved in appeal is less than the monetary limit fixed for Appeal by the
Board/Commissioner
v. Any other reason
7. Declaration (applicable in case appeal is filed under sub-section (1) of Section 107):
I/We <Taxpayer Name> hereby solemnly affirm and declare that the information given herein
is true and correct to the best of my/ our knowledge and belief and nothing has been concealed
therefrom.
Place: Signature
Date: Name of Applicant /Applicant Officer
Designation/ Status.

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IX. Deletion of clause (d) of sub-rule (14) of Rule 138
9.1 The threshold limit for generation of e-way bill has been prescribed in Rule 138 of CGST
Rules, 2017. As per sub-rule (1) of Rule 138 of the CGST Rules, 2017, a registered person who
causes movement of goods of consignment value exceeding fifty thousand rupees shall before
commencement of such movement has to generate the e-way bill. Further, sub-rule (14) of Rule
138 of CGST Rules, 2017 prescribes the conditions when the e-way bill is not required to be
generated.
9.2 As per clause (d) of the said sub-rule, e-way bill is not required to be generated in respect
of movement of goods within such areas as are notified under clause (d) of sub-rule (14) of Rule
138 of the SGST or UTGST Rules in that particular State or Union territory. Therefore, for intrastate movement of goods, the said threshold limit for generation of e-way bill is to be notified by
the Commissioner of State Tax, in consultation with the Principal Chief Commissioner/ Chief
Commissioner of Central Tax as per the provisions of clause (d) of sub-rule (14) of the Rule 138
of the respective SGST or UTGST Rules. Therefore, e-way bill is not required to be generated for
intra-state movement of goods where the consignment value of goods being transported is less
than the threshold value as notified by the respective Commissioner of State Tax.
9.3 Consequently, different States/ UTs have notified different threshold limits for
requirement of generation of e-way bill for intra-state movement of goods within their state/ UT.
While most of the States/ UTs have kept the threshold limit for generation of e-way bill for intrastate movement at the consignment value of fifty thousand rupees but some of the States/ UTs
like Delhi, Punjab, Bihar, Jharkhand, West Bengal and Tamil Nadu have kept the said threshold
value at one lac rupees. Further, Union Territory of Jammu and Kashmir has exempted generation
of e-way bill for intra-state movement of goods. Gujarat has exempted the same for some
specified goods transported for the purpose of job-work. In some of the States, intra-city
movement of goods has either been exempted from generation of e-way bill or higher threshold
limits have been prescribed for the same.
9.4 Representations have been received from various quarters that different threshold for
generation of e-way bill for intra-state movement of goods in different States/ UTs is creating
confusion and difficulties for the trade and industry.
9.5 Law Committee deliberated on the issue in its meeting held on 05.11.2022 and
recommended that the threshold for intra-state generation of e-way bill may be brought at the
same level in all the States/ UTs at par with that for inter-state movement of goods (i.e. Rs
50,000) by deletion of clause (d) of sub-rule (14) of Rule 138 of CGST Rules, 2017. The
proposed amendment in sub-rule (14) of Rule 138 is shown, in red color, as below:
Sub-rule (14) of Rule 138
(14) Notwithstanding anything contained in this Rule, no e-way bill is required to be
generated-
………………………..
(d) in respect of movement of goods within such areas as are Notified under clause (d) of subrule (14) of Rule 138 of the State or Union territory Goods and Services Tax Rules in that
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particular State or Union territory;
………………………..
Explanation. -…..
X. Amendment in Entry (5) of Annexure appended to sub-rule (14) of Rule 138
10.1 In terms of clause (a) of sub-rule (14) of Rule 138 of the CGST/SGST Rules, 2017, eway bill is not required to be generated in case of transportation of goods as specified in the
Annexure appended to the said sub-rule.Entry No.4 & 5 of the aforesaid Annexure cover the
entire Chapter 71 of the First Schedule to the Customs Tariff Act, 1975, including Imitation
Jewellery, thereby exempting the generation of e-way bill for transportation of imitation
jewellery.
10.2 It has been contended by the field formations that in common parlance, imitation
jewellery does not fall in the same genre as jewellery made of Gold and Silver. One of the
reasons to exempt Jewellery made of gold, silver and precious metal from the requirement of
generation of e-way bill was the security concern. The said reason may not be applicable in case
of imitation jewellery. Moreover, imitation jewellery is an item prone to evasion of tax. It has,
therefore, been suggested by field formations to mandate requirement of generation of e-way bill
for movement of consignments of imitation jewellery in the interest of revenue.
10.3 LC in its meeting held on 05.11.2022 deliberated on the issue and recommended a
modification in the Entry No. 5 of the Annexure appended to sub-rule(14) of Rule 138 of the
CGST Rules, 2017 so as to exclude imitation jewellery from the exemption from the generation
of e-way bill for its movement. Law Committee also recommended that GSTN and NIC should
ensure requisite enabling functionality on the e-way bill portal for the generation of e-way bills
for imitation jewellery. The proposed Amendment in Entry No. 5 in Annexure appended to subrule (14) of Rule 138 of CGST Rules, 2017 is shown, in red color, as below:
Annexure appended to sub-rule (14) of Rule 138
S.No. Description
(1) (2)
5. Jewellery, goldsmiths’, and silversmiths’ wares and other articles (Chapter
71) excepting Imitation Jewellery (7117)
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XI. Substitution of FORM GST REG-19
11.1.1 Under Rule 22(3) of CGST Rules, 2017, FORM GST REG-19 is the order for
cancellation of registration. Therein, the proper officer is required to select appropriate status
from the following options:
(i) Whereas no reply to notice to show cause has been submitted; or
(ii) Whereas on the day fixed for hearing you did not appear; or
(iii) Whereas the undersigned has examined your reply and submissions made at the time
of hearing, and is of the opinion that your registration is liable to be cancelled for
following reason(s).
11.1.2 There could be more scenarios based on whether the reply to the show cause notice has
been submitted or not and whether the concerned person has appeared for personal hearing or not.
Therefore, GSTN proposed an elaborate list of such options to choose from in FORM GST
REG-19 in order to clearly bring out the status.
11.2 Further, “Determination of amount payable pursuant to cancellation” along with a table is
also a part of the said order in FORM GST REG-19. Display of this table with nil value in
cancellation order may be misleading if no tax liability to be discharged by taxpayer has been
ascertained and mentioned by the tax officer in the table in the said order. Moreover, according to
Section 29(3) of CGST Act, 2017 cancellation of registration does not affect the liability to pay
tax and other dues or to discharge any obligation under CGST Act or the Rules made thereunder
for any period prior to the date of cancellation, whether or not such tax and other dues are
determined before or after the date of cancellation. Also, an electronic liability register specified
under sub-section (7) of Section 49 is maintained in FORM GST PMT-01 for each person liable
to pay tax, interest, penalty, late fee or any other amount on the common portal and all amounts
payable by him are debited to the said register.Therefore, it was proposed to remove the said table
for determination of amount payable pursuant to cancellation from FORM GST REG-19.
11.3 The matter was deliberated by the Law Committee in its meeting held on 05.11.2022.
The Law Committee felt that in addition to the above, the registered person, whose registration is
being cancelled through FORM GST REG-19, should also be communicated certain other
compliances due on his part such as furnishing the pending returns and the final return.
11.4 The Law Committee, accordingly, recommended that FORM GST REG-19 may be
substituted. New FORM GST REG-19 is shown, in red color, as under:
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FORMGSTREG-19
[SeeRule22(3)]
Reference Number Date
To
Name
Address
GSTIN/UIN
Application Reference Number(ARN) Date
Order for Cancellation of Registration
This has reference to show cause notice issued dated -----
฀ Whereas no reply to the show cause notice has been submitted;
and whereas, the undersigned based on record available with this office is of the opinion that
your registration is liable to be cancelled for following reason(s): or
฀ Whereas reply to the show cause notice has been submitted vide <ARN Number>
dated______;
and whereas, the undersigned on examination of your reply to show cause notice and based
on record available with this office is of the opinion that your registration is liable to be
cancelled for following reason(s): or
฀ Whereas no reply to the show cause notice has been submitted and on day fixed for personal
hearing, you did not appear in person or through an authorized representative;
and whereas, the undersigned based on record available with this office is of the opinion that
your registration is liable to be cancelled for following reason(s): or
฀ Whereas no reply to the show cause notice has been submitted, but you/ your authorised
representative attended the personal hearing and made a written or verbal submission;
and whereas, the undersigned on examination of your written or verbal submission made
during personal hearing and based on record available with this office is of the opinion that
your registration is liable to be cancelled for following reason(s): or
฀ Whereas reply to the show cause notice has been submitted vide <ARN Number>
dated______. But, you or your authorised representative did not attend the personal hearing
on scheduled or extended date;
and whereas, the undersigned on examination of your reply to show cause notice and based
on record available with this office is of the opinion that your registration is liable to be
cancelled for following reason(s): or
฀ Whereas reply to the show cause notice has been submitted vide <ARN Number>
dated______ and you/ your authorised representative attended the personal hearing, made a
written/oral submission during personal hearing;
and whereas, the undersigned has examined your reply to show cause notice as well as
submissions made at the time of personal hearing and is of the opinion that your registration
is liable to be cancelled for following reason(s):
i.
ii.
The effective date of cancellation of your registration is <<DD/MM/YYYY>>.
2. Kindly refer to the supportive document(s) attached for case specific details.
3. It may be noted that a registered person furnishing return under sub-section (1) of
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Section 39 of the CGST Act, 2017 is required to furnish a final return in FORM GSTR-10
within three months of the date of this order.
4. You are required to furnish all your pending returns.
5. It may be noted that the cancellation of registration shall not affect the liability to pay
tax and other dues under this Act or to discharge any obligation under this Act or the Rules
made thereunder for any period prior to the date of cancellation whether or not such tax and
other dues are determined before or after the date of cancellation.
Place:
Date:
Signature
<Name of the officer>
Designation
Jurisdiction
XII. Amendment in FORM GST REG-17
12. Under Rule 22(1) of CGST Rules, 2017, FORM GST REG-17 is show cause notice for
cancellation of registration. GSTN proposed that “Kindly refer to the supportive documents attached
for case specific details.” may be added at the end of FORM GST REG-17. The Law Committee in
its meeting held on 05.11.2022 recommended the same. The proposed amendments in FORM GST
REG-17 are shown, in red color, as below:
FORM GST REG -17
[See Rule 22(1)]
Reference No. - << Date >>
To
Registration Number (GSTIN/UIN)
(Name)
(Address)
Show Cause Notice for Cancellation of Registration
Whereas on the basis of information which has come to my notice, it appears that your registration is
liable to be cancelled for the following reasons: -
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1
2
3
….
You are hereby directed to furnish a reply to this notice within seven working days from the date of
service of this notice.
You are hereby directed to appear before the undersigned on DD/MM/YYYY at HH/MM
If you fail to furnish a reply within the stipulated date or fail to appear for personal hearing on the
appointed date and time, the case will be decided ex parte on the basis of available records and on
merits.
Kindly refer to the supportive document(s) attached for case specific details.
Place:
Date:
Signature
< Name of the Officer>
Designation
Jurisdiction
[Note: - Your registration stands suspended with effect from ---------- (date).]
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XIII. Amendment in FORM GST DRC-03
13.1 Circular No. 174/06/2022-GST dated 06.07.2022 has been issued prescribing the manner of
re-credit of amount of erroneous refund deposited by the taxpayer, in terms of provisions of sub-rule
(4B) of Rule 86, in electronic credit ledger using FORM GST PMT-03A. In this regard, GSTN has
been requested to make certain amendments in FORM GST DRC-03 to include the following options
in the drop-downregarding cause of payment:
i. Deposit of erroneous refund of unutilised ITC
ii. Deposit of erroneous refund of IGST, obtained in contravention of sub-rule (10) of Rule 96 of
the CGST Rules, 2017.
13.2 Further, GSTN has been requested to develop an automated functionality for online
transmission of intimation of payment of amount of erroneous refund through FORM GST DRC-03 to
the jurisdictional proper officer for issuance of FORM GST PMT-03A for re-credit of amount so
deposited by the taxpayer in his electronic credit ledger. For development of this functionality, certain
additional information has to be sought from the taxpayer in FORMGST DRC-03 regarding the details
of refund application or the shipping bill, date of credit of refund in the taxpayer’s bank account etc.
for making the said information available to the proper officer in order to automate the functionality.
13.3 In view of the above, GSTN has placed a proposal for making certain amendments in FORM
GST DRC-03 before the Law Committee in its meeting held on 21.09.2022 wherein LC has
recommended the changes in FORM GST DRC-03 with the following suggestions:
a) The options for drop down need not be specified in FORM GST DRC-03 and same may be
made available on the portal under drop down options.
b) A drop-down option may also be provided in the said Form for deposit of refund in case of
non-realisation of export proceeds under Rule 96B.
c) Taxpayer may be provided facility to choose multiple options in the drop down.
13.4 The proposed amendments in FORM GST DRC-03, as suggested by LC, are shown, in red
color, as below:

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FORM GST DRC- 03
[See Rule 142(2) & 142 (3)]
Intimation of payment made voluntarily or made against the show cause notice (SCN) or statement [or
intimation of tax ascertained through FORM GST DRC-01A
1. GSTIN
2. Name < Auto>
3. Cause of payment << drop down>>
3
A
Shipping bill details of erroneous
IGST refund (to be enabled only if
the specified category is chosen in
drop down menu)
(i) Shipping Bill/ Bill of Export No. & Date:
(ii) Amount of IGST paid on export of goods:
(iii) Notification No. used for procuring inputs at
concessional rate or exemption:
(iv) Date of notification:
(v) Amount of refund received:
(vi) Amount of erroneous refund to be deposited:
(vii) Date of credit of refund in Bank Account:
4. Section under which voluntary
payment is made
<< drop down>>
5. Details of show cause notice, if
payment is made within 30 days
of its issue, scrutiny, intimation of
tax ascertained through Form
GST DRC-01A, audit, inspection or
investigation, GST RFD-01, others
(specify)
Reference No./ARN Date of issue/filing
6. Financial Year
7. Details of payment made including interest and penalty, if applicable
(Amount in Rs.)
Sr.
No
.
Tax
Perio
d
A
ct
Place
of
supp
ly
Tax
/
Ces
s
Inter
est Penalty,
if
applica
Fe
e
Othe
rs
Tot
al Ledg
er
utilis
ed
Deb
it
entr
y
Dat
e
of
de
bi
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(PO
S)
ble (Cas
h /
Cred
it)
no. t
en
tr
y
1 2 3 4 5 6 7 8 9 10 11 12 13
8. Reasons, if any - << Text box>>
9. VerificationI hereby solemnly affirm and declare that the information given hereinabove is true and correct to
the best of my knowledge and belief and nothing has been concealed therefrom.
Signature of Authorized Signatory
Name
Designation / Status
Date ……………..
Note -
1.Payment to be only in cash for deposit of erroneous refund of unutilised ITC and for deposit of
erroneous refund of IGST, obtained in contravention of sub-rule (10) of Rule 96.
2. ARN of FORMGST RFD-01 to be mentioned mandatorily if cause of payment is selected as –
‘deposit of erroneous refund of unutilised ITC’.
3. Details of shipping bill numbers to be entered in the same pattern in which the details have been
entered in the return.
Accordingly, the agenda note is placed before the GST Council for deliberation and approval. PariMateria changes would also be required in the respective SGST Rules.
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Agenda Item 7(vii): Supplies by unregistered person and composition dealers through ecommerce operators
Attention is drawn to an agenda on the cited subject which was deliberated by the GST Council in
its 47th meeting held on 28th-29th June, 2022. The Council had given in-principle approval for
relaxation in the provisions for suppliers making supplies through E-Commerce Operators (ECOs), as
under:
(I) Waiver of requirement of mandatory registration under Section 24(ix) of the CGST Act,
2017 for person supplying goods through ECOs, subject to certain conditions, such as:
a. The aggregate turnover on all India basis does not exceed the turnover specified under
sub-section (1) of Section 22 of the CGST Act, 2017 and notifications issued
thereunder.
b. The person is not making any inter-state taxable supply
(II) Composition tax payers would be allowed to make intra-state supply through e-commerce
operators subject to certain conditions.
(III) The details of the scheme will be worked out by the Law Committee of the Council. The
scheme would be tentatively implemented with effect from 01.01.2023, subject to
preparedness on the portal as well as by ECOs.
2.1 In this regard, the detailed recommendations made by the Council in its 47th meeting are as
follows:
For unregistered persons supplying goods through electronic commerce operators
2.2. In respect of supplier supplying goods through electronic commerce operators, who are
required to be mandatorily registered under Section 24(ix) of the CGST Act, 2017, the Council had
deliberated the proposal to provide exemption from mandatory registration under Section 23(2) of the
CGST Act, 2017 for class of suppliers making supplies of goods through E-commerce operators,
subject to conditions thata. The exemption is available upto aggregate turnover on all India basis not exceeding
the turnover specified under sub-section (1) of Section 22 of the CGST Act, 2017 and
notifications issued thereunder.
b. such unregistered persons shall not make any inter-state taxable supply;
c. they would be mandatorily required to declare their Permanent Account Number
(PAN) and Principal place of business.
d. such unregistered person shall be restricted to declare principal place of business in
only one State.
e. The electronic commerce operators would be required to declare the supplies made by
unregistered persons through them in FORM GSTR-8 statement (by inserting a
suitable table in it). E-commerce operators would also be mandated to ensure that no
inter-state supply through them is allowed in respect of such unregistered persons by
making necessary checks and validations on their system/platform; failing which the
penalty would be imposable on the ECO.
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f. The electronic commerce operators will not be required to deduct any TCS in respect
of such supplies made by unregistered persons through them.
For composition taxpayers supplying through electronic commerce operators
2.3. In respect of composition taxpayers who are restricted under Section 10(2)(d) of the CGST
Act, 2017 from making supplies through E-Commerce operators, the Council had deliberated to make
a special procedure under Section 148 of the CGST Act, 2017 for persons supplying through
electronic commerce operators to opt for composition scheme by fulfilling all other eligibility
conditions provided under Section 10(1) and (2) or Section 10(2A), as the case may be, of the CGST
Act, 2017. This may be subject to conditions such as the following:
a. he is not engaged in making any supply of goods or services which are not leviable to tax
under this Act;
b. he is not engaged in making any inter-state outward supplies of goods or services;
c. he is not a manufacturer of such goods as may be notified by the Government on the
recommendations of the Council
d. he is neither a casual taxable person nor a non-resident taxable person.
e. Further, electronic commerce operators would be required to declare the supplies made by
such composition dealers through them through existing GSTR-8 statement (by inserting a
suitable table in it, if required). Electronic commerce operators would also be mandated to
ensure that no inter-state supply through them is allowed in respect of composition dealers by
making necessary checks and validations on their system/platform.
f. Whenever a registered person (including composition taxpayer) makes a supply through ecommerce operator, TCS collected by e-commerce operator would be credited to electronic
cash ledger of such registered person making supply. Given that composition sellers are
required to remit taxes in cash only, they can then make payment of GST on outward supplies
using TCS balance available in the electronic cash ledger.
3. The Law Committee in its meeting held on 03.08.2022 and 05.11.2022 deliberated on the
requisite legal changes to implement the aforementioned recommendations of the Council. The
recommendations of the Law Committee in this regard are as follows:
A. Recommendations in respect of unregistered persons supplying goods through electronic
commerce operators
4.1. Notification may be issued under Section 23(2) of the CGST Act, 2017 for exempting
unregistered persons from obtaining mandatory registration for supplying goods through electronic
commerce operators (enclosed as Annexure A to this agenda note).
4.2. Notification may be issued under Section 148 of the CGST Act, 2017 for providing special
procedure to be followed by the electronic commerce operators in respect of supplies of goods through
them by unregistered persons (enclosed as Annexure B to this agenda note).
4.3. FORM GSTR-8 may be amended for capturing the information of supplies made by
unregistered suppliers through electronic commerce operators by insertion of the following two tables
in FORM GSTR-8:
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3.1. Details of supplies made through e-commerce operator by un-registered suppliers
Enrolment no. of
supplier
Gross value of
supplies made
Value of supplies
returned
Net value of the
supplies
1 2 3 4
4.1. Amendments to details of supplies made through e-commerce operator by
unregistered suppliers
Original details Revised details
Month Enrolment no.
of supplier
Enrolment no.
of supplier
Gross value of
supplies made
Value of
supply
returned
Net value of
the supplies
1 2 3 4 5 6
4.4. Rule 67(2)of CGST Rules, 2017 may be amended to clearly bring out that the details of TCS
furnished by ECOs in FORM GSTR-8 shall be made available only to the registered suppliers, as,
supplies by unregistered persons do not attract TCS. Accordingly, the said Rule may be amended as
under:
(2) The details of tax collected at source under sub-section (1) of Section 52 furnished by the
operator under sub-rule (1) shall be made available electronically to each of the registered
suppliers on the common portal after filing of FORM GSTR-8 for claiming the amount of tax
collected in his electronic cash ledger after validation.
B. Recommendations in respect of the composition taxpayers supplying through electronic
commerce operators
5.1. To remove the condition restricting registered persons engaged in supplying through
electronic commerce operators from opting for the Composition Levy, clause (d) to sub-section (2)
and clause (c) to sub-section (2A) of Section 10 of CGST Act, 2017 may be amended as under:
(i) clause (d) to sub-section (2) of Section 10 of CGST Act, 2017 may be amended as under:
(d) he is not engaged in making any supply of goods or services through an electronic
commerce operator who is required to collect tax at source under Section 52;
(ii) clause (c) to sub-section (2A) of Section 10of CGST Act, 2017 may be amended as under:
(c) engaged in making any supply of goods or services through an electronic
commerce operator who is required to collect tax at source under Section 52;
5.2. Notification may be issued under Section 148 of the CGST Act, 2017 for providing special
procedures to be followed by the electronic commerce operators in respect of supplies of goods
through them by composition taxpayers (enclosed as Annexure C to this agenda note).
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C. Recommendations in respect of the penal provisions for non-compliant electronic commerce
operators
6.1. The scheme approved by the Council is based on certain compliances on part of the electronic
commerce operators in respect of the supplies made bythe unregistered persons and Composition
taxpayers through them. Such compliances include the following:
(i) Not allowing unregistered persons to supply goods through electronic commerce
operators without enrolment as prescribed.
(ii) Not allowing inter-state supplies through electronic commerce operators by
unregistered persons or composition taxpayers.
(iii) Reporting the details of supplies made by unregistered persons through electronic
commerce operators in FORM GSTR-8.
6.2. An examination of the existing provisions of the CGST Act, 2017 reveals that no specific
provisions exist in CGST Act, 2017 presently providing for demand or penalty in cases of violation of
the aforementioned compliances by electronic commerce operators. In the absence of such provisions,
there may not be any effective guard against violations by the electronic commerce operators.
6.3. Therefore, the Law Committee in its meeting held on 05.11.2022 has recommended that
relevant provisions may be made in the CGST Act for such instances by inserting sub-section (1B) in
Section 122, as under:
(1B) Any electronic commerce operator who-
(i) allows a supply of goods or services or both through it by an unregistered person
other than a person exempted from registration through a notification or an order
issued under this Act to make such supply through an electronic commerce
operator;
(ii) allows an inter-state supply of goods or services or both through it by a person
who is not eligible to make such inter-state supply; or
(iii) fails to furnish the correct details in the statement to be furnished under subsection (4) of Section 52 of any outward supply of goods effected through it by a
person exempted from obtaining registration under the provisions of this Act,
shall be liable to pay a penalty of ten thousand rupees or an amount equivalent to the
amount of tax involved considering the said supply to have been made by a registered
person, other than a person paying tax under Section 10, whichever is higher.
D. Recommendations in respect of the deferment of implementation of the scheme
7.1. The GST Council in its 47th meeting, while approving in-principle the scheme of allowing
unregistered persons and composition taxpayers to make supplies through electronic commerce
operators, recommended that the details of the scheme will be worked out by the Law Committee of
the Council. The Council had also recommended that the scheme would be tentatively implemented
with effect from 01.01.2023, subject to preparedness on the portal as well as by electronic commerce
operators.
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7.2. GSTN has informed that the said functionality to implement recommendations of the Law
Committee on the portal will be ready by June 2023. Thereafter, the same will also be required to be
made available to the electronic commerce operators for testing before it is implemented.
7.3. Further, industry representatives have given a feedback that sufficient time needs to be
provided for testing the APIs of on boarding unregistered online sellers (i.e., for enrollment number)
in the sandbox environment. This will help electronic commerce operators to prepare themselves as
well as unregistered online sellers. Accordingly, requests have been received that in order to provide
adequate time for testing and effective implementation, the planned schedule of January 1, 2023
should be reconsidered and appropriate extension be provided to the Industry.
7.4. In view of the above, the Law Committee in its meeting held on 05.11.2022 has recommended
deferring the implementation of the scheme till 01.10.2023. Wherever amendments in CGST Act/
SGST Act/ UTGST Act are required, the same may also be carried out by the Center and States/ UTs
by that date.
8. Accordingly, the recommendations of the Law Committee at para 4, 5, 6.3 and 7.4 are placed
for approval of the Council.
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ANNEXURE A
[TO BE PUBLISHED IN THE GAZETTE OF INDIA, EXTRAORDINARY, PART II,
SECTION 3, SUB-SECTION (i)]
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
(DEPARTMENT OF REVENUE)
CENTRAL BOARD OF INDIRECT TAXES AND CUSTOMS
NOTIFICATION
No. --/2022- Central Tax
New Delhi, the --October, 2022
G.S.R. ......(E).— In exercise of the powers conferred by sub-section (2) of Section 23 of the Central
Goods and Services Tax Act, 2017 (12 of 2017) (hereafter in this notification referred to as the said
Act), the Central Government, on the recommendations of the Council, hereby specifies the persons
making supplies of goods, through an electronic commerce operator who is required to collect tax at
source under Section 52 of the said Act, and having an aggregate turnover, in thepreceding financial
year and in the current financial year, not exceeding the amount of aggregate turnover above which a
supplier is liable to be registered in the State or Union Territory in accordance with sub-section (1) of
Section 22 of the said Act, read with clause (iii) of the Explanation to that Section, as the category of
persons exempted from obtaining registration under the said Act, subject to the following conditions:
(i) such persons shall not make any inter-state supply of goods;
(ii) such persons shall not make supply of goods through electronic commerce operator in more than
one State or Union Territory;
(iii) such persons shall be required to have a Permanent Account Number issued under the Income Tax
Act, 1961 (43 of 1961);
(iv) such persons shall, before making any supply of goods through electronic commerce operator,
declare on the common portal their Permanent Account Number issued under the Income Tax Act,
1961 (43 of 1961), address of their Place of Business and the State or Union Territory in which such
persons seek to make such supply, which shall be subjected to validation on the common portal;
(v) such persons have been granted an enrolment number on the common portal on successful
validation of the Permanent Account Number declared as per clause (iv);
(vi) such persons shall not be granted more than one enrolment number in a State or Union Territory;
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(vii) no supply of goods shall be made by such persons through electronic commerce operator unless
such personshave been granted an enrolment number on the common portal; and
(viii) where such personsare subsequently granted registration under Section 25 of the said Act, the
enrolment number shall cease to be valid from the effective date of registration.
[F. No.CBIC-20001/2/2022-GST]
(Rajeev Ranjan)
Under Secretary
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ANNEXURE B
[TO BE PUBLISHED IN THE GAZETTE OF INDIA, EXTRAORDINARY, PART II,
SECTION 3, SUB-SECTION (i)]
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
(DEPARTMENT OF REVENUE)
CENTRAL BOARD OF INDIRECT TAXES AND CUSTOMS
NOTIFICATION
No. --/2022 – Central Tax
New Delhi, the-- October, 2022
G.S.R. (E):— In exercise of the powers conferred by Section 148 of the Central Goods and Services
Tax Act, 2017 (12 of 2017) (hereinafter referred to as the said Act), the Central Government, on the
recommendations of the Council, hereby notifiesthe electronic commerce operator who is required to
collect tax at source under Section 52 (hereinafter referred to as the said electronic commerce
operator) as the class of persons who shall follow the following special procedure in respect of supply
of goods made through it by the persons exempted from obtaining registration in accordance with
Notification No. --/2022- Central Tax, dated the -- October, 2022, published in the Gazette of India,
Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R. ---(E), dated the -- October, 2022
(hereinafter referred to as the said person):-
(i) the said electronic commerce operator shall allow the supply of goods through it by the said person
only if enrolment number has been allotted on the common portal to the said person;
(ii) the said electronic commerce operator shall not allow any inter-state supply of goods through it by
the said person;
(iii) the said electronic commerce operator shall not collect tax at source under sub-section (1) of
Section 52 in respect of supply of goods made through it by the said person; and
(iv) the said electronic commerce operator shallfurnish the details of supplies of goods made through
it by the said person in the statement in FORM GSTR-8 electronically on the common portal.
[F. No.CBIC-20001/2/2022-GST]
(Rajeev Ranjan)
Under Secretary
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ANNEXURE C
[TO BE PUBLISHED IN THE GAZETTE OF INDIA, EXTRAORDINARY, PART II,
SECTION 3, SUB-SECTION (i)]
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
(DEPARTMENT OF REVENUE)
CENTRAL BOARD OF INDIRECT TAXES AND CUSTOMS
NOTIFICATION
No. --/2022- Central Tax
New Delhi, the --October, 2022
G.S.R. ......(E).— In exercise of the powers conferred by Section 148 of the Central Goods and
Services Tax Act, 2017 (12 of 2017) (hereafter in this notification referred to as the said Act), the
Central Government, on the recommendations of the Council, hereby notifiesthe electronic commerce
operator who is required to collect tax at source under Section 52 (hereinafter referred to as the said
electronic commerce operator) as the class of persons who shall, in addition to other compliances
under the said Act,also follow the following special procedure in respect of supply of goods made
through it by the persons paying tax under Section 10 of the said Act (hereinafter referred to as the
said person):-
(i) the said electronic commerce operator shall not allow any inter-state supply of goods through it by
the said person;
(ii) the said electronic commerce operator shall collect tax at source under sub-section (1) of Section
52 of the said Act in respect of supply of goods made through it by the said person and pay to the
Government as per provisions of sub-section (3) of Section 52 of the said Act; and
(iii) the said electronic commerce operator shall furnish the details of supplies of goods made through
it by the said person in the statement in FORM GSTR-8 electronically on the common portal.
[F. No.CBIC-20001/2/2022-GST]
(Rajeev Ranjan)
Under Secretary

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Agenda Item 7(viii): Amendments in the CGST Act, 2017
A. Amendment in second proviso to Section 16 of CGST Act, 2017 to align with GSTR-1/3B
In the 42nd GST Council meeting held in October 2020, it was recommended that the present
system of GSTR-1/3B return filing to be continued and the GST laws may be amended to make the
GSTR-1/3B return filing system as the default return filing system. Such amendments have been
carried out vide the Finance Act, 2022 and notified w.e.f. 01.10.2022.
2. However, the Law Committee in its meeting held on 26.08.2022 observed that 2nd and 3rd
provisos to Section 16(2) also require amendments in order to align with the GSTR-1/2B/3B return
filing system.
3. Therefore, the Law Committee has recommended that 2
nd and 3rd provisos to Section 16(2)
may be amended as below:
“Provided further that where a recipient fails to pay to the supplier of goods or services or
both, other than the supplies on which tax is payable on reverse charge basis, the amount
towards the value of supply along with tax payable thereon within a period of one hundred
and eighty days from the date of issue of invoice by the supplier, an amount equal to the input
tax credit availed by the recipient shall be added to his output tax liability paid by him, along
with interest thereon payable under Section 50, in such manner as may be prescribed:
Provided also that the recipient shall be entitled to avail of the credit of input tax on payment
made by him to the supplier of the amount towards the value of supply of goods or services or
both along with tax payable thereon.”
B. Amendment to Section 23 to provide overriding effect over Sections 22(1) & 24
4. Section 22 of the CGST Act, 2017 provides for persons liable for registration and Section 24
provides for compulsory registration in certain cases. On the other hand, Section 23 provides for
persons not liable for registration and exemption of specified categories of persons from obtaining
registration.
5. However, existing Section 23 does not have any clause overriding the registration requirement
imposed vide Section 24 and Section 2(1). Therefore, a doubt arises whether provisions of compulsory
registration under Section 24 prevail over the exemption under Section 23.
6. Accordingly, the Law Committee in its meeting held on 05.11.2022 recommended that to
avoid any conflict within the said provisions and to provide more clarity, Section 23 may be amended
retrospectively w.e.f. 01.07.2017 as under:
Section 23. Persons not liable for registration.-
(1) Notwithstanding anything to the contrary contained in sub-section (1) of Section 22 or Section
24, the The following persons shall not be liable to registration, namely:-
(a) any person engaged exclusively in the business of supplying goods or services or both that
are not liable to tax or wholly exempt from tax under this Act or under the Integrated Goods
and Services Tax Act;
(b) an agriculturist, to the extent of supply of produce out of cultivation of land.
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(2) The Government may, on the recommendations of the Council, by notification, specify the
category of persons who, notwithstanding anything to the contrary contained in sub-section (1) of
Section 22 or Section 24, but subject to such conditions and restrictions as may be specified in the
notification, may be exempted from obtaining registration under this Act.
C. Amendments in CGST Act, 2017 to restrict filing of returns / statements after
completion of specified time in view of data archival policy
7. GSTN has informed that GST System has completed more than five years and the huge data
size of all these years is putting an excessive load on the server and compromising performance.
Keeping massive data available online slows down the GST system applications and impacts return
filing, especially during peak filing days. Also, keeping data in big data format for either taxpayers or
tax officers involves considerable cost in terms of infrastructure requirements.
8. Considering this, GSTN proposed a data archival policy for the smooth functioning of the
GST Portal and also to provide superior experience to the taxpayers.
9. While deliberating on the proposed data archival policy for GST portal in its meetings held on
12.10.2022 and 05.11.2022, the Law Committee inter alia recommended that the maximum time limit
for filing returns / statements be fixed as three years beyond the due date of filing and accordingly,
CGST Act, 2017 may be amended as below:
(i) sub-section (5) may be inserted in Section 37 as below:
“(5) A registered person shall not be allowed to furnish the details of outward supplies under
sub-section (1) for a tax period after expiry of 3 years from the due date of furnishing the said
details:
Provided that the Government may, on the recommendations of the Council, by
notification, subject to such conditions and restrictions as may be specified therein, allow a
registered person or a class of registered persons to furnish the details of outward supplies
for a tax period under sub-section (1), even after the expiry of 3 years from the due date of
furnishing the said details.”
(ii) sub-section (11) may be inserted in Section 39 as below:
“(11) A registered person shall not be allowed to furnish a return for a tax period after expiry
of 3 years from the due date of furnishing the said return:
Provided that the Government may, on the recommendations of the Council, by
notification, subject to such conditions and restrictions as may be specified therein, allow a
registered person or a class of registered persons to furnish the return for a tax period, even
after the expiry of 3 years from the due date of furnishing the said return”
(iii) sub-section (2) may be inserted in Section 44 as below:
“(2) A registered person shall not be allowed to furnish an annual return under sub-section
(1) for a financial year after expiry of 3 years from the due date of furnishing the said annual
return:
Provided that the Government may, on the recommendations of the Council, by
notification, subject to such conditions and restrictions as may be specified therein, allow a
registered person or a class of registered persons to furnish an annual return for a financial
year under sub-section (1), even after the expiry of 3 years from the due date of furnishing the
said annual return.”
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(iv) sub-section (15) may be inserted in Section 52 as below:
“(15) An electronic commerce operator shall not be allowed to furnish a statement under subsection (4) for a month after expiry of 3 years from the due date of furnishing the said
statement:
Provided that the Government may, on the recommendations of the Council, by
notification, subject to such conditions and restrictions as may be specified therein, allow an
electronic commerce operator or a class of electronic commerce operators to furnish a
statement for a month under sub-section (4), even after the expiry of 3 years from the due date
of furnishing the said statement.”
D. Proposal for amendment of sub-section (6) of Section 54 of CGST/SGST Act, 2017
10. Sub-section (6) of Section 54 of the CGST/SGST Act,2017, provides for provisional refund
of ninety percent of the total amount claimed as refund on account of zero rated supplies of goods or
services or both excluding the amount of input tax credit provisionally accepted.
11. In this regard, it is worth mentioning that the concept of ‘provisionally accepted input tax
credit’ was related to the GSTR-1-2-3 system of return filing which has never been implemented.
However, in the absence of implementation of GSTR-1-2-3 system of return filing, it was clarified
vide para 2.0 of Circular no 24/24/2017 –GST dated 21.12.2017 that provisionally accepted input tax
credit would be sanctioned upon obtaining of an undertaking in relation to Sections 16(2)(c) and 42(2)
of the CGST/SGST Act, 2017. The same has also been reiterated in para 7 of Circular No.
125/44/2019 – GST dated 18.11.2019 issued by the CBIC. Therefore, in practice, no deduction on
account of provisionally accepted input tax credit is being made while granting provisional refund.
12. Further, Section 41 of the CGST/SGST Act, 2017 that provided for availing of eligible input
tax credit as self-assessed in the return on a provisional basis in terms of GSTR-1-2-3 system of return
filing has been amended in Finance Act, 2022 w.e.f. 01.10.2022 by doing away with the provision of
availment of input tax credit on a provisional basis.
13. In view of the above, as the provision relating to availment of input tax credit on provisional
basis has been done away with, it is proposed to omit the words “excluding the amount of input tax
credit provisionally accepted,” in sub-section (6) of Section 54 of the CGST Act as under:
(6) Notwithstanding anything contained in sub-section (5), the proper
officer may, in the case of any claim for refund on account of zero-rated
supply of goods or services or both made by registered persons, other than
such category of registered persons as may be notified by the Government
on the recommendations of the Council, refund on a provisional basis,
ninety per cent. of the total amount so claimed, excluding the amount of
input tax credit provisionally accepted, in such manner and subject to such
conditions, limitations and safeguards as may be prescribed and thereafter
make an order under sub-section (5) for final settlement of the refund claim
after due verification of documents furnished by the applicant.
14. The said proposal was placed before the Law Committee in its meeting held on 05.12.2022
wherein Law Committee has approved the amendment in sub-section (6) of Section 54 of the CGST
Act.
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15. Accordingly, the recommendations of the Law Committee in para 3, 6, 9 and 14 are placed
before the Council for deliberation and approval.
Agenda Item 7(ix): Amendment in the tables of GSTR-1 for reporting ECO Supplies made
under Section 9(5) of CGST Act and attracting TCS under Section 52 of CGST Act , 2017.
As per current notified format of FORM GSTR-1, the supplies made by a registered person
through e-commerce operators (ECOs) attracting TCS under Section 52 of CGST Act, 2017 are to be
reported in various tables of FORM GSTR-1 i.e. 4C, 5B, 7A(2), 7B(2), 10A(1) & 10B(1). The details
are to be provided invoice-wise and e-commerce operator-wise. However, these tables have not yet
been made functional on GST Portal.
2. Further, amendment has been made in FORM GSTR-3B vide Notification no. 14/2022-
Central Tax dated 05.07.2022, to provide that the taxable supplies made by the registered person
through electronic commerce operator, on which electronic commerce operator is required to pay tax
under sub-section (5) of Section 9 of CGST Act, 2017, are required to be reported by both the
registered persons as well as the E-commerce operator in their respective returns in FORMGSTR-3B.
However, there is no separate table in FORM GSTR-1 to furnish the aforementioned details.
3. In view of this, the issue was deliberated by the Law Committee in its meeting held on
18.11.2021, 29.12.2021 and 05.11.2022. The Law Committee has recommended certain changes in
FORM GSTR-1(enclosed as Annexure to this agenda note). A summary of the existing form and the
proposed changes is as below:
S.
No.
Table
No.
Existing Proposed Rationale of the change
1 2 3 4 5
1. 3 Aggregate turnover
in preceding year and
April-June, 2017.
Aggregate turnover may
be replaced with ARN and
date of ARN (ARN &
ARN date will be shown
in GSTR-1 pdf after filing
of GSTR-1)
The requirement was for
the first year of
implementation of GST. It
can be replaced with ARN
and date of ARN. AATO
is being computed
separately.
2. 4A Supplies other than
those (i) attracting
reverse charge and
(ii) supplies made
through e-commerce
Supplies other than those
attracting reverse charge
[including supplies made
through e-commerce
operator attracting TCS]
The supplies made through
e-commerce operators
attracting TCS will be
captured in the proposed
new table 14.
(Label changes only)
3. 4C Supplies made
through e-commerce
operator attracting
TCS (operator wise,
rate wise)
This table may be deleted. The supplies made
through e-commerce
operators attracting TCS
will be captured in the
proposed new table 14.
4. 5A Outward supplies
(including other than
supplies made
Outward supplies
(including supplies made
through e-commerce
Consequent change due to
omission of e-commerce
table 5B.
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S.
No.
Table
No.
Existing Proposed Rationale of the change
1 2 3 4 5
through e-commerce
operator, rate wise)
operator, rate wise) (Label changes only)
5. 5B Supplies made
through e-commerce
operator attracting
TCS (operator wise,
rate wise)
This table may be deleted. The supplies made through
e-commerce operators
attracting TCS will be
captured in the proposed
new table 14.
6. 7A(2) 7A (2). Out of
supplies mentioned at
7A(1), value of
supplies made
through e-Commerce
Operators attracting
TCS(operator wise,
rate wise)
This table may be deleted. The supplies made through
e-commerce operators
attracting TCS will be
captured in the proposed
new table 14.
7. 7B(2) 7B (2). Out of the
supplies mentioned
in 7B (1), the
supplies made
through eCommerce
Operators (operator
wise, rate wise)
This table may be deleted. The supplies made through
e-commerce operators
attracting TCS will be
captured in the proposed
new table 14.
8. 9 Amendments to
taxable outward
supply details
furnished in returns
for earlier tax periods
in Table 4, 5 and 6
[including debit notes
and, credit notes,
refund vouchers
issued during current
period and
amendments thereof]
Amendments to taxable
outward supply details
furnished in returns for
earlier tax periods in Table
4, 5 and 6 [including debit
and credit notes issued
during current period and
amendments thereof]
Advance is reported in
table 11. Refund
voucherscan also be
included in table 11 by
reporting the values as netof.
(Label changes only)
9. 10A(1) Out of supplies
mentioned at 10A,
value of supplies
made through eCommerce Operators
attracting TCS
This table may be deleted. The supplies made through
e-commerce operators
attracting TCS will be
captured in the proposed
new table 14.
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S.
No.
Table
No.
Existing Proposed Rationale of the change
1 2 3 4 5
10. 10B(1) Out of supplies
mentioned at 10B,
value of supplies
made through eCommerce Operators
attracting TCS
This table may be deleted. The supplies made through
e-commerce operators
attracting TCS will be
captured in the proposed
new table 14.
11. 11
Consolidated
Statement of
Advances
Received/Advance
adjusted in the
current tax
period/Amendments
of information
furnished in earlier
tax period
Consolidated Statement
of Advances
Received/Advance
adjusted in the current
tax period/ Amendments
of information furnished
in earlier tax period (Net
of refund vouchers, if
any)
Values can be reported as
net of refund vouchers.
(Label changes only)
12. 14, 14A,
15, 15 A
- Insertion of new tables to
capture the details of the
supplies made through ecommerce operators
attracting TCS as well as
under Section 9(5).
Supplies made through ecommerce operators
attracting TCS will be
reported by the supplier
here. Also, supplies u/s
9(5), on which ECO is
required to pay tax,were
not being reported
separately in GSTR-1,
either by the supplier or
the ECO. Such supplies
shall now be required to be
reported in GSTR-1 by
both the supplier as well
ECO in these tables.In
resepct of supplies made
u/s 9(5), ECOs shall
separately provide details
for registered and
unregistered suppliers, as
well as registered and
unregistered recipients.
4. Accordingly, the proposed changes in FORM GSTR-1 shown in Annexure to the agenda note
and as detailed in para 3 above, are placed for deliberation and approval of the Council.
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ANNEXURE
FORM GSTR-1
[See Rule (59(1)]
Details of outward supplies of goods or services
Financial Year
Month Tax period
1. GSTIN
2. (a) Legal name of the registered person
(b) Trade name, if any
3.
(a)
Aggregate Turnover in the preceding
Financial Year
ARN
(b) Aggregate Turnover - April to June, 2017
Date of ARN
4. Taxable outward supplies made to registered persons (including UIN-holders) other than supplies
covered by Table 6
(Amount in Rs. for all Tables)
GSTIN
/UIN
Invoice details Rate Taxable
value
Amount Place of
supply
(Name of
State / UT)
No. Date Value Integrated
tax
Central
tax
State
/UT tax
Cess
1 2 3 4 5 6 7 8 9 10 11
4A. Supplies other than those (i)attracting reverse charge and (ii) supplies made through e-commerce operator
[including supplies made through e-commerce operator attracting TCS]
4B. Supplies attracting tax on reverse charge basis
4C. Supplies made through e-commerce operator attracting TCS (operator wise, rate wise)
GSTIN of e-commerce operator
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5. Taxable outward inter-state supplies to un-registered persons where the invoice value is more than
Rs 2.5 lakh
Place of
Supply
(State/UT)
Invoice details Rate Taxable
Value
Amount
No. Date Value Integrated Tax Cess
1 2 3 4 5 6 7 8
5A.Outward supplies (including other than supplies made through e-commerce operator attracting
TCS, rate wise)
5B. Supplies made through e-commerce operator attracting TCS (operator wise, rate wise)
GSTIN of e-commerce operator
6. Zero rated supplies and Deemed Exports
GSTIN
of
recipient
Invoice details Shipping
bill/ Bill
of export
Integrated Tax Central Tax State / UT Tax Cess
No. Date Value No. Date Rate Taxable
value
Am
t.
Rate Taxable
value
Amt. Rate Taxable
value
Amt.
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
6A. Exports
6B. Supplies made to SEZ unit or SEZ Developer
6C. Deemed exports
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7. Taxable supplies (Net of debit notes and credit notes) to unregistered persons other than the
supplies covered in Table 5
Rate of tax Total Taxable value Amount
Integrated Central State Tax/UT
Tax
Cess
1 2 3 4 5 6
7A. Intra-State supplies
7A (1).Consolidated rate wise outward supplies [including supplies made through e-commerce
operator attracting TCS]

7A (2). Out of supplies mentioned at 7A(1), value of supplies made through e-Commerce
Operators attracting TCS(operator wise, rate wise)
GSTIN of e-commerce operator
7B. Inter-state Supplies where invoice value is upto Rs 2.5 Lakh [Rate wise]–Consolidated rate
wise outward supplies [including supplies made through e-commerce operator attracting TCS]
7B (1).Place of Supply (Name of
State)
7B (2). Out of the supplies mentioned in 7B (1), the supplies made through e-Commerce
Operators (operator wise, rate wise)
GSTIN of e-commerce operator
8. Nil rated, exempted and non GST outward supplies
Description Nil Rated
Supplies
Exempted
(Other than Nil
rated/non-GST
Non-GST
supplies
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supply)
1 2 3 4
8A. Inter-state supplies to registered persons
8B. Intra- State supplies to registered persons
8C. Inter-state supplies to unregistered persons
8D. Intra-State supplies to unregistered persons
9. Amendments to taxable outward supply details furnished in returns for earlier tax periods in Table
4, 5 and 6 [including debit notes and, credit notes, refund vouchers issued during current period and
amendments thereof]
Details of
original
document
Revised details of document or
details of original Debit/Credit
Notes or refund vouchers
Rate Taxa
ble
Valu
e
Amount Plac
e of
supp
ly
GSTI
N
In
v.
N
o.
In
v.
D
at
e
GST
IN
Invoice
Docum
ent
Shippi
ng bill
Val
u
e
Integrat
ed Tax
Cent
ral
Tax
Stat
e
/UT
Tax
C
es
s
N
o
Dat
e
N
o.
D
at
e
1 2 3 4 5 6 7 8 9 10 11 12 13 14 1
5
16
9A. Amendment of If the invoice/Shipping bill details furnished earlier were incorrect
9B. Debit Notes/Credit Notes/Refund voucher [Original]
9C. Debit Notes/Credit Notes/Refund voucher [Amendedamendments thereof]
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10. Amendments to taxable outward supplies to unregistered persons furnished in returns for earlier
tax periods in Table 7
Rate of tax Total Taxable value Amount
Integrated Central State/UT
Tax
Cess
1 2 3 4 5 6
Tax period for which the details are being
revised
<Month/Quarter>
10A. Intra-State Supplies [including supplies made through e-commerce operator attracting TCS] [Rate
wise]
10A (1). Out of supplies mentioned at 10A, value of supplies made through e-Commerce Operators
attracting
TCS (operator wise, rate wise)
GSTIN of e-commerce operator
10B. Inter-state Supplies [including supplies made through e-commerce operator attracting TCS] [Rate
wise]
Place of Supply (Name of State)
10B (1). Out of supplies mentioned at 10B, value of supplies made through e-Commerce Operators
attracting
TCS (operator wise, rate wise)
GSTIN of e-commerce operator
11. Consolidated Statement of Advances Received/Advance adjusted in the current tax period/
Amendments of information furnished in earlier tax period (Net of refund vouchers, if any)
Rate Gross Advance
Received/adjusted
Place of
supply (Name of
State / UT)
Amount
Integrated
tax
Centra
l
Tax
St
at
e/
U
Cess
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T
ta
x
1 2 3 4 5 6 7
I Information for the current tax period
11A. Advance amount received in the tax period for which invoice has not been issued (tax amount
to be added to output tax liability)
11A (1). Intra-State supplies(Rate Wise)
11A (2). Inter-state Supplies(Rate Wise)
11B. Advance amount received in earlier tax period and adjusted against the supplies being shown in
this tax period in Table Nos. 4, 5, 6 and 7
11B (1). Intra-State Supplies (Rate Wise)
11B (2). Inter-state Supplies(Rate Wise)
II Amendment of information furnished in Table No. 11[1] in GSTR-1 statement for earlier tax
periods[Furnish revised information]
Mon
th
Amendment relating to information
furnished in S. No.(select)
11A(
1) 11A(
2)
11B
(1)
11B
(2)
HSN-wise summary of outward supplies
Sr.
No.
HSN Description
(Optionalif
HSN is
provided)
UQC Total
Quantity
Rate
of
tax
Total
Taxable
Value
Amount
Integrated
Tax
Central
Tax
State/UT
Tax
Cess
1 2 3 4 5 6 7 8 9 10 11
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13. Documents issued during the tax period
Sr.
No.
Nature of document Sr. No. Total
number
Cancelled Net issued
From To
1 2 3 4 5 6 7
1 Invoices for outward supply
2 Invoices for inward supply from
unregistered person
3 Revised Invoice
4 Debit Note
5 Credit Note
6 Receipt voucher
7 Payment Voucher
8 Refund voucher
9 Delivery Challan for job work
10 Delivery Challan for supply on
approval
11 Delivery Challan in case of liquid
gas
12 Delivery Challan in cases other
than by way of supply (excluding
at S no.
9 to 11)
14. Details of the supplies made through e-commerce operators on which e-commerce operators
are liable to collect tax under Section 52 or liable to pay tax u/s 9(5) [Supplier to report]
Nature of supply GSTIN of
e-commerce
operator
Net
value of
supplies
Tax amount
Integrated
tax
Central
tax
State /
UT tax
Cess
1 2 3 4 5 6 7
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(a) Supplies on which
e-commerce operator is
liable to collect tax u/s
52
(b) Supplies on which
e-commerce operator is
liable to pay tax u/s 9(5)
. Amendment to details of the supplies made through e-commerce operators on which ecommerce operators are liable to collect tax under Section 52 or liable to pay tax u/s 9(5)
[Supplier to report]
Nature of
supply
Original details Revised
details
Net
value of
supplies
Tax amount
Month /
Quarter
GSTIN of
e-commerce
operator
GSTIN of
e-commerce
operator
Integrated
tax
Central
tax
State /
UT tax
Cess
1 2 3 4 5 6 7 8 9
(a) Supplies on
which ecommerce
operator is
liable to collect
tax u/s 52
(b) Supplies on
which ecommerce
operator is
liable to pay
tax u/s 9(5)
15. Details of the supplies made through e-commerce operators on which e-commerce operator
is liable to pay tax u/s 9(5) [e-commerce operator to report]
Type of
supplier
Type of
recipient
GSTIN
of
supplier
GSTIN
of
recipient
Document
no.
Document
date
Rate Value
of
supplies
made
Tax amount Place
of
supply Integrated
tax
Central
tax
State
/
UT
Cess
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tax
1 2 3 4 5 6 7 8 9 10 11 12 13
Registered Registered
Unregistered
Unregistered Registered
Unregistered
15A (I). Amendment to details of the supplies made through e-commerce operators on which ecommerce operator is liable to pay tax u/s 9(5) [e-commerce operator to report, for registered
recipients]
Type of
supplier
Original details Revised details Value
of
supplies
made
Tax amount Place
of
supply GSTIN
of
supplier
GSTIN of
recipient
Doc.
no.
Doc.
date
GSTIN
of
supplier
GSTIN of
recipient
Doc.
no.
Doc.
date
Rate
Integrated
tax
Central
tax
State
/
UT
tax
Cess
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
Registered
Unregistered
15A (II). Amendment to details of the supplies made through e-commerce operators on which ecommerce operator is liable to pay tax u/s 9(5) [e-commerce operator to report, for unregistered
recipients]
Type of
supplier
Original details Revised
details
Rate Value
of
supplies
made
Tax amount Place
of
supply
GSTIN
of
supplier
Tax
period
GSTIN
of
supplier
Integrated
tax
Central
tax
State
/
UT
tax
Cess
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1 2 3 4 5 6 7 8 9 10 11
Registered
Unregistered
16. Verification
I hereby solemnly affirm and declare that the information given herein above is true and correct to the
best of my knowledge and belief and nothing has been concealed there from and in case of any
reduction in output tax liability the benefit thereof has been/will be passed on to the recipient of
supply.
Signature
Place Name of Authorised Signatory
Date Designation /Status
A. General Instructions
1. Terms used:
a. GSTIN: Goods and Services Tax Identification Number
b. UIN: Unique Identity Number
c. UQC: Unit Quantity Code
d. HSN: Harmonized System of Nomenclature
e. POS: Place of Supply (Respective State)
f. TCS: Tax collection at source by e-commerce operator
g. SEZ: Special Economic Zone
h. ECO: E-commerce operator
i. DTA: Domestic Tariff Area
j. B to B: Supplies from one registered person to another registered person
k. B to C: Supplies from registered person to unregistered person
2. Quarterly taxpayers filing invoice details through GSTR-1/IFF for the first two month(s) of the
quarter shall not repeat such details while filing GSTR-1 of the quarter.
B.Table specific instructionsSr. No. Table No. Instructions
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1 2 3
1. 4A i. Supplies made to registered persons includingsupplies made through ecommerce operator attracting TCS u/s 52, but excluding supplies
attracting tax on reverse charge basis, shall be reported.
ii. Supplies made u/s 9(5) for which e-commerce operator is liable to pay
tax shall not be reported in this table.
iii. The supplies made by SEZ on cover of a bill of entry shall not be
reported by SEZ unit /developer.
2. 4B Supplies made to registered persons, attracting tax on reverse charge basis, shall
be reported. Supplies made u/s 9(5) for which e-commerce operator is liable to
pay tax shall not be reported in this table.
3. 5 Inter-state supplies made to unregistered persons having invoice value more than
Rs. 2.50 lakh shall be reported.
4. 6A Exports with or without IGST shall be reported. Shipping bill details, if
applicable, can be provided later through table 9 if such details are not available
at the time of filing the statement.
5. 6B Supplies made to SEZ units or SEZ developers, with or without IGST, shall be
reported.
6. 6C Deemed export supplies shall be reported.
7. 7 Supplies made to unregistered persons other than those reported in table 5 shall
be reported. Values shall be net of credit and debit notes.
8. 8 Supplies having no tax liability (Nil rated, exempted and non-GST supplies)
shall be reported. Supplies made through E-commerce Operator under Section
9(5) shall not be included under exempted supplies of supplier.
9. 9A Amendment of values reported in table 4A, 4B, 5, 6A, 6B and 6C shall be
reported.
10. 9B Credit and debit notes issued during the period shall be reported.
11. 9C Amendment of credit and debit notes reported in table 9B shall be reported.
12. 10 Amendment of unregistered supplies reported in table 7 shall be reported.
13. 11(I)A Advances received shall be reported. The values shall be net of refund vouchers,
if any.
14. 11(I)B Advances adjusted during the period shall be reported.
15. 11(II) Amendment to advances received or adjusted shall be reported.
16. 12 HSN details as per notifications issued by Government from time to time shall
be reported.
17. 13 Details of the documents issued during the period shall be reported.
18. 14(a) Details of the supplies reported in any table from 4 to 10, made through ecommerce operator on which ECO is liable to collect tax at source (TCS) under
Section 52,shall be reported by the supplier.
19. 14(b) Details of supplies made through ECO, on which ECO is liable to pay tax u/s
9(5), shall be reported by the supplier. Tax on such supplies shall be paid by the
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Sr. No. Table No. Instructions
1 2 3
ECO and not by the supplier.
20. 14A(a) Amendment to supplies reported in table 14(a) in earlier tax period shall be
reported.
21. 14A(b) Amendment to supplies reported in table 14(b) in earlier tax period shall be
reported.
22. 15 (i) ECO shall report details of the supplies made through him/ her on which
he/she is liable to pay tax u/s 9(5).
(ii) GSTIN of supplier and recipient, if registered, shall be reported.
(iii) Details of the documents issued by ECO shall be reported, if recipient is
registered.
23. 15A(I) Amendment to the details reported in table 15 in earlier tax periods in respect of
registered recipients shall be reported.
24. 15A(II) Amendment to the details reported in table 15 in earlier tax periods in respect of
unregistered recipients shall be reported.
Instructions–
1. Terms used:
l. GSTIN: Goods and Services Tax Identification Number
m. UIN: Unique Identity Number
n. UQC: Unit Quantity Code
o. HSN: Harmonized System of Nomenclature
p. POS: Place of Supply (Respective State)
q. B to B: From one registered person to another registered person
r. B to C: From registered person to unregistered person
2. The details in GSTR-1 should be furnished by 10thof the month
succeeding the relevant tax period.
3. Aggregate turnover of the taxpayer for the immediate preceding financial
year and first quarter of the current financial year shall be reported in the
preliminary information in Table 3. This information would be required
to be submitted by the taxpayers only in the first year. Quarterly turnover
information shall not be captured in subsequent returns. Aggregate
turnover shall be auto-populated in subsequent years.
4. Invoice-level information pertaining to the tax period should be reported
for all supplies as under:
(i) For all B to B supplies (whether inter-state or intra-State), invoice
level details, rate-wise, should be uploaded in Table 4, including
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commerce operator. Outwards supply information in these categories
are to be furnished separately in the Table.
(ii) For all inter-state B to C supplies, where invoice value is more than
Rs. 2,50,000/- (B to C Large) invoice level details, rate-wise, should
be uploaded in Table 5; and
(iii) For all B to C supplies (whether inter-state or intra-State) where
invoice value is up to Rs. 2,50,000/- State-wise summary of supplies,
rate-wise, should be uploaded in Table 7.
5. Table 4 capturing information relating to B to B supplies should:
(i)be captured in:
a. Table 4A for supplies relating to other than reverse charge/ made
through e-commerce operator, rate-wise;
b. Table 4B for supplies attracting reverse charge, rate-wise; and
c. Table 4C relating to supplies effected through e-commerce operator
attracting collection of tax at source under Section 52 of the Act, operator
wise and rate-wise.
(ii)Capture Place of Supply (PoS) only if the same is different from the location of the
recipient.
6. Table 5 to capture information of B to C Large invoices and other
information shall be similar to Table 4. The Place of Supply (PoS)
column is mandatory in this table.
7. Table 6 to capture information related to:
(i) Exports out of India
(ii) Supplies to SEZ unit/ and SEZ developer
(iii) Deemed Exports
8. Table 6 needs to capture information about shipping bill and its date.
However, if the shipping bill details are not available, Table 6 will still
accept the information. The same can be updated through submission of
information in relation to amendment Table 9 in the tax period in which
the details are available but before claiming any refund / rebate related to
the said invoice. The detail of Shipping Bill shall be furnished in 13
digits capturing port code (six digits) followed by number of shipping
bill.
9. Any supply made by SEZ to DTA, without the cover of a bill of entry is
required to be reported by SEZ unit in GSTR-1. The supplies made by
SEZ on cover of a bill of entry shall be reported by DTA unit in its
GSTR-2 as imports in GSTR-2. The liability for payment of IGST in
respect of supply of services would, be created from this Table..
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10. In case of export transactions, GSTIN of recipient will not be there.
Hence it will remain blank.
11. Export transactions effected without payment of IGST (under Bond/
Letter of Undertaking (LUT)) needs to be reported under ―0‖ tax amount
heading in Table 6A and 6B.
12. Table 7 to capture information in respect of taxable supply of:
(i) B to C supplies (whether inter-state or intra-State)with invoice value
uptoRs 2,50,000;
(ii) Taxable value net of debit/ credit note raised in a particular tax period
and information pertaining to previous tax periods which was not
reported earlier, shall be reported in Table 10. Negative value can be
mentioned in this table, if required;
(iii) Transactions effected through e-commerce operator attracting
collection of tax at source under Section 52 of the Act to be provided
operator wise and rate wise;
(iv) Table 7A (1) to capture gross intra-State supplies, rate-wise,
including supplies made through e-commerce operator attracting
collection of tax at source and Table 7A (2) to capture supplies made
through e-commerce operator attracting collection of tax at source out
of gross supplies reported in Table 7A (1);
(v) Table 7B (1) to capture gross inter-state supplies including supplies
made through e-commerce operator attracting collection of tax at
source and Table 7B (2) to capture supplies made through ecommerce operator attracting collection of tax at source out of gross
supplies reported in Table 7B (1); and
(vi) Table 7B to capture information State wise and rate wise.
13. Table 9 to capture information of:
(i) Amendments of B to B supplies reported in Table 4, B to C Large supplies
reported in Table 5 and Supplies involving exports/ SEZ unit or SEZ
developer/ deemed exports reported in Table 6;
(ii) Information to be captured rate-wise;
(iii) It also captures original information of debit / credit note issued and
amendment to it reported in earlier tax periods; While furnishing information
the original debit note/credit note, the details of invoice shall be mentioned in
the first three columns, While furnishing revision of a debit note/credit note,
the details of original debit note/credit note shall be mentioned in the first three
columns of this Table,
(iv) Place of Supply (PoS) only if the same is different from the location of the
recipient;
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(v) Any debit/ credit note pertaining to invoices issued before the appointed day
under the existing law also to be reported in this table; and
(vi) Shipping bill to be provided only in case of exports transactions amendment.
14. Table 10 is similar to Table 9 but captures amendment information
related to B to C supplies and reported in Table 7.
15. Table 11A captures information related to advances received, rate-wise,
in the tax period and tax to be paid thereon along with the respective PoS.
It also includes information in Table 11B for adjustment of tax paid on
advance received and reported in earlier tax periods against invoices
issued in the current tax period. The details of information relating to
advances would be submitted only if the invoice has not been issued in
the same tax period in which the advance was received.
16. Summary of supplies effected against a particular HSN code to be
reported only in summary table. It will be optional for taxpayers having
annual turnover uptoRs. 1.50 Cr but they need to provide information
about description of goods.
17. It will be mandatory to report HSN code at two digits level for taxpayers
having annual turnover in the preceding year above Rs. 1.50 Cr but
uptoRs. 5.00 Cr and at four digits level for taxpayers having annual
turnover above Rs.
5.00 Cr.
18. It will be mandatory to specify the number of digits of HSN code for goods
or services that a class of registered persons shall be required to mention as
may be specified in the notification issued from time to time under proviso to
Rule 46 of the said Rules.

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Agenda Item 7(x): Retrospective applicability of para 7, 8(a) and 8(b) of Schedule III of the
CGST Act, 2017
1. Taxability of supply of goods from a place in the non-taxable territory to another place in the
non-taxable territory without such goods entering into India:
1.1 Para 7 of Schedule III to Central Goods and Services Tax Act, 2017 (CGST Act) provides that
supply of goods from a place in the non-taxable territory to another place in the non-taxable territory
without such goods entering into India, is an activity which is to be treated as neither supply of goods
or services. The said para was inserted in Schedule III of CGST Act vide the Central Goods and
Services Tax (Amendment) Act, 2018 and was made applicable vide Notification No. 02/2019-Central
Tax dated 29.01.2019 with effect from 01.02.2019.
1.2 The said notification was not made applicable retrospectively from 01.07.2017 which implies
that before the said amendment of the CGST Act, such transactions were subject to GST. Moreover, as
per sub-section (5) of Section 7 of the Integrated Goods and Services Tax Act, 2017, the supply of
goods or services or both, when the supplier is located in India and the place of supply is outside India
shall be treated to be a supply of goods or services or both in the course of inter-state trade or
commerce. However, the taxpayers are taking the plea that the insertion of the para 7 in Schedule III of
CGST Act is only for clarifying that supply of goods from a place in the non-taxable territory to
another place in the non-taxable territory without such goods entering into India is neither supply of
goods nor supply of services, and therefore, may be treated similarly before 01.02.2019 also.
2. Taxability of High Sea Sales:
2.1 High Sea Sales (hereinafter referred to as, “HSS”) refers to the sale of the goods that takes
place on the high seas when the goods are still en-route to India and have not entered into the territorial
waters of the country.
2.2 It is pertinent to note that vide CGST (Amendment) Act, 2018, clause (b) of para 8 was
inserted in Schedule III of the CGST Act with effect from 01.02.2019, to provide that “Supply of
goods by the consignee to any other person, by endorsement of 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” will be treated neither as supply of goods nor as supply of services”. Thus, with
the insertion of the said entry in schedule III of the CGST Act, the said supply has been taken outside
the ambit of GST. However, it is significant to note that as the said amendment has been brought into
effect only from 01.02.2019, thereby implying that before the said amendment, such supply was
taxable under GST.
2.3 Many taxpayers engaged in HSS transactions may not have paid GST on the said transactions
during the period 01.07.2017 to 31.01.2019 claiming the said transactions as non-taxable on account of
the presumption that since the sale of the goods did not take place within the territory of India, the
same are non-taxable. In such cases, the taxpayers are taking the plea of Circular No.33/2017- Customs
dated 01.08.2017 which states that IGST on high sea sales transactions of imported goods shall be
levied and collected only at the time of importation of goods. The relevant portion of the said Circular
is reproduced below:
“IGST on high sea sale (s) transactions of imported goods, whether one or multiple, shall be levied
and collected only at the time of importation i.e. when the import declarations are filed before the
Customs authorities for the customs clearance purposes for the first time. Further, value addition
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accruing in each such high sea sale shall form part of the value on which IGST is collected at the time
of clearance.”
It is pertinent to note that the said Circular was issued as per the decision of the GST Council in its 18th
meeting dated 30.07.2017. The Council deliberated on the “Agenda Item 3(viii) - High Sea Sales” in
the said meeting and decided the following :
"High Sea Sales" is a terminology used in common parlance for "Sales in the course of import." In
such cases, sale taking place by transfer of documents of title to goods before goods are cleared from
Customs, is a sale in the course of import. There is need to bring clarity on the issue of levy of IGST,
when such sale (supply in GST parlance) takes place in high sea and a second-time levy of IGST when
goods are cleared through Customs. It is proposed to clarify by way of a Circular that when goods
sold on high sea sales basis are imported the first time, lGST would be levied at the time of importation
and the value addition due to high sea sales shall be part of the value on which IGST is collected. The
Council agreed to this proposal.
2.4 Taxpayers are also taking the view that the amendment made in Schedule III with effect from
01.02.2019 needs to be considered clarificatory, and should be applicable with effect from 01.07.2017.
3. Taxability of supply of warehoused goods to any person before clearance for home
consumption
3.1 Some taxpayers are engaged in supply of warehoused goods to a person before clearance for
home consumption and treat such transactions as non-taxable. It is pertinent to mention here that Para
8(a) of Schedule III to CGST Act provides that the supply of warehoused goods to any person before
clearance for home consumption, is an activity which is to be treated as neither supply of goods or
services. The said para was inserted vide the Central Goods and Services Tax (Amendment) Act, 2018
and was made applicable vide Notification No. 02/2019-Central Tax dated 29.01.2019 with effect from
01.02.2019.
3.2 In such cases, the taxpayers are taking the plea that the insertion of the para 8(a) in Schedule
III of CGST Act is only for clarifying that supply of warehoused goods to a person before clearance for
home consumption is neither supply of goods nor supply of services, and therefore, may be treated
similarly before 01.02.2019 also. However, the said notification was not made applicable
retrospectively from 01.07.2017 which implies that before the said amendment of the CGST Act,
supply of warehoused goods to any person before clearance for home consumption was subject to
GST.
4. Considering the issues discussed in paras above, to avoid unnecessary litigation and doubts,
there is a need to provide clarity in the GST law with respect of treatment of the transactions covered
by Para 7, 8(a) and 8(b) of Schedule III of CGST Act for the period from 01.07.2017 to 31.01.2019,
i.e. before the said paras were inserted in Schedule III of CGST Act.
5. The abovementioned amendments in Schedule III of CGST Act were carried out in accordance
with the decision taken in the 28th GST Council Meeting. The relevant portion of the Agenda Note
“Agenda Item 6(i): Proposals for amendments in the CGST Act, 2017, IGST Act, 2017, UTGST Act,
2017 and GST (Compensation to States) Act, 2017” and signed minutes of the said meeting are
attached as Annexure-A and Annexure-B respectively.
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6. Law Committee recommendations
Law Committee deliberated on these issues in its meeting dated 12.10.2022 and 23.11.2022
and recommended the following:
a. Para 7, Para 8(a) and Para 8(b) in Schedule III inserted vide the Central Goods and Services Tax
(Amendment) Act, 2018 should have retrospective effect w.e.f. 01.07.2017.
b. However, in cases where any tax has already been paid in respect of transactions/supplies covered
under Para 7, 8(a) and 8(b) of Schedule III of CGST Act during the period 01.07.2017 to 31.01.2019,
no refund shall be available in respect of such tax paid.
7. Accordingly, the recommendations of the Law Committee as detailed in para 6 above, are
placed before the GST Council for deliberation and approval.

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Annexure-A
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Annexure-B
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Agenda Item 7(xi): Mechanism to deal with differences in liabilities between GSTR-1 and
GSTR-3B, along with draft rules and proposed FORM DRC-01B for implementing the same.
The Law Committee in its meetings held on 05.11.2022, 23.11.2022 and 05.12.2022
deliberated upon ways to safeguard revenue by finding suitable manner of handling and controlling
the difference in liabilities reported between FORM GSTR-1 and FORM GSTR-3B by the
taxpayers. Law Committee felt that considering large number of taxpayers involved, such a
mechanism should be based on system based identification of the taxpayers based on certain approved
risk criteria and a procedure of auto-compliance on the part of the taxpayers to explain/ take remedial
action in respect of such difference.
2. The Law Committee opined that where the tax liability as per FORM GSTR-1 for a tax
period exceeds the tax liability as per FORM GSTR-3B for that period by more than a certain extent,
the registered person maybe intimated on the portal of such difference and be directed to either pay the
differential tax liability along with interest, or explain the difference. Unless he either deposits the
amount specified in the said intimation or furnishes a reply explaining the reasons for any amount
remaining unpaid, such a person may not be allowed to furnish the details of outward supplies in
FORM GSTR-1 or using invoice furnishing facility for a subsequent tax period. However, in cases
where the taxpayer deposits the said differential tax liability only partly, with or without an
explanation for such short payment, a separate procedure may be formulated for examination of such
cases by the proper officer, and for further action for recovery of the unpaid amount in accordance
with the provisions of Section 79, to the extent no satisfactory explanation has been provided by the
taxpayer for such differential unpaid amount.
3. To implement the said approach, the Law Committee recommended as follows:
(i) Insertion of new Rule 88C to communicate the difference between FORM GSTR-1 and
FORM GSTR-3B and to direct payment of the differential or explain the difference as below:
88C. Manner of dealing with difference in liability reported in statement of outward
supplies and that reported in return.-
(1) Where the tax payable by a registered person, in accordance with the statement of
outward supplies furnished by him in FORM GSTR-1 or using the Invoice Furnishing
Facility in respect of a tax period, exceeds the amount of tax payable by such person in
accordance with the return for that period furnished by him in FORM GSTR-3B by
such amount and such percentage, as may be recommended by the Council, the said
registered person shall be intimated of such difference in Part A of FORM GST DRC01B, electronically on the common portal, and a copy of such intimation shall also be
sent to his e-mail address provided at the time of registration or as amended from time
to time, highlighting the said difference and directing him to—
(a) pay the differential tax liability, along with interest under section 50,
through FORM GST DRC-03, or
(b) explain the aforesaid difference in tax payable on the common portal,
within a period of seven days.
(2) The registered person referred to sub-rule (1) shall, upon receipt of the intimation
referred to in that sub-rule, either,
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(a) pay the amount of the differential tax liability, as specified in Part A of
FORM GST DRC-01B, fully or partially, along with interest under section
50, through FORM GST DRC-03 and furnish the details thereof in Part B of
FORM GST DRC-01B electronically on the common portal, or
(b) furnish a reply electronically on the common portal, incorporating
reasons in respect of that part of the differential tax liability that has
remained unpaid, if any, in Part B of FORM GST DRC-01B,
within the period specified in the said sub-rule.
(3) Where any amount specified in the intimation referred to in sub-rule (1) remains
unpaid within the period specified in that sub-rule and where no explanation or
reason is furnished by the registered person in default or where the explanation or
reason furnished by such person is not found to be acceptable by the proper officer,
the said amount shall be recoverable in accordance with the provisions of Section 79.
(ii) Insertion of a new clause (d) in sub-rule (6) of Rule 59 to enable blocking of FORM
GSTR-1 for a subsequent tax period unless the taxpayer has deposited the amount specified in
the intimation or has furnished a reply explaining the reasons for any amount remaining
unpaid, as below:
(d) a registered person, to whom an intimation has been issued on the common portal
under the provisions of sub-rule (1) of Rule 88C in respect of a tax period, shall not
be allowed to furnish the details of outward supplies of goods or services or both
under Section 37, in FORM GSTR-1 or using the invoice furnishing facility for a
subsequent tax period, unless he has either deposited the amount specified in the said
intimation or has furnished a reply explaining the reasons for any amount remaining
unpaid, as required under the provisions of sub-rule (2) of Rule 88C.
(iii) FORM GST DRC-01B may be inserted as required under Rule 88C(1) (enclosed as
Annexure to this agenda note).
(iv) To begin with, difference between liability declared in FORM GSTR-1 & that declared
in FORM GSTR-3B of more than 20% as well as more than Rs. 25 lakhs may be taken for
the purpose of intimation under proposed Rule 88C(1).
(v)Law Committee to formulate a separate procedure for examination of such cases by the
proper officer, where the taxpayer deposits the differential tax liability only partly, with or
without an explanation for such short payment, and for further action for recovery of the
unpaid amount in accordance with the provisions of Section 79, to the extent no satisfactory
explanation has been provided by the taxpayer for such differential unpaid amount.
4. Accordingly, the recommendations of the Law Committee in para 3 are placed before
the Council for deliberation and approval.

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Annexure
FORM GST DRC-01B
[See Rule 88C]
PART-A (System Generated)
Intimation of difference in liability reported in statement of outward supplies and that reported
in return
Ref No: Date:
GSTIN:
Legal Name:
1. It is noticed that the tax payable by you, in accordance with the statement of outward supplies
furnished by you in FORM GSTR-1 or using the invoice furnishing facility, exceeds the amount of
tax paid by you in accordance with the return furnished in FORM GSTR-3Bfor the
period<from><to>by an amount of Rs. …………… The details thereof are as follows:
Form Type
Liability declared/ paid (in Rs.)
IGST CGST SGST/UTGST Cess Total
FORM GSTR-1 / IFF
FORM GSTR-3B
Difference in liability
2. In accordance with sub-rule (1) of rule 88C, you are hereby requested to either pay the said
differential tax liability, along with interest under section 50, through FORM GST DRC-03 and
furnish the details thereof in Part-B of FORM GST DRC-01B, and/or furnish the reply in Part-B of
FORM GST DRC-01B incorporating reasons in respect of that part of the differential tax liability
that has remained unpaid, within a period of seven days.
3. It may be noted that where any amount remains unpaid within a period of seven days and
where no explanation or reason is furnished by you or where the explanation or reason furnished by
you is not found to be acceptable by the proper officer, the said amount shall be recoverable in
accordance with the provisions of section 79 of the CGST Act, 2017.
4. This is a system generated notice and does not require signature.

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PART-B
Reply by Taxpayer in respect of the intimation of difference in liability
Reference No. of Intimation: Date:
A. I have paid the amount of the differential tax liability, as specified in Part A of FORM GST
DRC-01B, fully or partially, along with interest under section 50, through FORM GST DRC-03, and
the details thereof are as below:
ARN of FORM
GST DRC-03
Paid Under
Head
Tax Period IGST CGST SGST/UTGST CESS
AND/OR
B. The reasons in respect of that part of the differential tax liability that has remained unpaid, are
as under:
S. No Brief Reasons for Difference Details (Mandatory)
1 Excess Liability paid in earlier tax periods in FORM GSTR3B
2
Some transactions of earlier tax period which could not be
declared in the FORM GSTR-1/IFF of the said tax period but
in respect of which tax has already been paid in FORM
GSTR-3B of the said tax period and which have now been
declared in FORM GSTR-1/IFF of the tax period under
consideration
3
FORM GSTR-1/IFF filed with incorrect details and will be
amended in next tax period (including typographical errors,
wrong tax rates, etc.)

4 Mistake in reporting of advances received and adjusted
against invoices
5 Any other reasons
Verification
I _________________________________________ hereby solemnly affirm and declare that the
information given herein above is true and correct to the best of my knowledge and belief and nothing
has been concealed therefrom.
Signature of Authorised Signatory
Name:
Designation/Status:
Place:
Date:

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Agenda Item 7(xii): Clarification on various issues in GST.
A. Clarification on taxability of No Claim Bonus offered by Insurance companies
Representations have been received from General Insurance Council and various insurance
companies regarding seeking clarity on the treatment of No Claim Bonus (‘NCB’) under GST. It
has been represented that NCB is a discount given by insurance companies on the premium payable
by the customer/insured for a particular year, if the insured has not made any claim during the
previous year. However, some of the field formations/ investigation agencies are treating NCB as
supply by the customer to the insurance company and are not permitting the same to be deducted from
the value of supply of the insurance services being provided by the insurance company to the
customer.
1.2 Some of the field formations/ investigative agencies are taking a view that two supplies of
services are taking place simultaneously in the transaction, the first of insurance services provided by
the insurer to the insured in exchange for insurance premium, and the second supply where the insured
is providing insurer a service by not making any claims during the previous year in exchange for the
NCB discount (by treating NCB as the consideration for the alleged supply of service by the insured to
the insurer). In view of the same, they are claiming that the insurer is liable to pay GST on the gross
premium, and deduction for discount on account of NCB should not be allowed for the purpose of
calculation of value of supply made by insurer to the insured.
1.3 Insurance companies, on the other hand, have submitted that insurance is a business of
indemnity and the risk premium for indemnity is determined based on various parameters, including
the probability of a claim against the policy. If the insured has not made any claim in the previous
year(s), considering the lower probability of claims by such person, the premium to be charged from
the insured for the following year gets reduced, and this reduction is passed to the insured in form of
“No Claim Bonus”, i.e. NCB. NCB is not in respect of any service rendered by the insured to the
insurance company. NCB is allowed to the insured as an upfront discount from the premium payable
by him for the supply of insurance services by the insurer to the insured and therefore, the same is
deductible for the purpose of calculation of value of supply of insurance services under Section 15 of
CGST Act, 2017.
1.4 RELEVANT GST PROVISIONS:
1.4.1 For, determining value of supply of a service, reference needs to be made to sub-section (1) of
Section 15 of the Central Goods and Services Tax Act, 2017 (‘CGST Act’) which provides that the
value of taxable supply shall be the transaction value if the supplier and recipient of the supply are not
related, and price is the sole consideration for the supply.
1.4.2 Further, sub-section (3) of Section 15 of the CGST Act, provides that:
“(3) The value of the supply shall not include any discount which is given-
(a) before or at the time of the supply if such discount has been duly recorded in the invoice
issued in respect of such supply; and
(b) after the supply has been effected, ifAgenda for 48th GSTCM Volume 1

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(i) such discount is established in terms of an agreement entered into at or before the time of
such supply and specifically linked to relevant invoices; and
(ii) input tax credit as is attributable to the discount on the basis of document issued by the
supplier has been reversed by the recipient of the supply.”
1.5 Therefore, from the perusal of clause (a) of sub-section (3) of Section 15 of the CGST Act, it
is clear that the value of supply shall not include any discount which is given before or at the time of
supply if such discount has been duly recorded in the invoice issued in respect of such supply. Here, it
is to be noted that NCB amount is fully disclosed at the time of renewal of the policy and is included
in the policy document as well.
1.6. It is mentioned that the insurance companies deduct No Claim Bonus from the gross insurance
premium amount, when no claim is made by the insured person during the previous insurance period,
and the amount or percentage of such No Claim Bonus varies depending upon the consecutive period
for which no claim is made by the insured. There is no obligation on the insured, either as per the
terms of the insurance policy, or otherwise, not to claim insurance claim during any period covered
under the policy. Further, the insured is also not in any business of refraining to make any claim from
the insurance company. There is also no contractual agreement between insurer and inured for not
claiming any insurance claim from the insurer in lieu of the consideration of No Claim Bonus. On the
other hand, the insured has procured insurance policy from the insurance company to indemnify
himself from the loss, if any, during the policy period, which is covered by the said insurance policy,
and has not procured the said policy for the purpose of or under obligation of refraining from making
claim or tolerating any act of the insurance policy from the said insurance company, in lieu of
consideration in form of No Claim Bonus. Accordingly, there does not appear to be any supply from
the insured to the insurer on account of receipt of No Claim Bonus.
1.7 It is further mentioned that the insurance policy documents make the disclosure of the
fact of availability of discount in form of No Claim Bonus to the insured subject to certain
conditions. The pre-disclosure of NCB amount in the policy documents and specific mention
of the discount in form of No Claim Bonus in the invoice is in consonance with the conditions
laid down for deduction of discount from the value of supply under clause (a) of sub-section
(3) of Section 15 of the CGST Act, 2017.
1.8 Law Committee deliberated on the issue in its meeting held on 05.11.2022 and
recommended that the issue may be clarified through a Circular, specifying that the No Claim
Bonus (NCB) cannot be considered as a consideration for a supply by the insured to the
insurance company, but is to be considered as a permissible deduction under clause (a) of
Section 15(3) of CGST Act for the purpose of calculation of value of supply of the insurance
services provided by the insurance company to the insured, and accordingly, GST shall be
leviable only on actual insurance premium amount, after deduction of No Claim Bonus,
payable by the policy holders to the insurer in respect of insurance services received from the
insurer.
Clarifications, as recommended by the Law Committee, are covered at Sl. No 1 and 2 of the draft
Circular enclosed with the agenda note.
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B. Clarification on applicability of e-invoicing w.r.t an entity-reg
2. As per Rule 48(4) of the CGST Rules, 2017, the notified class of registered persons has to
prepare invoice by uploading specified particulars of invoice (in FORM GST INV-01) on Invoice
Registration Portal (IRP) and obtain an Invoice Reference Number (IRN). Vide Notification No.
13/2020-Central Tax dated 21.03.2020, as amended, the class of registered persons to whom einvoicing shall be applicable under Rule 48(4) of the CGST Rules, 2017 has been notified. Further,
SEZ units, government departments, local authority and those referred in sub-rules (2), (3), (4) and
(4A) of Rule 54 of the CGST Rules have been exempted from e-invoicing. In terms of the said
notification, as amended, the following entities/sectors have been exempted from issuance of e-invoice
and the same is also clarified as per Question 17 of Frequently Asked Questions (Version 1.4 dated
30.03.2021) available on GST Portal:
a. Special Economic Zone Units
b. Insurers
c. Banking companies or financial institutions, including a non-banking financial company
(NBFC)
d. Goods Transport Agency (GTA) supplying services in relation to transportation of goods by
road in a goods carriage
e. Suppliers of passenger transportation service
f. Suppliers of services by way of admission to exhibition of cinematograph films in multiplex
screens
g. Persons registered in terms of Rule 14 of CGST Rules (OIDAR)
2.1 Further, as per Question 18 of Frequently Asked Questions (Version 1.4 dated 30.03.2021)
available on GST Portal, it has been clarified that the exemption from e-invoicing is with respect to an
entity:
“18. The exemption from e-invoicing is w.r.t the nature of supply/transaction or w.r.t the entity?
It is with respect to the entity.”
2.2 Representations have been received from banking entities that banks are being subjected to
investigation by tax authorities wherein the tax officers are insisting that e-invoices are required to be
generated by banks for movement of goods, including bullion, arguing that said exemption from
generation of e-invoices is available to a banking company only with respect to the banking services
provided by it and not for the goods or for the Banking Company as a whole. The tax officers are,
therefore, insisting that generation of e-invoice and related compliances are mandatory in case of
supply/movement of goods by such banking companies. It has been represented by banking entities
that banks continue to face multiple challenges in movement of goods, including bullion, from one
state to another, on account of alleged non issuance of e-invoice which is causing undue hardship in
the regular movement and business operations. Thus, it has been requested to issue a suitable
clarification on the issue.
2.3 Law Committee deliberated on the issue in its meeting held on 5.11.2022 and recommended
that it may be clarified through a Circular that the exemption from mandatory issuance of e-invoices is
with respect to the entity as a whole and not just with respect to the nature of supply/transaction.
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Clarification, as recommended by the Law Committee is covered at Sl. No 3 of the draft Circular
enclosed with the agenda note.
3. The agenda note along with the draft Circular (enclosed as Annexure) is placed before the
GST Council for deliberation and approval.

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Annexure
Circular No. XXX/XX/2022-GST
F. No. CBIC-20001/2/2022-GST
Government of India
Ministry of Finance
Department of Revenue
Central Board of Indirect Taxes and Customs
GST Policy Wing
New Delhi, Dated the November , 2022
To,
The Principal Chief Commissioners/ Chief Commissioners/ Principal Commissioners/ Commissioners
of Central Tax (All)
The Principal Directors General/ Directors General (All)
Madam/Sir,
Subject: Clarification on various issue pertaining to GST-reg.
Various representations have been received from the field formations seeking clarification on
certain issues with respect to –
i. taxability of No Claim Bonus offered by Insurance companies;
ii. on applicability of e-invoicing w.r.t an entity.
2. In order to clarify the issue and to ensure uniformity in the implementation of the
provisions of law across the field formations, the Board, in exercise of its powers conferred by
Section 168 (1) of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as
“CGST Act”), hereby clarify the issues as under:
S. No. Issue Clarification
Taxability of No Claim Bonus offered by Insurance companies
1. Whether the deduction on account
of No Claim Bonus allowed by
the insurance company from the
insurance premium payable by the
insured, can be considered as
consideration for the supply
provided by the insured to the
insurance company, for agreeing
to the obligation to refrain from
the act of lodging insurance claim
during the during the previous
year?
As per practice prevailing in the insurance sector,
the insurance companies deduct No Claim Bonus
from the gross insurance premium amount, when no
claim is made by the insured person during the
previous insurance period. The customer/ insured
procures insurance policy to indemnify himself
from any loss/ injury as per the terms of the policy,
and is not under any contractual obligation not to
claim insurance claim during any period covered
under the policy, in lieu of No Claim Bonus.
It is, therefore, clarified that there is no supply
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provided by the insured to the insurance company
in form of agreeing to the obligation to refrain from
the act of lodging insurance claim during the during
the previous year and No Claim Bonus cannot be
considered as a consideration for any supply
provided by the insured to the insurance company.
2. Whether the No Claim Bonus
provided by the insurance
company to the insured can be
considered as an admissible
discount for the purpose of
determination of value of supply
of insurance service provided by
the insurance company to the
insured?
As per clause (a) of sub-section (3) of Section 15 of
the CGST Act, value of supply shall not include
any discount which is given before or at the time of
supply if such discount has been duly recorded in
the invoice issued in respect of such supply.
The insurance companies make the disclosure of the
fact of availability of discount in form of No Claim
Bonus, subject to certain conditions, to the insured
in the insurance policy document itself and also
provide the details of the no claim Bonus in the
invoices also. The pre-disclosure of NCB amount in
the policy documents and specific mention of the
discount in form of No Claim Bonus in the invoice
is in consonance with the conditions laid down for
deduction of discount from the value of supply
under clause (a) of sub-section (3) of Section 15 of
the CGST Act, 2017.
It is, therefore, clarified that No Claim Bonus
(NCB) is a permissible deduction under clause (a)
of sub-section (3) of Section 15 of the CGST Act,
2017 for the purpose of calculation of value of
supply of the insurance services provided by the
insurance company to the insured. Accordingly,
where the deduction on account of No claim bonus
is provided in the invoice issued by the insurer to
the insured, GST shall be leviable on actual
insurance premium amount, payable by the policy
holders to the insurer, after deduction of No Claim
Bonus mentioned on the invoice.

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Clarification on applicability of e-invoicing w.r.t an entity
3. Whether the exemption from
mandatory generation of einvoices in terms of Notification
No. 13/2020-Central Tax, dated
21stMarch, 2020 as amended, is
available for the entity as whole,
or whether the same is available
only in respect of certain supplies
made by the said entity?
In terms of Notification No. 13/2020-Central Tax
dated 21stMarch, 2020, as amended, certain
entities/sectors have been exempted from
mandatory generation of e-invoices as per sub-rule
(4) of Rule 48 of CGST Rules, 2017. It is hereby
clarified that the said exemption from generation of
e-invoice is for the entity as a whole and is not
restricted by the nature of supply being made by the
said entity.
Illustration: A Banking Company providing
banking services, may also be involved in making
supply of some goods, including bullion. The said
banking company is exempted from mandatory
issuance of e-invoice in terms of Notification No.
13/2020-Central Tax, dated 21st March, 2020 as
amended, for all supplies of goods and services and
thus, will not be required to issue e-invoice with
respect to any supply made by it.
It is requested that suitable trade notices may be issued to publicize the contents of this Circular.
4. Difficulty, if any, in implementation of this Circular may please be brought to the notice of the
Board. Hindi version would follow.
(Sanjay Mangal)
Principal Commissioner (GST)

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Agenda Item 7(xiii): Clarification regarding treatment of the difference in ITC availed in
GSTR-3B as compared to that available in GSTR-2A for FY 2017-18 and 2018-19
Section 16 of the Central GST Act, 2017 provides for eligibility and conditions for taking the
Input Tax Credit (ITC) for the taxpayer and is reproduced below:
Section 16. Eligibility and conditions for taking input tax credit.-
(1) …
(2) Notwithstanding anything contained in this Section, no registered person shall be
entitled to the credit of any input tax in respect of any supply of goods or services or both to
him unless,-
(a) he is in possession of a tax invoice or debit note issued by a supplier
registered under this Act, or such other tax paying documents as may be prescribed;
1
[(aa) the details of the invoice or debit note referred to in clause (a) has been
furnished by the supplier in the statement of outward supplies and such details have
been communicated to the recipient of such invoice or debit note in the manner
specified under Section 37;]
(b) he has received the goods or services or both.
………….
(c) subject to the provisions of Section 41, the tax charged in respect of such
supply has been actually paid to the Government, either in cash or through
utilization of input tax credit admissible in respect of the said supply; and
(d) he has furnished the return under Section 39:
Provided that …
1
Inserted w.e.f. 1st January, 2022 vide Notification No. 39/2021-C.T., dated 21st
December, 2021 by Sr.No. 109 of The Finance Act, 2021 (No. 13 of 2021)
1.1 A perusal of the above Section leads to the conclusion that input tax credit can be availed by a
registered person only if the conditions specified in Section 16 of the CGST Act, 2017 are fulfilled.
One of the conditions for availment of ITC is that the tax charged in respect of the said supply
should have been paid to the Government by the concerned supplier.
1.2 During the initial period of implementation of GST, especially during the financial years
2017-18 and 2018-19, many suppliers failed to furnish the correct details of outward supplies in their
FORM GSTR-1.Because of such discrepancies in FORM GSTR-1 of the suppliers, FORM GSTR2A of their recipients was incomplete. However, the concerned recipients may have availed input tax
credit on the said supplies in their returns in FORM GSTR-3B, as restrictions in availment of ITC
upto certain specified limit beyond the ITC available to the registered persons as per FORM GSTR2A were provided under Rule 36(4) only with effect from 9th October 2019.
1.3 The discrepancies between the amount of ITC availed by the registered persons in their
FORM GSTR-3B and the amount as available in their FORM GSTR-2A are being noticed by the tax
officers during proceedings such as scrutiny/ audit/ investigation etc. due to such credit not flowing
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to FORM GSTR-2A of the registered persons. Such discrepancies are considered by the tax officers
as representing ineligible ITC availed by the registered persons, and are being flagged by them
seeking explanation from the registered persons for such discrepancies and/or for reversal of such
ineligible ITC.
2. In view of this, various representations have been received from the trade as well as the tax
authorities, seeking clarification regarding the manner of dealing with such discrepancies between
the amount of ITC availed by the registered persons in their FORM GSTR-3B and the amount as
available in their FORM GSTR-2A during FY 2017-18 and FY 2018-19.
3. The matter was deliberated by the Law Committee in its meeting held on 12.10.2022 and
05.12.2022. The Law Committee considered the following scenarios:
a) Where the Supplier has failed to file FORM GSTR-1 for a tax period;
b) Where the supplier has filed FORM GSTR-1 but failed to report the supply in the same;
c) Where the supplier has filed FORM GSTR-1 but reported a particular supply as B2C supply
instead of B2B supply;
d) Where the supplier has filed FORM GSTR-1 but declared the supply under wrong GSTIN.
4. Law Committee recommended the following procedure to deal with such cases for FY 2017-
18 and 2018-19:
i) In cases, where the difference between the ITC claimed in FORM GSTR-3B and that
available in FORM GSTR 2A of the registered person in respect of a supplier for the said
financial year exceeds Rs 5 lakh, the proper officer shall ask the registered person to produce a
certificate for the concerned supplier from the Chartered Accountant (CA) or the Cost
Accountant (CMA), certifying that supplies in respect of the said invoices of supplier have
actually been made by the supplier to the said registered person and the tax on such supplies
has been paid by the said supplier in his return in FORM GSTR 3B. Certificate issued by CA
or CMA shall contain UDIN. UDIN of the certificate issued by CAs can be verified from
ICAI website https://udin.icai.org/search-udin and that issued by CMAs can be verified from
ICMAI website https://eicmai.in/udin/VerifyUDIN.aspx.
ii) In cases, where difference between the ITC claimed in FORM GSTR-3B and that
available in FORM GSTR 2A of the registered person in respect of a supplier for the said
financial year is upto Rs 5 lakh, the proper officer shall ask the claimant to produce a
certificate from the concerned supplier, to the effect that said supplies have actually been
made by him to the said registered person and the tax on said supplies has been paid by the
said supplier in his return in FORM GSTR 3B.
5. The Law Committee recommended that a Circular may be issued to clarify the manner of
dealing with discrepancies between the amount of ITC availed by the registered persons in their
FORM GSTR-3B and the amount as available in their FORM GSTR-2A during FY 2017-18 and FY
2018-19. The draft Circular as recommended by the Law Committee is enclosed as Annexure-I.
6. Accordingly, the recommendations of the Law Committee as detailed in para 4 and 5 above
are placed before the GST Council for deliberation and approval.

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ANNEXURE-I
Circular No. //2022-GST
F. No. - GST
Government of India
Ministry of Finance
Department of Revenue
Central Board of Indirect Taxes and Customs
GST Policy Wing
*****
New Delhi, Dated the xx December, 2022
To,
The Principal Chief Commissioners/ Chief Commissioners/ Principal Commissioners/ Commissioners
of Central Tax (All)/
The Principal Directors General/ Directors General (All)
Madam/Sir,
Subject: Clarification to deal with difference in Input Tax Credit (ITC) availed in FORM
GSTR-3B as compared to that detailed in FORM GSTR-2A in for FY 2017-18 and 2018-19 –
Regarding.
Section 16 of the CGST Act, 2017 provides for eligibility and conditions for availing Input Tax
Credit (ITC). During the initial period of implementation of GST, especially during the financial
years 2017-18 and 2018-19, in many cases, the suppliers have failed to furnish the correct details of
outward supplies in their FORM GSTR-1, which has led to certain deficiencies or discrepancies in
FORM GSTR-2A of their recipients. However, the concerned recipients may have availed input tax
credit on the said supplies in their returns in FORM GSTR-3B. The discrepancies between the amount
of ITC availed by the registered persons in their FORM GSTR-3B and the amount as available in their
FORM GSTR-2A are being noticed by the tax officers during proceedings such as scrutiny/ audit/
investigation etc. due to such credit not flowing to FORM GSTR-2A of the registered persons. Such
discrepancies are considered by the tax officers as representing ineligible ITC availed by the registered
persons, and are being flagged by them seeking explanation from the registered persons for such
discrepancies and/or for reversal of such ineligible ITC.
2. It is mentioned that FORM GSTR-2A could not be made available to the taxpayers on the
common portal during the initial stages of implementation of GST. Further, restrictions in availment
of ITC upto certain specified limit beyond the ITC available to the registered persons as per FORM
GSTR-2A were provided under Rule 36(4) only with effect from 9th October 2019. However, the
availability of ITC was subjected to restrictions and conditions specified in Section 16 of CGST Act,
2017 from 1st July, 2017 itself. In view of this, various representations have been received from the
trade as well as the tax authorities, seeking clarification regarding the manner of dealing with such
discrepancies between the amount of ITC availed by the registered persons in their FORM GSTR-3B
and the amount as available in their FORM GSTR-2A during FY 2017-18 and FY 2018-19.
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3. In order to ensure uniformity in the implementation of the provisions of the law across the
field formations, the Board, in exercise of its powers conferred under Section 168(1) of the CGST Act,
hereby clarifies as follows:
S. No. Scenario Clarification
a. Where the supplier has failed to file
FORM GSTR-1 for a tax period but
has filed the return in FORM GSTR3B, for said tax period due to which
the supplies made in the said tax
period do not get reflected in FORM
GSTR-2A of the recipients.
In such cases, the difference in ITC claimed by the
registered person in his return in FORM GSTR-3B
and that available in FORM GSTR-2A may be
handled by following the procedure provided in para
4 below.
b. Where the supplier has filed FORM
GSTR-1 and return in FORM GSTR3B for a tax period, but has failed to
report a particular supply in FORM
GSTR-1, due to which the said supply
does not get reflected in FORM
GSTR-2A of the recipient.
In such cases, the difference in ITC claimed by the
registered person in his return in FORM GSTR-3B
and that available in FORM GSTR-2A may be
handled by following the procedure provided in para
4 below.
c. Where supplies were made to a
registered person and invoice is
issued as per Rule 46 of CGST Rules,
2017, containing GSTIN of the
recipient, but supplier has reported
the said supply as B2C supply instead
of B2B supply in his FORM GSTR1, due to which the said supply does
not get reflected in FORM GSTR-2A
of the said registered person.
In such cases, the difference in ITC claimed by the
registered person in his return in FORM GSTR-3B
and that available in FORM GSTR-2A may be
handled by following the procedure provided in para
4 below.
d. Where the supplier has filed FORM
GSTR-1 as well as return in FORM
GSTR-3B for a tax period, but he has
declared the supply under wrong
GSTIN in FORM GSTR-1.
In such cases, the difference in ITC claimed by the
registered person in his return in FORM GSTR-3B
and that available in FORM GSTR-2A may be
handled by following the procedure provided in para
4 below.
In addition, the proper officer of the actual claimant
shall intimate the concerned jurisdictional tax
authority of the registered person whose GSTIN has
been mentioned wrongly, that ITC on those
transactions is required to be disallowed, if claimed
by such recipients in their FORM GSTR-3B.
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4. The proper officer shall first seek the details from the registered person regarding all the
invoices on which ITC has been availed by the registered person in his FORM GSTR 3B but which
are not reflecting in his FORM GSTR 2A. He shall then ascertain fulfillment of the following
conditions of Section 16 of the CGST Act, 2017 in respect of the input tax credit availed on such
invoices by the registered person:
i) he is in possession of a tax invoice or debit note issued by the supplier or such other tax
paying documents;
ii) he has received the goods or services or both;
iii) he has made payment for the amount towards the value of supply along with tax payable
thereon, to the supplier.
Besides, the proper officer shall also check whether any reversal of input tax credit is required
to be made in accordance with Section 17 or Section 18 of the CGST Act, 2017 and also whether the
said input tax credit has been availed within the time period specified under sub-section (4) of Section
16 of the CGST Act, 2017.
4.1 In order to verify the condition of Section 16 of CGST Act, 2017 that tax on the said supply
has been paid by the supplier, the following action may be taken by the proper officer:
4.1.1 In case, where difference between the ITC claimed in FORM GSTR-3B and that available in
FORM GSTR 2A of the registered person in respect of a supplier for the said financial year exceeds
Rs 5 lakh , the proper officer shall ask the registered person to produce a certificate for the concerned
supplier from the Chartered Accountant (CA) or the Cost Accountant (CMA), certifying that supplies
in respect of the said invoices of supplier have actually been made by the supplier to the said
registered person and the tax on such supplies has been paid by the said supplier in his return in
FORM GSTR 3B. Certificate issued by CA or CMA shall contain UDIN. UDIN of the certificate
issued by CAs can be verified from ICAI website https://udin.icai.org/search-udin and that issued by
CMAs can be verified from ICMAI website https://eicmai.in/udin/VerifyUDIN.aspx .
4.1.2 In cases, where difference between the ITC claimed in FORM GSTR-3B and that available in
FORM GSTR 2A of the registered person in respect of a supplier for the said financial year is upto Rs
5 lakh, the proper officer shall ask the claimant to produce a certificate from the concerned supplier, to
the effect that said supplies have actually been made by him to the said registered person and the tax
on said supplies has been paid by the said supplier in his return in FORM GSTR 3B.
4.2 However, it may be noted that for the period FY 2017-18, as per proviso to Section 16(4) of
the CGST Act, 2017 the aforesaid relaxations shall not be applicable to the claim of ITC made in the
FORM GSTR-3B return filed after the due date of September 2018 return till the due date of
However, allowance of ITC to the actual recipient
shall not depend on the completion of the action by
the tax authority of such registered person whose
GSTIN has been mentioned wrongly, and such
action will be pursued as an independent action.
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furnishing returns for March 2019, if supplier had not furnished details of the said supply in his
FORM GSTR-1 till the due date of furnishing FORM GSTR 1 for March 2019.
5. It may also be noted that the clarifications given hereunder are case specific and are applicable
to the bonafide errors committed in reporting during FY 2017-18 and 2018-19. Further, these
guidelines are clarificatory in nature and may be applied as per the actual facts and circumstances of
each case and shall not be used in the interpretation of the provisions of law.
6. These instructions will apply only to the ongoing proceedings in scrutiny/audit/ investigation,
etc. for FY 2017-18 and 2018-19 and not to the completed proceedings. However, these instructions
will apply in those cases for FY 2017-18 and 2018-19 where any adjudication or appeal proceedings
are still pending.
7. Difficulty, if any, in the implementation of the above instructions may please be brought to the
notice of the Board. Hindi version would follow.
Sanjay Mangal
Principal Commissioner
(GST)

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Agenda Item 7(xiv): Clarification regarding the treatment of statutory dues under GST law in
respect of the taxpayers for whom the proceedings have been finalised under the Insolvency and
Bankruptcy Code, 2016.
In some cases, the insolvency or bankruptcy proceedings are initiated against a corporate
debtor due to default in payment of their debts in timely manner, in accordance with the provisions of
the Insolvency and Bankruptcy Code, 2016 (IBC).In such cases, claims are required to be filed by
the tax officers in respect of statutory dues pending against such corporate debtor before the
appropriate authority specified under IBC. The adjudicating authority under IBC may pass an order
approving the resolution plan in respect of such entity. In number of cases, as a result of such
proceedings, the amount of government dues, payable by the said taxpayer, as per resolution plan
approved by the adjudicating authority, may be totally extinguished or may be reduced vis-à-vis the
amount claimed by the tax officers. Doubts are being raised by various tax authorities regarding the
modalities for implementation of the order of the adjudicating authority under IBC, after finalization
of the proceedings thereof, with respect to demand for recovery against such corporate debtor under
the CGST Act, 2017.
2. As per Section 84 of the CGST Act, 2017, if the government dues against any person under
the CGST Act, 2017 are reduced as a result of any appeal, revision or other proceedings in respect of
such government dues, then an intimation for such reduction of government dues has to be given by
the commissioner to such person and to the appropriate authority with whom the recovery proceedings
are pending. Further, recovery proceedings can be continued in relation to such reduced amount of
government dues.
2.1 Section 84 of the CGST Act, 2017 reads as follows:
“Section 84 - Continuation and validation of certain recovery proceedings.-
Where any notice of demand in respect of any tax, penalty, interest or any other
amount payable under this Act, (hereafter in this Section referred to as "Government dues"),
is served upon any taxable person or any other person and any appeal or revision application
is filed or any other proceedings is initiated in respect of such Government dues, then-
..
(b) where such Government dues are reduced in such appeal, revision or in other
proceedings-
(i) it shall not be necessary for the Commissioner to serve upon the taxable person a
fresh notice of demand;
(ii) the Commissioner shall give intimation of such reduction to him and to the
appropriate authority with whom recovery proceedings is pending;
(iii) any recovery proceedings initiated on the basis of the demand served upon him
prior to the disposal of such appeal, revision or other proceedings may be continued in
relation to the amount so reduced from the stage at which such proceedings stood
immediately before such disposal.”
2.2 Further, Rule 161 of the CGST Rules, 2017 prescribes FORM GST DRC-25 for issuing
order for such reduction of demand. Rule 161 reads as follows:
Rule 161. Continuation of certain recovery proceedings . -
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The order for the reduction or enhancement of any demand under Section 84 shall be issued
in FORM GST DRC- 25.
3. The word ‘other proceedings’ is not defined in the CGST Act, 2017. It is to be mentioned that
the adjudicating authorities and appellate authorities under IBC are quasi-judicial authorities
constituted to deal with civil disputes pertaining to insolvency and bankruptcy. For instance, under
IBC, NCLT serves as an adjudicating authority for insolvency proceedings which are initiated on
application from any stakeholder of the entity like the firm, creditors, debtors, employees etc. and
passes an order approving the resolution plan.
3.1 The issue was deliberated by the Law Committee in its meetings held on 12.10.2022 and
05.12.2022. The Law Committee was of the view that as the proceedings conducted under IBC also
adjudicate the government dues pending under the CGST Act, 2017 or under existing laws against the
corporate debtor, the same appear to be covered under the term ‘other proceedings’ in Section 84 of
the CGST Act, 2017.
3.2 Law Committee was also of the view that in cases where a confirmed demand for recovery
has been issued by the tax authorities for which a summary has been issued in FORM GST DRC07/DRC 07A against the corporate debtor, and where the proceedings have been finalised against the
corporate debtor under IBC reducing the amount of statutory dues payable by the corporate debtor to
the government under CGST Act or under existing laws, the jurisdictional Commissioner mayissue an
intimation in FORM GST DRC-25 reducing such demand, to the taxable person or any other person
as well as the appropriate authority with whom recovery proceedings are pending.
3.3 The Law Committee, accordingly, recommended issuing a Circular to clarify the treatment of
statutory dues under GST law in respect of the taxpayers for whom the proceedings have been
finalised under the Insolvency and Bankruptcy Code, 2016. Draft Circular recommended by the Law
Committee is enclosed as Annexure – I.
4. Law Committee also observed that whereas as per Section 84 of the CGST Act, 2017 a
demand notice (in case where the demand has been enhanced) and an intimation (in case where the
demand has been reduced) are to be issued to the taxable person or any other person, the relevant
Rule, i.e. Rule 161 of the CGST Rules, 2017 uses only the word “order”. Hence, there is a requirement
to amend Rule 161, as below, to align the same with Section 84 of the CGST Act, 2017:
Rule 161. Continuation of certain recovery proceedings . -
The order/intimation/ noticefor the reduction or enhancement of any demand under Section
84 shall be issued in FORM GST DRC- 25.
5. Law Committee also recommended that FORM GST DRC 25 may also be amended slightly,
to specifically include the authorities under IBC in the said FORM.The proposed amended FORM
GST DRC-25 is enclosed as Annexure – II.
6. Accordingly, the recommendations of the Law Committee as detailed in paras 3.3, 4 and 5
above are placed before the GST Council for deliberation and approval.
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ANNEXURE - I
Circular No.XXX/XX/2022-GST
CBIC-20016/11/2022-GST
Government of India
Ministry of Finance
Department of Revenue
Central Board of Indirect Taxes and Customs
GST Policy Wing
New Delhi, dated the xx December, 2022
To,
The Principal Chief Commissioners / Chief Commissioners / Principal Commissioners /
Commissioners of Central Tax (All)
The Principal Director Generals / Director Generals (All)
Madam/Sir,
Subject: Clarification regarding the treatment of statutory dues under GST law in
respect of the taxpayers for whom the proceedings have been finalised under the Insolvency and
Bankruptcy Code, 2016- regarding.
Attention is invited to Circular No.134/04/2020-GST dated 23rd March, 2020, wherein it was
clarified that no coercive action can be taken against the corporate debtor with respect to the dues of
the period prior to the commencement of CIRP (Corporate Insolvency Resolution Process). Such dues
will be treated as ‘operational debt’ and the claims may be filed by the proper officer before the NCLT
in accordance with the provisions of the IBC.
2. Representations have been received from the trade as well as tax authorities, seeking
clarification regarding the modalities for implementation of the order of the adjudicating authority
under the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the “IBC”) with respect to
demand for recovery against such corporate debtor under the CGST Act, 2017 as well under the
existing laws and the treatment of such statutory dues under the CGST Act, 2017 and existing laws,
after finalization of the proceedings under IBC.
3. In order to ensure uniformity in the implementation of the provisions of the law across the
field formations, the Board, in exercise of its powers conferred under Section 168(1) of the CGST Act,
2017 hereby clarifies as follows.
4.1 Section 84 of the CGST Act, 2017 reads as follows:
“Section 84 - Continuation and validation of certain recovery proceedings.-
Where any notice of demand in respect of any tax, penalty, interest or any other
amount payable under this Act, (hereafter in this Section referred to as "Government
dues"), is served upon any taxable person or any other person and any appeal or
revision application is filed or any other proceedings is initiated in respect of such
Government dues, then-
..
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(b) where such Government dues are reduced in such appeal, revision or in other
proceedings-
(i) it shall not be necessary for the Commissioner to serve upon the taxable person a
fresh notice of demand;
(ii) the Commissioner shall give intimation of such reduction to him and to the
appropriate authority with whom recovery proceedings is pending;
(iii) any recovery proceedings initiated on the basis of the demand served upon him
prior to the disposal of such appeal, revision or other proceedings may be continued in
relation to the amount so reduced from the stage at which such proceedings stood
immediately before such disposal.”
4.2 As per Section 84 of the CGST Act, 2017 if the government dues against any person under the
CGST Act, 2017 are reduced as a result of any appeal, revision or other proceedings in respect of such
government dues, then an intimation for such reduction of government dues has to be given by the
commissioner to such person and to the appropriate authority with whom the recovery proceedings are
pending. Further, recovery proceedings can be continued in relation to such reduced amount of
government dues.
4.3 The word ‘other proceedings’ is not defined in the CGST Act, 2017. It is to be mentioned that
the adjudicating authorities and appellate authorities under IBC are quasi-judicial authorities
constituted to deal with civil disputes pertaining to insolvency and bankruptcy. For instance, under
IBC, NCLT serves as an adjudicating authority for insolvency proceedings which are initiated on
application from any stakeholder of the entity like the firm, creditors, debtors, employees etc. and
passes an order approving the resolution plan. As the proceedings conducted under IBC also
adjudicate the government dues pending under the CGST Act or under existing laws against the
corporate debtor, the same appear to be covered under the term ‘other proceedings’ in Section 84 of
the CGST Act, 2017.
5. Rule 161 of the CGST Rules, 2017 prescribes FORM GST DRC-25 for issuing intimation
for such reduction of demand specified under the Section 84 of CGST Act, 2017. Accordingly, in
cases where a confirmed demand for recovery has been issued by the tax authorities for which a
summary has been issued in FORM GST DRC-07/DRC 07A against the corporate debtor, and where
the proceedings have been finalised against the corporate debtor under IBC reducing the amount of
statutory dues payable by the corporate debtor to the government under CGST Act or under existing
laws, the jurisdictional Commissioner shall issue an intimation in FORM GST DRC-25 reducing
such demand, to the taxable person or any other person as well as the appropriate authority with whom
recovery proceedings are pending.
6. It is requested that suitable trade notices may be issued to publicize the contents of this
Circular.
7. Difficulty, if any, in the implementation of the above instructions may please be brought to the
notice of the Board. Hindi version would follow.
(Sanjay Mangal)
Principal Commissioner (GST)
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ANNEXURE–II
FORM GST DRC – 25
[See Rule 161]
Reference No << --- >> <<Date >>
To,
GSTIN -------------
Name ---------------
Address --------------
Demand Order No.: Date:
Reference number of recovery: Date:
Period:
Reference No. in Appeal or Revision or any other proceeding Date:
Continuation of Recovery Proceedings
This has reference to the initiation of recovery proceedings against you vide above referred recovery
reference number for a sum of Rs.…………………..
The Appellate /Revisional authority / Adjudicating Authority or Appellate authority under IBC /Court
…………….…… << name of authority / Court>> has enhanced/reduced the dues covered by the
above mentioned demand order No.….……… dated…...…………vide order no. ---------- dated -------
--- and the dues now stand at Rs. …..………. The recovery of enhanced/reduced amount of
Rs…….…… stands continued from the stage at which the recovery proceedings stood immediately
before disposal of appeal /revision/any other proceedings. The revised amount of demand after giving
effect of appeal / revision/any other proceedings is given below:
Financial year: ………….
(Amount in Rs.)
Act Tax Interest Penalty Fees Other Dues Total
Arrears
1 2 3 4 5 6 7
Central tax
State / UT
tax
Integrated
tax
Cess
]1
Signature
Name
Designation
Place:
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Agenda Item 7(xv): Amendment in provisions related to OIDAR Services under the IGST Act,
2017
Taxation of cross border e-commerce services poses a significant challenge due to physical
absence of supplier in India and services by very nature being intangible and difficult to track. India
introduced a unique concept of Online Information Database Access and Retrieval (OIDAR) Services
in the erstwhile Service Tax law in 2016 and with implementation of GST, carried forward a similar
levy in GST regime as well. OIDAR is intended to tax digitally supplied services nature of which
renders their supply impossible to ensure in the absence of information technology. With the growth
of digital economy, the OIDAR services are expected to grow immensely in volume. Thus, it becomes
pertinent to take steps to ensure compliance under GST by OIDAR service providers.
1. PRESENT LEGAL PROVISIONS
1.1 DEFINITION OF OIDAR:
Section 2(17) of the IGST Act, 2017 defines “Online Information and database access or
retrieval services”, as services whose delivery is mediated by information technology over the internet
or an electronic network and the nature of which renders their supply essentially automated and
involving minimal human intervention and impossible to ensure in the absence of information
technology and includes electronic services such as, ––
(i) advertising on the internet;
(ii) providing cloud services;
(iii) provision of e-books, movie, music, software and other intangibles through telecommunication
networks or internet;
(iv) providing data or information, retrievable or otherwise, to any person in electronic form through
a computer network;
(v) online supplies of digital content (movies, television shows, music and the like);
(vi) digital data storage; and
(vii) online gaming;
1.2 PLACE OF SUPPLY & TAXABILITY OF OIDAR UNDER GST:
Sub-section 12 of Section 13 of the IGST Act, 2017 lays down the place of supply
provisions for OIDAR services as follows:
The place of supply of online information and database access or retrieval services shall be the
location of the recipient of services.
Explanation––For the purposes of this sub-section, person receiving such services shall be deemed to
be located in the taxable territory, if any two of the following noncontradictory conditions are
satisfied, namely:––
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(a) the location of address presented by the recipient of services through internet is in the taxable
territory;
(b) the credit card or debit card or store value card or charge card or smart card or any other card by
which the recipient of services settles payment has been issued in the taxable territory;
(c) the billing address of the recipient of services is in the taxable territory;
(d) the internet protocol address of the device used by the recipient of services is in the taxable
territory;
(e) the bank of the recipient of services in which the account used for payment is maintained is in the
taxable territory;
(f) the country code of the subscriber identity module card used by the recipient of services is of
taxable territory;
(g) the location of the fixed land line through which the service is received by the recipient is in the
taxable territory.
1.3 PAYMENT OF TAX
Section 14 of the IGST Act, 2017 deals with special provision for payment of tax by a
supplier of OIDAR services. The Section is as under,
(1) On supply of online information and database access or retrieval services by any person located in
a non-taxable territory and received by a non-taxable online recipient, the supplier of services
located in a non-taxable territory shall be the person liable for paying integrated tax on such supply
of services:
Provided that in the case of supply of online information and database access or retrieval services by
any person located in a non-taxable territory and received by a non-taxable online recipient, an
intermediary located in the non-taxable territory, who arranges or facilitates the supply of such
services, shall be deemed to be the recipient of such services from the supplier of services in nontaxable territory and supplying such services to the non-taxable online recipient except when such
intermediary satisfies the following conditions, namely:––
(a) the invoice or customer’s bill or receipt issued or made available by such intermediary taking part
in the supply clearly identifies the service in question and its supplier in non- taxable territory;
(b) the intermediary involved in the supply does not authorize the charge to the customer or take part
in its charge which is that the intermediary neither collects or processes payment in any manner nor is
responsible for the payment between the non-taxable online recipient and the supplier of such
services;
(c) the intermediary involved in the supply does not authorize delivery; and
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(d) the general terms and conditions of the supply are not set by the intermediary involved in the
supply but by the supplier of services. Special provision for payment of tax by a supplier of online
information and database access or retrieval services.
(2) The supplier of online information and database access or retrieval services referred to in subsection (1) shall, for payment of integrated tax, take a single registration under the Simplified
Registration Scheme to be notified by the Government:
Provided that any person located in the taxable territory representing such supplier for any purpose
in the taxable territory shall get registered and pay integrated tax on behalf of the supplier:
Provided further that if such supplier does not have a physical presence or does not have a
representative for any purpose in the taxable territory, he may appoint a person in the taxable
territory for the purpose of paying integrated tax and such person shall be liable for payment of such
tax.
1.4 NON-TAXABLE ONLINE RECIPIENT
Section 2(16) of the IGST Act, 2017 defines “non-taxable online recipient” as any
Government, local authority, governmental authority, an individual or any other person not registered
and receiving online information and database access or retrieval services in relation to any purpose
other than commerce, industry or any other business or profession, located in taxable territory.
Explanation.––For the purposes of this clause, the expression “governmental authority”
means an authority or a board or any other body,––
(i) set up by an Act of Parliament or a State Legislature; or
(ii) established by any Government,
with ninety per cent. or more participation by way of equity or control, to carry out any function
entrusted to a municipality under article 243W of the Constitution;
1.5 COMPULSORY REGISTRATION:
Section 24(xi) of the CGST Act, 2017:
The registration is compulsory for every person supplying online information and database
access or retrieval services (OIDAR) from a place outside India to a person in India, other than a
registered taxable person.
The supplier (or intermediary) of online information and database access or retrieval services shall, for
payment of integrated tax, take a single registration under the Simplified Registration Scheme in Form
GST REG-10 (Section 14(2) of the IGST Act, 2017 read with Rule 14 of CGST Rules, 2017).
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1.6 RETURN FILING:
In terms of Section 39 of the CGST Act, 2017 read with Rule 64 of the CGST Rules, 2017,
every registered person providing online information and data base access or retrieval services from a
place outside India to a person in India other than a registered person shall file return in FORM
GSTR-5A on or before the twentieth day of the month succeeding the calendar month or part thereof.
It is to be noted that GSTR-5A is required to be filed only by the service provider (or his
representative) providing OIDAR services from outside India to a non-taxable online recipient in
India. Other categories of OIDAR service providers (like those supplying OIDAR services from India)
will have to file regular returns (GSTR 1, 3B) prescribed for general categories of registered persons.
2. As it becomes pertinent to take steps to ensure compliance under GST by OIDAR service
providers, various ways need to be explored to do so. One way is to designate the payment gateways
or AD Banks as reporting entities for GST purposes to file information on such foreign remittances
processed by them for specified services such as OIDAR. Also, possibility can be explored of
imposing some liability in form of TCS on such payment gateways with regard to payment
transactions for OIDAR services through them by supplier located in non-taxable territory to
recipients in India, as a mechanism to collect the revenue upfront. It is pertinent to note that while the
above alternatives may be deliberated and explored in the future, amendments in law may be required
for exploring the abovementioned alternatives so as to reduce the requirement of interpretation for
deciding whether the said supply is covered under the scope of OIDAR services or not for taxation
under GST.
3. PROPOSED LAW RELATED CHANGES
3.1 Definition of non-taxable online recipient
3.1.1 As per Section 14 of the IGST Act, 2017 on supply of OIDAR services by any person located
in a non-taxable territory and received by a non-taxable online recipient, the supplier of services
located in a non-taxable territory shall be the person liable for paying integrated tax on such supply of
services. A “non-taxable online recipient” is defined under Section 2(16) of the IGST Act, 2017 to
mean any Government, local authority, governmental authority, an individual or any other person not
registered and receiving online information and database access or retrieval services in relation to
any purpose other than commerce, industry or any other business or profession, located in
taxable territory.
There are two requirements under this definition:
(a) Service recipient is not registered under the GST law, and
(b) Service recipient uses the OIDAR services for any purpose other than commerce, industry or any
other business or profession.
3.1.2 Above are twin cumulative conditions which both need to be fulfilled for a person to be
considered as non-taxable online recipient. It is pertinent to note that the second condition of nonbusiness is very difficult to ascertain and not capable of being substantiated by the service provider
who is located in the non-taxable territory. This condition not being met can potentially result in the
service being outside the levy. Further, any person who is otherwise not required to register under
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GST but is receiving OIDAR services in relation to any purpose related to commerce, industry or any
other business or profession is required to pay tax under reverse charge basis as per Notification No.
10/2017-Integrated Tax(Rate) dated 28th June, 2017. As a result, such person receiving OIDAR
services is required to take compulsory registration under GST as per clause (iii) of Section 24 of the
CGST Act, 2017. This puts additional burden on these otherwise exempt entities to register only for
the purpose of complying with RCM on import of OIDAR services for business purposes and it may
be practically very difficult to ensure implementation of the same, considering nature of OIDAR
services.
3.1.3 Further, in some countries, the only condition is that the recipient should be an unregistered
person and to this end only responsibility which is cast on the service provider is to check if the
service recipient has furnished his registration number. Similar mechanism may be adopted under
GST in India as well. If the person located in taxable territory is receiving OIDAR services from a
service provider located in non-taxable territory and the said person receiving OIDAR services does
not furnish his GSTIN number to the OIDAR service provider, it may be assumed that the recipient is
unregistered and thus may be covered under the definition of “non-taxable online recipient”. If the
said person receiving OIDAR services furnishes his GSTIN number to the OIDAR service provider,
the recipient will be required to pay tax under reverse charge basis. Thus, removing the second
condition from the definition of non-taxable online recipient i.e. service recipient uses the OIDAR
services for any purpose other than commerce, industry or any other business or profession, would
make the administration of the levy easier and also make it easier for the service provider to comply.
However, there may be requirement to keep the entities, which are required to be registered solely for
the purpose of TDS on supplies made to them as per clause (vi) of Section 24, read with Section 51, of
the CGST Act, 2017 within definition of non-taxable online recipients, so as to exclude such entities
from requirement of payment of tax on RCM basis on OIDAR supplies from a service provider
located in non-taxable territory.
3.1.4 Thus, the definition of non-taxable online recipient under Section 2(16) of the IGST Act, 2017
may be amended as under:
“(16) “non-taxable online recipient” means any Government, local authority, governmental
authority, an individual or any other person not registered and unregistered person receiving online
information and database access or retrieval services in relation to any purpose other than commerce,
industry or any other business or profession, located in taxable territory.
Explanation.––For the purposes of this clause, the expression “governmental authority”
means an authority or a board or any other body,––
(i) set up by an Act of Parliament or a State Legislature; or
(ii) established by any Government,
with ninety per cent. or more participation by way of equity or control, to carry out any function
entrusted to a municipality under article 243W of the Constitution; ”
Explanation.––For the purposes of this clause, the expression “unregistered person” includes
a person registered solely in terms of clause (vi) of Section 24 of Central Goods and Services Tax Act,
2017.
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3.2 Issue of minimal human intervention
3.2.1 Currently for a service to be classified as OIDAR services under Section 2(17) of the IGST
Act, 2017 an essential condition is that the supply of such service must be essentially automated and
should involve minimal human intervention. However, many a times interpretation of what is ‘human
intervention’ and what is ‘minimal’ becomes contentious and litigative. Representations have been
received from taxpayers asking for clarity on the meaning of the term “minimal human intervention”.
3.2.2 The intention of GST on OIDAR services is to remove the anomaly of taxation between
similar services provided by a resident and a non-resident supplier. Any supply of services by a
resident supplier electronically whether with or without or minimal human intervention is subject to
levy of GST. Restricting the scope of GST on cross border supply by non-resident suppliers only on
those services with minimal human intervention does not provide a level playing field.
3.2.3 Further, many countries are doing away with the requirement of “minimal human
intervention’. Thus, the definition of OIDAR services under Section 2(17) of the IGST Act, 2017 may
be amended as under:
(17) “online information and database access or retrieval services” means services whose delivery is
mediated by information technology over the internet or an electronic network and the nature of
which renders their supplyessentially automated and involving minimal human intervention and
impossible to ensure in the absence of information technology and includes electronic services such
as,––
(i) advertising on the internet;
(ii) providing cloud services;
(iii) provision of e-books, movie, music, software and other intangibles through
telecommunication networks or internet;
(iv) providing data or information, retrievable or otherwise, to any person in electronic
form through a computer network;
(v) online supplies of digital content (movies, television shows, music and the like);
(vi) digital data storage; and
(vii) online gaming;
4. Law Committee deliberated on the issue in its meeting held on 05.12.2022 and approved the
above mentioned law amendments proposed in para 3 above.
5. Accordingly, the agenda note is placed before the GST Council for deliberation and approval.
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Agenda Item 7(xvi): In Section 17 of the CGST Act, 2017 regarding ITC in respect of CSR
(Corporate Social Responsibility) expenditure
Doubts have been raised by trade as well field formations in respect of availability of ITC on
CSR expenditure incurred by companies in accordance with the provisions of Companies Act, 2013
due to various contradictory advance rulings. Some of these advance rulings are as follows:
1.2. Telangana AAR ruling in Bambino Pasta Food Industries Private Limited (2022):
The question before the AAR was whether ITC is available on CSR expenditure spent by the
company. The AAR observed that the Companies Act, 2013 requires Companies with a specified net
worth or net profit to incur a minimum of 2% of their net profit towards their corporate social
responsibility and failure to do so attracts penalty under sub- section 7 of Section 135 of the said Act
which may go upto a maximum of Rs.1 Cr. Thus, the running of the business of a company will be
substantially impaired if they do not incur the said expenditure. Therefore, AAR Ruled that the
expenditure made towards corporate responsibility under Section 135 of the Companies Act, 2013, is
an expenditure made in the furtherance of the business and hence the tax paid on purchases
made to meet the obligations under corporate social responsibility will be eligible for input tax
credit under CGST and SGST Acts.
1.3. UP AAR ruling in Dwarikesh Sugar Industries Ltd (2020): Two questions were placed
before the AAR, namely –
(a) whether CSR expenses under Companies Act, 2013 qualify as being incurred in the course
of business and eligible for ITC in terms of Section 16 of the CGST Act, 2017 ; and
(b) whether free supply of goods as part of CSR activities is restricted under Section 17(5)(h)
of the CGST Act, 2017.
The ruling refers to the definition of “business” under Section 2(17) of the CGST Act, 2017 as
well as the obligation cast upon companies under Section 135 of Companies Act, 2013 to mandatorily
spend 2% of its profit on CSR expenditure. Further, any failure to comply with CSR expenditure
norms would invite penalty against the defaulting companies. As CSR activities are compulsorily
required to be undertaken by companies in order to run its business, it becomes an essential part of its
business process as a whole. Thus, the said CSR activities are to be treated as incurred “in the
course of business”. Unlike gifts which are voluntary and occasional in nature, CSR expenditure is
not incurred voluntarily. Therefore, AAR Ruled that it cannot be treated as ‘gift’ in terms of
Section 17(5)(h) of the CGST Act, 2017 and accordingly, ITC in respect of CSR expenditure is
not restricted.
1.4. Kerala AAR ruling in Polycab Wires Pvt. Ltd(2019): The question before AAR was to
determine the admissibility of ITC in relation to goods that are supplied free of cost to Kerala State
Electricity board (KESB) for flood restoration work. The applicant stated that since GST amount was
paid while procuring such supplies, they are entitled to avail ITC on the same. However, the AAR
Ruled that such supplies are in the nature of ‘gifts’ in terms of Section 17(5)(h) of CGST Act,
2017 and therefore, ITC is inadmissible on the same.
1.5. Gujarat AAR ruling in Adama India Private Limited (2022): The AAR inter alia observed
that as per Rule 4(1) of the Companies (CSR Policy) Rules, 2014 (for the period prior to 23-1-2021),
the CSR activities undertaken by the company shall exclude activities undertaken in pursuance of its
normal course of business. As per Section 2(d) of the Companies (CSR policy) Amendment Rules
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2021 (w.e.f. 23-1-2021), ‘Corporate Social Responsibility’ does not include activities undertaken in
pursuance of normal course of business of the company. Accordingly, the AAR found that the CSR
activities are not activities undertaken in pursuance of applicant’s normal course of business. The
AAR Ruled that CSR activities, as per the Companies (CSR Policy) Rules, 2014 are those
activities excluded from normal course of business of the applicant and therefore not eligible for
ITC, as per Section 16(1) of the CGST Act, 2017.
2. From the foregoing, it appears that there are contradictory rulings on the issue as to whether
the CSR expenditure can be considered as the expenses incurred in the course of business. One view is
that CSR expenditure is incurred to meet the obligations of corporate social responsibility under
Section 135(5) of the Companies Act, 2013 and non-compliance on this count attracts penal action. It
is also claimed that Section 16 of the CGST Act, 2017 entitles a registered person to take credit of
input tax charged on any supply of goods or services which are used or intended to be used in the
course or furtherance of his business and that CSR expenditure being mandatory under the Companies
Act, such expenses should be considered to be in the course or furtherance of business and
accordingly, ITC should be available in respect of inputs and input services for CSR activities in terms
of Section 16(1) of the CGST Act, 2017. However, another view is that ‘Corporate Social
Responsibility’ does not include activities undertaken in pursuance of normal course of business of the
company and therefore, the CSR activities are not activities undertaken in pursuance of applicant’s
normal course of business. Accordingly, input tax credit may not be available to the registered person
on CSR expenditure under Section 16(1) of the CGST Act, 2017.
3.1 Section 135(5) of the Companies Act, 2013 reads as under:
Section 135(5) of the Companies Act, 2013:
(5) The Board of every company referred to in sub-section (1), shall ensure that the company
spends, in every financial year, at least two per cent. of the average net profits of the
company made during the three immediately preceding financial years, in pursuance of its
Corporate Social Responsibility Policy:
Provided that the company shall give preference to the local area and areas around it where
it operates, for spending the amount earmarked for Corporate Social Responsibility activities:
Provided further that if the company fails to spend such amount, the Board shall, in its report
made under clause (o) of sub-section (3) of Section 134, specify the reasons for not spending
the amount.
Explanation.—For the purposes of this Section “average net profit” shall be calculated in
accordance with the provisions of Section 198.
3.2 Further, Section 16(1) of the CGST Act, 2017 reads as follows:
Section 16(1) of the CGST Act, 2017:
(1) Every registered person shall, subject to such conditions and restrictions as may be
prescribed and in the manner specified in Section 49, be entitled to take credit of input tax
charged on any supply of goods or services or both to him which are used or intended to be
used in the course or furtherance of his business and the said amount shall be credited to the
electronic credit ledger of such person.
3.3. Besides, Section 17(1) of the CGST Act, 2017 reads as under:
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Section 17(1) of the CGST Act, 2017:
(1) Where the goods or services or both are used by the registered person partly for the
purpose of any business and partly for other purposes, the amount of credit shall be
restricted to so much of the input tax as is attributable to the purposes of his business.

4. Further, as per Section 17(5)(h) of the CGST Act, 2017 notwithstanding anything contained in
Section 16(1), input tax credit is not available in respect of goods disposed of by way of gift or free
samples. There are divergent rulings of AAR as to whether goods supplied free of cost under CSR can
be termed as gifts or not for the purpose of Section 17(5) (h), as detailed in Para 1.3 and 1.4 above.
Further, restriction in Section 17(5)(h) is only with respect of supply of goods as gifts and not is
respect of free services supplied as part of CSR.
5.1. Parallel needs to be drawn from another tax law i.e. the Income Tax Act. Explanation 2 to
Section 37(1) of the Income Tax Act, 1961 provides that the expenditure incurred by an assessee on
CSR activities shall not be deemed to be an expenditure incurred by the assessee for the purposes of
business or profession. Thus, Income Tax Act categorically states that CSR expenditure shall not be
treated as being in the ‘course or furtherance of business’, as under:
Section 37 (1) of Income Tax Act, 1961:
(1) Any expenditure (not being expenditure of the nature described in Sections 30 to 36 and
not being in the nature of capital expenditure or personal expenses of the assessee), laid out
or expended wholly and exclusively for the purposes of the business or profession shall be
allowed in computing the income chargeable under the head “Profits and gains of business or
profession”.
Explanation 1. For the removal of doubts, it is hereby declared that any expenditure incurred
by an assessee for any purpose which is an offence or which is prohibited by law shall not be
deemed to have been incurred for the purpose of business or profession and no deduction or
allowance shall be made in respect of such expenditure.
Explanation 2. For the removal of doubts, it is hereby declared that for the purposes of subsection (1), any expenditure incurred by an assessee on the activities relating to corporate
social responsibility referred to in Section 135 of the Companies Act, 2013 (18 of 2013) shall
not be deemed to be an expenditure incurred by the assesse for the purposes of the business or
profession.
5.2. While no deduction as business / professional expenditure in respect of CSR expenditure is
allowed under Income Tax Act for the purpose of calculation of tax liability, it appears only logical
that in GST law also no benefit of ITC may be provided in respect of such CSR expenditure.
6. In view of the above, the Law Committee in its meeting held on 05.12.2022 opined that ITC
in respect of CSR expenditure incurred by Companies under Section 135 of the Companies Act, 2013
should not be allowed. To unambiguously state such position, the Law Committee recommended that
such CSR expenditure may be included in the list of blocked credit under Section 17(5) as under:
(5) Notwithstanding anything contained in sub-section (1) of Section 16 and sub-section (1) of
Section 18, input tax credit shall not be available in respect of the following, namely:-
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……
(j) goods or services or both received by a taxable person and which are used or intended to
be usedfor activities relating to his obligations under corporate social responsibility referred
to in Section 135 of the Companies Act, 2013 (18 of 2013);
……
7. Accordingly, the proposal at para 6 is placed for deliberation and approval of the Council.

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Agenda Item 7(xvii): Issues related to place of supply in terms of the proviso to Section 12(8) of
the IGST Act, 2017
Place of supply (PoS) of services by way of transportation of goods, including by mail or courier,
where location of supplier and recipient is in India, is specified in sub-section (8) of Section 12 of the
IGST Act, 2017. The said sub-section reads as follows:
“The place of supply of services by way of transportation of goods, including by mail or
courier to, –
(a) a registered person, shall be the location of such person;
(b) a person other than a registered person, shall be the location at which such goods are
handed over for their transportation:
Provided that where the transportation of goods is to a place outside India, the place of
supply shall be the place of destination of such goods.”
1.2 The proviso was inserted in the aforesaid sub-section vide the Integrated Goods and
Services Tax (Amendment) Act, 2018 w.e.f. 01.02.2019.
2.1 Further, in terms of clause (a) of sub-section (5) of Section 7 of the IGST Act, 2017,
supply of goods or services or both are treated as an inter-state supply when the supplier is located
in India and the place of supply is outside India. Applicability of the aforesaid proviso of subsection (8) of Section 12 for determination of the PoS has given rise to doubts in respect of the
availment of input tax credit (ITC) by the recipient of such services. The same is illustrated as
under:
X is a person registered under GST in the state of West Bengal who intends to export goods to
a person Y located in Singapore. X avails the services for transportation of goods by air to
Singapore from an Air Freight Agency Z, who is also registered under GST in the state of West
Bengal.
The following may be observed in the above scenario:
(a) The PoS of the service provided by Z to X shall be the destination of goods i.e. Singapore,
in terms of the proviso to sub-section (8) of Section 12 of IGST Act;
(b) Z, the supplier of services for transportation of goods by air shall charge IGST on supply of
said service from X in terms of sub-section (5) of Section 7, read with sub-section (8) of
Section 12 of the IGST Act, 2017. However, Z while furnishing his FORM GSTR-1 may
report the place of supply as “Other Territory”.
(c) PoS being different from the location of the recipient of services, doubts arise in respect of
the availment of input tax credit by X. Also, there are doubts regarding the correct state code
under which the place of supply has to be declared in FORM GSTR-1.
(d) Section 16 of the CGST/SGST Act, 2017, which deals with eligibility and conditions for
taking input tax credit, does not restrict availment of input tax credit by the recipient located in
India if the place of supply of the said input service is outside India.
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2.2 Effect of insertion of the aforesaid proviso in determining the PoS is summarized as
under:
Prior to insertion of the proviso in Section
12(8)
After insertion of the proviso in Section 12(8)
Location of the
supplier of services West Bengal Location of the
supplier of services West Bengal
Location of the
recipient of services West Bengal Location of the
recipient of services West Bengal
Place of supply West Bengal Place of supply Singapore
Tax to be charged by
the supplier CGST + WBGST Tax to be charged by
the supplier IGST
2.3 Similar would be the case in respect of supply of services by way of transportation of goods
by a vessel from customs station of clearance in India to a place outside India w.e.f. 01.10.2022.
3.1 The aforesaid supply of services by way of transportation of goods by an aircraft or by a
vessel from customs station of clearance in India to a place outside India was exempted from IGST
from 25.01.2018 till 30.09.2018 vide Notification No . 2/2018-Integrated Tax (Rate) dated 25.01.2018.
The said exemption was extended from time to time, the last one being vide Notification No.07/2021-
IntegratedTax (Rate) dated 30.09.2021extending the exemption till 30.09.2022. No further extension
from exemption was provided for the supply of the aforesaid services after 30.09.2022. Thus, during
the period from 01.07.2017 to 24.01.2018, when the aforesaid supplies were taxable and were
supplied to a registered person, PoS was determined based on the location of such registered person
involving no dispute in availing of ITC by the said registered recipient, as the proviso to Section 12(8)
was inserted in the IGST Act, 2017 only w.e.f. 01.02.2019.
3.2 However, w.e.f. 01.10.2022, supply of services by way of transportation of goods by an
aircraft or by a vessel from customs station of clearance in India to a place outside India has become
taxable and the PoS in respect of supply of such services by a person located in India to a registered
person located in India would be outside the country as per proviso to Section 12(8) of the IGST Act,
2017. Thus, IGST would be payable on the said supply as illustrated in para 2.1 above, raising doubts
regarding availment of input tax credit by the recipient.
4. Recommendations of the Law Committee
The Law Committee deliberated on the issue in its meeting held on 05.11.2022 and
23.11.2022 and recommended the following:
a. A Circular may be issued for clarifying that input tax credit would be available to the
registered person located in India, in respect of receipt of services of transportation of goods
where supplier of the service is based in India, and where the place of supply is outside India
in terms of the proviso to sub-section (8) of Section 12 of the IGST Act, 2017 and that in such
cases, PoS is to be declared in FORM GSTR-1 on the common portal under the state code
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“96- Foreign Country”(and not under “97-Other Territory”). The draft Circular as
recommended by the Law Committee is attached as Annexure-A.
b. No useful purpose is being served by the proviso to Section 12(8) of IGST Act, 2017 inserted
w.e.f. 01.02.2019. On the other hand, the proviso is giving rise to complications in such cases
as highlighted above. Therefore, the Law Committee recommended that the proviso to
Section 12(8) of IGST Act, 2017 may be omitted.

5. Accordingly, the recommendations of the Law Committee as detailed in para 4 above, are
placed before the GST Council for deliberation and approval.
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Annexure-A
DRAFT Circular No. //2022-GST
F. No. - GST
Government of India
Ministry of Finance
Department of Revenue
Central Board of Indirect Taxes and Customs
GST Policy Wing
*****
New Delhi, Dated…….2022
To,
The Principal Chief Commissioners/ Chief Commissioners/ Principal Commissioners/ Commissioners
of Central Tax (All)/
The Principal Directors General/ Directors General (All)
Madam/Sir,
Subject: Clarification on the entitlement of input tax credit where the place of supply is
determined in terms of the proviso to sub-section (8) of Section 12 of the IGST Act, 2017 – Reg
Attention is invited to sub-section (8) of Section 12 of IGST Act, 2017, which provides for
the place of supply of services by way of transportation of goods, including by mail or courier, where
location of the supplier as well as the recipient of services is in India. As per clause (a) of the aforesaid
sub-section, the place of supply of services by way of transportation of goods, including by mail or
courier, to a registered person shall be the location of such registered person. However, the proviso to
the aforesaid sub-section which was inserted vide the Integrated Goods and Services Tax (Amendment)
Act, 2018 w.e.f. 01.02.2019 provides that where the transportation of goods is to a place outside India,
the place of supply of the said service shall be the place of destination of such goods. In such cases, as
the place of supply of service, as per the proviso to sub-section (8) of Section 12 of IGST Act, is the
concerned foreign destination and not the State where the recipient is registered under GST, doubts are
being raised regarding the availment of input tax credit of the said services by the recipient located in
India.
2. In order to clarify this issue and to ensure uniformity in the implementation of the provisions of
law across the field formations, the Board, in exercise of its powers conferred by Section 168 (1) of the
Central Goods and Services Tax Act, 2017 (hereinafter referred to as “CGST Act”), hereby clarifies the
issues as under:

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Sl. No. Issue Clarification
1. In case of supply of services by way
of transportation of goods, including
by mail or courier, where the
transportation of goods is to a place
outside India, and where the supplier
and recipient of the said supply of
services are located in India, what
would be the place of supply of the
said services?
The place of supply of services by way of transportation
of goods, including by mail or courier, where both the
supplier and the recipient are located in India, is
determined in terms of sub-section (8) of Section 12 of
the IGST Act, 2017 which reads as follows:
“(8) The place of supply of services by way of
transportation of goods, including by mail or
courier to,—
(a) a registered person, shall be the location of
such person;
(b) a person other than a registered person, shall
be the location at which such goods are handed
over for their transportation:
Provided that where the transportation of goods
is to a place outside India, the place of supply
shall be the place of destination of such goods”
Hence, in case of supply of services by way of
transportation of goods, including by mail or courier,
where the transportation of goods is to a place outside
India, and where the supplier and recipient of the said
supply of services are located in India, the place of
supply is the concerned foreign destination where the
goods are being transported in accordance with the
proviso to the sub-section (8) of Section 12 of IGST Act
which was inserted vide the Integrated Goods and
Services Tax (Amendment) Act, 2018 w.e.f. 01.02.2019.
Illustration:
X is a person registered under GST in the state of
West Bengal who intends to export goods to a
person Y located in Singapore. X avails the
services for transportation of goods by air to
Singapore from an air cargo operator Z, who is
also registered under GST in the state of West
Bengal.
In this case, the place of supply of the services
provided by Z to X is the place of destination of
goods i.e., Singapore, in terms of the proviso to
sub-section (8) of Section 12 of IGST Act.
2. In the case given in Sl. No. 1, whether
the supply of services will be treated
as inter-state supply or intra-State
supply?
The aforesaid supply of services would be considered as
inter-state supply in terms of sub-section (5) of Section
7 of the IGST Act since the location of the supplier is in
India and the place of supply is outside India. Therefore,
IGST would be chargeable on the said supply of
services.
In respect of the illustration given in Sl. No. 1. above, Z
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would charge IGST from X in terms of sub-section (5)
of Section 7 of the IGST Act, for supply of services by
way of transportation of goods.
3. In the case given in Sl. No. 1, whether
the recipient of service of
transportation of goods would be
eligible to avail input tax credit in
respect of the said input service of
transportation of goods?
Section 16 of the CGST Act lays down the eligibility
and conditions for taking input tax credit whereas,
Section 17 of the CGST Act provides for apportionment
of credit and blocked credits under circumstances
specified therein. The said provisions of law do not
restrict availment of input tax credit by the recipient
located in India if the place of supply of the said input
service is outside India. Thus, the recipient of service of
transportation of goods shall be eligible to avail input
tax credit in respect of the IGST so charged by the
supplier, subject to the fulfilment of other conditions
laid down in Section 16 and 17 of the CGST Act.
In the illustration given in Sl. No. 1 above, X would be
eligible to take input tax credit of IGST in respect of
supply of services received by him from Z, subject to
the fulfilment of other conditions laid down in Section
16 and 17 of the CGST Act.
4. In the case mentioned at Sl. No. 1,
what state code has to be mentioned
by the supplier of the said service of
transportation of goods, where the
transportation of goods is to a place
outside India, while reporting the said
supply in FORM GSTR-1?
The supplier of service shall report place of supply of
such supply by selecting State code as ‘96-Foreign
Country’ from the list of codes in the drop-down menu
available on the portal in FORM GSTR-1.
3. It is requested that suitable trade notices may be issued to publicize the contents of this Circular.
4. Difficulty, if any, in implementation of the above instructions may please be brought to the notice
of the Board. Hindi version would follow.
(Sanjay Mangal)
Principal Commissioner (GST)

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Agenda Item 08: Issues recommended by GSTN
Agenda Item 8 (1) : Proposed Changes in HR Policies and Transition Management from GSTN
1.1 The GST Council in its 27th meeting held on 4th May 2018 and the Union Cabinet in its
meeting held on 26th September 2018 decided to convert GSTN into a fully-owned Government
company. As per this decision, 50% equity of the company is held by the Central Government and the
balance 50% is held by the various States and Union Territories. The due process for the same has
been completed on 30th June 2022.
1.2 Union Cabinet in its meeting dated 26th September 2018 gave following directions in relation
to the HR policy of GSTN as a government company.
Flexible hiring & appropriate remuneration policy may be evolved by GSTN considering
criticality of the IT manpower, prevailing market compensation etc. and placed before the
GST council for its approval in due course.
1.3 The decision of the Union Cabinet was subsequent to similar directions which were given by
GST Council in its meeting dated 4th May 2018.
1.4 A transition period of five years was provided to the company to work under the old HR
policy. Accordingly, now the new HR policy is being placed before GST Council for approval.
1.5 The HR policy has been made taking into consideration that the compensation of employees
hired from the Market was fixed in the year 2014 and since then 8 years have elapsed without any
change. This has led to difficulty in hiring new talent, old executives moving out of GSTN for better
salaries and stagnation of existing executives.
1.6 GSTN followed three step process to finalize the proposal. First, the compensation
benchmarking study was done by M/s Deloitte. Second, the HR and Remuneration Committee (a SubCommittee of GSTN Board) went through the proposal and finalized its report on HR policies and
Transition Management with suitable changes. Third, the Board of GSTN approved the proposal on
HR policies and Transition Management in its 51st Meeting held on 16th Nov 2022.
1.7 Summary of the proposal approved by the GSTN Board:
1.7.1 The policy has been made by the GSTN board to cater to the needs of a lean and dynamic IT
company providing services to taxpayers and tax administrations. An executive summary of the same
is presented below for the approval of GST Council. Further, the entire document from Annex I to
Annex XI is placed for reference and approval.
1.7.2 New Grade Structure
a. The management levels are proposed to be revised to three instead of existing four (i.e.
Senior, Middle and Junior).
b. It is proposed to introduce designations prevalent in IT industry for hiring technical
manpower and corresponding equivalent non-tech designations. Both kind of designations
shall be implemented for future hiring after approval.
c. Addition of two grades is proposed i.e. 5 c – Executive / Associate Engineer at level 5 and
4 b – Associate VP/Principal Engineer at level 4 is proposed.
d. The employees of GSTN (both regular and tenured) would be placed in 5 levels and 10
grades. The levels and grades to be followed in future are shown in Table below:
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Table - 1
Level
Existing
Grades
New
Grades Designation Years of
Experience
Level 1 G1 1 Chairman
CEO 20 years +
Level 2 G2 2 EVP 18 years
Level 3 G3 3a SVP 15-18 years
G4 3b VP 14-16 years
Level 4
G5 4a Assistant VP / Chief Engineer 12-14 years
New 4b Associate VP / Principal Engineer 10-12 years
G6 4c Sr. Manager/ Technical Lead 8-11 years
Level 5
G7 5a Manager /Sr. Engineer 7-10 years
G8 5b Assistant Manager/ Engineer 5-9 years
New 5c Executive / Associate Engineer 0-5 years
1.7.3 New Pay Ranges:
a. The pay ranges applicable as per the approved proposal for employees of GSTN hired from the
market (not on Deputation) is detailed in the table below.
Table – 2 New Ranges* Annual Cost to Company (CTC) and Existing Pay Ranges
Leve
l Grade Designation Min Median Max
1
1
Chairman
CEO
93,13,000 1,46,17,000 2,09,30,000
(Old Range) 1,00,00,000 - -
2
2 EVP 58,20,000 88,59,000 1,22,40,000
45,69,396 60,92,528 76,15,660
3
3a SVP 41,57,000 61,95,000 84,41,000
33,12,902 44,17,302 55,21,503
3b VP 29,70,000 42,43,000 61,62,000
22,95,628 30,60,837 38,26,046
4 4a Assistant VP
/Chief
22,80,000 34,30,000 48,83,000
Senior Management
Grades in Level 1, 2 &3
Middle Management
Grades in Level 4
Junior Management
Grades in Level 5
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Table – 2 New Ranges* Annual Cost to Company (CTC) and Existing Pay Ranges
Leve
l Grade Designation Min Median Max
Engineer
15,02,615 20,03,487 25,04,359
4b
Associate VP
/Principal
Engineer
18,24,000 27,44,000 42,47,000
Newly introduced
Grade - - - -
4c
Sr. Manager/
Tech Lead
15,41,000 23,33,000 36,92,000
10,41,943 13,89,258 17,36,572
5
5a Manager / Sr.
Engineer 11,67,000 17,15,000 26,37,000
7,12,500 9,50,000 11,87,500
5b
Assistant
Manager/
Engineer
9,84,000 14,66,000 22,42,000
4,57,500 6,10,000 7,62,500
5c
Executive/
Associate
Engineer
7,03,000 10,86,000 16,37,000
Newly introduced
Grade - - - -
*The pay ranges shown above are inclusive of monetised benefits.
Note: The rows in white are the new pay ranges and the grey coloured rows are the existing pay
ranges. The new salary of the existing executives will be fixed as per the transition management policy
referred at para 1.7.4 (complete details at Annexure- IV)
b. The CTC figures in the Pay ranges are exclusive of Gratuity as per the provisions of the Gratuity
Act. Gratuity will be paid to regular employees only, tenured employees shall not be paid
Gratuity as the tenure shall be of 4 years.
c. Welfare Benefits viz. Medical Insurance shall be over and above the CTC.
d. The regular, tenured and employees on deputation from Government Departments on the pay roll
of GSTN will be eligible for being paid the monetised benefits. The monthly monetised
benefits/entitlements shall be in the range of 14,000 to 75,000 per month depending on the rank.
e. Hot Skills Allowance (HSA) for any Hot Skill prevalent in the IT industry and required in GSTN
may be offered as a payment of discretionary amount. Based on the market trends and
study/reports by consulting firms, the HSA list shall be revised annually. It is to be given to not
more than ten percent of the sanctioned strength. (Shall be proposed by GSTN HR and approved
by CEO, GSTN).
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1.7.4 Transition Management:
a. In future, GSTN shall hire employees on a tenure basis with each tenure being of four years.
Based on performance of an employee, a new tenure may be granted. The details of this policy
are provided under the heading recruitment guidelines.
b. Existing employees of GSTN would not be converted to tenure employee and would be
mapped to the new grade structure on as is where basis (i.e. designation) and the salary
correction shall be done by granting the following benefits:
• Transition Increment
• Progression along with an Increment to eligible employees at the time of
transition (FY 2022-23).
• Outlier Management at the time of transition (FY 2022-23).
1.7.5 Transition increment shall be based on the following table:
Table - 3
No Criteria Particulars of Transition Increment
1 All existing regular employees with more
than 4 years tenure at same grade.
Transition increment with amount equivalent to one
increment- as per the Remuneration Committee
approved percentage for corresponding management
level.
2
All existing regular employees with more
than 6 months (should have completed
probation period successfully) but less than
4 years at same grade.
Transition increment on pro rata basis - as per the RC
approved percentage for corresponding management
level.
1.7.6 Progression: The grade up to which each grade of employees in the organization can progress
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during transition is depicted in the chart below:
a. Eligibility at the time of transition for progression shall be as follows:
i. All existing employees up to Senior Manager level, with more than 4 years tenure at
same grade and having secured 18 & above merit points in past four years subject to
the condition that the employee has been awarded a rating of “A” in Financial Year
2021-22.
ii. Existing employees at Assistant Vice President level with 7 years or more tenure at
same grade having secured 32 & above merit points in the past seven years and have
been awarded a rating of “A” in the Financial Year 2021-22 to be given one time
progression to the level of Vice President.
b. Employees with less than 4 years at same grade at all levels shall not be eligible for progression
at the time of transition.
c. Employees of the Level of 2 & 3 i.e. VP, SVP & EVP shall not be eligible for progression to
next grade.
1.7.7 Outlier Management: During the time of progression in the process of transition, employees
shall be given increment so that their salaries reach the minimum of the new pay range. Similarly,
while giving either transition or progression increment, if an employee’s salary has reached or
breached the maximum, his/her salary would be capped at the maximum of the pay range or shall not
be given an increment at all.
1.7.8 Transition of NISG employees: The positions occupied by NISG employees shall be
advertised and the positions shall be filled up after interviews. If any employee on NISG payroll gets
selected he/she shall be offered a new contract of 4 years directly with GSTN as per the Recruitment
Guidelines of GSTN (Part II).They shall also be eligible for transition increment as per Table-3 above.
1.7.9 Performance Management Policy:
In the performance management policy it is envisaged that suitable changes be made in rating
scale, rating distribution and variable pay etc. which in turn shall bring meritocracy in the
organization.
a. A bell-shaped curve would be followed for rating distribution to achieve performance
differentiation and rewarding good performance while finalizing the performance ratings for
Variable Pay and Progression Increment. The distribution of various appraisal grading
proposed to be achieved is as follows:
Table - 4
Final Score in Appraisal Process Performance Rating
% of ratings to be awarded in each
group (i.e. Technology & Non
Technology)
85.1 and Above A+ 20%
70.1 to 85 A 40%
60.1 to 70 B 30%
50.1to 60 C 5%
Below 50 D 5%
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b. The employees shall be paid PLI based on their individual ratings in the performance appraisal
process after moderation of ratings to fit the bell shaped curve defined in above table. The
percentage of PLI disbursement at each rating is detailed in the following table (Table 5):
Table- 5
Final Score in Appraisal Mod. Perf. Rating Rating Description % PLI disbursement
85.1 and Above A+ Exceeds Performance
Standards
110
70.1 to 85 A Achieves Performance
Standards
100
60.1 to 70
B
Slightly Below Performance
Standards
80
50.1to 60 C Barely Achieves Performance
Standards
70
Below 50 D
Needs to Improve
Performance
50
c. Outlier Management: The following guidelines (clause d to h) would apply to those
employees whose pay does not fall within the new pay range for their respective grade after
giving the annual/progression increment.
d. If employee’s salary is below their grade minimum after giving annual/progression increment;
such employees would be given pull to minimum increment to bring the employee to the
minimum of the pay range.
e. If employee’s salary goes above their new grade’s maximum pay while giving the
annual/progression increment the following would be adopted:
f. In such cases, the quantum of annual/progression increment shall be capped at the maximum
of the grade pay range.
g. Such employees would be given minimum salary increase (i.e. 50%) based on the rating only
for next 2 years.
h. Also, in case the employee’s salary has already reached or breached the maximum pay of the
new grade while awarding progression, no progression increment would be admissible to
him/her.
1.7.10 Recruitment Guidelines for Hiring Market Recruits
Following new policy elements are proposed to be added to the existing recruitment
guidelines.
a. In future, hiring of tenured employees shall be for a contract period of 4 (four) years directly
with GSTN.
b. A balance shall be maintained between the number of regular employees of GSTN and
tenured employees of GSTN. The ratio shall be reviewed from time to time.
c. After completion of existing contract of employees (4 years), it shall be examined if the role
performed by the concerned employee is required or not. If the role is required in GSTN, it
shall be further examined if the concerned employee has rendered meritorious service before
initiating the rehiring process.
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d. GSTN proposes to engage independent Consultants for its various verticals, for a tenure of 2
years for specific projects. The remuneration of the independent consultants shall be in the
range of 60,000 to 3, 80,000.
e. A maximum of 25 number of Independent Consultants may be engaged by GSTN. The hiring
shall however, depend on the actual requirement at a particular point of time. These
engagements shall be above the sanctioned strength of 147 positions in GSTN.
1.7.11 Revision in Miscellaneous Entitlements and Leave Rules:
a. The proposal is to revise number of leave admissible as per present policy (EL 20 to 30), (SL
7 to 8), (CL 7 to 8) and accumulation limits to be revised for earned leave (30 to 50) and sick
leave (21 to 30). For serving employees, option will be given to employees for encashment of
50% of the EL balance at the end of calendar year.
b. All reimbursements viz. telephone bill, newspaper, OPD etc. are proposed to be dis-continued
and a fixed monetised value shall be paid on a monthly basis to the employees. It would form
a part of CTC but would be shown separately as monetised benefits. This amount would also
be admissible to deputationists.
c. The official tour related entitlements such as daily allowance and room tariff etc. are also
proposed to be revised to offset inflation.
1.7.12 Allowances to Deputationists:
Allowances admissible to deputationists are also proposed to be revised as they were fixed in
the year 2014. These officers are business process specialists who are needed for two reasons.
First, to convert law into a viable and programmable business process, and second, to interact
with tax administrations, tax payers and technologists as a bridge to deliver the product and
services to the satisfaction of these stakeholders.
a. Deputationists would continue to be paid their parent cadre Basic pay and DA.
b. The PLI paid to deputationists shall be replaced by an IT and Professional Allowance.
The rate shall vary between 40% - 50% of the Basic Pay plus DA.
c. There would be an increase of 10 to 20 percent in the HRA of deputationists to offset
inflation as GSTN is not an authorized office for allotment of Govt. quarters.
d. There would be an increase of ₹ 6000/- to ₹ 11000/- in the fuel allowance of
deputationists as cars in GSTN are provided only to the senior most officers. The senior
officer’s including Joint Secretary level officers shall be given an option to either avail
company car or receive ₹ 50,000/- as fuel allowance using which they can hire a car
themselves.
e. Fixed monetised amount per month in lieu of LTC and CEA shall be paid.
1.7.13 Dates of Implementation: The new HR Policy shall be implemented from 1st Jan 2023
onwards in a staggered manner, over the first quarter of the calendar year 2023.
1.7.14 Estimated Cost: The Estimated Cost of the proposed changes based on present manpower
strength in GSTN would be approximately ₹ 5.66 crore per annum which is an increase of around 12
percent in the total wage budget of GSTN which at present stands at ₹ 46.53 crore.
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1.8 Accordingly, the following proposal is placed before the GST Council for consideration
and approval:
a. The new HR policy (Annexures I to X1) approved by the GSTN Board in its 51st meeting held
on 16th Nov 2022, for which the summary has been presented in this agenda, may please be
approved.
b. The power to review and approve operational, HR and administrative matters from time to
time may kindly be delegated to the Board of GSTN as these are regular Company matters
requiring intervention based on market conditions.
c. In case of deputationists from Central and State Government, any review or change in these
approved proposals shall also need approval of the Union Finance Minister.

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Agenda Item 8 (2): Proposal for Changes in the Revenue Model of GSTN and transition to
the new Revenue Model
2.1 The present revenue model of GSTN was approved by the empowered committee of States
finance ministers in the year 2016. On GSTN becoming a government company a review of this
model was done and it was felt that there are limitations in the present model and change is required.
2.2 To briefly recapitulate, presently, GSTN receives funds from Central and State governments
based on the invoices it raises as per the present revenue model. The present Revenue Model of GSTN
has the following limitations, which need to be addressed:
a. Existing Revenue Model does not provide any funding options for the capital expenditure
post-go-live of the GST Project. This is a serious gap for an evolving project as periodic
CAPEX would be needed in the foreseeable future also. Currently, the user charges received
from the Centre and States Governments (OPEX) are being used for CAPEX also.
b. For the daily operation of GSTN, there are no provisions for minimum working capital that
should be maintained.
c. There is no clarity on the treatment of Interest earned on the surplus funds available with
GSTN, i.e. whether it should be treated as GSTN’s income or the Government’s contribution.
2.3 To address the above limitations a new Revenue Model has been designed and placed before
the Audit Committee of GSTN (a subcommittee of the GSTN Board) for deliberation and suggestions.
The Audit Committee of GSTN is chaired by the independent Director Shri Anand Sinha (Ex-Deputy
Governor of RBI). The suggestion and guidance of the committee have been incorporated in the new
revenue model. The same has approval of the GSTN management also.
2.4 The salient aspects of the four important changes proposed in the existing revenue model are
as follows:
2.4.1 Funding for Capital Expenditures
2.4.1.1 GSTN is an evolving technology platform which needs regular capital expenditure. Funding
for future capital expenditure can be arranged by multiple methods. Options for meeting the capital
expenditure of GSTN have been evaluated, and funds for capital expenditure by way of Grant-in-Aid
from the Centre and States Governments is the best option available in terms of ease of the procedure
and also the accounting treatment.
2.4.1.2 In the case of term loans from banks, the cost of Interest would be an additional cost to the
Governments. Therefore Grant in Aid for CAPEX is proposed for the approval of the GST
council. For the past i.e. till FY 2021-22, the accounting treatment for CAPEX shall not be
changed.
2.4.2 Working Capital Requirement for Smooth day-to-day Operations
2.4.2.1 For working capital requirements, GSTN will follow the current model of collecting the
Advance User Charges in future also. The Users Charges demand cycle would managed in a way
that enough funds for regular operation of six months are available at all times. Thus it will cater
to the working capital requirement of six months of operations which is presently assessed at Rs 300
crore (It will be reviewed by GSTN Board periodically).
2.4.3 Treatment of Interest Earned on Surplus Funds
2.4.3.1 GSTN proposes to adjust the Interest earned to reduce the invoice raised to the Centre
and States Governments. The Interest earned will be adjusted in the invoices based on the weighted
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average balance of Advance User Charges received from the respective Governments during the years.
For the Interest earned in the earlier years GSTN would follow the same methodology.
2.4.4 Continuity of Credit Facility
2.4.4.1 GSTN would continue to keep the Credit Facility to the tune of Rs. 500 Crore or as
assessed by the GSTN Board from the commercial banks to cater for the emergency needs of
either Capital Expenditure or Revenue Expenditure. Such Credit Facility will be backed by the
Government Guarantee from the Central Government.
2.5 The Revised Revenue Model (Annexure-A) is placed for approval of the GST Council.
Any incidental changes further needed shall be approved by the Chairman GSTN.

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Agenda Item 8 (3): Waiver of Interest on delayed receipt of Advance User Charges (AUC) from
a few states and CBIC.
3.1 As per the Revenue Model of GSTN approved by the Empowered Committee of State Finance
Ministers (EC) in its meeting held on 30th August 2016, cost incurred on the project along with
GSTN’s own expenses are shared equally by the Centre and States in the form of User Charges to be
remitted by them in two (2) installments on a half-yearly basis by 1st March and 1st September of the
year.
3.2 Further, as per Para iii (b) of the Revenue Model “Any Government that fails to pay the
Advance User Charges (AUC) before the due date will pay the defaulted amount together with interest
at the rate at which GSTN borrows money from the banks for this purpose”.
3.3 Status of Payment of AUC as on 07th December 2022
3.3.1 As per the approved Revenue Model, GSTN had raised demand for the payment of AUC to
the Central and State Governments for the FY 2020-21 and 2021-22. The status of AUC demanded
and received (as on date) is given below:
(Rs. in Crores)
Financial Year Amount demanded Amount received Amount Pending Pending States
2020-21 539.36 539.36 - NIL
2021-22 474.46 474.27 0.19 Ladakh – 0.10
Mizoram – 0.09

3.4 Waiver of Interest on late payment of AUC for FY 2020-21 and 2021-22
3.4.1 Late payment of AUC for FY 2020-21
a. The GST Council in its 42nd & 43rd meeting held on 5th /12th Oct 2020 and 28th May 2021
respectively approved the extension of payment of AUC of FY 2020-21 till 31st March 2021
and subsequently till 31st Dec 2021.
b. However, some of the States remitted the amount of AUC for FY 2020-21 after expiry of
extension period i.e.31st December 2021. No payment for FY 2020-21 is pending now.
c. The interest payable on the delay remittance of AUC has worked as Rs.0.087 crore
(Annexure-B), the interest is calculated considering the rate of interest @8.25%, the lending
rate of IDFC bank, which is as per the Revenue Model.
3.4.2 Late payment of AUC for FY 2021-22
a. For the FY 2021-22, there were no extension granted on the remittance of AUC for FY
2021-22. Accordingly, the interest on delayed remittance of AUC has been worked out
for the periods after the due date i.e. 1st May 2021 and 1st September 2021 for 1st
Instalment and 2nd Instalment respectively.
b. The details of Interest payable of Rs.15.27 Crores by the State Governments and CBIC
for delay in remitting the amount of AUC or for amount yet to be paid by State
Governments are placed at Annexure-C.
3.5 Proposal: Keeping into consideration the above and past practice of waiver of the interest
amount payable on AUC, following proposal is submitted for the kind consideration and approval of
the Council:
a. The interest payable by the defaulting Governments of Rs.0.087 Crores for FY 2020-21 due to
delayed payment of AUC till 07th December 2022 may be waived of.
b. The interest payable by the defaulting Governments of Rs.15.27 Crores for FY 2021-22 due to
delayed payment of AUC till 07th December 2022 may be waived of.
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c. It is also requested that State and Central Governments may pay their due in time so that in
future there is no need for waiver of interest by the GST Council.
Agenda Item 8 (4): Data Archival Policy for the GST System
4.1 GST data has been increasing rapidly every year on account of increase in taxpayer base,
improved compliance and introduction of new initiatives by the GST Council such as EWB & einvoice. Further, in consideration of the time limitation under Section 73 and 74, the data of 2017 has
to be retained in production up to 2025. This is a huge data which leads to GST System performance
issues and hence, a data archival policy is needed.
4.2 The issue was deliberated by the LC and a sub-committee consisting of Bihar, Gujarat,
Maharashtra, GSPTW and GSTN was formed to suggest a data archival policy for the GST system.
The recommendations of the subcommittee were submitted to LC on 24 September 2022.
4.3 In its meeting dated 12 October 2022 LC deliberated upon the recommendations of the
subcommittee and approved the archival policy. The salient features of the policy are as follows:
a. All data which may be needed under section 73 and 74 to issue SCN (Show Cause Notice), for
which the time period has not expired, will be kept in a live production environment. This data
would be available to both taxpayers and tax officers for download.
b. A separate archival data lake shall be created. After the expiry of the period in clause (a), data
will be kept in the archival data lake in the following manner:
(i) In granular form for taxpayers having cases under litigation during the period of
litigation.
(ii) In summary form for the rest of the taxpayers.
c. Further, for cases under litigation and cases not under litigation, two different formats has
been finalized and the data in such format would be removed from production and kept in a
separate data lake.
d. Data shall be deleted from the archival lake after seven years where there is no litigation and
on the conclusion of the litigation where there is litigation. The facility would be given to the
jurisdictional officers to report the conclusion of litigation.
e. Tax officers shall have access to the archival data lake. Taxpayers shall also have access to
archival data lake in cases where there is an ongoing litigation.
f. Clause (a) shall also apply to the data stored in the BIFA Lake.
4.4 The above draft data archival policy is submitted before GST Council for its kind
information.
Agenda Item 8 (5): Implementation of facility to Generate Document Identification Number in
GST Back Office for Model 2 States incompliance with the Supreme Court judgement in W.P
320 of 2022.
5.1 Hon’ble Supreme Court in its judgement of W.P. No. 320 of 2022 dated. 18.07.2022 directed
Union of India/GST council to issue advisories to the states for implementing Document
Identification Number (DIN) generation system. It was felt that the system generated Document
Identification Number (DIN) will bring transparency and accountability in the tax administrations.
5.2 In this regard, the operating para of the judgement is reproduced as under for ease of
reference:
Para 7 of Writ Petition, “ In view of the implementation of the GST and as per Article 279A of
the Constitution of India, the GST Council is empowered to make recommendations to the
States on any matter relating to GST. The GST council can also issue advisories to the
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respective states for implementation of the DIN system, which shall be in larger public
interest and which may bring in transparency and accountability in the indirect tax
administration. Therefore, we dispose of the present writ petition by directing the Union of
India / GST council to issue advisory/ instructions/ recommendations to the respective states
regarding implementation of the system of electronic (digital) generation of a DIN in the
indirect tax administration, which is already being implemented by the States of Karnataka &
Kerala. We impress upon the concerned State Tax Officers to taxpayers and other concerned
persons so as to bring in transparency and accountability in the indirect tax administration at
the earliest.
5.3 In relation to generation of DIN, it was discussed in LC on 07th September, 2022. Following
directions were received by GSTN from the law committee:
a. A facility for electronic generation of DIN for manual communications, similar to that
available with CBIC, be made available by GSTN to states.
b. An advisory may also be issued by GSTN that the reference number generated on the
documents issued on the common portal is also an identification number of the document.
GSTN may also examine providing a facility for verifying the reference number without
logging on the portal.
5.4 GSTN is in process of development of this functionality and currently it is in the
documentation for coding stage. The functionality will be having the following features:
a. The Back Office automation of GSTN regarding all important business processes uses “case
management system” and for each case generates reference numbers. Therefore, the
requirement as directed in the judgment of Hon’ble Supreme Court applies only to
communications outside the case management system.
b. In case of such manual communications (Outside case management system) from tax officers
to taxpayers, basic information would be required to be entered by the tax officer to generate a
reference number (RFN) for that communication. The reference number can be used by the
Tax administration as an identification number of the document issued manually.
c. A facility will be provided to the taxpayers on the GST portal to verify the authenticity of the
RFN mentioned in the manual communication. The facility will display the details of RFN.
d. It will work in the same way as DIN functionality of CBIC, except that it will be called RFN
instead of DIN.
5.5 The status is submitted before the GST Council as Hon’ble Supreme Court had given
the direction to the GST Council.
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Annexure - A
Revised Revenue Model of GSTN
1) Sharing of User Charges between Centre and States:
i. The GST System infrastructure managed by GSTN will be used by taxpayers, tax
administrations, banks etc. but the user charges will be paid entirely by the Central
Government and the States Governments in equal proportion i.e. 50:50 on behalf of all
the users. The States share will be apportioned to individual States in proportion to the
number of active dealers in the respective States at the end of period
(month/quarter/year). For calculation of the Advance User Charges, number of active
dealers in the States as on 31st December of the previous year or any date specified by
GSTN will be considered.
2) Operating Expenses:
i. On 1st January or a suitable date, of every financial year, GSTN will issue demand letters
for payment of Advance User Charges for the next financial year to the Central and the
States Governments.
ii. Advance User Charges will be paid by the respective Governments in two equal
instalments. First Instalment will be paid on or before 31s March or any other date as
decided by GSTN, of the financial year in which the demand letters are issued for the next
financial year. Second Instalment will be paid on or before 30th September or any other
date as decided by GSTN, of the relevant financial year for which the demand is raised.
iii. User Charge for the next year will be comprised of the following components:
a. Operating expense payments to be made to the Managed Service Provider next
financial year-(as per contract).
b. Payments of Revenue Expenditures to be made in the next financial year on account
of Change Request issued to MSP or any Service provider.
c. Payments of Revenue Expenditures to be made in the next financial year on account
of new projects/activities based on the new requirements.
d. GSTN's own estimated annual operational expenditure for the next financial years.
e. Depreciation amount as per the Company Law on the assets purchased other than
through Grant-in-Aid.
f. Amount of Interest Cost payable to the bank in the next financial year, if any.
g. Guarantee fee payable to the GoI next financial year, if any.
iv. Amount calculated above will be apportioned to Centre and States Government in the
ratio of 50:50 and portion of the States Governments will be apportioned between the
States on the basis of number of active dealers in the respective State.
v. GSTN will raise the user charges bills periodically (monthly /quarterly/half yearly/annual
) as per below mechanism:
a. Bills for the use of GST Portal and Services (the Front End):
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i. For this purpose, the periodic per dealer user charge will be calculated by
subtracting expenses on backend system as per contract from total amount of user
charges as defined above and dividing this amount by two (since this expense is to
be shared equally by the Central and State Governments) and further dividing the
amount so obtained by total number of active dealers.
ii. Bill for the Central Govt. will be raised by multiplying per dealer periodic charges
as derived above with the total number of active dealers as on the last day of the
period.
iii. Bill for each State Govt. will be raised by multiplying per dealer periodic charges
as derived above with the numbers of active dealers of the respective State as on
the last day of the period.
b. Bills for the use of Back End of GST System:
i. For this purpose, per dealer user charge will be calculated by dividing total
expenses on backend system as per contract by total number of active dealers in
Model-2 states.
ii. Bill for each Model 2 state will be raised by multiplying per dealer user charge as
derived above with the number of active dealers in that state as on the last day of
the period.
vi. The amount of these bills will be set off against the advance user charges paid by the
respective Government in the manner indicated below:
a. If the advance user charges paid by a Government exceeds the total amount of the
bills for the year, the excess amount will be adjusted against the advance payment to
be made by that Government for the next year.
b. If the advance user charges paid by a Government is less than the total amount of the
bills for the year, the amount of shortfall will be paid by that Government by 30th
April of the following year.
c. In case States/centre fails to pay the Advance users charges within stipulated time,
interest will be levied @12% per annum on the due amount.
3) Working Capital Requirements:
i. GSTN will raise demand letters for Advance User Charges post finalization of Annual
Budget for the next financial year. GSTN will request the Governments to pay Advance
User Charges in two equal instalments with the interval of six months. For smooth
functioning of the GST System Project (including e-way bill and e-invoicing), GSTN
would require sufficient funds in advance atleast for the next six months of operations.
The billing cycle would be so managed that GSTN has adequate funds for smooth
functioning for next six months.
ii. In case, requirement of additional working capital requirement arises, governments would
be approached for the additional amount.
4) Treatment of Interest earned on Surplus Funds:
i. Interest earned on the surplus funds available with GSTN will be apportioned between
the Governments and adjusted against the invoices on the basis of weighted average
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balance of Advance User Charges received from the respective Governments during the
years.
5) Funding for Future Capital Expenditures:
i. GSTN may request for funds for capital expenditure from the Centre and States
Governments based on the approved capital expenditure plan for the year in the form of
Grant-in-Aid. In case any urgent need of capital expenditure arises, which was not part of
Budget, a separate request would be made to the Governments. Such funds request would
be on the basis of 50% from Centre Government and 50% from the States Governments.
Each State’s share would be calculated based on the number of active dealer in the
respective States.
ii. Unutilized amount of Grant-in-Aid along with the interest earned thereon will be carried
forward to the next financial year and will be adjusted against the demand of next year.
6) Credit Facility from the Commercial Banks:
i. GSTN would continue to keep the Credit Facility to the tune of Rs. 500 Crore from the
commercial banks to cater the emergency needs of either Capital Expenditure or Revenue
Expenditure. Such Credit Facility would be backed by the Government Guarantee.

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Annexure-B
Calculation of Interest on pending payment of Advance User Charges for FY 2020-21 as on
07/12/2022:
Sl. No. CENTRE/STATE/ UT Interest Liability for Instalment of FY
2020-21 (Rs. In Crores)
1 Andhra Pradesh 0.084
2 Dadra & Nagar Haveli and Daman & Diu 0.000
3 Mizoram 0.000
4 Andaman & Nicobar 0.002
Total 0.087
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Annexure-C
Calculation of Interest on pending payment of Advance User Charges for FY 2021-22 as on
07/12/2022
Sl. No. CENTRE/STATE/
UT
Interest Liability for
Instalment of FY 2021-22
Interest Liability for Instalment
of FY 2021-22
First Instalment Second Instalment
1 CBIC 3.24 4.67
2 Andhra Pradesh 0.32 0.18
3 Arunachal Pradesh 0.01 0.01
4 Assam - 0.05
5 Bihar 0.39 0.23
6 Chhattisgarh 0.03 -
7 Goa 0.03 0.03
8 Gujarat 0.23 0.40
9 Haryana 0.06 0.03
10 Himachal Pradesh 0.07 0.03
11 Jharkhand 0.16 0.10
12 Jammu & Kashmir - 0.03
13 Karnataka 0.09 0.02
14 Kerala 0.24 0.14
15 Ladakh 0.007 0.005
16 Madhya Pradesh 0.08 0.04
17 Maharashtra 0.41 0.18
18 Manipur 0.01 0.01
19 Meghalaya 0.013 0.003
20 Mizoram 0.01 0.01
21 Nagaland 0.01 0.01
22 Punjab 0.29 0.17
23 Sikkim 0.002 0.004
24 Tamil Nadu 0.42 0.15
25 Tripura - 0.01
26 Telangana 0.36 0.21
27 Uttar Pradesh 0.55 0.77
28 Uttarakhand 0.003 0.028
29 West Bengal 0.04 0.06
30 Chandigarh 0.011 0.002
31
Daman & Diu and
Dadra & Nagar
Haveli
0.001 0.003
32 Delhi 0.15 0.39
33 Puducherry 0.003 0.002
34 Andaman & Nicobar 0.001 0.004
35 Lakshadweep 0.0004 0.0002

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Total 7.26 8.02
Index of Annexures I to XI
Annexure No Topic
I Presentation Before the Board
II Background to HR Policy Change
III Compensation and Remuneration policy
IV Transition Management
V Performance Management Policy
VI Recruitment Guidelines for Hiring Market Recruits (Part-II)
VII Engagement of Independent Consultants
VIII Leave Rules
IX Miscellaneous Entitlements
X Compensation rules for deputationists
XI Dates of implementation & Difficulty Removal
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Annexure-I

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Annexure – II
Background, Rationale for the changes in the proposed HR Policy, Financial Impact of Revision
in HR Policies and Existing and Proposed Grade Structure.
1. Background
1.1 The GST Council in its 27th meeting held on 4th May 2018 and the Union Cabinet in its
meeting held on 26th September 2018 decided to convert GSTN into a fully-owned Government
company with 50% equity of the company to be held by the Central Government and the balance 50%
to be held by the various States and Union Territories. The transition was completed on 30th June
2022.
1.1.1 Extracts from the minutes of the decision by Union Cabinet on 26th September 2018 are
given below:
1.1.2. Flexible hiring & appropriate remuneration policy may be evolved by GSTN within the next
five years considering criticality of the IT manpower, prevailing market compensation etc. and placed
before the GST council for its approval in due course.
1.1.3. GSTN is not a CPSE because share of Centre is 50% i.e. less than 51 %. Confirmation in this
regard has been received from DPE. Hence, it is proposed that all decisions would be approved by
GSTN Board and GST Council.
1.1.4. The Board of GSTN in its meeting dated 30th June 2022 decided that the HR and Remuneration
committee shall jointly deliberate on the HR Policy of GSTN and recommend the policies for the
approval of the Board. Accordingly, the Committee deliberated on the HR Policy on 15th & 23rd
September 2022. The salient features of the policy as approved by the Committee is detailed in the
following slides for approval.
2. Rationale for the proposed changes in the HR Policy
2.1 Attrition: The compensation of employees hired from the Market had been fixed in the year
2014 and since 8 years have elapsed without any change, the salary ranges have become redundant.
The fallout can be seen from the attrition data given below which is progressively increasing over the
years:
Table-1
Attrition data 2018-19 2019-20 2020-21 2021 - 22 2022-23
(Up to Sep 2022)
Market Hire
Attrition 7 4 11 14 10
Attrition % 6 5 10 14 15
2.2 Stagnation :Besides the above, most of the employees who have joined GSTN in the years
2014/2015 are still in their respective grades as there is no provision for career progression. At present
it is also getting difficult to hire technical manpower in GSTN in the existing grades and pay ranges.
Therefore, a revision is warranted.
3. Financial Impact of Revision in HR Policies
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a. Total Revenue budget of GSTN for 2022-23 – 602.75 Crore
b. Total Salary Budget (SB) of GSTN for 2022-23 (Excluding Deputation Salary) – 35.85 Crore
(i) GSTN payroll 15.42 + (ii) Third Party Payroll 17.85 + (iii) Welfare Benefits 2.58)
c. Total increase in wage bill on account of proposed revision – 4.89 Cr
d. Management fee savings from discontinuation of NISG – 0.88Crore (Annual)
e. Net percentage increase in wage bill (Excluding Deputation Salary) – 11.18%
f. Salary budget for employees on deputation(FY 2022-23) – 10.67 crore
g. Total increase in wage bill on account of revision in allowances for deputationists – 0.56 Cr
h. Total Present Salary Bill (Market + Deputation) - 46.52 Cr
i. Total increase in expenditure of the filled positions (4.89+0.56) i.e. (S.no. 3+ 7) - 5.45 Cr
j. Total expected increase in expenditure if all vacancies were filled – 8.30 Cr
k. Total percentage of increase in wage bill with the filled positions (Market + Deputation) -
11.71%
l. Total percentage of increase in wage bill hypothetically, if all vacancies are filled - 17.84%
m. Revised Salary bill would be (46.52 + 5.45) - 51.97 Cr
3.1 For kind consideration: The decision on issues involved should be seen from good HR
Practice and not from the perspective of budget, as the expenditure involved on the issue is quite low.
The effort should be to hire and retain best talent from market as well as deputation.
Note: (All calculations are based on person in position as on 1st July 2022)
4. Existing and Proposed Grade Structure
4.1 The grade and designation structure was defined for employees sourced through both
deputation and through private channels in the 8th Board meeting in 2014 as shown alongside.
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Table-2
i. The management levels are proposed to be revised to three instead of existing four
keeping in view the industry practices in the IT sector.
ii. It is proposed to introduce designations prevalent in IT industry for hiring technical
manpower and corresponding equivalent non-tech designations. Both kind of
designations shall be implemented for future hiring after approval.
iii. Addition of two grades is proposed i.e. 5 c – Executive / Associate Engineer at level 5
and 4 b – Associate VP/Principal Engineer at level 4 in line with generally accepted
designations in the industry.
iv. The existing and proposed grade structure as well as pay ranges is detailed in the
following paragraphs.

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5. Existing and Proposed Grade Structure
Table - 3
Level
Existing
Grades
Proposed
Grade Designation Years of Experience
Level 1 G1 1 Chairman & CEO 20 years +
Level 2 G2 2 EVP 18 years
Level 3 G3 3a SVP 15-18 years
G4 3b VP 14-16 years
Level 4 G5 4a Assistant VP / Chief Engineer 12-14 years
- 4b Associate VP / Principal
Engineer
10-12 years
G6 4c Sr. Manager/ Technical Lead 8-11 years
Level 5 G7 5a Manager /Sr. Engineer 7-10 years
G8 5b Assistant Manager/ Engineer 5-9 years
- 5c Executive / Associate
Engineer
0-5 years
5.1 Existing and Proposed Pay Ranges
5.1.1. Existing pay ranges in Table 1 were approved 8 years ago and market aligned pay ranges are
in Table 2 below (Figures represent the Yearly Emoluments – CTC per annum). The “Broad Pay
Range Approach” was being followed in GSTN which is proposed to be retained as all the levels
encompass different roles and therefore the salaries are paid to each role based on IT industry
benchmarking and last drawn salary of individual incumbent.

Junior Management:
Grades in Level 5
Middle Management:
Grades in Level 4
Senior Management:
Grades in Level 1, 2 &3
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Table -4
Existing Pay Ranges
Level Grades Designation Min Max
L1
G-1 Chairman Person Specific
G-1 CEO 1,00,00,000 (Person specific)
L2 G-2 EVP 45,69,396 76,15,660
L3
G-3 SVP 33,12,902 55,21,503
G-4 VP 22,95,628 38,26,046
L4
G-5 AVP 15,02,615 25,04,359
G-6 SM 10,41,943 17,36,572
L5
G-7 Manager 7,12,500 11,87,500
G-8 AM 4,57,500 7,62,500

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Table - 5
Proposed Pay Ranges
Level Grade Designation Min Max
Level 1 1 CEO 93,13,000 2,09,30,000
Level 2 2 EVP 58,20,000 1,22,40,000
Level 3
3a SVP 41,57,000 84,41,000
3b VP 29,70,000 61,62,000
Level 4
4a Assistant VP / Chief Engineer 22,80,000 48,83,000
4b Associate VP / Principal Engineer 18,24,000
42,47,000
4c Sr. Manager/ Technical Lead 15,41,000 36,92,000
Level 5
5a Manager / Sr. Engineer 11,67,000 26,37,000
5b Assistant Manager/ Engineer 9,84,000 22,42,000
5c Executive/ Associate Engineer 7,03,000 16,37,000
****

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Annexure III
Compensation and Remuneration Policy
1. APPLICABILITY:
The changes in the grade structure and compensation structure approved by the Board shall be
effective from the date proposed in Annexure XI.
2. GRADE STRUCTURE
2.1. The employees of GSTN (both regular and tenured) would be placed in 5 levels and 10
grades. The levels and grades to be followed in future are shown in Table-1.
2.2. The designations for technology and non- technology roles are also shown below which shall
be followed henceforth.
Table - 1
Level
Existing
Grades New Grades Designation Years of
Experience
Level 1 G1 1 Chairman
CEO 20 years +
Level 2 G2 2 EVP 18 years
Level 3
G3 3a SVP 15-18 years
G4 3b VP 14-16 years
Level 4
G5 4a Assistant VP / Chief Engineer 12-14 years
New 4b Associate VP / Principal Engineer 10-12 years
G6 4c Sr. Manager/ Technical Lead 8-11 years
Level 5
G7 5a Manager /Sr. Engineer 7-10 years
G8 5b Assistant Manager/ Engineer 5-9 years
New 5c Executive / Associate Engineer 0-5 years

Middle Management
Grades in Level 4
Junior Management
Grades in Level 5
Senior Management
Grades in Level 1, 2 &3
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2.3. Definition of responsibilities at each level has been defined in the table-2 below:
Table - 2
Level Profile of a typical role in the Grade at this Level
1 Provides strategic leadership. Visioning, Goal setting & Strategy Formulation. Works with
the Board and the GST council to define the future for the organisation and takes
accountability for the goals defined
2 Provides operational leadership and drives goals, objectives, and culture. Contributes
towards strategy formulation. Integrates and leads complex units and functions. Develops
operating frameworks for the respective units
3 Requires high domain exposure with direct and indirect leadership. Involved in designing
operational processes, structures, systems or methods for strategy implementation. Would
be responsible for delivery. Leads complex processes and contributes to business through
personal, professional and technical leadership
4 Routine kind of work, requires domain expertise or high generalist exposure. May warrant
some kind direct or indirect leadership. Involved highly in implementation. Oversee,
coordinate and control functional processes towards departmental achievement of targets.
Acts mostly as individual contributor or first line manager
5 Provides support in day-to-day operational activities. Works as individual contributor.
Undertakes standardized routine processes and follow detailed instructions to complete the
tasks assigned
3. Compensation Structure
3.1. The broad details of the constituents of CTC are enumerated below:
3.1.1. Fixed Base Salary : Basic Pay (30-40% of CTC)
3.1.2. Fixed Cash Allowances:
i. HRA – 50% of Basic Salary in metro cities, 40% of Basic Salary in non-metro cities
ii. PF – 12% of Basic Salary.
iii. LTA – 8.33% of Basic Salary.
iv. Special Allowance payable as a balancing amount.
v. Conveyance Allowance – Payable as a fixed amount of ₹ 19,200/- per annum for the levels
up to Manager in GSTN.
vi. Child Education Allowance – Payable as a fixed amount of 2,400/- per annum.
vii. Medical Reimbursement – Payable as a fixed amount of 15,000/- per annum.
viii. Monetised benefits as detailed in Para 4.1.2 (Though included in CTC shall not be
considered for any increments.)
ix. Fuel Allowance and Driver’s Salary is payable as fixed amounts to Senior Manager and
above grades. Employees eligible for Fuel Allowance & Driver Salary can either claim
reimbursement by producing bills or claim amounts without bill on payment of income tax.
The amounts payable on this account grade-wise is shown in the table below:
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Table – 3
Grade Designation
Fuel Allowance
Per Month (Rs.)
Driver Salary
Per Month (Rs.)
1 Chairman
CEO
20,625 12,000
2 EVP
3a SVP
15,000 10,000
3b VP
4a Assistant VP / Chief Engineer
12,692 8,000 4b Associate VP / Principal Engineer
4c Sr. Manager/ Technical Lead
5a
5b
5c
Manager /Sr. Engineer
Assistant Manager/ Engineer
Executive / Associate Engineer Conveyance allowance of 19,200 per annum
3.1.3. Variable Pay: Performance Linked Incentive (PLI) is payable as a percentage of CTC and it
will be fully variable. The percentage of variable pay will be 10%, 15% & 20% at Junior, middle and
senior level respectively. PLI i.e. the variable portion of the CTC shall be disbursed after completion
of the performance appraisal process. The methodology to be adopted for release of annual increments
and payment of PLI are described in the Performance Management Policy.
3.1.4. Other components: There would be certain other benefits payable to the employees which
would not form a part of the CTC as this would be paid as per Acts and Rules in vogue. Besides,
certain welfare measures provided to the employees would also not form a part of the CTC. The
details in this regard is given below:
a) Gratuity shall be over and above the CTC to be paid as per the Payment of Gratuity Act. This
will be only applicable for the regular employees of GSTN, as future hiring would be on
contract for a tenure of four years and would not come under the ambit of Gratuity.
b) Insurance premium shall be exclusive of the CTC.
c) Hot Skills Allowance (HSA) may be offered while hiring the candidate for the required skill
set as the percentage of Basic Pay. It is a discretionary amount which shall be given for the
tenure of 4 years.
i. The eligibility for HSA will be for individuals who not only possess a hot skill but also use
that skill at least 50% of the time when performing their jobs.
ii. HSA would not be taken into consideration while calculating the ceiling for freezing the
salary.
iii. HSA will be decided at the time of hiring the candidate for the required skill set, if it is a Hot
Skill for GSTN.
iv. Individuals must continue securing ‘A+’ or ‘A’ rating to maintain their eligibility for HSA for
the entire tenure.
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v. HSA will not be a part of CTC for the purpose of annual increments, PLI and retiral benefits
like PF.
vi. Based on the market trends and study/reports by consulting firms, the HSA list shall be
revised annually. It is to be given to not more than ten percent of the sanctioned strength based
on the criteria listed above (Shall be proposed by GSTN HR and approved by CEO).
The list of Hot Skills presently identified by the Consulting firms in the context of GSTN is given in
below table:
Table - 4
d) Joining Bonus may be offered while hiring the candidate. It is a discretionary payout
negotiated with the candidate and not necessarily to be paid to all. This shall be paid based on
the need of GSTN to hire and retain critical resources for its functioning. It may be recovered
if the new employee quits early.
i. The value of joining bonus to be paid level wise would be in the range of INR 1,00,000 to
INR 3,50,000 as shown in Table below:
Table - 5
Level Grade Designation Joining Bonus
1 1
Chairman
CEO
-
2 2 EVP 3,50,000
3
3a SVP 3,00,000
3b VP 3,00,000
4
4a Assistant VP / Chief Engineer
2,50,000
4b Associate VP / Principal Engineer
4c Sr. Manager/ Technical Lead 2,00,000
5
5a Manager /Sr. Engineer
1,50,000
5b Assistant Manager/ Engineer
5c Executive / Associate Engineer 1,00,000
Identified Hot Skills for GSTN Percent of Basic Pay
BIFA - Scrum Master 18%-20%
BIFA - Architects
(platform & data)
18%-20%
BIFA - UI/UX 15%-17%
BIFA - Data Science Lead 15%-17%
Business Analyst 12%-14%
Data Science Lead 15%-17%
Data Modelers 15%-20%
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ii. The employee would have to serve the organization for a minimum period of 2 years
failing which he/she would have to return the joining bonus. The amounts of recovery on
this account is given in the table below:
Table - 6
Tenure with GSTN Percentage recovery of the
bonus
Less than 6 months 100%
6 months – 1 year 75%
1 – 1.5 years 50%
1.5 – 2 years 25%
Note: The payment of Hot skills Allowance and Joining bonus shall be decided on individual basis by
the Management of GSTN depending on the business need or requirement for certain kinds of skills at
particular point of time. All the factors for recruitment of a particular resource viz. urgency of GSTN
to hire for a particular position, the criticality of the role in GSTN etc. would be considered critically
in order to arrive at the decision whether the hot skills allowance and/or joining bonus would be paid
to a particular candidate. There would be no bar to pay both the Hot Skills Allowance and the Joining
Bonus to the same candidate in case he/she is very deserving as decided by the Management of GSTN.

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4. PAY RANGES
The pay ranges applicable for employees of GSTN hired from the market has been detailed in the
table below.
Table – 7 New Pay Ranges *- Annual Cost to Company (CTC)
L
e
v
e
l
Grade Designation Min P25 Median P75 Max
1
1
Chairman
CEO
93,13,000 1,19,61,000 1,46,17,000 1,79,38,000 2,09,30,000
2 2 EVP 58,20,000 70,78,000 88,59,000 1,06,77,000 1,22,40,000
3 3a SVP 41,57,000 49,84,000 61,95,000 74,15,000 84,41,000
3b VP 29,70,000 34,85,000 42,43,000 53,34,000 61,62,000
4 4a Assistant VP
/Chief
Engineer
22,80,000 26,68,000 34,30,000 41,32,000 48,83,000
4b Associate VP
/Principal
Engineer
18,24,000 21,69,000 27,44,000 35,95,000
42,47,000
4c Sr. Manager/
Tech Lead
15,41,000 18,93,000 23,33,000 30,98,000 36,92,000
5 5a Manager / Sr.
Engineer 11,67,000 14,12,000 17,15,000 22,28,000 26,37,000
5b Assistant
Manager/
Engineer
9,84,000 11,20,000 14,66,000 18,45,000 22,42,000
5c Executive/
Associate
Engineer
7,03,000 8,48,000 10,86,000 13,18,000 16,37,000
*The pay ranges shown above are inclusive of monetised benefits.
4.1. The CTC figures in the Pay ranges are exclusive of Gratuity. Gratuity will be paid to regular
employees only, tenured employees shall not be paid Gratuity.
4.1.1 Welfare Benefits
i. Group Medical Insurance
ii. Group Term Life Insurance
iii. Group Personal Accidental Insurance
These would be over and above the CTC as a welfare measure for the employees of GSTN.
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4.1.2 Monetised Benefits Payable Monthly:
a) The regular, tenured and employees on deputation from Government Departments on the pay
roll of GSTN are eligible for being paid the monetized benefits detailed in the table below on
a monthly basis.
Table – 8
Designations
(Grades)
Existing Grades
(Pay Level- Deputationists)
Monthly monetised
benefits payable*
Chairman (1) G1 75000
CEO (1) G1 (Level 15) 70000
EVP (2) G2 (Level 14) 65000
SVP (3a) G3(Level 13) 60000
VP (3b) G4(Level 12) 50000
Assistant VP/Chief Engineer (4a) G5(Level 11) 40000
Associate VP/ Principal Engineer (4b) (Level 10+ 5 yrs exp in that level) 33000
Sr. Manager /Tech Lead (4c) G6(Level 10) 28000
Manager / Sr. Engineer (5a) G7(Level 9) 22000
Assistant Manager / Engineer (5b) G8(Level 8) 17000
Executive / Associate Engineer (5c) G9 (Level 7) 14000
*The monthly monetised benefits/entitlements comprise of the following:
• Mobile Handset
• Mobile/Broadband Bill
• Newspaper/Periodicals
• Hospitality
• Health & Wellness Allowance (OPD)
• Office Bag
Hereafter, the reimbursements on the above elements shall be discontinued.
b) The amounts mentioned in the above table would be payable to the employees on a monthly
basis and would form a part of CTC but would be shown separately as monetised benefits.
c) CTC including the monetised benefit shall be capped at the maximum of the pay range of the
concerned employee. While granting annual increment or progression increment, monetised
benefits shall not be taken into account.
5. The Pay, Allowances and Monetised Benefits shall be revised once there is a gap of 33 percent
based on the market trends and study/reports by consulting firms. Revision shall be approved by
the Board of GSTN.
****
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Annexure IV
Transition
1. Applicability: The transition management plan shall be implemented from the date of
approval by the GST Council.
1.1 Purpose & Scope:
1.1.1. Since the company is being converted into a Government owned company, the future hiring has
to be appropriately aligned so as to maintain the flexibility for GSTN to hire appropriate talent for the
Company. Existing employees would also be mapped to the new grade structure and the salary
correction shall be done by giving the following:
a. Transition Increment
b. Progression along with an Increment to eligible employees at the time of transition (FY
2022-23).
c. Outlier Management at the time of transition (FY 2022-23).
1.1.2. The existing employees on the payroll of GSTN shall be transitioned into the new grade
structure on as is and where is basis (i.e. by designation).
1.1.3. The monetised benefit shall not be considered while arriving at new pay during transition and
would be included in the CTC even in cases where the employee’s pay reaches or breaches the
maximum of the pay range. However, after transition the amount would be considered as part of CTC
and policy of outlier management shall be applicable thereafter.
1.1.4. The positions occupied by NISG employees shall be advertised and the positions shall be filled
up after interviews. If any employee on NISG payroll gets selected he/she shall be offered a new
contract of 4 years directly with GSTN as per the recruitment guidelines of GSTN. The employees on
NISG payroll who are not selected in the interview process shall either be continued till their existing
contract with NISG completes or may be given three months’ notice as per the contract of the
employees with NISG.
1.1.5. Hiring through NISG may not be continued in future.
1.2 New Grade Structure and Transition to new grades:
New pay band, grade wise is provided in (Table -1) with the following salient features:
1.2.1 Two new grades would be introduced in GSTN in order to align the grades to the Industry
practices. These are: Grade 5 c – Executive / Associate Engineer at level 5 and Grade 4 b –
Associate VP at level 4. The grades are detailed in Table-1 below. The designations for Tech &
non- tech levels & grades have also been given in Table-1 below.
1.2.2 There will be a total of 5 levels and 10 grades in the Company. The roles that would be
performed by each level of employee in the Company has been defined in Table -2 below.
Table - 1
Levels Existing
Grades
New
Grades
Designations
1 G1 1 Chairman & CEO
2 G2 2 EVP
3 G3 3a SVP
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G4 3b VP
4 G5 4a Assistant VP / Chief Engineer
- 4b Associate VP / Principal Engineer
G6 4c Sr. Manager / Technical Lead
5 G7 5a Manager /Sr. Engineer
G8 5b Assistant Manager/ Engineer
- 5c Executive / Associate Engineer
Table - 2
Level Profile of a typical role in the Grade at this Level
1 Provides strategic leadership. Visioning, Goal setting & Strategy Formulation. Works with the Board
and the GST council to define the future for the organisation and takes accountability for the goals
defined
2 Provides operational leadership and drives goals, objectives, and culture. Contributes towards strategy
formulation. Integrates and leads complex units and functions. Develops operating frameworks for
the respective units
3 Requires high domain exposure with direct and indirect leadership. Involved in designing operational
processes, structures, systems or methods for strategy implementation. Would be responsible for
delivery. Leads complex processes and contributes to business through personal, professional and
technical leadership
4 Routine kind of work, requires domain expertise or high generalist exposure. May warrant some kind
of direct or indirect leadership. Involved highly in implementation. Oversee, coordinate and control
functional processes towards departmental achievement of targets. Acts mostly as individual
contributor or first line manager
5 Provides support in day-to-day operational activities. Works as individual contributor. Undertakes
standardized routine processes and follow detailed instructions to complete the tasks assigned

Senior Management
Grades in Level 1, 2 &3
Middle Management
Grades in Level 4
Junior Management
Grades in Level 5
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1.3 Compensation and remuneration guidelines for future hiring and transition
1.3.1. The guidelines for compensation and remuneration will be applicable as per Annexure III
(Compensation & Remuneration Policy of GSTN) for the purpose of transitioning the existing
employees to new grade structure and pay ranges.
1.3.2. The existing practice in GSTN is that gratuity forms a part of the CTC for regular employees
which is paid at the time of their exit. However, after the transition, as per the new policy their
compensation structure shall be modified such that gratuity shall be excluded from CTC to comply
with the law. In case employees are on boarded for a period of four years, Gratuity shall not be
applicable as per the Act.
1.3.3. It is also proposed to pay LTA as 8.33% of Basic salary, instead of current practice of paying
fixed amounts.
1.3.4. Performance Linked Incentive (PLI) will be fully variable and impacted by the performance
rating (bell-shaped curve) as opposed to existing practice of giving 50% of variable pay at the end of
Financial Year without assessment. The percentage of variable pay will be 10%, 15% & 20% at
Junior, middle & senior levels respectively.
1.4 Process and methodology of transition increment:
1.4.1. The compensation & remuneration policy has not been revised since 2014 and employees who
have spent a considerable amount of time in GSTN have stagnated in their current roles due to lack of
revision in pay ranges. A transition increment shall be given to all the regular employees as per the RC
approved percentage for FY 2021-22 (i.e. 13.13, 10.6, 9.7 at the junior, Middle and Senior
management levels respectively). The increment at the time of transition shall be given to the
employees considering need for the salary correction so that the employees are brought into the new
pay ranges. The details of how employees would be brought into the pay ranges are detailed in the
subsequent paragraphs.
1.4.2. The tenure based scenarios of existing employees who will be eligible for transition increment
is shown in following Table:
Table -3
No Criteria Particulars of Transition Increment
1 All existing regular employees with more
than 4 years tenure at same grade.
Transition increment with amount equivalent to
one increment- as per the RC approved
percentage for corresponding management level
-refer para 1.4.1.
2
All existing regular employees with more
than 6 months (should have completed
probation period successfully) but less
than 4 years at same grade.
Transition increment on pro rata basis* - as per
the RC approved percentage for corresponding
management level -refer para 1.4.1.
*The calculation of the effective increment on pro rata basis shall be based on the below formula:
Transition increment = {Tenure (In Months) / 48 Months} x {RC approved increment percentage for
the respective management level}
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1.4.3. The transition increment shall be given to all the employees of GSTN as per above Table.
However, transition increment shall be restricted to the maximum of the pay range of the respective
employee.
1.4.4. The process of recruiting employees on NISG payroll to GSTN Payroll as tenured
employees
i. The positions occupied by NISG employees in GSTN shall be advertised. The employees
currently working in GSTN will also be given the option to apply for advertised vacancies.
This process shall be completed within the next one or two months as per the Recruitment
Rules of GSTN and actual induction shall be done after the approval of the GST Council.
ii. If any employee is selected he/she shall be offered a new contract for 4 years on GSTN
payroll.
iii. If any employee is not selected he/she may be relieved after giving three months’ notice or
allowed to be continued till completion of his contract with NISG.
iv. Progression of NISG executives only after contract with GSTN. The period worked under
NISG to be considered relevant experience for the purpose.
v. During the recruitment process, if any NISG employee is selected for any position to be
recruited in GSTN as tenured employee, he/she shall be given one transition increment
proportionately as detailed in Para 1.4 above. However, if any external candidate is selected
for the position, he/she shall be inducted as per the recruitment guidelines of GSTN.
1.4.5. Consultants hired on GSTN payroll prior to implementation of Recruitment Guidelines would
be offered, on a case to case basis, a new contract with a tenure of 2 years as per the new guidelines of
hiring consultants for short tenure at appropriate level when their existing contract gets over.
2. Career Progression during transition
2.1. Introduction:
During the formation of GSTN as a Section 8 company and thereafter during the initial phase of its
functioning, career progression was not envisaged as the project was in its nascent stage. After
conversion of GSTN into a fully owned Government company and also due to the fact that the GST
System has now stabilised substantially, keeping in view that the employees hired laterally who
joined the company in its initial phase have completed more than 6/7 years in the company without
any career progression, the career progression for employees on regular employment as well as
tenured employees have been contemplated during the transition process of the company from a
Private Limited company to a fully owned Government company. The details and methodology of
career progression is detailed below:
2.2. Salient Features:
2.2.1. The progression shall be based on the eligibility criteria consisting of performance and
minimum service at the same grade.
2.2.2. On the basis of defined eligibility criteria at each grade existing employees shall be considered
for progression, which will allow an employee to move to one grade above if he/she meets the
eligibility criteria of spending 4 years tenure or more at same grade (for employees up to Senior
Manager grade), 7 years or more at the same grade (for employees at Assistant VP grade) with top
performance ratings.
2.2.3. There would be change in designation as per the proposed grade structure.
2.2.4. The eligible employees shall be given one increment as approved by the Remuneration
Committee for the financial year 2021-22 for the current grade (i.e. grade from which the employee is
being progressed) as a progression increment during transition.
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2.2.5. The eligible employees up to Senior Manager will be given one progression increment on
progression to the next grade after completion of four years (Progression policy is explained later).
2.2.6. The eligible employees at Assistant Vice President Grade will be given one progression
increment on progression to the next grade (VP) if they have completed seven years in the
organization.
2.2.7. The employees at Level 2 & 3 (VP, SVP and EVP) will not be given any progression to the
next grade.
2.2.8. The effect of progression increment shall be given as per the date approved by the GST
Council for implementing the transition.
2.2.9. Irrespective of progression given to individual employees to higher grade, the level wise
sanctioned positions approved initially by the Board will be followed for the purposes of filling the
position. eg. An AVP might be given a progression to the level of VP. However, on his resignation the
post will be filled up as AVP.
2.2.10. The grade up to which each grade of employees in the organization can progress during
transition is depicted in the chart below:
2.3. Merit Points:
Merit points would be considered for preparing the list of eligible employees for progression as given
in Column (3) in following Table.
Table – 4
Existing
Rating Scale
(1)
Rating
Description
(2)
Merit
Points
(3)
A Exceeds Performance Standards 5
B Achieves Performance Standards 4
C Slightly Below Performance Standards 3
D Barely Achieves Performance Standards 2
E Needs to Improve Performance 1
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2.4. Eligibility Criteria for one time progression at the time of transition:
Table – 5
Sl.
No.
Employee to be progressed Particulars of Progression
1
All existing employees up to Senior
Manager level, with more than 4 years
tenure at same grade and having secured
18 & above merit points in past four
years subject to the condition that the
employee has been awarded a rating of
“A” in Financial Year 2021-22.
i. Progression to the next grade in the proposed
grade structure with amount equivalent to
one increment.
ii. The rate of the progression increment would
be the percentage approved by the
Remuneration Committee for the grade from
which the employee is being progressed.
iii. In total such employees shall get grade
change and two increments (i.e. transition
and progression increment).
2
Existing employees at Assistant Vice
President level with 7 years or more
tenure at same grade having secured 32
& above merit points in the past seven
years and have been awarded a rating of
“A” in the Financial Year 2021-22 to be
given one time progression to the level of
Vice President.
i. Progression to Vice President Level in the
proposed grade structure with amount
equivalent to one increment.
ii. The rate of the progression increment would
be the percentage approved by the
Remuneration Committee for the grade from
which the employee is being progressed.
iii. In total such employees shall get grade
change and two increments (i.e. transition
and progression increment). Such employees
shall be required to sign an undertaking that
the administrative reporting after progression
may continue to an employee of the same
grade (i.e. VP).
iv. Role and responsibilities shall continue to be
the same in most cases.
3 Employees with less than 4 years at same
grade at all levels No progression is proposed.
4. Employees of the Level of 2 & 3 i.e. VP,
SVP & EVP No progression is proposed.
2.5. Salary & Emoluments
Pay, Allowances & benefits which are linked to the pay drawn by an employee at higher grade shall
become applicable after the progression to next grade.
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2.6. Outlier Management at the time of transition: The following guidelines would apply to
those employees whose pay does not fall within the new pay range for their respective grade after
giving the progression increment. This could either be below the minimum of the pay range or above
the maximum of the pay range.
2.6.1. If employee’s salary is below the new grade’s minimum pay after giving progression
increment: Such employees would be given pull to minimum increment to bring the employee to the
minimum of the pay range.
a) Pull to minimum increment shall be given at the time of transition to only those
employees who are progressing to the next grade.
b) Pull to minimum increment at the time of progression during transition shall be looked
into with reference to the minimum of the new pay range to which the employee is being
progressed.
2.6.2. If employee’s salary goes above their new grade’s maximum pay while giving the
progression increment: In such cases the quantum of progression increment shall be capped at the
maximum of the new grade of the employee. Also, In case the employee’s salary has already reached
or breached the maximum pay of the new grade while awarding progression, no progression increment
would be admissible to him/her.
****

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Annexure - V
Performance Management Policy
1 Applicability: The new performance management policy and its terms & conditions shall
apply from FY 2022-23.
The management by objectives (which essentially means that Manager and the employee agree on
specific performance goals and then develop a plan to reach the same) approach shall be followed for
Performance Management System for existing employees i.e. the regular and tenured employees on
the pay rolls of GSTN.
1.1 Performance Planning
1.1.1. Goal setting process: At the beginning of the financial year the Departmental Head should
communicate Goals/Objectives/ Key Result Areas (KRAs) to the employees through the immediate
reporting manager at all levels.
a) Ideally the key result areas and work output should be defined at this stage. Any
modifications in the KRAs should be completed at this stage.
b) This is to be done through discussions and by keeping in view the individual role objective
/function.
c) The KRAs should be measurable & objective.
1.1.2. Components of Performance Assessment: There shall be a prescribed performance appraisal
form for all levels of employees in GSTN and the same shall be used for assessing the performance as
per the defined parameters in the form. The prescribed percentages for assessment of each employee is
given below:
a) Key Result Areas - This aspect would be accorded 70% weightage.
b) Assessment of Functional Competencies – This aspect would be accorded 15%
weightage
c) Assessment of Behavioural Competencies - This aspect would be accorded 15%
weightage
1.1.3. Performance Rating Description: Overall ratings must be provided against the following
five point rating scale.

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Table - 1
Final Score in Appraisal
Process
Performance
Rating Rating Description
85.1 and Above A+ Exceeds Performance Standards
70.1 to 85 A Achieves Performance Standards
60.1 to 70 B Slightly Below Performance Standards
50.1to 60 C Barely Achieves Performance Standards
Below 50 D Needs to Improve Performance
1.1.4. Performance Management Committee: A Performance Management Committee (PMC) shall
be constituted annually at the beginning of each financial year and would comprise of CEO, Head of
Support, EVP (Technology & Services) and any other member nominated by CEO. The PMC shall be
headed by the CEO. The terms of reference of the Committee would be as follows:
a) Moderate the performance ratings awarded by the reviewing manager after the Annual
Appraisal process of all the employees in order to achieve the prescribed bell shaped curve
for the purposes of paying PLI and to implement Career Progression.
b) The moderated performance ratings would be used for deciding PLI disbursement.
c) Based on the moderated performance ratings the eligible employees for progression would
be decided.
d) They could either award an overall higher or lower percentage in any of the rankings than
what is prescribed in the following guidelines depending upon the circumstances of the
organisation and individual contributions of the employees (for e.g. the percentage of A is
prescribed at 50 percent which can either be reduced or increased based on due
justification). Thus, the Committee shall have the power to make any exception to the
percentages prescribed for the bell shaped curve depending on the performance of the
individual contributors.
e) The exception so granted shall not be more than 5% of the total number of performance
ratings in each group.
f) The Committee shall exercise the power to moderate the performance ratings of the
employees such as either one level higher or lower, based on the detailed deliberations and
after discussions with the employee, his reporting manager or reviewing manager, if need
be.
g) The Performance Management Committee would conduct the interviews of the candidates
to be considered for Progression.
h) The Committee would also deliberate & decide on the representations submitted by the
employees detailing their grievances, if any, on the performance rating.
i) The meeting of the Committee shall be convened as and when required during the year.

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1.2 Performance Evaluation Process :
1.2.1. All employees who have joined on or before 31st December shall be considered for the
Performance Appraisals.
1.2.2. At the end of each financial year, the performance of an employee shall be reviewed against
the Objectives / Key Result Areas set at the beginning of the year in the performance planning phase
as detailed in Para-1.1.1 above.
1.2.3. The employee should fill a Performance Appraisal Form as a part of self-assessment and
submit the same to the Reporting Manager.
1.2.4. The Reporting Manager shall hold a formal discussion with the Employee and record his/her
observations/comments and ratings in the form.
1.2.5. It should then be submitted to the reviewing manager who shall review, and if required, hold
necessary discussions with the Employee and his/her Reporting Manager and record his observations
and ratings based on the overall performance of the employee.
1.2.6. Identification of performance gaps must be done and training need identification must be
recorded in the appraisal forms by the reporting manager/reviewing manager. Training needs
identified through this process shall be fulfilled as per the training policy.
1.2.7. The performance ratings given by the reviewing manager shall be moderated by the PMC.
1.2.8. The ratings awarded by the reviewing manager as well as moderated by the PMC would be
communicated to the employee and would serve in the process for providing the following:
a) Annual increment – based on Ratings awarded by the reviewing manager.
b) PLI – based on the moderated rating awarded by the PMC.
c) Career Progression on fulfilment of the eligibility criteria (Para – 2.4) based on the
moderated rating awarded by the PMC.
1.2.9. These appraisals should give a feedback to the employee on his/her performance and would
also enable the employee to focus, if need be, on the areas which require development.
1.2.10. The employees may appeal against the rating of the reviewing manager and/or the moderated
rating given by the PMC.
1.2.11. The PMC shall review and deliberate on the appeals received and convey their decision which
shall be final.
1.2.12. The decision of the PMC shall be communicated to the concerned employee and all benefits
that accrue to the employee, based on revised rating shall be given, if required.
1.2.13. Employees on deputation will follow the appraisal process (APAR) laid down by their parent
departments and guidelines issued by GoI/State Governments concerned.
1.2.14. Guidelines for Managing Annual Appraisal Process
a) The three level assessment shall be followed viz. Self-Assessment by the employee,
Reporting Manager Evaluation, final evaluation by the Reviewing Manager.
b) The Appraisal forms & formats shall be made available by HR after announcing the
appraisal cycle timelines from time to time during the year.
c) The KRAs/Objectives defined at the beginning of the year can be modified in situations
like change of reporting manager, matrix reporting structure, change in role/grade due to
progression or getting hired for a different role through Internal Job Posting (IJP) etc.
d) In case of matrix reporting there will be provision for incorporating KRAs & resulting
feedback from concerned reporting managers.
e) A lenient bell-shaped curve would be followed for rating distribution to achieve
performance differentiation and rewarding good performance while finalizing the
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performance ratings to start with. However, the employees on deputation will not be
considered for rating distribution and application of bell-shaped curve.
f) Irrespective of the level, the moderation shall be done after dividing the number of
employees of all levels into two groups viz. Technology & Non-Technology as detailed
below:
Table-2
Technology Roles Non - Technology Roles
Software & IT Infrastructure Finance & Accounts
Governance, Risk , Compliance HR
Project Management Administration
BIFA - Technical Procurements & Contracts
Services
Legal
Other functions
g) The maximum percentage of employees to be placed in a particular rating (viz. A+, A etc.)
has been detailed in the Table-3 below.
h) The Performance Management Committee shall decide the moderation percentages of
employees’ ratings as per the adapted bell shaped rating distribution detailed in Table 3
given below.
i) Rounding-off at each rating (viz. A+, A etc.) shall be done on the higher side i.e. any
decimals arrived at during calculation of the percentage shall always be taken to the higher
numeral.
j) The exception may be so granted by PMC that it shall not be more than 5% of the total
number of performance ratings in each group.
k) The impact of the bell shaped curve will be on calculation of the PLI as it is performance
based. It shall also apply to career progression.
l) Annual increment will be based on the performance rating given by the reviewing manager
and it will not be impacted by changes in the performance ratings due to application of
adapted bell shaped curve.
Table -3
Final Score in
Appraisal Process Performance Rating
% of ratings to be awarded in
each group (i.e. Technology &
Non Technology)
85.1 and Above A+ 20%
70.1 to 85 A 40%
60.1 to 70 B 30%
50.1to 60 C 5%
Below 50 D 5%
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1.2.15. Determination of Annual Increment Percentage
a) Remuneration Committee (RC): Based on the industry benchmark and other factors the
agenda for determining the Annual Increments would be prepared by HR and approved by
the Remuneration Committee.
b) Eligibility & applicability:
i) Full increment would be given to the employees who have joined in the first quarter of
the FY i.e. 1st April to 30th June.
ii) Pro-rata increment would be given to those employees who have joined during the
period from 1st July to 31st Dec.
iii) No Increment would be given to the employees who join in the last quarter i.e. 1st Jan
to 31st March. The increment for this period shall be paid as arrears in the next
evaluation cycle on pro-rata basis as per performance rating.
iv) Annual increment will be based on the performance rating given by the reviewing
manager and it will not be impacted by the moderation of rating to achieve the defined
bell shaped distribution of ratings.
v) The effect of annual increment shall be given to only those employees who were
working with GSTN on 30th April or thereafter. Any employee who is relieved from
GSTN before 30th April of the financial year shall not be eligible for annual increment.
c) Factors to be considered for deciding yearly salary increments:
i) Previous year’s performance rating of the employee.
ii) The exact salary increment percentage for every level will be determined annually by HR
as per the data published in Salary Increase Survey Report for IT Sector (i.e. product
companies, IT Application Development etc.) by consulting firms and placed before the
Remuneration Committee (RC) for their approval.
d) Guiding principle for grant of annual increment:
i)The salary increase percentage for each level to be adopted in GSTN (either higher or lower
than percentage proposed in Salary Increase Survey Report) shall be approved by the RC.
The annual increment or progression increment shall be granted exclusive of monetised
benefits.
ii)The salary increase percentage for each level to be adopted in GSTN on the higher side may
only range between 1.1 and 1.8 times of the percentage increase proposed in the Salary
Increase Survey Report to be decided by the RC. On the lower side, the percentage would
not be less than 0.8 per cent.
iii)The differential of 1.1 – 1.8 from the average salary increase of the IT industry may be
approved by RC upon considering the attrition rate for a small sized organization like
GSTN. Whenever, the attrition rate is above 10%, such a differential in the range of 1.1-1.8
may be approved by RC.
iv)Once the percentage to be adopted in GSTN for each level is decided by the RC (termed as
X), the following rating based weightages given in Table -4 would be adopted for granting
increments to employees.
Table -4
Rating Weightage of
Rating
Rating Description
A+ 1.1 Exceeds Performance Standards
A 1 Achieves Performance Standards
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v) Effective percentage increase for every employee shall be based on the rating awarded by the
reviewing manager.
vi) Formula for the calculation is:
Effective Salary Increment Percentage = Weightage of rating (As per the Table-4 above)
multiplied by X.
vii) This effective salary increment percentage will be applied to current CTC to arrive at the
annual increment amount.
viii) Illustration for calculation of Effective salary Increment percentage based on rating is given
below:
1.2.16. Outlier Management at the time of Annual Increment: The following guidelines
would apply to those employees whose pay does not fall within the new pay range for their
respective grade after giving the annual increment. This could either be below the minimum of the
pay range or above the maximum of the pay range.
1.2.17. If employee’s salary is below the grade minimum after giving annual increment:
Such employee would be given pull to minimum increment to bring the employee to the minimum of
the grade’s pay range. It shall be given if employee scores a rating of A+ in the current appraisal
cycle.
a) Increment given for addressing the pull to minimum cases shall be such that it is at least taking
the salary of the employee to the minimum of the respective pay range.
b) Pull to min approach shall not be followed at the time of hiring or hired through IJP (i.e. internal
candidate is hired against the advertised position).
1.2.18. If employee’s salary goes above their grade’s maximum pay while giving the
annual increment: In such cases the quantum of annual increment shall be capped at the maximum
pay of the grade of the employee. The maximum pay of the grade shall be calculated inclusive of the
monetised benefit. Such employees would be given minimum salary increase i.e. 50% based on the
rating from next financial year to offset inflation.
a) Performance rating awarded by reviewing manger would be used to calculate the 50%
increment.
b) This increase shall be available only for 2years.
B 0.80 Slightly Below Performance Standards
C 0.70 Barely Achieves Performance Standards
D 0.50 Needs to Improve Performance
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c) The salary of such individuals shall freeze after 2years.
1.2.19. Any exception to be given to employees on account of exceptional achievements/skills etc.
shall be approved by the Performance Management Committee.
1.3. Performance Linked Incentive (PLI)
1.3.1. CTC of an employee will be a combination of fixed pay and variable pay. The proposed
compensation structure will have the Variable Pay component, fully variable. Variable Pay would be
called as Performance Linked Incentive (PLI).
1.3.2. Level wise PLI percentages will be as follows:
Table - 5
Level Grade Existing Designation PLI = Percent of
CTC
Level 1 1 CEO
20%
Level 2 2 EVP
Level 3
3A SVP
3B VP
Level 4
4A Assistant VP / Chief Engineer
4B Associate VP / Principal Engineer 15%
4C Sr. Manager/ Technical Lead
Level 5
5A Manager / Sr. Engineer
5B Assistant Manager/ Engineer 10%
5C Executive/ Associate Engineer
1.3.3. PLI Disbursement Percentages: The employees shall be paid PLI based on their individual
ratings in the performance appraisal process after moderation of ratings to fit the bell shaped curve
defined. The percentage of PLI disbursement at each rating is detailed in the following table:
Table-6
Final Score in
Appraisal Process
Moderated
Performance
Rating
Rating Description
PLI
disbursement
(Percent of
Variable Pay)
85.1 and Above A+ Exceeds Performance Standards 110
70.1 to 85 A Achieves Performance Standards 100
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60.1 to 70 B Slightly Below Performance Standards 80
50.1to 60 C Barely Achieves Performance Standards 70
Below 50 D Needs to Improve Performance 50

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1.3.4. Eligibility & applicability for PLI:
a) The employees who have joined on or before 31st Dec of the financial year shall be paid
on the basis of assessment for the period worked on pro-rata basis.
b) The employees who have joined in last quarter (1st Jan – March 31st) shall be paid 75%
of the PLI for the period worked on pro-rata basis without assessment (i.e. less than or
equal to a quarter).
1.3.5. Eligibility for PLI in case of separation from the company:
a) If the employee has worked for the entire previous FY and has served till 31st March then
PLI will be paid for the financial year on the basis of moderated performance rating.
b)If the employee is relieved anytime during the financial year, he /she shall be eligible for
PLI on the basis of performance rating by the reviewing manager for the duration worked
on pro rata basis.
1.4. Performance Improvement Plan (PIP): The non- performing employee shall be given 3
months’ time to improve and if there is no improvement in performance he/she may be terminated
after following the process of documenting the whole procedure.
a) Employees may be put on PIP, if they fail to achieve the minimum objective/KRA set for
them i.e. upon securing a rating of “D” in the annual appraisal process. Such employee will
be asked to improve his/her performance within a period of three months, which may be
extended for another three months based on recommendations of the Unit Head.
b) The reporting manager should initiate the PIP by explicitly sending an email stating the
KRAs where improvement is required and the time period given for showing improvement.
c) Such employee shall be given a fair chance to improve his/her performance and will be
monitored very closely by his/her Reporting Officer against the set parameters for
improving his/her performance. They would also be given mentoring and counselling.
d) The periodic review of performance also should be documented by the reporting manager
and report must be submitted at the end of each month to HR. Any written warnings
thereafter shall be issued by HR.
e) At the end of the period, if the performance of the employee kept on watch list is found to
have improved and duly verified by unit head, his/her services would be continued without
any change in terms & conditions of his/her employment.
f) In case an employee fails to improve, his/her services would be terminated as per the
relevant clause in his/her appointment letter.
1.5. Termination Policy
a) In case value added by the employee is not commensurate with the salary being paid by the
employer, the termination process may be initiated to bring fresh knowledge about the
technology within the organization by hiring younger talent.
b) GSTN may authorise HR to negotiate termination of service on case to case basis, paying
one time severance pay which shall not be higher than one year salary of the executive.
2 Career Progression
2.1. Introduction:
During the formation of GSTN as a Section 8 company and thereafter during the initial phase of its
functioning, career progression was not envisaged as the project was in its nascent stage. After
conversion of GSTN into a fully owned Government company and also due to the fact that the GST
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System has now stabilised substantially, keeping in view that the employees hired laterally who joined
the company in its initial phase have completed more than 6/7 years in the company without any
career progression. Hence, the career progression for employees on regular employment as well as
tenured employees have been contemplated during the transition process of the company. This shall be
implemented w.e.f. 1st
Oct. 2023. The details and methodology of career progression is detailed
below:
2.2. Salient Features:
a) The progression shall be based on the eligibility criteria of exemplary performance and
minimum service at the same grade. The final decision for progression will be based on the
interview by Performance Management Committee (PMC) after employees have been
shortlisted on the basis of defined eligibility criteria at each grade.
b) Progression will allow an employee to move to one grade above if he/she meets the
eligibility criteria of spending 4 years tenure or more at same grade (for employees up to
Associate Vice President grade) and 7 years or more at the same grade (for employees at
Assistant Vice President grade) with top performance ratings.
c) There would be change in designation as per the proposed grade structure.
d) Administrative reporting after progression may continue to an employee at the same grade.
e) The eligible employee shall be given one progression increment based on the percentage
approved by the Remuneration Committee for the corresponding financial year {Effective
percentage increase = Weightage of Rating (refer Table 4 above) multiplied by X i.e. the
RC approved percentage}.
f) The progression increment would be the effective percentage increase for the grade from
which the employee is being progressed.
g) The employees from Grade 5c up to Grade 4b (Associate Vice President) will be given one
extra increment on progression to the next level after completion of four years.
h) The employees at Grade 4a (Assistant Vice President) will be given one extra increment on
progression to the next level (VP) after completion of seven years.
i) The employees at Level 2 & 3 (VP, SVP and EVP) who have spent more than six years
and secured 27 and above merit points in the past will only be given one extra increment
without any progression to next grade. The counting of the six years would commence only
from the date of implementation of the new policy. The increment percentage will be as per
the effective percentage increase for that grade. This increment shall be effective from 1st
October.
j) The tenure on the payroll of NISG and tenure on contract directly with GSTN shall be
considered in conjunction as relevant experience for the purpose of giving progression
increment.
k) The effect of progression increment shall be given from 1st October.
l) Pay & benefits which are linked to the pay drawn by an employee at higher grade shall
become applicable.
m)Irrespective of progression given to individual employees to higher grade, the level wise
sanctioned positions approved initially by the Board will be followed for the purposes of
filling the position e.g. an AVP might be given a progression to the level of VP. However,
on his resignation the post will be filled up as AVP.
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n) The grade up to which each grade of employees in the organization can progress is
depicted in the chart below:
2.3. Merit Points:
The employees who have been rated as per the rating scale in Column (1) till FY 2021-22, will
be given the merit points as defined in Column (4) in the table below. In future column (2) &
(4) would be considered for the purpose of eligibility for progression. Since there is a change
in the rating scale, equivalent merit points as given in the table below shall be considered for
preparing the list of eligible employees for progression by HR:
Table - 7
Old
Rating
Scale
(1)
New
Rating
Scale
(2)
Rating
Description
(3)
Merit Points
(4)
A A+ Exceeds Performance Standards 5
B A Achieves Performance Standards 4
C B Slightly Below Performance Standards 3
D C Barely Achieves Performance Standards 2
E D Needs to Improve Performance 1
For 2, 3, and 4 – Four years needed
For 1 – Seven years needed
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2.4. Eligibility Criteria:
Table -8
Items Criteria for Progression
Qualifying Service
i. For the employees from Grade 5c up to Grade 4b (Associate Vice
President) min 4 years at the same grade as on 31st March of the
respective year
ii. For the employees at Grade 4a (Assistant Vice President) min 7
years at the same grade as on 31st March of the respective year
Performance Rating in
Current Year iii. Top Rating of A+ in the current year
Merit Points iv. 18 and above up to Associate VP in last 4 years
v. 32 and above for Assistant VP in last 7 years
Alternative avenues of
progression Applying and competing with external candidates as per IJP policy
Note:
1. Eligibility shall be determined upon fulfilling ALL the conditions listed at point no. (i) to
(iv)/(v) in the above table.
2. The progression increment shall be effective from 1st October each year.
2.5. Selection process for Progression:
a) The HR would prepare the list of eligible employees for progression on the basis of the
eligibility criteria defined in para 2.4, after the completion of Annual Appraisal process.
b) The performance ratings after the application of bell shaped distribution as defined in
Table Nos. 2 and 3 shall be used to arrive at the potential employees to be interviewed for
progression.
c) The eligible employees will be interviewed by the Performance Management Committee
and final decision will be declared thereafter.
2.6. Outlier Management: The following guidelines would apply to those employees whose
pay does not fall within the new pay range for their respective grade after giving the progression
increment.
2.6.1. If employee’s salary is below their grade minimum after giving progression increment:
Such employees would be given pull to minimum increment to bring the employee to the minimum of
the pay range.
a) Pull to minimum increment at the time of progression shall be looked into with reference to
the minimum of the pay range to which the employee is being progressed.
b) Pull to min approach shall not be followed at the time of hiring or hired through IJP (i.e.
internal candidate is hired against the advertised position).
2.6.2. If employee’s salary goes above their new grade’s maximum pay while giving the
progression increment: In such cases the quantum of progression increment shall be capped at the
maximum of the new grade of the employee. Also, In case the employee’s salary has already reached
or breached the maximum pay of the new grade while awarding progression, no progression increment
would be admissible to him/her.
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2.6.3. Any exception to be given to employees on account of exceptional achievements/skills etc.
shall be approved by the Performance Management Committee.
3 Appeal process: The employees can submit their grievance, if any, in writing to Head HR.
However, it would be a time bound process i.e. within 15 days of declaration (or last date notified by
HR department) of the performance evaluation results i.e. after the completion of the moderation
process (fitting of the Bell-shaped Curve).
a) The representations made by the employees will be reviewed by the Performance
Management Committee and final decision on representations will be taken.
b) The proceedings of the Performance Management Committee will record all
representations and facilitate the resolution.
c) The Performance Management Committee members may speak with the employee,
reporting manager and reviewing manager to satisfy the concerns raised by the employee.
d) Resolution of the Performance Management Committee will be communicated to the
employee by Head HR.
*****

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Annexure - VI
Recruitment Guidelines for Hiring Market Recruits (Part-II)
1. Short Title and Commencement
1.1 This policy will be called as Recruitment Guidelines for hiring Market Recruits (Part-II) (For
GSTN from private sector). This shall be read with the Recruitment Guidelines approved by the
Hon’ble Finance Minister in March 2021 (to be called Part-I hereinafter). The Recruitment Guidelines
(Part-I) were also approved by the Board of GSTN in its 44th meeting held on 11th January 2021 before
being placed before the Hon’ble Finance Minister for approval. This was subsequently got approved
in the GST Council as well in the 43rd Meeting on 28th May 2021.
1.2 All the provisions of the Recruitment Guidelines (Part-I) would remain unchanged and be
followed except (i) tenure of market recruits which are proposed to be changed as was envisaged in
Para 7 (iii) (b) of the Recruitment Guidelines (Part-I) and (ii) the Pay Ranges of the Market Recruits as
envisaged in Schedule-III of the Recruitment Guidelines (Part-I) which mentioned that the pay ranges
to be aligned with market as required for market recruits from time to time. Comparison of change
from Recruitment Guidelines (Part-I) and (Part-II) is detailed in Table 1 below:
Table 1
Sl. No. Subject Para No. of Recruitment
Guidelines (Part-I)
Para No. of Recruitment
Guidelines (Part-II)
1. Tenure of Market
Recruits 7 (iii) (b) Para No. 2
2. Pay Ranges of the
Market Recruits Schedule III
Included in Para No. 4 of
Annexure-III
(Compensation and
Remuneration Policy)
1.3 The policy shall come into force from the date it is approved by the GST Council.
Guidelines for Selection and Recruitment
Hiring of tenured employees shall be for a contract period of 4 (four) years directly with GSTN.
a. The policy for hiring in future on 4 years tenure (contract) shall be reviewed from time to
time to maintain appropriate balance between regular (37 Nos.) & tenured employees.
b. The selection process shall comprise of an objective skill-based test for positions in
Technology functions.
c. Job rotation within Technology, Support & Services every 3 years shall be done upon
acquiring new skills. Executives are expected to acquire new skills.
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d. A search committee would be formed for recruitment of positions at VP & above level and
Executive Search firms would be engaged to search and identify the best suitable
candidates for the profile.
e. GSTN would do brand building initiatives for establishing GSTN as employer of choice
for attracting good talent. This would involve showcasing its work at various IT
forums/conferences.
f. If any position occupied by any employee in GSTN becomes vacant, the same shall be
filled by 4 year tenured employment.
g. In order to have a balance between the regular and tenured employees in GSTN, if any
position occupied by regular GSTN employee becomes vacant due to whatever reason, it
shall be filled from amongst the existing tenured employees hired on contract. The decision
as to whom to induct into GSTN regular rolls shall be taken by CEO, GSTN after assessing
the requirement as well as the antecedents of the employees.
Sourcing Channels
3.1 The Company shall adopt one or more of the following methods while recruiting:
Channel 1: Sourcing from Company’s internal resources (Through internal job posting i.e., IJP)
Channel 2: Recruitment and Manpower Agency(s)
Channel 3: Campus Recruitment
Channel 4: Sourcing through advertisements in company website, job portals, newspapers,
professional social media platforms like LinkedIn etc.
Channel 5: Direct Applications
Channel 6: Employee Referrals
3.2 The HR department will receive applications from all the channels used, shortlist candidates by
assessing their academic qualifications and experience and organize screening of candidates through
initial round of interview by the appropriate Screening Committee and submit a panel of shortlisted
candidates for Interview.
3.3 The selection shall be made by the Selection Committee. The selection shall be based on written
examination, if required, for the post, performance in the interview or both, as the case shall be. All
appointments shall be made from the list prepared by the Selection Committee.

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3.3.1 Channel 1: Sourcing from Company’s Internal Resources Internal Job Posting (IJP)
a. The purpose is to nurture high potential talent within the organization by providing them
suitable career growth opportunities. Priority and efforts should always be made to fill in
specific vacancies from its existing human resource pool.
b. The process for internal recruitment would be enforced through Internal Job Posting
(IJP) Policy by inviting job applications from existing employees along with external
candidates for advertised positions and communication including the job profile, candidate
profile, eligibility (who can apply), application deadline etc. would be made available by
HR to the existing employees of the GSTN if they wish to apply for open positions.
c. The guidelines as laid down in the IJP policy should be referred for internal recruitment.
d. Eligibility for Internal Job Posting (IJP): All existing regular and tenured employees
who have spent a minimum of two years in the current role/ Grade with a performance
rating of at least A (i.e., Meets Performance Standards) or above in last two appraisal
cycles can apply for IJP released for positions within GSTN. The tenure in the current role/
grade will be calculated on the basis of the date of communication of IJP.
e. The Internal candidates shall compete with external candidates for the advertised post.
f. Employee must also seek an approval from the HoD concerned and Reporting Manager
before applying for the IJP both of whom shall reply within 3 working days failing which it
shall be deemed approved.
g. Any employee who holds any warning letter on disciplinary grounds in last one year shall
not be eligible to apply through IJP.
h. Applications from the concerned employee should be forwarded to HR department of
GSTN for further processing.
i. Guidelines for employees:
i) An employee can apply for only one vacancy at any point in time. However, the employee
should be prudent while applying for roles that do not match his/her skills and experience.
In case of any query regarding the role, employee should make efforts to seek all
details/clarifications from the HR Team, before applying.
ii) An employee who has not been successful in the IJP can apply for another internal role
only on the basis of the following guidelines:
• For the same role - After six months. This duration is required to help the
employee address the developmental needs identified for him/her during the
assessment process. This period will be calculated on the basis of the date the
IJP is closed.
• For a different role - Can apply immediately after receiving the developmental
feedback from the previous application.
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3.3.2 Channel 2: Recruitment and Manpower Agency (s)
a. The job profile and eligibility criteria will be properly conveyed to the empanelled HR
Agency(s).
b. The HR Agency would invite applications following its own procedures by giving
reasonable publicity through print media, internet, headhunting etc. The vacancy
announcement will be uploaded on GSTN website too.
c. The HR Agency will receive applications, shortlist candidates by assessing their academic
qualifications, relevance of skills and experience, Age and after holding initial round of
interview submit a panel of shortlisted candidates to GSTN’s HR department.
d. The candidates’ profiles provided by the Agency(s) will be screened by the GSTN’s
Screening Panel, which will prepare a panel of candidates for final round of Interview by
GSTN along with the profiles received from other sourcing channels.
e. The Agency is expected to operate with the highest standards of accountability and
integrity. In order to do so, the Agency should also declare any possible Conflict of Interest
to the knowledge of GSTN beforehand.
3.3.3 Channel 3: Campus Recruitment
a. The HR Department shall make campus presentation in the reputed engineering colleges
based on NIRF ranking. A graded policy for offering remuneration shall be adopted for
campus hiring based on NIRF ranking i.e. the students from higher ranked colleges shall be
offered a higher remuneration vis-vis students from lower ranked colleges who would be
comparatively offered lesser remuneration.
b. The presentation shall comprise of the Company profile, Employee Value propositions,
Career opportunity, the recruitment process, dates for written test, if any, and eligibility
criteria.
c.Recruitment drive at the campus comprises of the pre-placement talk followed by sharing of
the shortlisted list of interested students by the Campus placement coordinator basis the
criteria shared by GSTN HR department. This is followed by technical round interview and
personal interview.
3.3.4 Channel 4: Sourcing through Company Website, Job Portals, Print Media &
Professional Social Media Sites like LinkedIn etc.
a. The HR department will upload the job openings on GSTN’s website as well as on external
job portals to which GSTN may subscribe to. The same may be published in the leading
newspaper(s) (for EVPs and SVPs) and professional social media sites like LinkedIn etc
(for all ranks)
b. Copies of the advertisements shall also be circulated internally.
c. The HR department will receive applications, shortlist candidates by assessing their
academic qualifications and experience and organize screening of candidates through
initial round of interview by the appropriate Screening Panel and submit a panel of
shortlisted candidates for Interview along with the profiles received from other sourcing
channels.
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3.3.5 Channel 5 – Direct Applications
Direct applications received from time to time would be kept in the live databank of GSTN &
whenever a vacancy arises, relevant applications from this data bank will be considered along
with applications received through the other sourcing channels.
3.3.6 Channel 6 – Employee Referrals
We believe that our people, as employees of GSTN, are the best suited to recommend top
talent to GSTN. Equipped with the knowledge of GSTN values, work culture and processes,
our people know how to be selective about the candidates we hire. The Employee Referral
Policy is our way of strongly encouraging our people to recommend their friends and excolleagues with whom they have personally interacted, to GSTN.
a. Who can recommend referrals?
The ‘employee staff’ category, which includes the following, is eligible to recommend
candidates:
i. Regular full-time employees (Market hires and deputationists)
ii. Tenured Employees
iii. Contract employees through third party
iv. Independent consultants
b. Process :
i. The HR department will upload the current openings on GSTN Intranet and also circulate
the same among GSTN employees through email, notice boards etc.
ii. The referral must be made against a relevant job requisition and should be shared with the
HR department using an employee referral form.
iii. All referral résumés will be valid and in active consideration only for a period of 90 days
from the date of submission of the resume/ application against a relevant open job
requisition.
iv. No employee referral can be made in relation to a fresher.
c. Criteria for pay-out of referral bonus:
The employee referral will be considered valid for pay-out only if it has been made through
the employee referral process.
i. Referral bonus will be paid to the referrer subject to the following conditions:
• The new hire completes 90 calendar days of service with the organisation,
• The referrer should be working with GSTN at the time the new hire completes 90 calendar
days of service, and
• The new hire would not have resigned at the time of payment to the referrer.
ii. The Referral bonus amount will be paid through the next payroll cycle and will be subject
to deduction of tax as applicable.
iii. Referrer will NOT be eligible for referral bonus if:
• He/she is part of the selection process and has any influence in the hiring decision (e.g.,
hiring for own teams/project),
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• The referred candidate is in the direct reporting line of the referrer
iv. If the referred candidate is selected for a different position than the original position against
which the candidate was referred, the referral bonus will be paid to the referrer.
v. Referral Bonus Pay-out Grid - If the referred candidate is selected for an employment, the
referrer will be eligible to get referral bonus as per the grid below, subject to fulfilment of the
criteria for payment of referral
Table 2
S. No. Referral Bonus Pay-out Grid
Grade at which referred
candidate is hired
Referral Bonus (INR)
1 3 a, 3 b, 2,1 25,000
2 4 a, 4 b, 4 c 15,000
3 5 a, 5 b, 5 c 10,000
Pay Fixation and Offer Letter:
Following guiding principles are to be used as reference while deciding the hiring salaries of
incumbents in the respective grades:
a. Once a candidate is finally selected and is to be recruited, the HR Recruitment SPOC shall
negotiate the CTC to be offered based on “grade -wise approved salary structure” of
GSTN; salary level of existing employees similarly placed and the current compensation
package of the candidate.
b. Pay Fixation in the Grade Pay should consider i) Candidates Experience (in comparison to
min threshold experience desired from the job as specified in the Job Description) and ii)
Candidates last drawn Compensation.
c. While deciding the offer, the time duration elapsed since their last appraisal or salary hike
would also be considered.
d. The salary range for future hiring of engineers at levels 4&5 shall start at P25 of the
proposed pay ranges for technology positions subject to negotiations & last drawn salary of
the prospective candidates.
e. Experienced candidates for technology & non- technology positions, on being hired from
market would be given a minimum of 20% increase from last salary drawn. This can lead
to offered salary being less than the minimum/P25 of the proposed pay range defined for
that level. This is the current industry practice.
f. Once the CTC offered is accepted by the candidate, the selected candidate shall be issued a
Letter of Offer/Intent in the prescribed format.
g. The selected candidate may be considered for the payment of hot skills allowance (Over
and above the CTC) and joining bonus as detailed below:
4.1 Hot skills allowance (HSA):
a. The niche/hot skills are compensated with a higher pay through additional premium pay in
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the IT application services sector. These skills being high in demand, a skill premium value
is identified for each of them through the market compensation data analysis.
b. It shall be a discretionary payout to be negotiated with the candidate and not necessarily to
be paid to all.
c. It is for salary differentiation for roles with a requirement for such niche skills. It shall be
paid as 12%-20% of base salary, this premium is over and above the CTC.
d. The premium value associated with each skill shall be tracked regularly to ensure that
GSTN is able to offer compensation as per the market value of a concerned skill and at the
same time avoid overpaying for urgent skill requirements which may be hard to hire for.
e. The negotiated and decided HSA shall be paid for the entire tenure of 4 years.
4.1.1 Eligibility for HSA:
a. The eligibility for HSA will be for individuals who not only possess a hot skill but also use
that skill at least 50% of the time when performing their jobs.
b. Based on the market trends and study/reports by consulting firms, the HSA list shall be
revised annually with approval of the CEO.
c. It is to be given to not more than ten percent of the sanctioned strength based on the criteria
listed above (Shall be proposed by GSTN HR and approved by CEO).
d. HSA would not be taken into consideration while calculating the ceiling for freezing the
salary.
4.1.2 Methodology for HSA payment
a. HSA will be decided at the time of hiring the candidate for the required skill set, if it is a
Hot Skill for GSTN.
b. Individuals must continue securing ‘A+’ or ‘A’ rating to maintain their eligibility for the
HSA
c. HSA not a part of CTC for the purpose of annual increments, PLI and retiral benefits like
PF, Gratuity computation etc.
d. The list of identified Hot Skills for GSTN and corresponding HSA percentages shall be
paid as per the table below.
Table 3
Identified Hot Skills for GSTN HSA percentages (at the rate of basic pay)
BIFA - Scrum Master 18%-20%
BIFA - Architects (platform & data) 18%-20%
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BIFA - UI/UX 15%-17%
BIFA - Data Science Lead 15%-17%
Business Analyst 12%-14%
Data Science Lead 15%-17%
Data Modelers 15%-20%
4.2. Joining Bonus
a. The candidates with niche/hot skills are paid Joining Bonus for attracting talent and
ensuring joining after accepting the offer in the IT application services sector.
b. Market Value of joining bonus level wise ranges from INR 1,00,000 to INR 3,50,000
c. It is a discretionary payout negotiated with the candidate and not necessarily to be paid to
all as per the table below:
Table 4
Level Grade Joining Bonus
Level 1 1 -
Level 2 2 3,50,000
Level 3 3a 3,00,000
3b 3,00,000
Level 4 4a
2,50,000
4b
4c 2,00,000
Level 5 5a
1,50,000
5b
5c 1,00,000
d. Retention Clause for Joining Bonus:
Minimum service requirement of 2 years with clause for return of joining bonus in case of
separation within 2 years; through the Full and Final Settlement shall be as per the below
approach:

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Table 5
Tenure with GSTN Percentage recovery of the joining bonus
Less than 6 months 100%
6 months – 1 year 75%
1 – 1.5 years 50%
1.5 – 2 years 25%
Note: The payment of Hot skills Allowance and Joining bonus shall be decided on individual basis by
the Management of GSTN depending on the business need or requirement for certain kinds of skills at
particular point of time. All the factors for recruitment of a particular resource viz. urgency of GSTN
to hire for a particular position, the criticality of the role in GSTN etc. would be considered critically
in order to arrive at the decision whether the hot skills allowance and/or joining bonus would be paid
to a particular candidate. There would be no bar to pay both the Hot Skills Allowance and the Joining
Bonus to the same candidate in case he/she is very deserving as decided by the Management of GSTN.
Rehiring of tenured employees: After completion of existing contract of employees (4 years), it shall
be examined if the role performed by the concerned employee is required or not. If the role is required
in GSTN, it shall be further examined if the concerned employee has rendered meritorious service.
The following steps would be taken in this regard:
i. If the condition of rendering meritorious service, objectively determined, is fulfilled the
employee may be offered next tenure-based contract for 4 years with GSTN directly after
internal review and after giving one week to one month cooling off period;
ii. A Committee shall be formed for such internal review, comprising of internal members of
GSTN. External members can also be co-opted in the Committee, if deemed necessary by
CEO.
iii. If the role is not needed or the performance of the employee is below par, CEO may decide
to relieve the employee concerned at the end of their contract with GSTN or by giving him
three months’ notice;
iv. The employee shall be informed about the decision to retain/relieve him before three
months of the termination of the contract, after internal review;
v. If the employee concerned is relieved, the position shall be advertised and fresh
recruitment initiated.
vi. In case of resignation, the employee may be relieved before three months by either
allowing the employee to buy out the notice period or obtaining waiver from the CEO,
GSTN.

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Re-hiring of Ex-Employees
a. Re-Hiring ex-employees brings along some benefits as the returnees benefit the company as
they come with a fresh perspective, additional skills and wider experience. Additionally, they
are familiar to organizations culture, systems and process and thus have a quick learning curve
to hit the ground running. An employee who leaves the Company can be considered for rehiring subject to the following:
b. The employee concerned must have had a good track record of performance and satisfactory
conduct while he/she was in Company’s employment;
c. Re-hiring will be treated as fresh employment and the past service will not be considered for
any purpose whatsoever. The process for selection will remain the same and the individual
candidate will have to go through the assessments/personal interviews as is the case with any
other candidate.
d. There needs to be a cooling off period of 6 Months before employee can be considered for rehiring.
Deserving Executive Assistants who have been serving in the organization for 4 years or more would
be considered for tenured contract with GSTN based on requirement. Their engagement shall be based
on open advertisement. Total number at any point shall not exceed 4 in numbers.
****

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Annexure- VII
Guidelines for Engagement of Independent Consultants in the Goods and Services Tax Network
(NOTE: Para 10 of Recruitment Guidelines (Part I) shall be replaced by these guidelines)
1. Background: Goods and Services Tax Network (GSTN) has built Indirect Taxation platform
for GST to help taxpayers in India to prepare, file returns, make payments of indirect tax liabilities and
do other compliances. It provides IT infrastructure and services to the Central and State Governments,
taxpayers and other stakeholders for implementation of the Goods and Services Tax (GST) in India.
1.1 The GST System Project is a unique and complex IT initiative as it established for the first
time a uniform interface for the taxpayer under indirect taxes through a common and shared IT
infrastructure between the Centre and States. The Centre and State indirect tax administrations which
used to work under different laws, regulations, procedures and formats and consequently the IT
systems worked as independent sites, were integrated into one system with uniform formats and
interfaces for taxpayers and other external stakeholders. GSTN provides a strong IT Infrastructure and
Service back bone which enables capture, processing and exchange of information amongst the
stakeholders (including taxpayers, States and Central Governments, Accounting Offices, Banks and
RBI).
1.2 The work of GSTN has been increasing over the period of time due to increase in the number
of taxpayers, resulting in filing of increased number of returns by the taxpayers and substantial
increase in collection of revenue. Interlinking of data with various other Government Agencies for
efficient and effective monitoring of the taxpayers has further expanded the project.
1.3 The work of GSTN would expand over the next few years as the Government of India plans to
achieve the $5 trillion economy which would essentially mean an increase in the overall turnover of
Goods and Services in the country. Besides, the digital and physical infrastructure of GSTN would
also have to be increased to cope with the increase in number of taxpayers and tax collections.
1.4 Keeping in mind all these developments, GSTN needs to strengthen itself with high quality
resources in the required areas. Therefore, GSTN proposes to engage independent Consultants for its
various Verticals. This would also allow GSTN to make assessment of additional manpower vis-à-vis
sanctioned strength by initially hiring Independent Consultants and eventually converting some of the
roles of Independent Consultants into tenured executives.
2. Type and Tenure of Engagement
a) The Engagements shall be at the level of Independent Consultants (ICs).
b) The engagement will be purely on a contractual basis.
c) Approving authority for hiring shall be at the level of CEO and a report of the
same shall be submitted to the Board on periodical basis.
d) These independent consultants would get lump sum payment and not get benefits of
regular or tenured executives of GSTN.
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e) These engaged personnel shall have the status of an independent consultant vis-a-vis,
GSTN and shall not be regarded, for any purposes, as being either a 'staff
member' or an 'official' of GSTN. Accordingly, nothing within or relating to the
Contract shall establish the relationship of employer and employee, or of
principal and agent, between GSTN and the Individual Consultants.
f) The engagement shall be initially for a period of two years which may be extended
up to three years, depending on the performance evaluation. After three years
further extension in only exceptional cases shall be permissible based on the
performance and organizational needs with the approval of the CEO, GSTN,
keeping the Board informed of the number of independent consultants engaged
periodically.
g) No extension shall be given to an independent consultant after the age of 67 years
has been attained by him/her.
3. Qualification, Experience and Vacancies: Applicants with following
qualifications and experience would be considered for engagement as Independent
Consultants.
3.1. Essential Education Qualification:
Table 1
Discipline Education Qualification*
Services Department
Graduate or Masters (With extensive
GST/Customs/Indirect Taxes knowledge)
Technology Department Graduate (B.Sc, BE, B.Tech) or Masters
(MCA, MBA, M.Tech) equivalent degree with
adequate domain knowledge will be
considered.
Support Department Graduate or Master’s Degree with adequate
domain knowledge in the concerned Wing
will be considered.
*For the candidates having degrees from universities/institutes from outside India, Times/OS
ranking of such universities/institutes will be taken into account.
3.2 Experience, Age and remuneration:
Table 2
Position Upper Age
Limit
Post qualification
Experience Years
Relevant
experience (No. o1
years)
Young Professionals 35 years Minimum 0 -1 year 0
Associate 45 years Minimum 1 - 3 years 1
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Consultant 50 years Minimum 8 years 3
Senior Consultant 65 years 15 years and above 5
* Experience includes up to 3 years for Ph.D. holder, provided no work experience is counted
during those 3 years.
3.3. Number of Independent Consultants: A maximum of 25 number of Independent
Consultants may be engaged by GSTN. The recruitment shall however, depend on the actual
requirement at a particular point of time. These engagements shall be above the sanctioned
strength of 147 positions in GSTN.
3.4 Independent Consultants shall be appointed for such projects which are short term in
nature and requisite skill is either not available within GSTN or the workload of the project
needs an Independent Consultant.
3.5. This would also allow GSTN to make assessment of need to augment sanctioned
strength from time to time based on the use of these appointments as Independent Consultants
as an interim arrangement.
3.6. Approving authority for hiring shall be at the level of CEO and a report of the same
shall be submitted to the Board on periodical basis.
4. Remuneration and Annual Enhancement
4.1. Remuneration
a) The remuneration will be inclusive of all applicable taxes and no other facility or
allowance will be provided by GSTN except providing laptop for working in the
office with policy on laptop being applicable. The range of remuneration for each of
the positions are as given in the table below:
Table 3
Position Remuneration per month (Rs.) IT Skills Allowance
Young Professional 60,000 20,000
Associate 80,000 - 1,45,000 30,000
Consultant 1,45,000 - 2,65,000 40,000
Senior Consultant 2,65,000 - 3,30,000 50,000
b) Remuneration for any selected candidates shall be fixed, based on the following:
i) The range of Remuneration proposed in the above table for the position in which the
candidate has been selected.
ii) Years of Experience
iii)Last Pay Drawn
iv) Remuneration over and above the rates mentioned in the table for deserving
candidates may be paid with the approval of Chairman GSTN.
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4.2. TA/ DA: The Independent Consultants may be required to travel to any place in India.
While on tour, TA I DA will be admissible to Young Professional, Associate, Consultant and
Senior Consultants as are admissible to Assistant Section Officer (Level 7), Section Officer
(Level 10), Under Secretary (Level 11) and Director (Level 13) of the Central Government,
respectively.
4.3. Annual Enhancement of Remuneration
a) The remuneration of an independent consultant shall be reviewed after completion
of every year of tenure of the independent consultant.
b) The enhancement in remuneration will be based on his / her performance during the
year after the recommendation of the Committee constituted for this, as per the
following criteria: -
i) Performance shall be judged on the basis of Annual Performance Assessment
grading.
ii) Performance management of the candidates would be based on clearly defined
KPls/KRAs for the relevant role and achievement of the same.
iii) Total enhancement in remuneration shall not exceed 10% annually in any case.
c) The Remuneration Enhancement shall be purely based on the Performance
management methodology adopted by GSTN for all its employees.
5. Orientation and Training:
a) A capacity building programme shall be designed for these resources for the
modules on which they would work, in association with an MSP. Each hired
resource shall undergo the orientation-cum-training programme.
b) There shall be an Induction Module which each of the hired resources shall go
through where the Independent Consultants would be inducted within GSTN.
c) Apart from this, there shall be role specific modules which the resources will go
through after joining in their position on an intermittent basis.
6. Terms of Reference: The terms of reference shall include the outputs to be
delivered and the functions to be performed. The outputs and functions shall be specific,
measurable, attainable, results - based and time-bound. Detailed TOR will be drawn by
respective divisions in GSTN to which ICs are posted. The TOR will be deemed to be part
of the contract.
7. Payment:
a) The Independent Consultants will be paid monthly remuneration within 7 days
after completion of the month.
b) The Income Tax or any other tax liable to be deducted, as per the prevailing
rules will be deducted at the source before effecting the payment, for which
GSTN will issue TDS certificates. Individual consultants shall be liable to pay
Goods and Services Tax, as applicable. GSTN undertake no liability for taxes or
other contribution payable by the Individual Consultant on payment made under
this contract.
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8. Working Hours and Leave:
a) Working Hours shall normally be from 9.30 AM to 6.00 PM with flexi time of
1 hour on both sides during working days including half an hour lunch break in
between. However, in exigencies of work, Independent Consultants may be
required to sit late and may be called on Saturday / Sunday and other holidays
also.
b) Independent Consultants will be eligible for 08 days leave during the period of
one year, on pro-rata basis subject to the prior written approval of the
controlling officer. Unavailed leave cannot be carried forward to the next year.
Further, leave up to one month can be considered without remuneration with the
prior approval of controlling Officer. However, in exceptional cases like need
for professional development, training etc., this condition may be relaxed with
the approval of Chief Executive Officer, GSTN, subject to official exigencies.
c) Apart from above, the women Independent Consultants may be eligible for
maternity leave as per the Maternity Benefit (Amendment) Act, 2017 issued by
Ministry of Labour & Employment vide letter No. S-36017/03/2015-SS-I dated
12th April, 2017.
9. Termination:
a) The engagement can be terminated at any time by GSTN by giving 30 days'
notice or pay in lieu thereof. Similarly, the Independent Consultant may also
resign after giving notice for a similar period.
b) GSTN reserves the right to terminate any Independent Consultant at any stage in
the event of a serious failure to perform the task assigned or of failure to observe
any standards of conduct.
10. Title Rights, Copyrights, Patents and Other Proprietary Rights:
a) Title to any equipment and supplies that may be furnished by GSTN to the
Independent Consultant for the performance of any obligations under the
Contract shall rest with GSTN, and any such equipment shall be returned to
GSTN at the conclusion of the contract or when no longer needed by
Independent Consultant.
b) GSTN shall be entitled to all intellectual property and other proprietary rights,
including, but not limited to, patents, copyrights and trademarks with regard to
products, processes, inventions, ideas, know-how or documents and other
materials which the Independent Consultant has developed for GSTN.
11. Force Majeure and other Conditions:
a) The Force majeure clause shall be applicable under this guidelines and any act
arising from causes beyond the control and without the fault or negligence of the
individual independent consultant shall not be attributable to the consultant.
12. Audits and Investigations: The Independent Consultants shall be liable to refund
any excess amounts paid to them which are brought out/highlighted by auditors during post
audit of GSTN.
13. Settlement of Disputes: GSTN and the Independent Consultant shall use their best
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efforts to amicably settle any dispute, controversy or claim arising out of the Contract or the
breach, termination or invalidity thereof.
14. Arbitration: Any dispute, controversy or claim between the parties arising out of the
Contract, or the breach, termination, or invalidity thereof, unless settled amicably, as provided
above, shall be referred by either of the parties to the CEO, GSTN for arbitration. The CEO,
GSTN may appoint an arbitrator for the settlement of the controversy.
15. Conduct of Independent Consultants and Conflict of Interest: The Individual
Independent Consultant shall be expected to follow all the rules and regulations of GSTN which
are in force. He/ she will be expected to display utmost honesty, secrecy of office and sincerity
while discharging his / her duties. In case the services of the Individual Independent Consultant
are not found satisfactory or found in conflict with the interests of the GSTNI Government of
India, his/her services will be liable for discontinuation without assigning any reason. Decision
to terminate any such contract shall need approval of the CEO.
16. General terms and conditions:
a) GSTN may require the Independent Consultant to submit a Statement of Good
Health from a recognized physician prior to commencement of work in any offices
or premises of GSTN.
b) The Independent Consultant shall be solely responsible for taking out and for
maintaining adequate insurance required to meet any of his/her obligations under
the Contract, as well as for arranging, at the Individual Independent Consultant's
sole expense, such life, health and other forms of insurance as the Independent
Consultant may consider to be appropriate to cover the period during which the
Individual Independent Consultant provides services under the Contract.
c) The engagement as Independent Consultant is subject to verification of documents
related to educational qualification and experience. If any information/ documents
submitted by Independent Consultant are found false I wrong at any stage, his/ her
engagement will be terminated immediately and appropriate action will be taken
against him / her as per rules.
d) In the unfortunate event of the death, injury or illness while serving GSTN, the
Independent Consultant or the next of kin shall not be entitled to any compensation or
Appointment.
e) The period of engagement would commence from the date of joining at GSTN.
f) The period of engagement as Independent Consultant will not confer any claim or
right for subsequent engagement / employment with GSTN or any other
Government Department at a later date.
g) Where the CEO, GSTN is of the opinion that it is necessary or expedient to do so, he
may by order and for reasons to be recorded in writing, relax any of the above
provisions or impose more conditions which are reasonably required for the
functioning of independent consultants and are in the interest of GSTN.
17. Consultants already working in GSTN desirous to avail the benefits of revised scheme
will have option to close to enter into a new contract for the balance of their tenure under this
policy.
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Annexure - VIII
Leave Rules
1. Short Title And Commencement
1.1. These rules may be called the GSTN Employees Leave Rules, 2023.
1.2. They shall come into force with effect from 1
st Jan 2023.
2. Extent Of Application
2.1. These rules shall apply to all regular employees, tenured employees directly employed with
GSTN for a period of four years but shall not apply to those on contract through third party, casual
employment and those engaged as Independent consultants.
2.2. Employees on deputation shall follow the leave rules of their parent department or the Central
Government Rules as applicable.
3. Definitions
3.1. In these rules, unless the context otherwise requires:
a) "Company" means ‘Goods & Services Tax Network’.
b) "Sanctioning Authority" with reference to the exercise of any powers under these rules means
the officer or the authority to whom such powers are delegated in accordance with the
schedule of delegation of powers and/or any other order issued in general or in particular.
c) "Employee" means a person appointed to any position in the Company and will include a
person on probation, a deputationist in the Company, and a re-employed person but shall not
include Apprentices.
d) "Month" means the calendar month.
e) “Year” means the calendar year.
4. General Conditions For Grant Of Leave
4.1. An employee before proceeding on leave shall furnish in the application the details about his
leave and get it approved from reporting manager.
4.2. Unauthorised absence from duty will render an employee liable to disciplinary action.
4.3. Except in an emergency, application for leave for three days or less shall be made at least
twenty-four hours prior to the time from which it is required. Applications for leave for more than
three days shall be made at least two days before the date from which the leave is required.
4.4. An employee who desires to extend his leave shall apply to the sanctioning authority giving
reasons for extension well in time so as to reach the sanctioning authority before the expiry of leave
already granted. He shall not avail the same before it is sanctioned, except in case of an emergency.
4.5. If the application for extension of leave is on the grounds of illness of the employee, it shall be
accompanied by a Medical Certificate if the leave is for more than 3 days.
4.6. Except as provided otherwise under these rules, any kind of leave may be granted in
combination with or in continuation of any other kind of leave.
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4.7. Holiday or a series of holidays including RH may be combined with any other type of leave.
The rules do not restrict any type of combination.
4.8. Leave shall be sanctioned by reporting officer in accordance with delegation of authority. In
case of special leave, approval from reviewing officer is also required.
4.9. Leave regularization in case of short leave or any missed punching cases, request to be
submitted to manager for approval as defined in Attendance rules.
4.10. In case of resignation, employees shall ordinarily be allowed to avail EL and SL or CL with
due approvals. However, the relieving of the employee may be extended by the number of leave
availed by the employee during the notice period. The total number of leave shall not be in excess of
five working days in total. In case of any exceptions the approving authority would be CEO, GSTN.
4.11. Any restricted holiday can be availed during the notice period after the approval of reporting
manager.
4.12. When applying for a half day leave, employee is required to spend a minimum of 4 business
hours at office. Half day leave can be used in the Casual Leave and Sick Leave category and in the
Earned Leave category only if there is no other leave available.
4.13. In case of a Bandh/Voting/Natural calamity or any situation decided by the CEO, the affected
special advisory may be issued for the same by HR with CEO’s approval. Such periods will be treated
as special casual leave.
4.14. The employee will be eligible for leave proportionate to the period of service computed from
the date of joining.
4.15. In the event of separation, all forms of Leave that accrue on an annual basis will be computed
on a pro-rata basis.
4.16. If the leave account of employee doesn’t have sufficient leave balance, the notice period may
be extended in case employee applies for leave during the notice period subject to salary deduction for
the number of days leave is availed.
4.17. In case of any exceptions the approving authority would be CEO, GSTN.
4.18. Employees will need to seek approval (written/email/HRMS) in the prescribed format before
proceeding for leave from the authority as specified in Table below
4.19. The reporting manager shall be authorised to approve leave. However, if more than 5 days of
leave is requested the approval will be required to be taken from the next level in the hierarchy.
5. Kinds and amount of leave admissible:
5.1. Earned Leave – Each employee will be entitled to 30 days of earned leave in a calendar year. It
will be credited on a monthly basis at the rate of 2.5 days per month.
a) Only 10 days of accumulated ELs (earned in the respective calendar year) will be carried
forward at the end of calendar year and rest of the accumulated ELs, if any, shall be
enchased at the end of calendar year.
b) If the EL balance is less than 10 in that case all the
ELs will be carried forward and it will not be encashed at the end of calendar year.
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c) Employee cannot accumulate more than 50 days of ELs over the years. However, after
reaching the maximum accumulation limit of 50, on 1st Jan in next calendar year employee
will be eligible for 30 days of EL to be credited to leave account as per policy.
d) For serving employees option will be given to employees for encashment of 50% of the EL
balance at the end of calendar year. This facility would be available for each of the FY here
after (i.e. 1st Jan 2023 onwards).
e) If the employee who is in service chooses to take the encashment of EL, it shall be allowed
only at the end of calendar year or on termination of service during the year.
f) Maximum Earned Leave that can be availed continuously, should not exceed 30 days. If
due to any exigency, more than 30 days of continuous leave is required, in addition to the
approval from reporting & reviewing officer, it should also be approved by the CEO.
g) The accumulated EL up to a maximum of 50 days will be encashed only at the time of exit.
5.2. Casual Leave – Each employee will be entitled to Casual leaves of 8 days in a Calendar year.
a) CL shall be credited at the time of joining on prorata basis for a new employee depending
on the date of joining.
b) For the existing employee 8 CLs will be credited on annual basis on 1st of January.
c) CL cannot be encashed and it cannot be carried forward.
d) CL may be granted for half day also. If casual leave for half day is taken, the lunch interval
shall be taken as a dividing line.
5.3. Sick Leave – An employee is entitled to 8 days of Sick leaves (SL) in a Calendar year.
a) SL shall be credited at the time of joining on prorata basis for a new employee depending
on the date of joining.
b) For the existing employee 8 SLs will be credited on annual basis on 1st of January.
c) Maximum accumulation of SLs can be up to 30 days which will not be en-cashable at the
time of separation or at the end of calendar year.
d) Even SL can be taken for half day. If SL for half day is taken, the lunch interval shall be
taken as a dividing line.
e) An application for grant of leave or extension of leave on medical grounds must be
accompanied by a Medical Certificate if the leave is more than 3 days.
5.4. Special Leave – Maternity leave, Paternity Leave & Compensatory Off will be treated as Special
Leave. The duration and other terms of the Maternity leave will be as per the Maternity Benefits
Act.
5.4.1. Maternity Leave - Applicable to all eligible women employees as per Maternity Benefits
Act-1961 and amendment in 2017. Women employees with less than two surviving children shall
be entitled to Maternity Leave not exceeding 26 weeks. Maternity leave will not commence
earlier than 8 weeks prior to the expected date of delivery.
a) A women employee (with less than two surviving children) who legally adopts a child
below the age of three months or a commissioning mother shall be entitled to maternity
benefit for a period of 12 weeks from the date the child is handed over to the adopting
mother or the commissioning mother, as the case may be.
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b) During such period, she shall be paid leave salary equal to the pay drawn immediately
before proceeding on leave.
c) In case of miscarriage or medical termination of pregnancy, a woman employee shall, on
production of the prescribed proof, be entitled to leave with wages at the rate of maternity
benefit, for a period of 6 weeks immediately following the date of her miscarriage or
medical termination of pregnancy.
d) Maternity leave shall not be debited against the leave account including adoption cases.
e) Maternity leave will be non-encashable in nature.
5.4.2. Paternity Leave- A male employee with less than 2 surviving children, may be granted
paternity leave to be approved by the reviewing manager for a period of up to 15 days, during the
confinement of his wife for childbirth i.e. up to 15 days before or up to six months from the date of
delivery of the child.
a) Paternity leave will also be admissible on adoption of child.
b) During such period of 15 days, he shall be paid leave salary equal to the pay drawn
immediately before proceeding on leave.
c) The paternity Leave may be combined with leave of any other kind if approved by the
competent authority.
d) If paternity leave is not availed of within the period specified above, such leave shall be
treated as lapsed.
e) The paternity leave shall not be debited against the leave account of the employee.
f) Paternity leave will be non-encashable in nature.
5.4.3. Compensatory Offa. Employees up to Assistant Vice President grade (with prior approval of Head of Unit) who
are required to report for duty in order to attend regular office work on an official holiday/
weekly off/ weekends are entitled to compensatory off, If employee has worked for more
than 6 hours.
b. In order to avail compensatory off, employees will have to utilize the leave within the next
6 months, failing which Compensatory off will lapse.
6. Encashment of leave:
a) In case of resignation/expiry of tenure, the employee shall be granted leave encashment for
the leave balance of EL (up to a maximum of 50 days) as on the date of relieving and the
same shall be paid with the full and final settlement of the employee. Any accumulated EL
balance in excess of 50 days will be considered lapsed.
b) Encashment of leave shall be calculated based on CTC.
c) The Earned Leave will be encashed by the serving employee only at the end of the calendar
year as per Para 5.1.
d) In case an employee dies while in service, cash equivalent of the Earned leave that the
deceased employee has accumulated would be paid to the employee’s dependent as per the
last drawn CTC.
e) In case the services are terminated by serving notice, encashment may be allowed in
respect of EL admissible to him/her.
7. Attendance Rules:
a) Office Timings applicable for all employees will be 09:30 AM to 06:00 PM
b) The above timings will include a 30 minute lunch break from 1:30 PM to 2:00 PM
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c) Employees may be required to work beyond office hours due to exigencies of work without
any overtime allowance.
d) Saturdays and Sundays will be non-working days.
e) Attendance Recording: Regular record of attendance will be kept for all employees.
f) Flexi Timing: A general flexi time of 30 minutes shall be allowed subject to the employee
completing his scheduled working hours. Need based Flexible work timing can also be
allowed on approval from Unit Head/CEO
g) Work from Home will be allowed as per the defined Work From Home Policy (Annexure)
h) An employee reporting late on a particular day, will be required to take prior permission
from her/ his Reporting Manager
i) Subject to the provisions of flexi time (clause vi above), late coming to office by an hour,
twice a month may be ignored. Each subsequent late coming (beyond 15 minutes) would
attract deduction of half-day leave from the employee’s leave credit and in case there is no
leave balance salary will be deducted.
j) In case of unavoidable delays in reaching office, the employee must inform her/ his
Reporting Manager through SMS/phone call/email.
k) If an employee leaves before the closing time of office, without permission from her/ his
Reporting Manager, he/ she will be penalized by half a day deduction from her/ his leave
account and in case there is no leave balance then in that case salary will be deducted.
8. Leave Without Pay (LWP):
a) An employee who has exhausted all his/her leave may be granted leave without pay for
such number of days, either at a stretch or intermittently, as the Company deems fit. The
employee will be required to obtain prior approval of the approving authority before
proceeding on leave. The decision of the CEO will be final in all such cases.
b) National Holidays, Paid Holidays, Saturdays and Sundays falling between Leave without
Pay will be treated as Leave without Pay.
c) An employee on LWP, will not be entitled to any compensation, including salary,
allowances, retirals, leave accumulation and other benefits / entitlements. It shall also not
be considered in reckoning the period of service for progression or confirmation after
probation.
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Annexure - IX
Miscellaneous Entitlements
1. Applicability:
The new entitlements shall be applicable after the proposal is approved by the GST Council (Date).
2. Recognizing Talent for Exemplary Performance
2.1 To reward the excellence in performance of employees and also to promote good and
healthy team spirit in the organization, two awards as follows are proposed:
a) Employee of the month: One employee from each function (i.e. Technology, Services &
Support/others) shall be given buffet dinner coupons for up to 4 family members every
month.
b) Best team of the quarter: Module & Function wise best performing team will be selected
for the reward. Company sponsored buffet dinner coupons for all the concerned team
members every quarter.
3. Official Travel
3.1 Room Tariff
a) The room tariff for Tier 1 cities viz. Delhi, Mumbai, Bangalore, Chennai, Kolkata,
Ahmedabad, Pune room shall be as given in column 3 below.
b) The remaining cities may be classified as Tier 2 and the existing limits given in column 2
below for room tariff may be continued.
Table - 1
Grades
Limits for Tier 2 Cities
(inclusive of tax)
Room Tariff for Tier 1 Cities
(inclusive of tax)
(1) (2) (3)
1 As per actual As per actual
2 Not exceeding Rs. 12000/- Not exceeding Rs. 17000/-
3a – 3b Not exceeding Rs. 12000/- Not exceeding Rs. 17000/-
4a – 4c Not exceeding Rs. 7000/- Not exceeding Rs. 10000/-
5a – 5c Not exceeding Rs. 7000/- Not exceeding Rs. 10000/-
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3.2 Daily Allowance on Tour:
a) The per diem shall be applicable as per column 2 in table below.
Table - 2
Grades Per Diem/Daily Allowance (Rs.)
(1) (2)
1 6000
2 4000
3a – 3b 4000
4a – 4c 3000
5a – 5c 3000
b) The local conveyance shall be reimbursed on actual basis on production of bills.
3.3 Local Travel Entitlements
a) Employees may avail the services of the vehicles hired by GSTN for official local travel. In
case of exigencies, employees would get reimbursement of actual fare by public transport.
In case employee is using own vehicle for Local travel due to official work, employee may
claim conveyance as per rates proposed.
b) The rates of transportation by four wheeler and two wheeler shall be as given in the table
below:
Table - 3
4. Relocation Expense
a) Currently the entitlement of SVP & above is J class for work related travel. However, for
relocation purposes the entitlement is economy class. The same is now being changed and
the entitlement for relocation purposes for SVP and above shall be J Class.
b) Entitlement for transportation of personal effects for all levels shall be Rs.50 per km as per
the following table.
Personal Conveyance Mode Rates
Four Wheeler Rs.24per Km
Two Wheeler Rs. 12per Km
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Table - 4
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Annexure-X
Compensation Rules for Deputationists
1. These rules shall be called the “compensation rules for deputationists in GSTN” and shall
include all employees in GSTN who are on deputation irrespective of whether they join GSTN from
the Central Government, State Government or from PSUs.
1.1 The following Pay and Allowances shall be paid to deputationists working in GSTN unless
and otherwise the Pay and Allowances are defined and prescribed by the Department of Revenue
while approving or processing the deputation or anytime thereafter:
a) Basic Pay shall be as admissible in the parent department or fixed in GSTN based on
Recruitment Guidelines of GSTN as per the Central Government Pay Matrix. The Basic Pay
of State Government employees shall be fixed as per the Central Government Pay Matrix
provided they give an undertaking that they opt for Central Government Pay Scales along with
allowances admissible in GSTN. In case any employee opts for the State Government pay
scales, they would be paid the Pay and allowances as admissible in the respective State
Government.
b) Dearness Allowance as admissible in the Central Government. This would be admissible to
State Government Employees on deputation in GSTN only if they have opted for the Central
Government pay scales otherwise they would be paid the dearness allowance admissible in
their respective State Government.
c) The following Allowances would be paid to the employees on deputation in GSTN. These
allowances would be paid to the State Government employees only if they have opted for the
Central Government Pay scales otherwise they would be paid the allowances as admissible in
their respective State Governments.
1.2 House Rent Allowance: The employees would be paid house rent allowance at the following
rates as they are not eligible for allotment of accommodation under the Central Government Pool of
accommodation. However, no HRA would be admissible, if the Central Government allows General
Pool Accommodation to any of the executives of GSTN on such representation being made as a
special case:
Table - 1
Designation Pay Level
Basic Pay Range
( As on Date)
House Rent
Admissible per
month
Chairman L-16 205400-224400 1,50,000 *
CEO L-15 182200-224100 1,25,000 *
EVP L-14 144200-218200 1,00,000
SVP L-13 123100-215900 85,000
VP L-12 78800-209200 80,000
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Assistant VP L-11 67700-208700 75,000
Associate VP L-10 (with 5 years’
experience in the level)
56100-177500 70,000
Senior Manager L-10 56100-177500 65,000
Manager L-9 53100-167800 60,000
Assistant Manager L-8 47600-151100 55,000
Executive L-7 44900-142400 50,000
Note (i) * Company lease facility along with maintenance and GST may be provided by GSTN for
Chairman and CEO.
(ii) Lease shall include self-lease also.
1.3 Fuel Allowance: The fuel allowance shall be paid to the employees on deputation at the
following rates:
Table-2
1.3.1 EVPs and SVPs would be given an option to either avail a Company provided Car or opt for
getting the monthly fixed amount mentioned in the table above.
1.4 Other Allowance: The employees on deputation to GSTN are neither entitled for Leave
Travel Allowance nor for Children Education Allowance as is admissible to them in the Government.
These allowances have been monetised and the same would be paid to the deputationists on a monthly
basis to different grades of employees as detailed in the following table:
Table - 3
Designations
Other Allowance to be paid monthly
(Rs.)
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SVP and above 17000
Up to VP 9000
1.5 IT and Professional Allowance: IT and Professional Allowance shall be paid to the
employees on deputation in GSTN as per the following table:
Table - 4
Designation Pay Level
Basic Pay Range
( As per 7th CPC)
Proposed (Percentage
of Basic Pay & DA)
Chairman L-16 205400-224400 40
CEO L-15 182200-224100 40
EVP L-14 144200-218200 45
SVP L-13 123100-215900 45
VP L-12 78800-209200 45
Assistant VP L-11 67700-208700 50
Associate VP L-10 (with 5 years’
experience in the level)
56100-177500 50
Senior Manager L-10 56100-177500 50
Manager L-9 53100-167800 50
Assistant Manager L-8 47600-151100 50
Executive L-7 44900-142400 50
a) The above rules shall be admissible to the employees on deputation in GSTN with effect
from the date the same is approved by the GST Council. Till the time same is approved, the
allowances being paid under the old policy shall be continued and if this is not approved
exit option should be given in further consultation with competent authority (GST
Council).
b) New deputationists to be on boarded as per the new policy after the same has been
approved;
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c) Existing deputationists were on boarded as per the advertised old policy and therefore,
would be given option to change their perks as per the new policy or stay with old policy
for the balance of their tenure.
d) Any revisions to Pay, Allowances and Monetised Benefits for deputationists shall be as per
the company policy after approval of the Board of GSTN.
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Annexure-XI
Dates of implementation and saving & difficulty removal during implementation
1. Dates of implementation
Table - 1
Particulars Dates of implementation
Transition
• Transition Increment
• Progression Increment during transition
• Pull to/near minimum for progression
cases
First day of the month after BOD & GST Council
approves the proposal for transition or any other date
decided by the BOD
Performance Management Policy
• Annual Increment
• PLI Based on Bell Curve for the Year
2022-23 & onwards
• Progression Based on Bell Curve for the
Year 2022-23 & onwards
FY 22-23 onwards (Assessment in FY 23-24 onwards)
• 1 April 23
• 1 April 23
• 1 Oct 23
Recruitment Policy First day of the month after BOD & GST Council
approves the proposal for transition or any other date
decided by the BOD
Leave Rules 1 Jan 2023
Entitlements for Mobile Handset & other
allowances
First day of the month after BOD & GST Council
approves the proposal for transition or any other date
decided by the BOD
Reward and Recognition 1 Jan 2023
Allowances for Deputationists After approval by competent authority.
Till the time same is approved, the allowances being paid
under the old policy shall be continued and if this is not
approved exit option should be given in further
consultation with competent authority (GST Council).
2. Saving and difficulty removal during implementation
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a) The points not listed in the proposal shall be continued as per the existing clauses in the
HR Manual viz. Joining, Attendance, Grievance & Disciplinary procedures etc. After the
in-principle approval of BOD/ Council of these documents (Presentation & Agenda), the
HR Manual would be revised to incorporate these changes and revised manual issued with
the approval of the CEO, GSTN.
b) All existing decisions of the Board and Management taken prior to the date on which these
policies become operational shall continue to apply notwithstanding any conflict with the
present policies provided that specific decision taken in relation to any of the past decisions
to overrule the past decision shall lead to the new specific decision prevailing.
c) Difficulty removal clause: Any difficulties/challenges during implementation of the
transition process/policy shall be resolved by CEO, GSTN for employees up to the level of
Senior Vice President and by Chairman, GSTN for employees of the level of EVP &
above. The resolution shall be provided based on the generally accepted principles laid
down in the policies.
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Agenda Item 09: Report of Group of Ministers on constitution of Goods and Services Tax
Tribunal
GOM CONSTITUTED VIDE OM NO. A-50050/150/2018-CESTAT-DOR
As per the provisions of the CGST Act, 2017, each bench of the Tribunal is composed of one Judicial
Member, one Technical Member (Centre) and one Technical Member (State). However, in its order
dated 20.09.2019 in WP 21147 of 2018 – Revenue Bar Association Vs. Union of India, Hon’ble High
Court of Madras held that “The number of expert members therefore cannot exceed the number of
judicial members on the bench” and struck down the relevant provisions of the law.
2. In addition to this, Hon’ble Supreme Court of India has laid down various principles with
respect to appointment to Tribunals, conditions of service etc. in various other judgements.
3. Accordingly, certain draft amendments were placed before the GST Council in its 47th
Meeting held on 28th -29th June, 2022 in Chandigarh and the Council decided that the matter be
referred to a Group of Ministers.
4. The GoM was mandated to recommend necessary amendments required in the GST Laws to
ensure that the legal provisions—
(a) maintain the right federal balance;
(b) are in line with the overall objective of uniform taxation within the country; and
(c) are in line with the principles outlined in various judgements of Courts in relation to
various aspects of Tribunal and are legally sustainable.
5. The GoM held two meetings for detailed deliberation on a list of issues. The first meeting was
held on 26th July 2022 in hybrid mode and deliberated and resolved many issues. The GoM considered
the original draft discussed in the 47th meeting of the GST Council and the views expressed by
Members during the meeting. The GoM took note of various judgments of Hon’ble Supreme Court in
various cases pertaining to Tribunals in the country, including order of Supreme Court in CA 3067 of
2004 – R Gandhi Vs. Union of India, CA No. 8588 of 2019 – Rojer Mathews Vs. Union of India, WP
(C) 804 of 2020 – Madras Bar Association Vs. Union of India. The GoM also took note of the
Tribunal Reforms Act, 2021 passed by the Parliament, provisions of which govern the appointment of
Members and Chairpersons of various Tribunals and their terms and conditions.
6. The GoM met the second time on 17th August 2022 in Bhubaneswar to discuss these issues
and finalize its recommendations. The GoM has submitted its report with draft amendments to the
CGST and SGST Acts.
7. It is submitted that the draft provisions state that the Chief Secretary of the State in which the
Bench is located, shall be a member of the Selection Committee for selection of Technical Member
(State) in the Bench. There could be a situation where the Council may constitute a Bench for more
than one State. In such cases, it is proposed that Chief Secretary of one of the States to which the
jurisdiction of the Bench extends may be nominated by the Council to the Selection Committee.
Accordingly, following proviso is proposed to sub-section (5) of Section 110:
Provided that where the jurisdiction of a Bench extends to more than one
State, the Council shall nominate Chief Secretary of one of such States to be the
Member under sub-clause (i) of clause (c).
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8. The final report and recommendations of the GoM is submitted before the GST Council for
consideration and approval. It is also proposed that the draft amendments may be approved subject to
changes during legislative vetting.

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OCTOBER, 2022
REPORT OF THE GROUP OF MINISTERS
ON CONSTITUTION OF THE GOODS AND
SERVICES TAX TRIBUNAL
SUBMITTED TO THE GST COUNCIL
GOM CONSTITUTED VIDE OM NO. A-50050/150/2018-CESTAT-DOR
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The Goods and Service Tax Appellate Tribunal (GSTAT) constituted under Section 109 of
the Central Goods and Services Tax Act, 2017 provides for the GST Tribunal which isto be the
second appellate authority within the GST framework. The process of original adjudication as
well as the first appeal happens through individual officers under the Act but the second appeal
against the orders of the first appellate authorities under Central as well as State GST Act lies
with the GST Tribunal constituted under the CGST Act. GST Appellate Tribunal has been
provided the responsibility to hear appeals under all the four GST laws namely the CGST Act,
SGST Act, UTGST Act and the IGST Act passed by the Central as well as State tax officers.
Therefore, this is the first common forum at which the dispute resolution process converges
under all GST laws and both tax administrations.
1. Background
1.1 As per the provisions of the CGST Act, 2017, each bench of the Tribunal is composed of one
Judicial Member, one Technical Member (Centre) and one Technical Member (State). In its order
dated 20.09.2019 in WP 21147 of 2018 – Revenue Bar Association Vs. Union of India, Hon’ble High
Court of Madras held that “The number of expert members therefore cannot exceed the number of
judicial members on the bench” and struck down the relevant provisions of the law.
1.2 In addition to this, Hon’ble Supreme Court of India has laid down various principles with
respect to appointment to Tribunals, conditions of service etc. in various other judgements.
1.3 Accordingly, certain draft amendments were placed before the GST Council in its 47th
Meeting held on 28-29 June 2022 in Chandigarh and the Council decided that the matter be referred to
a Group of Ministers.
2. Constitution of GoM
2.1 Based on the decision in the 47th meeting of the GST Council, the Group of Ministers (GoM)
on Goods and Services Appellate Tribunal was constituted with following composition:
Name Designation and State
1. Sh Dushyant Chautala Deputy Chief Minister, Haryana Convenor
2. Sh Buggana Rajendranath Finance, Planning, Commercial Taxes,
Skill Development & Training and
Legislative Affairs Minister, Andhra
Pradesh
Member
3. Sh Mauvin Godinho Transport, Industries, Panchayat and
Protocol Minister, Goa
Member
4. Sh Niranjan Pujari Finance and Parliamentary Affairs
Minister, Odisha
Member
5. Sh Shanti Kumar Dhariwal Local Self Government, Urban
Development and Housing, Law &Legal
Affairs and Legal Consultancy Office,
Parliamentary Affairs Department
Minister, Rajasthan
Member
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Name Designation and State
6. Sh Suresh Kumar Khanna Finance and Parliamentary Affairs
Minister, Uttar Pradesh
Member
2.2 The GoM was mandated to recommend necessary amendments required in the GST Laws to
ensure that the legal provisions—
(a) maintain the right federal balance;
(b) are in line with the overall objective of uniform taxation within the country; and
(c) are in line with the principles outlined in various judgements of Courts in relation to
various aspects of Tribunal and are legally sustainable.
2.3 The order of constitution of the GoM is placed at Annexure A.
3. Meetings of the GoM
3.1 The GoM held two meetings for detailed deliberation on a list of issues. The first meeting was
held on 26th July 2022 in hybrid mode and deliberated and resolved many issues. The GoM considered
the original draft discussed in the 47thmeeting of the GST Council and the views expressed by
Members during the meeting.The GoM took note of various judgments of Hon’ble Supreme Court in
various cases pertaining to Tribunals in the country, including order of Supreme Court in CA 3067 of
2004 – R Gandhi Vs. Union of India, CA No. 8588 of 2019 – Rojer Mathews Vs. Union of India, WP
(C) 804 of 2020 – Madras Bar Association Vs. Union of India.The GoM also took note of the Tribunal
Reforms Act, 2021 passed by the Parliament, provisions of which govern the appointment of Members
and Chairpersons of various Tribunals and their terms and conditions.
3.2 The GoM met for the second time on 17th August 2022 in Bhubaneswar to discuss these
issues.Various issues discussed by GoM and the decisions are listed in this report.
4. National Vs State Tribunals
4.1 The GoM recognized that this is the most critical issue that needs to be discussed and
resolved, which will have an impact on decisions on various other issues as well.The GoM deliberated
on whether GST Appellate Tribunal should be a National Tribunal with benches across the country or
there should be independent State Tribunals with jurisdiction in individual States.During the
47thCouncil meeting and later through written comments, some States had argued for separate State
Tribunals.
4.2 The GoM noted that when the GST law was originally considered by the Council, this issue
was discussed at length and the Council had opted in favour of a National GST Appellate
Tribunal.During the 7th GST Council meeting held on 22-23 December 2016, it was noted “the
Secretary to the Council explained that it was proposed to have a National Tribunal with State level
benches to facilitate creation of coordinate benches whose judgments would have persuasive value for
each other and this would help settle the jurisprudence faster”.The GoM discussed the pros and cons
of having one national tribunal vis-à-vis having thirty-one State Tribunals.
4.3 Hon’ble Minister from Goa stated that the GST legal framework has been designed in the
spirit of cooperative federalism and the CGST/SGST Acts are pari materia in nature. Therefore, there
should be one Tribunal at the national level with benches of the same in every State. The Convener of
the GoM acknowledged that this argument is valid even today, more than ever, and there is a need to
have one National Tribunal for GST since we have chosen for One Nation One Tax.The Convener
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stressed on the need to have persuasive value of the orders passed by the GST Tribunal across the
country for successful implementation of the GST Act. He further highlighted that while taking any
decision, interest of the taxpayers should be kept at top priority and from taxpayers’ perspective
having a National Tribunal with State level benches will be extremely beneficial and taxpayer
friendly.
4.4 During discussions, Members from Orissa, Andhra Pradesh and Goa agreed with the decision
of the Convener to opt for a National Tribunal with such number of benches (discussed later in this
report) as may be needed in each State based on their size.However, Members from Uttar Pradesh and
Rajasthan argued for separate National Tribunal and State Tribunals and they expressed that their
views may be recorded accordingly.
5. Search-cum-Selection Committee
5.1 The next important issue pertains to the method of selection. The GoM took note of the
Search-cum-Selection Committee (ScSC) composition as mandated in the judgment of Hon’ble
Supreme Court in Madras Bar Association (2020) case.
5.2 Many States had proposed that the ScSC for Technical Member(State) could be headed by the
Chief Justice of the High Court of the State concerned rather than Chief Justice of India or a Judge of
Supreme Court nominated by him.The GoM took note that the ScSC for Technical Member(State) and
ScSC for other Members cannot be different for the same Tribunal.Since all Members of the Tribunal
are equal in terms of their roles and responsibilities, they should all go through the same selection and
appointment process.
5.3 GoM concluded that keeping in view the judgement of Hon’ble Supreme Court in Madras Bar
Association (2020) case, the most legally tenable option would be to have ScSC chaired by Chief
Justice of India or a Judge of Supreme Court nominated by him and the President of the Tribunal (with
the President to be replaced by a retired Judge in cases where the President cannot be Members of
ScSC) and two officers as members of ScSC.
5.4 The GoM concluded that while one of the officers in ScSC could be a Secretary of Central
Government, the other should be the Chief Secretary of the State in which the bench is located for
selection of Technical Member (State). For all other Members, Chief Secretary of any State may be
nominated by the Council for a period of one year.The GoM acknowledged that this would give
necessary representation of the State concerned in the ScSC and it would be as per the spirit of the
order of Hon’ble Supreme Court.
5.5 The Chairman of the Committee shall have the casting vote and Revenue Secretary shall be
the Member Convener of the Committee with no vote, as per the judgement of Apex court in Madras
Bar Association (2020) case.
6. Composition of a bench of the Tribunal
6.1 This is one of the main points on which the legal provisions were struck down and have to be
reformulated.The GoM discussed this issue in detail and concluded that the bench should consist of
one Judicial and one Technical Member.The Technical Member should be a Technical Member
(Centre) or a Technical Member (State) in a 50:50 ratio in every State.
6.2 In cases where there is a difference of opinion between two members, the President may add a
third Member from another bench in the same State.If a Member in that State is not available, the
same could be taken from a bench in another State.The GoM concluded that a bench larger than that
would be impractical and inefficient in terms of speedier conclusion of cases.
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6.3 Finance Minister, UP argued that having a 3-member bench with two Judicial Members and
one Technical Member should be considered so that the question of 1-1 split does not arise.This
proposal was deliberated and the GoM concluded that split verdicts would happen in relatively limited
number of cases and it would be more efficient to have a third Member only in those cases rather than
in all cases.
6.4 The GoM also considered the provision relating to cases that can be heard by a single Member
and suggested that the same may be raised to Rs.50 lakh from current limit of Rs.5 lakh, where no
question of law is involved.
7. Qualification of Members
Technical Members
7.1 The GoM considered the qualification of Technical Members (State) in great detail.The GoM
took note that the minimum qualification that Hon’ble Supreme Court has laid down in R. Gandhi
case is that of Additional Secretary/ Secretary in Central Government. It acknowledged that the
requirement of experience of 25 years in Group ‘A’ posts in Central Government for Technical
Member (Centre) would be in line with that judgment but officers of the same rank in State
Government would not be available.The GoM concluded that keeping the spirit of the judgments of
Apex Court on this matter, it would be advisable to mirror the same requirement for State officers as
well, i.e.experience of 25 years in Group ‘A’ posts in State Government.Officers of the level of
Additional Commissioner and above in the State are highly skilled and knowledgeable.They have
spent considerable time in tax administration and have extensive experience and are fit for
appointment in Tribunals.
7.2 However, the GoM also took note of the fact that in many States, the recruitment is not at
Group ‘A’ level and even the senior most officer in the State hierarchy would not have spent 25 years
in Group ‘A’.The GoM concluded that, in such cases, the States should have flexibility to reduce this
requirement of 25 years in Group ‘A’ on the recommendations of the Council.This would enable every
State to offer their most experienced and competent officers for appointment as Technical Member
(State).However, GoM concluded that while the experience in Group ‘A’ post could be reduced
depending on the situation in a State, the officers should have total 25 years of Government service.
7.3 The GoM also noted that some flexibility may be required in fixing the rank as some States do
not have the rank of Additional Commissioner altogether or may not have officers in the rank of
Additional Commissioner due to various reasons.However, Finance Minister, Andhra Pradesh
highlighted that there should be some limit below which the rank should not be allowed to be
reduced.In this regard, GoM felt that the rank should be such that the officers are, at least one level
senior to the First Appellate level as they would be hearing appeals against their orders.
7.4 The GoM is of the opinion that every State would ensure that the best and most experienced
officers of their State are made available for appointment to the Tribunal and every State would ensure
that the qualification is not diluted beyond what is required to meet this objective.Since, these actions
will be taken after seeking necessary recommendation of the Council based on proposal of the State
concerned, it would ensure that undue dilution of qualifications does not happen.
7.5 The GoM discussed in detail the issue of officers of only that State being appointed as
Technical Member (State) in which the bench is located. The GoM saw value in this proposition as
every State has its own local issue despite GST being a uniform tax system. GoM evaluated that one
way could be to allow only officers of that State for appointment in that State and totally prevent
officers of other States from even being eligible.
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7.6 Hon’ble Minister from Goa opined that though this may be beneficial to larger States, smaller
States which do not have large cadres of tax officers will face a challenge in finding the appropriate
candidate. GoM accepted this view and also observed that for vacancies in a bench located in a
State,making officers of other States ineligible could be overly restrictive and could even be open to
legal challenge. GoM concluded that the better option would be that officers of the State could be
given first preference in appointment for Technical Member (State) in benches in that State. If, for
some reasons, officers of that State are not available, suitable officers from other States could be
considered for appointment.
7.7 The GoM considered that All India Service officers that have requisite experience in tax
administration are eligible for appointment as Technical Member (State), similar dispensation should
be there for Technical Member (Centre) as well. The GoM concluded that such officers should also be
considered eligible for appointment as Technical Member (Centre) as well. GoM felt that this would
expand the pool of selection for Technical Member (Centre).
Judicial Members
7.8 Finance Minister, Orissa pointed out that the proposed qualification of District
Judge/Additional District Judge qualified to be appointed as High Court Judge is vague and could
cause issues. Accordingly, GoM considered and decided in favour of adoption of combined experience
of 10 years as District Judge/Additional District Judge for appointment as Judicial Member, noting
that, today, this qualification exists for eight Tribunals under Tribunal Reforms Act, 2021.
7.9 The GoM also discussed eligibility of Advocates for appointment as Judicial Members. The
GoM noted that this point was examined by the Madras High Court in the Revenue Bar Association
case and that Court held that “the argument that section 109 & 110 of CGST Act, 2017 and TNGST
Act, 2017 are ultra vires, in so far as exclusion of lawyers from the scope and view for consideration
as Members of the Tribunal, is rejected.”. The Court held that just because Advocates are eligible in
some other Tribunals, the fact that the GST law does not make them eligible for appointment cannot
be held to be against Article 14. However, Hon’ble High Court recommended that including lawyers
for being eligible for appointment as Judicial Members should be considered.
7.10 The GoM acknowledged the recommendation made by the Hon’ble High Court and discussed
that the eligibility conditions for Members of the Tribunal is a policy decision to be taken by the GoM
and GST Council. The GoM discussed the issue in detail and concluded that at this stage there is no
reason to depart from the original decision taken by the Council while finalizing the GST laws and a
decision regarding the same may be taken later after seeing the experience of working of GST
Appellate Tribunal for few years.
8. Term of appointment and re-appointment
8.1 The GoM discussed merits and demerits of re-appointment and having a retirement age of 67
years for Members and 70 years for Chairman.Member from Goa argued that reappointment is helpful
in case of smaller States where enough eligible officers may not be available.Convener also argued
that no scope for re-appointment would significantly shorten effective tenure and discourage talent
from being attracted. However, GoM also noted that re-appointment may work against newer talent
being inducted in the Tribunal.
8.2 GoM noted that currently proposed provisions of retirement age are in line with the Tribunal
Reforms Act, 2021 and that the Apex Court in its Judgment in Madras Bar Association (2020) case
has sought for reappointment to be provided. GoM discussed that these are policy issues and should be
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appointment provisions should be such that they ensure availability of best candidates for the
Tribunal. Therefore, the GoM concluded that it is better to have early retirement at the age of 65 years
for Members and 67 years for President and recommends retirement age of 65 years against 67 years
for Members and 67 years against 70 years for President.
8.3 Members of the GoM discussed that re-appointment is an important provision since there may
be instances where new members may not be available for replacing the sitting Members and it is also
important to provide suitable re-appointment opportunity to sitting Members. Therefore, a balanced
view was adopted by the GoM and it was concluded that it is better to have a term of four years with
possible re-appointment for another two years.
8.4 The issue of transfer of Members by the President was also considered by the GoM.The GoM
discussed that since the entire set up of GST Tribunal is new, it was better if there is flexibility in the
law for unforeseen circumstances. The GoM noted that while a situation of transfer of a Member
appointed for four years may rarely arise, a complete bar on to transfer in the law may not be
advisable as such exigencies may arise. After detailed discussion and evaluating the merits and
demerits, the GoM concluded that the proposed provision ensures required balance and could be
retained.
9. Number of Benches in each State
9.1 The Convenor proposed that for deciding number of benches in each State, Council should
adopt a guiding formula. The GoM considered a formulation that States with population upto 2 crore
may have one bench, States with population more than 2 crore and upto 5 crore may have upto two
benches, States with population more than 5 crore and upto 10 crore may have upto three benches,
States with population more than 10 crore and upto 15 crore may have upto four benches and States
with population more than 15 crore may have upto five benches. Hon’ble Member from Rajasthan
suggested that their State being a geographically big State may require three benches to avoid making
people travel long distances.
9.2 Hon’ble Member from Andhra Pradesh expressed whether population is a better criterion or
should the number of benches be linked to number of registered persons in a State. It was discussed
that GST being a consumption-based tax, population would be a better proxy for consumption.
Additionally, population is a steadier parameter as compared to number of registered persons, which
would go up or down with registration and cancellation.
9.3 The GoM concluded that there should be some guiding principle for any State to request and
the Council to recommend the number of benches in each State. The GoM finally concluded that
States with less than 5 crore population may have upto maximum 2 benches and no State shall have
more than 5 benches.
10. Summary of Recommendations
10.1 The recommendations of the GoM on various issues are finalised below:
(i) There should be one National GST Appellate Tribunal with as many benches as may
be required, in every State, depending on the size of the State.
(ii) The Search-cum-Selection Committee should be chaired by the Chief Justice of India
or a Judge of Supreme Court nominated by him. The other members of the Committee
should be the President of the Tribunal (or a retired Judge of Supreme Court or Chief
Justice of High Court nominated by Chief Justice of India if the President is not
available), one Secretary of Central Government and Chief Secretary of the State in
which the bench is located for selection to the post of Technical Member (State) or
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Chief Secretary of a State to be nominated by Council for all other Members for a
period of one year.
(iii) Each bench should consist of a Judicial Member and a Technical Member, who
could be Technical Member (Centre) or Technical Member (State) in 50:50 ratio in
every State. Single Member bench should be empowered to hear cases with tax
implication upto ₹ 50 lakh.
(iv)Basic qualification for becoming Technical Member should be 25 years of experience
in Group A posts. For Technical Member (State), State Government should have the
flexibility to reduce the experience requirement in Group A service with the approval
of Council due to certain State specific limitations but with total experience of 25
years of Government Service and rank not below that of First Appellate Authority in
the State.
(v) High Court Judges orJudges who have combined experience of 10 years as District
Judge and/or Additional District Judge should be eligible for appointment as Judicial
Member.
(vi)President and Members should have retirement age of 67 and 65 years respectively
and have term of four years with provision for re-appointment for another two years.
(vii) States with less than 5 crore population should have maximum 2 benches and no State
should have more than 5 benches.
10.2 The draft provisions as approved by GoM are at Annexure B.
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Annexure A
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Annexure B
Amended Section 109, 110 and 114 of CGST Act
109. Constitution of Appellate Tribunal and Benches thereof
(1) The Government shall, on the recommendations of the Council, by notification, constitute
with effect from such date as may be specified therein, an Appellate Tribunal known as the Goods and
Services Tax Appellate Tribunal for hearing appeals against the orders passed by the Appellate
Authority or the Revisional Authority.
(2) The powers of the Appellate Tribunal shall be exercisable by Benchesconstituted under subsection (3) and sub-section (5).
(3) The Principal Bench of the Appellate Tribunal shall be situated at New Delhi which shall be
presided over by the President and shall consist of a Technical Member (Centre) or a Technical
Member (State).
(4) The jurisdiction to hear appeals against the orders passed by the Appellate Authority or the
Revisional Authority in the cases where one of the issues involved relates to the place of supply shall
lie only with the Principal Bench.
(5) In addition to the Principal Bench, Government shall, by notification, constitute such number
of Benches at such locations as may be recommended by the Council, based on the request of the State
Government.
(6) Benches, other than Principal Bench, shall have jurisdiction to hear appeals against the orders
passed by the Appellate Authority or the Revisional Authority in the cases involving matters other
than those referred to in sub-section (4).
(7) The President shall, by general or a special order, distribute the business or transfer cases
among the Benches.
(8) Each Bench of the Appellate Tribunal shall consist of a Judicial Member and a Technical
Member (Centre) or a Technical Member (State).
(9) The senior most Judicial Member within such Benches as may be prescribed, shall act as the
Vice President for such Benches and he shall exercise such powers of the President as may be
prescribed but for all other purposes shall continue to be considered as a Member.
(10) Where the tax or input tax credit involved or the amount of fine, fee or penalty determined in
any order appealed against, does not exceed fifty lakh rupees and which does not involve any question
of law may, with the approval of the President and subject to such conditions as may be prescribed on
the recommendations of the Council, be heard by a bench consisting of a single Member.
(11) If the Members of a Bench differ in opinion on any point or points, they shall state the point or
points on which they differ, and the case shall be referred by the President for hearing on such point or
points to another Member from a Bench within the State or another State, where no such Member is
available in a Bench within the State, and such point or points shall be decided according to the
opinion of the majority of Members who have heard the case, including those who first heard it.
(12) The Government, in consultation with the President may, for the administrative convenience,
transfer Members from one bench to the other.
(13) No act or proceedings of the Appellate Tribunal shall be questioned or shall be invalid merely
on the ground of the existence of any vacancy or defect in the constitution of the Appellate Tribunal.
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110. President and Members of Appellate Tribunal, their qualification, appointment,
conditions of service, etc
(1) A person shall not be qualified for appointment as—
(a) the President, unless he has been a Judge of the Supreme Court or is or has been the
Chief Justice of a High Court;
(b) a Judicial Member, unless he –
(i) has been a Judge of the High Court; or
(ii) has, for a combined period of ten years, been a District Judge or an Additional
District Judge;
(c) a Technical Member (Centre) unless he is or has been a member of Indian Revenue
(Customs and Central Excise) Service, Group A or of the All India Service with at least three
years of experience in the administration of an existing law or goods and services tax, and has
completed at least twenty-five years of service in Group A;
(d) a Technical Member (State) unless he is or has been an officer of State Government or
an officer of the All India Service, not below the rank of Additional Commissioner of Value
Added Tax or the State goods and services tax or such rank, higher than the First Appellate
Authority, as may be notified by the concerned State Government, on the recommendations of
the Council and has completed twenty-five years of service in Group A with at least three
years of experience in the administration of an existing law or the goods and services tax or in
the field of finance and taxation:
Provided that the State Government may, on the recommendations of the Council, by
notification, reduce the requirement of completion of twenty-five years of service in Group A
in respect of officers of such State where no person has completed twenty-five years of service
in Group A, subject to such conditions, and till such period, as may be specified in the
notification:
Provided further that the officer should have completed twenty-five years of service
in the Government.
(2) The President, Judicial Member, the Technical Member (Centre) and Technical Member
(State) shall be appointed by the Government on the recommendations of a search-cum-selection
Committee constituted under sub-section (5):
Provided that in the event of the occurrence of any vacancy in the office of the President by
reason of his death, resignation or otherwise, the Technical Member of the Principal Bench shall act as
the President until the date on which a new President, appointed in accordance with the provisions of
this Act to fill such vacancy, enters upon his office:
Provided further that where the President is unable to discharge his functions owing to
absence, illness or any other cause, the Technical Member of the Principal Bench shall discharge the
functions of the President until the date on which the President resumes his duties.
(3) While making selection for Technical Member (State), first preference shall be given to
officers who have worked in the State Government of the State to which the jurisdiction of the Bench
extends.
(4) In making appointments, the Government shall ensure that, over a period of time, there is
adequate balance in the number of appointments as Technical Member (Centre) and number of
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appointments as Technical Member (State), overall, as well as, in every State in such manner as may
be prescribed.
(5) The search-cum-selection Committee shall consist of—
(a) the Chief Justice of India or a Judge of Supreme Court nominated by him––
Chairperson of the Committee;
(b) Secretary of the Central Government nominated by the Cabinet Secretary –– Member;
(c) Chief Secretary of
(i) the State in which the Bench is located, in case of appointment of Technical
Member (State) in the Benches; or
(ii) a State to be nominated by the Council, in all other cases –– Member;
(d) one Member, who––
(i) in case of appointment of a President of a Tribunal, shall be the outgoing
President of the Tribunal; or
(ii) in case of appointment of a Member of a Tribunal, shall be the sitting
President of the Tribunal; or
(iii) in case of the President of the Tribunal seeking re-appointment or where the
outgoing President is unavailable or the removal of the President is being considered,
shall be a retired Judge of the Supreme Court or a retired Chief Justice of a High
Court nominated by the Chief Justice of India; and
(e) Secretary of the Department of Revenue in the Ministry of Finance of the Central
Government –– Member Secretary.
(6) The Chairperson shall have the casting vote and the Member Secretary shall not have a vote.
(7) Notwithstanding anything contained in any judgment, order, or decree of any court or any law
for the time being in force, the Committee shall recommend a panel of two names for appointment to
the post of Chairperson or Member, as the case may be.
(8) No appointment of the Members of the Appellate Tribunal shall be invalid merely by the
reason of any vacancy or defect in the constitution of the search-cum-selection Committee.
(9) Notwithstanding anything contained in any judgment, order or decree of any court, or in any
law for the time being in force, the salary of the President and the Members of the Appellate Tribunal
shall be such as may be prescribed, and allowances and other terms and conditions of service shall be
same as applicable to Central Government Officers carrying the same pay:
Provided that neither salary and allowances nor other terms and conditions of service of the
Presidentor Members of the Appellate Tribunal shall be varied to their disadvantage after their
appointment:
Provided further that, if the President or Member takes a house on rent, he may be reimbursed
a house rent higher than the house rent allowance as are admissible to a Central Government officer
holding the post carrying the same pay, subject to such limitations and conditions as may be
prescribed.
(10) Notwithstanding anything contained in any judgment, order, or decree of any court or any law
for the time being in force, the President of the Appellate Tribunal shall hold office for a term of four
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years from the date on which he enters upon his office, or until he attains the age of sixty-seven years,
whichever is earlier and shall be eligible for re-appointment for a period not exceeding two years.
(11) Notwithstanding anything contained in any judgment, order, or decree of any court or any law
for the time being in force, Judicial Member, Technical Member (Centre) or Technical Member
(State) of the Appellate Tribunal shall hold office for a term of four years from the date on which he
enters upon his office, or until he attains the age of sixty-five years, whichever is earlier and shall be
eligible for re-appointment for a period not exceeding two years.
(12) The President or any Member may, by notice in writing under his hand addressed to the
Government resign from his office:
Provided that the President or Member shall continue to hold office until the expiry of three
months from the date of receipt of such notice by the Government or until a person duly appointed as
his successor enters upon his office or until the expiry of his term of office, whichever is the earliest.
(13) The Government may, on the recommendation of the search-cum-selection Committee,
remove from the office the President or a Member, who—
(a) has been adjudged an insolvent; or
(b) has been convicted of an offence which involves moral turpitude; or
(c) has become physically or mentally incapable of acting as such President or Member;
or
(d) has acquired such financial or other interest as is likely to affect prejudicially his
functions as such President or Member; or
(e) has so abused his position as to render his continuance in office prejudicial to the
public interest:
Provided that the President or the Member shall not be removed on any of the grounds
specified in clauses (d) and (e), unless he has been informed of the charges against him and has been
given an opportunity of being heard.
(14) The Government, on the recommendations of the search-cum-selection Committee, may
suspend from office, the President or a Judicial or Technical Members in respect of whom proceedings
have been initiated under sub-section (13).
(15) Subject to the provisions of article 220 of the Constitution, the President or other Members, on
ceasing to hold their office, shall not be eligible to appear, act or plead before the Principal Bench or
the Benches where he was the President or, as the case may be, a Member.
114. Financial and administrative powers of President
The President shall exercise such financial and administrative powers over the Appellate Tribunal as
may be prescribed.
Amended Section 109, 110 and 114 of SGST Acts
109. Constitution of Appellate Tribunal and Benches thereof
Subject to the provisions of this Chapter, the Goods and Services Tax Tribunal constituted under the
Central Goods and Services Tax Act, 2017 shall be the Appellate Tribunal for hearing appeals against
the orders passed by the Appellate Authority or the Revisional Authority under this Act.
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Sections 110 and 114 can be deleted
Common amendments in Sections 117, 118 and 119
Amendment required to harmonise the terminology – “National and Regional Benches” to be replaced
with “Principal Bench” and “State and Area Benches” to be replaced with “Benches”.

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Agenda Item 10: Closure of Group of Ministers (GoM) on levy of Covid Cess on Pharma and
Power in Sikkim.

In pursuance of the decision of the GST Council at its 43rd meeting on 28th May, 2021, a Group of
Ministers (GoM) was constituted on levy of Covid Cess on Pharma and Power in Sikkim vide OM
dated 11.06.2021 issued by Department of Revenue (DoR) vide F. No. S-31011/12/2021-DIR(NC)-
DOR. The GoM consisted of the following members:

Sl. No. Name Designation & State
1 Sh. Basavaraj Bommai Minister for Home Affairs, Karnataka Convenor
2 Sh. Manish Sisodia Deputy Chief Minister, Delhi Member
3 Sh. T S Singh Deo Minister for Commercial Taxes, Chhattisgarh Member
4 Sh. K.N. Balagopal Minister for Finance, Kerala Member
5 Sh. Niranjan Pujari Minister for Finance, Odisha Member
6 Sh. B.S. Panth Minister for Tourism & Industries, Sikkim Member
7 Sh. Suresh Kumar Khanna Minister for Finance, Uttar Pradesh Member


2. The GoM examined the proposal moved by Government of Sikkim on levy of Covid Cess on
Pharma and Power in Sikkim and made the following recommendations:

a. State of Sikkim may levy a cess of 1% on of the turnover of pharmaceutical sector (excluding
the unorganized sector) restricted to only intra-State supplies.
b. Since levy of cess on power generation does not fall within the purview of GST, this call may
be taken by the State of Sikkim.
c. Regarding the special package of assistance by Government of India, the matter was under
the ambit of Central Government and not the GST council so a decision would be taken by
Central Government.

3. The GoM submitted its final report in the 45th GST Council Meeting held on 17th September,
2021. Consequently, the GoM has completed its mandate. Accordingly, Agenda for closure of the
GoM is placed before the GST Council.

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Agenda Item 11: Closure of Group of Ministers (GoM) to examine the feasibility of
implementation of e-way bill requirement for movement of gold and other precious stones.

In pursuance of the decision of the GST Council at its 37th meeting on 20th September, 2019, a Group
of Ministers (GoM) was constituted to examine the feasibility of implementation of e-way bill
requirement for movement of gold and other precious stones vide OM dated 22.11.2019 issued by
GST Council Secretariat vide F. No. 591/GOM/Mvmt Of Gold & Pre. Stones/GSTC/2019.

2. The Terms of Reference for the GoM were to examine the feasibility of implementation of eWay bill requirement for movement of Gold and precious Stones or otherwise and to suggest a
mechanism for controlling tax evasion without compromising on security aspects that may arise from
its implementation.

3. The GoM examined the feasibility of implementation of e-way bill requirement for movement
of gold and other precious stones. The final report of the GoM was tabled in the 47th GST Council
Meeting held on 28th-29th June, 2022. The following recommendations were made by the GoM:

A. E-way bill for intra-state movement of gold and precious stone:
i.
i. The states should be allowed to decide about imposition of the requirement of e-way
bill for intra-state movement of gold and precious stones within their states.
ii. There will be a minimum threshold value of Rs.2 Lakh, and the states can decide any
amount including or above this amount as minimum threshold for generation of Eway bill for intra-state movement of gold/precious stones in their state.
iii. Only part ‘A’ on the e-way bill will be required to be filled in such cases, without
any need for filling Part ‘B’ of the e-way bill.
iv. Further, modalities of generation of e-way bill for intra-state movement of
gold/precious stones will be as suggested by NIC/GSTN.
v. For deciding about implementation of such a system of e-way bill for intra-state
movement of gold and precious stones within the state as well as regarding the
threshold value to be adopted for generation of such e-way bill within the state, the
procedure of consultations with the jurisdictional Principal Chief Commissioner/Chief
Commissioner of Central Tax, or any Commissioner authorized by him, should be
followed by the States.
vi. Once e-way bill requirement for movement of gold and precious stones is decided, the
corresponding suitable amendment in CGST Rules, 2017 would have to be carried
out. While finalizing amendment in Rules, it is to be ensured that in case of supply of
gold by registered persons to unregistered buyers, the requirement of e-way bill
generation is mandated on registered supplier only.
B. E-invoicing for gold and precious stones:

i. E-invoicing should be made mandatory for B2B transactions by all taxpayers supplying
gold/precious stones (goods of HSN 71) and having annual aggregate turnover above Rs.20
Crore.
II. GSTN, in consultation with NIC, to work out the modalities and timelines for implementation
of the proposed requirement of e-invoicing for gold/precious stones.

C. Levy of GST on RCM basis on Old Gold:

i. ( i.) The issue of levy on GST on reverse charge mechanism (RCM) basis on purchase of
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old gold by registered dealers/jewellers from unregistered persons may be referred to Fitment
Committee for detailed examinations.


4. The recommendations made by the GoM were accepted by the GST council and it was decided
that the states are at liberty to the implement the said recommendations in their respective States.
Consequently, the GoM has completed its mandate. Accordingly, Agenda for closure of the GoM is
placed before the GST Council.

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Agenda Item 12: GST Data sharing with Ministries and Departments
1. The present Agenda is regarding GST data sharing with Ministries and Departments. After
the introduction of GST, large amount of quality data is available with the GST system that
can be used within Government for various purposes, including better decision making
and better targeting of Government resources. Further, Department of Revenue and State
Tax departments have been receiving request from different
Ministries/Departments/Agencies, at Central as well as State levels, seeking data related to
GST.
The requests for data can be broadly classified into four categories as under:
A. Validating GSTIN using GSTN validation API with the following data field.
These requests are from those agencies that take the GSTIN from their clients for their
purpose. Examples could include procurement, subsidy and other benefits. These agencies
may like to verify the validity of the GSTIN given by the entity. GSTN has a publicly
available facility on their portal, called “search taxpayer”, where the details of the taxpayer
for a given GSTIN is made available, including the legal name, trade name, address, date of
registration, whether it is Aadhaar authenticated, major goods and services that the entity
deals in and even the filing status. While this information is available on the portal, it has to
be accessed through manual intervention for each GSTIN.
It is proposed that since this facility is anyway available publicly, it could be made through
APIs to Government Ministries, Departments and Agencies so that their IT systems can
easily access this information.
Any agency that wants to carry out validation through API route and access basic registration
data (which is otherwise available on the GST portal on open basis or to registered persons),
could approach GSTN directly for the same. GSTN should review the data being
made available publicly and to registered entities to make it more useful to other
agencies.
B. Aggregated GST data which does not involve disclosure of any personally
identifiable information of a taxpayer etc.
The second set of data sharing request pertain to aggregate information, mainly for planning
and decision-making purposes. For example, aggregate information of e-way bill can give
important insights into movement of goods, that would be useful for National and State
Highway organisation. Details of gross GST collection every month is being widely used for
macro-economic monitoring.
It is proposed that the aggregate information as may be available from those fields of various
statements under GST legal framework that are credible and have a system to ensure its
correctness, even if on a risk- based system, but which do not reveal the identity of a
taxpayer or an identifiable set of tax payers in any way, can be shared with Government
Ministries, Department and Agencies for planning and better decision making.
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Any agency that intends to access summary data pertaining to GST should give the details in
the following format to Department of Revenue and thereafter DoR shall process the
request and get it placed before the GST Implementation Committee for a decision on
sharing of the data.
1. Centre/State Government
2. Ministry/ Department
3. Name of Agency
4. Data items on which aggregation needs to be done
Form Field
5. Data items of which aggregates are required
Form Field
6. Period for which data is to be aggregated
7. Whether one time or recurring
8. Periodicity, if recurring
9. Purpose for which data is being sought
10. Details of Contact Person
a. Name
b. Designation
c. Phone
d. Email
It can also be considered that a subset of this information can be made available even in
public domain so that they are available even to industry and research organisations.
Currently, details of GST collection and settlement are put in public domain with a delay as
per the decision of the GST Council. Depending on request of data that are frequently been
received, a decision could be taken to put the data in public domain for wider use.
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C. Dis-aggregated data which does not disclose the identity of the tax payer
Apart from the aggregate data, at times agencies request for disaggregated data but with the
identity of taxpayer masked. Such data can include details relating to individual e-way bills
with the GSTIN of the supplier and the recipient removed. While most of the requirements
can be met using aggregate data, many use advance analytics requiring disaggregated data.
This would also allow mapping of datasets across IT platforms of different agencies using
identifiers that cannot be traced back to the supplier or the recipient
It is proposed that this information could be shared with Government Ministries,
Department and Agencies if they are able to demonstrate that their use case requires disaggregated data and there is value in sharing dis-aggregated data for such a use case.
Any agency that intends to access summary data pertaining to GST should give the details in
the following format to Department of Revenue. Department of Revenue shall process the
request and get it placed before the GST Implementation Committee for a decision on
sharing of the data.
1. Centre/State Government
2. Ministry/ Department
3. Name of Agency
4. Mode of Sharing
5. Data items to be shared
Form Field
6. Purpose for which data is being sought
7. Reason why the objective cannot be achieved through aggregated
data and can only be achieved through disaggregated data
8. Details of Contact Person
a. Name
b. Designation
c. Phone
d. Email
D. Any data sharing request that does not fall under the above category should only be done
with specific approval of the GST Council/GST Implementation Committee on a case to case
basis. It may be noted that at previous occasions, data of individual taxpayers has been
shared with Government agencies where the legal framework required providing such
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data, like with National Authority Chemical Weapons Convention (NACWC), Cabinet
Secretariat, MSME registration etc. These have been done after approval of the
GSTC/GIC. At specific instances, data is being shared with enforcement agencies for
enforcement purposes and where GST data is required as an evidence.
2. The proposal further provides that the sharing of data should be subject to following
general conditions:
a. The user agency should ensure safety and security of the data received from GST system
and put in place proper IT and administrative mechanisms to ensure safety of data shared.
b. The user agency should use the data only for the purpose it was shared and not
disseminate the data further to other agencies.
c. The user agency should not use the raw data for commercial benefits since this data has
been acquired from the compliances furnished by taxpayers. Agencies can, however, charge
for value added services made available based on the data shared.
d. For data shared on recurring basis, right to access may be revoked at any time if it is
found that it is not in public interest.
3. The GST data is collectively owned by Centre and States and is held by GSTN under the
guidance of GST Council. In view of same, decision has to be taken by both Centre and
States as to how the GST data of the taxpayer can be shared with other
departments/Ministries for their use.
4. Accordingly, the above agenda is placed before the GST Council for approval.

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Agenda Item 13: Review of revenue position under Goods and Services Tax
1. The Figure below shows the trend and Table 1 shows the details of the collection in FY 2022-
23 vis-à-vis FY 2021-22.
Figure 1: Monthly gross GST collection (in ₹ lakh crore)
Table 1: Monthly gross GST collection (₹ crore)
GST Collection Jun-22 Jul-22 Aug-22 Sep-22 Oct-22 Nov-22
CGST 25,306 25,751 24,710 25,271 26,039 25,681
SGST 32,406 32,807 30,951 31,813 33,396 32,651
IGST 75,887 79,518 77,782 80,464 81,778 77,103
Domestic 35,785 38,098 35,715 39,249 44,481 38,468
Imports 40,102 41,420 42,067 41,215 37,297 38,635
Comp Cess 11,018 10,920 10,168 10,137 10,505 10,433
Domestic 9,821 9,925 9,151 9,282 9,680 9,616
Imports 1,197 995 1,018 856 825 817
Total 1,44,616 1,48,995 1,43,612 1,47,686 1,51,718 1,45,867
2. Table 2 shows the IGST collected, refunded and settled/apportioned during FY2022-23 till
November, 2022.
1.39
0.97 0.92
1.16 1.12 1.17
1.30 1.31 1.29
1.40 1.33
1.42
1.67
1.40 1.44 1.48 1.43 1.47 1.51 1.45
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
1.80
Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
Trends In GST Collection(Rs. In lakh Crore)
GST Collection in FY 2021-22 GST Collection in FY 2022-23
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Table 2: IGST Collection/Settlement/Apportionment/Refund in FY 2022-23
(Figures in Rs. Crore)
1 Collections (+) 6,22,861
2 Recovery from IGST Ad-hoc apportionment(+) -
3 Refunds (-) 1,01,088
4 Settlement (-)
i. CGST 2,56,325
ii. SGST 2,15,038
5 Ad-hoc Settlement (-) -
i. CGST ad hoc 24,500
ii. SGST ad hoc 24,500
6 Net (1+2-3-4-5) 1,410
Source: PrCCA, CBIC
Compensation Fund
3. As per provision of GST (Compensation to States) Act, 2017 the Compensation Cess
collected since implementation of GST w.e.f. 01.07.2017 till November 2022 and the compensation
released are shown in the table below:
Table 3: Compensation Cess collected and compensation released
(Figures in Rs. Crore)
2017-18 2018-19 2019-20 2020-21 2021-22 2022-23
(till Nov)
Opening Balance 21,466 47,271 55,736 9,734^ 9,344
Compensation Cess
collected (net)
62,612 95,081 95,551 85,191 1,04,609 82,467
Compensation
released
41,146 69,275 1,20,498 1,36,988 97,500 1,15,662
Balance 21,466 47,271 55,736* 3939 16,844$
(23,851)
* Centre had transferred Rs. 33,412 crore from CFI to Compensation Cess Fund as part of an exercise
to apportion balance IGST pertaining to FY 2017-18
^ Centre had transferred Rs. 5,795 crore from CFI to cess fund as part of an exercise to apportion
balance IGST pertaining to 2018-19 on 08.03.2022
$ Balance GST compensation cess available is Rs. 16844 crore. However, taking into account the
interest of back to back loan of Rs. 7,500 crore, GST compensation cess carried forward to FY 2022-
23 as opening balance is Rs. 9344 crore
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Trends in Return filing
5. The table 4 shows the trend in return filing in FORM GSTR-3B and GSTR-1 till due date for
return period Apr’22 to Oct’22. Tables 5and 6 show the State wise filing for these months.
Table 4: Return filing (GSTR-3B/GSTR-1) till due date
Return Period GSTR-3B (%) GSTR-1(%)
Apr’22 78.55 55.14
May’22 75.85 57.35
Jun’22 77.20 54.50
Jul’22 76.87 56.12
Aug’22 76.14 54.61
Sep’22 75.14 53.41
Oct’22 75.91 59.09
Figure 3: GSTR-3B/GSTR-1 Filing till due date

78.55 75.85 77.2 76.87 76.14 75.14 75.91
55.14 57.35 54.5 56.12 54.61 53.41
59.09
0
10
20
30
40
50
60
70
80
90
Apr’22 May’22 Jun’22 Jul’22 Aug’22 Sep’22 Oct’22
GSTR-3B (%) GSTR-1(%)
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Table 5: State-wise Return filing (GSTR-3B) till due date (Apr’22-Oct’22)
States Apr-22 May-22 Jun-22 Jul-22 Aug-22 Sep-22 Oct-22
Jammu and Kashmir 82% 78% 80% 80% 79% 79% 79%
Himachal Pradesh 81% 76% 79% 78% 76% 77% 77%
Punjab 82% 80% 80% 80% 79% 77% 78%
Chandigarh 85% 83% 82% 83% 82% 78% 82%
Uttarakhand 76% 73% 75% 73% 72% 71% 72%
Haryana 80% 78% 79% 78% 78% 75% 77%
Delhi 81% 79% 80% 78% 79% 76% 77%
Rajasthan 80% 78% 78% 78% 77% 76% 77%
Uttar Pradesh 81% 78% 78% 78% 78% 75% 77%
Bihar 69% 57% 71% 69% 68% 68% 69%
Sikkim 63% 62% 68% 62% 63% 64% 60%
Arunachal Pradesh 50% 51% 56% 53% 53% 53% 53%
Nagaland 66% 66% 67% 66% 67% 65% 65%
Manipur 55% 53% 57% 56% 54% 55% 53%
Mizoram 63% 61% 65% 64% 64% 63% 60%
Tripura 75% 73% 77% 76% 74% 73% 74%
Meghalaya 60% 60% 69% 60% 61% 67% 60%
Assam 68% 66% 68% 68% 66% 66% 67%
West Bengal 81% 79% 80% 80% 79% 78% 79%
Jharkhand 78% 76% 78% 77% 76% 75% 76%
Odisha 75% 72% 75% 74% 73% 72% 72%
Chhattisgarh 68% 66% 68% 69% 66% 68% 67%
Madhya Pradesh 78% 74% 75% 76% 74% 75% 76%
Gujarat 87% 85% 85% 85% 85% 85% 85%
Dadra and Nagar Haveli 79% 75% 76% 77% 77% 75% 75%
Maharashtra 75% 73% 75% 75% 73% 74% 73%
Karnataka 78% 76% 77% 77% 76% 74% 76%
Goa 62% 60% 64% 61% 61% 65% 63%
Lakshadweep 69% 68% 70% 67% 73% 71% 67%
Kerala 77% 74% 75% 76% 73% 72% 73%
Tamil Nadu 83% 80% 80% 80% 79% 78% 80%
Puducherry 79% 75% 75% 75% 75% 72% 75%
Andaman and Nicobar Island 65% 62% 63% 64% 63% 64% 62%
Telangana 70% 67% 69% 67% 67% 67% 67%
Andhra Pradesh 76% 75% 76% 76% 75% 73% 76%
Ladakh 68% 68% 71% 68% 66% 72% 65%
Other Territory 76% 22% 68% 74% 73% 67% 69%
All-India 79% 76% 77% 77% 76% 75% 76%

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Table 6: State-wise Return filing (GSTR-1) till due date (Apr’22-Oct’22)
States Apr-22 May22 Jun-22 Jul-22 Aug-22 Sep-22 Oct-22
Jammu and Kashmir 37% 41% 36% 41% 39% 38% 43%
Himachal Pradesh 56% 57% 49% 56% 54% 49% 59%
Punjab 72% 74% 69% 72% 71% 68% 74%
Chandigarh 75% 77% 73% 75% 74% 72% 77%
Uttarakhand 51% 53% 47% 50% 50% 46% 54%
Haryana 68% 70% 67% 67% 68% 65% 70%
Delhi 69% 71% 70% 69% 70% 69% 71%
Rajasthan 62% 66% 58% 63% 63% 59% 67%
Uttar Pradesh 48% 51% 46% 48% 48% 45% 52%
Bihar 27% 29% 27% 27% 27% 25% 31%
Sikkim 32% 34% 34% 34% 34% 27% 35%
Arunachal Pradesh 21% 24% 23% 23% 23% 21% 26%
Nagaland 29% 29% 29% 29% 28% 27% 29%
Manipur 21% 23% 22% 24% 22% 24% 25%
Mizoram 20% 21% 20% 20% 20% 20% 21%
Tripura 42% 46% 43% 44% 42% 38% 47%
Meghalaya 25% 26% 28% 27% 24% 24% 28%
Assam 33% 37% 33% 36% 35% 30% 39%
West Bengal 51% 53% 51% 53% 52% 47% 55%
Jharkhand 43% 43% 43% 45% 44% 41% 47%
Odisha 37% 40% 35% 38% 38% 33% 41%
Chhattisgarh 44% 48% 42% 46% 46% 42% 51%
Madhya Pradesh 48% 51% 42% 47% 47% 41% 56%
Gujarat 79% 82% 78% 79% 79% 78% 82%
Dadra and Nagar Haveli 72% 73% 71% 72% 73% 72% 76%
Maharashtra 60% 63% 60% 63% 61% 60% 66%
Karnataka 52% 56% 53% 55% 53% 51% 58%
Goa 44% 47% 48% 47% 44% 51% 52%
Lakshadweep 42% 52% 52% 56% 50% 49% 54%
Kerala 56% 59% 55% 60% 50% 54% 60%
Tamil Nadu 58% 58% 57% 59% 55% 55% 61%
Puducherry 51% 52% 50% 52% 49% 50% 54%
Andaman and Nicobar Island 38% 42% 39% 40% 41% 38% 43%
Telangana 43% 44% 42% 43% 41% 41% 46%
Andhra Pradesh 48% 52% 49% 51% 49% 46% 54%
Ladakh 27% 31% 34% 30% 26% 35% 32%
Other Territory 74% 74% 72% 75% 73% 69% 75%
All-India 55% 57% 55% 56% 55% 53% 59%
Agenda for 48th GSTCM Volume 1
Agenda for
48th GST Council Meeting
17th December 2022
Volume – II
Confidential
GST Council Meeting
Agenda for 48th GSTCM Volume 2
Page 2 of 575
Agenda for 48th GSTCM Volume 2
Subject: Notice for the 48th Meeting of the GST Council scheduled to be Convened on 17
December, 2022
The undersigned is directed to refer to the subject stated above and to convey that the 48
Meeting of the GST Council will be held on
Conferencing). The schedule of the Meeting is as fol
• Saturday, 17th December, 2022
2. In addition, an Officers Meeting
schedule:
• Friday, 16th
December, 2022
3. The agenda item and other details for the 48
communicated in due course of time.
4. Kindly convey the invitation to Hon’ble Members of the GST Council to attend the Meeting of the
GST Council.
Secretary to the Govt. of India and ex
Copy to:
1. PS to the Hon’ble Minister of Finance, Government of India, North Block, New Delhi with the
request to brief Hon’ble Minister about the above said meeting.
2. PS to the Hon’ble Minister of State (Finance), Government of India, North Block, New Delhi
with the request to brief Hon’ble Minister about the above said Meeting.
3. The Chief Secretaries of all the State Governments, Union Territories of Delhi, Puduc
Jammu and Kashmir with the request to intimate the Minister in charge of Finance/Taxation or any other
Minister nominated by the State Government as a Member of the GST Council about the above said
meeting.
4. Chairman, CBIC, North block, New De
Council.
5. Chairman, GST Network.
GST Council Secretariat
New Delhi
5
th Floor, Tower-II, Jeevan Bharti Building, New Delhi
OFFICE MEMORANDUM
Meeting of the GST Council scheduled to be Convened on 17
The undersigned is directed to refer to the subject stated above and to convey that the 48
Meeting of the GST Council will be held on 17th December, 2022 through virtual mode (Video
. The schedule of the Meeting is as follows:
December, 2022: 11:00 A.M. onwards
Officers Meeting will be held on 16th December, 2022 as per the following
December, 2022: 11: 00 A.M. onwards
item and other details for the 48th Meeting of the GST Council will be
communicated in due course of time.
4. Kindly convey the invitation to Hon’ble Members of the GST Council to attend the Meeting of the
ary to the Govt. of India and ex-officio Secretary to the GST Council
PS to the Hon’ble Minister of Finance, Government of India, North Block, New Delhi with the
request to brief Hon’ble Minister about the above said meeting.
PS to the Hon’ble Minister of State (Finance), Government of India, North Block, New Delhi
with the request to brief Hon’ble Minister about the above said Meeting.
The Chief Secretaries of all the State Governments, Union Territories of Delhi, Puduc
Jammu and Kashmir with the request to intimate the Minister in charge of Finance/Taxation or any other
Minister nominated by the State Government as a Member of the GST Council about the above said
Chairman, CBIC, North block, New Delhi, as a permanent invitee to the proceeding of the
Chairman, GST Network.
II, Jeevan Bharti Building, New Delhi
25th November, 2022
Meeting of the GST Council scheduled to be Convened on 17th
The undersigned is directed to refer to the subject stated above and to convey that the 48th
through virtual mode (Video
December, 2022 as per the following
Meeting of the GST Council will be
4. Kindly convey the invitation to Hon’ble Members of the GST Council to attend the Meeting of the
Sd/-
(Tarun Bajaj)
officio Secretary to the GST Council
Tel:011 23092653
PS to the Hon’ble Minister of Finance, Government of India, North Block, New Delhi with the
PS to the Hon’ble Minister of State (Finance), Government of India, North Block, New Delhi
The Chief Secretaries of all the State Governments, Union Territories of Delhi, Puducherry and
Jammu and Kashmir with the request to intimate the Minister in charge of Finance/Taxation or any other
Minister nominated by the State Government as a Member of the GST Council about the above said
lhi, as a permanent invitee to the proceeding of the
Page 3 of 575
Agenda for 48th GSTCM Volume 2
Page 4 of 575
Agenda for 48th GSTCM Volume 2
TABLE OF CONTENTS
Agenda
No.
Agenda Item Page No.
14 Final Report of Group of Ministers (GoM) on Capacity Based
Taxation and Special Composition Scheme in certain sectors on GST
7-23
15 Recommendations of the 17th IT Grievance Redressal Committee for
approval/decision of the GST Council
24-94
16 Agenda on Report of Committee of Officers (CoO) on GST Audit
along with Draft Model All India GST Audit Manual
95-98
i. Report of the Committee of Officers (CoO) on GST Audit
2022 (Annexure A)
99-137
ii. Report of the Sub-Committee (CoO) on GST Audit Policy
And practices of the Centre and the States that have already
implemented certain procedures (Annexure I)
138-248
iii. Model All India GST Audit Manual (Annexure II) 249-534
iv. Report of the sub-committee constituted to broadly outline the
procedural aspects of joint and thematic audit (Annexure III)
535-543
v. Report of the sub-committee constituted on using capability of
data analytic developed by DGARM for identification of state
taxpayers for Audit (Annexure IV)
544-547
vi. Report of the sub-committee constituted to suggest
measures of capacity building in Services for focused
approach on audit of Services Sector (Annexure V)
548-550
vii. Report of sub-committee constituted to study, examine and
make suggestions on the issue of “To build knowledge
on financial accounting and focused approach towards
interpreting business contract/agreement and understanding of
the system-driven business process through SAP, Oracle,
Tally, etc.” (Annexure VI)
551-571
17 Any other agenda with the permission of the Chair. -
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Agenda Item 14 : Report of Group of Ministers (GoM) on Capacity Based Taxation and Special
Composition Scheme in certain sectors on GST
The GST Council, in its 42nd Meeting, held on 5th and 12th October 2020, decided that a Group
of Ministers (GoM) may be formed to discuss and analyze the issues pertaining to the Capacity based
taxation on Pan Masala, Reverse Charge Mechanism in mentha oil, special composition scheme on brick
kilns, stone crushers, etc.
2. Accordingly, a Group of Ministers (GoM) on Capacity-based Taxation and Special Composition
Scheme in Certain Sectors in GST had been constituted on 24.05.2021, with Shri Niranjan Pujari,
Hon'ble Minister for Finance, Odisha, as the Convener of the GoM. The GoM comprises of
Minsters from Delhi, Haryana, Kerala, Madhya Pradesh, Uttar Pradesh and Uttarakhand. The Group of
Ministers had three detailed meetings on 6th July, 2021, 31st August, 2021, and 07th July, 2022. Inputs to
GoM were also provided by a Group of Officers after its meeting that was held on 17.08.2021.
3. The Interim Report on two issues, namely, special composition scheme for brick kiln sector
and imposition of levy of GST on reverse charge basis on mentha oil & allowing its exports only
against LUT with the consequential refund of accumulated input tax credit was placed and
considered by the GST Council in its 45th Meeting held on 17th September, 2021 [Agenda Item 9:
Volume 2].
4. Thereafter, the 3rd detailed meeting of GoM was held on 07th July, 2022, wherein the GoM
deliberated comprehensively including on challenges associated with and complexities involved in the
implementation of capacity based levy on pan masala, gutkha, chewing tobacco and other similar
tobacco products, need to curb evasion to plug the tax leakages with a view to augment the revenue and
study alternate possible systemic & administrative mechanisms to enhance compliance & enforcement
measures. The Final Report of the Group of Ministers (GoM) on capacity-based taxation and Special
Composition Scheme for certain sectors is placed in the Annexure for the consideration of the Council.

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FINAL REPORT
GROUP OF MINISTERS
Capacity based taxation and Special
Composition Scheme in Certain Sectors in
FINAL REPORT
GROUP OF MINISTERS
On
Capacity based taxation and Special
Composition Scheme in Certain Sectors in
GST
Annexure
FINAL REPORT
Capacity based taxation and Special
Composition Scheme in Certain Sectors in
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CONTENTS
Sl. No. Subject Page No.
I. Context 2
II. Group of Ministers and its Terms of Reference 2
III. Deliberations of the GoM 3
IV. Capacity based taxation 4
V. Track and Trace Mechanism 8
VI. Conversion of ad valorem compensation cess rate to specific rate 9
VII. Recommendations of the GoM 11
Annexure-A: Constitution of GoM 13
Annexure-B: Interim Report of GoM 15
Annexure-C: Specific Tax Calculation 18

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I. Context
1. In the existing GST legal framework, GST is a destination-based tax that is levied on supply of
goods or services or both as per the Article 366(12A) of the Constitution of India.
2. However, on the basis of the observations made by certain states regarding the fall in the
revenue realization after the roll-out of the GST regime from certain evasion prone commodities, a need
was felt to examine the possibility to levy GST based on the capacity of manufacturing unit and
introduce special composition schemes in such evasion-prone sectors like pan masala, gutkha, brick
kilns, sand mining etc., and to explore any other suitable administrative or systemic mechanism(s) to
plug the existing leakages in these sectors in order to augment the revenue realised from such sectors.
3. Further, certain other issues were raised pertaining to the Mentha Oil sector. These issues were
regarding fraudulent exports/fake invoicing menace, tax incidence falling on the mentha farmers, among
others, a need was felt to examine the impact of levy of GST on reverse charge basis on mentha oil, with
a view to augment the revenue from the sector.
4. While discussing these issues in its 42nd Meeting, held on 05th October, 2020, the GST Council
considered it appropriate to form a Group of Ministers (GoM) for looking into the possibility of
Capacity based taxation and Special Composition Scheme in certain sectors in GST.
II. Group of Ministers and its Terms of Reference
5. On the basis of the recommendation made by the GST Council in its 42nd Meeting, a Group of
Minsters (GoM) was constituted under the Chairmanship of Shri Niranjan Pujari, Hon’ble Finance
Minister of Odisha. The constitution of GoM is given at Annexure - A.
6. As per the Terms of Reference (ToR) given to the GoM, it has to–
6.1. To examine the possibility to levy GST based on the capacity of manufacturing unit and
special composition schemes in certain evasion-prone sectors like pan masala and gutkha,
brick kilns, sand mining, etc. with reference to the current legal provisions.
6.2. To examine whether any change is required in the legal provisions to allow such levy.
6.3. To examine the impact of such levy on the destination nature of the current GST design.
6.4. To examine any other administrative or systemic mechanism to plug leakages in these
sectors.
6.5. To examine the impact of levy of GST on reverse charge on mentha oil and to examine if
there could be other class of supplies that could be subjected to reverse charge to augment
revenue.

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III. Deliberations of the GoM
7. The Group of Ministers had three detailed meetings on 6th July, 2021, 31st August, 2021, and 07th
July, 2022. Inputs to GoM were also provided by a Group of Officers after its meeting that was held on
17.08.2021.
8. In the 2nd Meeting of the GoM, held on 31st August 2021, it was decided that an Interim Report
containing the recommendations of the GoM on two issues, namely, special composition scheme for
brick kiln sector and imposition of levy of GST on reverse charge basis on mentha oil & allowing its
exports only against LUT with the consequential refund of accumulated input tax credit may be
submitted to the GST Council. It was felt that further discussion is required on the remaining mandate of
the GoM regarding the capacity-based taxation on pan masala, gutkha, chewing tobacco, etc., and the
same may be included in the final report of the GoM to be issued at a subsequent date after further
deliberations.
9. Accordingly, an Interim Report was placed for the consideration of the GST Council in its 45th
Meeting held on 17th September, 2021 [Agenda Item 9: Volume 2]. The Interim Report of the GoM is
placed at Annexure-B.
10. Thereafter, the 3rd detailed meeting of GoM was held on 07th July, 2022, to deliberate on the
remaining mandate of the GoM.
11. The Group of Ministers while emphasising the rampant evasion in the sector consisting of pan
masala, gutkha, chewing tobacco, etc., felt an immediate need to put in additional intervention(s) to plug
the tax leakages with a view to augment the revenue from these commodities.
12. The GoM extensively deliberated on the issues like broad challenges associated with and
complexities involved in the implementation of capacity based levy in the sector and the alternate
possible systemic & administrative mechanisms to curb evasion and enhance compliance & enforcement
measures; the revenue realization figures [pre and post GST rollout] and the inferences thereof; the
international best practices to curb illicit trade in tobacco sector like track and trace mechanism; specific
tax based compensation cess levy to boost first stage [manufacturer level] collection of revenue.
13. The deliberations held in the GoM in its third meeting, leading up to its recommendations, are
summarized in the foregoing paragraphs.
IV. Capacity based taxation
14. The following challenges associated with, and complexities involved in the implementation of
capacity-based taxation were considered by the GoM:
a) The current legal framework for GST, including the relevant constitutional provision,
provides supply as the taxable event and does not appear to provide authority for capacitybased levy;
b) Capacity-based levy enhances the interface between the taxpayer unit and the officers and
such interface confines to jurisdictional officers only, that is therefore distortionary and
could be a cause of collusion.
c) Capacity-based taxation is extremely complex and requires frequent changes in rate
structure, without any guarantee of commensurate increase in the revenue [as was observed
in the Central Excise regime];
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d) It suppresses competition and goes against the small producers, who are not capable of
making huge investment in capital infrastructure.;
e) Experience of capacity-based regime in excise regime was not encouraging. It leads to
disputes/litigations, tapering followed by a sharp fall in revenue after initial jump in
revenue. In later years, revenue improved for the reason that the duty was raised manifold.
f) It is the evasion prone industry that is seeking imposition of capacity-based levy and mostly
pushed by the larger players in the sector. This in itself does not provide assurance as
regards to the effectiveness of the capacity-based taxation, and in fact, it could be construed
otherwise; and
g) Globally, other countries are also facing challenges of tax evasion in tobacco products.
However, capacity-based levy is not resorted to for curbing such evasion. Instead, countries
have opted for technological solution to track and trace such products in the entire supply
chain.
15. It was observed by the GoM that the overall revenue realization from the sector after the rollout
of GST has increased significantly, wherein most of the major producing and consuming states have
witnessed a sizable increase in their revenue realization from the sector in comparison to the VAT
regime. In view of these revenue figures, it was inferred that the effectiveness of GST with its inherent
supply chain tracking nature and associated technological mechanisms like e-way Bill, e-invoicing, etc.
was superior in comparison to the erstwhile capacity-based levy of the central excise regime for strict
enforcement and to augment the revenue from this evasion-prone sector. It was also seen from the
experience of the erstwhile capacity-based taxation, which was in place during the Central Excise
regime, that the revenue realisation from these products from FY 2009-10 to FY 2014-15 reflected a
negative Compound Annual Growth Rate (CAGR), despite frequent restructuring and upward revision
of the then duty structure. Thus, to summarize, it was observed by the GoM that the features that has
come in with the roll-out of GST has not only helped to overcome most of the above-mentioned
challenges associated with and complexities involved in the erstwhile capacity-based taxation but has
also significantly boosted the revenue realisation from these products in comparison to the Central
Excise and VAT regime.
16. The Members echoed the view that the idea behind examination of the issue was to suggest
measures to plug leakages as there is rampant evasion in the sector. In this context, the option of
capacity-based levy came up as an idea in absence of any better option before the GoM. However, if
there are better options available, it would be prudent to deploy those measures rather than going for
capacity-based levy, which, as felt, does not fit with GST and also may not be in tune with the
Constitutional mandate in GST.
17. The GoM deliberated the whole issue at length and examined all possible options for enhancing
the compliance in the sector. The GOM identified certain additional compliance measures with respect
to different aspects of production and supply, namely: -
a. Registration and Details of Machines: Any person who deals with pan masala, chewing
tobacco and such other tobacco products, as specified, in any manner, shall in addition to
his registration, take registration of the machines used in relation to such goods, in the
manner as prescribed;
b. Thus, there would be a mandatory registration of each machine; this would require
disclosure of the details like make and model of each machine, number of tracks, packing
capacity of each track, total packing capacity of each machine, total number of machines
installed in the factory;
c. Special Monthly Return: Maintaining of records and periodic filing of Special Monthly
Return with details such as Machine wise production, Shift wise production, machine
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disposed off with all its details, machine added with all its details, Inputs procured and
utilized in quantity and value terms, Product-wise and brand-wise details of clearance in
quantity and value terms, shift-wise records of reading of electricity meters and DG set
meters,waste generation stock, etc., in the manner as prescribed;
d. Certification of production capacity: Production capacity and quantity in unit per
pouch/container shall be duly certified by registered Chartered Engineer.
e. Copy of declaration in respect of production capacity submitted to other
department/agency/organization (if any), etc.;
f. Disclosure of details of non-working/partially working machines, etc.;
g. If required, installation of 24*7 CCTV cameras by the manufacturers [it was however felt
that this may be intrusive and be considered carefully];
h. Prescribing a heavy penalty for running any unregistered machine.
i. Gradually, the requirement of unique identification marking such as QR code or stamps, on
each packet/pouch will be prescribed. The unique identifier shall enable determination of
the following:
(a) the date, place and factory of manufacture;
(b) the machine used to manufacture;
(c) the production shift or time of manufacture;
(d) the product description, quantity and maximum retail sale price;
(e) any other relevant information, as may be prescribed.
18. The GoM also suggested that there is a need to further strengthen the tracking measures along
the supply chain of these evasion-prone commodities through measures like mandatory e-invoicing
[irrespective of turnover], mandatory e-way bill [irrespective of invoice value], mandatory FAST
tag/RFID on the vehicle, vehicle tracking through Vahan app & GPS installation, priority alert in E-Way
Bills for such products, and mandatory e-invoicing including B2C invoices under GST for such
suppliers. These features would help for stricter enforcement in these sectors.
19. The issue of fake invoicing and fraudulent exports thereof for claiming undue refund was also
taken up for discussion by the GoM and it was suggested that for commodities like pan masala, gutkha,
chewing tobacco, and similar other goods, the IGST refund route on exports be closed, similar to the
recommendation made for Mentha Oil and if necessary, exports may only be allowed against LUT with
the consequential refund of accumulated input tax credit.
20. The GoM simultaneously emphasized that the Ease of Doing Business shall not be hampered on
account of above suggested measures, and they shall be implemented on system based interface, to the
maximum extent feasible, in order to avoid any potential harassment of the concerned suppliers.
V. Track and Trace Mechanism
21. Since illicit trade in tobacco sector is a global phenomenon, the GoM deliberated on the
international best practices to tackle this menace.
22. In this Context, it was observed by the GoM that, in June 2018, India has submitted its
instrument of accession to the Protocol to Eliminate Illicit Trade in Tobacco Products, which builds
upon and complements Article 15 [Measures relating to the reduction of the supply of tobacco: Illicit
trade in tobacco products] of the WHO Framework Convention on Tobacco Control (WHO FCTC), and
that has entered into force on 25th September, 2018. The Article 8 of the said Protocol requires a time
bound action under which India is committed to put in place a technology driven Track and Trace
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system for Cigarettes by September, 2023, and for all tobacco products by September, 2028. The
objective of the Protocol is the elimination of all forms of illicit trade in tobacco products.
23. The basic requirements of implementation of Track and Trace Mechanism was taken note o
the GoM like a unique, secure and non
all unit packets of tobacco; date and location of manufacture; manufacturing facility; machine used to
manufacture tobacco products; production shift o
and payment records of the first customer who is not affiliated with the manufacturer; the intended
market of retail sale; product description; any warehousing and shipping; the identity of any known
subsequent purchaser; the intended shipment route, the shipment date, shipment destination, point of
departure and consignee, etc.
24. An illustration of the tobacco tracking and tracing mechanism is depicted in the picture below:
Source: Guidebook on Implementing Article 8: Tracking & Tracing, WHO FCTC
25. It was further observed that the Track and Trace is a technology driven mechanism that has
successfully been adopted by European Union, countries in Latin America, Africa (like Kenya) to curb
tax evasion in the tobacco sector.
26. Accordingly, GoM suggested that efforts shall be made to implement Track and Trace
Mechanism for all the tobacco products, preferably by the end of 2023, while carrying out the associated
infrastructural, systemic & legal feasibili
VI. Conversion of ad valorem
27. The GoM observed that there exist greater leakages in the revenue at the later stages of the
supply chain of such products and most of the end retailers of these products are below the threshold
limit for mandatory GST registration. Consequently, the GoM r
levied on such evasion-prone commodities like Pan masala, gutkha, chewing tobacco, etc., shall be
changed from the current ad valorem
level] collection of the revenue. Additionally, such a specific tax shall be linked to the retail sale price to
maintain revenue buoyancy. Further, the tax structure for compensation cess levied on such commodities
shall be further simplified by reducing the number of t
28. The GOM , in its extensive deliberations, also observed that these changes can be made in the
compensation cess component of tax, as in the subsequent stages, there is no other ITC than the
compensation cess paid in the previous stages.
by September, 2023, and for all tobacco products by September, 2028. The
objective of the Protocol is the elimination of all forms of illicit trade in tobacco products.
The basic requirements of implementation of Track and Trace Mechanism was taken note o
the GoM like a unique, secure and non-removable identification markings, such as codes or stamps on
all unit packets of tobacco; date and location of manufacture; manufacturing facility; machine used to
manufacture tobacco products; production shift or time of manufacture; the name, invoice, order number
and payment records of the first customer who is not affiliated with the manufacturer; the intended
market of retail sale; product description; any warehousing and shipping; the identity of any known
ubsequent purchaser; the intended shipment route, the shipment date, shipment destination, point of
An illustration of the tobacco tracking and tracing mechanism is depicted in the picture below:
Implementing Article 8: Tracking & Tracing, WHO FCTC
It was further observed that the Track and Trace is a technology driven mechanism that has
successfully been adopted by European Union, countries in Latin America, Africa (like Kenya) to curb
Accordingly, GoM suggested that efforts shall be made to implement Track and Trace
Mechanism for all the tobacco products, preferably by the end of 2023, while carrying out the associated
infrastructural, systemic & legal feasibility studies to implement the same.
ad valorem compensation cess rate to specific rate
The GoM observed that there exist greater leakages in the revenue at the later stages of the
supply chain of such products and most of the end retailers of these products are below the threshold
limit for mandatory GST registration. Consequently, the GoM recommended that the compensation cess
prone commodities like Pan masala, gutkha, chewing tobacco, etc., shall be
ad valorem tax to specific tax based levy to boost the first stage [manufacturer
ion of the revenue. Additionally, such a specific tax shall be linked to the retail sale price to
maintain revenue buoyancy. Further, the tax structure for compensation cess levied on such commodities
shall be further simplified by reducing the number of tax slabs and associated differential tax rates.
The GOM , in its extensive deliberations, also observed that these changes can be made in the
compensation cess component of tax, as in the subsequent stages, there is no other ITC than the
s paid in the previous stages.
by September, 2023, and for all tobacco products by September, 2028. The
objective of the Protocol is the elimination of all forms of illicit trade in tobacco products.
The basic requirements of implementation of Track and Trace Mechanism was taken note of by
removable identification markings, such as codes or stamps on
all unit packets of tobacco; date and location of manufacture; manufacturing facility; machine used to
r time of manufacture; the name, invoice, order number
and payment records of the first customer who is not affiliated with the manufacturer; the intended
market of retail sale; product description; any warehousing and shipping; the identity of any known
ubsequent purchaser; the intended shipment route, the shipment date, shipment destination, point of
An illustration of the tobacco tracking and tracing mechanism is depicted in the picture below:
Implementing Article 8: Tracking & Tracing, WHO FCTC
It was further observed that the Track and Trace is a technology driven mechanism that has
successfully been adopted by European Union, countries in Latin America, Africa (like Kenya) to curb
Accordingly, GoM suggested that efforts shall be made to implement Track and Trace
Mechanism for all the tobacco products, preferably by the end of 2023, while carrying out the associated
The GoM observed that there exist greater leakages in the revenue at the later stages of the
supply chain of such products and most of the end retailers of these products are below the threshold
ecommended that the compensation cess
prone commodities like Pan masala, gutkha, chewing tobacco, etc., shall be
tax to specific tax based levy to boost the first stage [manufacturer
ion of the revenue. Additionally, such a specific tax shall be linked to the retail sale price to
maintain revenue buoyancy. Further, the tax structure for compensation cess levied on such commodities
ax slabs and associated differential tax rates.
The GOM , in its extensive deliberations, also observed that these changes can be made in the
compensation cess component of tax, as in the subsequent stages, there is no other ITC than the
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29. An illustration of the same is depicted below:
Assuming a pouch of Pan Masala [HS 2106 90 20] with Retail Sale Price of Rs. 5
EXISTING
Ad valorem tax
[GST @ 28%, Compensation Cess @
60%]
PROPOSED
Specific tax
[GST @ 28%, Compensation Cess @ ‘x’ specific
tax]
(i) Retail price (incl of GST) = Rs 5
(ii) The distribution and retail margin
(@ 20% of retail price), including
all post manufacturing expenses
~Rs 1
(iii) Tax amount on the above margin
(@ 88%)= Rs 0.88
(iv) Factory gate price = (i)- (ii +iii) =
Rs 3.12
(v) Manufacturer pays GST+CC=
(iv)*0.88/1.88=Rs 1.46
(vi) Distributer and retailer to pay
GST+CC=(iii)=Rs 0.88
(vii) Total tax=(iii)+(v)=2.34
(viii) However, this Rs 0.88 (refer v)
may not be getting collected in
several cases because of the fact
that it is evaded, or retailer is
small.
(ix) It may be feasible to convert CC
to specific rate, like cigarettes.
Doing so may not be feasible for
GST because of ITC chain.
(i) Retail price (incl. of GST) = Rs 5
(ii) The distribution and retail margin and post
manufacturing expense (@ 20% of retail
price) ~Rs 1/-
(iii) Only GST rate being ad valorem, the GST on
distributor and retailer margin=
(ii)*0.28=0.28
(iv) Factory gate price=(i)- (ii +iii) = Rs 3.72
(v) Tax that will be paid by manufacturer:
GST at ad valorem rate of 28% and
Compensation cess at specific rate.
(I)Thus CC, specific rate
=(i)*0.6/1.88=1.6=32% of RSP
(II)GST by manufacturer = ((i)-
(ii+iii+1.6))*0.28/1.28=0.46
Thus, manufacturer will pay GST plus Cess
equal to Rs 1.6 (CC) + 0.46 (Cess)= Rs 2.06
(vi) Distributor to pay addl. tax= 0.28
(vii) Therefore, in this instance a tax of Rs 2.06
is collected from manufacturer instead of
Rs 1.46 in the existing payment mechanism
[41.1% extra] Hence feasibility of post
manufacturing leakage is quite less.
Hence under specific rate for CC, in the
case of these items, i.e., pan masala,
tobacco, etc., the tax collection is likely to
increase significantly.
30. The details of the tax structure for such evasion-prone commodities along with the suggested
specific tax-based levy is given in Annexure-C.
VII. Recommendations of the GoM
31. Based on the discussions outlined above, with a view to plug the leakages and improve the
revenue collection from the concerned evasion-prone commodities like pan masala, gutkha,
chewing tobacco, etc., the GoM has made the following recommendations:
a. Measures needs to be taken on priority to curb evasion on pan masala, chewing tobacco
and similar products.
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b. Capacity based levy may not be prescribed. Capacity based levy is not in the spirit of GST
levy and may not be permissible in terms of the Constitutional mandate in GST and
statutory provisions thereof.
c. To plug leakages/evasion of GST for these items, the measures as stated in Para 17 & 18 be
taken on priority. These measures essentially entail registration of machines; special
monthly return with details of machine, inputs, clearance, etc.; special compliance
requirements like mandatory e-invoicing, mandatory e-way bill, mandatory FAST tag/GPS
installation, mandatory unique identification marking, installation of CCTV cameras (after
careful consideration), etc.; heavy penal action.
d. The exports shall only be allowed against LUT with the consequential refund of
accumulated input tax credit, similar to the recommendation made for Mentha Oil, to curb
fake invoicing and fraudulent exports [Para 18].
e. The Compensation Cess levied on such evasion-prone commodities like pan masala,
gutkha, chewing tobacco, etc., shall be changed from the current ad valorem tax to specific
tax-based levy to boost the first stage [manufacturer level] collection of the revenue
[Details in Annexure-C].
f. Efforts shall be made for implementation of Track and Trace Mechanism for all the
tobacco products, preferably by the end of year 2023, while carrying out the associated
infrastructural, systemic & legal feasibility studies to implement the same. and
g. To ensure that interface remains minimal, the above measures may, to the extent feasible,
be implemented on system-based interface in order to avoid any potential harassment of the
concerned suppliers.
***
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ANNEXURE-A
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ANNEXURE-A
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ANNEXURE-B
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ANNEXURE-B
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ANNEXURE-B
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ANNEXURE-C
Sl. No. of
notification
No. 1/2017-
Compensation
Cess (Rate)
dated
28.06.2017
Chapter /
Heading /
Subheading
/ Tariff
item
Description of Goods Current ad
valorem rate
Proposed
specific rate
for
compensation
cess*
1 2106 90 20 Pan Masala 60% 0.32R
5 2401 Unmanufactured tobacco (without
lime tube) – bearing a brand name
71% 0.36R
6 2401 Unmanufactured tobacco (with lime
tube) – bearing a brand name
65% 0.36R
7 2401 30 00 Tobacco refuse, bearing a brand
name
61% 0.32R
19 2403 11 10 Hookah or gudaku tobacco bearing a
brand name
72% 0.36R
20 2403 11 10 Tobacco used for smoking 'hookah'
or 'chilam' commonly known as
'hookah' tobacco or 'gudaku', not
bearing a brand name
17% 0.12R
21 2403 11 90 Other water pipe smoking tobacco,
not bearing a brand name
11% 0.08R
22 2403 19 10 Smoking mixtures for pipes and
cigarettes
290% 0.69R
23 2403 19 90 Other smoking tobacco bearing a
brand name
49% 0.28R
24 2403 19 90 Other smoking tobacco not bearing a
brand name
11% 0.08R
25 2403 91 00 “Homogenised” or “reconstituted”
tobacco, bearing a brand name
72% 0.36R
26 2403 99 10 Chewing tobacco (without lime tube) 160% 0.56R
27 2403 99 10 Chewing tobacco (with lime tube) 142% 0.56R
28 2403 99 10 Filter khaini 160% 0.56R
29 2403 99 20 Preparations containing chewing
tobacco
72% 0.36R
30 2403 99 30 Jarda scented tobacco 160% 0.56R
31 2403 99 40 Snuff 72% 0.36R
32 2403 99 50 Preparations containing snuff 72% 0.36R
33 2403 99 60 Tobacco extracts and essence,
bearing a brand name
72% 0.36R
34 2403 99 60 Tobacco extracts and essence, not
bearing a brand name
65% 0.36R
35 2403 99 70 Cut tobacco 20% 0.14R
36 2403 99 90 Pan masala containing tobacco
‘Gutkha’
204% 0.61R
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37 2403 99 90 All goods, other than pan masala
containing tobacco 'gutkha', bearing
a brand name
96% 0.43R
38 2403 99 90 All goods, other than pan masala
containing tobacco 'gutkha', not
bearing a brand name
89% 0.43R
* "R" stands for retail sale price
Explanation 1. - For the purposes of this Annexure, "retail sale price" means the maximum price at
which the above-mentioned goods in packaged form may be sold to the ultimate consumer and includes
all taxes, local or otherwise, freight, transport charges, commission payable to dealers, and all charges
towards advertisement, delivery, packing, forwarding and the like and the price is the sole consideration
for such sale:
Provided that in case the provisions of the Legal Metrology Act, 2009 (1 of 2010) or the rules made
thereunder or under any other law for the time being in force require to declare on the package, the
retail sale price excluding any taxes, local or otherwise, the retail sale price shall be construed
accordingly.
Explanation 2. - For the purposes of this Annexure, -
(a) where on the package of any above-mentioned goods more than one retail sale price is declared, the
maximum of such retail sale prices shall be deemed to be the retail sale price.
(b) where the retail sale price, declared on the package of any above-mentioned goods at the time of its
clearance from the place of manufacture, is altered to increase the retail sale price, such altered retail
sale price shall be deemed to be the retail sale price.

Page 23 of 575
Agenda for 48th GSTCM Volume 2
Agenda Item 15 : Recommendations of the 17
th
IT Grievance Redressal Committee for approval/
decision of the GST Council:
The 17th meeting of the IT Grievance Redressal Committee (ITGRC) was held on 2ndDecember, 2022 at
10.30 AM in online mode over WebEx platform to resolve the grievances of the taxpayers arising out of
the technical problems faced by them on the GSTN portal in relation to GST Compliance filings.
The agenda for the 17th ITGRC meeting covered the following issues:
1. Technical Issues requiring data fixes through back- end utilities
2. Agenda on reversal of interest on delayed filing of statement in Form GSTR-8 by e-commerce
operators due to technical glitches
2. Recommendations of ITGRC on Data Fix issues:
As per the SOP approved in the 15th ITGRC meeting for Technical issues requiring data fix of the
processed incorrect data through backend utilities, GSTN identified twenty-eight (28) cases which
required data fixes. However, one case was withdrawn by the GSTN.
The ITGRC then took note of the aforementioned cases of which 10 (ten) cases were of Category1(Technical issues with no financial implication where data was known), 13 (thirteen) cases were of
Category-2 (Technical issues where there was financial implications and the correct data was also
known) and 04 (four) cases were of category-3 (Technical issues affecting locally with financial
implication and where data was not known) and thesewere unanimously approved by the Committee.
3. Recommendations of ITGRC on Agenda on reversal of interest on delayed filing of statement
in Form GSTR-8 bye-commerce operators due to technical glitches:
The Committee observed that while filing statement in Form GSTR-8 for the month of February 2022,
three taxpayers who were registered on the same PAN in different States, could not file the said
statement due to system glitches.
All three impacted operators have deposited the liability for the month of February, 2022 by due date.
For the month March, 2022, all operators have deposited the liability after due date but before fixing the
defect.ForApril, 2022,only one operator has deposited the liability before fixing the defect but this was
after the due date of liability. Since, there was no glitch in depositing the liability through challan,
therefore, interest paid on delayed filing of statement may not be refunded in those cases who have paid
the liability while filing the statement or before filing the statement but after fixing of the glitch.
In earlier cases also, the 15
th
ITGRC had adopted this approach in its meeting held on 12-08-2021. Based
on the decision, Government had issued Notification No. 08/2022 dated 07-06-2022 for refunding the
interest to those who had deposited the liability before filing the statement.
The ITGRC took note of the data fix and that interest waiver be recommended to GST Council for these
taxpayers.
The recommendations of ITGRC as per attached Minutes of the 17th meeting of the ITGRC are
placed for information of the GST Council as Annexure - A (Attached below)
The GST Council may give its approval on the issues mentioned in Paras 2 and 3 above.
Page 24 of 575
Agenda for 48th GSTCM Volume 2
Annexure-A
Minutes of the 17th Meeting of the IT Grievance Redressal Committee (ITGRC) held on dated
02.12.2022 in online mode over WebEx Platform
The 17th meeting of the IT Grievance Redressal Committee (ITGRC) was held in online mode
over WebEx platform on 02nd December, 2022 at 10.30 AM. The list of officers who attended the
meeting is attached as Annexure-1. The agenda and annexure to agenda circulated for the meeting are
attached as Annexure-2 and Annexure-4.
2. The Joint Secretary, GST Council Secretariat, welcomed all the members and gave a brief
introduction that there were two (02) agenda points which included Data fixes and waiver of interest due
to delay in filing the form GSTR-8 for e-commerce operators because of technical glitches. She further
informed that in the 15th ITGRC meeting, a SOP on the mechanism to fix various glitches by the GSTN
was approved. She also informed that data fixes having global financial implications needed prior
approval of the ITGRC where as data fixes which had local implications would be fixed by GSTN and
after fixation would placed before the ITGRC and that all these data fixes had local nature with or
without financial implications. That is why these were fixed by the GSTN and were being placed before
the ITGRC for perusal. Thereafter JS, GSTCS requested the GSTN to present the agendas before the
Committee.
3. Sh. Dheeraj Rastogi, Executive Vice President, GSTN informed the ITGRC that most of the
return filing got affected because of some inconsistency in the data due to some unforeseen scenarios or
duplicating the return which required data fixes and GSTN carried out these data fixes. Thereafter, he
requested Shri Nirmal Kumar, Executive Vice President, GSTN to explain each of the cases regarding
data fixes as to what kind of data error was found and what kind of data fixes had been done.
4. Sh. Nirmal Kumar, Executive Vice President, GSTN informed the Committee that the agenda
comprised of the following three categories technical issues where data fix was done.
i. Technical issues with no financial implication where data was known. There were ten such cases.
ii. Technical issues where there was financial implications and the correct data was also known. In this
category, there were thirteen cases.
iii. Technical issues affecting locally with financial implication and where data was not known. There
were only five such cases.
He then made a power point presentation which is attached as Annexure-5.
Page 25 of 575
Agenda for 48th GSTCM Volume 2
5. First category of technical issues with no financial implication where data was known as
follows:
S.
No.
Issue reported No. of
Cases
Impacted
Module Detail Description Status
1 Duplicate invoice
issue in GSTR6
form. At the time
of submission of
return, the portal is
showing "Error in
Submission“.
1 GSTR6 The invoices and credit notes uploaded
were processed by the portal while
uploading the JSON. At the time of
submission of return, the portal is
showing "Error in Submission". The error
report is showing that the ISD Invoices
and ISD credit notes are duplicate but
there is no duplication in either ISD
invoices or ISD credit notes. Taxpayer is
getting "Error in Submission" while filing
the GSTR6 but then after generating Error
report it is showing 'Duplicate ISD
invoice’.
Reason: According to the code flow
invoice should be inserted into
“UPLOADED_ISD_NOTES”,
“UPLOADED_ISD_INVOICES”,
“ISD_INVOICES” tables during save.
But for this user data is inserting into
“ISD_INVOICE_DTL”,
“ISD_NOTE_DTL”, “GSTR6SUBMIT”
table also. When user submitting the
form user getting the error as duplicate
invoice because invoice is present in
below DTL Hbase table.
This happened for
only one TP and
due to that code
fix was not taken.
Data fix done by
ICR.
2 Late fee reversal
of GSTR6
taxpayer.
Taxpayer was
unable to file
GSTR6 form in
production
environment for
return period July,
2021 due to “Error
in Submission”.
1 GSTR6 The invoices and credit notes uploaded
were processed by the portal while
uploading the JSON. At the time of
submission of return, the portal is
showing "Error in Submission" and the
report is showing that the ISD Invoices
and ISD credit notes are duplicate. But
there is no duplication in either ISD
invoices or ISD credit notes.
Reason: Taxpayer were unable to submit
the GSTR6 due to the error “Duplicate
ISD Invoice” displayed on the portal.
This happened
only once so code
fix was not taken.
Data fix was done
by Utility on 10th
Feb 2022 via
ICR:14811
3 Duplicate entries
present in
RTN_FILING_ST
AUS table. At the
time of Filling,
1 GST0R1 Tax payer is getting error “Latest
Summary is not available, Please generate
summary and try again”. Tax payer has
already deleted history from the browser
and tried different computer also but
Permanent fix will
be deployed in
production on Dec
2022.
Page 26 of 575
Agenda for 48th GSTCM Volume 2
GSTR-1 summary
not generated by
the system and
there is no
consolidated
summary shown
while filling
GSTR-1.
getting the same error and unable to file
the return.
Reason: There are 2 entries presents in
Return Filing Status table for GSTN
24AXLPT8085E1ZZ for return period
042022, hence tax payer is not able to
proceed with filing.
4 While filing
GSTR-4/
GSTR3B- “Error!
Payment amount
should not exceed
the outstanding
liability”– RQM:
14189. While
filing GSTR4
some of taxpayer
are getting the
error “ Issue while
filing GSTR-4 -
“Error! Payment
amount should not
exceed the
outstanding “.
2 GSTR4/3 GSTR4 calculates applicable late fees at
the time of submit (or in the new model at
the time of Offset). The late fee thus
calculated has three components.
Reason: Negative late-fee has been
applied to the ledger due to the logic.
Further, as per the logic in GSTR-4 and
GSTR-3B any negative liability is carried
forward to the next return period using a
pair of Credit/Debit entries.
GSTR4 quarter
form is disabled in
prod. Permanent
fix needs to be
analyzed. Utility is
used to fix the
data.
5 GSTR9 || Users
have filed R9 but
form status is RTF
in DB and not
filed on annual
dashboard.
Taxpayer has filed
GSTR9 form, but
status is still not
filed on portal.
1 GSTR9 User has claimed that he has filed the
form, but status is still not filed on portal.
It is due the issue that entries got posted to
ledger tables and cash is also debited for
user’s late fee. However, corresponding
record is not updated from Ready To File
to File in Return Filing Status table in
return database. Therefore, user is still
seeing form status as not filed even after
filing and paying the late fee.
Reason: Transaction handling between
different data sources is not properly
done.
Known issue
across the
application.
Analysis is under
progress. GSTR1
has similar issue
which is in UAT
and will be
deployed on
production in 29th
Nov 2022, other
modules may
adopt this solution
after discussion.
Data fix in such
cases is done
through ICR.
6 Duplicate
Amendable
column in
INVOICE_DTL
table of Hbase.
83 GSTR1 On Analysis it is found that AMDBL
column is present twice in
“INVOICE_DTL” table for the same
invoice. Hence while user trying to amend
invoice from Upper case to lower case he
It is fixed in
production on 26th
April 2022.
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Agenda for 48th GSTCM Volume 2
When Taxpayer is
trying to amend
EXPORT invoices
from upper case to
lower case records
stuck in “InProgress” Due to
duplicate Amdbl
column present in
“INVOICE_DTL”
Table.
is getting invoice in "In-Progress".
Reason: While analysing logs it is found
that at the time of submit, since invoice
column were present with upper case,
system validated it as different and
inserted AMDBL column with lower case.
7 When Taxpayer is
validating the
statement in
Refund, system is
giving error “RFFCAS1007” and
not allowing to
file the Refund.
32 GSTR1 While analyzing, it is found that Meta
Data (MD) column is not present in
“Invoice Detail” table. The invoices went
to error while adding to GSTR1 form due
to which Meta column was not inserted to
“Invoice Detail” Table though it is present
in “Invoices” table.
Reasons: - Since MD column is not
present in “ Invoice Detail ” table hence
user will not be able to raise refund for
affected invoices, validation will fail at
time of initiating refund.
- It is also noticed that due to connection
errors while inserting data to Invoice
Detail table, invoices went to error.
It is fixed in
production on 26th
April 2022.
8 CMP08||The end
user is unable to
file GST CMP-08
as error is
reflecting "Data
for the internal
Transaction Id
Already Posted"–
RQM: 21266. The
taxpayer is unable
to file GST CMP08 as error is
reflecting "Data
for the internal
Transaction Id
Already Posted"
while filing.
64 CMP-08 Filing status is ‘Not Filed’ and taxpayer is
not allowed to File GST CMP-08 again,
as error is reflecting "Data for the internal
Transaction Id already Posted" while
filing.
Reason: For few taxpayers, all ledger
tables were updated successfully but
request status did not change from RTF to
FIL in RTN_FILING_STATUS table.
Partially fixed on 14th Jun 2021 in
production. Another RCA is Known issue
across the application. Analysis is under
progress. GSTR1 has similar issue which
is in UAT and will be deployed on
production in 29th Nov 2022, other
modules may adopt after discussion.
Partially fixed on
14th Jun 2021 in
production.
Another RCA is
Known issue
across the
application.
Analysis is under
progress. GSTR1
has similar issue
which is in UAT
and will be
deployed on
production in 29th
Nov 2022, other
modules may
adopt after
discussion.
9 Issue prior to
Migration of
Tamil Nadu.
Clean up of
recovery Cases
88 Recovery The multiple recovery cases were created
for single demand id through event_dtl
job. The user was facing a system error, as
the mentioned CRN’s do not have the
demand details mapped to it.
Issue was before
Migration of
Tamil Nadu from
Modal 1 to Modal
2. Issue was
Page 28 of 575
Agenda for 48th GSTCM Volume 2
created in Case
management
folder, where
recovery cases
have no reference
to the Demand
order (for the 33-
state code – Tamil
Nadu
SR#601295). Tax
officers are facing
System error while
fetching the
recovery cases for
86 CRN’s (Case
Reference
Number).
Reason: Due to some technical issues in
event Job process, Multiple recovery
cases were created without a reference of
demand id in case management folder. As
a result, the case management folder had
unmapped recovery id which does not
require any action to be taken. We do not
have logs of that time to cross verify what
was exact issue.
permanently fixed
by executing a
utility job on 25th
Feb 2022.
10 Partial Data
movement i.e.
Data missing in
INV_DETL table
of Hbase. System
is throwing error
in GSTR-1 table
9A and not
allowing to submit
amended invoice
while amending
export invoices
from “without
payment” to “with
payment” type.
6 GSTR1 This is a partial data movement issue
before GSTR1 code improvement, where
data is present in “INVOICES” table of
HBase however few columns (OSPD,
TYPE) are missing in “INV_DETL”
table. Permanent fix has been done via
code improvement. However affected
users, before code improvement, whose
data is not sync for them, data fix is
required.
Reason: According to the older code flow
invoice should be inserted from
“INVOCES” to “INV_DETL“table during
submit, However some column
(OSPD,TYPE) are missing hence he is not
able to amend the invoice.
It is fixed in
production on 26th
April 2022.
Discussion and decision:
EVP, GSTN informed that above cases were taken up on the request of either the taxpayer or the tax
administration and required only data fixes which enabled the tax payer to file further returns or the tax
administration was having certain orphan records which needed to be removed. There were no financial
implications in these cases.
ITGRC took note of the data fixes done by the GSTN.
6. EVP, GSTN explained that in the second category, there were thirteen (13) cases having
technical issues affecting locally with financial implications and where the correct data was known.
He then presented the cases with the help of a power point presentation which is attached as
Annexure-5.
Page 29 of 575
Agenda for 48th GSTCM Volume 2
The details of the cases are mentioned as follows:
S.
No.
Issue reported No. of
Cases
Impacte
d
Modul
e
Detail Description Status
1 Issue in GSTR6 form.
Taxpayers were unable to
view ISD invoices in
GSTR2A form, as GSTR2A
form is a read only where
Supplier can see the
invoices added by the
recipient.
Financial Implication-YES
Whether Correct Data
Known-YES
88 GSTR
6
In this issue, ISD invoices are not
reflecting in GSTR2A form when
uploaded from GSTR6 form.
There are Multiple GSTR6 users
who have raised ticket against
different supplier’s GSTIN.
Reason: While adding the
multiple invoices through offline
utility, due to the issue in code,
only the last invoice was getting
saved in
ISD_UNIT_RelationShipHbase
table and that is why user was
unable to view all their invoices
on the portal.
An ISD credit of Rs 52, 33,708/-
were made to be reflected in
GSTR2A.
It is fixed in
production on 15th
Feb 2022 via
RQM:22445
Discussion and Decision:
Additional Secretary (DoR) enquired whether only one cycle of return or multiple previous cycles of
returns were affected and what the financial implications were.
EVP, GSTN informed that it was only one cycle of return as the problem was with the utility at that time
and further that the financial implication was not really there as the invoices had to be shown in the
counterparty’s GSTR-2A so as to enable them to take credit.
Additional Secretary (DoR) instructed to provide financial implications while drawing the minutes.
ITGRC took note of the data fixes done by the GSTN.
Page 30 of 575
Agenda for 48th GSTCM Volume 2
S.
No.
Issue reported No. of
Cases
Impac
ted
Module Detail Description Status
2 Recovery of TCS amount credited
twice in cash ledgers of suppliers.
(RQM: RET_R2X_18318).
Suppliers have taken excess TCS
credit than due, either by filing
GSTR-2X more than once or by
accepting the same record across
two tax periods.
Financial Implication-YES
Whether Correct Data KnownYES
37 Cash
Ledger
Due to change in status from filed to
not filed or posting the records across
two tax periods, taxpayer was able to
get the credit twice.
Reason: It is suspected that following
scenarios may have caused the defect:
Return filing status cache update issue
could have caused the issue. Second
scenario can be with XA transaction.
The total amount of Rs 5,09,376 was
debited in the Cash Ledger.
It is fixed
in
production.
Discussion and Decision:
EVP, GSTN informed that in this case, GSTN reversed one entry from the double entries in the cash
ledger and it is pro revenue. Further, as the taxpayers did not utilize the credit, no interest arises.
ITGRC took note of the data fixes done by the GSTN.
S.
No.
Issue reported No. of
Cases
Impact
ed
Module Detail Description Status
3 Taxpayers were unable to file
GSTR5 form in production
environment due to the error
“Submission had some error”.
Now reversal of late fee and
Interest in GSTR5 form is
requested.
Financial Implication-YES
Whether Correct Data KnownYES
2 GSTR5 Taxpayers were unable to file
GSTR5 form in production
environment due to the error
“Submission had some error”.
Reason: Due to the code issue
(MYSQL upgrade), there was a delay
in providing the correct resolution to
the taxpayers, they were unable to
file GSTR5 form within due date, so
late fee and Interest were charged to
the taxpayers. Although Taxpayers
have filed the form along with their
late fee and Interest, we have got the
request of late fee and interest
reversal from Daily ticket tracker.
A late fee amount of Rs 1550 (CGST
– 775 and SGST – 775) was waived
and an amount of Rs 2, 17.466
interest (CGST 108733 , SGST
108733) is required post facto
Permanent fix
on 16th Nov
2021 via
RQM: 22058
Page 31 of 575
Agenda for 48th GSTCM Volume 2
approval of GST Council for
reversal.
Discussion and Decision:
JS, GSTCS enquired whether late fee and interest waived by GSTN was suo-moto because only in once
case, interest has been waived off by issue of notification.
EVP, GSTN informed that only late fee was reversed as the same was paid by taxpayer at the time of
filing delayed return due to defect in the GST System. As regard interest, GSTN requested ITGRC to
recommend its waiver to GST Council, as done in the past.
ITGRC took note of the data fixes done by the GSTN.
S.
No.
Issue reported No. of
Cases
Impact
ed
Module Detail Description Status
4. Due to non-filling details of
liability in table 6 of GSTR-4, the
amount paid through CMP-08 of
the year became excess tax paid
and credited to negative liability
statement. The negative liability
was reduced by debiting the
amount from negative liability
statement. In some cases, the
amount has been debited twice.
Financial Implication- YES
Whether Correct Data KnownYES
1028 Cash
Ledger
Due to non-filling details of liability
in table 6 of GSTR-4, the amount
paid through CMP-08 of the year
became excess tax paid and credited
to negative liability statement.
Reason: Before recovery utility
execution, a select query was
executed to extract the impacted
records for recovery. In that select
query, we were ignoring those
records which were already
recovered.
But in that select query, Return
Type=’CMP08’ was missed while
extracting the impacted records, only
GSTR-4 (Annual) was considered.
Status: It is fixed in production on
31st Mar 2022 via CR:21592_A.
The total amount of Rs 2, 65, 67,031.
(CGST 1,32,71,615 , 1,32,71,615,
IGST – 23801) was re credited.
It is fixed in
production on
31st Mar
2022 via
CR:21592_A
Page 32 of 575
Agenda for 48th GSTCM Volume 2
Discussion and Decision:
Additional Secretary, GSTCS requested to explain the case in details.
EVP, GSTN explained that at the time of filing the annual return, the taxpayer had not filled up table 6
of GSTR-4 (Annual) due to which liability paid through Form GST CMP-08 became excess tax paid and
credited to Negative Liability Statement. Some taxpayers have thereafter utilized the amount so credited,
which was recovered by debiting their cash ledgers. In some cases, the amount was recovered twice,
hence, the same was re-credited to their cash ledgers. To avoid such mistakes at the level of taxpayer, a
reconciliation table has been provided for the convenience of taxpayers while filing the said return. An
alert is shown if the taxpayer tries to file the said return without filling up table 6 in case of negative
liability & he would not be able to file the return if the table is left blank and further informed that the
issue of negative liability had been fixed in production permanently.
Additional Secretary, DoR enquired about the past negative recoveries.
EVP, GSTN informed that after the incident of data fix and noise in the social media, negative balance
recoveries cases were assigned to the tax officers.
Additional Secretary, DoR observed that that was a revenue positive step.
EVP, GSTN informed that more than Rs. 100 crore had been recovered from the past cases where there
was negative balance and the fix is pro revenue.
Additional Secretary, DoR instructed that financial implications whether positive or negative needed to
be mentioned before finalization of the minutes.
ITGRC took note of the data fixes done by the GSTN.
S.
No.
Issue reported No. of
Cases
Impact
ed
Module Detail Description Status
5 Cash ledger entries have been
missed out or omitted after filing
R2X. Credit entry to be made in
the cash ledger (Table:
CASH_LDG) of taxpayers.
Financial Implication- YES
Whether Correct Data KnownYES
2 Cash
Ledger
Taxpayers having GSTIN
18AAACH0351E1Z4 and
19ALIPD4105A1ZS have accepted
the TDS credit of return period
02/2022, 03/2022 respectively but
the credit entry is not available in
CASH_LDG table even though filing
is done. Reason: Due to the
mismatch of row check value, credit
entry was not made to the cash ledger
(Table: CASH_LDG).
A total amount of Rs 49,062 (CGST
24531, SGST 24531) was credited to
the cash ledger.
It is fixed in
production.
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Agenda for 48th GSTCM Volume 2
Discussion and Decision:
Additional Secretary, DoR enquired how only two taxpayers were effected despite being a generic
problem.
GSTN informed that only two taxpayers had entered the values up to decimal places while others had
entered up to integers.
Additional Secretary, DoR instructed that permanent fix for this may be done.
ITGRC took note of the data fixes done by the GSTN.
S.
No.
Issue reported No. of
Cases
Impact
ed
Module Detail Description Status
6 Taxpayers are not able to file
GST CMP-08 for the subsequent
tax period.
Financial Implication- YES
Whether Correct Data KnownYES
3 CMP-08 It has been noticed that few
composition taxpayers who have
attempted to file statement in Form
GST CMP-08 between 15th June’ 21
to 8th July’ 21, got redundant entries
in their respective ledger tables and
out of these cases, taxpayers who
have liability open in any of the
previous tax periods are unable to file
non-nil statement for subsequent tax
period.
Reason: Due to XA removal, data for
few taxpayers got impacted as
rollback was not happening from
ledger tables
(RTN_LIAB_LDG/RTN_LIAB_MS
TR/RTN_LIAB_MSTR_HIST) in
case of any issue/exception like.
An excess liability debited in the
ledger of Rs 2,10,210 (CGST
1,05,105, SGST 1,05,105) was
corrected.
Permanent
fix is
deployed in
production on
9th Jul 2022.
Discussion and Decision:
ITGRC took note of the data fixes done by the GSTN.
Page 34 of 575
Agenda for 48th GSTCM Volume 2
S.
No.
Issue reported No. of
Cases
Impact
ed
Module Detail Description Status
7 Re-credit of interest paid on late
filing of statement in Form
GSTR-8 by e-commerce
operators due to system glitches.
(Defect: RQM: RET_R8_19830).
The post filing process for
GSTR-8 in the previous month
could not be completed due to
which filing of next month was
blocked.
Financial Implication- YES
Whether Correct Data KnownYES
116 GSTR-8 Since, filing of the statement is not
mandatory every month, some
operators have not filed the
statement. The operators who have
deposited the amount due by the due
date but paid interest due to late
filing of statement, are eligible for
reversal of the interest paid.
Reason: Upon analysis, it was seen
that operator has filed statement and
message posted for Kafka queue for
post filing process. On processing of
post filing process, transaction stuckup in IP/ ER. When operator tried to
file his next period’s statement,
application blocked him with the
error message “ Return filing process
is not yet completed for the earlier
period ”.
In 116 cases an interest amount of
IGST Rs 76,01,603, CGST – Rs
27,23,696 and SGST/UTGST – Rs
27,23,696 was reversed which was
approved by GST Council for credit
to the Cash Ledgers of the impacted
Operators vide notification 08/2022
and hence it was implemented.
It is fixed on
production.
Discussion and Decision:
Additional Secretary, DoR enquired how interest was charged when payment was done on due date.
EVP, GSTN explained that after taxpayers filed GSTR-8 form, the record of 116 taxpayers got stuck in
message queue itself due to technical issues and GSTR-8 could not be processed further. Therefore,
system calculated the interest.
EVP, GSTN further informed that problem in GSTR-8 was due to some unforeseen scenarios. Interest
reversal was required to be approved by GST Council for credit to the Cash Ledgers of the impacted
Operators and notification 08/2022 was issued by the Govt. It was done therefore in compliance to that
notification and no further waiver request was required to be made to GST COUNCIL, as done in the
past, in this case.
ITGRC took note of the data fixes done by the GSTN.
Page 35 of 575
Agenda for 48th GSTCM Volume 2
S.
No.
Issue reported No. of
Cases
Impact
ed
Module Detail Description Status
8 While filing GSTR4 Annual
form, few taxpayers are getting
incorrect auto populated amount
in Table 5 where one quarter’s
data is missing.
Financial Implication- YES
Whether Correct Data KnownYES
12 GSTR4 Taxpayer is getting incorrect amount
in table 5 of GSTR4 Annual form
due to which taxpayers are not able
to file their return as system is asking
additional liability to be paid. This is
an Adhoc exercise which will take
some time and due to that, we have
to apply data fixes on urgent basis
considering ageing of tickets.
Reason: Under analysis.
An amount of Rs 32,55,026 (CGST –
16, 01,300, SGST – 16, 01,300,
IGST – 52,426) was posted in Table
5 of Form GSTR-4.
Analysis for
permanent fix
is under
progress.
Discussion and Decision:
ITGRC took note of the data fixes done by the GSTN.
S.
No.
Issue reported No. of
Cases
Impact
ed
Module Detail Description Status
9 TDS amount is credited to their
Cash Ledger by filing the TDS &
TCS Credit received form twice
for same tax period.
Financial Implication- YES
Whether Correct Data KnownYES
141 Cash
Ledger
Cases where the amount of tax
deducted and reported in GSTR-7
differs from the amount credited to
cash ledger of deductee through
TDS/TCS credit received form.
Reason:
• When user login to the TDS
and TCS credit received
form, status is displayed
from the cache details. As
there is a problem with the
cache, user was able to see
status as ‘Not filed’. But, in
the Return Filing Status
table, the status was existing
as filed.
• In the second scenario, while
amending the TDS record in
R7, the status of the earlier
TDS / TDSA record is
verified in R2X related table
Issue is fixed
in production
via RQM:
RET_R7_191
11
Page 36 of 575
Agenda for 48th GSTCM Volume 2
to check whether it is
accepted and filed or not.
The amount of Rs 36.27
lakhs (CGST+SGST) was
debited in the Cash Ledgers
of concerned taxpayers.
Discussion and Decision:
Additional Secretary, DoR enquired as to the number of taxpayers who filed GSTR-7 and asked why
only 141 taxpayers were affected. He further asked whether these were a technical glitch or a mistake of
the taxpayer.
EVP, GSTN informed that some technical glitches occurred.
Additional Excise & Taxation Commissioner, Haryana observed that for TCS and TDS, concept of
rejection or acceptance issue should not be there.
ITGRC took note of the data fixes done by the GSTN.
S.
No.
Issue reported No. of
Cases
Impact
ed
Module Detail Description Status
10 Correction in cash ledger balance
due to credit and debit happened
simultaneously. The balance
could not be updated due to
credit and debit happening
simultaneously. It had happened
due to defect in the system
application.
Financial Implication- YES
Whether Correct Data KnownYES
03 Cash
Ledger
The balance could not be updated
due to credit and debit happening
simultaneously. It had happened due
to defect in the system application.
Reason: The issue had occurred due
to debit and credit entry in the cash
ledger happening at the same time,
which led to incorrect cash balance in
the cash ledger. The reason for
occurrence of the issue is due to dirty
read where the two transactions
happened simultaneously and read
the same record.
An amount of Rs 689468 (CGST +
SGST – Rs 6,87,622, Interest – Rs
1296, Fee – Rs 550) was corrected in
the cash Ledger.
CR#21982
has been
raised for
permanent fix.
This CR is
aligned with
REAP team
but yet to be
picked up for
development.
ITGRC took note of the data fixes done by the GSTN. As regard interest, GSTN requested ITGRC to
recommend its waiver to GST COUNCIL, as done in the past in these 3 cases.
Page 37 of 575
Agenda for 48th GSTCM Volume 2
S.
No.
Issue reported No. of
Cases
Impact
ed
Module Detail Description Status
11 R4X || Few taxpayers are able to
file their return without clearing
liabilities in case the liability
amount is already present in
negative liability table.
Taxpayers are unable to file their
further return period and getting
error message as “Liability for
previous tax period is yet to be
paid.
Financial Implication- YES
Whether Correct Data KnownYES
24 R4X Taxpayers are unable to file their
further return period and getting error
message as “Liability for previous
tax period is yet to be paid. If error
persists quote error number LG9048
when you contact customer care for
quick resolution.”
Reason: This issue started coming
post one recent major CR 21592
implementation. In this CR, ‘is
Negative Value Allowed’ flag was
introduced to check whether credit
entry of negative liability should be
posted into Return Negative Liability
Statement History table or not. But
this new flag also stopped posting
debit entry to Return Negative
Liability Statement History table if
tax amount difference between Table
6 and table 5 (either outward supply
or inward supply) of GSTR4X is
greater than 10% or 1000 (whichever
is less)
A total amount of Rs 92,050 (CGST
46,025 , SGST – 46,025 ) was posted
in the Liability Ledger.
It is fixed in
production on
31st Mar
2022 via CR:
21592_A.
Discussion and Decision:
Additional Secretary, DoR enquired what kind of form taxpayer had to file in particular and what was
the number.
EVP, GSTN explained that around14 lakh taxpayers filed GSTR-4 form which was a composition tax
form.
Additional Secretary, DoR enquired why only 24 taxpayers were affected.
EVP, GSTN explained that that might be due to interruption in internet connection or logging out
process while filing process was underway.
Additional Secretary, DoR asked the GSTN to provide exact technical glitch and the time line for which
that persisted at the time of drawing the minutes.
ITGRC took note of the data fixes done by the GSTN.
Page 38 of 575
Agenda for 48th GSTCM Volume 2
S.
No.
Issue reported No. of
Cases
Impact
ed
Module Detail Description Status
12 Users are able to file GSTR4
without clearing liabilities -: Recomputation of liability– RQM:
17176 / 20801. GSTR-4: User
has filed GSTR-4 without
clearing the liability amount.
GST CMP-08: As per the issue
reported by user, he is not able to
file CMP-08 as getting
'ERROR!! Liability for previous
tax period is yet to be paid'.
Financial Implication- YES
Whether Correct Data KnownYES
01 GSTR-8 Transaction handling was not proper
due to mix of Transaction Manager/
Non-Transaction Manager in GSTR4. Due to this, in case of any failure
rollback was not done completely
from all the respective data sources.
In this case, filing status has been
updated as “Filed” in return filing
status table without updating in
ledger table besides the rollback of
liability setoff entries in ledger.
Reason: User has filed GSTR-4
without clearing the liabilities and
due to this, user is unable to file
statement in Form GST CMP-08 for
next quarter.
An amount of Rs 1500 (CGST – Rs
750, SGST – Rs 750 ) was posted to
the liability ledger.
Partially fixed
on 14th Jun
2021 in
production on
14th Jun 2021
via ICR12663.
Another RCA
is Known
issue across
the
application.
Analysis is
under
progress.
Discussion and Decision:
Additional Secretary, DoR enquired why only one taxpayer got affected.
EVP, GSTN explained that that was due to corner scenarios and not a regular issue.
ITGRC took note of the data fix done by GSTN.
Page 39 of 575
Agenda for 48th GSTCM Volume 2
S.
No.
Issue reported No. of
Cases
Impact
ed
Module Detail Description Status
13 Taxpayer has saved invoices in
ITC-03 & submitted the form
with ‘NULL’ check but unable to
offset the outstanding liabilities.
Financial Implication- YES
Whether Correct Data KnownYES
01 ITC
Form
ITC03 form: Taxpayer has saved
invoices in ITC-03 & submitted the
form with ‘NULL’ check but unable
to offset the outstanding liabilities.
Reason: Taxpayer forgot to uncheck
the NIL checkbox while submitting
ITC03 form, however invoices were
already added in the form. Now
status is in ‘Submitted” state and
taxpayer is not ready to file the form
as he is unable to offset the
corresponding liabilities.
An amount of Rs 3,68,778 (CGST –
Rs 1,84,389 SGST – Rs 1, 84,389)
will be paid on filing the said form.
It is a single
Taxpayer
issue,
permanent fix
not required.
Data fix was
done via ICR:
18439
executed on
4th Nov 2022.
Discussion and Decision:
Additional Secretary, DoR said that if someone did a mistake in submitting the form with NULL check
despite saving invoices then NIL check should get cancelled.
EVP, GSTN agreed that and informed that the same should be the taxpayer’s option to check it.
ITGRC took note of the data fixes done by the GSTN. The GSTN calculated the financial implications
of the all the thirteen cases discussed above which is attached as Annexure-3.

Page 40 of 575
Agenda for 48th GSTCM Volume 2
7. In the third category, EVP, GSTN explained that there were five (05) cases having technical issue
affecting locally with financial implications and correct data was not known with certainty.
He then presented the cases with the help of a power point presentation which is attached as
Annexure-5. The details of the cases are mentioned as follows:
S.
No.
Issue reported No. of
Cases
Impact
ed
Module Detail Description Status
1. Taxpayers raised tickets stating
that they filed the GSTR-3B
returns but there is mismatch in
the data entered vis-à-vis
payment made. Ledgers are
updated on the basis of payment
table whereas pdf is generated on
the basis data entered.
Financial Implication- YES
Whether Correct Data KnownNO
07 GSTR3
B
After login to the GSTN portal,
taxpayer can open the GSTR-3B
form window on multiple tabs at the
same instant. There is no restriction
to this behavior at present. Taxpayer
have filed the GSTR-3B returns but
there is mismatch in the data entered
vis-à-vis payment made.
Reason: Difference between data
that was saved in HBASE and the
one that was posted to ledger db in
Return Liability Ledger and ITC
Ledger tables.
Permanent fix
is finalized
and it is with
REAP team.
RQM:22721
Discussion and Decision:
Additional Secretary, DoR enquired whether this was a technical fault or a mistake of taxpayer and
whether the jurisdictional GST Authorities were informed.
EVP, GSTN explained that such cases were of technical fault and as per the SOP, first GSTN rectifies
the technical error as the future return filing gets affected and after the approval from ITGRC, GSTN
forwards the MIS report to the Jurisdictional GST Authorities for a check.
Additional Secretary, DoR enquired as to why GSTN does not check the errors before correcting the
same and why the same should be brought to notice of ITGRC before checking the errors.
EVP, GSTN explained that as the error affects the future return submission process, GSTN fixes the
same before checking and that from the next time onwards GSTN would come before ITGRC after
getting all the errors checked.
Chairperson said that there is no need to change the current practice when GSTN is sending after
checking the errors.
Additional Secretary, DoR enquired when data fix is done on 18.08.2022 then when the same was sent
to the jurisdictional GST authorities for verification.
EVP, GSTN informed that permanent fix for this is in the process of development and will appear in the
production after1-1/2 month. He further informed that they have noticed the same error in many cases.
Page 41 of 575
Agenda for 48th GSTCM Volume 2
Actually, when the taxpayers file NIL return through SMS or API but there is data in their GSTR-2A/2B
due to which same data reflects in GSTR-3B then the discrepancies arise. Additionally, he informed the
ITGRC that GSTN is contemplating to fix this like when the taxpayer has filed the NIL return they will
not allowed to file the NIL return if the taxpayer delete those invoices.
Chairperson agreed with this.
The ITGRC took note of the data fix done by the GSTN and approved the same.
S.
No.
Issue reported No. of
Cases
Impact
ed
Module Detail Description Status
2. Taxpayers stuck up in filing
Form GST ITC-01 for claiming
credit- RQM 23200. Newly
registered taxpayers or taxpayers
opting out of composition
scheme or when exempted goods
become taxable, claim credit on
closing stock u/s 18(1) of Act
through Form GST ITC-01.
Financial Implication- YES
Whether Correct Data KnownNO
23 ITC
Form
ITC01 form has to be filed within 30
days of becoming eligible to claim
credit. Few taxpayers were stuck up
in filing the said form between 29th
June, 2022 and 5thJuly, 2022. One
taxpayer could not file the form as
downtime started from 11:00 pm on
16th June, 2022.
Reason: Few taxpayers were unable
to file declaration in Form GST ITC01 due to deployment of the change
in topology. “System was showing
following error – Your submit is in
progress. Check after sometime.”
This issue has
been faced
only once.
Permanent fix
not required.
All impacted
cases were
executed on
25th Aug
2022 in
production.
Discussion and Decision:
Additional Secretary, DoR enquired about the financial implication to which EVP, GSTN told that
GSTN had not calculated the financial implication, however, GSTN would mention that in the minutes.
He further explained that data fixing is required for processing and the financial implication would be
known only after processing of the data.
Chairperson enquired about whether this impacted the eligibility of the taxpayers opting out of the
composition scheme and asked for more care to be taken while verification.
EVP, GSTN replied in affirmative and informed that this time all the data is fixes are done and from the
next meeting onwards GSTN will do the first check and then data fixes will be done.
Additional Secretary, DoR instructed that GSTN should get a post-facto verification or physical
checking and get the record from the jurisdictional GST authorities. That whatever had been done, that
should have been verified also.
The ITGRC took note of the data fix done by GSTN and approved the same.
Page 42 of 575
Agenda for 48th GSTCM Volume 2
S.
No.
Issue reported No. of
Cases
Impact
ed
Module Detail Description Status
3. Data issue due to partial commit
happened on click of reset button
(RQM: RET_3B_15222).
Financial Implication- YES
Whether Correct Data KnownNO
02 GSTR3B
It may be recalled that initially, there
was a four tier system of filing return
in Form GSTR-3B, viz. Save,
Submit, Offset liability and File . All
saved entries used to become noneditable after clicking on ‘Submit’
button. Liability register and Credit
ledger used to be updated at submit
stage. In the beginning, lot of
complaints were received due to
freezing of entries before filing (at
submit stage). In the beginning,
returns lying at submit stage were
reset from the backend as lot of
complaints were received on account
of inadvertent mistakes.
Reason: This is an old issue when
there used to be a reset button on the
portal.
Permanent fix
is not required
because
RESET
button is
removed from
system. Old
return periods
data are being
fixed by
backend
query.
Discussion and Decision:
During the discussion, GSTN withdrew the said case as they were not having the full details.
S.
No.
Issue reported No. of
Cases
Impact
ed
Module Detail Description Status
4. Form GST ITC-03 filed without
debit in the ledgers - RQM
21652. Taxpayer had filed Form
GST ITC-03 successfully but still
it reflects as “NIL” Filed, even
though invoices are saved by the
taxpayer while filing the said
form.
Financial Implication- YES
Whether Correct Data KnownNO
38 ITC
Form
After opting into composition
scheme, taxpayer had filed Form
GST ITC-03 successfully but still it
reflects as “NIL” Filed, even though
invoices are saved by taxpayer while
filing the said form. No ledger
transactions had happened for the
same.
Reason: Due to some technical
issues, the details added were not
visible in UI. However, the NIL
filing details were saved and
transmitted at the time of filing.
Therefore, due to this defect, the
statement was filed as NIL. Invoice
It is fixed in
production on
15th June
2022 via ICR:
16751
Page 43 of 575
Agenda for 48th GSTCM Volume 2
details were still saved in the
backend. However, it was not
present in UI.
Discussion and Decision:
ITGRC took note of the same and approved the data fix done by the GSTN.
S.
No.
Issue reported No. of
Cases
Impact
ed
Module Detail Description Status
5. Multiple Blocking of ITC credit
– Details of impacted GSTINs.
27 GSTINs involving multiple
blocking of ITC credits were
shared for backend correction of
the ITC ledgers by GSTN.
Financial Implication- YES
Whether Correct Data KnownNO
27 ITC
Form
27 (21+6) GSTINs involving
multiple blocking of ITC credits
were shared for backend correction
of the ITC ledgers by GSTN.
Reason: Due to technical issue CBIC
was unable to capture the response
after blocking ITC by taxpayer.
Officer tried multiple times with
same GSTIN to block the ITC.
Out of 27
GSTINs, 26
GSTIN have
been
unblocked.
Rest 1 GSTIN
(33AAJFC74
64K1Z5) was
cancelled and
now it is in
active status
so we are in
process to
unblock this
GSTIN as
well.
Discussion and Decision:
EVP, GSTN informed that the data fix was requested by CBIC and that was a technical issue of blocking
of ITC multiple times. The ITGRC took note of the data fix and approved the same.
Page 44 of 575
Agenda for 48th GSTCM Volume 2
8. Agenda on reversal of interest on delayed filling of statement in form GSTR-8 by e-commerce
operators due to technical glitches.
8.1. Background
8.1.1 Section 52 of the GST Act mandates an e-commerce operator to collect tax at the specified rate on
the net value of the supplies made through it by other suppliers where consideration has to be collected
by the operator. The operator has to file the details of tax so collected in a statement in Form GSTR-8 on
monthly basis. On the basis of statement so filed by operators, the tax collected is made available to the
concerned suppliers for taking the credit into their cash ledgers.
8.1.2 The operators are not required to file the aforesaid statement for the month in which no supply has
been made by any supplier through his portal. But the details provided in a statement of the month can
be amended at the time of filing statement of the subsequent month if supplier has not taken action for
taking the credit till such time or supplier had rejected the details uploaded by the operator. Additional
amount is paid by the operator in case of upward amendment and he gets credit of the reduced amount in
liability if amendment is made downwards.
8.1.3 There was no late fee payable by operators before October, 2022 on delayed filing of the statement
of a month but interest was payable for delayed filing. Interest is computed by system based on the net
liability and the period of delay.
8.1.4 Tax collected and paid in a statement can be adjusted in subsequent statement if goods supplied are
returned. It means that liability is paid on net of basis in GSTR-8. Details are provided GSTIN wise for a
tax period.
8.2. System glitches
8.2.1 While filing statement in Form GSTR-8 for the month of February, 2022, three taxpayers
registered on the same PAN in different States, could not file the said statement due to system glitches.
After receiving the complaints from the ECOs, the system application was rectified on 29th July, 2022.
Thereafter, the operators had filed the statements for the month of February, 2022 and subsequent
months.
8. 2.2 Due date of filing GSTR-8 of a tax period is 10th of the following month. Due to the defect, the
filing of the said statement was delayed. Though, there was no late fee on delayed filing of GSTR-8
(before October, 2022) but interest becomes payable after the due date and same is computed by system.
The operators have filed the statements of tax periods which became due till rectification of the defect
with interest.
8.2.3 All three impacted operators have deposited the liability for the month of February, 2022 by due
date. For the month March, 2022, all operators have deposited the liability after due date but before
fixing the defect. For April, 2022, only one operator have deposited the liability before fixing the defect
but after due date only. Since, there was no glitch in depositing the liability through challan, therefore,
interest paid on delayed filing of statement may not be refunded in those cases who have paid the
liability while filing the statement or before filing the statement but after fixing of the glitch.
8.2.4 In earlier cases also, in the 15th ITGRC had adopted this approach in its meeting held on 12-08-
2021. Based on the decision, Government had issued notification vide Notification No. 08/2022 dated
07-06-2022 for refunding the interest who had deposited the liability before filing the statement.
Page 45 of 575
Agenda for 48th GSTCM Volume 2
8.3. Interest paid
Summary of the interest paid by the operators who had deposited the liability by due date or those had
deposited after due date but before fixing the defect is given as under:
Type of defect Tax deposit
status
No. of
stateme
nts
Tax period Amount of interest to be re-credited
IGST CGST SGST/UTGS
T
1 2 3 4 5 6 7
Problem faced in
amendment of records
Deposited by
due date
3 Feb, 2022 0 27335 27335
Deposited
after due date
but before
filing
statement and
fixing the
defect
3 Mar, 2022 0 12668 12668
1 Apr, 2022 0 2653 2653
TOTAL 7 42656 42656
Note – Liability deposited after fixing the defect but before filing the return have not been included in
the above table for reversal on interest.
8.4. Proposal for refund of interest paid
8.4.1 ITGRC may take a view to refund the interest paid by the operators detailed at para 3 on the
pattern of proposal approved earlier and notification issued by Government for the same. Amount of
interest to be refunded will be credited to cash ledger under respective major/minor head.
EVP, GSTN presented the agenda with the power point PPT which is attached below as Annexure-6.
Discussion and Decision:
Additional Secretary, DOR asked about the amount involved in the issue at hand.
EVP, GSTN informed that about Rs.85 thousand is involved.
Additional Secretary, DOR said the same can be approved since the amount involved is small.
Chairperson said that if facts have been verified by GSTN then there should be no issue.
EVP, GSTN informed that in the 15th ITGRC meeting, same issue was taken up and approved by the
ITGRC.
JS, GSTCS informed that a Notification No.08/2022-CT dated 07.06.2022 was also issued by GST
Policy Wing.
Chairperson agreed with the same.
The ITGRC took note of the data fix and that interest waiver be recommended to GST Council for these
taxpayers.
Page 46 of 575
Agenda for 48th GSTCM Volume 2
Annexure-1
Centre:
i. Member (GST), CBIC –Smt. V. Rama Matthew (Chairperson of ITGRC)
ii. Additional Secretary, DoR – Sh. Vivek Aggarwal
iii. Additional Secretary, GSTC- Sh. Pankaj Kumar Singh
iv. Pr. DG, DG Systems – Sh. S.R.Baruah
v. Pr. Chief Commissioner, CGST, Delhi Zone – Smt. Mallika Arya
States:
i. Commissioner, State Tax, West Bengal – Sh. Khalid Aizaz Anwar
ii. Additional Excise & Taxation Commissioner, Haryana – Sh. Siddharth Jain
iii. Joint Commissioner (Computer System), State Tax, Tamil Nadu – Sh.Thiru S. Ramasamy
iv. Joint Commissioner, State Tax, Gujarat – Sh. Mahesh Jani
GST Council Secretariat:
i. Joint Secretary, GSTCS- Smt. Ashima Bansal
Special Invitee:
i. Executive Vice President, GSTN- Sh. Dheeraj Rastogi

Page 47 of 575
Agenda for 48th GSTCM Volume 2
Annexure-2
Agenda on Data Fix issues
Technical Issues Requiring Data Fix of the Processed Incorrect Data through Backend
Utilities
The changes in GST law / Rules, the representations received from taxpayers and other
stakeholders require alterations to be continuously made in the GST System. GSTN has
therefore adopted an agile methodology of developing applications for GST System keeping it
modular to handle frequent changes in law and rules incorporated in a running application.
This has necessitated integrating all new application changes downstream being dependent on
the module undergoing the change and led to following concerns:
 Some corner scenarios owing to varying taxpayer actions and system behaviour, when
subjected to heavy load, go unhandled leading to inconsistent data persisting in GST
System.
 The data inconsistencies vary from ledger getting improper debits/credits, the return
details stored in the system having incorrect information relating to situations where an
irreversible commit has happened in the database.
 No option available to taxpayer to seek remedy in GST System leading to a need of
performing data fixes through auditable utilities.
These issues generally have been noticed after
 A complaint is raised by taxpayer/ tax officer,
 Result of a periodic internal and external audits.
In order to resolve these issues, the processed incorrect data requires fixing, collecting
correct data besides solving the software/platform issues being faced by respective
stakeholders. Accordingly, GSTN has initiated fixing of technical issues identified, as per the
SOP approved by the ITGRC in the15th meeting held on 12/08/2021, which is as below:
a. Analysis of data discrepancy.
b. Confirmation of discrepancy sought from MSP.
c. Upon confirmation, utility to be created by MSP to extract similar cases from GST
System data.
d. A root cause analysis conducted to fix the issue and implemented by MSP in consultation
with GSTN to rectify data inconsistency.
e. Scripts created for data fix and tested in multiple cycles by MSP and GSTN.
f. Approval note presented to competent authority to fix the issue.
g. After approval, audit entries created for each change affecting the data.
h. Scripts executed and post execution state of data stored for reference later.
i. List of all such changes to be presented and explained to GST policy wing & ITGRC and
periodic internal audit also to be undertaken.
Data Fix cases are accordingly presented to ITGRC for deliberations and decision as
mentioned in the attached Annexure.
Page 48 of 575
Agenda for 48th GSTCM Volume 2
Annexure to the Agenda
Technical Issues Requiring Data Fixes through Backend Utility (Period -1st Jan 2022 to 11th Nov
2022)
Cases Requiring Internal Approval of SVP, EVP/CEO or Post facto Approval of ITGRC
S.
No
.
Issue
reported
Approv
ed By
Date
of
App
roval
No.
of
Case
s
Imp
acte
d
Fin
anc
ial
Im
plic
ati
on
Mod
ule Corr
ect
Data
Kno
wn /
Not
Kno
wn
Detail Description Status
1 Issue in
GSTR6 form.
Taxpayers
were unable to
view ISD
invoices in
GSTR2A
form, as
GSTR2A form
is a read only
where Supplier
can see the
invoices added
by the
recipient.
EVP
(Service
s)
25-
01-
2022
88 Yes GST
R6
Kno
wn
In this issue, ISD
invoices are not
reflecting in GSTR2A
form when uploaded
from GSTR6 form.
There are Multiple
GSTR6 users who
have raised ticket
against different
supplier’s GSTIN.
Reason: While adding
the multiple invoices
through offline utility,
due to the issue in
code, only the last
invoice was getting
saved in
ISD_UNIT_RelationS
hipHbase table and
that is why user was
unable to view all their
invoices on the portal.
It is fixed
in
productio
n on 15th
Feb 2022
via
RQM:22
445
2 Duplicate
invoice issue
in GSTR6
form. At the
time of
submission of
return, the
portal is
showing
"Error in
EVP
(Service
s)
10-
02-
2022
1 No GST
R6
Kno
wn
The invoices and
credit notes uploaded
were processed by the
portal while uploading
the JSON. At the time
of submission of
return, the portal is
showing "Error in
Submission". The error
report is showing that
This
happened
for only
one TP
and due
to that
code fix
was not
taken.
Data fix
Page 49 of 575
Agenda for 48th GSTCM Volume 2
Submission“. the ISD Invoices and
ISD credit notes are
duplicate but there is
no duplication in either
ISD invoices or ISD
credit notes. Taxpayer
is getting "Error in
Submission" while
filing the GSTR6 but
then after generating
Error report it is
showing 'Duplicate
ISD invoice’.
Reason: According to
the code flow invoice
should be inserted into
“UPLOADED_ISD_N
OTES”,
“UPLOADED_ISD_I
NVOICES”,
“ISD_INVOICES”
tables during save. But
for this user data is
inserting into
“ISD_INVOICE_DTL
”, “ISD_NOTE_DTL”,
“GSTR6SUBMIT”
table also. When user
submitting the form
user getting the error
as duplicate invoice
because invoice is
present in below DTL
Hbase table.
done by
ICR.
3 Issue prior to
Migration of
Tamil
Nadu.Clean up
of recovery
Cases created
in Case
management
folder, where
recovery cases
have no
reference to
the Demand
order (for the
33-state code –
EVP
(Service
s)
08-
04-
2022
88 Yes Reco
very
Kno
wn
The multiple recovery
cases were created for
single demand id
through event_dtl job.
The user was facing a
system error, as the
mentioned CRN’s do
not have the demand
details mapped to it.
Reason: Due to some
technical issues in
event Job process,
Multiple recovery
cases were created
Issue
was
before
Migratio
n of
Tamil
Nadu
from
Modal 1
to Modal
2. Issue
was
permane
ntly
fixed by
Page 50 of 575
Agenda for 48th GSTCM Volume 2
Tamil Nadu
SR#601295).
Tax officers
are facing
System error
while fetching
the recovery
cases for 86
CRN’s (Case
Reference
Number).
without a reference of
demand id in case
management folder.
As a result, the case
management folder
had unmapped
recovery id which does
not require any action
to be taken. We do not
have logs of that time
to cross verify what
was exact issue.
executin
g a utility
job on
25th Feb
2022.
4 Recovery of
TCS amount
credited twice
in cash ledgers
of suppliers.
(RQM:
RET_R2X_18
318).
Suppliers have
taken excess
TCS credit
than due,
either by filing
GSTR-2X
more than
once or by
accepting the
same record
across two tax
periods.
EVP
(Service
s)
24-
05-
2022
37 Yes Cash
Ledg
er
Kno
wn
Due to change in
status from filed to not
filed or posting the
records across two tax
periods, taxpayer was
able to get the credit
twice.
Reason: It is suspected
that following
scenarios may have
caused the defect:
Return filing status
cache update issue
could have caused the
issue. Second scenario
can be with XA
transaction.
It is fixed
in
productio
n.
5 Late fee
reversal of
GSTR6
taxpayer.
Taxpayer was
unable to file
GSTR6 form
in production
environment
for return
period July,
2021 due to
“Error in
Submission”.
EVP
(Service
s)
26-
05-
2022
1 No GST
R6
Kno
wn
The invoices and
credit notes uploaded
were processed by the
portal while uploading
the JSON. At the time
of submission of
return, the portal is
showing "Error in
Submission" and the
report is showing that
the ISD Invoices and
ISD credit notes are
duplicate. But there is
no duplication in either
ISD invoices or ISD
credit notes. Reason:
Taxpayer were unable
This
happened
only
once so
code fix
was not
taken.
Data fix
was done
by
Utility
on 10th
Feb 2022
via
ICR:148
11
Page 51 of 575
Agenda for 48th GSTCM Volume 2
to submit the GSTR6
due to the error
“Duplicate ISD
Invoice” displayed on
the portal.
6 Taxpayers
were unable to
file GSTR5
form in
production
environment
due to the
error
“Submission
had some
error”. Now
reversal of late
fee and
Interest in
GSTR5 form
is requested.
EVP
(Service
s)
26-
05-
2022
2 Yes GST
R5
Kno
wn
Taxpayers were unable
to file GSTR5 form in
production
environment due to the
error “Submission had
some error”.
Reason: Due to the
code issue (MYSQL
upgrade), there was a
delay in providing the
correct resolution to
the taxpayers, they
were unable to file
GSTR5 form within
due date, so late fee
and Interest were
charged to the
taxpayers. Although
Taxpayers have filed
the form along with
their late fee and
Interest, we have got
the request of late fee
and interest reversal
from Daily ticket
tracker for the below
mentioned taxpayers.
Permane
nt fixon
16th Nov
2021 via
RQM:
22058
7 Due to nonfilling details
of liability in
table 6 of
GSTR-4, the
amount paid
through CMP08 of the year
became excess
tax paid and
credited to
EVP
(Service
s)
26-
05-
2022
1028 Yes Cash
Ledg
er
Kno
wn
Due to non-filling
details of liability in
table 6 of GSTR-4, the
amount paid through
CMP-08 of the year
became excess tax
paid and credited to
negative liability
statement.
Reason: Before
recovery utility
It is fixed
in
productio
n on 31st
Mar
2022 via
CR:2159
2_A
Page 52 of 575
Agenda for 48th GSTCM Volume 2
negative
liability
statement. The
negative
liability was
reduced by
debiting the
amount from
negative
liability
statement. In
some cases,
the amount has
been debited
twice.
execution, a select
query was executed to
extract the impacted
records for recovery.
In that select query, we
were ignoring those
records which were
already recovered.
But in that select
query, Return
Type=’CMP08’ was
missed while
extracting the
impacted records, only
GSTR-4 (Annual) was
considered.
Status: It is fixed in
production on 31st Mar
2022 via CR:21592_A
8 Duplicate
entries present
in
RTN_FILING
_STAUS
table. At the
time of Filling,
GSTR-1
summary not
generated by
the system and
there is no
consolidated
summary
shown while
filling GSTR1.
EVP
(Service
s)
07-
06-
2022
1 No GST
R1
Kno
wn
Tax payer is getting
error “Latest Summary
is not available, Please
generate summary and
try again”. Tax payer
has already deleted
history from the
browser and tried
different computer
also but getting the
same error and unable
to file the return.
Reason: There are 2
entries presents in
Return Filing Status
table for GSTN
24AXLPT8085E1ZZ
for return period
042022, hence tax
payer is not able to
proceed with filing.
Permane
nt fix
will be
deployed
in
productio
n on Dec
2022.
9 Cash ledger
entries have
been missed
out or omitted
after filing
R2X. Credit
entry to be
made in the
EVP
(Service
s)
07-
06-
2022
2 Yes Cash
Ledg
er
Kno
wn
Taxpayers having
GSTIN
18AAACH0351E1Z4
and
19ALIPD4105A1ZS
have accepted the TDS
credit of return period
02/2022, 03/2022
It is fixed
in
productio
n.
Page 53 of 575
Agenda for 48th GSTCM Volume 2
cash ledger
(Table:
CASH_LDG)
of taxpayers
respectively but the
credit entry is not
available in
CASH_LDG table
even though filing is
done. Reason: Due to
the mismatch of row
check value, credit
entry was not made to
the cash ledger (Table:
CASH_LDG).
10 Taxpayers are
not able to file
GST CMP-08
for the
subsequent tax
period.
EVP
(Service
s)
20-
07-
2022
3 Yes CMP
-08
Kno
wn
It has been noticed that
few composition
taxpayers who have
attempted to file
statement in Form
GST CMP-08 between
15th June’ 21 to 8 th
July’ 21, got redundant
entries in their
respective ledger
tables and out of these
cases, taxpayers who
have liability open in
any of the previous tax
periods are unable to
file non-nil statement
for subsequent tax
period.
Reason: Due to XA
removal, data for few
taxpayers got impacted
as rollback was not
happening from ledger
tables
(RTN_LIAB_LDG/RT
N_LIAB_MSTR/RTN
_LIAB_MSTR_HIST)
in case of any
issue/exception like.
Permane
nt fix is
deployed
in
productio
n on 9th
Jul 2022.
11 Partial Data
movement i.e.
Data missing
in INV_DETL
table of Hbase.
System is
throwing error
in GSTR-1
EVP
(Service
s)
25-
07-
2022
6 No GST
R1
Kno
wn
This is a partial data
movement issue before
GSTR1 code
improvement, where
data is present in
“INVOICES” table of
HBase however few
columns (OSPD,
It is
fixed in
productio
n on 26th
April
2022.
Page 54 of 575
Agenda for 48th GSTCM Volume 2
table 9A and
not allowing to
submit
amended
invoice while
amending
export
invoices from
“without
payment” to
“with
payment”
type.
TYPE) are missing in
“INV_DETL” table.
Permanent fix has
been done via code
improvement.
However affected
users, before code
improvement, whose
data is not sync for
them, data fix is
required.
Reason: According to
the older code flow
invoice should be
inserted from
“INVOCES” to
“INV_DETL“ table
during submit,
However some column
(OSPD,TYPE) are
missing hence he is
not able to amend the
invoice.
12 Re-credit of
interest paid
on late filing
of statement in
Form GSTR-8
by ecommerce
operators due
to system
glitches.
(Defect: RQM:
RET_R8_1983
0). The post
filing process
for GSTR-8 in
the previous
month could
not be
completed due
to which filing
of next month
was blocked.
EVP
(Service
s)
25-
07-
2022
116 Yes GST
R8
Kno
wn
Since, filing of the
statement is not
mandatory every
month, some operators
have not filed the
statement. The
operators who have
deposited the amount
due by the due date but
paid interest due to
late filing of statement,
are eligible for reversal
of the interest paid.
Reason: Upon
analysis, it was seen
that operator has filed
statement and message
posted for Kafka
queue for post filing
process. On processing
of post filing process,
transaction stuck-up in
IP/ ER. When operator
tried to file his next
It is fixed
on
productio
n.
Page 55 of 575
Agenda for 48th GSTCM Volume 2
period’s statement,
application blocked
him with the error
message “ Return
filing process is not
yet completed for the
earlier period ”.
13 GSTR9 ||
Users have
filed R9 but
form status is
RTF in DB
and not filed
on annual
dashboard.
Taxpayer has
filed GSTR9
form, but
status is still
not filed on
portal.
EVP
(Service
s)
25-
07-
2022
1 No GST
R9
Kno
wn
User has claimed that
he has filed the form,
but status is still not
filed on portal. It is
due the issue that
entries got posted to
ledger tables and cash
is also debited for
user’s late fee.
However,
corresponding record
is not updated from
Ready To File to File
in Return Filing Status
table in return
database. Therefore,
user is still seeing
form status as not filed
even after filing and
paying the late fee.
Reason: Transaction
handling between
different data sources
is not properly done.
Known
issue
across
the
applicati
on.
Analysis
is under
progress.
GSTR1
has
similar
issue
which is
in UAT
and will
be
deployed
on
productio
n in 29th
Nov
2022,
other
modules
may
adopt
this
solution
after
discussio
n. Data
fix in
such
cases is
done
through
ICR.
Page 56 of 575
Agenda for 48th GSTCM Volume 2
14 Duplicate
Amendable
column in
INVOICE_DT
L table of
Hbase. When
Taxpayer is
trying to
amend
EXPORT
invoices from
upper case to
lower case
records stuck
in “InProgress” Due
to duplicate
Amdbl column
present in
“INVOICE_D
TL” Table.
EVP
(Service
s)
17-
08-
2022
83 No GST
R1
Kno
wn
On Analysis it is found
that AMDBL column
is present twice in
“INVOICE_DTL”
table for the same
invoice. Hence while
user trying to amend
invoice from Upper
case to lower case he
is getting invoice in
"In-Progress".
Reason: While
analysing logs it is
found that at the time
of submit, since
invoice column were
present with upper
case, system validated
it as different and
inserted AMDBL
column with lower
case.
It is
fixed in
productio
n on 26th
April
2022.
15 When
Taxpayer is
validating the
statement in
Refund,
system is
giving error
“RFFCAS1007”
and not
allowing to
file the
Refund.
EVP
(Service
s)
17-
08-
2022
32 No GST
R1
Kno
wn
While analyzing, it is
found that Meta Data
(MD) column is not
present in “Invoice
Detail” table. The
invoices went to error
while adding to
GSTR1 form due to
which Meta column
was not inserted to
“Invoice Detail” Table
though it is present in
“Invoices” table.
Reasons:
- Since MD
column is not
present in “
Invoice Detail
” table hence
user will not
be able to raise
refund for
affected
invoices,
validation will
fail at time of
initiating
refund.
It is
fixed in
productio
n on 26th
April
2022.
Page 57 of 575
Agenda for 48th GSTCM Volume 2
- It is also
noticed that
due to
connection
errors while
inserting data
to Invoice
Detail table,
invoices went
to error.
16 Taxpayers
raised tickets
stating that
they filed the
GSTR-3B
returns but
there is
mismatch in
the data
entered vis-àvis payment
made. Ledgers
are updated on
the basis of
payment table
whereas pdf is
generated on
the basis data
entered.
EVP
(Service
s)
17-
08-
2022
7 Yes GST
R3B
Not
Kno
wn
After login to the
GSTN portal, taxpayer
can open the GSTR3B form window on
multiple tabs at the
same instant. There is
no restriction to this
behavior at present.
Taxpayer have filed
the GSTR-3B returns
but there is mismatch
in the data entered visà-vis payment made.
Reason: Difference
between data that was
saved in HBASE and
the one that was
posted to ledger db in
Return Liability
Ledger and ITC
Ledger tables.
Permane
nt fix is
finalized
and it is
with
REAP
team.
RQM:22
721
17 Taxpayers
stuck up in
filing Form
GST ITC-01
for claiming
credit- RQM
23200. Newly
registered
taxpayers or
taxpayers
opting out of
composition
scheme or
when
exempted
goods become
taxable, claim
EVP
(Service
s)
17-
08-
2022
23 Yes ITC
Form
Not
Kno
wn
ITC01 form has to be
filed within 30 days of
becoming eligible to
claim credit. Few
taxpayers were stuck
up in filing the said
form between 29th
June, 2022 and 5thJuly,
2022. One taxpayer
could not file the form
as downtime started
from 11:00 pm on 16th
June, 2022.
Reason: Few taxpayers
were unable to file
declaration in Form
This
issue has
been
faced
only
once.
Permane
nt fix not
required.
All
impacted
cases
were
executed
on 25th
Aug
2022 in
Page 58 of 575
Agenda for 48th GSTCM Volume 2
credit on
closing stock
u/s 18(1) of
Act through
Form GST
ITC-01.
GST ITC-01 due to
deployment of the
change in topology.
“System was showing
following error – Your
submit is in progress.
Check after
sometime.”
productio
n.
18 Data issue due
to partial
commit
happened on
click of reset
button (RQM:
RET_3B_1522
2).
EVP
(Service
s)
17-
08-
2022
2 Yes GST
R3B
Not
Kno
wn
It may be recalled that
initially, there was a
four tier system of
filing return in Form
GSTR-3B, viz. Save,
Submit, Offset liability
and File . All saved
entries used to become
non-editable after
clicking on ‘Submit’
button. Liability
register and Credit
ledger used to be
updated at submit
stage. In the
beginning, lot of
complaints were
received due to
freezing of entries
before filing (at submit
stage). In the
beginning, returns
lying at submit stage
were reset from the
backend as lot of
complaints were
received on account of
inadvertent mistakes.
Reason: This is an old
issue when there used
to be a reset button on
the portal.
Permane
nt fix is
not
required
because
RESET
button is
removed
from
system.
Old
return
periods
data are
being
fixed by
backend
query.
Page 59 of 575
Agenda for 48th GSTCM Volume 2
19 Form GST
ITC-03 filed
without debit
in the ledgers -
RQM 21652.
Taxpayer had
filed Form
GST ITC-03
successfully
but still it
reflects as
“NIL” Filed,
even though
invoices are
saved by the
taxpayer while
filing the said
form.
EVP
(Service
s)
17-
08-
2022
38 Yes ITC
Form
Not
Kno
wn
After opting into
composition scheme,
taxpayer had filed
Form GST ITC-03
successfully but still it
reflects as “NIL”
Filed, even though
invoices are saved by
taxpayer while filing
the said form. No
ledger transactions had
happened for the same.
Reason: Due to some
technical issues, the
details added were not
visible in UI.
However, the NIL
filing details were
saved and transmitted
at the time of filing.
Therefore, due to this
defect, the statement
was filed as NIL.
Invoice details were
still saved in the
backend. However, it
was not present in UI.
It is fixed
in
productio
n on 15th
June
2022 via
ICR:
16751
20 While filing
GSTR4
Annual form,
few taxpayers
are getting
incorrect auto
populated
amount in
Table 5 where
one quarter’s
data is
missing.
EVP
(Service
s)
26-
08-
2022
28-
08-
2022
12 Yes GST
R4
Kno
wn
Taxpayer is getting
incorrect amount in
table 5 of GSTR4
Annual form due to
which taxpayers are
not able to file their
return as system is
asking additional
liability to be paid.
This is an
Adhocexercise which
will take some time
and due to that, we
have to apply data
fixes on urgent basis
considering ageing of
tickets.
Reason: Under
analysis.
Analysis
for
permane
nt fix is
under
progress.
Page 60 of 575
Agenda for 48th GSTCM Volume 2
21 TDS amount is
credited to
their Cash
Ledger by
filing the TDS
& TCS Credit
received form
twice for same
tax period.
EVP
(Service
s)
14-
09-
2022
15-
09-
202
141 Yes Cash
Ledg
er
Kno
wn
Cases where the
amount of tax
deducted and reported
in GSTR-7 differs
from the amount
credited to cash ledger
of deductee through
TDS/TCS credit
received form.
Reason:
• When user
login to the
TDS and TCS
credit received
form, status is
displayed from
the cache
details. As
there is a
problem with
the cache, user
was able to see
status as ‘Not
filed’. But, in
the Return
Filing Status
table, the
status was
existing as
filed.
• In the second
scenario, while
amending the
TDS record in
R7, the status
of the earlier
TDS / TDSA
record is
verified in
R2X related
table to check
whether it is
accepted and
filed or not.
Issue is
fixed in
productio
n via
RQM:
RET_R7
_19111
22 While filing
GSTR-4/
GSTR3B-
“Error!
Payment
amount should
not exceed the
outstanding
liability”–
EVP
(Service
s)
28-
09-
2022
29-
09-
202
2 Yes GST
R4/3
B
Kno
wn
GSTR4 calculates
applicable late fees at
the time of submit (or
in the new model at
the time of Offset).
The late fee thus
calculated has three
components.
GSTR4
quarter
form is
disabled
in prod.
Permane
nt fix
needs to
be
Page 61 of 575
Agenda for 48th GSTCM Volume 2
RQM: 14189.
While filing
GSTR4 some
of taxpayer are
getting the
error “Issue
while filing
GSTR-4 -
“Error!
Payment
amount should
not exceed the
outstanding “.
Reason: Negative latefee has been applied to
the ledger due to the
logic. Further, as per
the logic in GSTR-4
and GSTR-3B any
negative liability is
carried forward to the
next return period
using a pair of
Credit/Debit entries.
analyzed.
Utility is
used to
fix the
data.
23 CMP08 || The
end user is
unable to file
GST CMP-08
as error is
reflecting
"Data for the
internal
Transaction Id
Already
Posted"–
RQM: 21266.
The taxpayer
is unable to
file GST
CMP-08 as
error is
reflecting
"Data for the
internal
Transaction Id
Already
Posted" while
filing.
EVP
(Service
s)
03-
10-
2022
64 No CMP
-08
Kno
wn
Filing status is ‘Not
Filed’ and taxpayer is
not allowed to File
GST CMP-08 again,
as error is reflecting
"Data for the internal
Transaction Id already
Posted" while filing.
Reason: For few
taxpayers, all ledger
tables were updated
successfully but
request status did not
change from RTF to
FIL in
RTN_FILING_STAT
US table.
Partially
fixed on
14th Jun
2021 in
productio
n.
Another
RCA is
Known
issue
across
the
applicati
on.
Analysis
is under
progress.
GSTR1
has
similar
issue
which is
in UAT
and will
be
deployed
on
productio
n in 29th
Nov
2022,
other
modules
may
adopt
after
Page 62 of 575
Agenda for 48th GSTCM Volume 2
discussio
n.
24 Correction in
cash ledger
balance due to
credit and
debit happened
simultaneously
. The balance
could not be
updated due to
credit and
debit
happening
simultaneously
. It had
happened due
to defect in the
system
application.
EVP
(Service
s)
25-
10-
2022
26-
10-
2022
3 Yes Cash
Ledg
er
Kno
wn
The balance could not
be updated due to
credit and debit
happening
simultaneously. It had
happened due to defect
in the system
application.
Reason: The issue had
occurred due to debit
and credit entry in the
cash ledger happening
at the same time,
which led to incorrect
cash balance in the
cash ledger. The
reason for occurrence
of the issue is due to
dirty read where the
two transactions
happened
simultaneously and
read the same record.
CR#2198
2 has
been
raised for
permane
nt fix.
This CR
is
aligned
with
REAP
team but
yet to be
picked
up for
develop
ment.
25 R4X || Few
taxpayers are
able to file
their return
without
clearing
liabilities in
case the
liability
amount is
already present
in negative
liability table.
EVP
(Service
s)
27-
10-
2022
24 Yes R4X Kno
wn
Taxpayers are unable
to file their further
return period and
getting error message
as “Liability for
previous tax period is
yet to be paid. If error
persists quote error
number LG9048 when
you contact customer
care for quick
resolution.”
It is fixed
in
productio
n on 31st
Mar
2022 via
CR:
21592_A
.
Page 63 of 575
Agenda for 48th GSTCM Volume 2
Taxpayers are
unable to file
their further
return period
and getting
error message
as “Liability
for previous
tax period is
yet to be paid.
Reason: This issue
started coming post
one recent major CR
21592 implementation.
In this CR,
‘isNegativeValueAllo
wed’ flag was
introduced to check
whether credit entry of
negative liability
should be posted into
Return Negative
Liability Statement
History table or not.
But this new flag also
stopped posting debit
entry to Return
Negative Liability
Statement History
table if tax amount
difference between
Table 6 and table 5
(either outward supply
or inward supply) of
GSTR4X is greater
than 10% or 1000
(whichever is less)
26 Users are able
to file GSTR4
without
clearing
liabilities -:
Recomputation of
liability–
RQM: 17176 /
20801.
GSTR-4: User
has filed
GSTR-4
without
clearing the
liability
amount. GST
CMP-08: As
per the issue
reported by
user, he is not
able to file
EVP
(Service
s)
27-
10-
2022
1 Yes GST
R4
Kno
wn
Transaction handling
was not proper due to
mix of Transaction
Manager/ NonTransaction Manager
in GSTR-4. Due to
this, in case of any
failure rollback was
not done completely
from all the respective
data sources. In this
case, filing status has
been updated as
“Filed” in return filing
status table without
updating in ledger
table besides the
rollback of liability
setoff entries in ledger.
Reason: User has filed
GSTR-4 without
Partially
fixed on
14th Jun
2021 in
productio
n on 14th
Jun 2021
via ICR12663.
Another
RCA is
Known
issue
across
the
applicati
on.
Analysis
is under
progress.
Page 64 of 575
Agenda for 48th GSTCM Volume 2
CMP-08 as
getting
'ERROR!!
Liability for
previous tax
period is yet to
be paid'.
clearing the liabilities
and due to this, user is
unable to file
statement in Form
GST CMP-08 for next
quarter.
27 Taxpayer has
saved invoices
in ITC-03 &
submitted the
form with ‘
NULL’ check
but unable to
offset the
outstanding
liabilities.
EVP
(Service
s)
27-
10-
2022
1 Yes ITC
Form
Kno
wn
ITC03 form: Taxpayer
has saved invoices in
ITC-03 & submitted
the form with ‘ NULL’
check but unable to
offset the outstanding
liabilities.
Reason: Taxpayer
forgot to uncheck the
NIL checkbox while
submitting ITC03
form, however
invoices were already
added in the form.
Now status is in
‘Submitted” state and
taxpayer is not ready
to file the form as he is
unable to offset the
corresponding
liabilities.
It is a
single
Taxpayer
issue,
permane
nt fix not
required.
Data fix
was done
via
ICR:184
39
executed
on 4th
Nov
2022.
28 Multiple
Blocking of
ITC credit –
Details of
impacted
GSTINs.
27 GSTINs
involving
multiple
blocking of
ITC credits
were shared
for backend
correction of
the ITC
EVP
(Service
s)
08-
07-
2022
27 Yes ITC
Form
Not
Kno
wn
27 (21+6) GSTINs
involving multiple
blocking of ITC
credits were shared for
backend correction of
the ITC ledgers by
GSTN.
Reason: Due to
technical issue CBIC
was unable to capture
the response after
blocking ITC by
taxpayer. Officer tried
multiple times with
same GSTIN to block
Out of 27
GSTINs,
26
GSTIN
have
been
unblocke
d. Rest 1
GSTIN
(33AAJF
C7464K
1Z5) was
cancelled
and now
it is in
active
Page 65 of 575
Agenda for 48th GSTCM Volume 2
ledgers by
GSTN.
the ITC. status so
we are in
process
to
unblock
this
GSTIN
as well.

Page 66 of 575
Agenda for 48th GSTCM Volume 2
Annexure-3
The financial implications of category-2 cases
S.
No.
Issue reported No. of
Cases
Impacte
d
Modul
e
Detail Description Status
1 Issue in GSTR6 form.
Taxpayers were unable to
view ISD invoices in
GSTR2A form, as GSTR2A
form is a read only where
Recipient can see the
invoices added by the
Supplier.
Financial Implication-YES
Whether Correct Data
Known-YES
88 GSTR
6
In this issue, ISD invoices are not
reflecting in GSTR2A form when
uploaded from GSTR6 form.
There are Multiple GSTR6 users
who have raised ticket against
different supplier’s GSTIN.
Reason: While adding the
multiple invoices through offline
utility, due to the issue in code,
only the last invoice was getting
saved in
ISD_UNIT_RelationShipHbase
table and that is why user was
unable to view all their invoices
on the portal.
An ISD credit of Rs 52, 33,708/-
were made to be reflected in
GSTR2A.
It was fixed in
production on 15th
Feb 2022 via
RQM:22445
S.
No.
Issue reported No. of
Cases
Impac
ted
Module Detail Description Status
2 Recovery of TCS amount credited
twice in cash ledgers of suppliers.
(RQM: RET_R2X_18318 –
TDS/TCS Credit Received Form).
Suppliers have taken excess TCS
credit than due, either by filing
GSTR-2X more than once or by
accepting the same record across
two tax periods.
Financial Implication-YES
Whether Correct Data KnownYES
37 Cash
Ledger
Due to change in status from filed to
not filed or posting the records across
two tax periods, taxpayer was able to
get the credit twice.
Reason: It is suspected that following
scenarios may have caused the defect:
Return filing status cache update issue
could have caused the issue. Second
scenario can be with XA transaction.
The total amount of Rs 5,09,376 was
debited in the Cash Ledger.
It is fixed
in
production.
Page 67 of 575
Agenda for 48th GSTCM Volume 2
S.
No.
Issue reported No. of
Cases
Impact
ed
Module Detail Description Status
3 Taxpayers were unable to file
GSTR5 form in production
environment due to the error
“Submission had some error”.
Now reversal of late fee and
Interest in GSTR5 form is
requested.
Financial Implication-YES
Whether Correct Data KnownYES
2 GSTR5 Taxpayers were unable to file
GSTR5 form in production
environment due to the error
“Submission had some error”.
Reason: Due to the code issue
(MYSQL upgrade), there was a delay
in providing the correct resolution to
the taxpayers, they were unable to
file GSTR5 form within due date, so
late fee and Interest were charged to
the taxpayers. Although Taxpayers
have filed the form along with their
late fee and Interest, we have got the
request of late fee and interest
reversal from Daily ticket tracker.
A late fee amount of Rs 1550 (CGST
– 775 and SGST – 775) was waived
and an amount of Rs 2, 17.466
interest (CGST 108733 , SGST
108733) is required post facto
approval of GST Council for
reversal.
Permanent fix
on 16th Nov
2021 via
RQM: 22058
S.
No.
Issue reported No. of
Cases
Impact
ed
Module Detail Description Status
4. Due to non-filling details of
liability in table 6 of GSTR-4, the
amount paid through CMP-08 of
the year became excess tax paid
and credited to negative liability
statement. The negative liability
was reduced by debiting the
amount from negative liability
statement. In some cases, the
amount has been debited twice.
Financial Implication- YES
Whether Correct Data KnownYES
1028 Cash
Ledger
Due to non-filling details of liability
in table 6 of GSTR-4, the amount
paid through CMP-08 of the year
became excess tax paid and credited
to negative liability statement.
Reason: Before recovery utility
execution, a select query was
executed to extract the impacted
records for recovery. In that select
query, we were ignoring those
records which were already
recovered.
But in that select query, Return
Type=’CMP08’ was missed while
It is fixed in
production on
31st Mar
2022 via
CR:21592_A
Page 68 of 575
Agenda for 48th GSTCM Volume 2
extracting the impacted records, only
GSTR-4 (Annual) was considered.
Status: It is fixed in production on
31st Mar 2022 via CR:21592_A
The total amount of Rs 2, 65, 67,031.
(CGST 1,32,71,615 , 1,32,71,615,
IGST – 23801) was re credited.
S.
No.
Issue reported No. of
Cases
Impact
ed
Module Detail Description Status
5 Cash ledger entries have been
missed out or omitted after filing
R2X. Credit entry to be made in
the cash ledger (Table:
CASH_LDG) of taxpayers.
Financial Implication- YES
Whether Correct Data KnownYES
2 Cash
Ledger
Taxpayers having GSTIN
18AAACH0351E1Z4 and
19ALIPD4105A1ZS have accepted
the TDS credit of return period
02/2022, 03/2022 respectively but
the credit entry is not available in
CASH_LDG table even though filing
is done. Reason: Due to the
mismatch of row check value, credit
entry was not made to the cash ledger
(Table: CASH_LDG).
A total amount of Rs 49,062 (CGST
24531, SGST 24531) was credited to
the cash ledger.
It is fixed in
production.
Page 69 of 575
Agenda for 48th GSTCM Volume 2
S.
No.
Issue reported No. of
Cases
Impact
ed
Module Detail Description Status
6 Taxpayers are not able to file
GST CMP-08 for the subsequent
tax period.
Financial Implication- YES
Whether Correct Data KnownYES
3 CMP-08 It has been noticed that few
composition taxpayers who have
attempted to file statement in Form
GST CMP-08 between 15th June’ 21
to 8th July’ 21, got redundant entries
in their respective ledger tables and
out of these cases, taxpayers who
have liability open in any of the
previous tax periods are unable to file
non-nil statement for subsequent tax
period.
Reason: Due to XA removal, data for
few taxpayers got impacted as
rollback was not happening from
ledger tables
(RTN_LIAB_LDG/RTN_LIAB_MS
TR/RTN_LIAB_MSTR_HIST) in
case of any issue/exception like.
An excess liability debited in the
ledger of Rs 2,10,210 (CGST
1,05,105, SGST 1,05,105) was
corrected.
Permanent
fixis deployed
in production
on 9th Jul
2022.
S.
No.
Issue reported No. of
Cases
Impact
ed
Module Detail Description Status
7 Re-credit of interest paid on late
filing of statement in Form
GSTR-8 by e-commerce
operators due to system glitches.
(Defect: RQM: RET_R8_19830).
The post filing process for
GSTR-8 in the previous month
could not be completed due to
which filing of next month was
blocked.
Financial Implication- YES
Whether Correct Data KnownYES
116 GSTR-8 Since, filing of the statement is not
mandatory every month, some
operators have not filed the
statement. The operators who have
deposited the amount due by the due
date but paid interest due to late
filing of statement, are eligible for
reversal of the interest paid.
Reason: Upon analysis, it was seen
that operator has filed statement and
message posted for Kafka queue for
post filing process. On processing of
post filing process, transaction stuckup in IP/ ER. When operator tried to
It is fixed on
production.
Page 70 of 575
Agenda for 48th GSTCM Volume 2
file his next period’s statement,
application blocked him with the
error message “Return filing process
is not yet completed for the earlier
period ”.
In 116 cases an interest amount of
IGST Rs 76,01,603, CGST – Rs
27,23,696 and SGST/UTGST – Rs
27,23,696 was reversed which
wasapproved by GST Council for
credit to the Cash Ledgers of the
impacted Operators vide notification
08/2022 and hence it was
implemented. I
S.
No.
Issue reported No. of
Cases
Impact
ed
Module Detail Description Status
8 While filing GSTR4 Annual
form, few taxpayers are getting
incorrect auto populated amount
in Table 5 where one quarter’s
data is missing.
Financial Implication- YES
Whether Correct Data KnownYES
12 GSTR4 Taxpayer is getting incorrect amount
in table 5 of GSTR4 Annual form
due to which taxpayers are not able
to file their return as system is asking
additional liability to be paid. This is
an Adhoc exercise which will take
some time and due to that, we have
to apply data fixes on urgent basis
considering ageing of tickets.
Reason: Under analysis.
An amount of Rs 32,55,026 (CGST –
16, 01,300, SGST – 16, 01,300,
IGST – 52,426) was posted in Table
5 of Form GSTR-4.
Analysis for
permanent fix
is under
progress.
S.
No.
Issue reported No. of
Cases
Impact
ed
Module Detail Description Status
Page 71 of 575
Agenda for 48th GSTCM Volume 2
9 TDS amount is credited to their
Cash Ledger by filing the TDS &
TCS Credit received form twice
for same tax period.
Financial Implication- YES
Whether Correct Data KnownYES
141 Cash
Ledger
Cases where the amount of tax
deducted and reported in GSTR-7
differs from the amount credited to
cash ledger of deductee through
TDS/TCS credit received form.
Reason:
• When user login to the TDS
and TCS credit received
form, status is displayed
from the cache details. As
there is a problem with the
cache, user was able to see
status as ‘Not filed’. But, in
the Return Filing Status
table, the status was existing
as filed.
• In the second scenario, while
amending the TDS record in
R7, the status of the earlier
TDS / TDSA record is
verified in R2X related table
to check whether it is
accepted and filed or not.
The amount of Rs 36.27
lakhs (CGST+SGST) was
debited in the Cash Ledgers
of concerned taxpayers.
Issue is fixed
in production
via RQM:
RET_R7_191
11
S.
No.
Issue reported No. of
Cases
Impact
ed
Module Detail Description Status
10 Correction in cash ledger balance
due to credit and debit happened
simultaneously. The balance
could not be updated due to
credit and debit happening
simultaneously. It had happened
due to defect in the system
application.
Financial Implication- YES
Whether Correct Data KnownYES
03 Cash
Ledger
The balance could not be updated
due to credit and debit happening
simultaneously. It had happened due
to defect in the system application.
Reason: The issue had occurred due
to debit and credit entry in the cash
ledger happening at the same time,
which led to incorrect cash balance in
the cash ledger. The reason for
occurrence of the issue is due to dirty
read where the two transactions
happened simultaneously and read
the same record.
An amount of Rs 689468 (CGST +
SGST – Rs 6,87,622, Interest – Rs
CR#21982
has been
raised for
permanent fix.
This CR is
aligned with
REAP team
but yet to be
picked up for
development.
Page 72 of 575
Agenda for 48th GSTCM Volume 2
1296, Fee – Rs 550) was corrected in
the cash Ledger.
S.
No.
Issue reported No. of
Cases
Impact
ed
Module Detail Description Status
11 R4X (GSTR 4 Annual) Few
taxpayers are able to file their
return without clearing liabilities
in case the liability amount is
already present in negative
liability table. Taxpayers are
unable to file their further return
period and getting error message
as “Liability for previous tax
period is yet to be paid.
Financial Implication- YES
Whether Correct Data KnownYES
24 R4X
(GSTR
4
Annual)
Taxpayers are unable to file their
further return period and getting error
message as “Liability for previous
tax period is yet to be paid. If error
persists quote error number LG9048
when you contact customer care for
quick resolution.”
Reason: This issue started coming
post one recent major CR 21592
implementation. In this CR,
‘isNegativeValueAllowed’ flag was
introduced to check whether credit
entry of negative liability should be
posted into Return Negative Liability
Statement History table or not. But
this new flag also stopped posting
debit entry to Return Negative
Liability Statement History table if
tax amount difference between Table
6 and table 5 (either outward supply
or inward supply) of GSTR4X
(GSTR 4 Annual) is greater than
10% or 1000 (whichever is less)
A total amount of Rs 92,050 (CGST
46,025 , SGST – 46,025 ) was posted
in the Liability Ledger.
It is fixed in
production on
31st Mar
2022 via CR:
21592_A.
Page 73 of 575
Agenda for 48th GSTCM Volume 2
S.
No.
Issue reported No. of
Cases
Impact
ed
Module Detail Description Status
12 Users are able to file GSTR4
without clearing liabilities -: Recomputation of liability– RQM:
17176 / 20801. GSTR-4: User
has filed GSTR-4 without
clearing the liability amount.
GST CMP-08: As per the issue
reported by user, he is not able to
file CMP-08 as getting
'ERROR!! Liability for previous
tax period is yet to be paid'.
Financial Implication- YES
Whether Correct Data KnownYES
01 GSTR-4 Transaction handling was not proper
due to mix of Transaction Manager/
Non-Transaction Manager in GSTR4. Due to this, in case of any failure
rollback was not done completely
from all the respective data sources.
In this case, filing status has been
updated as “Filed” in return filing
status table without updating in
ledger table besides the rollback of
liability setoff entries in ledger.
Reason: User has filed GSTR-4
without clearing the liabilities and
due to this, user is unable to file
statement in Form GST CMP-08 for
next quarter.
An amount of Rs 1500 (CGST – Rs
750, SGST – Rs 750 ) was posted to
the liability ledger.
Partially fixed
on 14th Jun
2021 in
production on
14th Jun 2021
via ICR12663.
Another RCA
is Known
issue across
the
application.
Analysis is
under
progress.
S.
No.
Issue reported No. of
Cases
Impact
ed
Module Detail Description Status
13 Taxpayer has saved invoices in
ITC-03 & submitted the form
with ‘NULL’ check but unable to
offset the outstanding liabilities.
Financial Implication- YES
Whether Correct Data KnownYES
01 ITC
Form
ITC03 form: Taxpayer has saved
invoices in ITC-03 & submitted the
form with ‘NULL’ check but unable
to offset the outstanding liabilities.
Reason: Taxpayer forgot to uncheck
the NIL checkbox while submitting
ITC03 form, however invoices were
already added in the form. Now
status is in ‘Submitted” state and
taxpayer is not in ‘Ready to file’
status in the form as he is unable to
offset the corresponding liabilities.
An amount of Rs 3,68,778 (CGST –
Rs 1,84,389 SGST – Rs 1, 84,389)
will be paid on filing the said form.
It is a single
Taxpayer
issue,
permanent fix
not required.
Data fix was
done via ICR:
18439
executed on
4th Nov 2022.
Page 74 of 575
Agenda for 48th GSTCM Volume 2
Annexure-4
Agenda for 17th ITGRC (Part II)
Reversal of Interest Paid on Delayed Filing Of Statement in Form GSTR-8 by E-Commerce
Operators Due to Technical Glitches.
1. Background
1.1 Section 52 of the GST Act mandates an e-commerce operator to collect tax at the specified rate on
the net value of the supplies made through it by other suppliers where consideration has to be collected
by the operator. The operator has to file the details of tax so collected in a statement in Form GSTR-8 on
monthly basis. On the basis of statement so filed by operators, the tax collected is made available to the
concerned suppliers for taking the credit into their cash ledgers.
1.2 The operators are not required to file the aforesaid statement for the month in which no supply has
been made by any supplier through his portal. But the details provided in a statement of the month can
be amended at the time of filing statement of the subsequent month if supplier has not taken action for
taking the credit till such time or supplier had rejected the details uploaded by the operator. Additional
amount is paid by the operator in case of upward amendment and he gets credit of the reduced amount in
liability if amendment is made downwards.
1.3 There was no late fee payable by operators before October, 2022 on delayed filing of the statement
of a month but interest was payable for delayed filing. Interest is computed by system based on the net
liability and the period of delay.
1.4 Tax collected and paid in a statement can be adjusted in subsequent statement if goods supplied are
returned. It means that liability is paid on net of basis in GSTR-8. Details are provided GSTIN wise for a
tax period.
2. System glitches
2.1 While filing statement in Form GSTR-8 for the month of February, 2022, three taxpayers registered
on the same PAN in different States, could not file the said statement due to system glitches. After
receiving the complaints from the ECOs, the system application was rectified on 29th July, 2022.
Thereafter, the operators had filed the statements for the month of February, 2022 and subsequent
months.
2.2 Due date of filing GSTR-8 of a tax period is 10th of the following month. Due to the defect, the
filing of the said statement was delayed. Though, there was no late fee on delayed filing of GSTR-8
(before October, 2022) but interest becomes payable after the due date and same is computed by system.
The operators have filed the statements of tax periods which became due till rectification of the defect
with interest.
2.3 All three impacted operators have deposited the liability for the month of February, 2022 by due
date. For the month March, 2022, all operators have deposited the liability after due date but before
fixing the defect. For April, 2022, only one operator have deposited the liability before fixing the defect
but after due date only. Since, there was no glitch in depositing the liability through challan, therefore,
interest paid on delayed filing of statement may not be refunded in those cases who have paid the
liability while filing the statement or before filing the statement but after fixing of the glitch.
Page 75 of 575
Agenda for 48th GSTCM Volume 2
2.4 In earlier cases also, in the 15th ITGRC had adopted this approach in its meeting held on 12-08-2021.
Based on the decision, Government had issued notification vide Notification No. 08/2022 dated 07-06-
2022 for refunding the interest who had deposited the liability before filing the statement.
3. Interest paid
Summary of the interest paid by the operators who had deposited the liability by due date or those had
deposited after due date but before fixing the defect is given as under:
Type of defect Tax deposit
status
No. of
statements
Tax period Amount of interest to be re-credited
IGST CGST SGST/UTGS
T
1 2 3 4 5 6 7
Problem faced in
amendment of records
Deposited by
due date
3 Feb, 2022 0 27335 27335
Deposited
after due
date but
before filing
statement
and fixing
the defect
3 Mar, 2022 0 12668 12668
1 Apr, 2022 0 2653 2653
TOTAL 7 42656 42656
Note – Liability deposited after fixing the defect but before filing the return have not been included in
the above table for reversal on interest.
4. Proposal for refund of interest paid
4.1 ITGRC may take a view to refund the interest paid by the operators detailed at para 3 on the
pattern of proposal approved earlier and notification issued by Government for the same. . Amount of
interest to be refunded will be credited to cash ledger under respective major/minor head.
Page 76 of 575
Agenda for 48th GSTCM Volume 2
Annexure-5
Power point presentation presented by GSTN before the 17thITGRC
S.
No.
Types of Issues Count
1 Technical issue with no financial
Implications – Correct data known
Slide No.
4 to 12
2 Technical issue affecting locally with
financial implications – Correct data known
Slide No.
14 to 27
3 Technical issue affecting locally with
financial implications – Correct data not
known with certainty
Slide No.
29 to 33
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Annexure-6
Additional agenda on reversal of interest on delayed filling of statement in form GSTR-8 by ecommerce operators due to technical glitches
15 : Issue in filing GSTR-8 by e-commerce operators
Issue Reported
Date Intimated
MSP to perform
Data Fix
Issue Description with No. of Cases Impacted
Three ECOs faced
problem in filing
monthly statement in
Form GSTR-8
February to
June,2022
Three ECOs could not file monthly statement in Form GSTR8 for the month of February, 2022 due to technical glitch and
examined raised tickets for the same. The defect was
examined by technical team fixed the same on 29th July,2022.
Impacted tax periods: February to June,2022 (5 tax periods).
Interest liability: Interest on delayed filing of the said
statement is computed by System and the same is noneditable. Though, defect was in filing the statement but there
was no defect in depositing the due tax through challan.
Refund on interest: In the 15th ITGRC meeting, it was
decided that reversal of interest should be done in those cases
where tax was paid by due date. Where tax was paid after
fixing the defect or at the time of filing the statement may not
be eligible for reversal of interest.
Financial Implication : Yes
Taxpayers Impacted – 03

Page 93 of 575
Agenda for 48th GSTCM Volume 2
THANK YOU!!

Page 94 of 575
Agenda for 48th GSTCM Volume 2
Agenda Item 16: Report of Committee of Officers (CoO) on GST Audit along with Draft Model
All India GST Audit Manual
1. A Committee of Officers (CoO) on GST Audit was constituted in pursuance of discussion
and decision in the 1st National GST Conference held on 25.11.2019 to have joint & collaborative
efforts for GST Audit; capacity building for audit and to follow uniform practices for GST Audit in
Centre and State Tax administration.
2. Initially, the Terms of Reference (ToR) for CoO on GST Audit issued vide OM dated
21.02.2020 (Annexure-VII), was to study, examine and draft an all-India GST Audit Manual but due
to different administrative set up in the States no consensus could be reached out for the most of
items of the ToR.
3. Subsequently, the Terms of Reference were revised vide OM dated 25.06.2021(AnnexureVIII).
3.1 The revised Terms of Reference (ToR) are as under:
(i) To study audit policy and practices of the Centre and the States which have already
implemented certain procedures;
(ii) To develop model Audit Manual, taking into account the policies and practices adopted
by Centre and States, with essential, preferred and best practices which may be adopted by
States as per administrative suitability;
(iii) To broadly outline the procedural aspects of joint and thematic audit, if and as and when
they are undertaken with the approval of Council;
(iv) Using capability of data analytic developed by DGARM for identification of State
Taxpayers for audit;
(v) To suggest measures of capacity building in Services for focused approach on the audit of
services sector;

(vi) To build knowledge on financial accounting and focused approach towards interpreting
business contract/agreement and understanding of the system-driven business process
through SAP, Oracle, Tally, etc.
4. To explore each topic of the ToRs in greater detail, sub-committees were formed for each
ToRs. After wide-ranging discussions and after obtaining inputs from many States, each of the six
Sub-Committees submitted their report on all the six ToRs. The reports of the sub-committees are
integrated into the final report of the committee. ToRs wise reports are as under:
4.1 To study audit policy and practices of the Centre and the States which have already
implemented certain procedures (ToR 1)
The report of the sub-committee is the compilation of practices followed by the Centre and
States in respect of the topics like identification of the risk parameters considered for selection of
cases for audit, scope of audit, criteria for authorization of the officers for selection of cases for audit,
basis/criteria for allocation of cases for audit etc.
The sub-committee has prepared its report in two parts. Part one of the report is the
compilation of topic-wise practice followed by the Centre and States in respect of each of the topics
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mentioned above. The second part is the model GST Audit best practices and procedures which are
recommendatory in nature. The recommendations were agreed to by the Committee. The detailed
report of the sub-committee is attached as ANNEXURE-I
4.2 To develop model Audit Manual, taking into account the policies and practices adopted
by Centre and States, with essential, preferred and best practices which may be adopted by
States as per administrative suitability (ToR 2)
The sub-committee was constituted to compile the existing and desirable audit practices and
to draft a model GST audit manual. The said sub-committee consisted of ADG, Audit
(Headquarters), EVP, GSTN, State Tax officers from West Bengal, Bihar and Gujarat who were
assigned the task to catalogue prevalent practices of audit in the Central and State Indirect tax
administrations and adopt the best practices for GST Audit across the country.
The aforesaid draft Model All India GST Audit Manual 2022 has been agreed to by the
Committee of Officers (CoO) and has been separately submitted for the consideration of GST
Council as Annexure-II.
4.3 To broadly outline the procedural aspects of joint and thematic audit, if and as and
when they are undertaken with the approval of the Council (ToR 3)
The sub-committee looked into the procedural aspects of joint and thematic audit, if and as
and when they are undertaken with the approval of Council. The sub-committee recommended that
for conducting thematic audit, GST Council may form a co-ordination committee at all India level
which shall be responsible for selecting themes for conducting theme based audit at all India level in
a coordinated manner. The co-ordination committee shall also be responsible for dissemination of the
best practices being followed across Audit formations.
It recommended that the co-ordination committee may be constituted with the following as
its members:
● DG (Audit) or any Additional Director General (Audit) as nominated by him;
● Joint Secretary, GST Council;
● Pr. Commissioner/ Commissioner (GST), GST Policy Wing;
● CEO, GSTN;
● Three Commissioners of SGST, as nominated by the GST Council;
● One CGST (Audit) Commissioner as nominated by the GST Council.

The recommendations were agreed to by the Committee. The detailed report of the subcommittee is attached as Annexure-III


4.4 Using capability of data analytic developed by DGARM for identification of State
Taxpayers for audit (ToR 4)
The sub-committee examined the capability of using data analytics developed by DGARM
for identification of State taxpayers for audit and made the following recommendations:

a. There is capability and expertise with DGARM to identify the risky taxpayers for Audit
falling in states’ jurisdiction using approved risk parameters. If any State wants DGARM to
select the risky taxpayers list for them, the State should make a specific request to DGARM.
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DGARM will identify risky taxpayers based on approved parameters for them and share the
list with the State along with risk scores and risk parameters.

b. For the States who opt, DGARM may evolve and establish permanent mechanism to
identify risky tax payers falling under their jurisdiction.

c. If any State only wants risk parameters to be shared with them and they do not want
DGARM to identify risky taxpayers for them, DGARM may share approved risk parameters
with them.

d. Risk parameters keep evolving over a period of time with feedback and detection of newer
modus operandi. Further there may be some local risk factors relevant in their jurisdiction.
Thus, the States must have the authority to select its own additional risk parameters
developed from their expertise, experience and knowledge from time to time. However, if
any State wants to select the taxpayers list for audit by using expertise of DGARM, they have
no objection in such matter.

The recommendations were agreed to by the Committee. The detailed report of the subcommittee is at ANNEXURE-IV

4.5 To suggest measures of capacity building in Services for focused approach on the audit
of services sector (ToR 5)
The sub-committee on examined the measures for capacity building in Services for focused
approach on the audit of services sector and the recommendations are as below:

a. The officers of State GST needs to be trained specifically in service sectors which needs to
be identified by the States and NACIN will draw a program to train the Master Trainers for
each state based on the requirements of those states.

b. Suggested that there are multiple services being offered by the business entities therefore
there is a need to understand the various concepts like time of supply, place of supply, mixed
vs. Composite supply, taxable and exempted supply etc. so that the model of the sector along
with the taxability is clear to the officers.

c. For identification of the specific sectors it is recommended that a Committee at the zonal
level shall be formed with the following officers as its Members
● ADG NACIN ZTI
● Commissioners of State GST or his representative.
This Committee shall decide the sectors that need to be focused upon.
d. Further the committee shall meet every quarter to review the specific sector areas. It is also
recommended that the industry experts along with the officers may be involved in the
training program to understand the specific sector model.
e. An institutional mechanism containing selected officers from States and Centre may be
created by NACIN to identify training needs of all the audit officers, identification and
maintain record of resource persons including website resources and developing periodic
training calendar.
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The aforesaid recommendations were agreed to by the Committee. The detailed report of the
sub-committee is at ANNEXURE-V.

4.6 To build knowledge on financial accounting and focused approach towards interpreting
business contract/agreement and understanding of the system-driven business process through
SAP, Oracle, Tally, etc. (ToR 6)

The sub-committee observed that GST has facilitated coordinated functioning of Central and
State tax administrations and that it is an opportunity as well as a challenge. The cumulative
experience of the state and the central administration can either create a vast knowledge base or it
may accentuate differences in practices and overlap in audit functions. The committee concluded
that:

a. To overcome differences in practices and overlap in audit functions better coordination and
sharing of information between the Centre and the States is required.

b. Standardization is the key. Appropriate Standard Operating Procedures need to be put in
place for cross-jurisdictional issues. Frequency of audit, selection of taxpayers and number of
taxpayers to be audited needs to be decided based on risk parameters.

c. As the actual audit needs to be done by the field staff, the officers and staff need to be
prepared well with the help of proper training and development. Training of auditors in
financial accounting, reading of contracts, use of accounting software etc. is imperative.

d. Finally, specialized software could be developed to cull out the relevant data from various
business accounting systems so that the process of audit is made more system oriented.

The recommendations and conclusion were agreed to by the Committee. The detailed report of
the sub-committee is at ANNEXURE-VI

5. The Committee of Officers (CoO) on GST Audit after extensive meetings, discussions and
deliberations on the Terms of Reference (ToR) and reports submitted by each sub-committee on
ToRs submitted its Report on GST Audit (Annexure-A). A Draft Model All India GST Audit
Manual (Annexure-II) has also been a submitted by The Committee of Officers (CoO) separately.
6. Accordingly, the report of the Committee of Officers (CoO) on GST Audit along with the
Draft Model All India GST Audit Manual is tabled before the GST Council for deliberation and
approval.
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REPORT
of the
Committee of Officers (CoO)
on
GST Audit
2022
Annexure-A
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TABLE OF CONTENTS
S. NO. ITEM PAGE NO.
1 Preface
3
2 Executive Summary
6
3 Report
20
4 Annexure 1 – OM dated 21.02.2020
5 Annexure 2 – Report of the CoO June 2020
6 Annexure 3 – OM dated 27.07.2021 for CoO
7 Annexure 4 – OM dated 25.06.2021 for ToR
8 Annexure 5 – Formation of sub-committees
9
Annexure 6 – Formation of sub-committees for (i)
to (iii)
10 Annexure 7 – RoD for 27.08.2021
11 Annexure 8 – RoD for 13.09.2021
12. Annexure 9 – RoD for 06.10.2021
13 Annexure 10 – RoD for 27.10.2021
14 Annexure 11 – RoD for 16.11.2021
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15 Annexure 12 – RoD for 11.01.22
16 Annexure 13 – RoD for 18.01.22
17 Annexure 14 - RoD for 12.05.2022
18 Annexure 15 – RoD for 27.05.2022
19 Annexure 16 – Report of Sub-committee (1)
20 Annexure 17 – Report of Sub-committee (3)
21 Annexure 18 – Report of Sub-committee (4)
22 Annexure 19 – Report of Sub-committee (5)
23 Annexure 20– Report of Sub-committee (6)
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PREFACE
The GST Council Secretariat constituted a Committee of Officers (CoO) on GST
audits after discussions in the 1st National GST Conference held on 25.11.2019.
Broadly the purpose of the CoO was joint and collaborative efforts for GST Audit,
Capacity Building for audit and to follow uniform practices for GST Audit in
Centre and State Tax administrations. An O.M. F. No. 350/Future
Initiative/GSTC/2019 / 2050 dated 21.02.2020 was issued by the Council
constituted a CoO with officers from Central and State GSTs, GSTN, and GST
Council as Members. ADG, Audit, was the Convenor from Central GST and Shri
Srikar M. S., Commissioner, Commercial Tax, Karnataka was the Convenor from
the State. The CoO was required to study, examine and make suggestions in respect
of six Terms of Reference.
However the State GST officers did not agree to the proposal of an all India GST
Audit Manual and Joint & Collective audits by Centre and State in respect of
taxpayers in selected Service Sectors. No consensus could be reached for the most
important first three items of the ToR. Based on the discussions held and the
reports of the sub-committee a Final Report of the CoO was prepared and
submitted to the GST Council in June 2020. The said report interalia mentioned
that the State GST officers did not agree to the proposal of an all India GST Audit
Manual and Joint & Collective audits by Centre and State in respect of taxpayers in
selected Service Sectors. The States pointed out several constraints in proceedings
with the idea of an All-India Audit Manual. They were of the opinion that each
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State had its own organizational and administrative structure that was different
from the Centre. Tax administration in different states is a successor of respective
VAT administrations, with different legacies, constraints, processes and
procedures. Moreover, the GST Audit Manual prepared by the CBIC was already
available with the States and each State could adapt and modify any procedure
therein that was suited to their needs. It was decided that the matter may be
discussed in the All India GST Council meeting or in such higher forum.
Thereafter, the GST Council Secretariat vide its OM dated 27.07.2021
reconstituted the Committee of Officers (CoO) on GST Audit again containing
officers from Centre, States, GSTN and GST Council. Which was further
reconstituted vide OM dated 26.05.2022.
The Terms of Reference (ToR) were also amended and notified vide their OM
dated 25.06.2021.
The CoO held extensive discussions and took inputs from other States also who
were not members of this Committee and arrived at a consensus on all the items of
the ToR. It is with great satisfaction to record that the CoO has been able to
achieve all the desired purpose for which it was created.
The Committee expresses its gratitude to Shri Yogendra Garg, Pr. ADG, NACIN,
Shri Sanjay Mangal, Pr. Commissioner, GST Policy Wing, CBIC, Shri Gurusharan
Singh, ADG, DGARM and Shri Nitish K. Sinha, ADG, DGGI, for providing
reports of their respective sub-committees. Contribution of the officers States and
all Members of the Committee is equally important and acknowledged.
It is also very heartening to note that the CoO has made substantive progress in
studying audit policy and practices of the Centre and the States which have already
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implemented certain procedures, in preparing the model GST Audit Manual and
developing a paper on Joint and Thematic Audits. The officers of the States have
played a pioneering role in preparing this document, particularly from Karnataka
and West Bengal. It is expected that the Model GST Audit Manual, 2022 is an
extensive and comprehensive document with a holistic approach of GST Audit and
facilitate the Audit Officers of States and Centre.Such document will not only
facilitate the audit officers but will also help in maintaining uniformity of audit in
all levels
CONVENOR (Centre) Co - CONVENOR (State)
Dr. Amandeep Singh Dr. Ravi Kumar Surpur
Additional Director General Chief Commissioner,
Directorate General of Audit (Hqrs.) Commercial Tax
CBIC, New Delhi Rajasthan
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EXECUTIVE SUMMARY
The GST Council Secretariat constituted a Committee of Officers (CoO) on GST
audits after discussions in the 1st National GST Conference held on 25.11.2019 for
the purpose of joint and collaborative efforts for GST Audit, Capacity Building for
audit and to follow uniform practices for GST Audit in Centre and State Tax
administrations. An O.M. F. No. 350/Future Initiative/GSTC/2019 / 2050 dated
21.02.2020 (Annexure 1) was issued by the Council constituted a CoO with
officers from Central and State GSTs, GSTN, and GST Council as Members.
ADG, Audit, was the Convenor from Central GST and Shri Srikar M. S.,
Commissioner, Commercial Tax, Karnataka was the Convenor from the State. The
CoO was required to study, examine and make suggestions in respect of below
mentioned six Terms of Reference.
i. To prepare a comprehensive All India GST Manual taking into account
procedures & practices in vogue in different States and Centre;
ii. To explore having joint and collective GST Audit by Centre & State for
the taxpayers in many sectors that have all India presence like Telecom,
Airlines, Banking, Railway etc.;
iii. To explore conducting thematic audit by both tax administration;
iv. Using capability of data analytics developed by DGARM for identification
of State taxpayers for audit;
v. To suggest measures of capacity building in Services for focused approach
on audit of Services sector; and
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vi. To build knowledge on financial accounting and focused approach
towards interpreting business contract/agreement and understanding of
system driven business process through SAP, Oracle, Tally etc.;
The said Committee held extensive deliberations and decided that in order to
facilitate in-depth examination and to expedite the report sub-committees should be
formed for each reference item. Regarding Reference Point numbers 1 to 3,
however there was no consensus on the formation of sub-committees. The State
GST officers did not agree to the proposal of an all India GST Audit Manual and
Joint & Collective audits by Centre and State in respect of taxpayers in selected
Service Sectors. No sub-committees on these issues were formed. The subcommittees on the remaining three reference points were duly constituted and they
submitted their reports. Based on the discussions held and the reports of the subcommittee a Final Report of the CoO was prepared and submitted to the GST
Council in June 2020 (Annexure 2). The said report interalia mentioned that the
State GST officers did not agree to the proposal of an all India GST Audit Manual
and Joint & Collective audits by Centre and State in respect of taxpayers in
selected Service Sectors. The States pointed out several constraints in proceedings
with the idea of an All-India Audit Manual. They were of the opinion that each
State had its own organizational and administrative structure that was different
from the Centre. Tax administration in different states is a successor of respective
VAT administrations, with different legacies, constraints, processes and
procedures. Moreover, the GST Audit Manual prepared by the CBIC was already
available with the States and each State could adapt and modify any procedure
therein that was suited to their needs.
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It was decided that the matter may be discussed in the All India GST Council
meeting or in such higher forum.
Thereafter, the GST Council Secretariat, vide its OM dated 27.07.2021 (Annexure
– 3), reconstituted the Committee of Officers (CoO) on GST Audit again
containing officers from Centre, States, GSTN and GST Council with the
following members:-
Centre State GSTN GST Council
i. Addl. DG, DG
Audit Headquarters,
CBIC - [Convenor]
ii. Pr. Commissioner/
Commissioner, GST
Policy Wing, CBIC
iii. Pr. Commissioner,
Meerut
iv. Principal
ADG/ADG, DGGI
Headquarters, CBIC
v. Pr. ADG/ADG, DG
Analytics & Risk
Management
vi. Pr. ADG/ADG,
NACIN, Faridabad
i. Commissioner of
Commercial Taxes,
Rajasthan (Shri Ravi Jain)
– [Co-Convenor]
ii. Commissioner of
Commercial Taxes,
Karnataka (Smt. Shikha C.)
iii. Special Commissioner,
State Tax, Gujarat (Shri
Samir Vakil)
iv. Special Commissioner of
State Tax, NCT of Delhi
(Shri Anil Banka)
v. Additional Commissioner,
State Tax, Uttarakhand
(Shri Amit Gupta)
vi. Additional Commissioner
of Commercial Taxes,
Karnataka (Shri Ravi
Jesuraj S.)
vii. Special Secretary, State
Tax, Bihar (Shri Arun
Kumar Mishra)
viii. Joint Commissioner,
State Tax, Maharashtra
(Shri Prasad Joshi)
EVP, GSTN i. Joint Secretary
ii. Director
iii. Deputy Director
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ix. Joint Commissioner, State
Tax, Tamil Nadu (Shri C.
Palani)
x. Joint Commissioner, State
Tax, West Bengal (Shri
Narayan Chandra Guriya)
xi. Joint Commissioner, State
Tax, Uttar Pradesh (Shri
Vivek Singh)
xii. Deputy Commissioner
(ST), Puducherry (Shri K.
Sridhar)
The said CoO was reconstituted vide OM dated 26.05.2022 and Shri Ravi Kumar
Jain, the Co-Convenor was replaced with Dr. Ravi Kumar Surpur, Chief
Commissioner, Commercial Tax, Rajasthan.
The Terms of Reference (ToR) were also amended and notified vide their OM
dated 25.06.2021 (Annexure-4)and the same are asunder:-
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i. To study audit policy and practices of the Centre and the States which have
already implemented certain procedures;
ii. To develop model Audit Manual, taking into account the policies and
practices adopted by Centre and States, with essential, preferred and best
practices which may be adopted by States as per administrative suitability;
iii. To broadly outline the procedural aspects of joint and thematic audit, if and
as and when they are undertaken with the approval of Council;
iv. Using capability of data analytic developed by DGARM for identification of
State Taxpayers for audit
v. To suggest measures of capacity building in Services for focussed approach
on the audit of services sector; and
vi. To build knowledge on financial accounting and focussed approach towards
interpreting business contract/agreement and understanding of the systemdriven business process through SAP, Oracle, Tally, etc.
(i) Reference No. 1 – “To study audit policy and practices of the Centre and the
States which have already implemented certain procedures”. A sub-committee was
constituted to examine the topic. The task of studying and compiling the best audit
policy and practices of Centre and States was entrusted to the officers of Karnataka
State. The sub-committee identified certain points/topics that can be dealt with in
studying the audit policies and practices of the Centre and States that have already
implemented certain procedures and to design the Model GST Audit Policy.
These topics are as under:-
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i. Identification of the risk parameters considered for selection of cases for
audit / Basis for selection of cases for audit (Including any process of
random selection of cases that may not be strictly covered by risk
parameters)
ii. Scope of audit - whether restricted to only the flagged risk parameters or
all business transactions of the auditee.
iii. Need for audit of all or some of the other related registered persons in the
value chain based on audit findings in selected primary cases. Norms for
such action i.e., whether to have the same audit officer for all cases,
approach for coordination among different audit officers, oversight etc.
iv. Need for audit of other years of the same auditee based on audit findings
in selected cases.
v. Criteria for Authorization of the officers for selection of cases for audit
and the process for final approval of a case for audit i.e., administrative
system of audit in a State including the assignment issuing authority.
vi. Basis/criteria for allocation of cases for audit - cadre, turnover.
vii. Need for fixing numerical targets, both upper and lower limits, on the
number of cases that are to be audited in a year by the State?
viii. Any time limit to be set for completion of audit of various sectors: large,
medium, small etc., (lesser than that mandated by the Act).
ix. Feedback mechanism and its functioning – in selection of cases for audit,
in the process and conduct of audit and in the acceptance of final audit
report.
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x. Post-audit process - Any Committee for review of the audit report and
recommendation for adjudication, who is the adjudicating authority.
xi. Any oversight of post-adjudication proceedings and its mechanism -
follow-up of additional demand created, ascertaining the correctness of
the order for its sustainability, putting up proper defense in appeal, etc.
xii. Any central repository of audit outcomes
xiii. Co-ordination between State and Central audit officers - in similar cases,
similar businesses, exchange of approaches, findings, outcome in appeals
etc.
xiv. Role of technology in automating audit process – Connecting
electronically every audit procedure seamlessly - the E-audit modules
developed by States, or those in the pipeline, to introduce technology in
the audit process and its interface with the audit officer and the auditee.
The Sub-committee decided to prepare its report in two parts. Part one of the
report is the compilation of topic-wise practice followed by the Centre and States in
respect of each of the topics mentioned above. Thirteen States sent in their
feedback/suggestions and the inputs from CBIC were also examined and compiled.
The States who provided inputs were :- Bihar, Himachal Pradesh, Kerala,
Maharashtra, Nagaland, New Delhi, Punjab, Rajasthan, Tamil Nadu, Uttar Pradesh,
Uttarakhand, West Bengal, and Karnataka.
The issues that are covered in the report may be termed as determinants of Model
GST Audit Policy and Practices.
The report broadly covers the common Audit policy and practices adopted by the
Audit jurisdictions across the country. The systemic approach to GST Audit
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followed by the State GST administrations, prima-facie, differ in varying degrees
due to the administrative architecture that was designed for erstwhile tax
administration. Notwithstanding such variations, the commonalities inherent in
their Audit policies and practices are inferred in the overall context of the GST Act
and the Rules and this report is precisely premised on such ‘inferred
commonalities’. The report contains two parts, the first part is a documentation of
the GST Audit practices and the policies of the Centre and the States that have
implemented certain procedures and adopted certain practices. The second part is
the model GST Audit best practices and procedures which are recommendatory in
nature.
(ii) Reference No. 2 – “To develop Model Audit Manual taking into account the
policies and practices adopted by Centre and States, with essential, preferred and
best practices which may be adopted by States as per administrative suitability” –
For this purpose, a sub-committee of officers was constituted to compile existing
and desirable audit practices and to draft a model GST audit manual. The said subcommittee consisted of ADG, Audit (Headquarters), EVP, GSTN, State Tax
officers from West Bengal, Bihar and Gujarat which was assigned the task to
catalogue prevalent practices of audit in the Central and State Indirect tax
administrations and adopt the best practices for GST Audit across the country.
Further, the activity of compiling the Model GST Audit Manual was allotted to
West Bengal Member of the Committee based on thoroughly studying the Audit
manual prepared by Central Government, GST Audit Manuals and Standard
Operating Procedures prepared by various states like West Bengal, Punjab,
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Maharashtra, Karnataka, Bihar, and Uttar Pradesh as well as the module developed
by the GSTN and available to Model 2 states. The draft Model GST Audit Manual
has been prepared after extensive discussions and taking inputs from all the
Members of the CoO. This Model Audit Manual aims to be an extensive and
comprehensive document with a holistic approach towards GST audit which will
not only facilitate the Audit Officers of the Centre and the States/UTs but will also
create an impact in facilitating the auditees during the exercise of audit. The
objective of this manual is to provide insights into the principles and procedures of
audit and to give a holistic view of the entire process to the users of this Manual.
It has been designed to cater to a systematic workflow of audit, ranging from brief
criteria of selection to the completion of the process. The final Draft Model GST
Audit Manual has been submitted for the consideration of the GST Council
separately.
(iii) Reference No. 3 - “To broadly outline the procedural aspects of joint and
thematic audit, if and as and when they are undertaken with the approval of
Council”; - The recommendations of the sub-committee are as follows:-
For conducting thematic audit, GST Council may form a co-ordination committee
at all India level which shall choose themes for conducting audit, establishing
Committee of Officers for selecting Tax payers in a state for thematic audit, coordination among various Audit Authorities for evolving a common minimum
audit plans for a given theme and, thereafter monitoring of actual audit by the field
formations so as to ensure uniformity. The co-ordination committee shall also be
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responsible for dissemination of the best practices being followed across Audit
formations.
It is recommended that the co-ordination committee may be constituted with the
following as its members:
● DG (Audit) or any Additional Director General (Audit) as nominated by
him;
● Joint Secretary, GST Council;
● Pr. Commissioner/ Commissioner (GST), GST Policy Wing;
● CEO, GSTN;
● Three Commissioners of SGST, as nominated by the GST Council;
● One CGST (Audit) Commissioner as nominated by the GST Council.
The co-ordination committee shall be responsible for selecting themes for
conducting theme based audit at all India level in a coordinated manner. For
selecting the Audit themes, the Committee may consider using the following
parameters/ data sources:
● Parameters which emerge from the systematic and methodical risk analysis
conducted by GSTN, DGARM, ADVAIT and the state revenue intelligence
units/economic intelligence units.
● Economic indicators;
● Third party information from Tax authorities and other Regulatory
authorities;
● Sensitive nature of the commodity and / or service;
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● Risky sectors in news for frauds for e.g., E-commerce, online gaming,
jewelers etc;
● Sectors directly involved in providing services to a large consumer base,
such as banking, insurance, air and land travel, utilities etc.
The said report also provides for determining local themes based on identified Risk
Parameters. Further for coordination of actual audits it is suggested that the
Coordination Committee may constitute a Committee of Officers for each
State/UT. Furthermore, the Report prescribes role of Audit Field Formations for
conducting such audits and a Standard Operating Procedure has also being laid
down for conducting Theme Based Audit. The Report contains similar suggestions
for conducting Joint Audits by Centre and States.
(iv) Reference No. 4 - ‘Using capability of data analytic developed by DGARM for
identification of State Taxpayers for audit’. The recommendations of the subcommittee are as follows:
a) If any State wants DGARM to select the risky taxpayers list for them, the
State should make a specific request to DGARM. DGARM will identify
risky taxpayers based on parameters approved for them and share the list
with the State along with risk scores and risk parameters.
b) DGARM may evolve and establish a permanent mechanism to identify
risky taxpayers falling under the jurisdiction of State GSTs, just as they do
for risky taxpayers under the jurisdiction of Central GST.
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c) If any state only wants risk parameters to be shared with them and they do
not want DGARM to identify risky taxpayers for them, DGARM may share
approved risk parameters with them.
d) If any State wants to select the taxpayers list for audit by using expertise of
DGARM, necessary expertise would be provided.
(iii) Reference Point No. 5 - ‘Suggest measures of Capacity Building in services for
focused approach on audit of Services sector’. The recommendations of the subcommittee are as follows:
The officers of State GST needs to be trained specifically in service sectors which
needs to be identified by the states and NACIN will draw a program to train the
Master Trainers for each state based on the requirements of those states. NACIN
through its Zonal Campus are already conducting bi-monthly training course on
GST Audit & Accounting.
This training program will identify
● The frequency with which the training program needs to be conducted by
NACIN for the master trainers as well as for the other officers.
● Nomination of Nodal officers from States for identification of Training
needs
● Training on specific service sector which has been identified by the
respective State GST (around top 5 services)
● Identification of officers to create proper training modules for identified
specific service sectors.
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NACIN in coordination with the State GST will identify the specific service sectors
where there is a need to train the officers for capacity building. It is also suggested
that since there are multiple services being offered by the business entities
therefore there is a need to understand the supply in accordance with the GST law
and procedures. In this regard supply of services needs to understand properly and
various concepts like time of supply, place of supply, mixed vs. Composite supply,
taxable and exempted supply etc. needs to be focused upon so that the model of the
sector along with the taxability is clear to the officers.
For identification of the specific sectors it is recommended that a Committee at the
zonal level shall be formed with the following as its Members
● ADG NACIN ZTI
● Commissioners of State GST or his representative
This Committee shall decide the sectors that need to be focused upon. Further the
committee shall meet every quarter to review the specific sector areas.
It is also recommended that the industry experts along with the officers may be
involved in the training program to understand the specific sector model. An
institutional mechanism containing selected officers from States and Centre may be
created by NACIN to identify training needs of all the audit officers, identification
and maintain record of resource persons including website resources and
developing periodic training calendar.
(iv) Reference No. 6 – “Build knowledge on financial accounting and focused
approach towards interpreting business contract / agreement and understanding of
systems driven business process through SAP, Oracle, Tally etc.” The
recommendations of the sub-Committees are as follows:
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● For the first time, GST has brought the Central and State Tax administration
to work in tandem with each other. This is an opportunity as well as a
challenge. On the one hand, the cumulative experience of the state and the
central administration can create a vast knowledge base. On the other hand,
it may accentuate difference of practices and overlapping in audit functions.
● To overcome this issue, a better coordination and sharing of information
between the Centre and the States is required.
● Standardization is the key. Appropriate Standard Operating Procedures need
to be put in place for cross-jurisdictional issues. Frequency of audit,
selection of taxpayers and number of taxpayers to be audited needs to be
decided based on risk parameters.
● As the actual audit needs to be done by the field staff, the officers and staff
need to be prepared well with the help of proper training and development.
Training of auditors in financial accounting, reading of contracts, use of
accounting software etc. is imperative.
● Finally, specialized software could be developed to cull out the relevant data
from various business accounting systems so that the process of audit is
made more system oriented.
***********
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REPORT
The GST Council Secretariat vide its OM dated 27.07.2021 reconstituted the
Committee of Officers (CoO) on GST Audit containing officers from Centre,
States, GSTN and GST Council. The CoO was reconstituted vide The CoO was
again reconstituted vide OM dated 26.05.2022. The following are the members of
the reconstituted Committee:-
Centre State GSTN GST
Council
i. Addl. DG, DG
Audit Headquarters,
CBIC - [Convenor]
ii. Pr. Commissioner/
Commissioner, GST
Policy Wing, CBIC
iii. Pr. Commissioner,
Meerut
iv. Principal
ADG/ADG, DGGI
Headquarters, CBIC
v. Pr. ADG/ADG, DG
Analytics & Risk
Management
vi. Pr. ADG/ADG,
NACIN, Faridabad
i. Chief Commissioner of Commercial
Taxes, Rajasthan (Dr. Ravi Kumar Surpur
Jain) – [Co-Convenor]
ii. Commissioner of Commercial Taxes,
Karnataka (Smt. Shikha C.)
iii. Special Commissioner, State Tax, Gujarat
(Shri Samir Vakil)
iv. Special Commissioner of State Tax, NCT
of Delhi (Shri Anil Banka)
v. Additional Commissioner, State Tax,
Uttarakhand (Shri Amit Gupta)
vi. Additional Commissioner of Commercial
Taxes, Karnataka (Shri Ravi Jesuraj S.)
vii. Special Secretary, State Tax, Bihar (Shri
Arun Kumar Mishra)
viii. Joint Commissioner, State Tax,
Maharashtra (Shri Prasad Joshi)
ix. Joint Commissioner, State Tax, Tamil
Nadu (Shri C. Palani)
x. Joint Commissioner, State Tax, West
Bengal (Shri Narayan Chandra Guriya)
xi. Joint Commissioner, State Tax, Uttar
Pradesh (Shri Vivek Singh)
xii. Deputy Commissioner (ST), Puducherry
(Shri K. Sridhar)
EVP,
GSTN
i. Joint
Secretary
ii. Director
iii. Deputy
Director
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The Terms of Reference (ToR) were also amended and notified vide their OM
dated 25.06.2021 and the same are asunder:-
i. To study audit policy and practices of the Centre and the States which have
already implemented certain procedures;
ii. To develop model Audit Manual, taking into account the policies and
practices adopted by Centre and States, with essential, preferred and best
practices which may be adopted by States as per administrative suitability;
iii. To broadly outline the procedural aspects of joint and thematic audit, if and
as and when they are undertaken with the approval of Council;
iv. Using capability of data analytic developed by DGARM for identification of
State Taxpayers for audit
v. To suggest measures of capacity building in Services for focussed approach
on the audit of services sector; and
vi. To build knowledge on financial accounting and focussed approach towards
interpreting business contract/agreement and understanding of the systemdriven business process through SAP, Oracle, Tally, etc.
Due to COVID 19 Pandemic conditions, physical meetings of the Committee could
not be held. It was decided to hold the meetings of the Committee and its subcommittees through video-conferencing. One meeting to discuss and finalise the
Draft Model GST Audit Manual was held physically as well as online.
7. The first meeting of the Committee was held through video-conference
on CISCO WEBEX Tool on 27/08/2021. The agenda for the said meeting was as
under:-
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S. No. Item SPEAKER
1. Introduction and welcome address Dr. Amandeep Singh, ADG, DG Audit
– Convenor, (Centre) & by Shri Ravi
Jain, Commissioner of Commercial
Tax, Rajasthan – Co-Convenor
2. Introduction of the Members – from Centre and
States and giving details of the Modified Terms
of Reference
Joint Secretary, GST Council
Secretariat
3. Feedback giving salient points of the report of
the earlier CoOs on GST Audit formed on
21.02.2020
ADG Audit
4. Best Practices of GST Audit in States States*
5. Best Practices / Principles of GST Audit in
Centre
ADG Audit
6. GSTN related issues of GST Audit EVP, GSTN
7. Law and Policy related issues of GST Audit PrCommr GST Policy
8. Using capability of data analytic developed by
DGARM for identification of State Taxpayers
for audit
ADG DGARM
9. Suggest measures of capacity building in
services for a focused approach on the audit of
the Services sector
Pr. ADG NACIN
10. To build knowledge on financial accounting and
focused approach towards interpreting business
contract/agreement and understanding of
systems driven business process through SAP,
Oracle, Tally, etc.
Pr. ADG DGI
11. Formation of sub-committees with the
distribution of tasks
ADG Audit
12. Closing Remarks Director GSTC Sect
*As below.
Presentation by the States (Sl. No, 4 of the agenda) State Document
1 Karnataka (presentation on e-audit system) Karnataka
2 Rajasthan Rajasthan
3 Bihar (presentation) Bihar
4. Gujarat Gujarat
5. Maharashtra Maharashtra
6. Uttar Pradesh Uttar Pradesh
7. West Bengal West Bengal
8. Uttarakhand (presentation of a study) Uttrakhand
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9. Puducherry Pondicherry
10. NCT of Delhi Delhi
11. Tamil Nadu Tamil Nadu
8. During the discussions in the meeting it was decided that to explore each topic
of the ToRs in greater detail, sub-committees should be formed for each ToR. The
reports of the sub-committees will be integrated into the final report of the
committee
9. Accordingly, the following sub-Committees were formed. (Annexure 5)
S.
No.
Task Centre State Issues to be
covered
1. (a) To study audit policy and
practices of the Centre and
the States which have already
implemented certain
procedure
(b) To develop model Audit
Manual taking into account
the policies and practices
adopted by Centre and States,
with essential, preferred and
best practices which may be
adopted by the State
administrative suitability.
(c) To broadly outline the
procedural aspects of joint
and thematic audit, if and as
and when they are undertaken
with approval of the Council.
ADG, Audit, Pr.
Commr. GST
Policy Wing.
Pr. Commr,
Meerut
EVP, GSTN
i. Rajasthan
ii. Gujarat
iii. Karnataka
iv. Bihar
v. Maharashtra
vi. West Bengal
vii. Uttar Pradesh
­ A team of
officers to study
the audit policy
and practices of
the Centre and
States that have
already
implemented
certain
procedures.
­ A team of
officers to develop
a model Audit
Manual
documenting audit
policy and
procedures
adopted by Centre
and States.
­ Mechanis
m to be created to
develop a policy
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and procedure to
identify themes
for joint and
thematic audits,
including the
mechanism for its
supervision.
2. Using capability of data analytic
developed by DGARM for
identification of State Taxpayers
for audit
Pr. ADG
DGARM
JS, GSTN
(Representative)
i. NCT Delhi.
ii. West Bengal.
iii. Karnataka
­ DGARM
to evolve and
establish a
permanent
mechanism to
identify risky task
payers.
­ Mechanis
m should allow
the States to add
risk parameters as
per their
knowledge and
experience.
­ Feedback
format to be
developed and
frequency to be
provided.
3. Suggest measures of capacity
building in services for focused
approach on audit of Services
sector
ADG NACIN i. Tamil Nadu
ii. Uttrakhand,
­ Training
Capacity and
frequency of
training to be
identified.
­ Nodal
officers from
States and ZTIs of
NACIN to be
identified for the
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training needs.
­ Specific
service sectors to
be identified and
its training needs
and resources to
be finalised.
- A
Committee of
officers to be
created to prepare
training modules
for specific
identified sectors
in consultation
with the states.
­ Access to
relevant training
modules in iGOT
to be provided to
the States.
­ Faculty for
imparting training
needs to be
identified.
4 To build knowledge on financial
accounting and focused approach
towards interpreting business
contract / agreement and
understanding of systems driven
business process through SAP,
Oracle, Tally etc.
Pr. ADG DGI i. Puducherry ­ Training
Capacity and
frequency of
training to be
identified.
­ Nodal
officers from
States and ZTIs of
NACIN to be
identified for the
training needs.
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­ Specific
service sectors to
be identified and
its training needs
and resources to
be finalised.
- A
Committee of
officers to be
created to prepare
training modules
for specific
identified sectors
in consultation
with the states.
­ Access to
relevant training
modules in iGOT
to be provided to
the States.
­ Faculty for
imparting training
needs to be
identified.
10. The sub-committee of the above item Nos. 1 to 3 of the ToRs was further
divided into three sub-committees (Annexure – 6) as under:-
S.
No.
Task Centre State Issues to be covered
(a) To study audit policy and practices
of the Centre and the States which
have already implemented certain
procedure
Pr. Commr,
Meerut
Rajasthan
Karnataka
Study the audit policy
and practices of the
Centre and States that
have already
implemented certain
procedures and to
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provide a report on the
study.
(b) To develop model Audit Manual
taking into account the policies and
practices adopted by Centre and
States, with essential, preferred and
best practices which may be
adopted by the State administrative
suitability.
ADG, Audit
EVP, GSTN
Gujarat
West Bengal
Bihar
To provide an outline
of developing a model
Audit Manual
documenting audit
policy and procedures
adopted by Centre and
States.
(c) To broadly outline the procedural
aspects of joint and thematic audit,
if and as and when they are
undertaken with approval of the
Council.
Pr. Commr.
GST Policy
Wing.
Maharashtra
Uttar Pradesh
Provide a document
containing mechanism
to be created to develop
a policy and procedure
to identify themes for
joint and thematic
audits, including the
mechanism for its
supervision.
11. The sub-committees were requested to meet amongst themselves to discuss the
tasks and provide their draft reports for circulation to all the members.
12. The Record of Discussions (RoD) of the meeting held on 27/08/2021 was
circulated to all the members. (Annexure 7)
Thereafter, the meetings of Committee and the Sub-Committees were held on
13/09/2021, 06.10.2021, 27/10/2021, 16/11/2021, 11/01/2022, 18/01/2022 and
12.05.2022 to discuss ToR-wise progress made and the status of draft reports of the
respective sub-committees. The Record of Discussions of each meeting was
circulated amongst the Members ((Annexure – 8 to Annexure – 14 respectively).
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13. A meeting of the CoO on GST Audit was held on 27/05/2022 in offline as well
as online mode, to discuss the draft Model All India GST Audit Manual. The
meeting was facilitated by the GST Council Secretariat vide their OM dated
24.05.2022 and held in the Meeting Hall of GST Council Secretariat, New Delhi.
The RoD of the said meeting were circulated amongst the Members (Annexure
15) After wide-ranging discussions and after obtaining inputs from many States,
each of the six Sub-Committees submitted their report on all the six ToRs. The
reports of the respective five sub-committees are annexed hereto. (Annexure 16 to
20 respectively)
Recommendations:-
(i) The sub-committee on Reference No. 1 – “To study audit policy and practices of
the Centre and the States which have already implemented certain procedures”
submitted their report with salient features as below:-
The report of the sub-committee is the compilation of topic-wise practice followed
by the Centre and States in respect of each of the topics mentioned below. The
States are Bihar, Himachal Pradesh, Kerala, Maharashtra, Nagaland, New Delhi,
Punjab, Rajasthan, Tamil Nadu, Uttar Pradesh, Uttarakhand, West Bengal, and
Karnataka.
These topics are as under:-
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i. Identification of the risk parameters considered for selection of cases for
audit / Basis for selection of cases for audit (Including any process of
random selection of cases that may not be strictly covered by risk
parameters)
ii. Scope of audit - whether restricted to only the flagged risk parameters or
all business transactions of the auditee.
iii. Need for audit of all or some of the other related registered persons in the
value chain based on audit findings in selected primary cases. Norms for
such action i.e., whether to have the same audit officer for all cases,
approach for coordination among different audit officers, oversight etc.
iv. Need for audit of other years of the same auditee based on audit findings
in selected cases.
v. Criteria for Authorization of the officers for selection of cases for audit
and the process for final approval of a case for audit i.e., administrative
system of audit in a State including the assignment issuing authority.
vi. Basis/criteria for allocation of cases for audit - cadre, turnover.
vii. Need for fixing numerical targets, both upper and lower limits, on the
number of cases that are to be audited in a year by the State?
viii. Any time limit to be set for completion of audit of various sectors: large,
medium, small etc., (lesser than that mandated by the Act).
ix. Feedback mechanism and its functioning – in selection of cases for audit,
in the process and conduct of audit and in the acceptance of final audit
report.
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x. Post-audit process - Any Committee for review of the audit report and
recommendation for adjudication, who is the adjudicating authority.
xi. Any oversight of post-adjudication proceedings and its mechanism -
follow-up of additional demand created, ascertaining the correctness of
the order for its sustainability, putting up proper defense in appeal, etc.
xii. Any central repository of audit outcomes
xiii. Coordination between State and Central audit officers - in similar cases,
similar businesses, exchange of approaches, findings, outcome in appeals
etc.
xiv. Role of technology in automating audit process – Connecting
electronically every audit procedure seamlessly - the E-audit modules
developed by States, or those in the pipeline, to introduce technology in
the audit process and its interface with the audit officer and the auditee.
The Sub-committee decided to prepare its report in two parts. Part one of the report
is the compilation of topic-wise practice followed by the Centre and States in
respect of each of the topics mentioned above. Thirteen States sent in their
feedback/suggestions and the inputs from CBIC were also examined and compiled.
The States who provided inputs were :- Bihar, Himachal Pradesh, Kerala,
Maharashtra, Nagaland, New Delhi, Punjab, Rajasthan, Tamil Nadu, Uttar Pradesh,
Uttarakhand, West Bengal, and Karnataka.
The issues that are covered in the report may be termed as determinants of Model
GST Audit Policy and Practices. The report broadly covers the common Audit
policy and practices adopted by the Audit jurisdictions across the country. The
systemic approach to GST Audit followed by the State GST administrations,
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prima-facie, differ in varying degrees due to the administrative architecture that
was designed for erstwhile tax administration. Notwithstanding such variations, the
commonalities inherent in their Audit policies and practices are inferred in the
overall context of the GST Act and the Rules and this report is precisely premised
on such ‘inferred commonalities’. The report contains two parts, the first part is a
documentation of the GST Audit practices and the policies of the Centre and the
States that have implemented certain procedures and adopted certain practices. The
second part is the model GST Audit best practices and procedures which are
recommendatory in nature.
The aforesaid recommendations were agreed to by the Committee.
The report of the sub-committee is attached as ANNEXURE 15.
(ii) The sub-committee for item No. 2 was “To develop model Audit Manual,
taking into account the policies and practices adopted by Centre and States, with
essential, preferred and best practices which may be adopted by States as per
administrative suitability” For this purpose, a sub-committee of officers was
constituted to compile existing and desirable audit practices and to draft a model
GST audit manual. The said sub-committee consisted of ADG, Audit
(Headquarters), EVP, GSTN, State Tax officers from West Bengal, Bihar and
Gujarat which was assigned the task to catalogue prevalent practices of audit in the
Central and State Indirect tax administrations and adopt the best practices for GST
Audit across the country. Further, the activity of compiling the Model GST Audit
Manual was allotted to West Bengal Member of the Committee based on
thoroughly studying the Audit manual prepared by Central Government, GST
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Audit Manuals and Standard Operating Procedures prepared by various states like
West Bengal, Punjab, Maharashtra, Karnataka, Bihar, and Uttar Pradesh as well as
the module developed by the GSTN and available to Model 2 states. Extensive
meetings, in which members from the Centre, States, GSTN and GST Council
Secretariat participated were held for detailed discussions and deliberations.
A draft copy of the Model GST Audit Manual was circulated to all the
members inviting their inputs and the draft Model Audit was modified accordingly.
Thereafter, the modified draft of the Model GST Audit Manual was shared once
again for final reading and deliberations with all the Members. After incorporating
the suggestions, the final draft of the Model GST Audit Manual has been prepared
and approved by the CoO. The Manual tries to take into account the differential
structure of GST revenue administration prevailing in different States and the
Centre.
Chapters on Thematic audit, Financial Accounting - Building Knowledge on
Financial Accounting and Recommendations for Model GST Audit Practices &
Procedures have been added to the draft Manual.
The aforesaid draft Model GST Audit Manual 2022 has been agreed to by the
Committee and has been separately submitted for the consideration of GST
Council.
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(iii) The sub-committee for item No. 3 was “To broadly outline the procedural
aspects of joint and thematic audit, if and as and when they are undertaken with the
approval of Council: and it has recommended as under:-
For conducting thematic audit, GST Council may form a co-ordination committee
at all India level which shall choose themes for conducting audit, establishing
Committee of Officers for selecting Tax payers in a state for thematic audit,
coordination among various Audit Authorities for evolving a common minimum
audit plans for a given theme and, thereafter monitoring of actual audit by the field
formations so as to ensure uniformity. The co-ordination committee shall also be
responsible for dissemination of the best practices being followed across Audit
formations.
It is recommended that the co-ordination committee may be constituted with the
following as its members:
● DG (Audit) or any Additional Director General (Audit) as nominated by
him;
● Joint Secretary, GST Council;
● Pr. Commissioner/ Commissioner (GST), GST Policy Wing;
● CEO, GSTN;
● Three Commissioners of SGST, as nominated by the GST Council;
● One CGST (Audit) Commissioner as nominated by the GST Council.
The co-ordination committee shall be responsible for selecting themes for
conducting theme based audit at all India level in a coordinated manner. For
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selecting the Audit themes, the Committee may consider using the following
parameters/ data sources:
● Parameters which emerge from the systematic and methodical risk analysis
conducted by GSTN, DGARM, ADVAIT and the state revenue intelligence
units/economic intelligence units.
● Economic indicators;
● Third party information from Tax authorities and other Regulatory
authorities;
● Sensitive nature of the commodity and / or service;
● Risky sectors in news for frauds for e.g., E-commerce, online gaming,
jewelers etc;
● Sectors directly involved in providing services to a large consumer base,
such as banking, insurance, air and land travel, utilities etc.
The said report also provides for determining local themes based on identified Risk
Parameters. Further for coordination of actual audits it is suggested that the
Coordination Committee may constitute a Committee of Officers for each
State/UT. Furthermore, the Report prescribes role of Audit Field Formations for
conducting such audits and a Standard Operating Procedure has also being laid
down for conducting Theme Based Audit. The Report contains similar suggestions
for conducting Joint Audits by Centre and States.
The aforesaid recommendations were agreed to by the Committee.
The Report of the sub-committee is at ANNEXURE 16
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(iv) The sub-committee for item No. 4 was ‘Using capability of data analytics
developed by DGARM for identification of State taxpayers for audit’
recommended as follows:
a) There is capability and expertise with them to identify the risky taxpayers for
Audit falling in states’ jurisdiction using approved risk parameters. If any
State wants DGARM to select the risky taxpayers list for them, the State
should make a specific request to DGARM. DGARM will identify risky
taxpayers based on approved parameters for them and share the list with the
State along with risk scores and risk parameters.
b) For the States who opt, DGARM may evolve and establish permanent
mechanism to identify risky tax payers falling under their jurisdiction.
c) If any State only wants risk parameters to be shared with them and they do
not want DGARM to identify risky taxpayers for them, DGARM may share
approved risk parameters with them.
d) Risk parameters keep evolving over a period of time with feedback and
detection of newer modus operandi. Further there may be some local risk
factors relevant in their jurisdiction. Thus the States must have the authority
to select its own additional risk parameters developed from their expertise,
experience and knowledge from time to time. However, if any State wants to
select the taxpayers list for audit by using expertise of DGARM, they have
no objection in such matter.
The aforesaid recommendations were agreed to by the Committee.
The report of the sub-committee is at ANNEXURE 17
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(v) The sub-committee on Reference Point No. 5 - ‘To suggest measures of
capacity building in Services for focussed approach on the audit of services sector’
recommended as follows:
The officers of State GST needs to be trained specifically in service sectors which
needs to be identified by the states and NACIN will draw a program to train the
Master Trainers for each state based on the requirements of those states. NACIN
through its Zonal Campus are already conducting bi-monthly training course on
GST Audit & Accounting.
This training program will identify
● The frequency with which the training program needs to be conducted by
NACIN for the master trainers as well as for the other officers.
● Nomination of Nodal officers from States for identification of Training
needs
● Training on specific service sector which has been identified by the
respective State GST (around top 5 services)
● Identification of officers to create proper training modules for identified
specific service sectors.
NACIN in coordination with the State GST will identify the specific service sectors
where there is a need to train the officers for capacity building. It is also suggested
that since there are multiple services being offered by the business entities
therefore there is a need to understand the supply in accordance with the GST law
and procedures. In this regard supply of services needs to understand properly and
various concepts like time of supply, place of supply, mixed vs. Composite supply,
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taxable and exempted supply etc. needs to be focused upon so that the model of the
sector along with the taxability is clear to the officers.
For identification of the specific sectors it is recommended that a Committee at the
zonal level shall be formed with the following as its Members
● ADG NACIN ZTI
● Commissioners of State GST or his representative
This Committee shall decide the sectors that need to be focused upon. Further the
committee shall meet every quarter to review the specific sector areas.
It is also recommended that the industry experts along with the officers may be
involved in the training program to understand the specific sector model. An
institutional mechanism containing selected officers from States and Centre may be
created by NACIN to identify training needs of all the audit officers, identification
and maintain record of resource persons including website resources and
developing periodic training calendar.
The aforesaid recommendations were agreed to by the Committee.
The report of the sub-committee is at ANNEXURE 18.
(vi) The sub-committee on Term of Reference No. 6 - ‘To build knowledge on
financial accounting and focused approach towards interpreting business
contract/agreement and understanding of the system-driven business process
through SAP, Oracle, Tally, etc.’ recommended as follows:
a) For the first time, GST has facilitated coordinated functioning of Central and
State tax administrations. This is an opportunity as well as a challenge. On
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the one hand, the cumulative experience of the state and the central
administration can create a vast knowledge base. On the other hand, it may
accentuate differences in practices and overlap in audit functions.
b) To overcome this issue, better coordination and sharing of information
between the Centre and the States is required.
c) Standardization is the key. Appropriate Standard Operating Procedures need
to be put in place for cross-jurisdictional issues. Frequency of audit,
selection of taxpayers and number of taxpayers to be audited needs to be
decided based on risk parameters.
d) As the actual audit needs to be done by the field staff, the officers and staff
need to be prepared well with the help of proper training and development.
Training of auditors in financial accounting, reading of contracts, use of
accounting software etc. is imperative.
e) Finally, specialized software could be developed to cull out the relevant data
from various business accounting systems so that the process of audit is
made more system oriented.
The aforesaid recommendations were agreed to by the Committee.
The report of the sub-committee is at ANNEXURE 19.
**************
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DRAFT REPORT OF THE
SUB-COMMITTEE (CoO)
on
“GST AUDIT POLICY AND PRACTICES OF THE CENTRE
AND THE STATES THAT HAVE ALREADY IMPLEMENTED
CERTAIN PROCEDURES”
Prepared by
The Department of Commercial Taxes,
Government of Karnataka
Under the guidance of
Smt. SHIKHA.C, IAS
Commissioner of Commercial Taxes
(Karnataka)
19-03-2022
Annexure-I
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With inputs from –
Himachal Bihar
Kerala
Pradesh
Maharashtra
Nagaland
Punjab
New Delhi
Rajasthan
Uttar Pradesh
West Bengal
CBIC
Tamil Nadu
Uttarakhand
Karnataka
2 | D r a f t R e p o r t o f t h e S u b - C o m m i t t e e ( C o O )
P r e p a r e d b y D e p a r t m e n t o f C o m m e r c i a l T a x e s , K a r n a t a k a
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forEWorD
Prior to the introduction of GST from 1st July, 2017, even with the VAT regime
prevalent in the States, there were considerable variations in the laws and
rules providing for taxation on sale of goods and a few services (entertainment
etc.). The thresholds for registration and tax liability, rates of tax, point of levy,
formats of returns and the periodicity of their filing, etc. varied. While a few
States provided for self-assessment with a provision for audit and
reassessment in selected cases, others provided for mandatory assessment by
the Departmental officers. The process and procedures of assessment and
reassessment of taxpayers varied widely to suit the local laws and regulations
as well as the local trade practices which moulded such law and regulations.
Similarly, while in a few States the entire process of registration , return
filing, tax payment, processing of returns filed etc. was digital and automated,
in others it was predominantly paper based and manual. Neither were there
any commonalities in the process and procedures adopted by the different
State tax administrations for assessment or reassessment of taxpayers nor was
there any necessity. Consequently, the need and enabling ecosystem did not
exist for a structured exchange of experience and knowledge gained by the
different States tax administrators in assessment and reassessment or other
areas.
One of the main objectives of GST introduction was to create one common
market in the country by totally removing the wide disparities and compliance
complexities among the States in taxation of goods and services that had led to
not only tax inefficiency but also interfered in investment decisions. GST has
provided a uniform structure in taxation of goods and services throughout the
country. There is total uniformity in taxable event, tax rates, point of levy,
provisions for registration, return filing, tax payment, refunds, audit,
adjudication, appeals etc. GSTN has created the necessary digital backbone to
ensure seamless uniformity in the process and procedures relating to
registration of taxpayers, return filing, tax payment, refunds etc.
Self-assessment/self-compliance is the edifice upon which GST eco-system is
built. Though it provides for audit of taxpayers, it does not make it mandatory
in all the cases. It is well accepted that Audit is a suboptimal solution to
3 | D r a f t R e p o r t o f t h e S u b - C o m m i t t e e ( C o O )
P r e p a r e d b y D e p a r t m e n t o f C o m m e r c i a l T a x e s , K a r n a t a k a
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enforce tax compliance. Unless the processes and procedures of selection of
cases for audit and the consequent proceedings are grounded on sound
principles of neutrality, transparency, accountability and sustainability, and
outcome of audit is analyzed and appreciated, the purpose of audit would not
be served and it would amount to wasteful deployment of limited human
resources. It is imperative that audit should be transformed into an effective
tool to mould corrective policy decisions to create a positive environment for
total compliance. With implementation of GST the States have readily
accepted that uniform taxation policies will create an enabling conducive
environment for trade and industry to flourish with equal opportunities.
Uniform adoption of the tried and tested best practices of audit procedures
and processes by all the States as well as the Centre would enable
consolidation of the outcomes of the individual States and the Central
Authorities and their analysis for any consequential policy decisions, thereby
sub-serve the primary objective of GST and ensure stable revenues to the
States. The sharing of experience and knowledge gained can be efficiently and
gainfully shared among the States and replicated, if the procedures and
processes adopted are uniform. There can be an efficient deployment of
limited human resources by the States in focused and productive activities.
It is precisely for these reasons that the Department of Commercial Taxes,
Government of Karnataka brought out a comprehensive KGST Audit
Manual Version-1 on 01-01-2021. The purpose was to delineate the
principles and policies of audit conducted under the KGST Act, 2017 and the
rules made there under. The guidelines provided in the manual are intended
to enable audit officers to carry out effective audit in a uniform, efficient and
comprehensive manner adopting the best international practices. The Audit
Processes envisaged under the GST regime are ably assisted by technological
tool named “e-Shodhane Audit Module” which complements and
enhances the domain knowledge of the Audit officers. The name EShodhane is comprehensive in its expression conveying the meaning of
verification, examination, investigation, scrutiny and the like. As a fillip to our
efforts to have a robust GST Audit Mechanism and to contribute the
experience that we have gained in the GST regime, constitution of Committee
of Officers (CoO) on GST Audit by the GST Council and inclusion of Karnataka
in the CoO as a member came at an opportune time and was a significant
development in the overall context of GST.
On behalf of Karnataka, I wish to place on record my sincere gratitude to the
GST council for giving the State an opportunity to be part of the Committee
and Sub-committee of Officers constituted “To study audit policy and practices
4 | D r a f t R e p o r t o f t h e S u b - C o m m i t t e e ( C o O )
P r e p a r e d b y D e p a r t m e n t o f C o m m e r c i a l T a x e s , K a r n a t a k a
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of the Centre and the States which have already implemented certain
procedures”. The sub-committee was an offshoot of the Committee of Officers
on Audit constituted by the GST Council on 27.07.2021, which was done after
recognizing the importance of Audit in the GST system. It was found
imperative that an effective audit mechanism comprising of the best practices
and procedures tried and tested by the various indirect tax authorities in the
country needs to be adopted to deter any misuse of the self-assessment feature
and promote total compliance.
My compliments to Shri. Ravi Jesuraj S, Additional Commissioner of
Commercial Taxes, (Audit, Intelligence and Co-ordination) (K) and
his team of officers of this Department for their earnest efforts in preparing
this report. My special thanks to Dr. Amandeep Singh, Additional Director
General, DG Audit Headquarters, CBIC, convener of CoO, who facilitated
online Webex Meetings and for giving his valuable inputs. I hope the best
practices and procedures in GST Audit documented in Part-I and proposed by
way of recommendation in Part-II will determine the GST Audit policy across
GST Audit Jurisdictions in the country.
Ms. Shikha. C IAS.,
Commissioner of Commercial Taxes,
Department of Commercial Taxes,
Government of Karnataka,
Bangalore.
5 | D r a f t R e p o r t o f t h e S u b - C o m m i t t e e ( C o O )
P r e p a r e d b y D e p a r t m e n t o f C o m m e r c i a l T a x e s , K a r n a t a k a
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EXECutiVE summArY
GST, as universally understood, is a trust-based taxation system anchored
strongly on self-compliance/self-assessment by the tax payers. In order to
validate such self- assessments and to correct any non-compliance of/nonadherence to the GST law and rules that adversely impact revenue legitimately
due, whether unintentional or otherwise, an effective audit mechanism
comprising of the best practices and procedures tried and tested by the various
indirect tax authorities in the country needs to be adopted. Such a mechanism
should be moulded on a structured audit process. Needless to emphasize that
GST Audit in principle should be systematic, coherent and comprehensive
primarily premised on identified risk areas, unexplored compliance
verification parameters and eventually educating and empowering the Tax
Payers in voluntary compliance while making the tax authorities more
effective and efficient.
To achieve the above objective, the GST Council re-constituted a Committee of
Officers (CoO) vide File No. 350/Future Initiative/GSTC/2019 Dated: 27-07-
2021 on GST Audit, which held its first meeting on 27-08-2021 on WebEx
platform. It initiated a discussion on the Audit policy and practices adopted by
the various States and the Centre and their administrative suitability for
uniform adoption across the country. In pursuance of the discussion held
thereon, the aforesaid CoO was further split into sub- committees vide Order
Dated: 31-08-2021 and the task of this sub-committee was “To study audit
policy and practices of the Centre and the States which have already
implemented certain procedures”.
The Sub-committee comprised of members from the State of Karnataka and
the Officers from the Central GST and was required to study the audit policy
and practices of the Centre and States that have already implemented certain
procedures adopted certain practices and to provide a report on the study.
In consequence thereof, a meeting of the aforesaid sub-committee was
convened by Dr. Amandeep Singh, Additional Director General, DG Audit
Headquarters, CBIC. In the online meeting held, the officers from Karnataka
had identified certain points/topics that can be dealt with in studying the audit
6 | D r a f t R e p o r t o f t h e S u b - C o m m i t t e e ( C o O )
P r e p a r e d b y D e p a r t m e n t o f C o m m e r c i a l T a x e s , K a r n a t a k a
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policies and practices of the Centre and States that have already implemented
certain procedures and to design the Model GST Audit Policy.
These topics are as under: -
i. Identification of the risk parameters considered for selection of cases for
audit / Basis for selection of cases for audit (including any process of random
selection of cases that may not be strictly covered by identified risk
parameters)
ii. Scope of audit - whether restricted to only the flagged risk parameters or
all business transactions of the auditee.
iii. Need for audit of all or some of the other related registered persons in
the value chain based on audit findings in selected primary cases. Norms for
such action i.e., whether to have the same audit officer for all cases, approach
for co-ordination among different audit officers, oversight etc.
iv. Need for audit of other years of the same auditee based on audit
findings in selected cases.
v. Criteria for authorization of the officers for selection of cases for audit
and the process for final approval of a case for audit i.e., administrative system
of audit in a State including the assignment issuing authority.
vi. Basis/criteria for allocation of cases for audit - cadre, turnover.
vii. Need for fixing numerical targets, both upper and lower limits, on the
number of cases that are to be audited in a year by the State
viii. Any time limit to be set for completion of audit of various sectors: large,
medium, small etc., (lesser than that mandated by the Act).
ix. Feedback mechanism and its functioning – in selection of cases for
audit, in the process and conduct of audit and in the acceptance of final audit
report.
x. Post-audit process - Any Committee for review of the audit report and
recommendation for adjudication and who is the adjudicating authority.
xi. Any oversight of post-adjudication proceedings and its mechanism
follow-up of additional demand created, ascertaining the correctness of the
adjudication order for its sustainability, putting up proper defense in appeal,
etc.
7 | D r a f t R e p o r t o f t h e S u b - C o m m i t t e e ( C o O )
P r e p a r e d b y D e p a r t m e n t o f C o m m e r c i a l T a x e s , K a r n a t a k a
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xii. Any central repository of audit outcomes.
xiii. Co-ordination between State and Central audit officers - in similar
cases, similar businesses, exchange of approaches, findings, outcome in
appeals etc.
xiv. Role of technology in automating audit process – Connecting
electronically every audit procedure seamlessly - the E-audit modules
developed by the States, or those in the pipeline, to introduce technology in
the audit process and its interface with the audit officer and the auditee.
The Sub-committee held several intensive discussions, moderated by Dr.
Amandeep Singh, Additional Director General, DG Audit Headquarters, CBIC,
on the above topics to identify the best practices and procedures of the States
and the Centre that would probably determine model audit policy and
practices and there was a broad agreement on the issues covered. However,
inclusion of point no. 14 namely the Role of technology in automating audit
process was suggested by the Additional Director General, DG Audit,
Headquarters CBIC. The sub-committee concurred with the suggestion of the
learned ADG and it was taken as an additional topic for consideration in this
report.
Further, it was decided unanimously by the members of the subcommittee
that feedback/suggestions from all the State Departments on the aforesaid
topics could be sought so as to understand their audit policy and practices.
Accordingly, a letter dated 12- 10-2021 was emailed to the Commissioners of
all the States and Central GST. Some States have sent in their
feedback/suggestions which are documented in this report.
This document broadly covers the common Audit policy and practices adopted
by the Audit jurisdictions across the country. The systemic approach to GST
Audit followed by the State GST administrations, prima-facie, differ in varying
degrees due to the administrative architecture that was designed for erstwhile
tax administration. Notwithstanding such variations, the commonalities
inherent in their Audit policies and practices are inferred in the overall context
of the GST Act and the Rules and this report is precisely premised on such
‘inferred commonalities’. The issues that are covered in this report may be
termed as determinants of Model GST Audit Policy and Practices.
8 | D r a f t R e p o r t o f t h e S u b - C o m m i t t e e ( C o O )
P r e p a r e d b y D e p a r t m e n t o f C o m m e r c i a l T a x e s , K a r n a t a k a
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The report contains two parts, the first part is a documentation of the GST
Audit practices and the policies of the Centre and the States that have
implemented certain procedures and adopted certain practices. The second
part is the model GST Audit best practices and procedures which are
recommendatory in nature.
I wish to express my grateful thanks to the Learned Commissioner of
Commercial Taxes (K) for her kind guidance and unstinted support. I am
indebted to Dr. Avinash Rajendran Menon IAS Additional Commissioner of
Commercial Taxes (Services Analysis Wing) (Former) for his invaluable inputs
and guidance. I also wish to express my sincere appreciation to my supportive
colleagues Shri. Rajeev S E, Deputy Commissioner of Commercial Taxes, Smt.
Shruthi Chethan, Deputy Commissioner of Commercial Taxes and Dr. Deepthi
Suresh, Commercial Tax Officer (Probationary Officer).
Ravi Jesuraj. S
Additional Commissioner of Commercial Taxes,
(Audit, Intelligence & Co-ordination),
Government of Karnataka,
Bangalore.
9 | D r a f t R e p o r t o f t h e S u b - C o m m i t t e e ( C o O )
P r e p a r e d b y D e p a r t m e n t o f C o m m e r c i a l T a x e s , K a r n a t a k a
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COMMITTEE OF OFFICERS (CoO) ON
GST AUDIT
INITIAL CONSTITUTION:
Committee of Offices (CoO) on GST Audit has been constituted in pursuance
of discussion and decision in the First National GST Conference held on
25.11.2019 to have joint & collaborative efforts for GST Audit; capacity
building for audit and to follow uniform practices for GST Audit in Centre and
State Tax administration
Centre State/UT GSTN GST Council
Sectt.
1. Addl. DG, DG Commissioner of Commercial
Taxes, Karnataka (Shri Srikar
M. S.)-[Convenor]
EVP,
GSTN
Joint Secretary
Audit (Shri Dheeraj Headquarters,
CBIC - [Convenor] Rastogi)
Special Commissioner of State
2. Pr. Commissioner/ Tax, NCT of Delhi (Shri Udit
Commissioner,
GST Policy Wing,
CBIC
Prakash Rai) Director
Special Commissioner, State
Tax, Gujarat (Shri Samir Vakil)
(Ms. Ujjaini Datta)
3. Pr. Commissioner,
Meerut (Shri S.V.
Singh)
Additional Secretary, State Tax,
Bihar (Shri Arun Kumar
Mishra)
Under Secretary
(Shri Rakesh
4. Principal
ADG/ADG, DGGI
Headquarters,
CBIC
Agarwal) Joint Commissioner, State Tax,
Maharashtra
Joshi)
(Shri Prasad
Joint Commissioner, State Tax,
Assam (Shri Gautam Dasgupta) 5. Pr. ADG/ADG,
DG Analytics &
Risk Management Joint Commissioner, State Tax,
West Bengal (Shri Narayan
Chandra Guriya) 6. Pr. ADG/ADG,
NACIN, Faridabad
Joint Commissioner (TRU),
Commercial Tax HQ, Lucknow,
Uttar Pradesh (Shri Sanjay
Kumar Pathak)
Deputy Commissioner, State
Tax, Uttarakhand (Shri Praveen
Gupta)
Deputy Commissioner (ST),
Puducherry (Shri K. Sridhar)
10 | D r a f t R e p o r t o f t h e S u b - C o m m i t t e e ( C o O )
P r e p a r e d b y D e p a r t m e n t o f C o m m e r c i a l T a x e s , K a r n a t a k a
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INITIAL TERMS OF REFERENCE
(TOR):
To prepare a comprehensive All India GST Manual taking into account
procedures & practices in vogue in different States and Centre;
To explore having joint and collective GST Audit by Centre &
State for the taxpayers in many sectors that have all India
presence like Telecom, Airlines, Banking, Railway etc.;
To explore conducting thematic audit by both tax
administration;
Using capability of data analytics developed by DGARM for
identification of State taxpayers for audit;
To suggest measures of capacity building in Services for
focused approach on audit of Services sector; and
To build knowledge on financial accounting and focused approach towards
interpreting business contract/agreement and understanding of system
driven business process through SAP, Oracle, Tally etc.;
11 | D r a f t R e p o r t o f t h e S u b - C o m m i t t e e ( C o O )
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RE-CONSTITUTION:
Centre GSTN GST Council State/UT Sectt.
Joint Secretary
(Shri Dheeraj
Rastogi)
1. Addl. DG, DG Audit 1. Commissioner of Commercial EVP,
Headquarters, CBIC
- [Convenor]
Taxes, Karnataka (Shri Srikar M.
S.)-[Convenor] GSTN
2. Pr. Commissioner/ 2. Commissioner of Commercial
Taxes, Rajasthan (Dr Preetam
B. Yashvant)
Director
(Ms.
Datta)
Commissioner, GST
Policy Wing, CBIC
Ujjaini
3. Pr. Commissioner, 3. Addl Commissioner of Commercial Under Secretary
(Shri Rakesh
Agarwal)
Meerut (Shri S.V.
Singh)
Taxes, Karnataka (Shri. Ravi Jesuraj
S)
4. Principal ADG/ADG, 4. Special Commissioner of State
DGGI Headquarters,
CBIC
Tax, NCT of Delhi (Shri Udit
Prakash Rai)
5. Pr. ADG/ADG, DG 5. Special Commissioner, State Tax,
Analytics & Risk Gujarat (Shri Samir Vakil)
Management 6. Additional Secretary, State Tax,
6. Pr. ADG/ADG, Bihar (Shri Arun Kumar Mishra)
NACIN, Faridabad 7. Joint Commissioner, State Tax,
Maharashtra (Shri Prasad Joshi)
8. Joint Commissioner, State Tax, Tamil
Nadu (Shri C. Palani)
9. Joint Commissioner, State
Tax, West Bengal (Shri
Narayan Chandra Guriya)
10. Joint Commissioner (TRU),
Commercial Tax HQ, Lucknow,
Uttar Pradesh (Shri Sanjay
Kumar Pathak)
11. Deputy Commissioner, State
Tax, Uttarakhand (Shri Praveen
Gupta)
12. Deputy Commissioner (ST),
Puducherry (Shri K. Sridhar)
12 | D r a f t R e p o r t o f t h e S u b - C o m m i t t e e ( C o O )
P r e p a r e d b y D e p a r t m e n t o f C o m m e r c i a l T a x e s , K a r n a t a k a
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MODIFIED TERMS OF REFERENCE
(TOR)
To study audit policy and practices of the centre and the
States which have already implemented certain
procedures
To develop model Audit Manual, taking into account the
policies and practices adopted by Centre and States,
with essential, preferred and best practices which may
be adopted by States as per administrative suitability.
To broadly outline the procedural aspects of joint and
thematic Audit, if and as and when they undertaken with
approval of Council.
Using capability of data analytics developed by DGARM
for identification of State tax payers for Audit.
To suggest messures of capacity building in services for
focussed approach on Audit of services sector.
To build knowledge on financial accounting and
focussed approach towards interpreting business
contract/agreement and understanding of system driven
business process through SAP, Oracle, Tally etc.
13 | D r a f t R e p o r t o f t h e S u b - C o m m i t t e e ( C o O )
P r e p a r e d b y D e p a r t m e n t o f C o m m e r c i a l T a x e s , K a r n a t a k a
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FURTHER RE-CONSTITUTION:
GST Council
Sectt. Centre State/UT GST
N
1.Addl. DG, DG Audit 1. Commissioner of Commercial Taxes, EVP, Joint Secretary
Headquarters, CBIC GSTN
- [Convenor]
Rajasthan (Shri Ravi Jain) – [CoConvenor]
Director
2. Pr. Commissioner/
Commissioner,
GST Policy Wing,
CBIC
Commissioner of Commercial
Taxes, Karnataka (Smt. Shikha C.)
2.
3.
4.
5.
Special Commissioner, State Tax,
Gujarat (Shri Samir Vakil)
Under
Secretary
3. Pr. Commissioner,
Meerut Special Commissioner of State Tax, NCT
of Delhi (Shri Anil Banka)
4. Principal
ADG/ADG, DGGI
Headquarters,
CBIC
Additional Commissioner, State Tax,
Uttarakhand (Shri Amit Gupta)
6. Additional Commissioner of
Commercial Taxes, Karnataka (Shri
Ravi Jesuraj S.)
5. Pr. ADG/ADG,
DG Analytics &
Risk
Management 7. Special Secretary, State Tax, Bihar
(Shri Arun Kumar Mishra)
6. Pr. ADG/ADG,
NACIN, Faridabad Joint Commissioner, State Tax,
Maharashtra (Shri Prasad Joshi)
8.
9. Joint Commissioner, State Tax, Tamil
Nadu (Shri C. Palani)
10. Joint Commissioner, State Tax, West
Bengal (Shri Narayan Chandra Guriya)
11. Joint Commissioner, State Tax, Uttar
Pradesh (Shri Vivek Singh)
12. Deputy Commissioner (ST), Puducherry
(Shri K. Sridhar)
14 | D r a f t R e p o r t o f t h e S u b - C o m m i t t e e ( C o O )
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MEMBERS (STATE):
SL Name of the Members Designation
No.
1
2
Shri. Ravi Jain Commissioner of Commercial
Taxes, Rajasthan
Smt. Shikha C Commissioner of Commercial
Taxes, Karnataka
3 Shri. Samir Vakil
Shri. Anil Banka
Special Commissioner, State Tax,
Gujarat.
4 Special Commissioner, State Tax,
NCT of Delhi.
5 Shri. Amit Gupta
Shri. Ravi Jesuraj S
Shri. Arun Kumar Mishra
Shri. Prasad Joshi
Shri. C Palani
Additional Commissioner, State
Tax, Uttarakhand.
6 Additional Commissioner of
Commercial Taxes, Karnataka
7 Special Secretary State tax, Bihar.
8 Joint Commissioner, State tax,
Maharashtra
9 Joint Commissioner, State tax,
Tamilnadu
10
11
12
Shri. Narayan Chandra Guriya
Shri. Vivek Singh
Shri. K Shridhar
Joint Commissioner, State tax,
West Bengal.
Joint Commissioner, State tax,
Uttar Pradesh.
Deputy Commissioner (ST),
Puducherry
15 | D r a f t R e p o r t o f t h e S u b - C o m m i t t e e ( C o O )
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MEMBERS (CENTRE/GSTC):
SL
No.
Name of the Members
Dr. Amandeep Singh-Convener
Sh. Sanjay Mangal
Designation
1
2
ADG, DG Audit Headquarters,
CBIC.
Pr. Commissioner, GST Policy
Wing CBIC.
3 Sh. Rajiv Jain Pr. Commissioner, Meerut.
4
5
Sh. Sunil Tated Principal ADG/DGGI
Headquarters, CBIC.
Sh. Gurusharan Singh
Sh. Ashutosh Banwal
Sh. Dheeraj Rasdogi
Smt. Ashima Bansal
Sh.Kshitendra Verma
Sh. Karan Choudhary
ADG/DG analytics and Risk
Management
6
7
Pr.ADG, NACIN, Faridabad
EVP, GSTN
8
9
10
Joint Secretary, GST Council
Director GST Council
Under Secretary, GST Council
16 | D r a f t R e p o r t o f t h e S u b - C o m m i t t e e ( C o O )
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FORMATION OF SUB-COMMITTEE:
In pursuance to the formation of Sub-committee is formed vide Order
dated:31-08-2021 and to further facilitate and accelerate the reports, the
following further sub-committee are formed for items numbers 1, 2 and 3 of
the modified Terms of Reference.
Issues
to be
covered
Sl
No. Task Centre State
(a) To study Audit ADG Audit, Karnataka Study Audit policy
and practices of the
Centre and States
which have already
implemented certain
procedures and to
provide a report on
the study.
policy and
practices of
Pr.Commr,
Meerut(S,h.Sunil
the Centre and Jain, Commissioner
States which
have already
implemented
certain
of Customs,
Mumbai-Co-opted).
procedures.
(b) To develop
Model Audit
ADG, Audit
EVP,GSTN,
Gujarat
West Bengal
Bihar
To propose a model
Audit manual
documenting Audit
policy and procedures
adopted by Centre
and State.
Manual taking (Sh.Ravneet Singh
into account
the policies
and practices
adopted by
Centre and
States, with
essential,
Khurana,
Spl.Secretary,
Government of
Punjab - Co-opted).
preferred and
best practices
which may be
adopted by the
State
Administrative
suitability.
(c) To broadly (O.P.Patel, Maharashtra
Uttar Pradesh
Propose a document
outline the containing
procedural
aspects of
joint and
thematic
audit, if and as
when they are
taken with
approval of
the Council
Jt.Commissioner,
GST Policy Wing-Coopted).
mechanism to be
created to develop a
policy and procedure
to identify themes for
joint and thematic
audits, including the
mechanism for its
supervision.
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Compilation of GST Audit best practices and policies of
the Centre and the States that have already
implemented certain procedures.
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Identification of the risk parameters
considered for selection of cases for I Audit/Basis for selection of cases for Audit
(Including any process of random selection of ca
may not be strictly covered by risk paramet
1. Tamil Nadu
A set of risk parameters like registration, nature of commodity, return filing, e
way bill, refund, ITC, payment pattern, external data are considered to identify
the tax payers for the purpose of audit. The data is further classified as follows:
a) High Risk
b) Medium Risk
c) Low Risk
In addition to the above, a random selection of 5% cases which are not part of
any of the above risk categories and 1% of the case from those which are
already audited are also considered.
2. Rajasthan
The following are the main risk parameters which are predominantly
considered by the State for identification of cases for auditA. Taxpayers claiming itc of more than an amount from eligible itc.
B. Taxpayers who have filed all returns and tax adjusted from cash ledger
is less than an amount.
C. Taxpayers who have filed all returns and difference in tax liability in
gstr-1 > gstr-3b by an amount.
D. Composition taxpayers having turnover of more than 1.25 crore.
E. Newly registered taxpayers with high turnover of more than an amount.
F. Taxpayers with (a) multiple use of pan (b) multiple use of email ids (c)
multiple use of mobile nos.
G. Refund amount is greater than an amount.
H.Taxpayer having purchases from registration cancelled taxpayers.
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I. Shipping bill/export proof submitted by taxable person not verified
from Icegate.
J. The taxpayers whose tcs/tds is deducted and are defaulters in filing
their gstr 1 and gstr 3b.
K. Turnover declared in gstr 3b must be comparable with tds/tcs deducted
(it should be more than 100 times than tcs deducted and more than 50
times than tds deducted).
L. Taxable persons dealing in evasion prone commodities/services as per
HSN/SAC code.
M.Taxpayer having tax liabilities of an amount and discharging it 100
percent by using ITC.
N. High spike by n amount in e-way bill value in n months.
O. Ratio of Output Tax paid in cash to the total turnover in the current year
is n percentage point higher to the ratio of the same in the previous year.
P. Ratio of Output Tax paid to Net Profit in the current year is n percentage
point higher to the ratio of the same in the previous year.
Q. Taxpayers whose loss is greater than n amount.
R. Taxable Persons whose turnover is less than n percentage point
turnover from the previous year.
S. Ratio of expenses to turnover in current year is greater than the ratio of
by n than same in the previous year.
T. Audit not done in last n years.
U. The ratio of exempted supply of services or goods to total turnover in
the current year is n percentage point higher when compared to the
ratio of the same in the previous year.
V. Taxpayers filing return late by n months.
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W. Taxpayers against whom the orders u/s 74, 129 & 130 have been passed
in the previous/current year.
X. Taxable persons who have not filed all returns during the year and
whose turnover in the previous year is greater than by an amount.
3. Delhi
A list of risky Tax payers falling within the jurisdiction of Delhi State are being
provided by the Directorate General of Analytics and Risk Management
(DGARM)/BIFA for the audit purpose. Risk score is assigned to the taxpayers
by (DGARM)/BIFA based on certain parameters, such as sales turnover is less
than the purchase turnover, high ratio of zero rated turnover to total turnover,
very high ratio of tax paid through ITC to total tax payable as per GSTR-3B,
decline in average monthly taxable turnover as per GSTR-3B, positive
difference between ITC shown in GSTR-3B and ITC as per GSTR-2A, etc.,
Active taxpayers are being selected from such list for conducting Audit based
on the category within which such taxpayers fall(i.e. large/medium/small) as
well as their risk score.
4. Uttar Pradesh
The following risk parameters are considered for audit:
a. Inward supply from bogus dealers.
b. Zero cash set-off against tax liability.
c. Inward supply received but no outward supply.
d. Difference between GSTR-1 and GSTR-3B.
e. GSTR-1 submitted but GSTR-3B not submitted.
f. Manufactures whose cash set-off is less than 5 percent.
g. GSTR-9 not filed.
h. ITC difference between GSTR-2A and GSTR-3B.
i. Three or more cases booked by mobile squad.
j. Cancelation of E-way bill is more than 2 percent.
Note :- Other than above risk parameters, some dealers of services and
manufactures of sensitive goods are also included by the State.
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5. Kerala
The Risk-based taxpayer’s selection for conducting the audit is done at the
Commissionerate level. The target followed by the State for audit is 30% each
for Large tax payers, Medium Taxpayers and the Small Taxpayers. The balance
will be reckoned from the suggestions or recommendations made by other
wings of the Department. It is the responsibility of the Audit Commissionerate
to prepare an audit schedule for a whole year and review the audit progress in
participation with the taxpayer’s services unit and the audit wing. The audit
plan so designed shall be implemented from April 1st of each year.
6. Nagaland
The State follows certain identified risk parameters for selection of cases for
audit.
7. Himachal Pradesh
The State analyzes normal taxpayers based on return data for 9 months i.e.,
July 2017 to March 2018. Total 4.06 lakhs GSTR 3B returns and unique 63842
normal taxpayers are covered for analyses. It also considers taxpayers other
than normal taxpayer, (Source of data SFTP Server, GST Pro/Prime, BO web
portal and BIFA/GSTINs.). Top 500 out of above normal taxpayers were
shortlisted on different parameters for audit. These parameters are:
A. Segregation of normal taxpayer under State jurisdiction on different
parameters like –
i. Taxpayer’s nature of business (manufacturer, wholesaler, retailer, and
service sectors etc.),
ii. registration status (active/cancel),
iii. registration type (new/migrated),
iv. jurisdiction-wise, zone/district-wise,
v. -revenue to State-wise (contributor / dragger / neutral).
B .Turnover
C. Net contributions
D. BIFA/GSTIN indications
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E. Ratio(s)
F. Refund reports
G. Annual return GSTR9 & 9C
(For details please refer HP GSTAM-2019)
8. Uttarakhand
The selection of tax payers is being done by the State, on the following
parametersEvasion-prone Goods and Services – Iron and Steel, Pan Masala, tobacco,
Plywood, Works Contractor etc
Higher rate of Tax
Output Liability Vs Cash Set Off Ratio
DGARM Data
In addition to the above, Human Intelligence, previous track record of the tax
payers in the VAT regime/Central Excise and Service Tax are also considered.
9. Punjab
For the year 2017-18 parameters as deployed by CBIC as well as that of the
internal SAS tool and GSTN risk score were employed for identification of
cases for audit. For the year 2018-19, the risk parameters as detailed in BIFA
have been proposed to be utilized for the selection of cases for audit. The
outcome of 2017-18 audit cases will also be used as input for selection of cases
for 2018-19.
10. West Bengal
The Commissioner by a general or specific order may select any registered
person for audit of his books of accounts for a specific period. The
Commissioner may fix the criteria of selection based on certain parameters as
he may deem fit.
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Selection based on Return related Risk Parameters: The list of potential highrisk taxpayers may be prepared by selecting one or multiple criteria under
different major risk heads from the available options, viz.: Specific
benchmarks may be fixed against the risk criteria for each of the above major
heads such as:
Only the normal taxpayers under the State/Central jurisdiction, i.e., the
taxpayers who are required to file Form GSTR- 3B and Form GSTR-1, may be
selected by the Commissioner.
Those tax-payers who have filed at least 06 (selection criteria for 2017-18) &
09 (selection criteria for each subsequent year) Form GSTR-3B in the financial
year may be selected.
The taxpayers’ pool may be divided into 3 segments namely Large, Medium &
Small based on turnover in the State, where Large taxpayers will be those
having Turnover in the State> Rs. 100 crores, Medium tax payers will be those
having aggregate Turnover in the State ranging from Rs. 10 crores to Rs. 100
crores and Small taxpayers will be those having Turnover in the State< Rs. 10
crores. This turnover limit while fixing the selection criteria may vary from
State to State, in different Zonal levels of a particular State and also for service
sector when compared to that for goods.
All risk parameters are required to be identified and all probable aspects need
to be considered to identify non-compliance and non-payment / short
payment of tax, interest, late fee, penalty etc and evasion of tax.
To select the tax payers for audit in an effective manner, secondary data source
(such as VAT/Service Tax/Central Excise/Custom data, Income Tax data etc.)
may be considered along with the primary data source (i.e. GST data).
The weightage of each parameter may vary depending upon its importance in
selection of taxpayers for audit.
Based on the average weight considering all the parameters, a final score may
be calculated on the basis of which the final selection may be done.
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The final selection of taxpayers to be audited may be done based on the
descending order of the final score thus calculated. In case, more than one
Registered Taxable Persons has the same final score, the parameter of
declared liability will then be considered and a taxpayer with more declared
liability will be selected first.
A Selection Committee is constituted to identify various risk parameters for
selection for audit considering all the aspects where there are chances of lack
of compliance of the Act resulting in short payment of tax etc.
i. This final score is calculated based on the data for each financial year and
the parameters as well as the weightage adopted will undergo necessary
modifications, if required.
j. In case the Registered Taxable Persons selected for audit have multiple
registrations under the same PAN / TAN in the State, it is suggested that all
such registration numbers may be selected for audit.
k. 10% of the selection of the tax payer is done on random basis.
11. Karnataka
The selection of cases for audit is done on the basis of compliance risks and
risk evaluation method using a specially developed tool named as E-Shodane
online Audit module (electronic Scrutiny of High-risk cases, Audit
Observations & DRC under Assessment module). Cases with at least 2 or more
risk factors are selected for scrutiny. Top 60,000 involved in the business of
evasion-prone commodities with primary risk factors are included under
secondary risks.
Certain representative selection criteria considered for risk assessment are
given below:
R3B<R1 Total Output tax declared in GSTR-1 is more than
5% of that declared in GSTR-3B.
R3B>R2A Total ITC claimed in GSTR-3B is more than 10% of
that declared in GSTR-2A.
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Service Sector Service Sector cases having more than Rs.10 crore
aggregate turnover per year
TRAN-1 Transitional input credit carried forward from
earlier tax regime
Delayed ITC
Evasion
If ITC availed in Form GSTR-3B filed after
23/04/2019 for the FY 2017-18
Top 60,000 Taxpayers dealing in evasion-prone
Prone Comm. commodities
ITC Block Input Tax Credit blocked cases
Old Refund Refund sanctioned by the LGSTOS/SGSTOs under
Manual Refund process (up to 25/09/2019)
Refund sanctioned by the LGSTO/SGSTOs under
Online Refund process (After 26/09/2019)
Cases having inspection/investigation reports.
New Refund
Inspection
Reports
In addition to system identified cases, there is a provision for the field level
officers to identify cases for audit based on local intelligence network, which
also carry risk of revenue leakage.
12. Bihar
The selection of taxpayers for audit is done centrally on the basis of risk
parameters devised centrally by the CCT and other officers
Some parameters include: –
Total tax/turnover,
Throughput of tax,
Percentage discharge by credit,
Credit claim at odds with system generated reports,
Inspection report or adverse information,
Disproportionate use of e-way bills,
Discrepancies in statutory forms,
Evasion prone commodities
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The parameters are customizable for larger and smaller circles VAT Audit in
the State. The selection is generally, 2-3% of taxpaying dealers are selected for
audit (ceiling 10%) by 31st March of following year. Criteria for selection is
notified by the Commissioner and list of dealers is posted on official website of
Department within 15 days of selection along with criteria. Taxpayer objecting
to selection may file objections to Commissioner by the end of May of the
following year. The objections to be dealt with by the Commissioner within
one month. After hearing the taxpayer any consequent changes to the list of
dealers to be made and final list to be posted on website within 15 days of the
order.
13. Maharashtra
The audit parameters are a mix of mismatch thrown by information available
with the Department like GSTR-1, GSTR 3B and GSTR -9/9C and also with a
view to learn new sectors with emphasis on the size of revenue.
14. Centre
Given the large number of registered persons under GST, it is impossible to
subject every registered person to audit each year with the available resources.
Selection of units for audit in a scientific manner is extremely important as it
permits efficient use of audit resources viz. manpower and skills for achieving
effective audit results. The registered persons are selected on the basis of
assessment of the risk to revenue. This process, which is an essential feature of
audit selection, is known as ‘Risk Assessment’. It involves ranking of the
registered persons according to a quantitative indicator of risk known as a ‘risk
parameter’. Risk Assessment Programme jointly run by DG (Audit) &
DGARM. Lists of category– wise taxpayers provided by DGARM. Allocation of
units as per Large, Medium and Small amongst the audit teams. Allot to the
Audit teams 7/8 number of taxpayers out of the 80% list of Taxpayers
provided by DGARM. Allots 10 % Random list of Taxpayers amongst the Audit
Teams. The remaining 20% of the taxpayers to be audited should be selected
by the Audit Commissionerate based on local risk factors, after obtaining
approval from the jurisdictional Chief Commissioner.
A scientific and well deliberated Risk Assessment programme has been
developed in coordination with the Directorate General of Analytics and Risk
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management to identify risky taxpayer. List of most risky taxpayers have been
shared with the Audit Commissionerate to facilitate selection for audit.
Presently 34 risk parameters are being used. The broad heads for calculating
the risk scores are as under: -
1. IGST payment at the time of import is more than the ITC availed
2. Ratio of nil/exempt to total turnover (minus non-GST supplies)
3. Zero rated to total turnover (minus non-GST supplies)
4. Very High Ratio of Tax paid through ITC to total Tax payable
5. Ratio of Non-GST supplies to total turnover
6. Ratio of inward supplies (liable to reverse charge) to total turnover
7. Late filing of returns
8. Stop filers
9. Positive Difference between ITC shown in Table 4A (5) of GSTR-3B and ITC
as per GSTR 2A.
Probable Local Risk Parameters Few examples of local risk parameters that
may be considered during selection of units for audit. The planning section,
Head-quarters of Audit Commissionerate may consider all or some of the
below criteria, depending on available data and resources, and may also use
additional criteria not listed below. The Taxpayer who did not provide or
delayed in providing documents sought by the Audit Team. The Taxpayer was
not previously audited; Length of time since last audit; The size of the
Taxpayer's turnover / net profit; The size of the Taxpayer's loss, if any; The
size of the Taxpayer's refund, if any; The size of change in the Taxpayer's
turnover/net profit from the previous year; The size of the impact detected
mistakes had on the Taxpayer's turnover/ net profit; Taxpayer dealing with
sensitive commodities/supplies.
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Scope of Audit - whether restricted to only
the flagged risk parameters or all business
transactions of the auditee. II
1. Tamil Nadu
In general, the audit covers all business transactions of auditees but a plan to
introduce desk audit only for flagged risk parameter is also in the pipeline.
2. Rajasthan
The scope of the audit is not limited to red flagged risk parameters, it
encompasses all major points which are whether covered under red flagged
risk parameters or not. As the taxpayer might have the possibility of evading
the tax at multifarious levels, so all points related to business sector must be
considered and looked into in depth. Sometimes, the sensitive points become
noticeable after the detailed examination of the books of accounts and record
pertaining to the business unit and hence, it becomes vital to perceive the
things in detail.
3. Delhi
When the audit of any taxpayers has been taken up, which has been selected
on the basis of parameter as stated at point No. 1 above, then all business
transactions of such taxpayers for the particular financial year for which audit
is being conducted are covered in such audit.
4. Uttar Pradesh
It includes all business transactions of the auditee.
5. Kerala
The audit may not be restricted only to the extent of flagged risk parameters.
An efficient and effective audit system in all aspects based on a checklist will
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increase voluntary compliance and facilitate the tax administrations aim of
getting the right tax at the right time.
6. Nagaland
The State is of the opinion that the scope of audit may not be restricted only to
flagged issues.
7. Himachal Pradesh
All business transactions of the auditee are covered under GST audit.
8. Uttarakhand
When once the firm is selected for audit then complete audit as per the
definition given in Section 2 is done rather than on flagged risk parameters.
9. Punjab
The scope of Audit is defined by the definition of 'Audit' u/s 2 of the GST Act,
and is primarily focused on verification of the correctness of turnover
declared, tax paid, refund claimed and input tax credit availed and to access
the compliances of the tax payer with the provisions of these Acts or the rules
made there under.
10. West Bengal
As per the audit manual, audit team is required to study various areas to
examine the compliance of the selected auditee apart from the criteria of
selection. Audit is defined in sub-sec 13 of sec 2 of the CGST/WBGST Act, 2017
as “detailed examination of records, returns and other documents maintained
or furnished by the taxable person under this Act or Rules made thereunder or
under any other law for the time being in force to verify, inter alia, the
correctness of turnover declared, taxes paid, refund claimed and input tax
credit availed, and to assess his compliance with the provisions of this Act or
rules made thereunder”.
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11. Karnataka
When, once a case is selected for audit, its scope is not restricted only to the
flagged risk parameters, but will cover all the transactions of the auditee.
12. Maharashtra
Based on the risk methodology, a list of cases will be communicated to the
Nodal /Local Tax Unit audit Officer (i.e. L.T.U), for the purpose of conducting
audit for the audit year. The list will contain the names of the registered
persons and the risk indicator along with the action points for decision
support so that the Audit officer is aware of the area to focus while conducting
audit. Nodal / LARGE TAXPAYER’S UNIT officer with the recommendation of
concerned Joint Commissioner may propose cases to be audited based on local
risk parameter and the cases be conveyed to the Committee comprising Addl.
CSTs headed by the Special CST and it is ensured by them that 20% of the
taxpayers to be audited are selected based on local risk.
13. Bihar
Selection of taxpayers for audit is done centrally on the basis of risk
parameters devised centrally by the CCT and other officers. The parameters
are customizable for larger and smaller circles.
14. Centre
The scope of audit is determined in the Desk Review conducted by each audit
officer and it includes the flagged risk parameters and all business
transactions of the auditee. In the Desk review - emphasis is on gathering data
about the registered person, his operations, business practices and an
understanding of the potential audit issues, understanding his financial and
accounting system, studying the flow of materials, cash and documentation
and run tests to evaluate the vulnerable areas. The idea is to gather as much
relevant information about the registered person and its operations, as is
possible, before visiting the unit. It culminates in development of a logical
audit plan and focus on potential issues.
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Need for audit of all or some of the other related
registered persons in the value chain based on audit
findings in selected primary cases. Norms for such
action i.e., whether to have the same audit officer for all
cases, approach for coordination among different audit
officers, oversight etc.
III
1. Tamil Nadu
Considering the man-power constraint, the State is of the opinion that, it is not
feasible to take up all the taxpayers in the chain for Audit. However, some of
the cases may be considered based on the inputs from the audit team. It is
also not mandatory to have the same audit officer.
At present, no specific procedures are being followed for the approach of
coordination among different audit officers, oversight etc.
2. Rajasthan
The other registered persons in the value chain may also be taken for audit.
Further, if there are one or two officers posted in the same zone, then audit is
conducted by the same officer but if cases are of different zones & regions,
then obviously it is conducted by other officers. The Additional Commissioner
or Deputy Commissioner of Audit of respective Zone are required to
coordinate with each other.
3. Delhi
At present, the audit is being conducted for the selected taxpayers. Based on
the audit report/findings, audit of other registered persons in the value chain,
is taken only if it is required.
4. Uttar Pradesh
No other registered person in the value chain is taken up for audit.
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5. Kerala
If the audit teams find that the other registered persons in the value chain also
need to be taken up for an audit, the team may take up the cases under its
jurisdiction with the concurrence of the Audit Commissionerate. Where such
other registered person is not falling under the jurisdiction of the audit team it
may be reported to the Audit Commissioner to take up the issue with the
concerned audit team who have jurisdiction over the area.
6. Nagaland
Some of such Registered Taxable Persons in the value chain are taken up for
audit. Norms for such action (whether to have the some audit officer for all
cases, approach of coordination among different audit officers, oversight etc.,)
has not been put in a place yet.
7. Himachal Pradesh
Commissioner or any officer authorized by him, may undertake audit of such
registered person for such period, at such frequency and in such manner as
may be prescribed.
8. Uttarakhand
Not all but some registered persons are definitely taken up for audit, if there
are serious flaws in the returns and normally the same audit officer is assigned
for the audit of that firm/registered person.
9. Punjab
The extant audit manual as well as instructions empower the Commissioner of
the State Tax to take up any registered person for audit other than those
selected on the basis of the defined risk parameters.
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10. West Bengal
There is no such suggestion so far in the audit selection committee to select all
the taxpayers in the value chain for audit. Rather, it is suggested that audit
team may refer a case to any investigation agency, if more numbers of
taxpayers are associated in a value chain where any less payment/nonpayment of taxes is identified.
11. Karnataka
Currently, there is no fixed policy on this issue and decision is taken on case to
case to basis.
12. Maharashtra
The modalities are yet to be designed.
13. Bihar
The modalities are yet to be designed.
14. Centre
Audit of taxpayers selected on risk basis is conducted within the jurisdiction of
the Audit Commissionerate. In case any other taxpayer of the same chain is
noticed, then information is shared with the respective jurisdictional Audit
Commissionerate. At present there is no system of coordinated audit of all
taxpayers in the value chain.
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IV Need for audit of other years of the same auditee
based on audit findings in selected cases.
1. Tamil Nadu
If any inspection of the selected Registered Taxable Persons is conducted for
the periods covered in the limitation period, audit shall be excluded for the
entire period of inspection. Audit will be generally taken for whole of
completed financial year unless, it is specially mentioned to cover part of any
financial period. In certain desk audit cases, where audit will be taken only for
one financial year and if any defect is detected then it will be proceeded for
further previous year.
2. Rajasthan
Based on the audit findings, the Audit of other years of the same auditee can
be taken up for audit. In case of the rate of tax disputes, other legal issues or
large amount of revenue is involved, then audit is taken for the audit of the
same auditee for the different financial years also.
3. Delhi
Currently, the audit of the selected taxpayers for the particular financial year/s
are being conducted. Based on the audit reports / findings, audit for other
financial years is also undertaken if required.
4. Uttar Pradesh
On the finding of audit, audit of other years of the same auditee can be taken
up with the permission of Commissioner.
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5. Kerala
The Audit need not be restricted to a particular financial year. If a tax payer is
selected for audit, a complete audit by clubbing more than 1 financial year is to
be done. The Audit Commissionerate shall prepare the target parameters per
year. The time limit to complete each audit shall be in line with the audit
duration as specified in para 2.6.1 of the GST Audit Manual prepared by the
CBIC.
6. Nagaland
Depending on the audit findings, audit of other years of the same auditee may
be considered for audit.
7. Himachal Pradesh
The period to be covered under audit is prescribed in Rule 101 (1) of the HP
Goods and Service Tax Rules, 2017 as a financial year, or part thereof or
multiples thereof to cover the retrospective period up to the previous audit or
the limitation period specified in the Act.
8. Uttarakhand
If the findings are found to be risk for the revenue, the audit proceedings are
initiated for the other financial years also.
9. Punjab
The final approval for the selection of the case for audit is given by the
Commissioner of State Tax. As far as the audit objections raised, the final
authority is the Deputy Commissioner of the State Tax of Division to which the
auditee pertains. Further, any un-reconciled objection that could not be
finalized during MCM on account of any reason is to be taken up with higher
authority.
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10. West Bengal
If an officer comes across any specific information relating to a Registered
Taxable Persons and has specific reasons to believe that Audit of the said
Registered Taxable Persons books of accounts is required to be done for one or
more financial years, or, if any audit officer in the course of audit has specific
reasons to believe that an observation made upon audit will have revenue
impacts in other periods also, he may send a proposal in this regard to the
Commissioner. Similarly, an audit officer or his/her higher authority can
propose for any taxpayer to be selected by the Commissioner for audit upon
mentioning adequate reasons. The Commissioner upon consideration of all
such proposals may select some/all of such Registered Taxable Persons for
audit. GSTN has developed a module to facilitate such proposals for suo-motto
selection of any taxpayer for audit from the L3/L2/L1 level.
11. Karnataka
Currently, audit is restricted only to the financial years 2017-18 and 2018-19.
12. Maharashtra
The modalities are yet to be designed.
13. Bihar
The modalities are yet to be designed.
14. Centre
The period to be covered under audit is prescribed in Rule 101 (1) of The
Central Goods and Service Tax Rules, 2017 as financial year, or part thereof or
multiples thereof to cover the retrospective period up to the previous audit or
the limitation period specified in Section 73 or 74 of the CGST Act, 2017.
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Criteria for Authorization of the officers for
selection of cases for audit and the process for
V final approval of a case for audit i.e.,
administrative system of audit in a State
including the assignment issuing authority.
1. Tamil Nadu
Inputs may be received through various sources; however, final selection of list
and its approval is done only by the Commissioner of Commercial Taxes.
Team of officers headed by the Additional Commissioner (Int) takes care of
the process before final approval by the Commissioner of Commercial Taxes.
2. Rajasthan
The major part of selection of the cases should be based on risk parameters
decided and it must be on online basis. It must be done through the module
developed so that transparency is ensured in selection process of audit cases.
There may be a provision to include some cases through the feedback of the
field officers. It must also be seen that selection of the cases is based on sectorwise basis depending upon the market trend of that particular
commodity/sector. Online selection should be based on maximum risk
parameters given. In the process, we can have turnover-wise slab system so
that all type of taxpayers from smallest to largest turnover could be examined
and the basic motto of audit to ensure timely compliance of the law and
procedure is fulfilled and no one is left behind from the ambit of audit.
3. Delhi
Audit cases are being currently selected based on the reports/lists provided by
DGARM/BIFA, based on their scale of business and their risk score and the
same are allocated to the officers of the Department with the approval of the
Commissioner, State taxes in terms of the provisions of the Sec-65 of the
DGST Act, 2017/ CGST Act, 2017.
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4. Uttar Pradesh
Commissioner is authorized to select cases for audit. On the basis of selected
parameters, a committee headed by Additional Commissioner (Law) at the
headquarters, selects the dealers for tax Audit and finally approved by the
Commissioner. The Joint commissioner (Tax Audit) at zonal level will create a
local committee headed by himself and zonal committee headed by the Zonal
Additional Commissioner of respective zone.
5. Kerala
The Audit Head Quarters will have a Joint Commissioner (Audit) who
prepares the audit calendar and convene the Audit Monitoring Committee
meetings wherein, the Additional Commissioner (Audit) will chair. The
Committee resolves problems in the implementation of the audit system. The
Audit Monitoring Committee reviews the audit reports, finalizes the report
and recommend it to the adjudicating authority.
6. Nagaland
The State is considering to authorize officers as per back office module
developed for model 2 State for selection, approval and assignment of cases
for audit.
7. Himachal Pradesh
The Commissioner or any officer authorized by him, may undertake audit of
such registered person for such period, at such frequency and in such manner
as may be prescribed.
8. Uttarakhand
Selection is done by Audit wing which is headed by the Additional
Commissioner (Audit) and final approval is done by the Commissioner.
9. Punjab
For the year 2017-18, looking at the administrative structure and the allocated
manpower, taxpayers with turnover less than Rs. 50 crores have been assigned
to the State Tax Officer as audit team leader and those with turnover greater
than Rs. 50 crores have been assigned to the Assistant Commissioner of State
Tax as audit team leader.
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10. West Bengal
A committee is formed for deciding the criteria of selection of registered
taxpayers for audit for the period from 1.7.2017 to 31.3.2018 and 1.4.2018 to
31.3.2019 with prior approval of the CCT/WB. The committee is formed
comprising of following officers:
a. The Special Commissioner -1,
b. Special Commissioner (Audit Vertical),
c. Additional Commissioner ((Audit Vertical),
d. Additional Commissioners from Circles,
e. Additional and Senior Joint and Joint Commissioner of Information
System Division,
f. Senior Joint Commissioners of Charges,
g. Joint Commissioner of GST Policy Planning Unit.
Allotment of selected Registered Taxable Persons – As per provisions of sec
65(1) read with rule 101(1), any officer who is authorized by the Commissioner
has the power to audit. If the HQ feels that audit for a particular taxpayer need
not to be carried out, the case can be dropped. In order to drop an audit case,
proper and adequate reasons are required to be given along with uploading of
any document in support of such reasons for dropping the same. Dropping of
an audit case cannot be done after the commencement of Audit. After the audit
selection, the list of selected Registered Taxable Persons may be made
available before the jurisdictional proper officers through the functional
hierarchy. GSTN has developed the module for assignment of auditees to
Audit Officers.
Allocation of Taxpayer of Zonal Audit Head - The selected cases are required
to be allocated to the Zonal level audit head (L2). The system provides facility
to the Commissioner i.e. the HQ level (L1) to allocate Taxpayers of a particular
Zone to that Zonal level Head (L2). The Commissioner is empowered as the
head of the ISD to function as L1 in the system.
In case of already allocated Taxpayer(s), if the HQ officer wants to modify the
Zonal officer, he/she may do so after recording reasons for such change.
Assignment & Team formation for audit:
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11. Karnataka
On scrutiny of selected cases allotted to them electronically by the Audit
Module, the Audit Officers are required to seek further authorization for audit
from the Commissioner routing their request through their Divisional Joint
Commissioner and the Additional Commissioner (Audit).
12. Maharashtra
Draft parameters are drawn up by the Audit Parameters Selection Committee
and presented to the Committee of ACSTs headed by the Special CST for
finalizing the identified tax-payers for GST Audit with the final approval of
CST. The cases will be distributed by EIU with reference to the risk
parameters. Allotment of selected cases to the Jurisdictional Nodal / Large
taxpayers unit Audit officer (i.e., Audit officer).
13. Bihar
The Criteria for selection is notified by the Commissioner.
14. Centre
There are 48 Audit Commissionerate’s - Each Audit Commissionerate is
headed by Principal Commissioner / Commissioner – two Additional / Joint
Commissioners, 20 AC/DCs, 80 Superintendents and 100 Inspectors.
Administrative Structure – Headquarters – Planning and coordination
section, Risk management and quality assurance section, Personnel,
Administration and Vigilance section and Technical / Legal and follow up
section. Audit Circles – Geographically attached to each Executive
Commissionerate. The authorization for conducting an audit is given by the
Pr. Commissioner / Commissioner.
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VI Basis/criteria for allocation of cases for
Audit - cadre, turnover.
1. Tamil Nadu
No specific procedure followed.
2. Rajasthan
The allocation of cases is predominantly based on the administrative system
where each officer in the State is authorized to assess for a particular
pecuniary limit of a case based on the turnover of the tax payer. The same is
applied to Audit allocation system and accordingly, the cases are allotted to
the officer in the field. Start Risk Assessment of tax payers and calculation of
risk Score engine Selects the units for audit (selection criteria based on risk
parameters of that year). Allocate Audit task lists to Commissionerate based
on CDR Mapping, Allocate Audit task lists to Circles based on CDR Mapping,
Allocate Audit task lists to Groups based on CDR mapping Select a unit from
list for audit (Audit case created in system Send intimation to unit (GST ADT01), Start Audit Activity (i) Prepare working Papers (ii) Desk Review (iii)
Calculation of financial ratio Send intimation to unit on audit findings GST
ADT-01A, Update units reply/consent/objection to findings (GST ADT -1B),
Update draft audit report in form of paras created for each finding objection
record status of each Para(On spot accepted/not accepted), Update final audit
report after MCM Record status of each para with remarks comments Para
close Case referred for issuance of Show Cause Notice.
The selection and allocation of cases must carry a message that no one is out of
ambit of audit and anyone can be audited at any point of time along with it
must be focused that everyone comply the procedure defined in Act.
In Rajasthan State, we have prescribed pecuniary power to the officer which is
based on turnover of the tax payer.
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3. Delhi
Audit cases are being currently selected based on the reports/lists provided by
DGARM/BIFA, based on their scale of business and their risk score and the
same are allocated to the officers of the Department with the approval of the
Commissioner, State taxes in terms of the provisions of the Sec-65 of the
DGST Act, 2017/ CGST Act, 2017.
4. Uttar Pradesh
The allocation of cases for audit is based on turnover. 1200 Dealers for 2017-
18 and 1200 Dealers for 2018-19 selected for whole of the State. Each Zone is
assigned 60 dealers for each financial year.
5. Kerala
The Audit Head Quarters will have a Joint Commissioner (Audit) who will
prepare the audit calendar and convene the audit monitoring committee
meetings, wherein, the Additional Commissioner (Audit) will chair. The
committee resolves problems in the implementation of the audit system. The
Audit Monitoring Committee in its meetings reviews the audit reports, finalize
the report and recommends it to the adjudicating authority.
6. Nagaland
The State is yet to work out the details. However, the cases are allotted to the
officers on the basis of the turnover.
7. Himachal Pradesh
No specific procedure followed for the same.
8. Uttarakhand
Since there are twelve teams of Audit in Uttarakhand and each team is headed
by Deputy Commissioner. Therefore, there is no basis for allocation of cases
Officer-wise.
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9. Punjab
Although no target has been fixed for the year 2017-18. It is understood that
all the assigned cases (450) for the said year are to be completed by 31st March
2022.
10. West Bengal
No such procedure is followed in regard to allotment of Registered Taxable
Persons for Audit on the basis of turnover. Similarly, cases for Audit are also
not allotted based on the designation.
11. Karnataka
Selected cases for audit are allotted to the officers based on the turnover, risk
score and cadre. Cases involving high risk score with higher turnovers are
allotted to the Deputy Commissioners and other cases are allotted to the
Assistant Commissioners and Commercial Tax Officers.
12. Maharashtra
The audit parameter selection committee will draw up draft parameters and
present it to the Committee of Additional Commissioners of Sales Tax (ACSTs)
headed by the Special Commissioner of Sales Tax (CST) for finalizing the
identified tax-payers for GST Audit with the final approval of CST.
13. Bihar
No specific criteria is devised. However, the Commissioner will notify the
criteria.
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14. Centre
The taxpayers are classified into three segments, Large/Medium/Small based
on the total turnover. The Audit Commissionerates are also divided into three
Categories, I II and III based on the taxpayer’s spread across various
segments. By and large, the categorization is uniform across the Audit
Commissionerates subject to the availability of more risky taxpayers in a
particular category which is as underi) Large - taxpayers with turnover more than Rs. 40 Crore for category 1
Commissionerates, Rs. 30 Crores for category 2 Commissionerates and Rs. 20
crores for category 3 Commissionerates.
ii) Medium – taxpayers with turnover Rs.10 Crores to 40 Crores for
category 1 Commissionerates, Rs. 7.5 Crores to Rs. 30 Crores for category 2
Commissionerates and Rs. 5 Crores to Rs.20 crores for category 3
Commissionerates.
iii) Small – taxpayers with turnover below Rs. 10 Crores for category 1
Commissionerates, below Rs. 7.5 Crores for category 2 Commissionerates and
below Rs. 5 Crores for category 3 Commissionerates.
The turnover includes total taxable, exempt and zero rated clearances of goods
and services but excludes non-GST supplies during a financial year. The said
list contains only those taxpayers who are under Centre’s administration.
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Need for fixing numerical targets, both
upper and lower limits, on the number of
cases that are to be audited in a year by the
State.
VII
1. Tamil Nadu
There is a plan to fix the same in future.
2. Rajasthan
No such practice is in place. However, there is a proposal to bring in some sort
of mechanism to have a fixed number of disposals for the officers.
3. Delhi
No such target is being fixed currently and audit of the most risky taxpayers
with significant business volume are being undertaken.
4. Uttar Pradesh
The allocation of cases for audit is based on turnover. 1200 tax payers for
2017-18 and 1200 tax payers for 2018-19 are selected for audit and accordingly
each Zone is assigned 60 tax payers for each of the aforesaid financial years.
5. Kerala
No such practice is being followed.
6. Nagaland
Fixing numerical targets for audit in a year are being considered.
7. Himachal Pradesh
No such target is being fixed currently and audit of the most risky taxpayers
are being undertaken.
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8. Uttarakhand
Since the audit assignment has been taken up recently, no such numerical
targets are fixed. However, an audit team generally conducts about three to
four audits in a period of two months.
9. Punjab
No such practice is being followed.
10. West Bengal
No such target has been fixed. In the first phase the Commissioner has
selected 759 numbers of Registered Taxable Persons fixing numbers of files 2
to 4 per officer which will be completed within 3 months. From the experience
of this first phase, the next lot will be selected for this period from 1st July,
2017 to 31.3.2018.
11. Karnataka
Currently, there is no strict numerical targets for fixed cases to be audited in a
financial year. However, Audit Officers, on an average are required to conduct
audit in 45 to 50 cases in a year.
12. Maharashtra
No such target is being fixed currently in the State
13. Bihar
No such target is being fixed currently in the State.
14. Centre
The total number of taxpayers to be audited by each Audit Commissionerate is
worked out in advance based on their capacity to audit. It is worked out on the
basis of the Working Strength of each Audit Commissionerate and on the basis
that it takes 07, 05 and 03 days working days to audit a Large, Medium and
Small taxpayer respectively.
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Any time limit to be set for completion of
VIII audit of various sectors:
large, medium, small etc., (lesser than that
mandated by the Act).
1. Tamil Nadu
The indicative duration for conduct of Audit is inclusive of Preparation of
audit plan based on the reports/data/records available in the Department,
verification of records which are submitted by the tax payer against GST ADT01 and discussion with the tax payer for finalizing audit Para, wherever
necessary, for each category would be as under:
Large taxpayers – 10 to 15 working days
Medium taxpayers – 8 to 12 working days
Small taxpayers – 5 to 10 working days.
2. Rajasthan
The State Department follows the mandate contained in Sec 65(4) of the RGST
Act 2017, in regard to the time line for completion of audit.
3. Delhi
Audit is mandated to be conducted in terms of the provisions of Sec-65 of the
DGST Act, 2017/CGST Act, 2017.
4. Uttar Pradesh
Time line has been prescribed for audit as per the provisions of the Act.
5. Kerala
No time limit is fixed for completion of the audit. However, the time limit
mandated by the Act is being followed.
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6. Nagaland
No such time limit is fixed.
7. Himachal Pradesh
The HP GST Audit Manual contains the details pertaining to duration of audit.
It is mentioned that efforts should be made to complete each audit within the
following general time limits: -
The indicative duration for conduct of Audit that is inclusive of desk review,
preparation and approval of audit plan, actual audit and preparation of audit
report wherever necessary, for each category would be as under:
i. Large taxpayers – 6 to 8 working days
ii. Medium taxpayers – 4 to 6 working days.
iii. Small taxpayers – 2 to 4 working days
The above mentioned working days are indicative and applicable for conduct
of audit covering one year period. In case the audit coverage is for five years,
the number of days may be increased to maximum of 16/12/8 days for Large,
Medium and Small taxpayers respectively. In other words the number of days
for conduct of audit may be increased proportionately, with an increase of 25%
of working days for every additional year of coverage.
The duration, as above, covers the effective number of working days spent by
the audit group for the audit of a particular registered person from desk review
to preparation of audit report (i.e. days spent in office as well as at the
premises of the registered person). In exceptional cases, the aforesaid period
may be extended with the approval of Audit Commissioner. Further, in
accordance with the requirements of the audit of a particular registered person
such duration can suitably be reduced with the express, prior concurrence of
the Additional/Joint Commissioner, provided the verification as per the audit
plan has been completed in the prescribed manner.
8. Uttarakhand
It is prescribed in the Manual but it is not given effect to in practice.
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9. Punjab
In addition to the timelines mandated by the Act, timeline of 55 days has been
delineated through the administrative instructions for conclusion of audit. The
said timeline defines the stage-wise time allocation.
10. West Bengal
No time line is prescribed but the time limit mandated under the Act is
followed.
11. Karnataka
Under the Team Audit concept, time limit for completion of Audit is 7 to 8
working days in Large turnover cases, 3 to 4 working days in Medium turnover
cases and 2 to 3 working days in Low turnover cases is prescribed. However,
Divisional Joint Commissioners are empowered to fix time limit for
completion of Audit depending upon the nature and complexity of the case
and availability of Human Resources.
12. Maharashtra
The indicative duration for conduct of Audit that is inclusive of desk review,
preparation and approval of audit plan, actual audit and preparation of audit
report wherever necessary, for each category would be as under:
I. Large taxpayers – 15 working days
II. Medium taxpayers – 8 working days.
III. Small taxpayers – 5 working days
The above mentioned working days are indicative and applicable for conduct
of GST audit covering a period of one year. The duration, as above, covers the
effective number of working days spent by the audit group for the audit of a
particular registered person from desk review to preparation of audit report
(i.e. days spent in office as well as at the premises of the registered person). In
exceptional cases, the aforesaid period may be extended with the approval of
immediate Supervisory Authority.
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13. Bihar
The timeline mandated under the Act is being followed.
14.Centre
The GST Audit Manual contains the details pertaining to duration of audit. It
is mentioned that efforts should be made to complete each audit within the
following general time limits:-
The indicative duration for conduct of Audit that is inclusive of desk review,
preparation and approval of audit plan, actual audit and preparation of audit
report wherever necessary, for each category would be as under:
1. Large taxpayers – 6 to 8 working days.
2. Medium taxpayers – 4 to 6 working days.
3. Small taxpayers – 2 to 4 working days (including audit of the
Deductors, who fall under the provisions of Section 51 of CGST Act,
2017 {who pay TDS} and operators who collect tax at source as per
provisions of Section 52 of CGST Act, 2017).
The above-mentioned working days are indicative and applicable for conduct
of GST audit covering one year period. In case the audit coverage is for five
years, the number of days may be increased to maximum of 16/12/8 days for
Large, Medium and Small taxpayers respectively. In other words the number
of days for conduct of audit may be increased proportionately, with an
increase of 25% of working days for every additional year of coverage.
The duration, as above, covers the effective number of working days spent by
the audit group for the audit of a particular registered person from desk review
to preparation of audit report (i.e., days spent in office as well as at the
premises of the registered person). In exceptional cases, the aforesaid period
may be extended with the approval of the Deputy/Assistant Commissioner of
the Circle. Further, in accordance with the requirements of the audit of a
particular registered person such duration can suitably be reduced with the
express, prior concurrence of the Additional/Joint Commissioner, provided
the verification as per the audit plan has been completed in the prescribed
manner.
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Feedback mechanism and its functioning – in
selection of cases for audit, in the process and
conduct of audit and in the acceptance of final
audit report.
IX
1. Tamil Nadu
It is in the pipeline.
2. Rajasthan
It is always essential for the successful & smooth functioning of a system, that
it is based on feedback. Similarly, here, periodic meetings of the field officers
in various zones are essential to express their hurdles and impediments and
experiences. Head quarter will receive the feedback and after deliberating over
the issues expressed by the office of various Zones, will circulate and transmit
it to all zones so that a broader outlook is developed and everyone is
benefitted.
3. Delhi
As already stated above, DGARM provides lists of risky taxpayers based on
certain risk parameters through online portal. There is also a feedback
mechanism available on the DGARM online loop through which demand
created consequent upon such audit is to be intimated to DGARM.
4. Uttar Pradesh
The State is in the process of devising a feedback mechanism
5. Kerala
No such practice is in existence.
6. Nagaland
The State would prefer to have a feedback mechanism on entire functioning
and processes of the Audit system for addressing any deficiencies and taking
timely reminder measures and actions.
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7. Himachal Pradesh
No such mechanism is prescribed.
8. Uttarakhand
The audit findings are placed in the monthly Monitoring Committee Meeting
(MCM) which is headed by the Commissioner and the final approval is given
by the Committee.
9. Punjab
The audit objections are shared with the auditee through FAR and those which
are not accepted by the auditee are then taken up for the purpose of issuance
of SCN and adjudication. The same is carried out by the concerned audit team.
10. West Bengal
Feedback mechanism is system based developed by GSTN.
11. Karnataka
The Divisional Joint Commissioners conducts meetings on a regular basis to
discuss the Audit findings and their legal sustainability.
12. Maharashtra
Feedback mechanism is yet to be developed.
13. Bihar
Feedback mechanism is yet to be devised.
14. Centre
As mentioned earlier DGARM shares the lists of risky taxpayers based on
certain risk parameters through online portal. There is also a feedback
mechanism available on the DGARM online portal and currently the Audit
Commissionerates are being sensitized to provide the feedback.
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Post-audit process - Any Committee for
review of the audit report and
recommendation for adjudication and who
is the adjudicating authority.
X
1. Tamil Nadu
The territorial proper officer of the concerned auditee is the adjudicating
authority.
2. Rajasthan
After completion of audit, the final audit report is placed before the
monitoring committee. The committee will have the final verdict on each para
made by the auditor. After that, the report with approved paras will be
recommended for adjudication. The adjudicating officer can be the audit
officer or report may be sent to regular assessing authority for adjudication.
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3. Delhi
Audit reports and demand in Form ADT-02 are sent to the jurisdictional
proper officer for adjudication and for taking further necessary action in the
matter,
including for defending the matter in appeal etc., in case the tax payer does
not pay the demand created as a result of such audit/contents the demand.
4. Uttar Pradesh
There are two audit committees-
(a) Zonal Audit committee headed by Additional Commissioner (Grade-1) of
respective Zone.
(b) Local Audit committee headed by Joint commissioner (Tax Audit) of
respective zone.
On the basis of final audit report, the adjudication proceedings will be
conducted by the officer posted in the concerned Sector or in the corporate
circle.
5. Kerala
If the audit verticals perform the adjudication function based on the audit
reports prepared by them, the focus of the audit system will be shifted from
their core audit function to adjudication function and connected appellate
proceedings, court proceedings and arrears recovery. This will affect the
professionalism of the audit systems. Hence the adjudication and postadjudication proceedings are to be done by the tax payer service verticals.
6. Nagaland
The State will prefer to have a committee at the Head Quarter to review the
audit report and assign officers for adjudication.
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7. Himachal Pradesh
No such mechanism exists. The Audit Reports are finalized by the Monitoring
Committee Meeting headed by the Additional Commissioner (Audit).
8. Uttarakhand
The adjudication is being taken up the jurisdictional officer. The show cause
notice is issued by the audit officer and it is answerable to sector officer who is
the adjudicating authority.
9. Punjab
Once the demand for tax has been adjudicated by the concerned audit team,
the file is transferred to the jurisdictional tax authority for recovery of the
same.
10. West Bengal
The audit officer shall clearly mention in his working paper, the reply of the
auditee in respect of the findings drawn and communicated to the auditee.
After careful consideration of the reply a Draft Audit Report (DAR) should be
prepared by the audit officer for internal administrative purpose and not for
the auditee.
The DAR shall be placed before the audit plan sanctioning authority for
perusal. If, the total amount of tax due exceeds 200% of the disclosed output
tax and total dues of tax over Rs.1 Crore the DAR should be placed before the
office of the Special Commissioner in charge of Audit with a short narration of
such dues for perusal and approval. This condition may vary State to State.
This condition is purely administrative purposes to ensure that the demand is
genuine. The aforesaid narration for such high dues should be concise, to the
point and self-contained.
Where any finding is based on any circulars or clarifications or notifications
issued by the State Government or the Central Government or by the
Commissioner or the Board, such finding must be mentioned clearly in the
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DAR. Similarly, where findings are based on discussion, merit of any decision
of any Hon’ble Court, decisions of Advance Ruling Authority, decisions of
Appellate Authorities, such should be clearly cited.
Final Audit Report: The audit officer shall finalize the findings of the audit and
draw Final Audit Report in GST Form ADT-02 (herein after referred to as
‘FAR’) after due consideration of the reply furnished [Rule 101(4)]. After
approval of the DAR by the appropriate authority, the FAR shall be issued to
the auditee preferably through system / electronically to the auditee within 7
(seven) working days of approval. Even in case of ‘NIL’ dues also FAR needs to
be issued.
Audit Consequences: After receipt of the FAR, the auditee may agree to the
audit observations in full, or he may disagree in full or he may even agree to a
part of the observations made. In case of full or partial agreement, the audit
officer should encourage the auditee to make voluntary payment of the dues in
Form GST DRC – 03 as detected in the course of audit. Where the Registered
Taxable Persons agrees with the short levy as per the show cause notice, the
auditor should explain the benefits available u/s 73(6) / 74(6) of the
SGST/CGST Act, as the case may be. Now, the observations made in the FAR
may be of 2 types:
Those of technical nature and not having any real revenue impact.
Those having revenue impact, i.e. short payment of tax, interest etc., by the
auditee.
11. Karnataka
Currently, adjudication in audited cases may be assigned to the same officer
who has audited or to any other Proper Officer at the discretion of the
Commissioner. Further, it is proposed to have an Audit Monitoring Committee
(AMC) for deliberation and discussion for final approval of the Audit reports
in the Divisional GST office.
An online platform has been created for inter divisional exchange of Audit
insights titled “IDEA-i” meet once in fortnight. The idea behind this concept is
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to facilitate exchange of interesting and unusual audit findings among the
audit officers of the Department. One audit division makes a power point
presentation of its interesting audit findings which can be followed by all the
audit officers of the State.
12. Maharashtra
The officer who has audited the taxpayer is the adjudicating authority as well.
13. Bihar
After conduct of Audit, Team to draw up a draft report, to be submitted to
Head of the Audit Division
• The Head of the Audit Division to scrutinize and review the draft report
• Final report to be prepared in consultation of the Audit Team within 2
months of the draft report
14. Centre
All the audit findings are finalized in the meetings of Monitoring Committee
headed by the Pr. Commissioner / Commissioner of Audit Commissionerates.
Monitoring Committee Meeting (MCM) is convened by the Audit
Commissionerate at least once a month, to which the Executive Commissioner
or his representative are invited to attend. Each of the audit
objections/observations is examined for its sustainability. MCM also decides
as to whether the extended period of limitation can be invoked or not and also
on the applicability of the provisions relating to waiver of show cause notice in
respect of each para. The objections rejected by the meeting are treated as
closed. The decision taken by the Audit Commissioner, with regard to
settlement of audit objections after recovery of all dues or dropping of the
unsustainable audit objections, are final. The show cause notices issued by the
Audit Commissionerates for recovery of tax consequent to audit objections are
adjudicated by the Executive Commissionerates and there is a separate review
mechanism for the said adjudications.
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Any oversight of post-adjudication proceedings
and its mechanism - follow-up of additional
demand created, ascertaining the correctness of
the order for its sustainability, putting up proper
defense in appeal, etc.
XI
1. Tamil Nadu
The reviewing authority monitors the post adjudication process.
2. Rajasthan
The State Department desires to have a review committee and a separate legal
wing to monitor the post adjudication proceedings at the H.O level.
3. Delhi
Audit reports and demand in Form ADT-02 are sent to the jurisdictional
proper officer for adjudication and for taking further necessary action in the
matter, including for defending the matter in appeal etc., in case the tax payer
does not pay the demand created as a result of such audit/contents the
demand.
4. Uttar Pradesh
The State is in the process of developing oversight mechanism of postadjudication review.
5. Kerala
No such mechanism exists.
6. Nagaland
The Department proceeds as per the provisions of the Act and Rules for curing
any deficiencies noticed post-adjudication.
7. Himachal Pradesh
Separate system of Review is prescribed in the State.
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8. Uttarakhand
There is internal review section in the Uttarakhand State GST which reviews
all the orders passed by the adjudicating authority. It reviews the adjudication
orders for their legality and if the need arises appeals are filed before the
appropriate forum.
9. Punjab
The mechanism is being maintained at the head quarter level.
10. West Bengal
Technical lapses by the Registered Taxable Persons which do not have any
revenue implication, and have occurred out of oversight or ignorance, should
be allowed for correction (if required). After issuing the FAR, the Audit Case
will have to be closed. Such closure of case can be done in the following
scenarios:
a) The technical lapses (if any) are corrected and the entire dues as per the
FAR are paid by the Taxpayer within 30 days in Form GST DRC-03;
b) FAR is issued with Nil Revenue implication;
c) The tax, interest, penalty or any other amount payable by the Registered
Taxable Persons as have been ascertained as short paid or not paid is not
deposited by the taxpayer within 30 days after the issuance of the FAR, and in
such situation the case is required to refer to the respective jurisdiction
(Charge or Large Taxpayer’s Unit as the case may be) for initiation of demand
and recovery proceedings.
d) Demand & Recovery proceedings.
e) If the tax, interest, penalty or any other amount payable by the Registered
Taxable Persons as have been ascertained as short paid or not paid is not
deposited by the taxpayer within 30 days after the issuance of the FAR, the
case is required to be referred to the respective jurisdiction as per the
provisions of Section 65(7) of the WBGST/CGST Act for initiation of demand
and recovery proceedings. The proper officer having the assigned role of
‘Demand & Recovery’ shall initiate action under Section 73 or 74 of the said
Acts, as the case may be, through the ‘Assessment & Adjudication’ module in
back office of GST. In our State of West Bengal the same audit officer or a
different officer may initiate ‘Demand & Recovery’ proceedings. The
concerned jurisdictional head will decide the same. It is desirable that the
adjudicating officer carefully considers the findings as noted in the Final Audit
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Report and initiate actions independently. However, repetition of points of
examination (including documents thereof) should be avoided unless it is
absolutely necessary. In case, the adjudicating officer comes upon any
additional information (both from the documents /evidences/ submissions
produced by the auditee at the time of audit as well as from any other source
including Enforcement units), he shall consider such points of examination
independently and conclude the proceedings upon incorporating all the
findings made in this case.
11. Karnataka
The adjudicating officer is responsible for overseeing the post- adjudication
proceedings in consultation with the Divisional Joint Commissioner and the
reviewing authority namely, the Additional Commissioner (Zonal). The
proposal for constitution of an Audit Monitoring Committee, to oversee the
post adjudication process in each audit division is being considered.
12. Maharashtra
No oversight mechanism for post-adjudication proceedings. However, certain
specific instructions are given to the adjudicating officers for follow- up of the
post adjudication process.
13. Bihar
Concerned Circle In-charge to assign disposal of reports so received to any
officer posted in the Circle.
• This is done to avoid any duplication of levy, in the absence of an integrated
IT platform
• If the officer to whom the report is assigned is of the opinion that- – tax
liability not disclosed correctly, or – there is concealment or omission of any
fact or – presentation of facts in such manner which has led to reduction in tax
payable- then proceeding for re-assessment and recovery to initiated.
14. Centre
There is an established review mechanism in place for all adjudication orders
issued by adjudicating authorities.
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XII Any Central repository of audit outcomes
1. Tamil Nadu
No such central repository is maintained.
2. Rajasthan
No such central repository is maintained.
3. Delhi
No such central repository is maintained.
4. Uttar Pradesh
No such central repository is maintained.
5. Kerala
No such central repository is maintained.
6. Nagaland
No such central repository is maintained.
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7. Himachal Pradesh
No such central repository is maintained.
8. Uttarakhand
No such central repository is maintained.
9. Punjab
No such central repository is maintained.
10. West Bengal
No such central repository is maintained.
11. Karnataka
A centralized repository of audit outcomes is maintained in the
Commissioner’s Office. It is proposed to make all the DGSTOs to prepare a
booklet containing important Audit findings and also to make an Online
Presentation of the audit outcomes every fortnight, with all the audit officers
participating in it. A repository of such outcomes will be maintained and
circulated to all the Audit Officers by the office of the Additional
Commissioner (Audit, Intelligence & Co-ordination).
12. Maharashtra
No such central repository is maintained.
13. Bihar
No such central repository is maintained.
14. Centre
Presently, Monthly Audit Bulletins are issued by the Directorate General of
Audit. These bulletins contain important Audit Objections noticed by the
Audit Commissionerates. After the GST Audit Module becomes operational all
the audit reports will be available to all the field formations.
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Coordination between State and Central audit
officers - in similar cases, similar businesses,
exchange of approaches, findings, outcome in
appeals etc.
XIII
1. Tamil Nadu
No such coordination is in place.
2. Rajasthan
The State Department desires to have co-ordination between the Centre for
sharing of knowledge and experience for mutual benefit.
3. Delhi
No such coordination is in place.
4. Uttar Pradesh
No such coordination is in place.
5. Kerala
The co-ordination between State and Central audit officers, including sharing
the audit statistics and connected information, is key to preventing
overlapping work. The CBIC has ensured the support for training and capacity
building. The training of the State audit officers will be done by the National
Academy of Customs, Excise and Narcotics (NACEN). The initial and the
finalized audit reports will be shared in a similar manner as it is done in the
case of the incidence reports.
[
6. Nagaland
The Department desires to have an active coordination between State and
Central audit officers for effective and efficient implementation of the audit
provisions as it affects the revenue of both the Central and the States.
7. Himachal Pradesh
No such co-ordination is in place.
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8. Uttarakhand
No such formal process of coordination exists as of now. However, discussions
between the center and State officers takes place once in a while in an informal
way.
9. Punjab
As audit is a new exercise for the Department, visits to the Central Tax
authorities for sharing of knowledge and understanding the audit process were
carried out. However, there is no formal mechanism for the sharing of audit
practices or the objections as a result of such exercise. It is suggested that
there should be defined mechanism for such knowledge sharing between the
State and Central audit officers.
10. West Bengal
No such coordination is in place.
11. Karnataka
A co-ordination between the State and Central GST takes place at regular
intervals either online or offline. Some of the senior officers of the Audit
Commissionerates interact with the Divisional Audit Wings and exchange
Audit findings, insights, methodologies and strategies etc. However, there is
no formal co-ordination committee as such being established.
12. Maharashtra
No such mechanism currently in place.
13. Bihar
No such mechanism currently in place.
14. Centre
Directorate General of Audit has prepared a draft proposal for conduct of audit
of multi-location Taxpayers by a system of coordination between Centre and
States. This proposal is pending approval.
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Role of technology in automating audit
process –
XIV Connecting electronically every audit procedure seamlessly - the
E-audit modules developed by States, or those in the pipeline, to
introduce technology in the audit process and its interface with
the audit officer and the auditee.
1. Tamil Nadu
E-audit module is under development for seamless connect of the audit
process electronically.
2. Rajasthan
The State Department desires to have an automated audit module which can
capture the entire audit processes electronically and to eventually make the
audit faceless.
3. Delhi
No such mechanism is in place.
4. Uttar Pradesh
There is an automated audit module wherein, each and every audit procedure
is seamlessly connected electronically.
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5. Kerala
The State is preparing software requirement specifications for the Audit
backend based on the workflow for audit and following the audit manual. The
functionality will be designed so that the quality and quantity of work turned
out by the audit units are electronically captured. It will also ensure that the
audit officers duly verify the audit parameters while doing the audit as per the
manual. The recording of each task of verification and the results thereon will
enhance the performance of the audit team and create an environment of
competition for professionally replicating in the success.
6. Nagaland
The Department desires to implement E-audit Module developed for the
Model-2 States by GSTN.
7. Himachal Pradesh
There is an e-module on Boweb portal for conducting online GST Audit.
8. Uttarakhand
The Audit module developed by GSTN is being followed.
9. Punjab
The audit module developed by GSTN is proposed to be followed for the audit
for the financial year 2018-19.
10. West Bengal
Audit process in West Bengal is developed by GSTN for the Model 2 States.
The pre-selection procedures, and feedback mechanism is through e-office and
module developed by ISD. Every unit (Circle level/Charge Level/ Large
Taxpayers Unit) should represent the status of audit once in every month in a
pre-scheduled date in a format before the Monitoring Committee in the
Monitoring Committee Meeting (MCM) under the chairmanship of the
Commissioner/ Special Commissioner (Head of Audit functionality). This
Committee, besides monitoring the status of audit of every Circle/Charge
Level, will also try to identify the important observations made upon audit by
different Circles/ Charges for better coherence among all the existing audit
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teams. At the same time, the Committee will also try to identify the areas of
audit related to the Circles or Charge that need special attention and make
suggestions accordingly. The Monitoring Committee shall invite the Audit
head of all the Circles, Officers under the Special Commissioner (Audit), Nodal
Officer (Audit) of Information System Division and representatives from GSTPPU of the State to offer their views to maintain the progress and ensure
uniformity in audit and subsequent demand and recovery proceedings. The
Committee may invite any Audit Team or Audit Officer or Charge officer or
Circle Officer or Officer of Large Taxpayers Unit if deemed fit.
11. Maharashtra
No such mechanism is in currently in place.
12. Bihar
No such mechanism is in currently in place.
13. Centre
GST Audit Module is being developed in CBIC – GST System by Directorate
General of Systems in collaboration with the Directorate General of Audit. It
proposes to automate most of the activities of Audit Process.
a. Automatic creation of Audit Groups
b. List of risky taxpayers made available
c. Facilitate conducting of Desk Review by providing all information in
Taxpayer at a Glance (TAG)
d. Creation of effective Audit Plan
e. Recording the findings of audit
f. Enabling conduct of Monthly Monitoring Committee (MCM)
g. Creation of Final Audit Report
h. Interacting with the taxpayer on audit matters and
I. Enabling effective audit monitoring by different supervisory authorities.
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Automated Audit Process Flow





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14. Karnataka
Karnataka has developed an automated online Audit module called EShodhane in collaboration with NIC, Bengaluru, using which, registered
persons are selected for scrutiny based on risk evaluation method and the
audit officers seek assignment for audit electronically. It is an end-to-end
digital back office application which covers the entire audit process starting
from the selection of cases to the finalization of audit report and adjudication
process. Results of certain audit processes carried out by the audit officers
physically are also to be uploaded on to the system.
E-Shodhane Audit process flow chart:-
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SCREENSHOT OF DASHBOARD OF ANALYTIC REPORTS
SCREENSHOT OF SUMMARY ANALYTIC REPORTS
ACCESSIBLE TO AUDIT OFFICER
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SCREENSHOT OF SAMPLE CASES IDENTIFIED FOR
RISK BASED SCRUTINY
SCREENSHOT OF SAMPLE CASES SELECTED BASED
ON RISK FACTORS
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SCREENSHOT OF PENDING AUDIT CASES
AVAILABLE IN AUDIT OFFICER’S LOGIN
SCREENSHOT OF TEMPLATE AVAILABLE FOR
AUDIT OFFICER TO LOG AUDIT INITIATION
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SCREENSHOT OF SAMPLE ASSIGNMENT NOTE
SCREENSHOT OF KARNATAKA GST PORTAL FOR
RAISING AUDIT VALIDATION QUERY
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SCREENSHOT OF TOOL AVAILABLE TO ALL
STAKEHOLDERS TO VERIFY AUTHENTICITY AND
STATUS OF AUDIT
SCREENSHOT OF RESULT OF AUDIT ASSIGNMENT
NOTE VALIDATION QUERY
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SCREENSHOT OF POST AUDIT PAYMENT STATUS IN
A SAMPLE CASE
SCREENSHOT OF SAMPLE POST AUDIT PAYMENT
STATUS OF ADDITIONAL DEMANDS
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SCREENSHOT OF SAMPLE POST AUDIT PAYMENT
STATUS OF ADDITIONAL DEMANDS
SCREENSHOT OF BREAKUP OF POST AUDIT
PAYMENT IN A SAMPLE CASE
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SCREENSHOT OF BREAKUP OF POST AUDIT
PAYMENT IN A SAMPLE CASE
SCREENSHOT OF BREAKUP OF POST AUDIT
PAYMENT IN A SAMPLE CASE
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SCREENSHOT OF DETAILS OF POST AUDIT
PAYMENT IN A SAMPLE CASE ( DRC-04 )
SCREENSHOT OF LOGIN PAGE FOR ENTERING
STATUS OF ADJUDICATION ON AUDIT REPORT
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SCREENSHOT OF APPEAL MODULE
SCREENSHOT OF AUDIT OFFICERS LOGIN PAGE
FOR RECORDING ACTION ON TAXPAYES’S
RECTIFICATION REQUEST POST-AUDIT
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RECOMMENDATIONS FOR MODEL
GST AUDIT
PRACTICES AND PROCEDURES
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Recommendation - 01
Basis for selection of cases for audit
Identification of cases for audit is of threefold:
Random
selection
Based on Risk
Assessment
Based on Local Risk
parameters/wild card
entry
A. Based on risk assessment:
Selection of cases on the basis of compliance risks is very essential and integral
to GST audit. Currently, the returns data of tax payers i.e., GSTR-3Bs are being
considered by various States and the Centre. The guiding principle of audit
envisages selection of taxpayers for audit based on certain risk parameters.
The Commissioner by a general or specific order may select any registered
person for audit of his books of accounts for a specific period. The
Commissioner may fix the criteria of selection based on certain parameters as
he may deem fit.
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This turnover limit while fixing the selection criteria may vary from State to
State, in different Zonal levels of a particular State and also for service sector
when compared to that for goods. All risk parameters are required to be
identified and all probable aspects need to be considered to identify noncompliance and non-payment / short payment of tax, interest, late fee, penalty
etc. and evasion of tax. The taxpayers maybe classified into three segments,
Large/Medium/Small based on the total turnover. The States can also be
divided into three Categories, viz. I II and III based on the taxpayer’s spread
across various segments. By and large, the categorization may be uniform
across the States subject to the availability of more risky taxpayers in a
particular category which is as under:
Large - taxpayers with turnover more than Rs. 40 Crore for category 1
Commissionerates, Rs. 30 Crores for category 2 Commissionerates and Rs. 20
crores for category 3 Commissionerates.
Medium – taxpayers with turnover Rs.10 Crores to Rs.40 Crores for category
1 Commissionerates, Rs. 7.5 Crores to Rs. 30 Crores for category 2
Commissionerates and Rs. 5 Crores to Rs.20 crores for category 3
Commissionerates.
Small – taxpayers with turnover below Rs. 10 Crores for category 1
Commissionerates, below Rs. 7.5 Crores for category 2 Commissionerates and
below Rs. 5 Crores for category 3 Commissionerates.
The turnover includes total taxable, exempt and zero rated clearances of goods
and services but excludes non-GST supplies during a financial year.
To select the tax payers for audit in an effective manner, secondary data source
(such as VAT/Service Tax/Central Excise/Custom data, Income Tax data etc.)
may be considered along with the primary data source (i.e. GST data).
The weightage of each parameter may vary depending upon its importance in
selection of taxpayers for audit. Based on the average weight, considering all
the parameters, a final score may be calculated on the basis of which the final
selection may be done.
The final selection of taxpayers to be audited may be done based on the
descending order of the final score thus calculated. In case, more than one
RTP has the same final score, the parameter of declared liability will then be
considered and a taxpayer with more declared liability will be selected first.
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A Selection Committee may be constituted to identify various risk parameters
for selection for audit considering all the aspects where there are chances of
lack of compliance of the Act resulting in short payment of tax etc. such as:
Entity level risks (e.g. Turnover, Tax, ITC, Refund, Commodity such as Iron &
Steel, Paints & Chemicals, Textiles, Cement, Medicine, Footwear, Branded
food grain, Automobiles etc., Service: Works contract, Real Estate,
Information Technology, Consultancy service, Manpower service, Hospitality,
Travel & Tourism, Leasing etc.).
Risks associated with compliance behavior (e.g. late filer of return, nonsubmission of Form GSTR-1, Form GSTR-3B, Form GSTR-9 &Form GSTR9C).
Certain representative selection criteria that are
considered for risk assessment are given below.
1 Ratio of Taxable turnover – present year vis-à-vis previous year.
Ratio of ITC reversed vis-à-vis Total ITC availed during the year.
Ratio of total ITC availed in this year vis-à-vis previous year.
2
3
Ratio of IGST payment at the time of import vis-à-vis Total
ITC availed ({Col.2 of table 4(A) (1) & (2) of GSTR-3B} in
corresponding period).
4
5
6
Ratio of nil/exempt supplies (Col.2 of Table 3.1(C) of GSTR3B) to total turnover (excluding non GST supplies ) (col.2 of
Table 3.1(a) + (b) + (c) of GSTR-3B).
Ratio of Zero-rated supplies (col.2 of Table 3.1(b) of GSTR3B) to total turnover (excluding non-GST supplies) (col.2 of
Table 3.1 (a)+(b) + (c) of (GSTR-3B).
Ratio of Non-GST supplies to total turnover. {(Col.2 of Table 3.1
(e) / (col.2 of Table 3.1 (a) + (b) +(c) of GSTR-3B)}. 7
Ratio of inward supplies (liable to reverse charge) to total turnover
8 [col.2 of Table 3.1(d)}/Col.2 of 3.1 (a)+(b)+(c) of GSTR-3B)].
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Ratio of ITC shown in Table 4A(5) of GSTR 3B and ITC as per
GSTR-2A.
9
Ratio of tax paid under reverse charge (as per {Col.3+4+5+6 of
Table 3.1(d)} to ITC taken on import of services/other reverse
charge (other than import of goods)
10
{Col.2+3+4+5 of Table 4A (2+3) of GSTR 3-B}.
Ratio of ISD credit {Col.2+3+4+5 of Table 4A (4) of GSTR-3B) to
total ITC taken 11
{Col.2+3+4+5 Table 4A of GSTR-3B}.
Ratio of ITC reversed {Col.2+3+4+5 of table 4(B) of GSTR 3B} to
ITC taken 12
{Col.2+3+4+5 of table 4(A) of GSTR-3B}.
Ratio of zero-rated supply to SEZ as per Table 6(B) of GSTR-1 to
total GST turnover. 13
14
Ratio of deemed exports as per Table 6(C) of GSTR-1 to total GST
turnover.
15 Turnover declared in Form GSTR-3B vis-à-vis Form GSTR-1.
16 Claim of ITC from cancelled RTPs, aggregate turnover in GST
return vis-à-vis Turnover disclosed in Income Tax return.
Turnover declared by RTP in Form GSTR-3B compared to
turnover on which TDS deducted as reflected in Form GSTR-7
submitted by TDS deductor.
17
Turnover declared by RTP in Form GSTR-3B compared to
turnover on which TCS collected as reflected in Form GSTR-8
submitted by TCS collector.
18
Refund claimed against purchase from taxpayer having no autopopulation of ITC in Form GSTR-2A.
19
20 Purchases from non-existent RTPs.
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RTPs having adverse reports in VAT/Service Tax/Central Excise
who are operative in GST etc.)
21
In case, the RTP selected for audit has multiple registrations under
the same PAN / TAN in the State, it is suggested that all such
registration numbers may be selected for audit.
22
23
10% of the selection of the tax payers may be done on random
basis.
Relating to compliance behaviour-based risk (e.g. late filer of
return)– RTPs defaulting in filing GSTR-3B for 3 months will be
marked 5, those defaulting for 2 months will be marked 3.33 &
those defaulting by 1 month will be marked 1.67.
24
25 Taxpayers claiming ITC of more than n amount from eligible ITC.
26
Taxpayers who have filed all returns and tax adjusted from cash
ledger is less than n amount.
Taxpayers who have filed all returns and difference in tax liability
in GSTR-1 > GSTR-3b by n amount. 27
28 Composition tax payers having turnover more than 1.25 crore.
Newly registered tax payers with high turnover more than n
29 amount.
Taxpayers with (a) multiple use of pan (b) multiple use of email id
30 (c) multiple use of mobile no.
31 Refund amount is greater than n amount.
Shipping bill/export proof submitted by taxable person not
verified from Ice gate. 32
33
Turnover declared in GSTR 3b must be compared with TDS/TCS
deducted (it should be more than 100 times than TCS deducted
and more than 50 times than TDS deducted).
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Taxable persons dealing in evasion-prone commodities/services as
per HSN/SAC code. 34
35 High spike by n amount in e-way bill value in n months.
Ratio of Output Tax paid in cash to the total turnover in the
current year is n percentage higher to the ratio of the same in the
previous year.
36
Ratio of Output Tax paid to Net Profit in the current year is n per
cent higher to the ratio of the same in the previous year. 37
38
39
Taxable Person whose Turnover is less than n percentage turnover
from previous year.
Ratio of expenses to turnover in current year is greater than by n
than the ratio of same in the previous year.
40
41
Inward supply from bogus dealers.
Zero cash set-off against tax liability.
42
43
Inward supply received but no outward supply.
GSTR-1 submitted but GSTR-3B not submitted.
Manufactures whose cash set-off is less than 5 per cent.
Three or more cases apprehended by mobile squad.
44
45
Cancelation of E-way bill is more than 2 per cent. 46
B.Based on Local Risk parameters/wild card
entry:
State GST Departments invariably have mobile squads for checking the
correctness of the documents carried in support of the goods transported in
the state and it is an integral part of their enforcement activity to supplement
their efforts to prevent and check tax evasion. It is theexperience of the States
that tax is evaded by businesses by transporting goods without documents or
with fake/ invalid documents or by recycling of old documents that were not
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checked earlier, enabling them not to record and declare the corresponding
transactions in their books. Apart from the seller and purchaser, unscrupulous
transporters also form part of the network indulging in tax evasion. Based on
the inputs gathered from mobile squad vigilance, risk parameters can be
identified by the Officers of Anti-evasion/Enforcement wings and the
corresponding tax payers may be selected for audit based on the above risk
assessment. Percentage of tax payers that may be selected on the basis of the
above risk assessment may be left to the decision of the State GST
Departments.
C.Random selection:
Tax payers (roughly around 10%) may also be selected randomly on the basis
of local intelligence network which otherwise may not be covered strictly by the
overall risk parameter selection. The discretion for selecting cases may rest
with the appropriate authority of a Zone or a Division.
Recommendation – 02
Scope of audit
Whether restricted to only the flagged risk
parameters or all business transactions of the
auditee.
Risk parameters are meant for determining the total risk score based on which
registered persons would be selected for audit. When, once a registered person
is selected, the audit should be carried out as per definition of ‘Audit’ (under
Section 2(13) of the CGST Act/ KGST Act). Thus, audit would not be restricted
only to the flagged risk parameters and audit should be taken up based on desk
review conducted by audit team and audit plan prepared accordingly. An
efficient and effective Audit system in all aspects based on a checklist will
increase voluntary compliance.
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Recommendation– 03
Norms for audit and co-ordination
among audit officers.
Audit of all or some of the other related registered
persons in the value chain based on audit findings
in selected primary cases. Norms for such action
i.e., whether to have the same audit officer for all
cases, approach for coordination among different
audit officers, oversight etc.
State audit jurisdictions do not have an annual scheduling of Audit for a
financial year. Such elasticity in planning Audit of related registered persons in
the value chain based on audit findings in selected primary cases is possible.
Whereas, in the CGST audit manual, the annual Schedule for audits for a
financial year would be drawn at the beginning of the year and there is a need
to adhere to such schedule, taking up the audits of other registered persons in
the value chain based on audit findings, may not be possible during the same
year. Furthermore,taking up audit of other persons in the value chain may not
always yield good results. However,if the risk scores of such registered persons
in the value chain are identified to be higher, thesame can be taken up for audit
during subsequent audit years. Whether to have the same Audit Officer for all
such cases including monitoring the same may be left to the discretion of the
divisional heads or any officer authorized by the State Commissioner.
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Recommendation –04
Open ended assignment for Audit.
Audit of other years of the same auditee
based on audit findings in selected cases.
In general, when a registered person is selected for audit based on risk scores
arrived at for a financial year or multiples thereof, the audit is to be taken up
for the entire period for which previous audit (GST audit) is not covered. It
need not to be restricted to a particular financial year, a complete audit by
clubbing more than one financial year is to be done. In other words,a tax payer
may be subject to Audit from the un-audited period till the last return filed up
to thedate of visit. The Parameters to analyze data base can be ascertained by
adopting the following method as
RATIO
ANALYSIS
TREND
ANALYSIS
RISK
ANALYSIS
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Recommendation -05
Authorization for Audit.
Authorization of the officers for selection of
cases for audit and the process for final
approval of a case for audit i.e., administrative
system of audit in a State including the
assignment issuing authority.
Commisioner /
Additional
commissioner
Audit Divisional
Head may finalize
a list of 20% of
taxpayers
(Audit) may
finalise a list of
10% may be 70% of tax payers
finalized at
random based on
local intelligence
network
Commissioner/Additional Commissioners in-charge of Audit work or any
other wing entrusted with the task of monitoring audit mechanism in a State
may finalize a list of 70% of the tax payers to be taken up for audit by each
Joint Commissioner (Divisional Head), based on risk scores arrived at State
level. Joint Commissioner (Divisional Head), may be authorized to select 20%
of the tax payers for audit based on local risk parameters and 10% of the tax
payers at random based on local intelligence network. The issue of overall
number of cases that could be taken up for audit is dealt separately.
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Recommendation - 06
Criteria for allocation of cases for audit
Basis/criteria for allocation of cases for auditcadre, turnover.
Taxable turnover-wise allocation of cases or pecuniary jurisdiction for audit may
be considered based on the corresponding State’s GST department’s
administrative architecture. Audit officers in many States are in the cadres of
Deputy Commissioner, Assistant Commissioner and Commercial/State Tax
Officer, while it may not be so in others. In keeping with the hierarchical
structure in a State, tax payers for audit may be assigned to the officers.
Allocation of cases for audit may be based on the turnover as may be decided
by the appropriate authority.
Recommendation – 07
Numerical targets for Audit.
Fixing numerical targets, both upper and lower
limits, on the number of cases that are to be
audited in a year by the State
For conduct of audits in a State, target may be fixed for every year depending
upon the number of officers allocated/available for conduct of audits. The
calculation of target can be made by taking into account the total working days
in a year, the norms for number of days required to complete the audit of
different and the working strength of the audit officers.
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Recommendation - 08
Time limit for completion of Audit.
Time limit for completion of audit of various
sectors: large, medium, small etc., (lesser than
that mandated by the Act).
Section 65 (4) of the CGST Act/ KGST Act specifies that the audit initiated shall
be completed within three months from the date of Commencement. The word
commencement of audit as explained under the said sub-section is the date on
which the records and other documents called for by the authorities are made
available by registered person or date of actual institutionof audit whichever is
earlier. However, it would be reasonable to fix a lesser duration for Audit
depending upon the volume and complexity so that the limited human
resources are utilized optimally.
Recommendation - 09
Feedback mechanism.
Feedback mechanism and its functioning – in
selection of cases for audit, in the process and
conduct of audit and in the acceptance of final
audit report.
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Feedback mechanism under the GST Audit, is an important component of GST
eco-system itself; feedback obtained from the tax payer fraternity in regard to
the strength and weakness of the audit system itself will go a long way in not
only correcting the rough edges, but also establishing vibrant and robust audit
system. Feedback exercise may have to be a regular feature in the GST
Administrative calendar in each and every State.
Recommendation – 10
Audit Monitoring Committee.
Post-audit process - Committee for review
of the audit report and recommendation
for adjudication and the adjudicating
authority.
Audit is treated to be completed, when once audit report which may contain
objections detected during the audit is finalized by the Department. But before
finalizing the objections, the initial objections being raised the by audit officer
may be taken up for discussion by a Committee of officers in a monthly/
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periodical meeting (may be termed as “Audit Monitoring Committee”)
with regard to the sustainability/correctness or otherwise in respect of each
objection. This system of AMC that may be instituted in each State department
will probably reduce unproductive disputes and also standardize practices. The
Audit Monitoring Committee may comprise of the Joint Commissioner
(Divisional Head), Deputy Commissioner, Assistant Commissioner and GST
Officer (Commercial Tax Officer, Sales Tax Officer as the case may be).
However, the constitution of such a committee may be decided by the State
Commissioner to suit the administrative architecture in a State.
In addition to such a committee, an online exchange of Inter -zonal /
Inter-divisional audit insights / findings may also be a useful knowledge
sharing platform. Any zone or a division which has come across interesting
audit findings may make use of such a platform and share them with the
officers of the State once in fifteen days so that , the other zones and audit
divisions may follow them or such an inter-divisional exchange may pave way
for thematic audit.
Recommendation - 11
Post-adjudication proceedings followup.
Mechanism for post-adjudication proceedings
and follow-up of additional demand created,
ascertaining the correctness of the order for its
sustainability, putting up proper defense in
appeal, etc.
Section 108 of the CGST Act/ KGST Act empowers a revisional authority to
take up review of any decision taken by his sub-ordinate officers. Hence not
only for audit cases and even for other investigation cases also, a Revision or
Review wing may be created in the Office of the Chief Commissioner (CGST) or
State Commissioner (SGST) to take-up review of such adjudication/orders so
as to ensure there is no loss of revenue on account of some incorrect
interpretations/orders. If an exclusive wing for Revision/Review is not
practical to be established in that eventuality, the existing Revisional
Authorities in the State Administration may be entrusted with the task of
review of any decision taken by the subordinate authorities.
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Recommendation -12
Central repository of audit outcomes:
At the Central Government level, the Director General-Audit is preparing a
monthly/quarterly audit bulletin containing important audit objections raised
during each quarter. The same may be considered for circulation amongst the
audit officers of all the States too. The State of Karnataka maintains a
compilation of interesting audit paras that are discussed in the IDEA-i meet
platform (Inter Divisional Exchange of Audit insights) held once in a
fortnight. Similarly, each State may have its own mechanism of maintaining and
circulating Audit outcomes.
Recommendation – 13
Coordination between State and
Central audit officers
Coordination between State and Central audit
officers - in similar cases, similar businesses,
exchange of approaches, findings, outcome in
appeals etc.
A co-ordination cell may be established by the GST Council consisting of senior
officers from the Centre and the State in order to have a collaborative and
cohesive strategies for audit and also to share various initiatives developed by
the Centre and the State and this will certainly usher in regular sharing of best
practices.
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Recommendation – 14
E-Audit Module.
Role of technology in automating audit process –
Connecting electronically every audit procedure
seamlessly - the E-audit modules developed by
States, or those in the pipeline, to introduce
technology in the audit process and its interface
with the audit officer and the auditee.
From the feedback submitted by various States, it is found that some of the
States are preparing software requirement specification for Audit backend,
based on the workflow system of Audit. The functionalities that may be
designed by the States will cover the entire Audit processes such as Selection,
Planning, and actual conduct of Audit, Reporting, Payment, Closure and
Adjudication. Capturing the data electronically at each stage of audit will
probably enhance the performance of the Audit team and create intellectual
and professional atmosphere.
The Department of Commercial Taxes, Karnataka has developed an automated
online Audit module called E-Shodhane Online Audit module in
collaboration with NIC, Bengaluru, i.e., www.gst.kar.nic.in/gstprime
whereby registered persons are selected for scrutiny based on risk evaluation
method and the audit officers seek assignment for audit electronically. It’s an
end-to-end digital back office application which covers the entire audit process
starting from the selection of cases to the finalization of audit report and
adjudication process with the exception of on-premises audit physically carried
out by designated Audit teams. To be more precise, the Audit module is not
100% seamlessly connected electronically. Certain audit processes are to be
carried out by the audit officers physically and results of such audit processes
are to be uploaded on to the system.
The GSTN has also developed GST Audit Module which is an end-to-end
digital back-office application that helps in carrying out the entire GST audit
97 | D r a f t R e p o r t o f t h e S u b - C o m m i t t e e ( C o O )
P r e p a r e d b y D e p a r t m e n t o f C o m m e r c i a l T a x e s , K a r n a t a k a
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process electronically (with the exception of on-premises audit physically
carried out by the designated Audit teams). Right from selection of taxpayers
for auditing and assigning the same to various Audit Teams to serving the
Final Audit report and/or SCN to the Taxpayer, every Audit proceeding is
seamlessly connected electronically.
Some of the Model-II States are found to have adopted GSTN Audit Module.
GST Audit Modules developed by GSTN and the State of Karnataka broadly
have the same features with minor tweaks as the GST Audit process is partly
dictated by the GST Act itself. Therefore, E-audit Modules that may be
developed by States may have these common audit tools with a few tweaks that
conform to their administrative structure.
I. AUDIT MIS APP
MIS APP is a tool which focuses on the need for sound information for
decision taking and which aims finding the relationship between audit
officer and their audit practice.
MIS and Audit process are targeted at satisfying the information required
for appraisal of performance of Audit Divisions on a real time basis.
98 | D r a f t R e p o r t o f t h e S u b - C o m m i t t e e ( C o O )
P r e p a r e d b y D e p a r t m e n t o f C o m m e r c i a l T a x e s , K a r n a t a k a
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MIS is a system that enables the Audit Divisional head and the Head
Office or Audit Commissionerate to have access to dependable
information for planning and decision making. This information could be
either qualitative or quantitative or both depending on the method
employed in the process.
The sub-committee suggest that an MIS APP Tool on the lines mentioned
herein may be developed exclusively for audit officers to upload the dayto-day activities with respect to the findings of the Audit, Audit
observations made, demand created, collected and the recovery made
thereof. Benefits for MIS: -
MIS plays the role of information generation, communication, decision
making, management, Administration, and operation of an organization.
The benefits accruable from an effective MIS could be reiterated thus:
1) The MIS App fulfils the informational needs of an Individual or a group
of individuals.
2) MIS satisfies a variety of system such as query system, analysis system,
modeling system & decision support system. The MIS helps in strategic
planning, management control and operational control.
3) MIS helps in target setting like Audit disposals, recovery and Refund.
4) The MIS assists the Head Office or Audit Commissionerate in goal
setting, strategic planning and evolving audit plans and thus
implementation.
99 | D r a f t R e p o r t o f t h e S u b - C o m m i t t e e ( C o O )
P r e p a r e d b y D e p a r t m e n t o f C o m m e r c i a l T a x e s , K a r n a t a k a
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MIS APP FLOW:
100 | D r a f t R e p o r t o f t h e S u b - C o m m i t t e e ( C o O )
P r e p a r e d b y D e p a r t m e n t o f C o m m e r c i a l T a x e s , K a r n a t a k a
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E-Shodhane Audit process flow chart
(Karnataka e-Audit Module):-
101 | D r a f t R e p o r t o f t h e S u b - C o m m i t t e e ( C o O )
P r e p a r e d b y D e p a r t m e n t o f C o m m e r c i a l T a x e s , K a r n a t a k a
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SCREENSHOT OF DASHBOARD OF ANALYTIC
REPORTS
SCREENSHOT OF SUMMARY ANALYTIC REPORTS
ACCESSIBLE TO AUDIT OFFICER
102 | D r a f t R e p o r t o f t h e S u b - C o m m i t t e e ( C o O )
P r e p a r e d b y D e p a r t m e n t o f C o m m e r c i a l T a x e s , K a r n a t a k a
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SCREENSHOT OF SAMPLE CASES IDENTIFIED FOR
RISK BASED SCRUTINY
SCREENSHOT OF SAMPLE CASES SELECTED BASED
ON RISK FACTORS
103 | D r a f t R e p o r t o f t h e S u b - C o m m i t t e e ( C o O )
P r e p a r e d b y D e p a r t m e n t o f C o m m e r c i a l T a x e s , K a r n a t a k a
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SCREENSHOT OF PENDING AUDIT CASES
AVAILABLE IN AUDIT OFFICER’S LOGIN
SCREENSHOT OF TEMPLATE AVAILABLE FOR
AUDIT OFFICER TO LOG AUDIT INITIATION
104 | D r a f t R e p o r t o f t h e S u b - C o m m i t t e e ( C o O )
P r e p a r e d b y D e p a r t m e n t o f C o m m e r c i a l T a x e s , K a r n a t a k a
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SCREENSHOT OF SAMPLE ASSIGNMENT NOTE
SCREENSHOT OF KARNATAKA GST PORTAL FOR
RAISING AUDIT VALIDATION QUERY
105 | D r a f t R e p o r t o f t h e S u b - C o m m i t t e e ( C o O )
P r e p a r e d b y D e p a r t m e n t o f C o m m e r c i a l T a x e s , K a r n a t a k a
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SCREENSHOT OF TOOL AVAILABLE TO ALL
STAKEHOLDERS TO VERIFY AUTHENTICITY AND
STATUS OF AUDIT
SCREENSHOT OF RESULT OF AUDIT ASSIGNMENT
NOTE VALIDATION QUERY
106 | D r a f t R e p o r t o f t h e S u b - C o m m i t t e e ( C o O )
P r e p a r e d b y D e p a r t m e n t o f C o m m e r c i a l T a x e s , K a r n a t a k a
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SCREENSHOT OF POST AUDIT PAYMENT STATUS IN
A SAMPLE CASE
SCREENSHOT OF SAMPLE POST AUDIT PAYMENT
STATUS OF ADDITIONAL DEMANDS
107 | D r a f t R e p o r t o f t h e S u b - C o m m i t t e e ( C o O )
P r e p a r e d b y D e p a r t m e n t o f C o m m e r c i a l T a x e s , K a r n a t a k a
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SCREENSHOT OF SAMPLE POST AUDIT PAYMENT
STATUS OF ADDITIONAL DEMANDS
SCREENSHOT OF BREAKUP OF POST AUDIT
PAYMENT IN A SAMPLE CASE
108 | D r a f t R e p o r t o f t h e S u b - C o m m i t t e e ( C o O )
P r e p a r e d b y D e p a r t m e n t o f C o m m e r c i a l T a x e s , K a r n a t a k a
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SCREENSHOT OF BREAKUP OF POST AUDIT
PAYMENT IN A SAMPLE CASE
SCREENSHOT OF BREAKUP OF POST AUDIT
PAYMENT IN A SAMPLE CASE
109 | D r a f t R e p o r t o f t h e S u b - C o m m i t t e e ( C o O )
P r e p a r e d b y D e p a r t m e n t o f C o m m e r c i a l T a x e s , K a r n a t a k a
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SCREENSHOT OF DETAILS OF POST AUDIT
PAYMENT IN A SAMPLE CASE (DRC-04 )
SCREENSHOT OF LOGIN PAGE FOR ENTERING
STATUS OF ADJUDICATION ON AUDIT REPORT
110 | D r a f t R e p o r t o f t h e S u b - C o m m i t t e e ( C o O )
P r e p a r e d b y D e p a r t m e n t o f C o m m e r c i a l T a x e s , K a r n a t a k a
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SCREENSHOT OF APPEAL MODULE
SCREENSHOT OF AUDIT OFFICERS LOGIN PAGE
FOR RECORDING ACTION ON TAXPAYES’S
RECTIFICATION REQUEST POST-AUDIT
111 | D r a f t R e p o r t o f t h e S u b - C o m m i t t e e ( C o O )
P r e p a r e d b y D e p a r t m e n t o f C o m m e r c i a l T a x e s , K a r n a t a k a
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i Model All India GST Audit Manual 2022: Prepared by the CoO on GST Audits
Annexure-II
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PREFACE
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Table of Contents
List of abbreviations v
Foreword vii
Executive Summary x
Chapter 1 Definition of Audit and Legal Provisions 1
Chapter 2 Purpose and Principles of audit 20
Chapter 3 Audit Flow Chart and Steps of Audit 29
Chapter 4 Audit Planning and Preparation, Desk Review and Audit Plan 38
Chapter 5 Conduct of audit, findings and finalisation of audit 48
Chapter 6 Follow up of audit 62
Chapter 7 Audit in certain circumstances 64
Chapter 8 Thematic and Joint Audit 68
Chapter 9 Capacity Building in specialised areas 78
Annexures
Annexure 1: Notice for conducting audit 97
Annexure 2: Letter seeking mutual assistance 98
Annexure 3: Questionnaire for auditee 100
Annexure 4: List of documents/ statements and books of accounts to
be produced for the purpose of audit
104
Annexure 5: Format of a sample Audit Plan 105
Annexure 6: Final Audit Report (FAR)- FORM GST ADT 02 108
Annexure 7: Format of status report to MCM 109
Annexure 8: Check list for key points for supply and supply of Goods or Services
or both
112
Annexure 9: Levy of tax on Reverse Charge Mechanism (RCM) 141
Annexure 10: Check list for key points for value of supply and value of supply 149
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Annexure 11: Input Tax Credit 163
Annexure 12: Important Changes in GST Laws and Rates during 2017-18 & 2018-
19
184
Annexure 13: Due dates and extension of due dates of submission of various
returns
190
Annexure 14: Ratio Analysis & Trend Analysis 212
Annexure 15 Study of Profit and Loss Account and Balance Sheet 219
Annexure 16: Indian Accounting Standards in the perspective of GST 241
Annexure 17: Recommendations for Model GST Audit Best Practices and
Procedure as per the report of sub-committee on ToR No. 1
257
Annexure 18: Composition and purpose of the Committee of Officers on GST
Audit alongwith modified ToRs
272

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List of abbreviations used in the Manual
Abbreviation Definition
CoO Committee of Officers
GST Goods and Service Tax
CGST Central Goods and Service Tax
SGST State Goods and Service Tax
GSTN Goods and Service Tax Network
CBIC Central Board of Indirect Taxes & Customs
DGARM Directorate General of Analytics & Risk Management
DGA Directorate General of Audit
RPMF Registered Person Master File
ISD Input Service Distributor
ITC Input Tax Credit
RTP Registered Taxpayer
DAR Draft Audit Report
FAR Final Audit Report
MCM Monitoring Committee Meeting
TAG Taxpayer at a Glance
ToR Term(s) of Reference
SEZ Special Economic Zone
HSN Harmonized System of Nomenclature
SAC Service Accounting Code
POS Point of Supply
OIDAR Online Information Database Access and Retrieval
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services
RCM Reverse Charge Mechanism
GSTAM GST Audit Manual
AAR Authority for Advance Ruling
AAAR Appellate Authority for Advance Ruling
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FOREWORD
Goods and Services Tax in India has stepped towards the completion of
five years. One of the main objectives of introduction of GST was to create
one common market in the country by totally removing the wide disparities
and compliance complexities of various laws of taxation of the States and
Centre. In taxation of goods and services (not as ―activities‖, per se, but as
―objects‖ or ―events‖), that had led to not only tax inefficiency but had also
interfered in investment decisions of businesses. GST has provided a
uniform structure in taxation of goods and services throughout the country.
There is total uniformity in terms of the taxable event, tax rates, point of
levy, provisions for registration, return filing, tax payment, refunds, audit,
adjudication, appeals etc. In fact, the CGST and SGST laws are almost
mirror images. GSTN, as an enabling organisation, has created the
necessary digital backbone to ensure seamless uniformity in the process
and procedures relating to registration of taxpayers, return filing, tax
payment, refunds etc.
Self-assessment/self-compliance of the taxpayers is the edifice upon which
the GST eco-system is built. Though it provides for audit of taxpayers, it
does not make it mandatory in all cases. Audit is an important compliance
verification tool that complements anti-evasion action and constructive
taxpayer engagement to improve tax compliance. Unless the processes
and procedures of selection of cases for audit and the consequent
proceedings are grounded in sound principles of neutrality, transparency,
accountability and sustainability, and proper analysis and appreciation of
audit, the purpose of audit would not be served. Uniform adoption of tried
and tested best practices of audit procedures and processes by all the
States as well as the Centre would enable consolidation of the outcomes of
the individual States and Central authorities and their analysis for any
consequential policy decisions sub-serves the primary objectives of GST
and ensures stable revenues to the States as also to the Centre.
Experience and knowledge gained through audit can be efficiently and
gainfully shared among the States and replicated only if the procedures
and processes adopted converge toward commonly agreed norms. Such
convergence can lead to efficient deployment of limited human resources
by the States in focused and productive activities.
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Audit is also a specialized exercise which requires not only sound
knowledge in law but also demands adequate skill. To facilitate all the
States and the Centre in respect of audit in GST a task of preparation of a
comprehensive All India Model GST Audit Manual was allotted to the
Committee of Officers on GST Audit. For this purpose, a sub-committee of
officers was constituted to compile existing and desirable audit practices
and to draft a model audit manual. Inputs have been taken from both
Centre and States from various sources like (i) GST Audit Manual 2019
published by DG Audit, Government of India, (ii) CBIC Quality Assurance
Review Manual 2021, (iii) West Bengal State Tax GST AUDIT
MANUAL_2021 (iv) Bihar State Tax Audit SOP, (v) Maharashtra State Tax
GST Audit Manual 2020, (vi) Punjab Audit-Manual, Punjab Audit
Administrative Instruction, Punjab Audit Checklist Documents - Value of
Supply, Punjab Audit Checklist Documents And Returns – Supply, (vii)
Karnataka State Tax GST Audit Model, (viii) GSTN Audit Process Flow, (ix)
Uttar Pradesh GST Tax Audit, (x) further suggestions from States and
Centre during compilation. On the basis of all such valuable inputs, the
State of West Bengal has compiled this audit manual which has been
accepted by the Committee of Officers.
The guidelines provided in the manual are intended to enable audit officers
to carry out effective audits in a uniform, efficient and comprehensive
manner adopting the best practices of the States and the Centre, as well as
international practices. Audit processes envisaged under the GST regime
are ably assisted by a technological tool named ―BI Tools‖ developed by
GSTN, tools of ―DGARM‖, concept of ―Registered Person Master File
(RPMF)‖ of DG Audit. Various States also developed technological and
analytical tools, such as ―e-Shodhane Audit Module‖ of Karnataka, ―Tax
Payers at a Glance‖ by West Bengal, Standard Operating Procedure of
Bihar focusing areas of concern in Audit which not only complements and
enhances the knowledge of the Audit officers also provides data backups
and analysis. The technological tool is intended to encompass verification,
examination, investigation, scrutiny and the like. Members of the
Committee, as well as all the Members of the Sub-Committees and their
leadership deserve kudos for forging a consensus consistent with the best
audit practices. We congratulate them all. We sincerely hope that the
model manual in your hands would lead to implementation of an effective
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audit mechanism consisting of best practices and procedures tried and
tested by the various indirect tax authorities in the country in the interest of
revenue, to improve internal control at work in organisations of taxpayers
and reduced burden of compliance upon taxpayers.
While emphasis has been placed in this Manual on developing a wellestablished audit procedure based on sound principles, it is needless to say
that there cannot be a uniform approach to the audit of every taxpayer.
Occasions may arise when a fact or figure apparent on the documents may
need an examination with reference to some other sets of documents or even
other sources. Therefore, the scope of audit in GST may vary depending on
facts and circumstances of audit. An attempt has been made to address
these issues in this document.

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EXECUTIVE SUMMARY
A Committee of Officers (CoO) on GST Audit was constituted by the GST
Council Secretariat, comprising officers from the CBIC, States, GSTN and
GST Council secretariat. The details of the said committee, alongwith its
timelines and Terms of References (ToR) are discussed in detail in Annexure
18 (p.272). To explore each of the six ToRs in greater detail, sub-committees
were formed for each ToR. The proposal contained in each report of the subcommittees has been incorporated in the relevant Chapter of this Manual.
The task of preparation of a comprehensive All India Model GST Audit
Manual (hereinafter called the Model GSTAM/ the Manual) for the Centre and
the States was allotted to the Committee of Officers on GST Audit. For this
purpose, a sub-committee of officers was constituted to compile existing and
desirable audit practices and to draft a model audit manual. The subcommittee was requested to catalogue prevalent practices of audit in the
Central and State Indirect tax administrations and adopt the best practices for
GST Audit across the country. The task of compiling this manual was allotted
to West Bengal as a Member of the Committee, studying thoroughly the Audit
manual prepared by Central Government, GST Audit Manuals and Standard
Operating Procedures prepared by various states like West Bengal, Punjab,
Maharashtra, Karnataka, Bihar, and Uttar Pradesh as well as the module
developed by the GSTN and available to Model 2 states. After compilation,
the draft Model GST Audit Manual was circulated to all the members inviting
their inputs and suggestions. The Model GST Audit Manual has been
prepared after incorporating many of these suggestions. The Manual tries to
take into account the differential structure of GST revenue administration
prevailing in different States and the Centre. Furthermore, a sub-committee
was constituted to study and compile the best audit policy and practices of
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Centre and States. The sub-committee compiled the best practices and also
made recommendations for Model GSTAM. The relevant recommendations
have been included in this GSTAM and all the 14 recommendations are in
Annexure 17 (p-257).
This Manual aims to be an extensive and comprehensive document with a
holistic approach towards GST audit which will not only facilitate the Audit
Officers of the Centre and the States/UTs but will also create an impact in
facilitating the auditees during the exercise of audit. The objective of this
manual is to provide insights into the principles and procedures of audit and
to give a holistic view of the entire process to the users of this Manual.
In the pre-GST regime, the audit process of States/UTs often got lengthened
due to procurement and production of various statutory forms by the auditees
in order to claim statutory deductions in the States/UTs. The GST regime
does not require production of any such statutory forms and hence it is
expected that substantial time of both the auditor and the auditee would be
saved. Furthermore, audit in the GST regime has been designed in such a
way as to complete the entire process within a short span of time. This will
require the officers to concentrate on the process of examination of the books
of accounts of a particular auditee within a short timeframe while at the same
time yielding optimum results from the auditing exercise. Eventually, this
would help the auditee also, who would be relieved from his engagement in
the process of auditing sooner than was the case earlier.
This manual has been designed to cater to a systematic workflow of audit,
ranging from brief criteria of selection to the completion of the process. It
includes mechanisms for Joint and Thematic audit as and when they are
approved by the Council.
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It is hoped that this Model Audit Manual would form an important yet dynamic
reference for audit principles, practices, and procedures for GST audit
practitioners in the country.
Dr. Amandeep Singh Dr. Ravi Kumar Surpur
ADG, DG Audit, Hqtrs, CBIC Chief Commissioner, CT Rajasthan
Convenor Co-Convenor
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1
CHAPTER 1
This chapter covers the definition of audit, types of audit, and salient legal
provisions related to audit.
1.1. Definition of audit under CGST/SGST Act, 2017
Audit is defined in subsec 13 of sec 2 of the
CGST/SGST Act, 2017
as – ―detailed
examination of records,
returns and other
documents maintained or
furnished by the taxable
person under this Act or
Rules made thereunder
or under any other law
for the time being in force
to verify, inter alia, the
correctness of turnover
declared, taxes paid,
refund claimed and input
tax credit availed, and to
assess his compliance
with the provisions of this
Act or rules made
thereunder‖.
EXHIBIT 1
Hence, GST audit is not restricted to the reconciliation of only the tax liability
& payment of tax by a taxable person, but its scope is also extended to
assessment with reference to the provisions of GST laws.
1.2 Types of Audit in GST
Three types of Audit are prescribed in GST:
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Note: This Model GST Audit Manual is focused on audit by Tax Authorities
only. The audited books of accounts and audit report submitted by the
taxpayer in prescribed Form(s) are also subject to audit u/s 65.
1.3 Legal Provisions of Audit by Tax Authorities: This section aims to
familiarise auditors with salient provisions of GST law.
1.3.1 Section 65 of CGST Act, 2017, and respective SGST Acts, 2017.
Sub
-
sect
ion
Provisions of the Act
(1)
The Commissioner or any officer authorised by him, by way of a
general or a specific order, may undertake audit of any registered
person for such period, at such frequency and in such manner as
may be prescribed.
(2) The officers referred to in sub-section (1) may conduct audit at the
place of business of the registered person or in their office.
(3)
The registered person shall be informed by way of a notice not less
than fifteen working days prior to the conduct of audit in such
manner as may be prescribed.
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(4)
The audit under sub-section (1) shall be completed within a period
of three months from the date of commencement of the audit:
Provided that where the Commissioner is satisfied that audit in
respect of such registered person cannot be completed within three
months, he may, for the reasons to be recorded in writing, extend
the period by a further period not exceeding six months.
Explanation. – For the purposes of this sub-section, the expression
‗commencement of audit‘ shall mean the date on which the records
and other documents, called for by the tax authorities, are made
available by the registered person or the actual institution of audit at
the place of business, whichever is later.
(5)
During the course of audit, the authorised officer may require the
registered person,— (i) to afford him the necessary facility to verify
the books of account or other documents as he may require; (ii) to
furnish such information as he may require and render assistance
for timely completion of the audit.
(6)
On conclusion of audit, the proper officer shall, within thirty days,
inform the registered person, whose records are audited, about the
findings, his rights and obligations and the reasons for such
findings.
(7)
Where the audit conducted under sub-section (1) results in
detection of tax not paid or short paid or erroneously refunded, or
input tax credit wrongly availed or utilised, the proper officer may
initiate action under section 73 or section 74.
1.3.2 Rule 101 of CGST / SGST Rules, 2017.
Sub
-
rule
Provisions of the rule
(1) The period of audit to be conducted under sub-section (1) of section
65 shall be a financial year or part thereof or multiples thereof.
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(2)
Where it is decided to undertake the audit of a registered person in
accordance with the provisions of section 65, the proper officer shall
issue a notice in FORM GST ADT-01 in accordance with the
provisions of sub-section (3) of the said section.
(3)
The proper officer authorised to conduct audit of the records and
books of account of the registered person shall, with the assistance
of the team of officers and officials accompanying him, verify the
documents on the basis of which the books of account are
maintained and the returns and statements furnished under the
provisions of the Act and the rules made thereunder, the
correctness of the turnover, exemptions and deductions claimed,
the rate of tax applied in respect of supply of goods or services or
both, the input tax credit availed and utilised, refund claimed, and
other relevant issues and record the observations in his audit notes.
(4)
The proper officer may inform the registered person of the
discrepancies noticed, if any, as observed in the audit and the said
person may file his reply and the proper officer shall finalise the
findings of the audit after due consideration of the reply furnished.
(5)
On conclusion of the audit, the proper officer shall inform the
findings of audit to the registered person in accordance with the
provisions of sub-section (6) of section 65 in FORM GST ADT-02
1.3.3 Section 71 of CGST and SGST Acts, 2017 (Access to
business premises).
―(1) Any officer under this Act, authorised by
the proper officer not below the rank of Joint
Commissioner, shall have access to any
place of business of a registered person to
inspect books of account, documents,
computers, computer programmes, computer
software whether installed in a computer or
otherwise and such other things as he may
require and which may be available at such
place, for the purposes of carrying out any EXHIBIT 2
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audit, scrutiny, verification and checks as may
be necessary to safeguard the interest of
revenue.
(2) Every person in charge of place referred to in sub-section (1) shall, on
demand, make available to the officer authorised under sub-section (1) or the
audit party deputed by the proper officer or a cost accountant or chartered
accountant nominated under section 66––
(i) such records as prepared or maintained by the registered person and
declared to the proper officer in such manner as may be prescribed;
(ii) trial balance or its equivalent;
(iii) statements of annual financial accounts, duly audited, wherever
required;
(iv) cost audit report, if any, under section 148 of the Companies Act, 2013;
(v) the income-tax audit report, if any, under section 44AB of the Income
Tax Act, 1961; and
(vi) any other relevant record,
for the scrutiny by the officer or audit party or the chartered accountant or cost
accountant within a period not exceeding fifteen working days from the day
when such demand is made, or such further period as may be allowed by the
said officer or the audit party or the chartered accountant or cost accountant.‖
Such access to business premises includes apart from physical
access, online access to the books of accounts/records of the
taxpayer.
1.3.4 Section 72 of CGST and SGST Acts, 2017 (Officers to assist
proper officers).
―(1) All officers of Police, Railways, Customs, and those officers engaged in
the collection of land revenue, including village officers, officers of central tax
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and officers of the Union territory tax shall assist the proper officers in the
implementation of this Act.
(2) The Government may, by notification, empower and require any other
class of officers to assist the proper officers in the implementation of this Act
when called upon to do so by the Commissioner.
1.3.5 Section 73 of CGST and SGST Acts, 2017 (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 willful misstatement
or suppression of facts).
―(1) Where it appears to the proper officer
that any tax has not been paid or short
paid or erroneously refunded, or where
input tax credit has been wrongly availed
or utilised for any reason, other than the
reason of fraud or any willful misstatement
or suppression of facts to evade tax, he
shall serve notice on the person
chargeable with tax which has not been so
paid or which has been so short paid or to
whom the refund has erroneously been
made, or who has wrongly availed or
utilized input tax credit, requiring him to
show cause as to why he should not pay
the amount specified in the notice along
with interest payable thereon under section
50 and a penalty leviable under the
provisions of this Act or the rules made
thereunder.
EXHIBIT 3
(2) The proper officer shall issue the notice under sub-section (1) at least
three months prior to the time limit specified in sub-section (10) for issuance
of order.
(3) Where a notice has been issued for any period under sub-section (1), the
proper officer may serve a statement, containing the details of tax not paid or
short paid or erroneously refunded or input tax credit wrongly availed or
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utilised for such periods other than those covered under sub-section (1), on
the person chargeable with tax.
(4) The service of such statement shall be deemed to be service of notice on
such person under sub-section (1), subject to the condition that the grounds
relied upon for such tax periods other than those covered under sub-section
(1) are the same as are mentioned in the earlier notice.
(5) The person chargeable with tax may, before service of notice under subsection (1) or, as the case may be, the statement under sub-section (3), pay
the amount of tax along with interest payable thereon under section 50 on the
basis of his own ascertainment of such tax or the tax as ascertained by the
proper officer and inform the proper officer in writing of such payment.
(6) The proper officer, on receipt of such information, shall not serve any
notice under sub-section (1) or, as the case may be, the statement under subsection (3), in respect of the tax so paid or any penalty payable under the
provisions of this Act or the rules made thereunder.
(7) Where the proper officer is of the opinion that the amount paid under
subsection (5) falls short of the amount actually payable, he shall proceed to
issue the notice as provided for in sub-section (1) in respect of such amount
which falls short of the amount actually payable.
(8) Where any person chargeable with tax under sub-section (1) or subsection (3) pays the said tax along with interest payable under section 50
within thirty days of issue of show cause notice, no penalty shall be payable
and all proceedings in respect of the said notice shall be deemed to be
concluded. (9) The proper officer shall, after considering the representation, if
any, made by person chargeable with tax, determine the amount of tax,
interest and a penalty equivalent to ten per cent. of tax or ten thousand
rupees, whichever is higher, due from such person and issue an order.
Officers to assist proper officers. 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 willful misstatement or suppression of facts.
(10) The proper officer shall issue the order under sub-section (9) within three
years from the due date for furnishing of annual return for the financial year to
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which the tax not paid or short paid or input tax credit wrongly availed or
utilised relates to or within three years from the date of erroneous refund.
(11) Notwithstanding anything contained in sub-section (6) or sub-section (8),
penalty under sub-section (9) shall be payable where any amount of selfassessed tax or any amount collected as tax has not been paid within a
period of thirty days from the due date of payment of such tax.‖
1.3.6 Section 74 of CGST and SGST Acts, 2017 (Determination of tax
not paid or short paid or erroneously refunded or input tax credit wrongly
availed or utilised by reasons of fraud or any wilful mis-statement or
suppression of facts
―(1) Where it appears to the proper
officer that any tax has not been paid or
short paid or erroneously refunded or
where input tax credit has been wrongly
availed or utilised by reason of fraud, or
any willful misstatement or suppression
of facts to evade tax, he shall serve
notice on the person chargeable with tax
which has not been so paid or which
has been so short paid or to whom the
refund has erroneously been made, or
who has wrongly availed or utilised input
tax credit, requiring him to show cause
as to why he should not pay the amount
specified in the notice along with interest
payable thereon under section 50 and a
penalty equivalent to the tax specified in
the notice.
EXHIBIT 4
(2) The proper officer shall issue the notice under sub-section (1) at least six
months prior to the time limit specified in sub-section (10) for issuance of
order.
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(3) Where a notice has been issued for any period under sub-section (1), the
proper officer may serve a statement, containing the details of tax not paid or
short paid or erroneously refunded or input tax credit wrongly availed or
utilised for such periods other than those covered under sub-section (1), on
the person chargeable with tax.
(4) The service of statement under sub-section (3) shall be deemed to be
service of notice under sub-section (1) of section 73, subject to the condition
that the grounds relied upon in the said statement, except the ground of fraud,
or any willful-misstatement or suppression of facts to evade tax, for periods
other than those covered under subsection (1) are the same as are
mentioned in the earlier notice.
(5) The person chargeable with tax may, before service of notice under subsection (1), pay the amount of tax along with interest payable under section
50 and a penalty equivalent to fifteen per cent. of such tax on the basis of his
own ascertainment of such tax or the tax as ascertained by the proper officer
and inform the proper officer in writing of such payment.
(6) The proper officer, on receipt of such information, shall not serve any
notice under sub-section (1), in respect of the tax so paid or any penalty
payable under the provisions of this Act or the rules made thereunder.
(7) Where the proper officer is of the opinion that the amount paid under
subsection (5) falls short of the amount actually payable, he shall proceed to
issue the notice as provided for in sub-section (1) in respect of such amount
which falls short of the amount actually payable.
(8) Where any person chargeable with tax under sub-section (1) pays the said
tax along with interest payable under section 50 and a penalty equivalent to
twenty-five per cent. of such tax within thirty days of issue of the notice, all
proceedings in respect of the said notice shall be deemed to be concluded.
(9) The proper officer shall, after considering the representation, if any, made
by the person chargeable with tax, determine the amount of tax, interest and
penalty due from such person and issue an order.
(10) The proper officer shall issue the order under sub-section (9) within a
period of five years from the due date for furnishing of annual return for the
financial year to which the tax not paid or short paid or input tax credit wrongly
availed or utilised relates to or within five years from the date of erroneous
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refund. 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 willful
misstatement or suppression of facts.
(11) Where any person served with an order issued under sub-section (9)
pays the tax along with interest payable thereon under section 50 and a
penalty equivalent to fifty per cent. of such tax within thirty days of
communication of the order, all proceedings in respect of the said notice shall
be deemed to be concluded.
Explanation 1.—For the purposes of section 73 and this section, —
(i) the expression ―all proceedings in respect of the said notice‖ shall not
include proceedings under section 132;
(ii) where the notice under the same proceedings is issued to the main
person liable to pay tax and some other persons, and such proceedings
against the main person have been concluded under section 73 or section 74,
the proceedings against all the persons liable to pay penalty under sections
122, 125, 129 and 130 are deemed to be concluded.
Explanation 2. – For the purposes of this Act, the expression ―suppression‖
shall mean non-declaration of facts or information which a taxable person is
required to declare in the return, statement, report or any other document
furnished under this Act or the rules made thereunder, or failure to furnish any
information on being asked for, in writing, by the proper officer.‖
1.3.7 Section 75 of CGST and SGST Acts, 2017 (General provisions
relating to determination of tax).
―(1) Where the service of notice or issuance of order is stayed by an order of
a court or Appellate Tribunal, the period of such stay shall be excluded in
computing the period specified in sub-sections (2) and (10) of section 73 or
sub-sections (2) and (10) of section 74, as the case may be.
(2) Where any Appellate Authority or Appellate Tribunal or court concludes
that the notice issued under sub-section (1) of section 74 is not sustainable
for the reason that the charges of fraud or any willful misstatement or
suppression of facts to evade tax has not been established against the
person to whom the notice was issued, the proper officer shall determine the
tax payable by such person, deeming as if the notice were issued under subsection (1) of section 73.
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(3) Where any order is required to be issued in pursuance of the direction of
the Appellate Authority or Appellate Tribunal or a court, such order shall be
issued within two years from the date of communication of the said direction.
(4) An opportunity of hearing shall be granted where a request is received in
writing from the person chargeable with tax or penalty, or where any adverse
decision is contemplated against such person.
(5) The proper officer shall, if sufficient cause is shown by the person
chargeable with tax, grant time to the said person and adjourn the hearing for
reasons to be recorded in writing: Provided that no such adjournment shall be
granted for more than three times to a person during the proceedings.
(6) The proper officer, in his order, shall set out the relevant facts and the
basis of his decision.
(7) The amount of tax, interest and penalty demanded in the order shall not
be in excess of the amount specified in the notice and no demand shall be
confirmed on the grounds other than the grounds specified in the notice.
(8) Where the Appellate Authority or Appellate Tribunal or court modifies the
amount of tax determined by the proper officer, the amount of interest and
penalty shall stand modified accordingly, taking into account the amount of
tax so modified.
(9) The interest on the tax short paid or not paid shall be payable whether or
not specified in the order determining the tax liability.
(10) The adjudication proceedings shall be deemed to be concluded, if the
order is not issued within three years as provided for in sub-section (10) of
section 73 or within five years as provided for in sub-section (10) of section
74.
(11) An issue on which the Appellate Authority or the Appellate Tribunal or the
High Court has given its decision which is prejudicial to the interest of
revenue in some other proceedings and an appeal to the Appellate Tribunal
or the High Court or the Supreme Court against such decision of the
Appellate Authority or the Appellate Tribunal or the High Court is pending, the
period spent between the date of the decision of the Appellate Authority and
that of the Appellate Tribunal or the date of decision of the Appellate Tribunal
and that of the High Court or the date of the decision of the High Court and
that of the Supreme Court shall be excluded in computing the period referred
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to in sub-section (10) of section 73 or sub-section (10) of section 74 where
proceedings are initiated by way of issue of a show cause notice under the
said sections.
(12) Notwithstanding anything contained in
section 73 or section 74, where any amount of
self-assessed tax in accordance with a return
furnished under section 39 remains unpaid, either
wholly or partly, or any amount of interest payable
on such tax remains unpaid, the same shall be
recovered under the provisions of section 79.
EXHIBIT 5
(13) Where any penalty is imposed under section 73 or section 74, no penalty
for the same act or omission shall be imposed on the same person under any
other provision of this Act.‖
1.3.8 Section 76 of CGST and SGST Acts, 2017 (Tax collected but
not paid to the Government).
―(1) Notwithstanding anything to the contrary contained in any order or
direction of any Appellate Authority or Appellate Tribunal or court or in any
other provisions of this Act or the rules made thereunder or any other law for
the time being in force, every person who has collected from any other person
any amount as representing the tax under this Act, and has not paid the said
amount to the Government, shall forthwith pay the said amount to the
Government, irrespective of whether the supplies in respect of which such
amount was collected are taxable or not.
(2) Where any amount is required to be paid to the Government under subsection (1), and which has not been so paid, the proper officer may serve on
the person liable to pay such amount a notice requiring him to show cause as
to why the said amount as specified in the notice, should not be paid by him
to the Government and why a penalty equivalent to the amount specified in
the notice should not be imposed on him under the provisions of this Act.
(3) The proper officer shall, after considering the representation, if any, made
by the person on whom the notice is served under sub-section (2), determine
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the amount due from such person and thereupon such person shall pay the
amount so determined.
(4) The person referred to in subsection (1) shall in addition to paying
the amount referred to in sub-section
(1) or sub-section (3) also be liable to
pay interest thereon at the rate
specified under section 50 from the
date such amount was collected by
him to the date such amount is paid
by him to the Government. EXHIBIT 6
(5) An opportunity of hearing shall be granted where a request is received in
writing from the person to whom the notice was issued to show cause.
(6) The proper officer shall issue an order within one year from the date of
issue of the notice.
(7) Where the issuance of order is stayed by an order of the court or
Appellate Tribunal, the period of such stay shall be excluded in computing the
period of one year.
(8) The proper officer, in his order, shall set out the relevant facts and the
basis of his decision.
(9) The amount paid to the Government under sub-section (1) or sub-section
(3) shall be adjusted against the tax payable, if any, by the person in relation
to the supplies referred to in sub-section (1).
(10) Where any surplus is left after the adjustment under sub-section (9), the
amount of such surplus shall either be credited to the Fund or refunded to the
person who has borne the incidence of such amount.
(11) The person who has borne the incidence of the amount, may apply for
the refund of the same in accordance with the provisions of section 54.
1.3.9 Section 77 of CGST and SGST Acts, 2017 (Tax wrongfully
collected and paid to the Central Government or State Government).
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A registered person who has paid
the central tax and State tax on a
transaction considered by him to be
an intra-State supply, but which is
subsequently held to be an interState supply, shall be refunded the
amount of taxes so paid in such
manner and subject to such
conditions as may be prescribed.
EXHIBIT 7
(2) A registered person who has paid integrated tax on a transaction
considered by him to be an inter-State supply, but which is subsequently held
to be an intra-State supply, shall not be required to pay any interest on the
amount of State tax payable.
1.3.10 Section 78 of CGST and SGST Acts, 2017 (Initiation of recovery
proceedings).
―Any amount payable by a taxable
person in pursuance of an order
passed under this Act shall be
paid by such person within a
period of three months from the
date of service of such order
failing which recovery proceedings
shall be initiated: EXHIBIT 8
Provided that where the proper officer considers it expedient in the interest of
revenue, he may, for reasons to be recorded in writing, require the said
taxable person to make such payment within such period less than a period of
three months as may be specified by him.‖
1.3.11 Section 47 of CGST and SGST Acts, 2017 (Levy of late
fee).
―(1) Any registered person who fails to furnish the details of outward or inward
supplies required under section 37 or section 38 or returns required under
section 39 or section 45 by the due date shall pay a late fee of one hundred
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rupees for every day during which such failure continues subject to a
maximum amount of five thousand rupees.
(2) Any registered person who fails to furnish the return required under
section 44 by the due date shall be liable to pay a late fee of one hundred
rupees for every day during which such failure continues subject to a
maximum of an amount calculated at a quarter per cent. of his turnover in the
State.‖
1.3.12 Section 50 of CGST and SGST Acts, 2017 (Interest on
delayed payment of tax).
―(1) Every person who is liable to pay tax in accordance with the provisions of
this Act or the rules made thereunder, but fails to pay the tax or any part
thereof to the Government within the period prescribed, shall for the period for
which the tax or any part thereof remains unpaid, pay, on his own, interest at
such rate, not exceeding eighteen per cent., as may be notified by the
Government on the recommendations of the Council.
Provided that the interest on tax payable in respect of supplies made during a
tax period and declared in the return for the said period furnished after the
due date in accordance with the provisions of section 39, except where such
return is furnished after commencement of any proceedings under section 73
or section 74 in respect of the said period, shall be levied on that portion of
the tax that is paid by debiting the electronic cash ledger. [Proviso inserted
on 01.09.2020 w-e-f 01.07.2017]
(2) The interest under sub-section (1) shall be calculated, in such manner as
may be prescribed, from the day succeeding the day on which such tax was
due to be paid.‖
(3) Where the input tax credit has been wrongly availed and utilised, the
registered person shall pay interest on such input tax credit wrongly availed
and utilised, at such rate not exceeding twenty-four per cent. as may be
notified by the Government, on the recommendations of the Council, and the
interest shall be calculated, in such manner as may be prescribed."
[Sub-sec (3) has been amended retrospectively as above as per the Finance
Act, 2022].
1.3.13 Section 122 of CGST and SGST Acts, 2017.
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“Section 122. (1) Where a taxable person who––
(i) supplies any goods or services or both without issue of any invoice or
issues an incorrect or false invoice with regard to any such supply;
(ii) issues any invoice or bill without supply of goods or services or both in
violation of the provisions of this Act or the rules made thereunder;
(iii) collects any amount as tax but fails to pay the same to the Government
beyond a period of three months from the date on which such payment
becomes due;
(iv) collects any tax in contravention of the provisions of this Act but fails to
pay the same to the Government beyond a period of three months from the
date on which such payment becomes due;
(v) fails to deduct the tax in accordance with the provisions of sub-section (1)
of section 51, or deducts an amount which is less than the amount required to
be deducted under the said sub-section, or where he fails to pay to the
Government under sub-section (2) thereof, the amount deducted as tax;
(vi) fails to collect tax in accordance with the provisions of sub-section (1) of
section 52, or collects an amount which is less than the amount required to be
collected under the said sub-section or where he fails to pay to the
Government the amount collected as tax under sub-section (3) of section 52;
(vii) takes or utilises input tax credit without actual receipt of goods or services
or both either fully or partially, in contravention of the provisions of this Act or
the rules made thereunder;
(viii) fraudulently obtains refund of tax under this Act;
(ix) takes or distributes input tax credit in contravention of section 20, or the
rules made thereunder;
(x) falsifies or substitutes financial records or produces fake accounts or
documents or furnishes any false information or return with an intention to
evade payment of tax due under this Act;
(xi) is liable to be registered under this Act but fails to obtain registration;
(xii) furnishes any false information with regard to registration particulars,
either at the time of applying for registration, or subsequently;
(xiii) obstructs or prevents any officer in discharge of his duties under this Act;
(xiv) transports any taxable goods without the cover of documents as may be
specified in this behalf;
(xv) suppresses his turnover leading to evasion of tax under this Act;
(xvi) fails to keep, maintain or retain books of account and other documents in
accordance with the provisions of this Act or the rules made thereunder;
(xvii) fails to furnish information or documents called for by an officer in
accordance with the provisions of this Act or the rules made thereunder
or furnishes false information or documents during any proceedings
under this Act;
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(xviii) supplies, transports or stores any goods which he has reasons to
believe are liable to confiscation under this Act;
(xix) issues any invoice or document by using the registration number of
another registered person;
(xx) tampers with, or destroys any material evidence or document;
(xxi) disposes off or tampers with any goods that have been detained, seized,
or attached under this Act,
he shall be liable to pay a penalty of ten thousand rupees or an amount
equivalent to the tax evaded or the tax not deducted under section 51 or short
deducted or deducted but not paid to the Government or tax not collected
under section 52 or short collected or collected but not paid to the
Government or input tax credit availed of or passed on or distributed
irregularly, or the refund claimed fraudulently, whichever is higher.
(2) Any registered person who supplies any goods or services or both on
which any tax has not been paid or short-paid or erroneously refunded, or
where the input tax credit has been wrongly availed or utilised,—
(a) for any reason, other than the reason of fraud or any wilful misstatement
or suppression of facts to evade tax, shall be liable to a penalty of ten
thousand rupees or ten per cent. of the tax due from such person, whichever
is higher;
(b) for reason of fraud or any wilful misstatement or suppression of facts to
evade tax, shall be liable to a penalty equal to ten thousand rupees or the tax
due from such person, whichever is higher.
(3) Any person who––
(a) aids or abets any of the offences specified in clauses (i) to (xxi) of subsection (1);
(b) acquires possession of, or in any way concerns himself in transporting,
removing, depositing, keeping, concealing, supplying, or purchasing or in any
other manner deals with any goods which he knows or has reasons to believe
are liable to confiscation under this Act or the rules made thereunder;
(c) receives or is in any way concerned with the supply of, or in any other
manner deals with any supply of services which he knows or has reasons to
believe are in contravention of any provisions of this Act or the rules made
thereunder;
(d) fails to appear before the officer of central tax, when issued with a
summon for appearance to give evidence or produce a document in an
inquiry;
(e) fails to issue invoice in accordance with the provisions of this Act or the
rules made thereunder or fails to account for an invoice in his books of
account, shall be liable to a penalty which may extend to twenty-five thousand
rupees.
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1.3.14 Section 125 of CGST and SGST Acts, 2017 (General
penalty).
―Any person, who contravenes any of the provisions of this Act or any rules
made thereunder for which no penalty is separately provided for in this Act,
shall be liable to a penalty which may extend to twenty five thousand rupees.‖
1.3.15 In addition to the provisions above, auditors must bear
certain other provisions in mind. These are summarized below:-
Sec Section Heading Rules Remarks
7 & 8 Supply, Composite and
mixed supply Schedule I, II and III
12 Time of Supply of Goods
Advance payment has been
delinked from time of supply
in case of supply of goods.
13 Time of Supply of Service
Notification no.06/2019 –
CT(R) in respect of time of
supply of services in
respect of any TDR/FSI
received by a promoter.
14 Time in case of change in
rate of tax.
15 Value of Taxable Supply 27 to 35 Determination of Value of
Supply
16,17,1
8,
19 & 20
Input Tax Credit 36 to 45 Rules related to ITC and
ISD
31 Tax Invoice
46 to 55A
Tax Invoice, Credit and
Debit Notes
34 Credit & Debit Notes
35 Accounts and other
records 56 to 58 Accounts and Records
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37 to
39 Statements and Returns 59 & 61
44 Annual Return 80
Annual return and
Reconciliation Statement
(GSTR 9, 9A, 9B, 9C)
49
Payment of tax,
interest, penalty and
other amounts.
85 to
88A Payment of Tax
54 Refund of tax
89 to 97A &
updated
Circulars
Master Circular no.
125/44/2019-GST
dt.18.11.2019 &
135/05/2020-GST
dt.31.3.2020
71 Access to business
premises
73 &
74
Determination of tax not
paid or short paid
Rule 142 Demand & Recovery
76 Tax collected but not paid
to the Government
1.4 An Audit Officer should always check the amended provisions of
the Act and Rules made there under and apply provisions applicable for the
period under audit.
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CHAPTER 2
This chapter covers intended audience, purpose of the manual, aims and
objectives of audit, principles of audit, dealing with the auditee, rights and
obligations of the auditee, and pre-requisites of an audit officer.
2.1 Intended Audience
Every document, especially one
such as this, is intended for an
audience. The Model GSTAM is
intended to benefit GST Audit
authorities, supervisory officers,
audit team leaders, and
individual auditors.
This Manual should be used in
conjunction with statutory
provisions, other Standard
Operating Procedures of
respective GST administrations,
circulars, notifications, and
relevant case law.
2.2 Purpose of this Manual
The All-India Model GST Audit
Manual is intended to be a
comprehensive document which
would be helpful for the audit
teams of the Centre and the
States/UTs throughout the entire
process of selection of taxpayers
for audit till the completion of
audit in an efficient and effective
manner.
EXHIBIT 9
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Audit in GST should verify the correctness of the facts and figures declared in
the returns vis-a-vis books of accounts and returns filed by the taxpayers.
Self- assessed declarations may contain hidden deviations. These deviations
may be the result of omission, error, or deliberate action by a taxpayer. The
Manual aims to play an important role in detection of non-compliances, if any,
in the self-assessed declarations. However, such deviations may also be
mere technical in nature without having any real revenue impact. The
approach to be adopted in such cases would also be dealt with in this
manual. This manual discusses methods,- (i) of looking into the aspects that
demand meticulous attention, (ii) for preparation of an effective pre-audit
desk review before the audit actually commences and (iii) for conducting a
quality audit under GST that would not only monitor compliance of the
taxpayers but would also successfully achieve the goal of revenue
augmentation. The manual also suggests the need for an appropriate
organizational structure so that audit officers can place their findings before
an appropriate higher authority. This would help the audit officer in preparing
a proper audit plan and conducting audit as per the plan. The Commissioner
and other supervisory officers would also be updated with the progress of
audits through an institutional arrangement enabling transparency,
accountability, and organizational learning.
The approach towards a particular auditee may vary depending upon the
study of that Auditee. The main objective here is to identify the areas where
non- compliance or wrong interpretation of the law may have occurred
resulting in less payment or non-payment of taxes, interest, late fees, etc.
Identification of such areas will prevent the auditee from continuing with such
deviations which result in erroneous declaration of self-assessed liability.
2.3 Aims and objectives of Audit
Audit in GST should intend to evaluate the credibility of self-assessed tax
liability of a taxpayer based on the twin test of accuracy of their declarations
and the accounts maintained by the taxpayer. Thus, Audit in GST should
have the following objectives:
 Measurement of compliance levels with reference to compliance
strategy of the tax administration.
 Detection of non-compliance and revenue realization
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 Prevention of non-compliance in the future.
 Discovering areas of non-compliance to prevent taxpayers from
continuing with such deviations from expected compliance behaviour
that results in erroneous declaration of self-assessed liability.
 Providing inputs for corrections in/amendments to the legal framework
which are being exploited by taxpayers to avoid paying taxes.
 Encouraging voluntary compliance.
 Any other goals deemed worth pursuing by the GST administration.
2.4 Principles of audit
An important objective of GST audit is to measure the level of compliance of
the auditee in the light of the provisions of the GST Act(s) and the rules made
thereunder. Audit should be consistent with Notifications / Circulars / Orders
issued from time to time.
GST audit should be teamwork where the Audit officer (Team Leader) leads
and conducts the audit and prepares the audit report with the assistance of
team members. This entire work process would involve a series of activities
including pre-audit desk review to identify high-risk areas, preparation of a
sound audit plan, approval / sanction of the audit plan by an appropriate
higher authority, conducting audit within prescribed time limits and other
performance parameters and ensuring consistently high audit standards.
The following principles should guide the audit process:-
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1. Adherence to risk factors developed through a
targeting strategy with the approval of the
Commissioner/other appropriate authority.
2. Consistency with Departmental Circulars and
using professional methodology.
3. Chalk out a sound pre-audit plan/audit program
and conduct the audit accordingly.
4. Emphasize a systematic, flexible and penetrative
audit.
5. Regular review of the audit plan and progress
and modification of the audit program whenever
necessary.
6. Concentrate on scrutiny of returns and records,
the degree of which will depend on the identified risk
areas.
7. Identify the veracity of turnover declared, taxes
paid, refund claimed and received, input tax credit
(ITC)availed, assessment of compliances as per the
provisions of the GST Act(s) and the Rules made
thereunder with particular focus on the
aspects/transactions/activities of the taxpayer which
led to his being selected for audit.
EXHIBIT 10
8. Record the proceedings of audit and findings thereof.
9. Provide a fair opportunity to the auditee to be heard and to submit their
contention.
10. Carry out audit while adhering to high standards of professional
conduct.
11. Implement a feedback mechanism with the objective of measuring the
taxpayer‘s experience of audit and for validation of targeting parameters.
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2.5 Dealing with the auditee
The main objective of the
audit is to quantify shortfall
of revenue in a cost
effective and transparent
manner. The attitude of the
officer conducting the audit
should reflect this. Audit
officers should be aware
that they are the main
channel of communication
between the department
and the auditee.
EXHIBIT 11
The officer conducting audit should maintain a good professional relationship
with the auditee. She/ He should recognize the rights of the auditees, such as
uniform and transparent application of law and their right to be treated with
courtesy and consideration. The audit officer should explain that a tax
compliant auditee may reap a number of benefits from an audit, such as: -
1. They will be better equipped to comply with the laws and the relevant
procedures.
2. The preparation of prescribed returns and self-assessment of Goods
and Services Tax will be better focused, correct and complete.
3. The scrutiny of business accounts and returns submitted to various
authorities, made in the course of an audit would help in removing any
deficiency in their accounting and internal control systems.
4. Disputes and proceedings against them would be substantially reduced
or even eliminated.
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2.6 Rights and Obligations of the auditee
Tax administrations should consider
implementing a Charter of rights and duties
of taxpayers with regard to audit and
publishing the same through measures of
taxpayer engagement. Ideally, these should
be aligned with the service delivery
standards of the GST Administration.
During the course of audit, the authorised
officer may ask the registered person to
provide him/her necessary facility to verify
the books of account or other documents as
he/she may require, and to furnish such
information as he/she may require and
render assistance for timely completion of
audit. [Sec 65(5)].
EXHIBIT 12
2.7 Pre-requisites of an audit officer
An audit officer, acting in close coordination with other members of his/her
team and supervisory officers, is the lynchpin of an effective audit and should
be equipped with a number of skills and relevant knowledge. These are
summarized below. An audit officer should be able to answer the questions
pertinent to a particular area of legal, technical, and interpersonal skill and
knowledge. A list of competencies and an illustrative list of questions is given
below:-
Area of Competence
(Skill-set/ Knowledge) Illustrative Questions
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1
Have a well-drafted preplan for identifying areas
of concern.
● What to examine?
● How to examine?
2
Be well aware of the
procedural aspects.
● Is the Officer well aware of the online/offline Audit
modules?
● Is the Officer aware of the departmental guidelines?
● Have all the points noted in the audit plan been
covered?
● Is the officer aware of the workflow and
documentation/ recording system followed by the auditee?
3
Possess legal knowledge
of legal provisions,
changes in law,
notifications, circulars,
relevant case law, rates.
● Is the officer well aware of the legal provisions and
changes thereto?
● Is there any specific guideline in any circular?
● Are there any court judgements that are applicable?
4
Possess knowledge of the
industry / sector in which
the taxpayer is active.
● Does the officer have a primary knowledge about
the business pattern of the auditee with respect to the
auditee‘s particular trade & industry?
● Is the audit officer aware of the existing trade
practices, conventions, and market trends?
● Section 133 of the Companies Act, 2013 read with
Rule 7 of the Companies (Accounts) Rules, 2014 provides
that the Final Accounts should comply with the Accounting
Standards. Does the audit officer possess the knowledge of
the prevalent Indian Accounting Standards?
5 Be able to compute dues.
● If the auditee is willing to deposit the dues, what to
do?
● If the auditee is not willing to deposit the dues in
accordance with the audit report, what are the next steps?

6 Skills for taxpayer
engagement
● Is the audit officer unbiased and judicious in the
course of audit?
● Is he/she tactful to gain the goodwill and confidence
of the auditee and act as a motivator and a facilitator who
ensures voluntary compliance?
● Does the auditor record technical lapses by the
auditee which do not have any revenue implication, and
have occurred due to oversight or ignorance, and ignore
them on merit? Does the auditor discuss these with the
auditee to improve the quality of compliance and make
internal controls more robust?
● Does the auditor apprise the auditee of the
provisions of the GST Act, Rules, and relevant notifications,
circulars, and court decisions to encourage the taxpayer to
make voluntary payment in the course of audit?
● Is the auditor transparent and discuss any
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discrepancies found in the course of audit with the auditee?
● Does the auditor give auditee an opportunity for
filing his/her explanation in respect of such discrepancies
as intimated by the auditor and consider all the
explanations and documents provided by the auditee
regarding the points of dispute before drawing the Final
Audit Report?
● Does the auditor consult his/her immediate
functional head to resolve any issue in the course of the
audit?
● Does the auditor inform his/her immediate
supervisory officer of any lack of co-operation or deliberate
failure to provide information and records by the auditee
and follow it up with a written report?
● Does the auditor preserve all the important
documents submitted by the auditee in the course of audit
which are relevant to findings as office records, preferably
in electronic format?
● Does the auditor maintain confidentiality in respect
of sensitive and confidential information furnished in the
course of audit?
Some important areas in which an auditor should check levels of compliance
of the auditee are given in Exhibit – 13 below:
EXHIBIT 13
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An attempt has been made to address the aforesaid issues in this Manual.
While this Manual seeks to propose principles and procedures for audit, GST
administrations have to ensure that skilled auditors are trained and deployed
in adequate numbers to meet organisational requirements.
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CHAPTER 3
This Chapter covers the audit flowchart, different steps of audit, selection of
taxpayers for audit, team formation and assignment and allocation audit to
audit teams. This chapter also contains the gist of the proposal submitted by
the sub-committee ―on using the capability of Data Analytic developed by
DGARM for identification of State Taxpayers for Audit‖.
3.1 While GST Audit is a highly skilled exercise, it can also be conceived as
a logical workflow of steps. These are summarised in the audit flow-chart
below. Each of the steps is elaborated in the subsequent sections.
Audit Selection: RTP for audit for a financial year or part or multiple thereof
may be selected by Commissioner / appropriate authority based on targeting
parameters /local factors developed in-house.
Allotment of selected RTP: The selected RTPs may be distributed to the
respective jurisdictional officer. Allocation should be consistent with audit norms
(no. of days to audit a RTP, size of each RTP audit capacity, etc.).
Issuance of notice for audit: The audit officer should issue FORM GST
ADT - 01 fixing the date of audit. A Master File should be maintained in respect
of each auditee, which should be updated before the commencement of audit.
Pre-audit desk review: Basic ground work to chalk out the lines along which
a particular audit will progress as well as to identify areas where audit attention
should be concentrated for maximum yield.
Preparation and approval of audit plan: Based on desk review, the audit team
should prepare an audit plan and place it before the proper higher authority for
approval. Any necessary modification may be done by the higher authority if
required.
Commencement of audit: The date on which the records /documents are
made available by the registered person or the actual institution of audit at the
place of business constitute commencement of audit. Prior identification of the
sources of relevant data would lighten the burden of compliance on the
auditee. Every GST Administration should consider publishing a white list of
documents already available with the department which should not be called
for from the taxpayers. This list can be shared with the auditee to emphasise
the collaborative and facilitatory nature of audit
Examination: In-depth checking of the records /documents/ books made
available by the registered person during audit. ―Original copies of documents
like invoices, etc. may be called for only if deemed vital for being
examined/subjected to close scrutiny by the audit team‖.
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Communication of discrepancies found: The observations made upon audit
are to be communicated to the auditee in writing. The auditee should be
allowed due opportunity for filing his explanation in respect of discrepancies
intimated by the department.
Preparation and approval of Draft Audit Report (DAR): Drawing up a DAR
containing the observations made in the course of audit after considering
explanations & documents provided by the auditee in respect of such
discrepancies and approval of the same by the appropriate higher authority. A
mechanism like Monitoring Committee Meeting should be established to
decide each audit para.
Preparation of Final Audit Report: After approval, a final report is to be drawn
up and issued to the auditee.
Audit consequences: i. Closure of audit (in case the observations are
admitted by the RTP and the amount short paid as indicated is paid) or ii.
initiation of demand and recovery proceedings by issuance of show cause
notice u/s. 73/74. A mechanism should be implemented to ensure that show
cause notices are issued within the prescribed time limit
3.2 Different Steps of audit
3.2.1 Selection for audit
Statutory provisions: As per the provisions of section 65(1) of the Act read
with rule 101(1) of the Rules (p.14), the Commissioner or any officer
authorised by him, by way of a general or a specific order, may undertake
audit of any registered person for a financial year or part thereof or
multiples thereof. The Commissioner by a general or specific order may
select any registered person for audit of his books of accounts for a
specific period.
Importance of risk-based selection: The principle of risk-based audit
envisages selection of taxpayers for audit based on certain risk
parameters. Ascertaining the risk profile of the auditees based on a
scientific approach is vital for selection of audit. Audit selection is a
dynamic process where the experience of audit in each year plays a vital
role in modifying the selection criteria. Some aspects of such risk profile
assessment are discussed in this section.
Selection criteria for risk-based selection of auditees: are developed in
response to a certain compliance environment and aggregate compliance
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behaviour, as well as yield of past selection criteria. Hence, no selection
criteria can be set in stone.
However, certain representative selection criteria as well as certain broad
areas from which selection criteria can be chosen are briefly discussed below:
Selection based on Risk Parameters: The list of potential high risk
taxpayers may be prepared by selecting one or multiple criteria under
different major risk heads from the available options, viz. :
EXHIBIT-14
Specific benchmarks may be fixed against the risk criteria for each of the
major heads. Some major heads are discussed below:-
 Entity level risks (e.g. Turnover, Tax, ITC, Refund, Commodity such as
Iron & Steel, Paints & Chemicals, Textiles, Cement, Medicine, Footwear,
Branded food grain, Automobiles etc., Service: Works contract, Real
Estate, Information Technology, Consultancy service, Manpower service,
Hospitality, Travel & Tourism, Leasing etc.).
 Risks associated with compliance behaviour (e.g. late filer of return,
non-submission of Form GSTR-1, Form GSTR-3B, Form GSTR-9 & Form
GSTR-9C).
 Various ratios, e.g.
o Taxable turnover: Exempted turnover
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o Export/SEZ turnover/ total turnover (except in case of export houses)
o Output tax : Input tax
o Cash payment: Output tax
o Set-of using e-credit ledger : Set-of using e-cash ledger
o Inter-state supply: Intra-state supply etc.
 Exceptional Reports e.g.
o ITC claimed in Form GSTR-3B vs. ITC auto-populated in Form GSTR2A/GSTR-2B
o Turnover declared in Form GSTR-3B vis-à-vis Form GSTR-1
o claim of ITC from cancelled RTPs, aggregate turnover in GST return
vis-à-vis Turnover disclosed in Income Tax return
o Turnover declared by RTP in Form GSTR-3B compared to turnover on
which TDS deducted as reflected in Form GSTR-7 submitted by TDS
deductor
o Turnover declared by RTP in Form GSTR-3B compared to turnover on
which TCS collected as reflected in Form GSTR-8 submitted by TCS
collector
o Turnover declared by RTP in Form GSTR-3B compared to minimum
turnover expected on the basis of e-way bills generated in respect of the
said RTP
o Refund-claim against purchase from taxpayer having no autopopulation of ITC in Form GSTR-2A
o purchases from non-existent RTPs
o RTPs having adverse reports in VAT/Service Tax/Central Excise who
are operative in GST etc.)
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Some of the steps and broad principles that may be followed for
selection are given below:-
A. Taxpayers under the State/Central jurisdiction, i.e. the taxpayers who
are required to file Form GSTR- 3B and Form GSTR-1, may be selected by
the respective Commissioner.
B. Those tax-payers who have filed at least such a minimum number of
returns as the administration would decide, in the financial year or those who
have been granted a refund beyond a certain amount may be selected.
C. The taxpayers‘ pool may be divided into 3 segments namely Large,
Medium & Small based on turnover, or on some other logical criterion.
D. All risk parameters are required to be identified and all probable aspects
need to be considered to identify non-compliance and non-payment / short
payment of tax, interest, late fee, penalty etc. and evasion of tax.
E. To select taxpayers for audit in an effective manner, secondary data
sources (such as VAT/Service Tax/Central Excise/Custom data, Income Tax
data etc.) may be also considered and referred to along with the primary data
sources (i.e. GST data).
F. The weightage of each parameter may vary depending upon its
importance in selection of taxpayers for audit as well as effectiveness of risk
parameters chosen in the preceding Financial Year (s).
G. Based on the average weight considering all the parameters, a final
score may be calculated on the basis of which the final selection may be
done.
H. The final selection of taxpayers to be audited may be done based on
the descending order of the final score thus calculated. In case, more than
one RTP has the same final score, the parameter of declared liability may
then be considered and a taxpayer with more declared liability may be
selected first.
I. A Selection Committee may be constituted to identify various risk
parameters for selection for audit, considering all the aspects where there are
chances of lack of compliance with the Act resulting in short payment of tax
etc. such as:
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J. The final score may be calculated based on the data for each financial
year and the parameters as well as the weightage adopted may undergo
necessary modifications if required.
K. In case the RTP selected for audit has multiple registrations under the
same PAN / TAN in the State, it is suggested that all such registration
numbers may be selected for audit.
L. A certain percentage of the selection of the taxpayers may be done on a
random basis. The percentage may be fixed by an audit administration based
on their audit strategy. Random samples can serve as useful controls and
uncover latent compliance issues.
M. A certain percentage of taxpayers can also be selected for audit based
on local parameters such as intelligence inputs, past compliance behaviour,
etc.
N. Suo-motu selection: If an officer comes across any specific information
relating to a RTP and has specific reasons to believe that Audit of the said
RTP‘s books of accounts is required to be done for one or more financial
years, or, if any audit officer in the course of audit has specific reasons to
believe that an observation made upon audit will have revenue impacts in
other periods also, he/she may send a proposal in this regard to the
Commissioner/appropriate authority. Similarly, an audit officer or his/her
higher authority can propose an audit of a taxpayer for adequate reasons
which are recorded in writing. The Commissioner/appropriate authority upon
consideration of all such proposals may select some/all of such RTPs for
audit. GSTN has developed a module to facilitate such proposals for suo
motu selection of any taxpayer for audit.
3.2.2 Administrative / procedural arrangements for risk-based selection
of auditees:
The practice for risk-based selection varies between the Centre and the
States. Any GST Administration which intends to implement risk-based
selection of RTPs for audit has multiple options before them.
● In States, the Commissioner may fix the criteria of selection based on
certain parameters as the Commissioner deems fit.
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● In CGST, the Central Board of Indirect Taxes and Customs has
mentioned in their GST Audit Manual that the selection of registered persons
for them would be done based on the risk evaluation method prescribed by
the Directorate General of Audit (DGA) in consultation with the Directorate
General of Analytics and Risk Management (DGARM). The risk evaluation
method as well as RTPs selected for audit is separately communicated to the
Audit Commissionerates during the month of January/February of every year.
The risk assessment function is jointly handled by the Directorate General of
Audit and the Risk Management section of the GST Audit Commissionerates,
as the latter are also at liberty to select a certain percentage of RTPs for audit
based on local risk parameters.
● Any State GST administration can also request the DGARM for
selection of taxpayers for the State for audit u/s.65 by using expertise of the
DGARM. A State GST administration can also request the DGARM to share
the targeting criteria with them.
● GSTN has also provided a targeting methodology based on assigning
risk weight to different taxpayers as per their past compliance behaviour and
other thresholds. State GST administrations may also refer to the same if they
so wish.
● Certain State GST Administrations, such as Karnataka, have developed
methodologies for targeting RTPs for audit. Their expertise is also available to
other GST administrations upon request.
3.2.3 Allotment of selected RTP
Statutory provisions: It may be recalled that per provisions of sec 65(1) of the
Act read with rule 101(1) of the Rules, any officer who is authorized by the
Commissioner has the power to conduct an audit (P.14)
Decision not to audit: If the audit administration feels that an audit of a
particular taxpayer need not be carried out, the case can be dropped. In order
to drop an audit case, proper and adequate reasons are required to be given
along with documents the reasons for dropping the same.
Allocation of auditees:
After audit selection, the list of selected RTPs may be made available to the
jurisdictional proper officers through the functional hierarchy. The practice
varies between state and central GST administrations.
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State GST: In the State GST administrations, selected cases are allocated to
the Zonal level audit head. The system provides facility to the Commissioner
i.e. the HQ level to allocate Taxpayers of a particular Zone to that Zonal level
Head. In the case of already allocated Taxpayer(s), if the HQ officer wants to
modify the Zonal officer, he/she may do so after recording reasons for such
change.
Central GST: In CGST, Audit Commissioners allocate taxpayers selected for
audit (by the list developed by DGARM and DG (Audit) and a list based on
local risk parameters) to audit circles and circle in-charges further allocate
auditees to audit groups. The Audit Module developed by the CBIC allows
allocation of auditees across the entire functional hierarchy.
Audit modules: The Audit Modules provide a way to leverage IT for better
audit planning, conduct of audit and audit monitoring. Audit Modules
developed by the CBIC permit assignment of auditees. A module developed
by GSTN also permits assignment of auditees to Audit Officers. Some
States have also automated this function in their respective Audit Modules.
3.2.4 Assignment & team formation for audit:
1. After allocation, the next step is to assign the selected taxpayer to the
officers of the Audit Team, who will finally carry out the audit. Normally, such
assignment and team formation will be done by the Zonal officer. However,
the same functionality has also been provided to the HQ Officer. So, the HQ
Officer, if he/she desires, can also assign the Audit Team Lead and Audit
Team Members on his/her own.
2. The allocating officer can fetch a list of allocated taxpayers which are
pending for assignment. The allocation process involves the following steps:-
A. Assign Audit Team Lead – The HQ/Zonal Officer, while assigning a
Taxpayer for Audit to a particular ‗Team lead‘ can view the existing
assignments i.e. number of audit cases assigned to that particular officer.
This will help him to assign taxpayers keeping in view the existing workload
on an audit officer and thereby maintain uniformity in work load on the audit
officers in his/her jurisdiction. At any stage, if a need for change of Team
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Lead arises, the same can be done through the system by reassigning such
role to another officer in the jurisdiction.
B. Assign Audit Team Members – After assigning the Team Lead, the
HQ/Zonal officer can go for assigning the Team Members. The names of the
available officers along with their designation and existing work allocation can
be viewed on the system and maintaining uniformity in work allocation, Team
members can also be assigned. If needed, Team Members can also be
changed with other available officers.
The RTPs relating to a particular jurisdiction on being selected for Audit may
be allotted by the jurisdictional head to next junior level Officers having
functional role of Audit and/or Adjudication in that particular jurisdiction (in
some jurisdictions the audit officer may not have adjudicating authority). In the
CBIC Audit Module, this step has been automated.
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Chapter 4
This Chapter covers preparatory activities prior to audit, starting with seeking
information from the auditee, audit planning and preparation, including Desk
Review, and formulation Audit Plan.
4.1 Seeking information:
Maintaining a Master File of the RTP:
The Department may maintain certain information relating to the selected
RTP in the format named as ―Tax payer at a Glance (TAG)‖ or a Registered
Person Master File (RPMF).
This TAG contains the basic
profiling of the selected RTP in
respect of registration, returns,
ITC, payment of tax, and any
other pertinent information (e.g.
exceptional reports). The officer
can also examine GSTR 9 &
GSTR 9C and Balance Sheet, if
available.
An updated Master File will
minimise the information that the
audit officer seeks from the
taxpayer, increasing the ease of
audit for auditor and taxpayer
alike.
EXHIBIT 15
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4.2 Issuance of Notice in FORM GST ADT-01:
Once the file is allotted to a particular Audit officer/Audit Team, a notice for
conducting the audit is to be issued to the auditee in FORM GST ADT-01.
The format of GST ADT-01 is provided in this manual as Annexure – 1
(p.97). Intimation of audit (i.e. ADT-01) is to be issued to the taxable person
at least 15 days in advance prior to the conduct of audit. [Sec 65(3), Rule
101(2)]. Form GST ADT–01 preferably should be issued within five (05)
working days of allotment of files to an audit team or audit officer.
It has been observed that asking for all the books of accounts and records
from an auditee with a large volume of business on the very first day of audit
causes inconvenience for both the auditee and the auditor. It is difficult and
impractical for an audit officer to examine all the documents with equal
importance on one single occasion.
As a result, it would be prudent to ask a RTP to keep all his Books of
Accounts and records ready to be made available for examination during the
course of audit and to produce those in a staggered manner as decided by
the audit officer. For example, the Audit Officer may ask for the first set of
documents on the first day of hearing which is required for a thorough study
of the annual business performances of the RTP, by issuing a separate letter
along with the FORM GST ADT-01. This will help the Audit officer to chalk out
an effective audit plan.
While directing furnishing of accounts/books/documents, the team/officer
should also factor in the risk factor/s leading to the selection of the particular
RTP and focus more on such aspects as may have contributed to the
particular risk profile associated with that particular taxpayer. For instance, if it
is found that a particular taxpayer got selected primarily on account of a very
low cash pay-out, the audit team should focus more on the credit claims, the
origin of such credit claims, the documentation, the authenticity of the vendors
of the selected taxpayer, the break-up of categories of supplies on which
credit has been claimed, the value addition profile, the inventory position, etc.
Accordingly, the demand for records/documents/accounts should
appropriately reflect this.
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However, in cases, where the volume of business is not significant, the
relevant documents and records may be asked to be produced on the first
day of hearing as scheduled in FORM GST ADT-01.
Furthermore, the Audit Officer may send –
 a letter seeking mutual assistance to complete the audit in a focused
manner (A sample of the letter is given in Annexure -2 (p.98)
 a questionnaire to the RTP for providing information required for audit
(A sample of the same is given in Annexure -3 (p.100)
 a list of documents / statements and books of accounts to be produced
for the purpose of audit. (A sample of the list is given in Annexure -4
(p.104).
This questionnaire will help both the auditee and auditor to complete the audit
process in a focused and planned manner. The questionnaire should
incorporate queries relating to assessment of the business process of the
auditee, the documentation process, the scheme of recording of documents in
the accounts, and most important, the internal control put into place by the
auditee. These questions should help the auditor to assess the overall
soundness of the accounting system followed by the auditee, the areas of
weakness which could indicate the nature of transactions which should be
subjected to a deeper examination by the audit team.
It is needless to say that the questionnaire will change according to the need
of the concerned case. The questionnaire should be issued as attachment
with FORM GST ADT - 01.
On production of such documents and records by the RTP on the first date of
audit as per FORM GST ADT-01, audit will commence and the Audit officer
will start chalking out the audit plan.
The remaining books of accounts, ledgers, statements, documents, records,
etc. may be asked from time to time on the basis of the audit plan in the
respective case. A letter may be attached/uploaded with the FORM GST ADT
– 01 along with the questionnaire.
Observance of the following principles is suggested while seeking information
from the auditees.
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 Avoid making repeated requests for information.
 Obtain as much information as possible from the data sources available
in the system.
 Seek information only with respect to areas of audit‘s interest.
 Develop a white list of documents, to be shared with the taxpayers that
would not be sought for from the taxpayers.
 Avoid asking for original copies of invoices/debit-credit/notes, as far as
possible; further, ALL/complete set of all invoices issued/received may
also not be insisted on, particularly in large taxpayers
 Documents and transactions should be scanned/examined thoroughly on
the basis of sampling and the sample should be drawn based on a
careful consideration of the implicit risk areas/revenue implication.
4.3 Pre-audit desk review

EXHIBIT-16
This is the first phase of the audit programme done in the office by the audit
officer. This process needs to be completed by the Audit Officer before the
first date of appearance of the auditee as per FORM GST ADT-01. The idea
behind this process is that the Audit Officer would get accustomed with the
nature of business of the auditee vis-a-vis information available with her/him.
Analyse the
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Upon studying this information, the audit team and its members should
have clarity about the following: -
 Reason(s) for selection.
 Profile of the auditee with details of ownership, numbers of registered
persons under the same PAN within the State, principal and additional
places of business, migration status (if any), business trends and
compliance level of the RTP in the pre-GST period as well as in the
GST regime, business trend of the RTP vis-à-vis trends of the industry
etc.
 Broad types of supply involved (i.e., resale, manufacturing, export,
import, service, works contract, job work, ISD, etc.).
 Business pattern of the auditee i.e. nature of goods and/or
services dealt along with classification (e.g. importer of medicine,
exporter of leather goods, reseller of iron & steel, manufacturer of jute
goods, restaurant service, manpower supply, travel agent, aviation,
transport, etc.).
 Return filing & tax compliance pattern of the auditee in GST for the
period under audit. If any irregularity is found in submission of Return,
the Audit Officer should calculate the Late Fees & Interest payable
at the desk-review stage itself. Furthermore, there may be chances of
mismatch of Turnover and Tax as disclosed in Form GSTR-3B vis-à-vis
Form GSTR-1. Similarly, there may be a mismatch between ITC
claimed in Form GSTR-3B vis-à-vis ITC auto-populated in Form GSTR2A/GSTR-2B.
 Analysis of business operations as declared by the auditee in the
GST Returns in the light of other data sources available in the GST
portal itself. The Audit Officer should verify the turnover declared by the
RTP in the GSTR Returns for the concerned period vis-à-vis footprint of
payments made to the RTP as per GSTR-7 or GSTR-8 filed by TDS
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deductors or TCS collectors, as the case may be. The Audit Officer
should also consult the various exceptional reports made available.
 Analysis of business operations as declared by the auditee in the
GST Returns in the light of secondary data sources, e.g. turnover
declared by the RTP in the GSTR Returns for the concerned period visà-vis the turnover declared in the income tax return(s)/tax audit report or
any other source, if available.
 An audit officer is required to study each case from a holistic point
of view keeping in view applicability of statutory provisions and
amendments thereof, notifications, circulars and orders relevant to the
audit period. There have been various instances where a specific
transaction, when looked at from a wider perspective, yielded
interesting conclusions. Many of these instances are covered by
various clarificatory Circulars issued both by the Central Government
and the State Government.
 As a part of Desk review, an Audit Officer should:
o Read the entire original documents as available in various public
domains,
o Understand the reasons and contexts of such clarifications,
o Cite any relevant portion of the clarification only from such original
documents and not from any truncated reference.
 Ratio and trend analysis as also intra-industry comparisons to ascertain
significant deviant behaviour and indicate areas requiring enquiry and
deep examination
 The pre-audit desk review should enable Audit Officers to gather
relevant information about the selected RTP before actual
commencement of audit, enabling them to be fully prepared from the
very first day of visiting the auditee‘s place or examining the books
produced by the auditee for audit.
4.4 Preparation and approval of Audit plan
Audit plan for a particular auditee is the roadmap for a sound performance
of the audit.
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This plan will serve as a schema of the entire process. Every such plan
should be consistent with the departmental guidelines (Format of Audit Plan is
in Annexure 5 (p.105).
All the officers of an audit team should be involved in the process of
preparation of the audit plan under the supervision of the immediate Senior
Officer of the Audit vertical to draw up a good audit plan. Teamwork ensures
buy-in from an early stage, brings forth a greater variety of ideas and can be
reasonably expected to improve audit outcomes.
4.4.1 General guidelines to prepare audit plan
 Reason(s) for selection – The audit team should study the reasons for
selection and try to identify the focus area. There may be two sets of selection
criteria – (i) as available in BIFA Tool of GSTN portal and (ii) as provided by
the Department. It should try to identify major risk areas. In case the volume
of documents for verification is large, the auditor should adopt sample
verification. In such a case, sample selection techniques used should be spelt
out. The sample should be chosen in such a way that it represents the whole.
Samples should represent relevant time-periods, business activities, value
addition chain and other parameters. Sampling criteria should be material.
 Profile of the auditee (Taxpayer Master File, Taxpayer Profile,
Taxpayer at a Glance or other suitable nomenclature may be adopted)
with details of ownership, numbers of registered persons under the same
PAN within the State, principal and additional places of business, migration
status (if any), business trend and compliance level of the RTP in the preGST period as well as in the GST regime, business trend of the RTP vis-à-vis
the trends of the industry etc. Ideally the audit administration should maintain
a Taxpayer Master File which contains all this information. Utilities developed
for audit should enable automatic updation of the Taxpayer Master File.
 Broad types of supply involved (i.e., resale, manufacturing, export,
import, service, works contract, job work, ISD, etc.).
 Business pattern of the auditee i.e. nature of goods and/or
services dealt along with classification (e.g. importer of medicine, exporter
of leather goods, reseller of iron & steel, manufacturer of jute goods,
restaurant service, manpower supply, travel agent, aviation, transport, etc.).
 Return filing & tax compliance pattern of the auditee in GST for the
period under audit. If irregularity is found in case of submission of Return, the
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Audit Officer should calculate the Late Fees & Interest payable at the
desk- review stage itself. Furthermore, there may be chances of mismatch
of Turnover and Tax as disclosed in Form GSTR-3B vis-à-vis Form GSTR-1.
Similarly, there may be a mismatch between ITC claimed in Form GSTR-3B
vis-à-vis ITC auto-populated in Form GSTR-2A.
 Analysis of business operations as declared by the auditee in the
GST Returns in the light of other data sources available in the GST portal
itself. The Audit Officer should verify the turnover declared by the RTP in the
GSTR Returns for the concerned period vis-à-vis footprint of payments made
to the RTP as per GSTR-7 or GSTR-8 filed by TDS deductors or TCS
collectors, as the case may be. The Audit Officer should also consult the
various exceptional reports made available.
 Analysis of business operations as declared by the auditee in the
GST Returns in light of secondary data sources, e.g. turnover declared by
the RTP in the GSTR Returns for the concerned period vis-à-vis the turnover
declared in income tax return(s)/tax audit report or any other source, if
available.
 Analysis of business operations as declared by the auditee in the
Annual Financial Statement.
 An audit officer is required to study each case from a holistic point
of view of applicability of statutory provisions and amendments thereof,
notifications, circulars and orders relevant for the audit period. As mentioned
above, there have been various instances where a specific transaction, when
looked at from a wider perspective, has yielded interesting conclusions. Many
of these instances are covered by various clarificatory Circulars issued by the
Central Government and the State Government.
 The auditor should mention the precise issue pertaining to the subject,
for example, discounts passed on to the buyer, utilisation of inputs for
repair/re- processing, etc.
 Source document(s)/ information to be verified: Documents/
information reflecting or having a bearing on payment of GST should be
verified, if required. For example GST Invoice(s) showing a particular
discount.
 Back-up / supporting document(s): Back-up or supporting
documents should be examined to check the correctness of the information
contained in the source document (s), if required. The method of their
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examination may also be specified in the plan. For example, commercial
invoice, party ledger, discount policy documents, price circulars, etc. reflecting
the said discount.
 Period of coverage: Normally, the coverage will be for the whole of the
audit period. However, the auditor may conduct test verification for specific
periods each extending over a short duration, if required.
 Efforts should be made to make a simple audit plan in case of small
taxpayers
4.4.2 How to make an effective audit plan?
An effective audit plan actually starts building up from the stage of desk
review.
Audit Plan is the most important stage before the conduct of audit. Each audit
team should prepare an Audit Plan for each individual auditee allocated to it
based on the information gathered from available sources and based on
observations made upon pre-audit desk review and data analysis done by the
team in relation to the auditee‘s business performance and information
furnished in response to the questionnaire sent to the auditee along with
notice in Form ADT-01. The information available from the GST back-office
portal, MIS available internally and various reports (if available) should be
analysed to prepare an effective audit plan. Any other pertinent information
(e.g. received from any enforcement unit) in respect of the said auditee may
also be taken into account.
The Audit plan should be prepared preferably within seven (07) days
prior to the first date of hearing / visit to be fixed in Form GST ADT 01.
An effective audit plan will be a guiding track for Audit conducted under both
―Field Audit Method‖ (Audit at RTP‘s place) as well as ―Desk Audit Method‖
(Audit at Audit Officer‘s place of work).
4.4.3 Approval of audit plan
The audit team shall get each Audit plan approved as per the departmental
guidelines provided from the higher authority. The approving officer may
modify the Audit plan if necessary.
On the basis of scrutiny of the set of documents and records and the filled-in
questionnaire produced by the RTP during audit hearing, new angles may
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open up. Inclusion of these points adds value to the audit plan. In case an
Audit Team finds it necessary to modify the audit plan in the course of the
audit, details of the same with reasons thereof shall be placed for approval
before the same authority that has sanctioned the plan.
GSTN has developed a process to sanction audit plan through a back-office
portal. The audit plan submitted should be sanctioned and modified as early
as possible, preferably through back-office or through any other electronic
means like e-office.
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Chapter 5
This chapter covers conduct of audit, audit findings and finalisation of audit.
5.1 Commencement of Audit
As per Explanation to Section 65(4) of the CGST/SGST Act, 2017 (p.14),
‗commencement of audit‘ shall mean the date on which the records and other
documents, called for by the tax authorities, are made available by the
registered person or the actual institution of audit at the place of business,
whichever is later.
Thus, audit will commence on the first date of hearing as per GST ADT-01
provided the auditee produces the requisite documents and records as have
been asked for.
GST Administration may decide to audit any individual auditee or a class of
auditees remotely in the interest of public health, availability of audit
resources, taxpayer‘s facilitation or for any other reason which is fair and
equitable.
5.2 Examination of Books of Accounts and records
Examination of Books of accounts and records involves verification of data
and information and actual verification of documents submitted by the RTP in
the course of audit and verification of the points mentioned in the audit plan.
This is the most vital part of the audit process. The entire outcome of audit
depends on examination of books of accounts systematically and in a
planned manner.
 The officer should have primary knowledge about the business pattern of
the RTP with respect to the particular trade & industry.
 He should also be well aware of the existing trade practices, conventions
and market trends.
 The Audit Officer should be well aware of the statutory provisions, rates of
taxes, Circulars, Orders etc. as applicable for the particular period of audit.
 An Audit Officer should apprise the RTP of the provisions of the GST Acts
in respect of maintenance of books.
 He should preserve all the documents submitted by the auditee in the
course of audit as office records preferably in electronic format.
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 Physical copy duly authenticated or digitally signed copies wherever
possible should be collected which are pertinent to the queries / audit para
of the audit officer.
 He should take an unbiased and judicious approach in the course of audit.
 An Audit Officer should be tactful to gain the goodwill and confidence of
the RTP.
 Technical lapses by the RTP which do not have any revenue implication,
and have occurred out of oversight or ignorance, should be ignored.
However, any such incident should be noted down in the course of audit.
 Confidentiality should be maintained in respect of sensitive and
confidential information furnished in the course of audit.
 Understanding of the Indian Accounting Standards and the impact of GST
thereupon while examining the Books of Accounts will facilitate an Audit
Officer while examining Books of Accounts.
Some illustrative examples for primary understanding of accounting standards
vis-à-vis GST are given as Annexure 16 (p. 241).
5.3 Indicative parameters
Some indicative parameters for examination are discussed in this section.
Registration/Migration Analysis, Return Analysis, Ratio analysis, Trend
Analysis, Balance sheet study are some of the vital areas of
Examination/Verification of Books of Accounts and records in the course of
audit. The checks to be carried out regarding Reverse Charge Mechanism
are given in Annexure 9 (p. 141). Important changes in GST Law and Rates
of Tax are in Annexure 12 (p.184).
5.3.1 Registration/Migration analysis
Previous registration details (if any) under earlier Acts are to be verified. If
such information is not disclosed there may be a tendency to hide earlier
history of compliance behaviour.
Updated details of business promoters, additional place of business, bank
accounts, and details of authorised signatory/(ies) should be examined. If the
same are not provided, the auditee should be asked to provide the same.
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Furthermore, the Audit Officer should analyse trends and patterns of turnover,
tax payment, nature of business etc. from the pre-GST registration data, if
available.
5.3.2 Return Analysis
This is a most vital area before commencement of the Audit program. A great
deal of the groundwork can be done upon analysis of the available return
figures and thereby having a prima-facie idea of the business trend of the
auditee.
5.3.3 Illustrative steps that may be considered for an effective Return
Analysis:
 HSN code of the goods and/or SAC of the services dealt in by the
RTP should be verified where available to ensure that such are in
conformity with the schedules/notifications and it is to be checked
that the proper rate of tax thereupon was applied on outward
supplies as shown in Form GSTR-1 & Form GSTR-3B.
 Time of filing of returns should be noted and should be checked to
confirm whether the returns were filed within the prescribed time.
 Outward supplies as declared in Form GSTR-1, Form GSTR-3B
and GSTR-9 should be compared with the Books of Accounts as
maintained and produced by the auditee. The reconciliation
statement, in case of any difference, is required to be examined
with supporting documents and explanations along with Form
GSTR-9/9A and Form GSTR-9C, if such have been submitted by
the auditee.
 Claim of the RTP under different heads like – Zero-rated, Nil
rated, Exempted and non-GST outward supplies, etc. as shown in
Form GSTR-1, Form GSTR-3B. The reconciliation statement, in
case of any difference, is required to be examined with supporting
documents and explanations along with Form GSTR-9/9A and
Form GSTR-9C, if such have been submitted by the auditee.
 Amount appearing under the head ―Advance received‖ needs to
be reviewed carefully since GST is applicable on ―Advance
received‖ against future ―supply of services‖. As per Notification
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No.66/2017 - CT. dated 15.11.2017; payment has been delinked
to determine time of supply in case of supply of goods.
 Transactions like import of services and transactions between
related parties and activities specified in Schedule-I which are
required to be considered as supply even without consideration
are required to be examined thoroughly. These cases would
require very cautious examination of the books of accounts, final
accounts, P/L account and balance sheet to determine whether
there are any such transactions which are not reflected in the
returns. Some illustrative examples are given in Annexure 15 (p.
219) for understanding of the matter.
 Goods sent for approval and goods sent to job workers should be
examined with the books of accounts.
 Data in respect of way bills, both inward and outward, should be
verified with the books for compliance level analysis. It may
happen that the total value of outward waybill grossly differs with
the total outward supply. In that case one should go through the
details into the accounts.
 Refund may be made to the auditee on account of export with or
without payment of tax. In such cases, the veracity of export
claims need to be checked. For this, the shipping bill details
should be checked with the ICEGATE portal; in case of high
volume of export through non-EDI check posts where the shipping
bill details cannot be verified through ICEGATE portal, extra
caution should be exercised in scrutinising the shipping bills in
support of the export claims.
 In the case of export with payment of tax, if the value of export is
found to be significantly higher than similar products sold in the
domestic market in depth scrutiny of the payment received in
respect of the export is required since there may be a possibility
of monetizing excess ITC.
 In respect of claim for refund of unutilized ITC on account of zerorated supply, adequate caution is required to be taken so that, ITC
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on account of transitional credit, capital goods are not claimed for
refund.
 Claim for refund of unutilized ITC may be made on account of
inverted tax structure. In such cases, (i) verification of the
classification of inputs and output supplies and the respective
rates of taxes attracted by them is very crucial; (ii) Refund of
unutilized ITC in accordance with section 54(3)(ii) of the
CGST/SGST Act is provided where credit has accumulated on
account of rate of tax on inputs being higher than rate of tax on
output supplies. Similarly, ―Net ITC‖ for the purpose of refund
should not include any ITC relatable to trading activity; nor should
it include ITC on account of capital goods or input services.
 The claim of ITC of an auditee should be checked against
fulfilment of the conditions laid down in the Acts and Rules made
thereunder.
 If usage of ITC for payment on account of export is significantly
high, in depth scrutiny of the availment of ITC is warranted.
 In depth checking is needed in respect of goods and services on
which ITC is blocked.
 Some illustrations in respect of the provisions of input tax credit
are attached as Annexure 11 (p.163).
 Enquiry should be made to confirm whether any specific Advance
Ruling/Appeal Order of Advance Ruling is applicable for any of
the supplies made by the auditee.
 Output tax payment is required to be examined to ascertain
interest liability. Any output liability which has been discharged
other than by Form GSTR 3B is required to be examined as to
whether interest (if applicable) has also been paid for the same or
not.
 Checking should be done in respect of interest and late fee
payable as per notification(s).
 All possible areas related to compliance issues that may result in
short payment or evasion of tax are also required to be checked.
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 The intention of these above illustrations is to create awareness of
Officers in the subject so that an Audit Officer looks into the
statutory provisions in detail. It may be mentioned in this regard
that these illustrations are merely indicative in nature. However, it
is desirable that an Audit Officer should not confine himself to
these indicative illustrations and should be prudent enough to go
through the provisions of law and rule, various clarifications
issued in different circulars, judgments passed by various Courts
of Law and Rulings passed by AAR & AAAR in this respect in
detail. As mentioned in Para 5.8 below, GST Tax administrations
should strive to develop a shared platform for sharing audit
related information.
5.3.4 Trend Analysis
This analysis focuses on any abnormality that may have occurred in a
particular financial year with respect to the previous financial years. For audit
purposes, comparison of either absolute values or certain ratios over a period
of time is absolutely necessary to see the trend and the extent of deviation
from the average values during any particular period. The analysis of trends
may indicate areas where short payment / evasion of taxes is involved. A
representative example of such trend analysis is discussed in Annexure 14
(p. 212). The application of the various examples of trend analysis and ratio
analysis as discussed here may vary from case to case. In this case, sector
specific trend (or the accounting principles followed by an auditee) may play a
vital role. The trend of a supplier of particular goods may not be pertinent for
another type. Moreover, services sector may demand a different angle of
analysis compared to the goods sector. It may be noted that trend analysis
should also be consistent with the industry-trends during the same period; a
rising/falling trend in industry does not gel with a reverse trend in the case of
a particular auditee unless the auditee faces an altogether different/abnormal
situation.
5.3.5 Areas of concern during examination
Following points may be covered in the process of examination.
5.3.5.1 Migration/Registration compliance
Probable area of Areas of concern Action to be
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detection /
examination
taken
Previous registration
details under earlier
Acts and up to date
details of information
of registration.
If not disclosed there may be a tendency
to hide earlier history of turnover and
compliance (liabilities of taxes). Asking to provide
such numbers
and information. Up to date details of business promoters,
additional place of business, bank
accounts, details of authorized signatory.
Why is examination of the above compliance important?
Disclosing of the previous registration details is optional both in case of
registration and migration. However, knowledge of previous registration
details would help an audit officer to know the pre-GST compliance pattern of
an auditee. In many cases it may appear that the RTP has failed to amend his
registration and is continuing with the old information. If so, the audit officer
should encourage the taxpayer to amend his registration with up-to-date
information which would help both the audit officer and the auditee.
A few illustrative examples, as stated below, may help the Audit Officers in
this regard. However, the intention of these examples is to provide a glimpse
of the matter so that an Audit Officer can look into these aspects in detail.
Illustrative Examples of some interesting issues in this regard:
Example 1: Suppose there is a huge amount of exempted supply in the
period under audit. Before entering into the details of the exempted supply the
audit officer may first examine the nature of supply in pre-GST regime. So,
knowing Pre-GST registration numbers is important. Maybe there was no
such exempted supply. Maybe sales in the pre-GST regime were much
higher than in GST.
Example 2: The auditee fails to deposit the dues as reflected in the audit
report after submission of the audit report. The Proper officer raises demand
as per provisions of sec. 73 / sec 74 of the SGST/CGST Act, 2017 (as the
case may be). The RTP again fails to comply. The officer initiates recovery
proceeding by attaching the bank account of the auditee, debtor‘s account
etc. But, if up to date bank accounts details are not amended, the efforts of
the officer may not be fulfilled.
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Example 3: Incorrect information in registration may lead to suppression of
taxable turnover and less payment / evasion of tax. Date of commencement
of business and date of liability for registration are two important aspects
manipulating which an auditee may hide his pre-registration liability.
5.3.5.2 Invoicing compliance
Probable area of
detection /
examination
Areas of concern Action to be
taken
Tax Invoice/ Debit
Note/ Credit Note/
Bill of Supply etc.
Whether as per Sec. 31 / sec. 34 of
the SGST/CGST Act and Rules
made there-under?
In case of any
discrepancies,
clarification may
be sought
Continuity of the Sl. No. of such
Tax Invoice/ Debit Note/ Credit
Note/ Bill of Supply etc.
Compliance in relation to issue of Invoice, Bill of supply, debit notes and credit
notes: Checklist for checks to be carried out and key points of supplies and
supply of Goods and Services or both are given in Annexure 8 (p. 112).
Check list for key points of value of supply and details of value of supply are
in Annexure 10 (p. 149).
A tax invoice is an important document. It not only evidences the supply of
goods or services, but is also an essential document for the recipient to avail
Input Tax Credit (ITC). Similarly, debit notes and credit notes are also vital
documents. A supplier of goods or services or both is mandatorily required to
issue a tax invoice. However, various situations may arise in a business, after
issuance of an invoice. Possible situations are listed as follows:
 The supplier has erroneously declared a value which is more than the
actual value of the goods or services supplied.
 The supplier has erroneously declared a higher tax rate than what is
applicable for the kind of the goods or services or both supplied.
 The quantity received by the recipient is less than what has been
declared in the tax invoice.
 The quality of the goods or services or both supplied is found to be
deficient.
In the aforesaid cases, the supplier may issue a credit note to the recipient.
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But, output tax reduction on that credit note is conditional. It is dependent on
the reversal of ITC of the recipient. Credit notes with tax implication in GST
can be issued within the time limit as specified u/s 34(2) of the CGST / SGST
Act, 2017.
Similarly, following situations may also arise in a business after an invoice is
issued:
 The supplier has erroneously declared a value which is less than the
actual value of the goods or services supplied.
 The supplier has erroneously declared a lower tax rate than what is
applicable for the kind of the goods or services or both supplied.
In such a case, the supplier may issue a debit note to the recipient.
Compliance of invoice, debit notes and credit notes related provisions are
directly linked with revenue in GST.
A few examples as given below may help the Audit Officers in this regard.
However, these examples are merely indicative in nature:
Example 1: The audit officer may notice that there is discontinuity in serial
numbers of the invoices issued. A number of reasons may be adduced by the
auditee for the same. But, his explanations should be supported with
evidence / correspondences. Otherwise, these explanations may be far from
reality.
Example 2: An auditee has set up an exclusive brand kiosk to sell products
of X company.
X Co. pays a consideration for setting up such a kiosk by issuing a
commercial Credit Note to the auditee of Rs.10,000 p.m. Is there any revenue
implication in GST?
Consideration is received in the form of a Credit Note in respect of supply of
service by the auditee to X Co. So, GST is applicable @ 18%.
Example 3: The auditee being an importer / manufacturer of medicines has
received some expired medicines from a distributor and issued credit notes
for the same for an amount of Rs.50 Lakh. The tax component in the credit
note was Rs. 3 Lakh CGST and Rs. 3 Lakh SGST. The auditee reduced his
liability of output tax to such extent and the recipient also reversed his ITC to
that extent. Is this correct?
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Since, the auditee being an importer / manufacturer has received medicines
from his distributor which are expired; he has to destroy such medicines.
Therefore, the auditee must also reverse the ITC availed on such destroyed
medicines.
5.3.5.3 Maintenance of books of accounts
Areas of
concern
Action to be
taken Probable area of detection / examination
To ensure
compliance of
maintaining
books of
accounts. To
examine cash
flow, valuation,
input and output
ratio, etc.
To examine
correctness
of tax
compliance
made in
returns.
RTP will be asked to produce following books
of accounts:
 Annual report and Director‘s report (if any)
 Profit & Loss A/C
 Balance Sheet
 Notes to accounts
 Tax Audit Report
 Statement of income tax TDS.
 List of HSN /SAC of the goods /or services in
respect of the business.
 Reconciliation statement in respect of Form
GSTR 9, GSTR-1 AND GSTR 3B
 Suppliers list with GSTIN (where applicable)
 Ledger accounts of the suppliers
 Statement of sales party wise and POS
wise.
 Supply for which tax paid in RCM.
 Bank Statement for the period under audit
 Stock register
 Other documents and records as applicable
as provided in section 35 of the Act
The basic objective of audit stands on the principle of examination of books of
accounts. The GST laws have prescribed the nature of books of accounts
required to be maintained by an RTP. The officer in this case should be well
aware of such provisions and ask the auditee to produce such books of
accounts.
Further, the Officer should be well acquainted with the accounting policies
which form the basis of any books of Accounts. Apparently, an entry may not
appear to be related with GST revenue but, upon thorough examination in the
course of audit such may turn out to be valuable information.
A few examples are given herein below, which may help the Audit Officers in
this regard. However, these illustrations are merely indicative in nature with
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the sole purpose to alert the audit officers in this regard who are also required
to go through the relevant statutory provision in detail:
Example 1: In order to have an idea of the quantum of supply of an auditee,
an officer generally examines the Debtors list. But there may be a case,
where a Debtor (i.e. customer), say A is also a creditor (i.e. supplier). In such
a case, it is required to examine whether A‘s Ledger A/c (as a Debtor)
correctly reflects only the credit supply made by the RTP to A or it is rather a
set-off account where the balancing figure reflects the net figure of amount
receivable less amount payable.
Example 2: It is a normal business practice to get advances from the
customers. In this case, advances played a role in determining the time of
supply for goods till 14.11.2017. However, tax liability on advances received
is still there in case of services. Now, as per the provisions of Rule 56(3),
every RTP is required to maintain a separate account of advances received,
paid and adjustments made thereto. An advance for which service is not
provided or not adjusted in any invoice, the RTP is required to show such
amount as Current Liabilities in the Final Accounts. So, the Audit Officer
should only examine such Liability Accounts to verify whether such tax on
such advances is actually paid or not.
5.3.5.4 Return submission compliance
There have been various extensions of the due dates and conditional
extensions of due dates for the return periods of different financial years. To
facilitate an audit officer in this regard, an exclusive annexure is prepared
which is attached as Annexure 13 (p.190), which contains due dates,
extension of due dates of various returns and other details of the returns
alongwith the checks to be carried out. It also contains the State codes
(p.203).
5.4 Communication of discrepancies noticed
Upon examination of the books of accounts and records in the course of
audit, the audit officer shall clearly note all his observations relating to the
possible areas of lapses, as discussed above.
The grounds of any discrepancies against the disclosed parameters of the
auditee should be concise, to the point and self-contained. Different para(s)
should be formed depending on the nature of observations.
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Where any discrepancy is based on any circular or clarification or notification
issued by the State Government or the Central Government or by the
Commissioner or the Board, such must be mentioned clearly. Similarly, where
findings are based on discussion or merit of any decision of any Hon‘ble
Court, decisions of Advance Ruling Authority, and decisions of Appellate
Authorities such should be clearly cited. Similarly, where discrepancies are
noticed in respect of information disclosed in the return and those ascertained
from accounts/documents, the same need to be mentioned clearly in the
communication, alongwith the tax implications.
The findings of audit should be prepared and are required to be
communicated to the RTP within 30 days of commencement of audit.
The auditee, if he thinks fit, may submit a written explanation in reply to such
findings upon adducing supporting documentary evidence and other facts &
figures as may be necessary.
The auditee shall be given a time of at least seven (07) days from the receipt
of the draft report to submit his/her reply.
The Audit Officer should inform the auditee about the observations made in
the course of audit preferably in electronic format. The auditor should also
apprise the auditee of the provisions relating to his voluntary compliance and
at the same time encourage him to pay the dues in Form GST DRC – 03 in
the course of audit.
5.5 Draft Audit Report and approval thereof
The audit officer shall clearly mention in his working paper the reply of the
auditee in respect of the findings drawn and communicated to the auditee.
After careful consideration of the reply a Draft Audit Report (DAR) should be
prepared by the audit officer for internal administrative purpose and not for
the auditee.
The DAR shall be placed before the audit plan sanctioning authority for
perusal. If the total amount of tax due exceeds a certain amount, DAR should
be placed before the appropriate higher authority with a short narration of
such dues for perusal and approval. This condition may vary State to State
and the Centre. This condition is purely for administrative purposes to ensure
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that the demand is genuine. The aforesaid narration for such high dues
should be concise, to the point and self-contained.
Where any finding is based on any circulars or clarifications or notifications
issued by the State Government or the Central Government or by the
Commissioner or the Board, such must be mentioned clearly in the DAR.
Similarly, where findings are based on discussion, merit of any decision of
any Hon‘ble Court, decisions of Advance Ruling Authority and decisions of
Appellate Authorities, such should be clearly cited.
On points of difference, further consultations / examination may be required.
5.6 Monitoring Committee Meeting
Every team of audit should represent the status of audit once in every month
on a pre-scheduled date in a format annexed hereto as Annexure 7 (p. 109)
before the Monitoring Committee in the Monitoring Committee Meeting
(MCM) under the chairmanship of the Commissioner/ appropriate authority.
This Committee, besides monitoring the status of audit of every level, will also
try to identify the important observations made upon audit by different units
for better coherence among all the existing audit teams. At the same time, the
Committee will also try to identify the areas of audit related to the unit that
need special attention and make suggestions accordingly. The committee
may also review the audit objections raised by the Audit Teams and after
discussions take a decision on the same.
The Monitoring Committee shall invite the Audit head of all the units, Nodal
officer of Information System Division/IT Division and representatives from
GST-Planning Unit of the State/Centre to offer their views to maintain the
progress and ensure uniformity in audit and subsequent demand and
recovery proceedings. The Committee may invite any Audit Team or Audit
Officer of any unit if deemed fit.
Composition and procedure of this committee may vary from State to State
and at the Centre. As MCM is an important institutional mechanism, the
frequency of its meetings and mandate should be revisited from time to time
to make it more effective.
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5.7 Final Audit Report
The audit officer shall finalize the findings of the audit and draw Final Audit
Report in GST Form ADT-02 (hereinafter referred to as ‗FAR‘) after due
consideration of the reply furnished [Rule 101(4)] and the discussions in
MCM.
After approval of the DAR by the appropriate authority, the FAR shall be
issued to the auditee preferably through system / electronically to the auditee
within 7 (seven) working days of approval.
Format of GST FORM ADT-02 is annexed herewith as Annexure 6(p. 108)
After issuing the FAR, the Audit Case will have to be closed.
5.7.1 Such closure of case can be done in the following scenarios:
a) The technical lapses (if any) are corrected and the entire dues as per
the FAR are paid by the Taxpayer preferably within 30 days in Form GST
DRC-03;
b) FAR is issued with Nil Revenue implication;
c) The tax, interest or any other amount payable by the RTP as have been
ascertained as short paid or not paid is not deposited by the taxpayer within
30 days after the issuance of the FAR, and in such situation the case is
required to be referred to the respective jurisdiction for initiation of demand
and recovery proceedings (after the issuance of show cause notice, as the
case may be, depending on the administrative and legal arrangement in this
regard).
5.8 GST Tax administrations across the country should endeavour to
develop a common platform for sharing important audit findings and other
sources of relevant information to improve the quality and efficiency of audit.
This inclusion can take the form of an audit bulletin on an online portal or a
GST Audit Knowledge Management System.
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CHAPTER 6
This chapter covers follow up of audit.
6.1 Audit Consequences
After receipt of the FAR, the auditee may agree to the audit observations in
full, or he may disagree in full or he may even agree to a part of the
observations made.
In case of full or partial agreement, the audit officer should encourage the
auditee to make voluntary payment of the dues in Form GST DRC – 03 as
detected in the course of audit. Where the RTP agrees with the short levy as
per the show cause notice, the auditor should explain the benefits available
u/s 73(6) / 74(6) of the SGST/CGST Act, as the case may be.
Now, the observations made in the FAR may be of 2 types:
 Those of technical nature and not having any real revenue impact.
 Those having revenue impact, i.e. short payment of tax, interest etc. by
the auditee.
Technical lapses by the RTP which do not have any revenue implication, and
have occurred out of oversight or ignorance, should be allowed for correction
(if required).
6.2 Demand & Recovery proceedings
If the tax, interest, penalty or any other amount payable by the RTP as have
been ascertained as short paid or not paid, is not deposited by the taxpayer
within 30 days after the issuance of the FAR, the case is required to be
referred to the respective jurisdiction as per the provisions of Section 65(7) of
the SGST/CGST Act for initiation of demand and recovery proceedings. The
proper officer having the assigned role of ‗Demand & Recovery‘ shall initiate
action under Section 73 or 74 of the said Acts, as the case may be, through
the ‗Assessment & Adjudication‘ module in the back office of GST.
It is the administrative decision of the respective State whether the audit
officer will subsequently adjudicate or that will be done by a separate officer.
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Whatever may be the arrangement, it is desirable that the adjudicating
officers carefully consider the findings as noted in the Final Audit Report and
take subsequent actions independently.
However, repetition of points of examination (including documents thereof)
should be avoided unless it is absolutely necessary.
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Chapter 7
This chapter covers audit in certain circumstances.
7.1 Different possible scenarios during the conduct of audit
During the course of audit, beginning with the process of selection to
completion, various possible scenarios may arise such as registration has
been cancelled before or after selection, RTP is in NCLT, death of the
proprietor, transfer of business, non- existent person, etc. Such various
scenarios during audit along with possible actions are discussed below:
7.1.1 The auditee is found non-existent
It is to be noted that audit is a document-based exercise and the purpose of
audit as delineated in this audit manual is to examine the records, returns and
other documents maintained or furnished or filed by the registered person
under this Act or Rules made thereunder or under any other law for the time
being in force to verify the correctness of turnover declared, taxes paid,
refund claimed and input tax credit availed, and to assess his/her compliance
with the provisions of the Act or rules made thereunder. Thus, where the
taxpayer is not found to be existent the process of examination and
verification cannot be carried out as the said taxpayer is a bogus taxpayer
with no credentials that can be attributed to a taxpayer registered under the
SGST/CGST Act. Therefore, in such a scenario it is proposed that the audit of
such taxpayers need not be carried out. The details of such a taxpayer should
be shared with the Jurisdictional GST officer and the enforcement wing for
further necessary action.
7.1.2 GSTIN/Registration Certificate (RC) of taxpayer is cancelled
Audit under section 65 is an exercise that is required to be carried out in
relation to a registered person to assess his compliance with the provisions of
the Act or rules made thereunder. In the scenario where the registration of the
auditee has been cancelled from an anterior date which is prior to the
initiation of the audit, the audit of such a taxpayer would not be within the
ambit of the ―Audit‖ as defined in section 2 of the Act. Therefore, in such a
scenario if deemed fit, audit of such a taxpayer need not be carried out. The
details of such a taxpayer should be shared with the Jurisdictional GST officer
and the enforcement wing for further necessary action.
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7.1.3 Taxpayer is existent but documents are seized
The case for conduct of audit has already been assigned. There may arise a
situation in which a taxpayer is existent and active but the documents relevant
for audit are seized or under the possession of some other Government
agency like CGST, ED, Court, Police etc. Audit is primarily a document-based
exercise which fundamentally examines the records, returns and other
documents maintained or furnished or filed by the registered person under the
relevant GST Laws or Rules made thereunder. So, in a scenario where
records of the auditee have been seized by some authority and the same are
not available with the auditee it is suggested that audit of such auditee should
be deferred and the audit wing should endeavour to obtain records from the
concerned authority which has seized the said records so that meaningful
audit can be carried out. As for the information available in the returns which
can be examined from the perspective of tax it would be prudent that the said
exercise is carried out by the jurisdictional officer rather than audit officer in
case the jurisdictional office has a separate wing or section for audit. Once
the documents of the auditee are obtained then the audit wing can proceed
with the audit. Further course of action in such cases can also be discussed
and decided in the MCM.
7.1.4 Investigation/verification by some other wing/agencies are going on
If the taxpayer is found existent and active and the records of the auditee are
available although the investigation into certain activity of the taxpayer is
being carried out by the other investigating agencies it suggested that the
audit of such taxpayer should be carried out irrespective of the fact that
another agency is also investigating the taxpayer. The audit wing should be
expected to coordinate with the other investigating authority so as to be
abreast of the aspect being examined by the said authority and its
repercussions on the audit being carried out. However, different GST tax
administrations may, in the interest of administrative exigencies, adopt a
different approach in such cases.
7.1.5 During examination the business model of the auditee is
found fraudulent
The case has already been assigned for conduct of audit. The taxpayer is
existent and active, but during the conduct of audit, it emerges that the
business model of the auditee is fraudulent and it is beyond the powers of the
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audit officer to deal with the issue under the Act/Rules formulated thereunder.
In this scenario, although all the parameters of audit are met by the auditee
but during the conduct of audit it emerges that the nature of transactions
being carried out by the auditee are so fraudulent that they vitiate the
existence of the registered taxpayer to the core and the investigation of same
cannot be carried out within the four walls of audit as well as the powers
assigned thereunder to the audit officers. It is therefore suggested that in
such a scenario, the case should be transferred to the enforcement wing to
carry out further investigation in the manner by exercising the various powers
assigned to them including that of inspection, search and seizure.
7.1.6 During audit it appears that the taxpayer is engaged in
certain fraudulent activities
The case has already been assigned for conduct of audit. The taxpayer is
existent and active. But during the conduct of audit, it emerges that the
taxpayer is engaged in certain fraudulent activities beside the regular
business. It is to be noted that section 65 of the CGST/SGST Act empowers
the tax authority to take action under section 73 as well as section 74 of the
Act in relation to the observations originating out of the conduct of audit.
Further, Section 74 is specifically for 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. Thus, it is
suggested that in such a scenario the audit team should carry out the audit
and should mention specifically in the final report such fraudulent activities so
that any demand of tax for such fraudulent activity should be raised under
section 74 of the CGST/SGST Act.
7.1.7 Taxpayer is not cooperating with the audit team
The case for conduct of audit has already been assigned for audit. The
taxpayer is existent and active. But during the conduct of audit, it emerges
that the taxpayer is not cooperating in submission of documents sought by
the audit team. In this scenario, although all the parameters of audit are met
by the auditee, the auditee is not cooperating in submission of documents
sought by the audit team. As noted above, audit is primarily a documentbased exercise which fundamentally examines the records, returns and other
documents maintained or furnished by the registered person under this Act or
Rules made thereunder. So, in a scenario where the auditee is not providing
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the records, the audit wing/team/audit officer should issue SCN to impose
penalty upon the auditee under section 125 of the SGST/CGST Act read with
IGST Act and should give a detailed report to the head quarter / head of the
audit vertical. In this scenario, the case should also be transferred to the
enforcement wing to carry out further investigation by exercising the various
powers assigned to them including that of inspection, search and seizure.
Progress of such cases referred for investigations should be monitored
through MCM.
7.2 General guidelines
It is important to ensure that the registration number of non-existing persons
does not survive for a long period. As criteria for selection of audit cases is
related to the high turnover parameters, it is all the more dangerous that
registration of such persons remains active for a long period. As such, in such
cases, immediate action is needed against the RTP to cancel the registration
and other proceedings against the person. The jurisdictional officer should
explain the cause of not initiating action against such RTP for such a long
period to their supervisory officer.
Audit selection committee should try to collect the above information before
finalising the list for audit so that in the list there should not be any cancelled
person and to minimise selection of non-extent persons in the list.
In the above situations where it is advised not to continue audit u/s 65 of the
Acts, the audit team or the audit wing should first inform the same through the
audit vertical / audit wing to the Commissioner / organisation carrying out the
targeting exercise, requesting for de-selection of the selected RTP.
Uniform audit templates go a long way in ensuring uniformity of practices and
similar taxpayer experience. Templates that capture the spirit of GST laws,
use unambiguous language and cover all the relevant issues will lead to
mitigating excessive correspondence with taxpayers, minimize gaps in audit
exercise and reduce potential for litigation. Correspondence based on
templates should be automated and templates should be made available to
the audit officers through an internal communication tool on audit module or a
departmental website.
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CHAPTER 8
This Chapter covers administration, role of officers, Constitution of
Committees and Standard Operation Procedure (SOP) for the conduct of
Thematic Audits and Joint Audits as and when approved by the GST Council.
8.1 Thematic Audit
8.1.1 Overview
Purpose of Theme-based audit is to conduct ―focused audit‖ instead of a
―comprehensive audit‖, so that available resources are directed to check/
verify compliance of sensitive issues or sectors. The results obtained from
theme based audit assists the policy makers to assess compliance level of a
particular type of service/industry or trade sectors or areas so that compliant
sectors may be extended greater facilitation and special focus may be
directed to ensuring compliance on sectors with relatively low compliance
scores. It is a value-adding approach that helps the Auditors to determine,
consolidate and report high-level insights in the business transactions and
practices prevalent in a particular type of industry/service sector. Themebased audit may have both compliance and performance audit objectives.
8.1.2 Scenarios which may necessitate conducting thematic audit:
The following scenarios may lead to a thematic audit.
 Taxpayers in the same supply chain registered in same/different states;
 Simultaneous audit of units which have same modus operandi of tax
evasion and are registered across states;
 Taxpayers dealing in supply of some goods/services which have also
been determined as evasion prone.
 Thematic audit may also extend to specificity like trends in availment
and utilisation of ITC in any given sector e.g. telecom sector, trends in
valuation of supplies to distinct persons in the pharma sector, etc.
8.1.3 Administrative arrangement for Selection of themes for
thematic audit
For conducting thematic audit, GST Council may form a co-ordination
committee at all India level which should choose themes for conducting audit,
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constitute a Committee of Officers for selecting taxpayers in a state for
conducting thematic audit, coordination among various Audit Authorities for
evolving a common minimum audit plans for a given theme and, monitor
actual audit by the field formations and disseminate audit outcome to
appropriate stakeholders.
It is recommended that the co-ordination committee may be constituted with
the following as its members:
 Pr. DG/DG (Audit) or any Pr. Additional Director General (Audit) /
Additional Director General (Audit) as nominated by him;
 Joint Secretary, GST Council;
 Pr. Commissioner/ Commissioner (GST), GST Policy Wing;
 CEO, GSTN;
 Three Commissioners of SGST, as nominated by the GST Council;
 One CGST (Audit) Commissioner as nominated by the GST Council.
The co-ordination committee shall be responsible for selecting themes for
conducting theme based audit at all India level in a coordinated manner. For
selecting the Audit themes, the Committee may consider using the following
parameters/ data sources:
8.1.4 Indicative parameters for selection of themes are given below:-
 Economic indicators;
 Third party information from Tax authorities and other Regulatory
authorities;
 Sensitive nature of the commodity and / or service;
 Risky sectors in news for frauds for e.g., E-commerce, online gaming,
jewellers etc.;
 Sectors directly involved in providing services to a large consumer
base, such as banking, insurance, air and land travel, utilities etc.
 Sectoral revenue and value addition trends and variations therein
In addition to above, risky themes identified by the State and Central Tax
Authorities based on local intervention can also be used for determining a
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local theme. Certain risk - based parameters may also be adopted for
selection of Taxpayers for conducting theme - based audit, such as:
 Taxpayers showing abnormal growth;
 High revenue contributing Taxpayers;
 Sectors/units flagged by the CAG or PAC or otherwise where credible
information is available to point out that the provisions of the Act are not
being followed or where issues like place of supply issues or point of taxation
are cropping up;
 Taxpayers availing benefit of major exemption notification;
 Sectors with low cash pay-out
 Taxpayers engaged in supply of risky and sensitive commodities and
services viz., advertising services, event management services, metals,
chemicals, entertainment services and Health & education related auxiliary
services etc.
8.1.5 Administrative arrangement for conduct of Thematic audits.
For coordination of actual audit, the Co-ordination Committee may constitute
a Committee of Officers (CoO) for each state/ UT composed of the following
two members:
 State GST Commissioner
 CGST Audit commissioner preferably located at the same station
The Committee of Officers shall select the Taxpayers based on the themes
which have been finalised by the Coordination committee. The details of the
taxpayers so selected, will be shared with Audit formations of the Central and
State tax authorities for conducting audit proceedings.
8.1.6 Role of Audit field formations (of Central and State Tax) for
conducting thematic audit
Theme-based audit of a selected Taxpayer would be conducted by the
concerned GST audit authority (i.e. the jurisdictional central or state audit
officer).
Considering the importance of thematic audit, it is imperative to allocate
appropriate resources/staff in each of the Audit formation. The Head of the
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Audit formation in the State/Centre may like to specifically earmark
appropriate staff (Audit Groups) exclusively for Thematic Audit. Even
separate nomenclature may be adopted for such audit groups. It is
emphasised that the Audit groups should be provided with proper
infrastructure for efficient handling of the Audit work. Audit groups dealing
with Thematic Audits should be given proper training to deal with audit of
records of the taxpayers of these themes.
8.1.7 Standard Operating Procedure (SOP) for conducting Thematic
Audit.
a) The Co-ordination Committee (CC) shall select the themes for Audit
and communicate the Themes to the Committee of officers (CoO)
responsible for Audit.
b) For a given theme, the committee of officers shall select the taxpayers
to be audited in that particular state.
c) Audit groups earmarked for conducting the theme based audit shall
request the selected tax payer(s) for providing necessary documents viz.
Balance sheet(s), 3 CD reports(statement of particulars required to be
furnished under Section 44AB of the Income Tax Act, 1961), profit and loss
statements, income tax returns etc. The concerned audit group shall also
take out various GST returns filed by the said taxpayer and
examine/scrutinise them. They will accordingly prepare the Desk Review
(DR) and also the Audit Plan (AP). As with entity-based audit discussed in
earlier section above, as much data as possible may be gathered from the
documents/returns already available in the system.
d) All such Audit groups (both under Centre and State tax authorities)
shall forward the proposed audit plan so prepared by them, to the Committee
of Officers which shall examine these audit plans to ensure uniformity in
approach and provide further inputs, if any. After this exercise, a common
minimum Audit Plan shall be prepared and communicated to all Audit Groups
for conduct of audit.
e) The Committee of Officers for conduct of thematic audit shall also
indicate a date on which audit of all such taxpayers irrespective of their
jurisdiction (whether under Centre or State) shall commence.
f) After conduct of audit, all the Audit Groups shall prepare their
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observations and convey to the taxpayer (s) for their written response to
these observations. In their written response, the taxpayer is expected to
communicate their agreement or disagreement as the case may be to the
observations pointed out by the Audit Group. After taking into account the
written response from the taxpayer, the Audit Group shall prepare the draft
audit para(s).
g) The Audit Group shall forward their draft audit para(s) to the Committee
of Officers for approval. Before approving the draft audit para(s), the
Committee of Officers may hold a meeting (physical/virtual) with concerned
audit groups. This Committee may also point out certain additional areas
which need to be looked into by the audit groups before finalising the audit
paras.
h) Once draft audit para(s) are approved by the Committee of Officers, the
audit group (s) shall present their draft audit report before their respective
Audit Authorities for approval. The Audit Authorities may adopt a practice of
holding monthly meetings of the monitoring committee for approval of audit
paras presented by their audit groups. At present, Central Tax Authorities are
holding monthly meetings of the monitoring committee consisting of
Commissioner (Audit), Joint Commissioner/Additional Commissioner (Audit)
and Assistant/Deputy Commissioners heading various Audit Circles
wherein audit objections are discussed and approved.
i) Once audit para(s) are finalised after approval of the Monitoring
Committee, the concerned audit officers/groups shall issue Final Audit
Report (FAR), a copy of which shall also be endorsed to the coordination
committee for dissemination to Central Tax Audit Commissionerates /State
Audit Officers across India for information.
j) The audit paras which have been agreed upon by the taxpayer shall be
closed after payment of the due tax amount along with appropriate interest
and penalty, if any.
k) As regards unpaid/short paid GST is concerned where the taxpayer is
not in agreement with the audit para and is not willing to pay outstanding
GST along with interest and penalty, the audit groups shall prepare demand
cum show cause notice to be adjudicated by the appropriate Tax Officer.
Before issue of demand cum show cause notice, the taxpayers may be given
pre-consultation so as to give them one more opportunity to explain their
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point of view to the senior tax officers before a final decision is arrived at. The
Tax Authorities may also use this opportunity to explain the department‘s
view point to the taxpayers and encourage them for voluntary compliance.
This will reduce unnecessary litigation which is good for both the taxpayer as
well as the government.
l) After adjudication proceedings, recovery action against the taxpayer
shall be taken by the appropriate jurisdictional tax authority (i.e. Central Tax
Commissionerates or State Tax Jurisdictional Authority) in accordance with
Section 79 of the CGST/SGST Act read along with relevant rules and
provisions issued therein.
m) The jurisdictional tax authorities shall upload the audit findings (in a
predetermined format), in an Audit Utility which shall be accessible to all the
Audit formations across the country. These findings may be helpful in
detecting similar types of anomalies in similar cases across the country.
8.2 Joint Audit
8.2.1 Overview
It is possible that some taxpayers registered on the same PAN may be
spread across multiple locations either within the same State or across
States of India. These multi-location taxpayers may fall under different tax
administrations, particularly so in case of multistate operators. Therefore,
there is a need to ensure a coordinated approach for conducting audit of
such multi-location taxpayers.
8.2.2 Administrative arrangement for Selection of Joint audits
Constitution of Coordination Committee - It is proposed that the Coordination
Committee constituted by the GST Council for the purpose of thematic audit
may also be entrusted with the work of coordinating joint audit.
The Coordination Committee may select certain taxpayers for joint audit out
of the database provided by GSTN. It is proposed that the taxpayers may be
selected for joint audit based on clear and mutually agreed criteria/risk
parameters between different tax administrations.
8.2.3 Examples of criteria for selection of taxpayers for joint audits :-
 Registration in two or more GST Tax administrations.
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 Entities above a certain turnover aggregate threshold, for example,
more than Rs. 100 Crore.
 Taxpayers dealing in the service industry, having national or multi state
operations. Inter-agency coordination failure in the aforementioned cases
may lead to lack of uniformity in interpretation of law leading to compliance
hassles for the taxpayer and increased litigation for the department.
Therefore, there is a need for well-defined procedures to delineate the
modalities of conducting theme-based audit.
The Coordination Committee may also adopt any other parameters/criteria
for selecting taxpayers for joint audit.
8.2.4 Administrative arrangement for conduct of Joint audits.
Constitution of Committee of Officers - For coordination of conduct of joint
audit of a multi locational taxpayer, Committee of Officers (hereinafter
referred to as Supervisory Committee) may be constituted.
It is proposed that this committee may comprise the following:-
● The Commissioner (SGST/CGST) of the jurisdiction where the
headquarter of the said company/business entity is located.
● The Commissioner (SGST/CGST) of the jurisdiction having the highest
risk score in the GSTINs of the company/business entity.
● The Commissioner (SGST/CGST) of the jurisdiction other than the
above two where the turnover of the GSTIN of the said PAN is the highest.
● The Commissioner (SGST/CGST) of the jurisdiction other than the
above three where the ITC utilisation of the GSTIN of the said PAN is the
highest. (If it is the same as the unit where the highest turnover is then this
criteria does not come into play)
● The Commissioner (SGST/CGST) of the jurisdiction where the selected
company/business entity maintains its compliance and financial records.
8.2.5 Standard Operating Procedure for conducting Joint Audit
a) The Co-ordination Committee shall select the multi-locational taxpayers
for joint audit and communicate the same to the concerned Supervisory
Committee. This should be done no later than the month of February for the
next financial year. This Committee in turn will intimate the jurisdictional Audit
Authorities to allocate the selected taxpayer to a particular audit group for
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conduct of audit.
b) The nominated Audit group shall request the taxpayer for providing
necessary documents viz. Balance sheet(s), 3 CD reports (statement of
particulars required to be furnished under Section 44AB of the Income Tax
Act, 1961), profit and loss statements, income tax returns etc. The concerned
audit group shall also take out various GST returns filed by the said taxpayer
and examine/scrutinise them. They will accordingly prepare the Desk Review
(DR) and also the Audit Plan (AP). As recommended in para 10.7 above any
documents not available with the taxpayer administration/GSTN/other
regulators should be sought from the auditee.
c) All such Audit groups (both under Centre and State tax authorities)
shall forward the proposed audit plan to the Supervisory Committee which
shall examine these audit plans to ensure uniformity in approach and
providing further inputs, if any. After this exercise, a common minimum Audit
Plan shall be prepared and communicated to all Audit Groups for conduct of
audit.
d) The Supervisory Committee shall also indicate a date on which an audit
of all such taxpayers irrespective of their jurisdiction (whether under Centre or
State) shall commence. An effort should be made to start and conclude the
audit within 3 months and at any rate, within the same financial year.
e) After conducting an audit, all the Audit Groups shall prepare their
observations and convey to the taxpayer(s) for their written response to these
observations. In their written response, the taxpayer is expected to
communicate their agreement or disagreement as the case may be, to the
observations pointed out by the Audit Group. After taking into account the
written response of the taxpayer, the Audit Group shall prepare the draft audit
para(s).
f) The Audit Group shall forward their draft audit para(s) to the
Supervisory Committee for vetting. Before vetting the draft audit para(s), this
Committee may also hold a meeting (physical/virtual) with concerned audit
groups. The Committee may also point out certain additional areas which
need to be looked into by the audit groups before finalising the audit paras.
g) The Supervisory Committee shall, before finalising the audit paras,
resolve any inconsistency or conflicting interpretations on any point of law
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made by the different audit teams and recommend modification of such
interpretations accordingly and the audit teams shall suitably incorporate
them in their report.
h) Once draft audit para(s) are vetted by the Supervisory Committee, the
audit group(s) shall present their draft audit reports before their respective
Audit Authorities for approval. The Audit Authorities may adopt a practice of
holding monthly meetings of the monitoring committee for approval of audit
paras presented by their audit groups. At present, Central Tax Authorities are
holding monthly meetings of the monitoring committee consisting of
Commissioner (Audit), Joint Commissioner / Additional Commissioner (Audit)
and Assistant/Deputy Commissioners heading various Audit Circles wherein
audit objections are discussed and approved.
i) Where it is felt that different audit authorities are adopting different
opinions with regard to approval of audit para in their respective monitoring
committees, the role of the supervisory committee will come into the picture.
It is proposed that they may hold meetings with all CGST Audit
Commissioners/State GST Commissioners quarterly or more frequently, if
needed for establishing a uniform approach in this regard across tax
jurisdictions in India.
j) Once audit para(s) are finalized after approval of the Monitoring
Committee (or Supervisory Committee), the concerned audit officers/groups
shall issue Final Audit Report (FAR), a copy of which shall also be endorsed
to the Supervisory Committee for dissemination to Central Tax Audit
Commissionerates/State Audit Officers across India for information.
k) The audit paras which have been agreed upon by the taxpayer shall be
closed after payment of the due tax amount along with appropriate interest
and penalty, if any.
l) As regards unpaid/short paid GST is concerned where the tax payer is
not in agreement with the audit para and is not willing to pay outstanding
GST along with interest and penalty, the audit group shall prepare demand
cum show cause notice to be adjudicated by the appropriate Tax Officer.
Before issue of demand cum show cause notice, the taxpayer may be given
pre-consultation so as to give him/her one more opportunity to explain his/her
point of view to the senior tax officers before a final decision is arrived at. The
Tax Authorities may also use this opportunity to explain the department‘s
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view point to the taxpayer and encourage him/her for voluntary compliance.
This will reduce unnecessary litigation which is good for both the taxpayer as
well as the government.
m) After adjudication proceedings, recovery action against the taxpayer
shall be taken by the appropriate jurisdictional tax authority (i.e. Central Tax
Commissionerates or State Tax Officers) in accordance with Section 79 of
the CGST/SGST Act read along with relevant rules and provisions issued
therein.
n) The jurisdictional tax authorities shall upload the audit findings (in a
predetermined format), in an Audit Utility which shall be accessible to all the
Audit formations across the country. These findings may be helpful in
detecting similar types of anomalies in similar cases across the country.
The follow up action to be taken after completion of above audits is the same
as given in Chapter 6 above (p. 62)
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CHAPTER 9
This chapter covers capacity building in specialised areas.
9.1 Training and Capacity Building
The erstwhile VAT did not have service sectors therefore it has been felt that
officers of State GST needs to be trained specifically in service sectors which
needs to be identified by the states and NACIN will draw a program to train
the Master Trainers for each state based on the requirements of those states.
NACIN through its Zonal Campus are already conducting bi-monthly training
course on GST Audit & Accounting and one training program for Master
Trainers of GST Audit has already been conducted.
9.1.1 This training program will identify
● The frequency with which the training program needs to be conducted
by NACIN for the master trainers as well as for the other officers.
● Nomination of Nodal officers from States for identification of Training
needs
● Training on specific service sector which has been identified by the
respective State GST (around top 5 services)
● Identification of officers to create proper training modules for identified
specific service sectors.
The above needs shall be identified in coordination with the State GST by the
ZTI NACIN. The identification and conduct of the program shall be a
continuous one where the SGST can even rotate the master trainers and
officers to create training modules on specific sectors based on their
requirement.
The frequency of the training program will be shared by State GST based on
their requirements and the officers which need to be trained.
This training program will be in addition to the regular training program on
GST Audit.
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Since there are multiple types of services being supplied by business entities
therefore it is also suggested that the process flow along with the case study
of that service sector shall be part of the training program. For eg, banking
sector and insurance sector are giving multiple services therefore there is a
need to explain and train the officers on the overall work flow of the services
so that the holistic picture of the services being supplied is available to the
officers.
This work flow of the services needs to align with the GST Act so that the
officers shall understand the services which are taxable and which are
exempted. They shall also understand the concept of mixed and composite
supply in the gamut of services being supplied.
9.1.2 Identification of Specific Service Sectors for focused training
NACIN in coordination with the State GST will identify the specific service
sectors where there is a need to train the officers for capacity building. It is
also suggested that since there are multiple services being offered by the
business entities therefore there is a need to understand the supply in
accordance with the GST law and procedures. In this regard supply of
services needs to understand properly and various concepts like time of
supply, place of supply, mixed vs. Composite supply, taxable and exempted
supply etc. needs to be focused upon so that the model of the sector along
with the taxability is clear to the officers.
For identification of the specific sectors it is recommended that a Committee
at the zonal level shall be formed with the following as its Members
● ADG NACIN ZTI
● Commissioners of State GST or his representative
This Committee shall decide the sectors which needs to be focused upon.
Further the committee shall meet every quarter to review the specific sector
areas.
Some of the sectors which have been identified where there is a need for
training are
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1. Work contract
2. E commerce Services
3. IT & ITES
4. Banking & Insurance
5. Hospitality
6. Telecom
7. Online Information Database access & Retrieval(OIDAR)
It is recommended that the industry experts along with the officers may be
involved in the training program to understand the specific sector model.
9.2 Building knowledge on financial accounting
9.2.1 Introduction
a. Accounting is reporting through financial statements. It is the process of
recording, summarizing, and reporting the myriad of transactions resulting
from business operations over a period of time and results in the preparation
of Financial Statements (including Balance sheet, Profit & Loss account etc.).
b. Financial accounting is keeping track of a
company's financial transactions. Using standardized guidelines, the
transactions are recorded, summarized, and presented in a financial report or
financial statement such as an income and expenditure statement, trading
and P & L account and a balance sheet. GST Audit basically refers to
examination of various records, returns and other documents maintained or
furnished by the auditee, like
­ Monthly/ Quarterly/ Annual Return;
­ Copy of the audited annual financial statements;
­ Reconciliation statement, reconciling the value of supplies declared in
the Annual return furnished for the financial year with the audited annual
financial statement in FORM GSTR 9C/any other form, etc.;
­ Such other particulars, as may be prescribed.
9.2.2 Audit in GST with reference to financial accounting
a. While implementing the GST Law, the GST officers come across the
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financial accounts of the taxpayer. Taxpayers‘ business consists basically of
his daily transactions of outward or inward supplies (alongwith events related
to such supplies), and each transaction may have GST implications i.e. either
levy of GST or the claim of legitimate and eligible ITC or the GST by way of
RCM. Hence, the GST officers are required to have a working knowledge of
financial accounting, on the basis of which entire business transactions are
recorded and compliance is made by the taxpayer.
b. GST audit casts a huge responsibility on the auditor for detection of tax
not paid or short paid or erroneously refunded, or input tax credit wrongly
availed or utilized etc. Hence, it is very important that the auditor possesses a
good understanding of accounting fundamentals as well as sufficient
accounting skills to read and analyze financial statements. Further, there are
several transactions which may not appear in the financial accounts and
records maintained by the registered persons such as stock transfers, free
samples (except in stock registers), services received from outside India from
related parties (except in correspondences), other supplies made without
consideration, etc. Due care must be exercised by the auditor to identify such
transactions as there may be no direct reference to these transactions in the
financial records. Another skill that is very important is being able to link the 3
financial statements, i.e., income statement, balance sheet, and cash flow
statement.
c. Following are various aspects of financial accounting having impact on
GST, which have to be examined and analyzed by the auditor thoroughly:
d. Identification of various types of Income (Taxable, Exempt, Export, SEZ
supplies, Other Income, Reimbursements etc.) of companies in respect of
Supply of Goods and Services.
– Study of various items of balance sheets that impact GST like
Capital Account (Withdrawal of assets, Debits/credits in nature of supplies),
Loans (Figures in odd amounts, standing for long, No interest, No
movement), Current liabilities (Advances, RCM, reversal of ITC), GST paid
on RCM, Mismatched Credits, Other credits in dispute, Duty Paid on Exports
and so on.
– Understanding of ―Notes to Accounts‖ in financial statements which
would help in understanding the business of the entity, Taxes / Contingent
Liabilities, Cost or Net Realizable Value (Assistance in valuation provision
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under GST), Information about related parties & Payments made to Related
Party / Key Managerial Personnel, Payments made to Foreign subsidiaries/
Associated concerns, Valuation of Inventory etc.
– Analysis of various accounting ratios (like Net profit ratio, Gross
profit ratio, Supplies/Turnover ratio, Creditor Turnover ratio, ITC/ gross tax
liability ratio, Non-GST expenses/GST expenses ratio, Addition to fixed
assets/Total assets ratio etc., Liquidity/Solvency ratios to indicate areas of
probing.
– Indian companies follow Indian Accounting Standards, while the
companies operating in the US follow the Generally Accepted Accounting
Principles (GAAP) and companies with international exposure follow
International Financial Reporting Standards (IFRS). Hence, it is imperative to
familiarize the Auditors to these accounting/ reporting Standards.
– Different software tools are available for conducting an audit, and
the one appropriate to the financial accounting must be chosen or designed
for the auditor.
e. In this context, it is relevant to note that the importance of evaluating
the internal control mechanism of the entity under audit cannot be
overemphasised. Evaluation of the internal control system is a very important
step in the actual conduct of audit as it enables drawing of correct samples
for auditing and effective targeting of risk areas. Internal control mechanism
is actually the sum total of all policies and procedures which are adopted by
the entity in order to achieve the objective of "orderly and efficient conduct of
its business", including safeguarding of assets, prevention and timely
detection of any fraud/error, ensuring accuracy and completeness of
recording, classification and disclosure of transactions.
f. Essentially, the efficacy and effectiveness of the internal control
mechanism of the auditee provides a reasonable assurance to the auditor as
to the degree of reliance that can be placed on the accounts and financial
statements of the auditee. Based on his/her assessment of the effectiveness
of such a mechanism the auditor can draw appropriate samples for
subjecting them to detailed scrutiny and verification.
g. Internal control systems with regard to accounting have the following
objectives: -
 that ALL transactions are RECORDED
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 that recorded transactions are REAL
 that ALL transactions are RECORDED TIMELY
 that all recorded transactions are PROPERLY VALUED
 that all recorded transactions are PROPERLY CLASSIFIED & POSTED
 that all recorded transactions are PROPERLY DISCLOSED
 that all recorded transactions are PROPERLY SUMMARISED
h. Internal control mechanism provides reasonable assurance, not only to
the auditor but also the management, that all essential aspects of all
transactions have been properly and appropriately recorded and that there
are no material errors of omission or commission. Internal control mechanism
can be evaluated through appropriate questionnaires, check lists and through
a study of the business process adopted by the entity. It is recommended that
such an exercise should be undertaken before commencing the audit and
verification process and the outcome of the evaluation exercise should be
utilized for deciding the scope and extent of audit and also for identifying
which areas of the operations the auditor must specially focus on.
9.2.3 A perspective through Accounting Standards
The GST Officer, while looking into the financial statements of a Taxpayer/
Company, should first understand the accounting standards applicable to the
Taxpayer/company. There could be differences in the manner of the
accounting and treatment of certain transactions as per Accounting Standard
in the financial statements vis-à-vis the treatment under GST. This can lead
to difference in turnover as per GST law and the principles of accounting and,
consequently, turnover as per final accounts. This could be better understood
through the following example:
Time of Supply Recognition from the GST Perspective:
 As per the provisions of CGST Act, in respect of ‗Time of Supply of
Goods‘ revenue shall be recognized as per Section 12 and in respect of
‗Time of Supply of Services‘ as per Section 13 of the said Act. The Value to
be considered for such transactions is as per the provisions of Section 15 of
the CGST Act. However, primarily GST is triggered when the entity makes
supply of goods or services or both. The definition of supply under GST is
very comprehensive and includes sale, transfer, barter, exchange, rental,
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lease, disposal, stock-transfer etc. of goods and/or services.
 On the contrary, in ‗financials‘ revenue is recognized when the goods
are sold, or services are rendered. No revenue is recognized when the fixed
assets are sold / disposed of, except for profit on sale of such assets or when
goods are transferred to the branches.
 For instance, from an accounting standpoint, revenue from sale of
goods is recognized when significant risks and rewards in the goods is
transferred by the seller to the buyer while in case of services revenue is
recognised either on proportionate completion method or completed service
contract method. These events may not correspond to the time of supply set
out in sections 12, 13 and 14 of the Act and, accordingly, revenue as per the
books of accounts may differ with that under GST law.
 This leads to the concept of billed/unbilled revenues and prior period
items.
9.2.4 Value of Supply recognition from a GST perspective
 Such transactions would result in difference between the revenue
reported under GST when compared to the ‗financials‘.
 Value of supply of goods or services or both under Section 15 of GST
law is the transaction value i.e. the price actually paid or payable for the said
supply and would include any duties and taxes paid under any other law
other than GST, incidental expenses incurred to meet such supplies, interest
charged, if any, etc.
 Valuation of contracts under Indian Accounting Standards (Ind AS)
might differ on certain aspects from GST Laws. For example, the contract
value may not include any duties and taxes paid which is refundable, interest
on delayed payment, expenditure incurred by the recipient etc. These
differences might lead to differences in valuation of contracts.
 Supplies without consideration: As per Schedule I of the CGST ActGST is leviable on certain transactions even if such transactions are made
without consideration – like supply of goods from principal to agent, disposal
of business assets, supplies to related parties etc. Under Ind AS transactions
without any consideration would not form a part of the financial statements
and would be treated as a non-balance sheet item / off- balance sheet item.
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 Post sales discounts: Usually if the entity has a practice of granting
discounts to its customers on post-sale basis, then for providing such
discounts the entity may raise a financial credit note which will not be
subjected to GST but would be reported as discounts in the financial
statements.
9.2.5 Cash Flow - The third important financial statement
 A cash flow statement is one of three mandatory financial reports
generated by every business organization monthly, quarterly, or yearly. It
measures the rate at which a business generates its cash so as to operate,
invest and pay its debts. The statement of cash flow complements the other
two financial statements of the business, i.e. the income statement and the
balance sheet.
 The cash flow statement summarizes the inflow and outflow of cash and
cash equivalents pertaining to a business. Main objective of a cash flow
statement is to help a business keep track of its cash inflow and outflow.
 As per GST law Cash flow statement is required to be disclosed as per
(Part B of GSTR 9C), though for 2017-18 and 2018-19 its optional, its
verification will be an integral part of verification by the GST Officer. Even if it
were not mandatory in terms of GST law, the cash flow statement would,
nevertheless, be a very useful tool in most cases for verifying whether all
supplies to external entities have been reflected in the return.
 Further, it can also help GST officer to understand the working of a
business and its operations. It provides them with details about the business‘
cash flow, from where is it coming and where it is going. Cash flow is the
indicator of the Taxpayer‘s financial well-being, its liquidity, and its operating
ability.
 The GST officer needs to calculate and reconcile the Receipts disclosed
and find out and confirm that they are appropriately disclosed and subjected
to tax.
9.2.6 Sector specific approach
Some sectors involve complex income streams, financial reporting
mechanisms etc., of which officers may not always be fully conversant. For
example, various income/revenue heads often need to be verified by the
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officers during audit of Banking, Insurance and Non-Banking Financial
Companies (NBFC) sectors. The Banking sector generates income among
others through interest income, capital markets operations (e.g., sales and
trading services, underwriting services, mergers & acquisition advisory), other
fee-based income (e.g., credit card fees, savings/ current accounts charges,
mutual fund revenue, investment management fees, custodian fees). The
revenues could also come through alternative financial services, investment
banking and wealth management. Each of these aspects merit a close look
by the audit officers for possible implications with regard to GST. Similarly, in
the insurance sector, various streams exist like premiums earned,
reinsurance, income from investments (e.g., interest, profit on
sale/redemption of investments, transfer/gain on revaluation/change in fair
value). As these are specialised sectors, it is necessary that the audit-related
training modules focus on these sector-specific accounting principles,
accounting standards etc. for a better appreciation of audit requirements of
these sectors.
9.2.7 In view of the above, capacity building of tax officials in respect of
financial accounting is necessary. This can be done through:
1. Imparting Training/capacity building of officers in the field of financial
accounting from institutions like NACIN to:
a. analyze and examine Financial Statements, various accounting ratios
etc.;
b. enhance skills of officers for detecting lacunae in the financial
accounting of any company;
c. learn about different strategies used to detect tax fraud and evasion.
2. Utilizing services of experienced tax officers from States and the
Centre. The sharing of knowledge amongst the officers of both the tax
administrations is of utmost importance as tax administrations on both the
sides have evolved over the years and both of them have certain unique
attributes which have to be factored in before devising an approach to GST
audit. The experience of Central Tax officers in the services and
manufacturing and that of the State Tax officers in dealing with the traders
can be mutually beneficial to improve the overall quality of the Audit systems
and procedures.
3. Creation of various Checklists to be examined during the audit. The
checklists to be prepared should also be able to reflect the industry specific
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factors and the domain expertise of officers from both the tax administrations
can be made use of.
Creating a strategy that builds the right mix of skills and experience — IT,
statistical, analytical and tax domain knowledge. Learning and knowing the
theoretical aspects of financial accounting albeit important but it has to be
backed up with the knowledge of the modern tools of accounting software and
systems.
9.2.8 Interpreting Business Contracts/Agreements
a. A business contract/agreement is the statement, either oral or written,
of an exchange of promises in business. It is a negotiated and legally
enforceable understanding between two or more legally competent parties.
b. There are different types of business agreements/contracts. Scrutiny of
these contracts or agreements constitutes one of the important functions of
audit, some of which are discussed below:-
c. Foreign Technical Collaboration Agreement: This agreement may be a
pure technical collaboration agreement or technical-cum-financial
collaboration agreement. In the latter, there is equity participation also.
Sometimes, collaboration agreements are only financial in nature wherein
only equity participation by a foreign company is involved. This is relevant for
the following reasons:
 Where there is equity participation, imports from the collaborator
may be subjected to scrutiny;
 Payment of royalty/technical know-how fee may involve GST liability
towards import of services including IPR;
 Whether consideration paid to the collaborator has been taken into
account in arriving at cost of production; etc.
 When the supply is from a related party (a) with consideration, (b)
without consideration .
d. Joint Venture Agreement: Many times, a joint venture company is set
up by Indian Companies with equity participation. Generally, there is a joint
venture agreement or promoter‘s agreement which defines various terms and
conditions subject to which a joint venture has been formed. This is relevant
for the following reasons:-
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● Nature of shareholding in the company;
● If there are any clauses regarding pricing pattern for sale to one of the
joint venture partners that may have a bearing on related persons sale or sale
at arms-length. This may impact valuation;
● The agreement may contain clauses for payment for certain services
which may have tax implication;
● There may be provisions for common Managing Director or common
Directorship indicating control/management of various companies which may
have a bearing on related persons concept; etc.
e. Joint Development Agreement in Real Estate Sector and GST Audit
 Joint Development Agreements are common in the real estate industry
wherein the Land Owner enters into an agreement with a Builder/Developer
for the development of the land in lieu of certain consideration. The
consideration in such cases can be varied- ranging from a lump sum
payment by the builder to the land owner to a share in the ultimately
constructed flats/property or a combination of both.
 Such agreements involve an element of transfer of land for
developmental purposes. Transfer of Development Rights (TDR) are covered
under the GST and there is no ambiguity in this regard unlike the Service Tax
period.
 Various transactions in a JDA with concomitant GST implications are as
follows:
(i) Land Owner to Builder/Developer.
(ii) Builder/Developer to Land Owner.
(iii) Land Owner to Customers/buyers.
(iv) Builder/Developer to Customers/buyers.
(v) Retention of flats/property for own use.
 All such transactions have GST implications like the eligibility of ITC,
Time of Supply, Rate of Tax, Value of Supply etc. which would require a
detailed reading of the various agreements entered between the concerned
parties. A case in point is the eligibility of ITC in such cases only for the
portion of the flats/property sold before a completion certificate is obtained.
The ITC availed and utilized in the flats/property sold after the completion
certificate is obtained has to be reversed. The exact liability of the GST on
such projects can be arrived at only after the details of the agreements are
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studied thoroughly in consonance with the provisions of the GST Act and
Rules. The treatment of transfer of development rights and implications in
varied schemes like rehabilitation also have to be understood clearly.
f. Works Contract:
Works contract is an activity wherein supply of both service and goods takes
place, for example, construction of building; erection, commissioning,
installation of plant and machinery, etc. In common parlance, a works
contract relates to both ‗movable property‘ and ‗immovable property‘. In the
Service Tax regime, the service portion in the supply of works contract
service for carrying out construction, erection, commissioning, installation,
completion, fitting out, repair, maintenance, renovation, alteration of any
‗moveable property‘ or ‗immoveable property‘ was subjected to levy of
Service Tax. In the GST period, the definition of works contract has been
restricted to any work undertaken for an ‗immovable property‘ only.
Consequently, any composite supply (comprising supply of goods and supply
of service) on movable property (goods), for example, a fabrication work or
paint work done in automotive body shop does not fall within the definition of
works contract under the GST; and such contracts would be treated as
composite supplies and would be taxed accordingly. Further, circumstances
under which a seemingly immovable property is to be treated as a moveable
property and vice versa in terms of judicial pronouncements is crucial in this
context and has to be considered carefully in the light of facts of the case.
Under the GST law, works contract has been treated to be supply of services,
as per Entry No. 6(a) in Schedule II of the CGST Act. This is relevant for the
following reasons:-
 If a works contractor has his project office in a State, he has to take
registration in that State once he crosses the threshold limit of Rs. 20 lakhs
(Rs. 10 lakhs in a Special Category State).
 As the works contract has been defined to be a supply of service, the
works contractor is not entitled to avail of the Composition Scheme, because
it is available only to suppliers of goods and the restaurant industry (not
serving alcohol).
 Unlike the Service Tax and VAT regimes, no abatement from the value
of service is allowed to the works contractor under the GST law.
 ITC of tax paid on works contract service is not available when such
works contract service is supplied for construction of an ‗immovable property‘
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(other than plant and machinery) except where works contract service is an
input service for a supplier of works contract service. [refer to section 17(5)(c)
of the CGST Act]. In other words, ITC of tax paid on the works contract
service can be availed only by a recipient of such works contract service
(taxable person) who is using these services for further supply of works
contract service. For example, a company, not engaged in the supply of
works contract service, cannot be entitled to avail of ITC of GST paid on the
works contract service received from a works contractor.
 As the supply of works contract service under the GST laws
necessarily involves immovable property, the place of supply of service would
normally be the place of where the immovable property is located.
 The value of supply of works contract service, involving transfer of
property in land or undivided share of land, as the case may be, shall be
equivalent to the ‗total amount‘ (‗consideration charged for works contract
service plus the ‗amount charged for transfer of land or undivided share of
land‘, as the case may be) charged for such supply less the value of land or
undivided share of land, as the case may be. The value of land or undivided
share of land, as the case may be, in such supply shall be deemed to be one
third of the ‗total amount‘ charged for such supply.
g. Manufacturing Agreement:
There can be contract / manufacturing agreements which a company might
enter into with another company, usually brand owner of repute. Such brand
owning companies usually contract out the manufacturing of finished goods
to a contract manufacturing facility under certain terms and conditions. This is
relevant for the following reasons:-
● The payment under the contract manufacturing arrangement may be
looked into;
● What happens to the waste and scrap generated under the contract;
● Whether the contract manufacturer is the real manufacturer or the
dummy created for the purpose of declaration of lower assessable value;
● Whether the agreement contains any other consideration which can be
converted into monetary terms; etc.
h. Service Agreement:
There may be service agreements/MOUs on various aspects of the business.
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In some businesses, Purchase Orders constitute the agreement which
contains various terms and conditions for supply of services. Specific focus
could be sector-wise service agreements in automobile, FMCG and infra
projects. This is relevant for the following reasons:-
● Service given or parts supplied during AMC
● To verify the terms and conditions especially with respect to supply of
services;
● Whether the invoice is raised as per the Agreement/contract;
● To compare the total price charged in the Agreement/contract with the
GST invoice to ensure that no extra flow back is received outside the invoice
through commercial invoice/debit note;
● To study tax structure agreed upon in the Agreement/Contract;
● Any clause regarding Liquidated damages, or Penalties etc.
i. Job Work Agreement:
Job work agreements would be formal agreements or through letters
exchanged between the parties which contain the basic terms and conditions
of the job work. This is relevant for the following reasons:-
● Nature of job work done;
● Time period of returning job worked items as per Section 143 of the said
Act;
● What happens to the waste and scrap generated during the job work;
● Whether an applicable rate of tax is charged; etc.
j. Dealership/Distribution agreement:
Manufacturers/ suppliers usually market goods through a distributor or dealer
network; and enter into dealer/distribution/stockist agreements containing
various terms and conditions. Supplies by Principal and Agent as defined in
CGST Act 2017 are areas of specific focus. This is relevant for the following
reasons:-
● Whether the agreement contains any condition or terms whereby the
dealer/distributor is to advertise on behalf of manufacturer; if so, what are the
conditions;
● Post sale discounts
● Warehousing facility
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● Whether there is any provision for sharing of expenses;
● Whether the goods under supply require after sale service/warranty;
● Whether there is any separate optional warranty agreement, set to
commence immediately after the initial mandatory warranty period;
● Is there any provision in the agreement for delivery of free gift items
through dealer;
● What is the discount pattern or incentive offered by manufacturer in the
agreement; Is it based on the commercial considerations normally prevailing
in the trade or not;
● Whether the agreement provides for any non-refundable security
deposit with or without interest; etc.
k. Purchase Contract:
Purchase of materials/goods are under specific contracts or by tenders
floated. These purchase contracts/tenders may also contain information
related to audit. This is relevant for the following reasons:-
● Who is the supplier; whether he is related person or not;
● Whether the delivery of goods made directly to factory or to job worker;
etc.
l. Lump sum turn-key contract:
The assessee may have a turnkey contract which may involve supply,
erection at site and commissioning of the goods. This is relevant for the
following reasons:-
● Whether the price of the goods is inclusive of erection, commissioning
at site;
● Whether any attempt has been made to overload the erection and
commissioning charges;
● Whether the machinery is supplied by the manufacturer; etc.
● Case study of solar project (70% of value as goods @ 5% and 30% of
value as services @ 18%).
m. Apart from the above there can be many other types of
contracts/agreements such as Works Contracts, Constructions contracts,
Leasing contracts, Hire purchase agreements, Franchisee agreements, Nondisclosure agreement, Non-Competitive contract , Insurance and reinsurance
agreements / contracts, Banking contracts – to the extent of the Banking
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fees, charges, penalties charged for services rendered to its customers, other
banks, etc. and the exact nature and nuances of such contracts/agreements
will have to be understood by the officers conducting audit by factoring in the
scope and type of business activity being conducted by the taxpayer.
n. GST officer has to verify and ensure that the results or outcomes of
various agreements are accounted for appropriately and the appropriate
compliance is made by the taxpayer.
o. It is the duty of GST officer to not only plug the revenue leakages, but
to also keep a close watch on systemic tax planning that may adversely
affect GST revenues. It should be ensured that while conducting the audit,
the terms and conditions of the contracts are gone through and their impact
on the value of the supply should be ascertained appropriately so as to point
out any duty evasion. For this, conditions of contract, compliance of such
terms & conditions, scope of manipulations while performing the contract
(e.g. Supplies under Schedule-II of CGST Act, 2017), liquidated damages,
penalty clause etc. need to be checked and factored in appropriately.
p. At times this may also require cross-referencing between the
contract(s) and the financial statements.
9.2.9 Understanding System Driven Business Process through
SAP, Oracle, Tally Etc.
a) A process is a series of tasks that are completed in order to accomplish
a goal. A business process, therefore, is a process that is focused on
achieving a goal for a business. Processes are something that businesses go
through every day in order to accomplish their mission. The better their
processes, the more effective the business. As processes grow more
complex, they need to be documented. For businesses, it is essential to do
this, because it allows them to ensure control over how activities are
undertaken in their organization. It also allows for standardization. The
complex nature of the business transactions these days has made it
mandatory to make the business processes and specifically the accounting
processes to be automated and system driven.
b) With the advent of GST, a large number of GST software packages
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have been developed and have become widely available. These software
packages help organizations simplify the process of GST billing, filing returns,
and generating GST invoices. These software packages vary in cost,
complexity, features, security, data processing ability, scalability etc. Effective
GST software can aid businesses in managing their finances, accounts,
inventory, purchase, sales, payroll, taxation, and other processes efficiently.
c) Financial Accounting System is an accounting system where
the financial data of the organization is maintained. It is important for auditors
to be well conversant with various industry standard softwares like SAP,
Oracle, Tally etc.; and also to various accounting methods like Cash
Accounting and Accrual Accounting methods. Hence, the auditors must be
well trained in financial accounting concepts and use of financial accounting
systems that would help them examine and analyze the accounting process,
various transactions and ledgers of the assessee while correlating the same
with various GST Returns, financial statements etc. Therefore, it is necessary
to:
● Impart knowledge related to latest financial accounting systems and
methods through various training programs;
● Use of Software for identifying risk parameters similar to CAAP used in
the Central Excise regime.
● Developing software to collect back up of Financial Accounts
maintained by the Taxpayer.
9.2.10 Audit in an ERP Environment
a) The objective of an GST auditor is to identify and assess the risks of
material misstatement, whether due to fraud or error, at the financial
statement or entry feeding level. The auditor has to understand the nature of
the governance structures of the entity i.e. the business structures as well as
the IT structures. The IT team is usually the custodian/owner of the
application and the business team is the custodian/owner of the data residing
within that application, therefore, it is imperative to segregate and understand
the roles of both the structures/team. The GST officer has to understand the
IT systems and related procedures within IT and business processes by
which the transactions are initiated, recorded, processed, reported in the
ERP environment. It will also be desirable for the GST officer to get a grasp
of the various access controls and rights like the Administrator role/rights,
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senior management role/rights and the like so as to access data accessible
only to a certain level of officers of an entity. A company may be using a
number and variety of software packages to carry out its various functions as
depicted in the table below:
Information
System Purpose Location In-house or
Packaged
SAP/Tally Accounting, Supply
Chain, Production USA Packaged
Pay Master Pay Roll India Packaged
Budget king MIS, Budgeting India In-house
b) The GST officer will thus be required to have a good knowledge of the
general IT systems and the Automated Application software being used in a
business for carrying out the task of audit in an efficient and effective manner.
c) The modern tools/software like Tally. ERP9 designed specifically for the
purpose of preparing and finalizing GST Returns has in-built mechanisms to
generate various Reports. For example, the GSTR-1 statements can be
generated from Tally. ERP9 in JSON format, compressed in the .zip format
and uploaded. An advanced tool such as the Tally.ERP9 not only allows the
officers to get a summary of the various reports but also goes a long way in
finding out about the mismatches in the data. The knowledge of the ERP
software will help the GST officers in reconciling the various figures submitted
on the portal with those of the financial statements. Further, the ERP systems
are designed to cater to a multitude of taxpayer‘s needs such as Profit
tracking, Fixed Assets Management, Risk Management, Multi- Currency
Management and Tax Management and therefore, the GST officer auditing
an entity should be able to understand various aspects related to these
automated accounts.
d) The traditional system of bookkeeping mandated the preparation of
separate ledgers like the Purchase Ledger, Sales Ledger, Credit Ledger,
Bank/Cash Book etc. but the shift to the automated environment has done
away with these requirements and all the transactions are now integrated. An
enterprise resource planning system inherently means that all the modules
within the system are seamlessly connected with each other and the
transactions flow through the relevant modules. Thus, there is one Primary
Set of Books and all the transactions reside here. For example, if we take 2
purchase transactions involving 2 Vendors
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Purchases Dr - Purchase Control Account
To Vendor 1 A/c - Creditors Control Account
Purchases Dr - Purchase Control Account
To Vendor 2 A/c - Creditors Control Account
e) In the above example, the ERP will maintain the details of transactions
separately for Vendor 1 and Vendor 2 and also have a Creditors Control
Account to capture the total of all Creditors balances.
f) In such an automated environment, while deciding on the audit
procedures the GST officer should consider the risk of material misstatement
at the assertion level (at the level of initial entry) for each class of
transactions, account balance and disclosure. Thus, the traditional way of
conducting audit may not prove to be fruitful for the department because of
the inherent risks prevalent due to the complexity of systems, use of
sophisticated application software, systems being distributed over
geographies, volume of transactions, outsourced processes and the like.
g) In view of the above cited difficulties, the GST officers will have to
mould their thought process and start relying more on what the accountants
call the ―Controls Based Audit‖. Some of the basic tenets of conducting audit
under systems driven approach are:
1) Design of the Audit Team- incorporation of more experts/ specialists
who can extract the data from the ERP systems. Obtaining data
independently from the software gives the officers more direct audit evidence.
2) Use of Computer Assisted Audit techniques;
3) Preparation of customised and specialised systems in-house by the
department by using the experience of the tax administrations;
4) Use of latest technology like cloud computing;
5) Develop competence for ―forensic audit‖.
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Annexures
Annexure 1: Notice for conducting audit (p. 39)
Form GST ADT – 01
[See rule 101(2)]
Reference No.: Date:
To,
…………………………………….
GSTIN …………………………………….
Name ………………………………………
Address ……………………………………
Period - F.Y.(s) - ……………………………..
Notice for conducting audit
Whereas it has been decided to undertake an audit of your books of account and
records for the financial year(s) ……….. to ……….. in accordance with the provisions
of section 65. I propose to conduct the said audit at my office/at your place of business
on -------.
And whereas you are required to:-
(i) afford the undersigned the necessary facility to verify the books of account and
records or other documents as may be required in this context, and
(ii) furnish such information as may be required and render assistance for timely
completion of the audit.
(iii) furnish/keep ready the following on the said date
(a) your reply to the questionnaire annexed hereto vide Annexure A,
(b) Information duly filled in the Tables annexed hereto vide Annexure B
(c) The documents/accounts listed in Annexure C hereto
You are hereby directed to attend in person or through an authorised representative
on ………………….. (date) at……………………………(place) before the undersigned
and to produce your books of account and records for the aforesaid financial year(s)
as required for audit.
In case of failure to comply with this notice, it would be presumed that you are not in
possession of such books of account and proceedings as deemed fit may be initiated
as per the provisions of the Act and the rules made thereunder against you without
making any further correspondence in this regard.
Signature … ………………………….
Name …………………………… …...
Designation…………………………
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Annexure 2 (p.40)
Sample letter seeking mutual assistance to complete the audit in a focused
manner.
GOVERNMENT OF ………………………
Office Name…………………………………………….
Address……………………………………………………………….
Memo No. ADT/AUDIT YEAR/Section/Audit Gr./case no. Date: ………………………………….
[e.g.: Memo No. ADT/2017-18/Park Street/Team 1/5 Date: 1st December, 2021]
To
………………………………………………………….
GSTIN : …………………………………………….
Address : …………………………………………………………………………………….
Period : ……………………………………………………………..
You are aware by now that you have been selected by the Commissioner, State Tax/Central Tax,
………………………. for audit of your books of accounts and records for the period
from……………………….to ……………………. in accordance with the provisions of section 65 of the
SGST/CGST Act, 2017 read with section 20 of the IGST Act, 2017.
In accordance with the provisions of the Acts and Rules made there under, you are required to (i)
provide the undersigned the necessary facility to verify the books of account and records or other
documents as may be required in this context, and (ii) furnish such information as may be
required and render assistance for timely completion of the audit.
To avoid any inconvenience from your part to produce the entire set of book of accounts and
records on the first date of hearing as specified in Form GST ADT-01, it will be much more
practical to produce such books of accounts in a staggered manner and to the extent of what
actually will be required from time to time. This will help you and the audit authority to complete
the audit process in a focused and planned manner. For such reasons you are hereby asked to
produce following statements and accounts (duly signed and stamped) before the
undersigned on first date of hearing as specified in Form GST ADT-01 issued to you:
● Annual report and Director’s report for the FY …………………..
● Profit & Loss A/c for the year ended on 31st March, …………………..
● Balance Sheet as they stood on 31st March, ……………………
● Auditor’s Notes to the A/c for the FY ………………..
● If GSTR -9C is not submitted for the period then Trial Balance for the RTP having above
mentioned GSTIN (It is applicable where the RTP has multiple GSTIN),
● Consolidated statement (party-wise total for the period under audit) of inward & outward
supplies including exempted and non-GST supply:
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RTP to
whom
supply
made
GSTIN
Total
numb
ers of
invoic
e/
debit
notes
issue
d
Supply
Value
(Rs)
Tax (Rs)
Broad category
of
CGST SGST IGST Cess Goods/services
RTP from
whom
supply
received
GSTIN
Total
numbers
of
invoice/
debit
notes
issued
Supply
Value
(Rs)
Tax (Rs)
Broad category
of
CGST SGST IGST Cess Goods/services
● List of HSN code of goods and SAC of services in respect of your supply.
● Reconciliation statement in respect of Turnover as disclosed in GSTR 3B and GSTR 1 and
as per books of accounts.
● ITC as claimed in GSTR 3B and as auto populated in GSTR-2A.
You are requested to fill up the Questionnaire as annexed herewith and produce it (duly
signed and stamped) before the undersigned on the first date of hearing as specified in Form
GST ADT-01 issued to you. You are also requested to mail all these afore-stated statements
and accounts at: ………………………. well in advance.
The other accounts, statements, records and documents as and when will be required
during the course of audit will be duly informed to you or your authorized representative.
Signature of the Audit Officer… ………………………….
Name : …………………………………………..
Designation : …………………………………………….
Full Address : ………………………………………………..
E-mail Address :……………………………………………………
Phone Number:………………………..(Office),…………………..(M)
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Annexure 3: Sample questionnaire for auditee (p.40)
[Please fill up and attach separate sheets wherever necessary]
1. General Information about the RTP (auditee):
a) Legal Name & Trade Name (if any)
b) GSTIN
c) Address (Principal place)
d) Period of GST Audit
e)
Name and contact number and email address of the ‗Authorized
Person‘ for Audit and the person
responsible for Accounts & Billing.
f)
Total tax paid for supply of goods
and/or services for the period under
audit (Act wise).
Tax From e-credit
ledger
From e-cash
ledger
SGST
CGST
IGST
CESS
g)
Whether possesses GSTIN as ISD /
TDS deductor / TCS collector in the
State?
GSTIN as ISD
GSTIN as TDS
deductor
GSTIN as TCS
collector
h)
Constitution of Business and names
of the current business
owners/promoters.
i)
Details of transactions with related
and distinct persons [Ref: Sch. I as
appended in Sec 7]
Name
with
GSTIN,
if any
Total
supply
value
during
the
period
Total tax
involved
(act wise)
POS
in
case
of
inter
state
supp
ly
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C
G
S
T
S
G
S
T
I
G
S
T
C
E
S
S
j)
Details of transactions without any
consideration, excluding details
mentioned in sl. No. i) above [Ref:
Sch. I as appended in Sec 7]
Please fill up in an identical table as in above
in sl.no. i).
k)
Types of goods and or services
supplied [with HSN/SAC] other than
those attracting tax under Reverse
Charge
Name of the goods /
services
HSN/SA
C
Rate of
Tax
l)
Types of goods and or services
received [with HSN/SAC] on which
tax is payable under Reverse
Charge
Name of the goods /
services
HSN/SA
C Rate of tax
m)
Whether any offence case is booked
in respect of Tax for supply of
goods/or services, by any Authority
under any law in force. If so, details
thereof.
n)
Whether any amount payable/ paid
to the Client has been adjusted
against the receipt/ receivable and
net income shown in the P&L
Account. If yes, details thereof.
o)
If the answer to question (n) above
is yes, then, whether it has affected
the Turnover as per GST Returns
and whether due tax on the receipt/
receivable and net income shown in
the P&L Account (relating to supply)
has been paid?
p)
Whether any advance payment is
received towards providing
services? If yes, whether Tax for
supply of services was paid on such
receipts?
q)
Whether any advance payment is
received towards supply of goods? If
yes, whether Tax was paid on such
transactions accordingly?
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r)
Details of any refund applied for the
period concerned (please provide
details of the status of the refund
application: accepted/rejected, if
rejected reasons thereof, amount of
refund received etc.)
2. Information on invoicing and accounting pattern:
a) Is invoice issued in all transactions? If not, reasons for not issuing
invoice.
b) How many series of invoices are being used?
c) If more than one series is used, give details of each such series.
d) If there are more than one series of invoices, is tax for supplies paid on
all the series of invoices?
e)
If the answer to question (d) is not, then the reasons for not paying tax
for supplies on such series of invoices (e.g. exempted / zero rated
without payment of tax / trading / nontaxable goods /services). Give
details.
f) In case of provision of service, is the invoice issued on the date of
provision of service or before or later?
g) List of the different account heads under which invoices issued for
taxable supplies are recorded in the P/L account or in Trial Balance.
h)
List of the different account heads under which invoices/bills issued for
exempted and non-GST supplies are recorded in the P/L account or in
Trial Balance.
i)
Whether the Invoice Numbers are generated automatically or are fed
manually. Give the name and designation of the person having the
authority to cancel an invoice.
j) Whether any amount is recovered by issue of debit note and whether it is
included in the gross value of supplies?
k) Are any goods or services provided free of cost or at subsidized price? If
so, provide details of such goods / services.
l) Are any reimbursements received from the recipients? If so, quantum
and reasons for such.
m) Is any expenditure that the supplier is liable to pay for a supply but is
actually borne by the recipient? If so, details of such.
n)
Whether the Accounts are maintained electronically? If yes, the name of
accounting packages / computer software installed for maintaining
accounts in the units like Tally, FAS etc
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o) Are the accounts prepared on mercantile basis or cash basis?
p) Whether there has been any switching over of the accounting software
during the audit period?
q)
Have any changes been made in the accounting policies affecting GST
liability relating to reimbursement of expenses, timing of payment of Tax
for supply of services and treatment of payments in foreign currency?
r) Are the accounts audited by a Statutory Auditor? If so, name, address,
phone number and E-mail id of the auditor.
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Annexure 4: List of documents/ statements and books of accounts
to be produced for the purpose of audit (p. 40)
 Annual report and Directors report (if any)
 Profit & Loss A/C
 Balance Sheet
 Notes to Accounts
 Tax Audit Report
 If GSTR -9C is not submitted for the period then Trial Balance for the RTP
having above mentioned GSTIN (It is applicable where the RTP has
multiple GSTIN),
 Statement of Income Tax TDS
 List of HSN /SAC of the goods /or services in respect of the business dealt
in by the auditee
 Reconciliation statement in respect of Form GSTR 9, GSTR-1 AND GSTR
3B
 Suppliers list with GSTIN (where applicable)
 Ledger accounts of the suppliers in respect of inward supplies
 Statement of outward supplies (party wise and POS wise).
 Statement of inward supplies for which tax paid/payable in RCM.
 Statement of outward supplies for which tax is payable in RCM by the
recipient.
 Bank Statement for the period under audit
 Stock register
 Other documents and records as applicable as provided in section 35 of
the Acts and the rules made thereunder and as may be required for the
purpose of audit.
Note - 1: On the first date of audit the auditee may be asked to produce only
the documents and statements as specified in the letter annexed with ADT -
01.
Note – 2: The above list is illustrative. It is recommended that GST
Administrations ensure to identify documents/records/filings already available
in the system and not to ask for the same from the taxpayers.
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Annexure 5: Format of a sample Audit Plan (p. 44)
SAMPLE AUDIT PLAN
Note: This is only an illustrative Audit Plan. Plan for each auditee should be prepared based on the
specific requirement of the audit of that auditee.
A. Basic Information
1. Name of
the auditee
………… ……………………………………………………
2. GSTIN ……………………..
3. Period of
Audit
4. Nature of
Business
4.1.
Goods
&
Service
s:
………………
..
4.2.
Manufacturing
unit (if any),
name of the
State(s) only:
………………

4.3.
Corporate
office / ISD
[Name of the
State(s)]:
………………
…..
5. Risk score
of selection
6. Major risk
areas as per
score
1) ……………………………………………….
2) …………………………………………………..
3) ……………………………………………………..
4) ………………………………………………………….
5) ………………………………………………………………….
6) ……………………………………………………………………
7) …………………………………………………………………………….
7. Audit
Case No.
…………………………………
….
Date of issuance of
ADT – 01 with ref.no.
Reference No:
……………………
…….. Date:
………………..
8. Date of
Commencement
……………………………
Normal date of
completion by ……………………
9. Name &
designation of
Officers in the
Audit team.
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10. Audit Unit
(Name)
……………………………………..
B. Audit Plan drawn by Audit Officer/Audit Team.
Sl.
No.
Type of
working
paper (Ratio
study, Trend
analysis,
Others)
Description
(e.g.: Return
filing pattern,
Outward
supply, inward
supply, reverse
charge, ITC,
refund, etc)
Audit
Risk
(Low,
Modera
te,
High)
Documents to
be examined
Audit
proce
dure
(Desk
Audit /
Field
Audit/
3
rd
party
enquir
y)
Ratio
Study/Trend
study/ Other
study in brief
Remarks
1
2
3
4
5
6
…….
.............................................................................
[Signature of the Audit Team Lead
Date…………………………………………
Name: ………………………….
Designation: …………………………………………………..
C. Modifications suggested by Ratifying Officer
Comments
Placed before the Sanctioning Officer for final sanction.
.............................................................................
Date:……………………………
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Signature
Name……………………………………………………………….
Designation of Ratifying Officer……………………….
D. Modifications suggested by Sanctioning Officer:
Comments
Sanctioned / sanctioned as modified.
.............................................................................
Signature Date:…………………………………….
Name ……………………………………………………………………
Designation of Sanctioning Officer…………………………………………..
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Annexure 6: Final Audit Report (FAR)- FORM GST ADT 02
(p.61)
Form GST ADT – 02
[See rule 101(5)]
Reference No.: Date:
To,
………………………………..
GSTIN ………………………………..
Name ……………………………………
Address ………………………………….
Audit Report No. ……….. dated ……..
Audit Report under section 65(6)
Your books of account and records for the F.Y.…………… has been examined
and this Audit Report is prepared on the basis of information available /
documents furnished by you and the findings are as under:
Short payment
of Integrated tax Central tax State /UT tax Cess
Tax
Interest
Any other
amount
[Upload pdf file containing audit observation]
You are directed to discharge your statutory liabilities in this regard as per the
provisions of the Act and the rules made thereunder, failing which proceedings as
deemed fit may be initiated against you under the provisions of the Act.
Signature…………………….…………...
Name ……………………………………..
Designation
………………………..…
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Annexure 7: Format of status report to MCM (p.60)
MCM REPORT (Format)
CONSOLIDATED
1. Period of Audit
2. Name of Team
Leader (Audit Team)
3. Other members of the
Audit Team
4. No. of cases allotted
5. No. of audit cases
completed
6. No. of cases pending
7. Status of pending
cases:
Pending at the stage of desk-review
Pending for approval of audit plan
Pending at the stage of examination of
books
Examination completed but DAR is
pending
Pending at the stage of preparation of
FAR
8.
Notable findings in
respect of cases
where FAR is issued.
Findings in brief (case-wise report may
be placed in such cases only as per
following format)
CASE-WISE REPORT
1. Case No.
2. Legal Name and Trade Name
3. GSTIN
4. Period of Audit
5. Name of the Audit Officer(s) with designation
6. Name and designation of the officer who
sanctioned the Audit Plan
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7. Important dates
Date of
initiation
Date of
sanction of
Audit Plan
Date of FAR
8. Date of first appearance
9. Name & other details (phone no., e-mail) of A/
appearing
10. Mode of Audit (specify)
Desk
Audit Field Audit Both
11.
List of observations made upon
audit [in brief]
Revenue
implication
(Rs.)
Whether admitted
by Auditee
(Yes/No)
If Yes, amount
realized, Act-wise
(Rs.)
i)Rate difference (wrong
HSN/SAC) Pl. mention in brief.
ii)Supply not disclosed in
returns. (Separate row may be
used for each type of such nondisclosure)
iii) Tax was payable under
RCM but not paid
iv)Wrong claim of ITC
v)Reversal of ITC not made
(specify in brief).
vi)Excess refund claimed
(specify brief findings)
vii) Similarly add rows, if required.
12.
Particulars
Integrated
Tax with
POS
Central
Tax State Tax Cess
(a)Total amount of tax involved
for the discrepancy found (in
Rs.)
(b)Tax paid during audit or after
getting FAR
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Tax dues (12a – 12b)
13
(a)Total interest payable
(b)Interest paid during audit or
after getting FAR
Interest dues (13a-13b)
14
(a)Penalty payable
(b)Penalty paid during audit or
after getting FAR
Penalty dues (14a-14b)
15 Total amount paid during audit
or after getting FAR
16 Total amount dues (Tax +
Interest +Late fees +Penalty)
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Annexure 8: KEY POINTS FOR SUPPLY and SUPPLY OF
GOODS OR SERVICES OR BOTH (p. 55)
TABLE I: KEY POINTS FOR SUPPLY
Sr.
No. Key issues Reference Points from
returns/law Accounts
1
Whether the kind of
outward supplies like
Taxable supply,
exempted supply,
Zero- rated supply, NIL
rated supply, Supplies
to SEZ unit/
developers, Deemed
Export etc. are
appropriately classified
under GST law?
 Sr. No. 4 & 5 of GSTR 9
 Taxable Supply: Sr. No. 5N of
GSTR 9
 Exempted: Sr. No. 5D of
GSTR 9
 Nil: Sr. No. 5E of GSTR 9
 Non-GST Supply: Sr. No. 5F
of GSTR 9
 Zero Rated: Sr. No. 5A, 4C of
GSTR 9
 Supply to SEZ: Sr. No. 5B, 4D
of GSTR 9
 Deemed exports: Sr. No. 4E
of GSTR 9
 Section 7 of SGST/CGST Act
 Section 17(3) of SGST/CGST
Act
 Section 147 of SGST/CGST
Act
 Schedule I, II and III of
SGST/CGST Act
 Section 16 of IGST Act
 Invoice /Bill of Supply
 Tax rate Notification
 Exemption
Notification
 HSN/SAC
 Contract
 Shipping Bill/Bill of
Export
 Bill of Lading
 Letter of Undertaking
 Duty drawback
availed
 Payment received
(Bank/Cash)
 Composite/Mixed
Supply

2
Whether any activity or
transaction which
falls within the scope of
supply has not been
identified by the
Registered Person?
 Non-GST Supply: Sr. No. 5F
of GSTR 9
 Schedule III of SGST/CGST
Act
 Invoice/Bill of Supply
 Contract
 Consideration
received
 Analysis of cash flow
and mapping cash flow onto
the returns
 Business purpose
3
Whether supply
has been correctly
classified as InterState supply/IntraState as per Section
7(5) & 8 of the IGST
Act, 2017?
 Sr. No. 3.1 & 3.2 of GSTR 3B
 Section 10,12,13 of IGST Act
 Invoice/Bill of Supply
 Party-wise supply
with address
 Contract
 Transportation
document
 Whether B2B or B2C
in case of supply of services
4 What is the treatment
of promotional items  Sr. No. 5E & 5 F of GSTR-9  Sales promotion
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given free to end
consumers by FMCG
companies?
 Sr. No. 14N, 14P, 14Q of
GSTR-9C
expenses
 Ledger account of
Distributors/Franchisees/Age
nts
 Stock Register
5
Whether the Zero -
rated supply is
verified as per the
provisions of law?
 Sr. 5A & 4C of GSTR-9
 Section 16 of IGST Act
 Contract
 Shipping Bill/ Bill of
Export
 Bill of Lading
 Payment received
(Bank Statement)
 Letter of Credit /
Telegraphic Transfer
 Letter of Undertaking
 Duty drawback
availed
6
Whether supply of
capital goods has
been subjected to
GST and as to
whether the same
has been included in
the returns filed?
 Section 18(6) of CGST/SGST
Act
 Fixed Asset
Schedule
 Contract
 Ledger account of
fixed assets/plant and
machinery
 Ledger account of
scrap
 TCS under Income
Tax Act
 Bank Statement
(Payment received)
7
Whether the
transactions are
correctly classified as
supply of goods or
supply of services as
per Schedule-II of the
CGST/SGST Act,
2017?
 Table 9 of GSTR 9C
 Sr. No. 17 & 18 of GSTR 9c
 Schedule II of CGST/SGST
Act
 Invoice/Bill of Supply
 Contract
 Composite/Mixed
Supply
8
Are there any
transactions wherein
goods sent for jobwork are not received
back within the
specified period?
 Form ITC -04
 Section 143 of CGST/SGST
Act
 Delivery Challan
 Gate outward
register
 Gate Inward register
 Stock register
 Job work charges
9
Whether any business
asset has been
permanently disposed
off for which input tax
credit had been
availed?
 Sr. No 6B of GSTR-9
 Schedule I of CGST/SGST
Act

 Fixed Asset
Schedule
 Contract
 Ledger account of
fixed assets/plant and
machinery
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 Ledger account of
scrap
 Stock register
 Bank Statement
(Payment received)
 Cash flow statement
10
Whether "Related
persons" or "Distinct
persons" in relation to
the registered person
have been identified
and whether activities
or transactions with
them have been duly
identified and
accounted for as per
law?
 Section 15(4) of CGST/SGST
Act

 List of related/distinct
persons
 Ledger account of
Related persons
 Loans and advances
 Income tax Audit
report
 Annual return under
Companies Act
11
Whether any "Agent"
has been appointed by
the registered person
and whether
transaction with such
agent has been duly
accounted for as per
law?
 Schedule I of CGST/SGST
Act

 Commission
expenses
 TDS/ Form 26AS
 Contract with
franchisee /distributor
 Structure of business
supply chain
12
Whether any foreign
exchange has been
remitted outside India
for any import of
services and whether
tax on the same has
been paid as per
law?
 Sr. No. 6E and 6F of GSTR- 9
 Contract
 Bank Statement
(payment made)
 Letter of credit/
telegraphic transfer
 Director report
13
Whether the goods
for business use
have been put to
personal use?
 Section 17 (1) of CGST/SGST
Act
 Schedule II of CGST/SGST
Act

 Stock register
 Drawings account
 Nature of expenses
especially telephone, repair
and maintenance, insurance
etc.
14.
Whether tax has been
paid on RCM on
inward supplies?
 Section 9(3) and 9(4) of
CGST/SGST Act
 Self- invoices issued
 Payment vouchers
 Examine the nature
of expenses especially
freight (inward and outward),
legal charges, import of
services etc.
 Bank Statement
(payment made)
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15. Whether tax paid on
advances received?
 Sr. No. 4F of GSTR-9
 Section 12 and 13 of
CGST/SGST Act
 Bank Statement
(Payment received)
 Cash book for any
cash received
 Loans and advances
in the Balance Sheet
 Ledger account of
debtors
 Current liabilities on
account of unearned
income/advance received
16.
Whether any credit note
issued for supplies
made?
 Sr. No. 4I of GSTR-9
 Section 34 of CGST/SGST
Act
 Credit Note Vouchers
 Goods return register
 Ledger account of
sale returns
 Weigh bill
 Gate Inward pass
 Transportation
document
 ITC reversed by
recipient
 Whether issued
within timeline defined by
section 34
Supply of Goods or Services or both.
In the pre-GST era, incidence of
taxation on goods and services varied
under different tax laws. ‗Excise duty‘
was levied upon removal of
manufactured products from the
factory, ‗Service Tax‘ was levied on
‗provision of service‘ and VAT was
levied on the value of sales or deemed
sales of goods. These multiple
incidences of taxation of the pre-GST
era have been converted into the
single incidence of taxation of
SUPPLY in GST.
EXHIBIT 17
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GST Law has defined 'supply' in an inclusive manner. Supply in GST
comprises of all forms of supply of goods or services or both. It includes sale,
transfer, barter, exchange, licence, rental, lease or disposal made or agreed
to be made for a consideration by a person in the course or furtherance of
business [section 7(1)(a) of CGST & SGST Act].
EXHIBIT 18
 Import of services for a consideration whether or not in the course or
furtherance of business is also a supply.
 Some activities as specified in Schedule I of CGST/ SGST Act, even if
made or agreed to be made without a consideration, are treated as supply.
 Further, activities or transactions specified in Sch III shall be treated
neither as a supply of goods nor a supply of services in GST.
Thus, supply has following important characteristics
 Supply shall be for a consideration except transactions specified in
Sch.I which shall be treated as supply even if made without consideration.
 Supply is done in the course or furtherance of business except import of
service for a consideration which is considered as supply whether or not in
course or furtherance of business.
 There are certain activities specified in Sch. III which are not to be
treated as supply of goods or services.
Conditions of „Supply‟ in GST:
(a) for a consideration and (b) in the course or furtherance of business
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Exceptions:
(a) Activities in Schedule I to be treated as supply even if made without
consideration
(b) Import of Service to be treated as supply even if it is not in the course or
furtherance of business
The above conditions are discussed below with some examples:
A. Consideration is a condition of supply - EXHIBIT 19
A person runs two coaching centres. One is for needy
students which is absolutely free, whereas the other is
against fees. He is providing the same services from
both the coaching centres. But, the services provided
from the free coaching centre does not fulfil the first
characteristic of supply (i.e. consideration) in GST. So,
it is not a supply in GST. But, the services from the
other coaching centre fulfills all the characteristics of
supply. It must be remembered that consideration may
not wholly be in monetary form; it may be in forms
other than money too. For instance, supply of a new
mobile phone worth Rs.50000 in exchange for a
specified old mobile phone worth Rs.10000 and
Rs.40000 in cash. When the consideration is not
wholly in money, the value of the supply is to be
ascertained as per rule 27 of the CGST Rules, 2017.
B. Supply should be “in the course or furtherance of” business -
One of the characteristics of supply is that supply should be ―in the course
or furtherance of‖ business except a few. ‗In the course or furtherance‘ is
not defined in GST law, but is broad enough to cover any supply made in
connection with the business and therefore the phrase needs to be
analyzed in detail. The Australian Concise Oxford Dictionary (1997) defines
the phrase 'in the course of' as 'during' and the word 'furtherance' to mean
'furthering or being furthered; the advancement of a scheme etc.' The literal
meaning of the said phrase ‗in the course or furtherance of business‖ is ―as
part of doing regular business‖ or ―anything done in relation to business‖.
For example:
i. Purchases & Sales of goods by reseller.
ii. Selling scrap generated in the process of manufacturing is also in the
course of business.
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iii. Activities done as part of CSR by a Company are also in the course of
business.
Thus, the phrase widens the scope of supply to bring more activities in its
ambit.
C. Import of services for a consideration is supply in GST even if not in
course or
furtherance of business. Suppose, a
person ‗P‘ of West Bengal is
constructing his own house for his
personal use. He availed the
services of an architect in the USA
and paid USD 10,000 for it. In this
case, though it is not in the course of
furtherance of business, still it would
be treated as supply in GST and Mr.
P would be liable for payment of
GST under RCM; that he may be
exempted from payment is another
matter but the liability is there.
EXHIBIT 20
It is also relevant to mention in this respect that, services are considered to be
imported when three conditions are fulfilled- (i)Supplier of services is located
outside India, (ii) Recipient of services is located in India and (iii) Place of
supply of services is located in India [sec 2(11) of the IGST Act,2017].
D. Exceptions in respect of „Consideration‟ being an essential
condition for Supply in GST –
There are some exceptions where activities are treated as ‗Supply‘ under
GST even if such are made without consideration. These are specified in
Schedule- I under section 7 of the Act.
Schedule I: Following activities to be treated as supply even if made without
consideration:
1. Permanent transfer or disposal of business assets where ITC has been
availed on such assets.
2. Supply of goods or services or both between related persons (such as
officers or directors of one another's business, employer & employee,
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members of the same family, legally recognized partners in business etc.) or
between distinct persons as specified in sec 25, when made in the course or
furtherance of business. But gifts not exceeding rupees fifty thousand in
value in a financial year by an employer to an employee shall not be treated
as supply.
3. Supplies of goods by principal to his agent where the agent undertakes
to supply such goods on behalf of the principal.
Supplies of goods by an agent to his principal where the agent undertakes to
receive such goods on behalf of his principal.
4. Import of services by a person from a related person or from any of his
other establishments outside India, in the course or furtherance of business.
EXHIBIT 21
1. Permanent transfer or disposal of business assets without
consideration: There is no doubt that disposal of business assets against
consideration is a supply. However, if ITC on any business asset has been
availed, then disposal of such business assets even if made without
consideration should also be treated as supply. Examples –
a. Permanent transfer: Example No. 1 - Suppose XYZ Ltd., is in the
business of hospitality. He purchases an air conditioner and a car for his hotel
business and avails ITC on the air-conditioner but no ITC is availed in respect
of the car. After 2 years, he permanently transfers the AC to one director and
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the car to another director, both without any consideration. Though no
consideration is taken in case of transfer of the air conditioner still, it would be
treated as a supply as per Schedule I and supplier shall have to pay an
amount determined according to section 18(6) of the CGST/SGST Act. In the
case of permanent transfer of the car, it will not be treated as supply since no
ITC has been availed on the same.
Example No. 2 - Woodwork, being a sole proprietorship firm is in the
business of selling furniture. However, if the owner takes a set of furniture
from its inventory to furnish his bedroom, the transfer of the furniture by the
owner is a supply as per Schedule I and would be subject to GST.
Whether temporary transfer of business assets would be considered as
supply in GST?
Temporary transfer of business assets with consideration is a supply in GST.
However, temporary transfer of business assets without consideration has not
been covered under Sch. I. So, it will not be treated as supply. But, for that
limited period for which such assets are not used for the purpose of business,
ITC shall have to be reversed as per provisions of section 17(1) read with rule
42 and 43.
Disposal of business assets: There are various reasons for disposal of
business assets without any consideration. Most common reasons for such
disposal are following: Assets are not in usable condition, Assets donated etc.
e.g. – A company disposes of its old fans to a nearby rural health Centre as a
donation during renovation of its office. The company had availed ITC on
such fans. So, even if no consideration is involved in this disposal, it will still
be treated as supply in GST.
Supplies between related persons:
a. Transactions between related persons is considered a supply in GST
even if made without any consideration. Related persons are defined u/s
2(84) of the CGST/SGST Act. Persons shall be deemed to be related if they
fall under any of the following categories:
 Officer/ director of one business is the officer/ director of another
business,
 Businesses are legally recognized as partners,
 An employer and an employee,
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 Any person holds at least 25% of shares in another company either
directly or indirectly,
 One of them controls the other directly or indirectly,
 They are under common control or management,
 The entities together control another entity,
 They are members of the same family.
However, in accordance with the provision in entry no. 2 of Schedule I, gifts
not exceeding fifty thousand rupees in value in a financial year by an
employer to an employee shall not be treated as supply.
Example: Company X gives a mobile phone worth Rs. 25000/- to each
member of its sales team as a gift in 2017-18. The same Company X gives a
high-end laptop worth Rs. 60,000/- to the head of the sales team for his
performance.
Here, the gift of mobile phone to a salesperson as stated above, would not be
treated as supply since the value of such gift to an employee does not exceed
Rs.50,000/- in that FY. However, say, the company over and above the
above, also gifts a family tour package to that employee which is worth
Rs.30,000/- in the same FY. In this case, since the value of the gift exceeds
Rs.50,000/-, the entire amount of Rs.55, 000/-(=Rs.25, 000/- + Rs.30, 000/-)
would be treated as a supply by the employer. In the second case also, gift of
laptop worth Rs.60, 000/- to the sales head would be treated as a supply
since the value of gift exceeds Rs.50,000/-.
Sometimes companies‟ gift to non-related persons without any
consideration. The same may be illustrated as follows –
a. Gifts provided by pharmaceutical companies to the Doctors – Gifts
given by the pharmaceutical companies to the doctors shall not be treated as
supply since in this case, both are not related persons or distinct persons as
specified in section 25 and the activity (of giving gift) is made without
consideration. However, the pharmaceutical company in this case, is not
entitled to claim ITC on corresponding purchase of such gift items in
accordance with section 17 (5) of the CGST/SGST Act.
b. Diwali gift / New Year gift to business Clients – The activity of giving
Diwali Gifts or New Year gifts to business clients would also not qualify as
supply since the activity is not between related parties and is without
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consideration. However, ITC on corresponding purchase of the same needs
to be reversed, if already availed, in accordance with S.17 (5) of the
SGST/CGST Act.
Supply between distinct persons:
Stock transfer from one branch to another branch or from the manufacturing
unit to different sales units within or outside the State is a very common
practice in business. In the pre-GST regime, this type of inter-state
transaction was exempted subject to fulfilment of certain conditions. However,
this stock transfer is a supply between distinct persons in GST. Following
persons are distinct persons –
a. All registered persons (whether in the same State or different States)
under a single PAN are distinct persons (section 25(4) of the CGST/SGST
Act).
b. Where registration has been obtained by a person in respect of an
establishment in a State (or a union territory), another establishment of the
same person in another State (or union territory) they are treated as
establishments of distinct persons (section 25(5) of the CGST/SGST Act).
Example: A registered manufacturer in Delhi, transfers finished goods worth
Rs.5,00,000/- to its depot located in Kolkata, WB. This would be treated as a
supply in GST.
Supply of principal and agent: In pre-GST regime, consignment transfer to
consignment agents in VAT and CST Acts was exempted subject to fulfilment
of certain conditions. However, supply of goods by a principal to his agent
where the agent undertakes to supply such goods on behalf of his principal is
treated as supply by principal to the agent even if such is made without
consideration. Similarly, supply of goods by an agent to his principal where
the agent undertakes to receive goods on behalf of the principal is treated as
supply by the agent to his principal even if such is made without
consideration. The key here is whether the invoice for the supply has been
issued by/to the agent in his own name rather than in the name of the
principal; if so, the transaction between the principal and the agent is a
supply, otherwise not. (Circular no. 57/31/2018-GST dated 4th September,
2018 refers)
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The same is illustrated below–
A manufacturer of hosiery products in Kolkata engages an agent in Siliguri to
sell his products as an agent. When the manufacturer transfers his stock to
the agent it would be treated as supply by the principal to the agent and
subsequently when the agent sells the same to the customer such would be
treated as supply by the agent.
This manufacturer further engages an agent in Nadia to receive cotton yarn
from vendors of Nadia. When the agent transfers cotton yarn to the
manufacturer the same would be treated as supply by the agent to the
principal.
Import of services from a related person or from overseas establishment
Import of services is a supply, if it is made for a consideration.
However, Import of Service without consideration would also be treated as
supply if such is made in the course or furtherance of business and is
made from any related person or from any establishment outside India to him
in India and the same is made. Example – A multinational company engaged
in engineering services provides engineering drawing from its unit at France
to a unit in Kolkata, free of cost.
This import of service would be treated as supply even if it is without any
consideration.
However, in this case it is very difficult to identify such services., if there is no
self-compliance made by the RTP. If we examine the books of accounts
carefully, we may find some areas where an audit trail of such supply may be
identified. In such cases a list containing details of establishments outside
India can be obtained and the correspondences between the entity in India
and its foreign counterpart can be examined, at least on a sample basis.
For example, a company asks engineers from his foreign establishment to
supply engineering services to a client in West Bengal. The foreign
establishment charges nothing for the services but travel expenses and all
other expenses of such engineers are borne by the registered company in
West Bengal. So, audit trail of such services can be found in the relevant
head of expenses. Therefore, it is very important to know the business pattern
of the auditee to identify probable areas where reflection of such type of
transactions may be identified.
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E. Activities neither to be treated as supply of Goods nor as supply
of service
Before going into the detailed discussion on activities or transactions which
shall neither be treated as supply of goods nor supply of service as
provided in Schedule III, it is important to know the context of Schedule-III.
In GST law, services are defined in the widest form ; ‗anything other than
goods‘ is defined as services. So, the services provided by an employee to
his employer also becomes a supply of services. Functions performed by
MLAs and MPs also get into the ambit of services as far as the definition of
services is concerned. But it was never the intention of the GST law to bring
services by the employees or MLAs or MPs and similar other activities into
the scope of supply.
Accordingly, the following activities or transactions which are enlisted
in Sch. III, shall neither be treated as a supply of goods nor a supply
of services:
i) Services by an employee to the employer in the course of or in relation to his
employment.
ii) Services by any court or Tribunal.
iii) Functions performed by the Members of Parliament, Members of State
Legislature, Members of Panchayats, Members of Municipalities and Members of
other local authorities;
iv) The duties performed by any person who holds a post in pursuance of the
provisions of the Constitution in that capacity;
v) The duties performed by any person as a Chairperson or a Member or a
Director in a body established by the Central/ State Govt. or a local authority and
who is not deemed as an employee before the commencement of this clause.
vi) Services of funeral, burial, crematorium or mortuary including transportation
of the deceased.
vii) Sale of land, sale of building (other than specified in Para. 5(b) of schedule II of
the Acts].
viii) Actionable claim, other than lottery, betting and gambling.
ix) Supply of goods from one non-taxable territory to another without entering into
India.
x) (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
documents of title to the goods, after the goods have been dispatched from the port
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of origin located outside India but before clearance for home consumption (High
Seas Sale).
i) Services by an employee to the employer in the course of or in
relation to his employment
In case of supply of services by an employee, fulfilment of the following three
broad conditions is required for the levy of GST -
i. presence of service,
ii. existence of consideration and
iii. the supply is in the course of or in relation to the employment of the
employee; that is to say, the services rendered by the employee are as per
the contract of employment or within the scope of the employment.
But, as per entry no.1 in Schedule III, services rendered by an employee to
his employer in the course of or in relation to his employment, shall neither be
treated as supply of goods nor as supply of services.
It is important to note that the exclusion is applicable only in circumstances
where the services are rendered in the course of or in relation to his
employment and not otherwise. Any service rendered by an employee to
his employer beyond the normal course of employment can be subject to
GST unless otherwise exempted. Therefore, employee-employer agreement
should have comprehensive details about the roles and responsibilities of the
employee and remuneration against those services. These are also important
areas to examine.
For example –
a. There is a condition in the employment clause of a pharma company that
an Area Sales Manager is required to fulfil his target during a year otherwise,
it would affect his increment and next promotion. An Area Sales Manager who
is highly efficient exceeded the target prior to the end of the financial year.
The company, being pleased, gifted him a personal car. This is nothing but a
gift by the employer to the employee but the same would be treated as supply
in accordance with entry 2 of Schedule I.
ii)Actionable claim, other than lottery, betting and gambling: Except
lottery, betting and gambling, all other actionable claims are neither to be
treated as supply of goods nor as supply of services.
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Section 3 of the Transfer of Property Act, 1882 defines Actionable Claim. It is
a claim of –
1. any debt which is not secured by:
a. Mortgage of immovable property,
or
b. Hypothecation, or pledge of movable property,
2. any beneficial interest in movable property, which is not in
possession of the claimant. The possession can be actual or constructive.
Examples of Actionable Claims
 Lottery ticket,
 Betting & gambling,
 Right to credit in a provident fund,
 Dividends on shares, debentures,
negotiable instruments such as bills of
exchange etc.,
 Rights shares or option to purchase
shares,
 Bank guarantee,
Examples of Non-Actionable Claims
 Copyright,
 Right to claim damage in the event
of breach of contract,
 Right to use,
 Coupons and Vouchers.
EXHIBIT 22
There are several examples of actionable claims. But, only lottery, betting
and gambling are liable to GST.
iii)Sale of land, sale of building (other than specified in Para. 5(b) of
schedule II of the CGST/ SGST Act):
Sale of land is outside the ambit of GST. But there may be many activities
and transactions related to land which can be taxable in GST. Some of
these activities are mentioned in Sch. II.
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Schedule II: Activities or transactions to be treated as supply
of goods or supply of services
1. TRANSFER
(a) Any transfer of title in goods is a supply of goods - Transfer of title
of goods means transfer of possession and control on such goods i.e
transfer of ownership. However, sometimes, title may be transferred before
getting physical possession of goods. For example, X being a reseller of
sewing machines receives an order to supply 15 pieces of sewing machine
to a business person Y in Bihar. But, Y instructs X to deliver the same to Z
in Jharkhand. In this case, Y transfers the title of the goods to Z without
getting physical possession of the goods. Hence, in this case there are two
distinct supplies of goods, first one by X to Y and the second one by Y to Z.
There may be situations where transfer of title of taxable goods may not be
treated as supply in GST. In the case of ‗High Sea Sales‘, transfer of title of
goods occurs on high seas. Subsequently, documents of Customs
clearance i.e. Bill of Entry etc is filed by the person who buys the goods
from the original importer during the said sale. This high sea sale is not a
supply in GST as per entry no. 8(b) of Sch. III.
(b) Any transfer of right in goods or of undivided share in goods
without the transfer of title thereof is a supply of services – “Transfer
of right to use of goods” was always a point of dispute between two
different taxation authorities. Transfer of effective control and possession
over any goods along with the transfer of right to use was considered as
deemed sale under the VAT Acts. However, if there was no transfer of
effective control and possession over any goods, mere transfer of right to
use was considered as supply of service. So, upon consideration of all the
conditions it was always difficult to decide whether a particular transaction
was liable to levy of VAT or service tax. This particular entry in Sch. II has
done away with any such confusion and henceforth any transfer of right in
goods or of undivided share in goods without the transfer of title thereof
would be considered as supply of services.
Excavators, Cranes, Dumper trucks, Generator, Transit Mixer and many
such machineries are usually supplied on rent basis without transferring the
title. All such transactions are treated as supply of service in GST. But, as
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per the rate notification, rates of applicable GST of such services is
equivalent to the rates of the particular goods.
(c) Any transfer of title in goods under an agreement which stipulates
that property in goods shall pass at a future date upon payment of full
consideration as agreed, is a supply of goodsExample of the aforesaid entry can be Hire Purchase. There may be a twoparty transaction between the owner and the hirer or there may be a
tripartite agreement between seller, the buyer and the financer. Obviously
the second type of agreement is more popular nowadays. However, this
kind of tripartite arrangement cannot be considered as hire purchase. In
this case, full payment is made by the financing company for the purchase
of the buyer and the purchaser becomes the owner of the goods. The
finance company has only the right to seize the goods for non-payment of
loan. In case of failure to pay the loan, the finance company sells the goods
after taking possession of the goods. In such a case, it is a supply in GST
and there is specific valuation rule 32(5) of the CGST/ SGST Rules, 2017
which reads as follows:
―Where a taxable supply is provided by a person dealing in buying and
selling of second hand goods i.e., used goods as such or after such minor
processing which does not change the nature of the goods and where no
input tax credit has been availed on the purchase of such goods, the value
of supply shall be the difference between the selling price and the purchase
price and where the value of such supply is negative, it shall be ignored:
Provided that the purchase value of goods repossessed from a defaulting
borrower, who is not registered, for the purpose of recovery of a loan or
debt shall be deemed to be the purchase price of such goods by the
defaulting borrower reduced by five percentage points for every quarter or
part thereof, between the date of purchase and the date of disposal by the
person making such repossession‖.
This is further clarified by Question No.63 in FAQ issued by the CBIC on
Banking, Insurance and stock brokers sector dated 27.12.2018.
2. LAND AND BUILDING
(a) Any lease, tenancy, easement, licence to occupy land is a supply
of services,
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(b) Any lease or letting out of the building including a commercial,
industrial, or residential complex for business, or commerce, either
wholly or partly is a supply of services -
Land and buildings being immovable properties are kept outside the ambit
of ‗Goods‘ as defined under the CGST/SGST Act, 2017. But services like
lease, tenancy, tenancy transfer, easement, licence to occupy land, lease
or letting out of any building or part thereof are treated as supply of service
in GST. Even, the tenancy premium is liable for levy of GST. There are
certain kinds of such supplies which are notified as nil rated supply. e.g.
Leasing of industrial plots or plots for development of infrastructure for
financial business. Grant of tenancy rights in a residential dwelling for use
as residential dwelling against tenancy premium or periodic rent or both is
also exempt supply [vide sl. no 12 of Notification No. 12/CT (R)2017].
An interesting ruling by AAR of GST, Karnataka is relevant to mention here
[vide, ruling 2020 (4) TMI 692]:
Applicant has let out a Residential complex to a company who is engaged
in the business of providing residential accommodation to students by
entering into sublease agreement with students for providing residential
accommodations with amenities, security, entertainment facilities for a
period varying from 3 months to 11 months. The ruling held that they are
like hotel rooms and no circumstances can be termed as a residential
dwelling. The services provided are not for use as a residence by the
lessee. Hence it is not the nature of the property which determines taxability
but the purpose of letting out the property which determines taxability.
3. TREATMENT OR PROCESS
Any treatment or process which is applied to another person‟s goods
is a supply of services –
Any treatment or process applied to another person‘s goods is a service.
Further, any treatment or process undertaken by a person on goods
belonging to another registered person is defined as ―job work‖ in GST.
Now, if consumables are supplied by the job worker in the process of
applying treatment or process then also it would be treated as supply of
services.
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However, if goods are also supplied by the job worker for manufacturing of
a product as per the specification of the Principal then the same may be
considered as manufacturing of that particular goods. Accordingly, the job
worker is liable to charge GST at applicable rates for supply of that
particular goods. In this respect clarification in Circular No: 52/26/2018-GST
dated 09.08.2018 is relevant:
Fabrication of buses may involve the following two situations - (a) Bus
body builder builds a bus, working on the chassis owned by him and
supplies the built-up bus to the customer, (b) Bus body builder builds body
on chassis provided by the principal for bodybuilding. In situation (a), the
supply of a bus is being made, and accordingly the supply would attract
GST@ 28%. In situation (b), fabrication of body on chassis provided by the
principal (not on account of bus bodybuilder), the supply would be treated
as services, and 18% GST as applicable will be charged accordingly.
4. TRANSFER OF BUSINESS ASSETS
(a) Where goods forming part of the assets of a business are
transferred or disposed of by or under the direction of a person
carrying on the business so as no longer to form part of those assets,
such transfer or disposal is a supply of goods by the person.
In this entry ―business assets‖ means both Fixed and Current assets.
Transfer or disposal of the same would be taxable under GST irrespective
of whether the transaction is done with consideration or without
consideration.
(b) Where, by or under the direction of a person carrying on business,
goods held or used for the purpose of the business are put to any
private use or are used , or made available to any person for use, for
any purpose other than a purpose of the business, the usage or
making available of such goods is a supply of services.
Where goods held or used for the purpose of business -
(i) are put to private or personal use; or
(ii) made available to another person for use for any purpose other than a
purpose of the business,
In both such cases it would be a supply of services only if such a
transaction is made for consideration.
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e.g1. A proprietor who is in the business of selling cars brings a car
temporarily for 2 months to his residence for personal use. Here, it should
be deemed as a supply of services by the said registered person to the
proprietor if he pays to the business for the personal usage of the car;
otherwise, credit proportional to such usage is to be reversed in terms
of section 17(5)(g).
e.g2. When a registered person transfers the right to use his assets to his
sister concerns (who are distinct persons) for a limited period of time, it
would also be a supply of services even if there is no consideration
involved by virtue of falling within the scope of entry 2 of Schedule I.
(c) Where any person ceases to be a taxable person, any goods
forming part of the assets of the business carried on by him, shall be
deemed to be supplied by him in the course or furtherance of his
business immediately before he ceases to be a taxable person unless-
(i) The business is transferred as a going concern to another person,
or
(ii) The business is carried on by a personal representative who is
deemed to be a taxable person.
Example- A manufacturer of hosiery goods has decided to close his
business. At the time of filing application for cancellation of registration, he
has raw materials and finished goods as stock worth Rs.10 Lakh. He also
has Plant & Machinery worth Rs.15 Lakh. He has disclosed such assets but
failed to pay any tax. His application is accepted and registration is
cancelled. This manufacturer is liable to pay tax on his stock including Plant
& Machinery as the same is deemed to be supplied by him immediately
before he ceases to be a taxable person. However, in the present case if
the person would have transferred the business as a going concern to
another person, in such case, it would have been treated as exempt supply
of services in accordance with sl.no 2 of Notification No. 12-CT(R)/2017
dated 28.06.2017. Similarly, in case of death of the person, if the business
is carried on by his legal heir as a taxable person under GST then all
liability of the deceased proprietor would be transferred to the legal heir.
5. SUPPLY OF SERVICES
As per Sch. II the following activities are treated as supply of services:
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(a) renting of immovable property.
(b) Construction of a complex, building, civil structure or a part thereof,
including a complex or a building intended for sale to a buyer, wholly or
partly, except where entire consideration has been received after the
issuance of completion certificate, where required by the competent
authority or after its first occupation, whichever is earlier.
(c) Temporary transfer of right to use or enjoyment of intellectual
property right is service.
(d) Development, design, programming, customization, adaptation,
upgradation, enhancement, implementation of information technology
software.
(e) Agreeing to the obligation to refrain from an act, or to tolerate an act
or a situation, or to do an act.
(f) Transfer of the right to use any goods for any purpose (whether or not
for a specified period) for cash, deferred payment, or other valuable
consideration.
(a)Renting of immovable property is service - The word ‗Immovable
Property‘ has not been defined in the CGST/WBST Act, 2017, however the
same has been defined u/s 2(19) of the General Clauses Act, 1977 -
―Immovable Property‖ shall include land, benefits to arise out of the land,
and things attached to the earth, or permanently fastened to anything
attached to the earth.
Suppose, a heavy generator is installed on the ground of any registered
person. Whether the same would be treated as immovable property? In the
judgement of Mallur Siddeswara Spinning Mill case (166) ELT 154 (SC) the
Hon‘ble Supreme Court of India held that if a machine (say a Genset) is
fastened on a frame and is capable of being shifted from that place, it is
capable of being sold. It is goods and not immovable property. In such
cases the twin test of ―permanence‖ and ―marketability‖ have been laid
down by the Apex Court. It is advised to go through the relevant
judgements in this regard.
Several activities are associated with renting of immovable properties such
as:
 Renting of residential complex / building / flats/ etc.
 Renting of a commercial complex/unit/flat.
 Renting of a place / property/ complex for a religious function.
 Renting of a place / property/ complex for social function.
 Renting of a place / playground for sports and games.
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 Renting of property to an educational institution.
(b)Construction of a complex, building, civil structure or a part
thereof, including a complex or a building intended for sale to a buyer,
wholly or partly -
Where any consideration in respect of construction of complex, building,
civil structure or part of it is received partly or wholly, before issuance of
completion certificate, then the entire consideration shall be treated as
consideration for the services provided and, the same is taxable under the
Act. But, if no consideration is received before getting completion certificate
or after its first occupancy, whichever is earlier, then sale of that complex or
building or any civil structure will neither be treated as supply of services
nor as supply of goods.
The tax rate on supply related to real estate projects has undergone a
change w.e.f. 01.04.2019. The input- output scenario up to 31.3.2019 was
as follows:
EXHIBIT 23
In the real estate sector, a Developer - Promoter or a Landowner –
Promoter is primarily engaged in supply of service.
A Developer-Promoter is a promoter who constructs or converts a building
into apartments or develops a plot for sale.
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A Landowner-Promoter is a promoter who transfers the land or
development rights or FSI to a developer-promoter for construction of
apartments and receives constructed apartments against such transferred
rights and sells such apartments to his buyers independently.
Apart from the aforesaid services there are various other services also
associated. A separate book has been published by the Directorate of
Commercial Taxes, West Bengal on the real estate sector. An Audit officer
entrusted with the job of auditing a taxpayer in the real estate sector is
advised to follow the book and go through the notifications related to real
estate.
Present input- output scenario in the real estate sector which is effective
from 01.04.2019 is as follows:
EXHIBIT 24
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(c)Temporary transfer or permitting the use or enjoyment of any
intellectual property right -
The term ‗Intellectual Property Right‘ (IPR) has not been defined in the GST
Act. However, IPR includes Copyright, Trademark, Patents and other
similar rights to an intangible property. In GST law goods comprise of both
tangible and intangible goods. IPR is nothing but goods. Temporary
transfer or permitting the use or enjoyment of IPR is treated as supply of
service in GST. However, if IPR is permanently transferred it would be
considered as a supply of Goods.
(d)Development, design, programming, customization, adaptation,
upgradation, enhancement, implementation of information technology
software -
Software a goods or service?
Software in physical form is considered as goods in GST. However, the act of
development of software is service.
(e)Agreeing to the obligation to refrain from an act, or to tolerate an act
or a situation, or to do an act is service in GSTOne of the services which have always been the point of discussion in preGST regime as well as in the GST regime is the supply of service for
"agreeing to the obligation to refrain from an act, or to tolerate an act or
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situation, or to do an act". The key here is whether any of the following
activities of:
(a) refraining from doing an act, or
(b) tolerating an act or a situation, or
(c) doing an act,
has been carried out
(I) in accordance with an agreement or contract (express or implied)
which provides for the same, and
(II) whether any consideration (whether in money or otherwise) is paid in
return for engaging in any of the aforesaid activities.
If both the aforesaid conditions at (I) and (II) above are satisfied then
such activity constitutes a supply within the meaning of the Act.
(f)Transfer of Right to use goods for cash, deferred payment or valuable
consideration is considered supply of services under Schedule II.
It has already been discussed in Sl. No.1(b) above. Let us discuss some
rulings by AAR in this respect:
Example 1: AAR Kerala in the case of M/s. Abbott Healthcare Pvt. Ltd. –
Abbott undertakes an agreement for placement of specified medical
instruments to customers like hospitals, labs etc., for their use without any
consideration but with the condition that these hospitals, labs etc. agree to
purchase at least a specified number of products like reagents, calibrators,
disposals etc. The ruling says that it is a composite supply where the principal
supply is the transfer of right to use of any goods for any purpose which is
supply of service and is liable to GST under SI No. 17 (iii) – Heading 9973 of
Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017.
Example 2: Case Number 46 of 2019, Order Number 40 of WBAAR/2019-20 -
M/s Ishan Resins & Paints Limited, the applicant engaged in the business of
leasing out trucks or tankers without operator to GTA raised query as to
whether it would be covered under serial no. 22 (b) of Notification No.
12/2017 CT(Rate) dated 28/06/2017 (corresponding State Notification No.
1136 – FT dated 28/06/2017) as exempt services by way of giving on hire of
transportation of goods to GTA.
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The AARWB HELD THAT: - The Applicant intends to lease out vehicles like
trucks, tankers etc. that are designed to transport goods. The control and
possession of the vehicle will be transferred to the lessee, who will engage
the operators and bear the cost of repair, insurance etc. It is, therefore, not
classifiable under SAC 9966, which is restricted to rental services of transport
vehicles with operators. The service is classifiable under SAC 997311 as
leasing or rental services concerning transport equipment without an
operator. It amounts to transfer of the right to use the goods and taxable
under Sl No. 17(iii) of the Rate Notification.
6. COMPOSITE SUPPLY
The following composite supplies shall be treated as a supply of
services, namely:
(i) works contract as defined in clause (119) of section 2; and
(ii) supply, by way of or as part of any service or in any other manner
whatsoever, of goods, being food or any other article for human consumption
or any drink (other than alcoholic liquor for human consumption), where such
supply or service is for cash, deferred payment or other valuable
consideration.
(i)Works contract:
Works Contract has been defined in Section
2(119) of the CGST Act, 2017 as a contract for
building, construction, fabrication, completion,
erection, installation, fitting out, improvement,
modification, repair, maintenance, renovation,
alteration or commissioning of any immovable
property wherein transfer of property in goods
(whether as goods or in some other form) is
involved in the execution of such contract.‖
EXHIBIT 25
Thus, it is seen from the definition that the term works contract has been
restricted to a contract for building construction, fabrication etc. of any
immovable property only. This is a clear diversion from the concept of
works contract as per the VAT Act. This diversion is expected to solve
many disputes in the realm of taxation of works contracts.
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In a works contract both goods and services are naturally bundled and
supplied in conjunction with each other in the ordinary course of business.
So, basically it is a composite supply. But, there is no need to find the
principal supply since this entry 6(a) in Schedule II specifies works contract
as a supply of service.
Apart from works contracts in GST, there are several other composite
supplies such as fabrication or painting jobs done in automotive body
shops, service contracts relating to different machines and equipment etc.
However, these would not be covered within the definition of works contract
in GST. In such contracts it is important to identify the principal supply for
levy of appropriate rate of tax.
(ii)Supply, by way of or as part of any service or in any other manner
whatsoever, of goods, being food or any other article for human
consumption or any drink (other than alcoholic liquor for human
consumption), where such supply or service is for cash, deferred
payment or other valuable consideration is a supply of service –
There were several judgements before
the 46th amendment of the Constitution of
India in this respect. Hon‘ble Apex Court
in the matter of State Of Punjab vs M/S.
Associated Hotels Of India (on 4 January,
1972) analyzed the nature of contract
where a customer stays in the hotel and
meals are served as part of and incidental
to that service. EXHIBIT 26
Hon‘ble Andhra High Court in the matter of Durga Bhavan And Ors. vs The
Deputy Commercial Tax Officer on 19th September, 1980 categorized the
sale of food in restaurant into two parts -
The supply of food, etc., by restaurants may be made to customers who sit
in the restaurants and consume the food. In such a case they enjoy the
amenities provided by the owners of the restaurants.
The second class of cases comprise of supply of food-stuffs, snacks,
drinks, etc., across the counter where there is practically no service
rendered or amenities provided except in the manner of supplying the
goods like packing, etc.
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Finally, it was needed to make 46th Constitutional Amendment in the year
1981.
Key Elements of Article 366(29A)(f)
―Tax on the sale or purchase of goods includes:
(f) a tax on the supply, by way of or, as part of any service or in any other manner
whatsoever, of goods, being food or any other article for human consumption or any
drink (whether or not intoxicating), where such supply or service, is for cash, deferred
payment or other valuable consideration, and such transfer, delivery or supply of any
goods shall be deemed to be a sale of those goods by the person making the transfer,
delivery or supply and a purchase of those goods by the person to whom such transfer,
delivery of supply is made.‖
Thus, in the pre-GST regime both Service Tax and VAT was levied on this
supply. This entry 6(b) of the Schedule II is expected to reduce any
confusion in respect of determination of this particular nature of supply
since entry 6(b) of the Schedule II specifies the supply as the supply of
service.
However, there may still prevail some confusion regarding the nature of
certain supplies.
Illustration -
a. Whether tobacco consumed in hookah bars would get covered in the
entry 6(b) of Schedule – II ―as any other article for human consumption‖?
To analyse this, we need to take resort to a well-recognised and
established principle of a law which is “Ejusdem Generis”.
“Ejusdem Generis” is an aspect of the principle of ―Noscitur a sociis”.
The Latin word ‗sociis‘ means ‗society‘, ‗Society‘ of the same nature. It is an
established principle of law that when general words follow specific words,
such cannot be read in isolation. Their colour and their contents are to be
derived from the context of specific words. In this case ―any other article for
human consumption‖ can‘t be read in isolation. It must be read as ―being
food or any other article for human consumption‖.
The phrase ‗any other article‘ takes its colour from the word ‗food‘. Now the
question arises whether hookah is a food? Since it is not a food it will not
be covered under this entry of Schedule II. In hookah bars, hookah paste
is supplied with the right to use a smoking apparatus. So, it is a composite
supply, where hookah paste is the principal supply.
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[There is a very famous judgement in respect of the principle of
“Ejusdem Generis”. Interested readers may go through the judgement
in the case of McBoyle v. United States 283 U.S. 25 (1931)].
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Annexure – 9: Levy of tax on Reverse Charge Mechanism
(RCM) (p.49 )
Tax is payable by a ‗taxable person‘
in GST. Usually, tax is levied on the
outward supplies of goods or services
or both by a supplier. But in some
specified transactions liability to pay
tax gets shifted i.e., in such cases
tax is levied on the recipient.
EXHIBIT 27
This mechanism of liability / leviability to pay tax by the recipient is called
Reverse Charge Mechanism (hereinafter referred to as RCM).
a. Definition of reverse charge: ―reverse charge‘‘ 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 /SGST Act or under section 5(3) or 5(4) of the Integrated
Goods and Services Tax Act. [sec. 2(98)]
b. Notified supplies under sec 9(3):
The Government may, on the recommendations of the Council, by
notification, specify categories of supply of goods or services or both, the
tax on which shall be paid on reverse charge basis by the recipient of such
goods or services or both and all the provisions of this Act shall apply to
such recipient as if he is the person liable for paying the tax in relation to the
supply of such goods or services or both. [sec. 9(3) of the SGST/CGST
Act/sec. 5(3) of the IGST Act].
Notifications issued:
Sl. No. Subject Notification No. & date
1.
Consolidated list of goods on which tax
is payable under RCM under section
9(3) of the SGST Act, 2017.
CGST Notification No. 04/2017-
CT(Rate) dt. 28.06.2017
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2.
Consolidated list of services on which
tax is payable under RCM under section
9(3) of the SGST Act, 2017
CGST Notification No. 13/2017-
CT(Rate) dt. 28.06.2017
3. Notification for RCM on goods under
section 5(3) of the IGST Act, 2017
4/2017-ITR dated 28.06.2017 as
amended time to time.
6. Notification for RCM on services under
section 5(3) of the IGST Act, 2017
10/2017-ITR dated 28.06.2017 as
amended time to time.
c. Supplies received from unregistered person under sec 9(4):
The provision of section 9(4) of CGST/SGST Act /5(4) of IGST Act has been
amended w.e.f. 01.02.2019. Before this amendment the aforesaid provision
upto 31.01.2019 was as follows - ―The State tax/central tax/integrated tax in
respect of the supply of taxable goods or services or both by a supplier, who
is not registered, to a registered person shall be paid by such person on
reverse charge basis as the recipient and all the provisions of this Act shall
apply to such recipient as if he is the person liable for paying the tax in
relation to the supply of such goods or services or both.‖
Thus, as per the above provision (s), a registered person was liable to pay
tax on RCM whenever he received any taxable supply from an unregistered
person.
But, on the recommendation of the GST Council, notification under section
11(1) has been issued to exempt payment of tax under section 9(4) of the
CGST/SGST Act upto a certain limit (Rs.5000/- per day) of inward supply
from 01.07.2017. [CGST Notification No. 08/2017-CT(Rate) dt. 28.06.2017.]
The Gist of the said notification is as under:
 If the amount of inward supplies of goods or services or both, received
in a day by a registered person from all unregistered suppliers, does not
exceed Rs.5000/-, no tax is payable on RCM under section 9(4) by a
registered recipient.
 If a registered person receives inward supplies of goods or services or
both exceeding Rs. 5000/- in a day from all unregistered suppliers, he is
liable to pay tax on RCM basis on the entire amount of such supplies
received by him.
Example - on 01.08.2017, a registered person X receives goods and/or
services from five suppliers. Three of such suppliers are unregistered from
whom total supplies have been received to the tune of Rs. 4900/-. In this
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case, the entire amount of Rs. 4900/- is exempted from payment of any tax
u/s 9(4) by virtue of the notification No. 1132-F.T. Now, on the same day
another registered person Y has received supplies of goods and/or services
from ten suppliers out of whom six are unregistered from whom, total
supplies received on that day is of Rs. 5100/. In this scenario, Y is liable to
pay tax on the entire value of supplies received from the unregistered
persons i.e., on Rs.5100/-.
 The above provision was effective from 01.07.2017 to 12.10.2017.
From 13.10.2017 the provision for payment of tax under section 9(4) of
SGST/CGST Act and section 5(4) of IGST Act have been omitted by
amending CGST Notification No. 08/2017-CT(Rate) dated 28.06.2017 and
CGST Notification No. 38/2017-CT(Rate) both dated 13.10.17.
CGST Notification No. 08/2017-CT(Rate) dated 28.06.2017 have been
finally rescinded w.e.f. 01.02.2019 vide CGST Notification No. 01/2019-
CT(Rate) dated 29.01.2019.
d. Supplies received from unregistered person under amended
provisions of sec 9(4):
Finally, the provision is amended w.e.f. 01.02.2019 as below:
―Govt. may specify by notification a class of Registered recipients who shall
pay tax on RCM on supply received from an unregistered supplier.
CGST Notification No. 07/2019-CT(Rate) dated 29.03.2019 have been
issued w.e.f. 01.04.2019 to specify that subject to certain conditions a
promoter is liable to pay tax under section 9 (4).
e. Compulsory Liability of Registration for a person liable to pay tax
on RCM:
As per the provisions of section 24(iii) of the SGST/CGST Act, persons who
are required to pay tax under reverse charge are liable to be registered
without any threshold.
Hence if any person receives inward supply of goods and/or services for the
purpose of business on which tax is payable on RCM, he is liable to be
registered without any threshold.
f. Tax payable by e-commerce operator [Sec 9(5)]:
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The Government on the recommendation of the GST Council may notify categories of
services wherein the person responsible for payment of taxes in GST would neither be
the supplier nor the recipient of supply, but the e-commerce operator through which the
notified services are effected. It is important to know that all the provisions of the Act are
applicable to such e-commerce operator as if he is the supplier of the specified services
and liable to pay tax.
The Govt. has notified certain services in this regard vide, CGST Notification
No.17/2017-CT (R), dated 28.06.2017 as amended time to time, including services by
way of transportation of passengers by a radio-taxi, motor cab, maxi cab and motor
cycle, etc. on which tax will be payable by the e-commerce operator u/s 9(5).
Where the e-commerce operator does not have a physical presence in the taxable
territory, any person representing him in the taxable territory would be liable to pay the
taxes. If no such representative exists, the e-commerce operator is liable to appoint such
a person to discharge all the obligations.
g. Some queries on RCM
Sl.
No
.
Question Answer
1
A registered person
receives service from a
Goods Transport Agency
(GTA) who doesn‘t charge
any GST.
a. Is the registered
person liable to pay tax on
RCM?
b. What would happen
if the recipient was
unregistered? In that case,
who will pay the tax, and at
which rate?
a. Yes. (vide, Entry No. 1 of CGST
Notification No. 13/2017-CT(Rate) dt.28.6.2017)
b. The recipient, other than an individual or a
HUF, is liable to pay tax on RCM.
(i) From 01.07.2017 till 21.08.2017, the GTA
was liable to pay tax @ 5% without ITC;
(ii) from 22.08.2017 to 12.10.2017 the GTA
may pay tax @ 5% without ITC or @12% with
ITC; and
(iii) from 13.10.2017, no tax is payable on such
supply to an unregistered individual as it
became ―NIL‖ rated only in such cases vide Entry
No. 21A of CGST Notification No. 12/2017-
CT(Rate) dated 28.06.2017.
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2
i) XYZ Co. is the title
sponsor of a cricket
tournament. In this case, is
there any supply involved?
What is the nature of such
supply?
(i) Who is the supplier,
and who is the recipient?
(ii) Who is liable to pay
GST?
(i) In this case, there is a supply of
―Sponsorship service (SAC Code-998397)‖.
(ii) Here, the tournament‘s organizing body is
the supplier of such services and XYZ Co. is the
recipient.
(iii) Here, the tax is payable under RCM by
XYZ Co. .
3
A registered person in India
imports services (other
than OIDAR services
provided by a person in a
non-taxable territory
received by a non-taxable
online recipient) from a
company in the USA. Is
there any liability to pay tax
under GST by either of the
parties? If the answer is
‗Yes‘, who is liable to pay
tax?
Yes. Notification No. 10/2017-ITR dated
28.06.2017 issued under section 5(3) of the IGST
Act stipulates that the recipient registered person
is liable to pay tax on RCM.
Note: In case of OIDAR services provided by a
person in a non-taxable territory received by a
non-taxable online recipient, the supplier of
services located in a non-taxable territory is liable
for paying integrated tax.
4
A Panchayat Samithi sells old
and used goods to a
registered person. In this
case who is liable to pay tax ?
If such sale would have been
effected on say, 01.11.2017
who is liable to pay tax?
If the recipient of the supply is a registered person,
then such recipient was liable to pay tax on RCM.
(Entry No. 6 of CGST Notification No. 04/2017-
CT(Rate), dated 28.06.2017 inserted by CGST
Notification No. 36/2017-CT(Rate) w.e.f. 13.10.2017).
However, if the said supply is made to an unregistered
person, the Panchayat Samithi itself has to charge tax
on forward charge basis.
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5
A registered person imports
goods from Bangladesh. Is
he liable to pay tax (IGST)
on RCM as in case of
importer of services?
While importing goods from Bangladesh, he has
to pay IGST. But such tax is paid by him in
accordance with section 3 of the Customs Tariff
Act, 1975. It is worthwhile to mention that subject
to conditions, the importer is eligible to avail ITC
on such payment of IGST.
6
A GTA has accrued liability
for registration. He thinks
that as tax is payable on
GTA service by the
recipient on RCM basis, he
is not required to be
registered under GST. Is
he correct?
As per CGST Notification No. 05/2017-CT dated
19.06.2017, persons who are only engaged in
making supplies of taxable goods and/or services,
the total tax on which is liable to be paid on RCM
by the recipient under section 9(3) of the
CGST/SGST Act are exempted from obtaining
registration. But in the case of a supplier of GTA
services, the option is there to pay tax on forward
charge also. So, it cannot be said that total tax on
that service is liable to be paid on RCM by the
recipient under section 9(3). Thus, the person is
not correct, and may be required to get himself
registered.
7
An Advocate decided not to
get registration even
though he has crossed the
threshold of Rs. 20 lakhs.
Is he correct as per GST
Law?
Yes. Advocate service is exclusively taxable on
RCM under section 9(3). So, the said Advocate is
correct in his position.
h. Court judgements on RCM under GST
Several judgments have been pronounced by different High Courts on
reverse charge mechanism under GST. Gist of some important
judgements are compiled in the Table below:
Sl.
No. Issue of the case Gist of the Judgement
1.
Bombay High
Court
Bai Mamubai
Trust and 2 Ors
vs
Q.1. Whether GST is liable to be paid on services or
assistance rendered by the Court Receiver
appointed by Court?
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Suchitra Wd/Of
Sadhu Koraga ...
on 13 September,
2019
Bench:
S.J. Kathawalla
(Courtesy: Indian
Kanoon Org)
(i) Where the Court Receiver is appointed to run
the business of a partnership firm in dissolution, the
business of the firm under the control of receivership
may generate taxable revenues.
(ii) Where the Court authorises the Court
Receiver to let out the suit property on leave and
licence, the licence fees paid may attract GST.
(iii) Where the Court Receiver collects rents or
profits from occupants of properties under
receivership, the same will be liable to payment of
GST.
(iv) Consideration received for assignment,
licence or permitted use of intellectual property.
In such cases, GST may be collected from the Court
Receiver as a representative assessee under
Section 92 and as such the Court Receiver may be
required to obtain registration under the relevant
GST laws. [Para. 84 & 85]
However, if the Court Receiver is deputed to make
an inventory of goods, collect rents with respect to
immovable property in dispute or where the property
has to be sealed, or the Receiver is appointed to call
bids for letting out the premises on leave and
licence, the fees or charges of the Court Receiver
are exempt. [Para. 86]
Q.2. Whether GST is liable to be paid on royalty or
payments under a different head paid by a
defendant (or in a given case by the plaintiff or third
party) to the Court Receiver in respect of properties
over which a Court Receiver has been appointed?
A.2. The answer is in the affirmative, subject to the
payment towards royalty or the payment to the Court
Receiver (described by whatever name) is towards
or in relation to a ―supply‖ within the meaning of the
CGST Act. [para. 87]
Q.3. Specifically, in the facts of the present Suit,
where the Plaintiff alleges the Defendant is in illegal
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occupation of the Suit Premises: Whether there is
any 'supply' within the meaning of the CGST Act?
Whether payment of royalty for remaining in
possession of the Suit Premises, either during the
pendency of the Suit, or at the time of passing of the
decree, falls within the definition of 'consideration' for
a 'supply' chargeable to payment of GST under
Section 9 of the CGST Act?
A.3. The answer is in the negative. [Para. 88]
Q.4. If in any circumstance, GST is payable or
applicable to payments made to the Court Receiver,
how
that statutory liability is to be discharged? Is it to be
paid by the Defendant / party in occupation directly,
or by the Court Receiver?
A.4. Where any payment to be made under an order
of the Court attracts GST, the agent appointed by
the Court Receiver must have or must obtain CGST
registration and make such payment on behalf of the
Receiver and indemnify the Receiver for any liability
that may fall upon the Receiver under Section 92 of
the concerned GST Act. Where no agent is
appointed, naturally the Court Receiver will have to
obtain registration. [Para. 91 & 92]
2.
Rajasthan High
Court - Jodhpur
Vinod Kumar
Sharam vs State
Of Rajasthan on
10 April, 2019
read with
Ladu Lal Hiran
and Ors vs State
Of Rajasthan And
Ors on 28 August,
2018
(i) Whether Royalty Contractors (termed as
ERCC Contractors) appointed by the Government of
Rajasthan exclusively for collecting the royalty on
behalf of the Government from the mining lessee of
natural resources without supply of such natural
resources can collect GST @ 18% as forward
charges – the answer is in the negative.
(ii) Whether the royalty paid for mining activities
as chargeable under the notification dated
28.06.2017 provides that the lease holders are
required to pay the GST under the reverse charge
mechanism – the answer is in the affirmative.
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Annexure 10: Key points for value of supply and details of
value of supply (p.55)
TABLE II: KEY POINTS FOR VALUE OF SUPPLY
SR.
NO.
KEY POINTS IN RELATION
TO
SCOPE OF SUPPLY
Reference Points from
returns Accounts
1
Whether the transaction value is
in accordance with the terms of
the contract?
● Contracts/Agreement
● Purchase order
● Invoices
● File of
Correspondence with
Client/Customer
2
Whether the discounts allowed
are in accordance with regular
practice of the taxpayer and the
purchaser has paid the sum
originally charged less the
discount?
● Price Circular
● Invoice linked to
Discount
3
Whether any amount that the
supplier is liable to pay but
incurred by the purchaser has
been included in the value of
supply?
● Price circular
● Contract/Agreement
4
Whether interest or late fee or
penalty for delayed payment of any
consideration for any supply
collected from the purchaser is
included in the value of supply?
Debit Notes
5
Whether there are supporting
documents for the credit notes
issued for supplies made?
Price circular
Contract/Agreement
6
Whether there are supporting
documents for the debit notes
issued for supplies made?
7
Whether terms of contract detail
any consideration flowing from
the third party?
Contract/Agreement
8
Whether the taxpayer has engaged
in any supplies to related persons
as defined in section 15? If so,
check whether there is significant
variation in the value in
comparison to similar transactions
with unrelated buyers.
List of related persons
Inter-unit movement check
through delivery challan.
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9
Whether the taxpayer has made
any supplies where money is not
the sole consideration?
10
Whether any exchange offer or
scheme has been offered by the
taxpayer?
Exchange offers during festive
months.
Value of supply
The GST is applied on the
value of supply of goods and
services. The consideration
may be in money or in other
forms. Buyer can also pay for
his inward supply with nonmonetary considerations by
giving the seller other goods or
services in exchange. There
may be a situation when there
is no consideration at all. Then
what will be the value of
supply? Hence it is really
important to calculate the
value of supply properly as per
provisions of laws.
EXHIBIT 28
There are several situations where valuation takes a vital role, such as the
case of different sales offers, free distribution, combo offers etc. Therefore,
what can be part of the value of supply or what does not, is very important
to understand to levy GST.
A. The methodology of valuation of a particular supply is
exclusively discussed in Section15 of the CGST/SGST Act, 2017.
What is the value of supply under GST?
As per Section 15(1), the value of supply is the transaction value actually
paid or payable for the supply of goods and / or services between parties
not related and where price is the sole consideration. The value of
supply shall include -
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(a) any taxes, duties, cesses, fees and charges levied under any law for the
time being in force other than CGST Act, SGST Act, UTGST Act and the
GST (Compensation to States) Act, if charged separately by the supplier;
(b) any amount that the supplier is liable to pay in relation to such supply but
which has been incurred by the recipient of the supply and not included in
the price actually paid or payable for the goods or services or both;
(c) incidental expenses, including commission and packing, charged by the
supplier to the recipient of a supply and any amount charged for anything
done by the supplier in respect of the supply of goods or services or both at
the time of, or before delivery of goods or supply of services;
(d) interest or late fee or penalty for delayed payment of any consideration
for any supply; and
(e) subsidies directly linked to the price excluding subsidies provided by the
Central Government and State Governments.
The above provisions of Section 15(1) are applicable to determine
value of supply when the parties are not related. So, it is important to
know first as to who are related parties and who are not.
Related Parties
The supplier and recipient of a particular supply will be considered as
related persons if they satisfy the below mentioned situations enumerated in
the explanation to Section 15(5) of the CGST /SGST Act 2017:
(i) such persons are officers or directors of one another‘s businesses;
(ii) such persons are legally recognised partners in business;
(iii) such persons are employer and employee;
(iv) any person directly or indirectly owns, controls or holds twenty-five per
cent. or more of the outstanding voting stock or shares of both of them;
(v) one of them directly or indirectly controls the other;
(vi) both of them are directly or indirectly controlled by a third person;
(vii) together they directly or indirectly control a third person; or
(viii) they are members of the same family;
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Where persons are related, price determined under section 15(1) is
irrelevant and is subject to verification under section 15(4) by
reference to the rules applicable.
Price is the sole consideration
It is important then to understand the term ‗price is the sole consideration‘. If
there is any consideration not in money, the money actually paid cannot be
taken as the basis of valuation. Any additional consideration received apart
from the monetary consideration shall also be considered to arrive at the
actual transaction value. In fact, the consideration can be both monetary
and non-monetary which is well defined in Section 2(31) of the CGST /
SGST Act.
There is an important clause in the provisions of valuation – ―any
amount that the supplier is liable to pay in relation to such supply but which
has been incurred by the recipient of the supply and not included in the
price actually paid or payable..‖
This clause is a check to ascertain that any amount of a supply may not be
diverted by the supplier from the actual value of supply.
Example: There is a supply agreement between a principal and an agent
where the principal fixed his supply value to the agent at Rs.500/- per unit
for a taxable item and also fixed the sale price of the agent to any buyer at
Rs.600/- per unit of that item where Rs.50/- per unit will be retained by the
agent as commission and balance as incidental expenses. Question arises
now, what will be the supply value of principal to the agent? As per the
above clause of valuation provision, the supply value should include this
commission and incidental expenses of the agent. The supplier (here the
principal) manages to escape from the liability of paying commission and
incidental expenses to the agent by transferring them to the buyer. But, it
shall be part of supply value from principal to agent.
Incidental expenses as a part of supply value – Incidental charges
incurred before or at the time of supply shall form part of supply value.
Example – There is a supply contract of door delivery of fragile goods with
proper packing. Suppose, the value of the goods is Rs.10,000/-, packing
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charges are Rs.500/- and door delivery cost is Rs.600/-. Then, it will be a
composite supply with the supply of that goods as principal supply and
value of supply is Rs.11,100/-.
So, the incidental charges incurred before or at the time of supply shall be
part of supply value. But, if such charges incurred after the supply whether
that should not be part of supply value? Let us explain it with an example –
Warranty supply of parts to end-customers through a dealership – Suppose
a company sold a car with a consideration of Rs.10 Lakh to a customer with
3 years free service warranty. An authorised service centre of that car
company supplies service of servicing of the car to that car owner. This
service is actually provided by the car company (as per terms of purchase
of car), through the authorised service centre. There may be replacement of
parts under warranty also. Now, the transaction of free service and / or
warranty replacement between the car company to the customer is not
liable to GST not because it is free now, but since the price for the
replacement is built into the price of the car originally supplied and therefore
tax has already been paid by the car company at the time of selling of the
car. Now, the question arises then what is the role of the service centre
here? In fact, the service centre delivers the part and rendered service to
the customer but ‗supplies‘ it to the car company. Hence, there is another
supply involved here between the service provider and the car company
which is taxable supply in GST.
[Reference: Mohd. Ekram Khan‘s decision of SC in 144 STC 542. As such,
warranty involves two supplies and neither of which are free from tax. One
is tax pre-paid and another is currently taxed though not involving the end
customer].
Interest, late fee or penalty for delayed payment are also part of supply
value- All these special charges are linked to an underlying original supply,
therefore, shall be part of supply value. So many questions may arise –
what will be the time of supply for these special charges? Whether the rate
of tax of original supply will be applied for the special charges also?
Whether all such special charges are liable to GST? It is better to explain it
with an example –
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Example: A contractee awarded a contractor with a ‗turnkey project‘ to build
a road with an agreed price of Rs.100 Cr (Excluding GST). Some of the
terms of agreement were as follows –
i. The contractor must pay earnest money Rs.5 Cr in the form of FD as
a security to abide by the terms and conditions to use machinery and
materials not below the specified standard and also for timely completion of
the project. However, if completion is delayed by more than 6 months, 50%
of the security will be forfeited. Similarly, any breach in the condition of
quality is liable to forfeiture of 10% of the security. At the same time, if it is
completed 2 months prior to the date, the company will provide prize money
of Rs.50 Lakh to the contractor. There was also a clause that if the
contractee fails to provide land in time the contractor will charge 1 Cr. for
each month of delay.
ii. The contractor finished the work 2 months prior to scheduled time.
Due to bad quality of machinery used, the contractee forfeited 5% of
earnest money. The contractee failed to deliver land to the contractor in due
time therefore, the contractor charged Rs. 4 Cr extra to the contractee. The
contractor also charged interest of Rs.60 lakh for late payment.
In this example, there are so many incidental charges. But, all are not
taxable in GST. Earnest money is a kind of security only. So, GST is not
leviable on the same. The taxability of the above charges is explained the
table below –
Sl.
No. Description Amount Remarks
1 Turnkey project of
construction of road 100 Cr Taxable as works contract
service.
2 Security 5 Cr. Not a supply in GST
3 Forfeiture of security by
the contractee 2.5 lakh
It is a penalty for not using
the specified quality of
machinery and hence it is not
a supply
4 Award for early
completion
50
Lakh
Taxable service being a
supply ancillary to the main
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supply of construction
service
5 Penalty for delay to
handover land. 4 Cr

It is a penalty (hence not a
supply) for not adhering to
the terms of the contract
which stipulated
transfer/providing land on a
specific date
6
Interest for delayed
payment of contractual
price
60
Lakh
Taxable and shall be part of the
value of construction service.
Thus, there are so many special charges but only the last one is for the
underlying original supply of construction service.
Discounts to be excluded from Taxable Value – As per Sec 15(3) value
of supply will not include discount, provided:
 It is allowed before supply, or
 It is allowed after supply, provided that it is established in agreement
linked to specific supplies and corresponding credit is reversed by the
recipient.
Example: M/s. A of Kolkata supplied 10 pcs of i-Phone to M/s. B of Kolkata
on 20.09.2019 where basic price of such phones is Rs. 10 lakh. A discount
of Rs. 1 lakh is offered and courier charges of Rs.1000.00 is charged at the
time of supply. What is the value of supply in the above transaction if
the tax rate of such i-phones is 12%? As per the conditions, 50%
payment was made at the time of delivery and further condition was that if
balance payment is made within 20.10.2019 then 10% further discount on
basic price will be allowed. If such payment is made in time, whether this
discount will also be deducted from the supply value?
In this example, courier charges are to be added to the value of supply as
incidental charges and discount is to be deducted as it is offered at the time
of supply. Hence, taxable value will be Rs. 9,01,000/-. GST @ 12% is to be
added to Rs. 9,01,000/- to get the value of supply i.e. Rs. 10,09,120/-. If
50% of the amount is paid and rest is paid within 20.10.2019, further
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discount of 10% on basic price will be allowed. Though it is a post-sale
discount, the condition was fixed at the time of supply. So, the discount is
allowed as a deduction. Accordingly, M/s A may decrease his output tax
subject to the condition that M/s B reverses an equal amount of ITC.
In lieu of discounts if promotional items are offered by the supplier to
increase sales volume and to attract new customers for their products, such
promotional items are not discounts as not satisfying the requirements of
section 15(3).
Example: Two goods, say A (tax rate 12%) & B (tax rate 18%) are
offered for a single price of Rs. 3000/- under the scheme ‗Buy one get one
free‘. Now, what will be the transaction value? What will be the rate of tax
on such supply?
In this example, it may appear first at a glance that one item is being
‗supplied free of cost‘ without any consideration. But it is not an individual
supply of free goods rather a case of two or more individual supplies where
a single price is being charged for the entire supply. It can at best be treated
as supplying two goods for the price of one. Hence, here transaction value
will be Rs. 3000/-. Taxability of such supply will be dependent upon whether
the supply is a composite supply or a mixed supply. If it is a composite
supply, then the tax rate of the principal supply will be applicable and if it is
a mixed supply, tax rate shall be 18%.
B. Determination of Value of Supply as per GST Rules:
Reference to GST Rules related to valuation is permitted only if the
transaction value cannot be determined as discussed above. These are
cases where either the parties are related/distinct/agent or the price is not
the sole consideration. Valuation Rules are prescribed under Chapter IV of
the CGST/SGST Rules, 2017 from Rule 27 to Rule 35.
The above Rules are explained below:
1. Where consideration is not wholly in money - Rule 27
This rule is applicable for the supplies like barter, exchange and
transactions listed in schedule I where the transaction is not wholly in
money as they fail to qualify for application of section 15(1).
Now, the order of application of the methods to determine the value of
supply has to be maintained in the following sequence.
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EXHIBIT 29
Example 1:
(a) X Co. supplied a car to Mr. Sen in exchange for Mr. Sen‘s old car and on
payment by Mr. Sen of Rs. 5,00,000/-. If the price of the new car without
exchange is Rs. 9,00,000/-, then the open market value of the new car is
Rs. 9,00,000/-.
(b) If the open market value of the new car is not known, and the price of
the old car is Rs. 4,00,000/- at the time of supply, then the value of supply of
the new car will be Rs. 9,00,000/-.
(c) A customized air conditioning unit whose open market value is not
available is installed at an office wherein the consideration is paid in the
form of money of Rs. 40,000 and an old air conditioning unit whose price is
not available at the time of supply. A similar air conditioning unit in terms of
characteristics, quality, functional components, materials and reputation etc.
has been installed by the company at another client‘s premises for Rs.
60,000/-. Since, the value of goods of like kind and quality is available, the
value of Rs. 60,000/- will be taken under Rule 27.
(d) value determined by rule 30 or rule 31.
2. Where supply is made between related persons with or without
consideration and distinct persons without consideration - Rule 28
The value of supply under this rule will be:
(a) Open market value: Example: A cell phone dealer gifts a cell phone
set worth Rs. 23,000/- to his son. Since, this is the open market value, it will
be the value of supply for the mobile set supplied to a related person.
(b) Value of Supply of Like kind and quality: If open market value is
not available, then value of supply may be determined on the basis of
supply of like kind and quality.
(c) Value determined by rule 30 or rule 31.
The two provisos to this rule are of significance:
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(i) If the supply to a related or distinct person is for further supply, then
the value may be an amount equivalent to 90% of the value of supply of like
kind & quality to non-related person.
(ii) where it is the recipient, who is entitled to full credit, the value
declared in the invoice is deemed to be open market value. This provision
appears to accommodate internal preferences between distinct persons.
[Reference: In a case of GKB Lens Pvt Ltd, Advance Ruling had been sought on
whether goods supplied to the branches in the States other than West Bengal can be
valued in terms of the Cost Price under the Second Proviso to Rule 28 of CGST Rules,
2017, instead of 90% of MRP as required under the First Proviso of the same Rule. AAR
West Bengal held - The Applicant has the option of not supplying goods to its branches
under the First Proviso of Rule 28 and is eligible to value these goods by applying the
terms of the Second Proviso to Rule 28 of GST Act.]
3. Where supply is made or received through agent - Rule 29
This rule is applicable only in case of „supply of goods‟ and not ‗supply of
services‘. The value of supply under this rule will be:
(a) Open market value or ‗at the option‘ of supplier 90% of the price
charged for goods of ‗like kind and quality‘ by the Agent.
Example: Agent supplies groundnut @5000/- per Qtl. Agent is purchasing
groundnut from a non-related supplier @4550/- per Qtl. What should be the
supply value from principal to agent?
It should be 90% of Rs. 5000/- ie. Rs. 4500/-
(b) Value determined by rule 30 or rule 31.
This rule is applicable only in case of those transactions where the Agent
„handles‟ the goods of the Principal. It is clarified vide Circular No.
73/47/2018-GST dated 05-11-2018 that in case of supply of goods, if the invoice
is issued by supplier to customer either himself or through del credere agent
(DCA) then it does not fall under the ambit of agent. However, in a case where
the invoice is issued by the del credere agent then it would fall under the ambit of
an agent.
4. Value of supply based on cost - Rule 30
This rule is applicable for valuation of supply of goods and services, only
where the other methods of valuation do not apply. It provides that the value
will be „cost plus 10%‟.
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Example: Suppose ABC Limited is a manufacturer of office furniture. Say,
the cost of manufacturing a chair is Rs. 4,000/-. Similar chair in the open
market is valued at Rs. 4,500. These chairs are supplied to a furniture
showroom at the rate Rs. 3,000 and balance in non-monetary consideration.
Now since the open market value is available, Rs. 4,500 will be considered
for valuation of supply. However, if Open Market Value is not available, the
value of supply as per cost method will be 110% of the cost of
manufacturing i.e. Rs. 4,000*110% = Rs. 4,400.
5. Residual method of valuation - Rule 31
As per the residual method, where the value of supply of goods or services
or both cannot be determined under the cost method, the same shall be
determined using reasonable means consistent with the principles and
general provisions of the GST law. Unitary method or number of man hours
required to complete a job can be examples of such valuation method.
6. Lottery, betting, gambling and horse racing - Rule 31A
Supply Value in case of Lottery: Value shall be 100/128 of the face value
of ticket or of the price as notified in the Official Gazette by the Organising
State, whichever is higher.
Note: The above Rule is as amended by the CGST/SGST (Second
Amendment)
Rules, 2020, w.e.f. 1-3-2020. Prior to the amendment, the Rule provided for
determination of value of supply for lottery run by state Government as
100/112 of the face value of ticket or the price as notified in the Official
Gazette by the organising State whichever is higher. Value of supply for the
lottery authorized by a State Government is determined as 100/128 of the
face value of ticket or the price as notified in the Official Gazette by the
organising State whichever is higher.
Betting, Gambling or Horse Racing: Actionable claim in the form of
chance to win in betting, gambling or horse racing in a race club shall be
100% of the face value of the bet or the amount paid to the totalisator. This
implies that the value on which GST has to be paid will be the amount of bet
placed or the amount paid to the totalisator instead of the commission or
share of revenue of the race club.
Actionable claim is ―goods‖ under section 2(52). Hence, actionable claim in the form
of chance to win betting, gambling and horse racing with reference to the above
definitions will be goods and not services. The tax rate notifications issued for goods
states that ‗actionable claim in the form of chance to win in betting, gambling, or
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horse racing in a race club‘ is liable to tax at the rate of 28%. The rate notification
issued for services also specifies that the gambling as an activity involving services
and accordingly, liable to tax at 28% (refer entry No. 34(v) of Notification No. 11/2017
(Rate)).
With the above ambiguities there may be some confusion whether to tax actionable
claims as goods or services.
7. Specific valuation provisions – Rule32
Rule 32 is only an option available to the supplier for determination of
valuation of certain specific supplies. He may opt for the mechanisms
specified in rule 32 or in rules 27-31 or in section 15 as the case may be.
(a) Purchase and sale of foreign currency including money
changing:
Option 1 Option 2
Difference between buying-selling rate and
the RBI reference rate.
Where reference rate is not available, 1%
of gross Indian Rupee provided/received.
And where the conversion is not into Indian
Rupees, then 1% of the lesser of the Indian
Rupee equivalent of each currency
exchanged.
Example: Suppose a company M/s
Thomas Cook Ltd, a money changer,
converts 1000 Euro into rupees @90 per
Euro. The RBI reference rate for Euro is
Rs. 88.
So, the value of supply shall be = (90-88) *
1000 = Rs. 2000/-.
For currency exchange ≤Rs.1 L:
1% or Rs.250/- which one is higher.
For currency exchange >Rs.1Lbut ≤ 10L
0.5% of exchanged amount exceeding 1 L plus
Rs.1000/-
For currency exchange >Rs.10L:
0.1% of exchanged amount exceeding 1 L plus
Rs.5500/- but maximum Rs.60000/-
Example: Suppose a money exchanger received
Singapore Dollar and provided Indian Rs. 5,00,000/-.
The value of supply shall be (4,00,000*0.5%) +1000
=Rs. 3000/-
(b) Value of service in relation to air travel agents: 5% of basic fare in
case of domestic booking and 10% of basic fare in case of international
booking of passengers by air. Commission to the travel agent may flow
from passenger or airline or any other person and the value determined
here will be the tax for all the sources of commission.
(c) Supply of services in relation to life insurance
(i) If in the policy allocation for investment of certain amount is intimated
to the policy holder: Gross premium - Investment amount
(ii) In case of single premium other than (i): 10% of single premium
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(iii) In cases other than (i) & (ii): 25% of premium charged for first year &
12.5% for subsequent year
(d) Supply of services of person dealing in second-hand goods
(i) If supplied as it is or after minor processing without changing nature of
goods and without availing ITC: Sale price - Purchase price (If this
difference is negligible, that shall be ignored)
(ii) Purchase price in case of repossessed goods from a defaulting
borrower who is unregistered: Purchase price - 5% from purchase price for
each quarter from date of purchase to date of disposal after repossession.
(e) Supply of voucher: The value will be the redemption value of the
voucher. Voucher includes coupon, stamp, token, et
8. Service of pure agent - Rule 33
This rule applies only to supply of services. The cost incurred by the
supplier shall be excluded from value of supply if the following tests are
satisfied:
(a) the supplier acts as a pure agent of the recipient of the supply, when
he makes payment to the third party on authorisation by such recipient;
(b) the payment made by the pure agent on behalf of the recipient of
supply is separately indicated in the invoice issued by the pure agent to the
recipient of service;
(c) the supplies procured by the pure agent from the third party as a pure
agent of the recipient of supply are in addition to the services he supplies on
his own account.
Pure agent:
● A person who enters into a contractual agreement with the recipient of
supply to act as his pure agent to incur expenditure in the course of supply of
goods or services or both;
● Neither intends to hold or holds any title to the goods or services or
both so procured or supplied as pure agent of the recipient of supply.
● Does not use for his own interest such goods or services so procured
as pure agent.
● Receives only the actual amount incurred to procure such goods or
services in addition to the amount received for supply he provides on his own
account.
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Example: Mr. A is an importer who goes to Mr. B for Customs clearance
work in respect of import of a consignment. The clearance of goods would
also require taking of transporter service. Mr. A also authorizes Mr. B to
incur expenditure on his behalf for procuring the transporter service and
agrees to reimburse such expenses. In this scenario, Mr. B is providing
custom broker service to Mr. A, which is principal to principal basis and the
transportation services procured by Mr. B on behalf of Mr. A is a pure agent
service and expenses incurred by Mr. B on transportation shall not form part
of the value of the Customs broker service.
9. Rate of exchange of foreign currency - Rule 34
Any transactions undertaken in foreign currency must be converted into INR
and the rate of such exchange is as follows:
(a) For determination of the value of taxable goods the rate of exchange
shall be the applicable one as notified by the Board under section 14 of the
Customs Act, 1962.
(b) for determination of the value of taxable services rate of exchange
shall be the applicable one determined as per the generally accepted
accounting principles for the date of time of supply of such services in terms
of section 13 of the Act.
10. Value of supply inclusive of integrated tax, central tax, state tax,
union territory tax – Rule 35
In such cases, the tax amount shall be determined in the following manner:
Tax amount = (Value inclusive of taxes X tax rate in % of IGST or, as the
case may be, CGST, SGST or UTGST) ÷ (100 + sum of tax rates, as
applicable, in %)
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Annexure 11: Input Tax Credit (p. 52)
Availability of Input Tax Credit
throughout the value chain is the
essence of GST in India.
Needless to say that examining
the veracity of ITC availed by an
auditee is of paramount
importance to an auditor. The
provisions related to ITC are as
follows: EXHIBIT 30
EXHIBIT 31
Relevant Rules
Rule 36 Rule 37 Rule 38 Rule 39 Rule 40
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Rule 41 Rule 42 Rule 43 Rule 44 &
44A Rule 45
a. How is Input Tax Credit (ITC) defined in GST
Section 2(63) of the CGST/SGST Act defines Input Tax Credit as the
credit of input tax.
Section 2(62) defines input tax as follows: “input tax” in relation to a
registered person means any tax such as Central Tax, State Tax,
Integrated Tax or Union territory tax charged on any supply of goods or
services or both made to him & includes: -
 Integrated Tax charged on import of goods &
 Tax payable under reverse charge mechanism,
but does not include the tax paid under the composition levy.
Input is defined in Sec 2(59) as any goods other than capital goods used
or intended to be used by the supplier in the course or furtherance of
business.
Capital goods is defined in Sec 2(19) as goods, the value of which is
capitalized in the books of account of the person claiming ITC and which
are used or intended to be used in the course or furtherance of business.
Input service is defined in Sec 2(60) as any service used or intended to
be used by a supplier in the course or furtherance of business.
b. Provisions of section 16(1)
EXHIBIT 32
In accordance with Section 16(1) of the CGST/SGST Act, 2017:
(i). Only a registered person other than persons under composition scheme is
entitled to claim ITC.
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(ii). However, this claim is not unconditional and is subject to conditions and
restrictions as prescribed.
(iii).Self-assessed ITC taken in the return is credited to the electronic credit ledger
of the taxpayer.
(iv). ITC can be taken on such supply of goods or services or both to the
registered person which are used or intended to be used in the course or
furtherance of his business.
c. Provisions of sec 16(2) provide conditions to avail of ITC –
With effect from 01.01.2022 another condition to the effect that supplies
in respect of which credit is being claimed have been declared by the
supplier in his GSTR-1 and the credit available has been communicated
to the recipient (vide GSTR-2B) and that the credit is not restricted in
terms of the said communication
d. Deemed recipient of goods / services
Where goods are delivered by the supplier to a recipient or any other person
on the direction of such registered person, whether acting as an agent or
otherwise, before or during movement of goods either by way of transfer of
documents of title to goods or otherwise, it shall be deemed that the
registered person has received the goods for the purpose of Section 16(2)(b).
Where services are provided by the supplier to any person on the directions of
and on account of another registered person, it shall be deemed that the
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registered person has received the services for the purpose of Section
16(2)(b).
It may be noted in this regard that the date of receipt of the goods or services
is vital for availing ITC. It may happen that the supplier issues invoice on 30th
of a particular month and uploads details of the same in Form GSTR-1 of that
month and the same is auto-populated in GSTR-2A of the recipient in the
same month. However, this does not make the recipient eligible to avail of ITC
in the return of this said month if he receives the goods in the subsequent
month. In the case of goods, many audit trails can be found in respect of
receipt of goods in documents like E-Waybill, GRN etc.
This, however, may be difficult to ascertain in the case of services. Further,
there may be a situation where goods are received in the subsequent month
but purchase is auto populated in GSTR 2A in the month of sale as disclosed
by the supplier in GSTR 1. In such cases there is a probability to claim ITC
wrongly by the recipient though the goods are not received.
e. Goods received in lots
If goods are received in instalments against a single invoice, credit can be
availed only upon receipt of the last instalment of goods.
Suppose, a consignment of iron ores was dispatched from Jharkhand to
Kolkata by 10 trucks. Invoice was raised to the recipient on 28.10.2018. Three
trucks reached Kolkata by 30.10.2018 but the truck carrying the final lot of the
consignment reached the recipient on 03.11.2018. The supplier also disclosed
such sales in his GSTR 1 for the month of Oct‘18. In this case, ITC in respect
of the invoice issued on 28.10.2018 can be availed not before the month
of November, 2018.
f. Payment in respect of the supply as a condition to avail ITC:
When a recipient fails to pay his supplier (other than supplies on which tax is
payable under RCM), the amount of value of supply along with tax payable
thereon within a period of 180 days from the date of issue of invoice, the
recipient is liable to add the ITC availed on such supply to his output tax
liability along with interest thereon.
However, the recipient is also entitled to avail the credit of ITC once he makes
the payment towards the amount of value of supply along with tax payable
thereon.
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Capital goods and plant & machinery on which depreciation is claimed
on the tax component under the Income Tax Act:
Sec 16 (3) does not allow a registered person to take ITC on such a tax
component of the cost of capital goods and plant and machinery, on
which he has claimed depreciation under the provisions of the Income Tax
Act, 1961.
g. Time limit to claim ITC
As per Sec 16(4), a registered person shall not be entitled to take ITC in
respect of any invoice or debit note for supply of goods or services or both
after the due date of furnishing of the return (Form GSTR-3B) under section
39 for the month of September following the end of financial year to which
such invoice or ‗invoice relating to such debit note pertains‘ or furnishing of the
relevant annual return, whichever is earlier.
 For F/Y 2017-18, a taxpayer shall be allowed to take ITC till the due
date of furnishing of the return for the month of March, 2019 i.e. 23.04.2019 in
respect of any invoice or invoice relating to such debit note for supply of
goods or services or both made during the FY 2017-18, the details of which
have been uploaded in the Form GSTR-1 for the month of March, 2019.
 For F/Y 2018-19, a taxpayer shall be allowed to take ITC till the due
date for furnishing of the return for the month of September, 2019 i.e.
20.10.2019. For the FY 2018-19, for the taxpayers having aggregate turnover
upto Rs. 2 cr, filing of GSTR-9 is optional and for the taxpayers having
aggregate turnover upto Rs. 5 cr filing of GSTR-9C is optional. The Ministry of
Finance, GoI in an Official Press Release dt.24.10.2020 announced the
extension of due date to file GSTR 9, GSTR 9A & GSTR 9C for the FY 2018-
19 to 31st December, 2020.
h. ITC in respect of supplies not declared by the supplier in Form GSTR1
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A supplier is supposed to disclose all B2B supplies in Form GSTR 1 which
gets auto populated in Form GSTR 2A of the recipient. Auto-population of
invoices in Form GSTR 2A primarily assures disclosure of relevant supply by
the supplier. However, disclosure in Form GSTR-1 does not sufficiently
ensure that tax in respect of such supplies has been paid by the supplier
which is paid in the return in Form GSTR-3B.
Rule 36(4) has been inserted vide notification No 49/2019-CT, dt. 09-10-2019
(corresponding State notification. No 1730-F.T. dt.16.10.2019) and it applies
to all returns filed after 9th Oct 2019. In accordance with Rule 36(4), a
registered person is entitled to avail of maximum 10% (20% from 09.10.2019
to 31.12.2019) of eligible credit on the basis of auto-populated details in Form
GSTR-2A of a particular month in respect of details of invoices or debit notes
which have not been uploaded by the corresponding suppliers (i.e. which
have not been auto-populated in Form GSTR-2A).
Illustration:
Suppose X calculates ITC at Rs. 100/- for the month of January 2020 on the basis
of invoices in his possession. However, his suppliers declare invoices whose
corresponding ITC calculates to Rs. 60/- only, in their Form GSTR-1 which is autopopulated in Form GSTR-2A for the month of January 2020 of X. It is also found out
that ITC is eligible for Rs. 60/- since nothing in this amount is restricted by Section
17(1)/ (2)/ (5) etc.
In this case, X is eligible to avail of ITC to the tune of Rs. 66/- [Rs. 60/- + Rs. 6/-
(=Eligible ITC: Rs. 60/- x 10%)]
i. Apportionment of Credit [Sec 17(1)]
EXHIBIT 33
Example: A registered person claims ITC as follows –
a. ITC of Rs.20,000/- for purchase of taxable goods for resale.
b. ITC of Rs.5000/- on rent payment for a two storied building, where 1st
floor is used for business purpose and 2nd floor for residential purpose.
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c. ITC of Rs.1500/- for renting cab services both for business and for
personal use.
d. ITC of Rs.6000/- for purchase of furniture for residence.
Ineligible ITC:
Rs.1500/-: Restricted in accordance with section 17(5)
Rs.6000/-: On purchase of Furniture for residence (for purpose other than
business).
Eligible ITC:
Rs.20,000/-
ITC to be apportioned in accordance with rule 42
Rs.5,000/-: Common Credit for service availed for both business and non –
business purpose.
Eligible to claim portion of ITC out of Rs.5, 000/- which is attributable to
business purpose (to be calculated in accordance with rule 42)
j. Availability / apportionment of ITC when used for taxable supplies
(including zero-rated supplies) as well as exempt supplies [Sec 17(2)]
EXHIBIT 34
Value of exempt supply for the purpose of apportionment of ITC [Sec
17(3)] Exempt supply has been defined in sec 2(47) of the CGST/SGST Act
as supply of any goods or services or both which attracts nil rate of tax or
which may be wholly exempt from tax under section 11 of the CGST/SGST
Act or under section 6 of the IGST Act, and it includes non-taxable supply.
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For the purpose of apportionment of ITC as per sec 17(2) exempt supply
includes the outward supplies on which the recipient is liable to pay tax on
reverse charge basis, transactions in securities, sale of land and, subject to
clause 5(b) of Schedule-II, sale of building.
However, it shall not include the value of activities or transactions specified
in Schedule III, except sale of land & subject to clause 5(b) of Schedule II,
sale of building.
Example: A registered person engaged in manufacturing of both taxable and
exempted goods and pays tax amounting to Rs.1,50,000/- on procurement of
inputs and input services for a particular period.
The corresponding tax paid on inputs and input services which are used as
follows –
a. Rs.5,000/- exclusively for non-business purposes.
b. Rs.45,000/- exclusively for exempt supply.
c. Rs.10,000/- ineligible credit u/s 17(5).
d. Rs.40,000/- exclusively for taxable supplies including zero rated supply.
e. Rs.50,000/- Common credit for both taxable and exempt supply.
f. Exempt supply during the period was Rs.1,20,00,000/- and taxable
supply was Rs.80,00,000/-.
What will be the eligible credit during the period?
Answer:
Ineligible ITC:
Rs.5,000/-: exclusively for non-business purposes.
Rs.45,000/-: exclusively for exempt supply
Rs.10,000/-: Restricted in accordance with section 17(5)
Eligible ITC:
Rs.40,000/-: exclusively for taxable supplies including zero rated supply
ITC to be apportioned in accordance with rule 42
Rs.50,000/-: Common Credit used for both taxable supply & exempted supply
Eligible to claim portion of ITC out of Rs.50, 000/- which is attributable to taxable
supply (calculated in accordance with rule 42)
Rs.50,000× (Rs.80,00,000/(Rs.80,00,000+ Rs.1,20,00,000) = Rs.20,000/-.
Total eligible credit available to the registered person: Rs.40,000/- + Rs.20,000/- =
Rs.60,000/-
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Availability of Credit for a banking Company or a financial institution
including NBFC [Sec 17(4)]
Descriptions Options of availing of ITC Conditions
Banking company or a
financial institution
including a nonbanking financial
company, engaged in
supplying services by
way of accepting
deposits, extending
loans or advances.
● Either apportion
the ITC as per
provisions of section
17(2).
OR
● Avail 50% of the
eligible ITC on inputs,
capital goods and input
services every month
and the rest shall lapse.
● Option once
exercised shall not be
withdrawn during the
remaining part of the FY
● The restriction of
50% shall not apply to the
tax paid on supplies made
by one registered person to
another registered person
having the same PAN.
k. Ineligible Input Tax Credit [Sec 17(5)]
Input tax credit is not available in respect of certain inward supply of goods
or services in accordance with Section 17(5) (blocked credit). The provision
of Section 17(5) was amended w.e.f 1st February, 2019. Hence, the
provisions are discussed accordingly:
i. Motor vehicles and other conveyances (valid upto 31.01.2019)–
EXHIBIT 35
Example:
ABC Pvt Ltd has purchased an SUV @ Rs 7.5 lac +GST on 31.12.2018 to be
used by one of its directors. Shall the company be allowed to avail of this
ITC?
Ans: No, the company is not eligible avail of this ITC since this is blocked as
per the provisions of Sec 17(5).
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There may be a situation where a company may claim ITC on cars purchased
in the name of the company with the plea that cars are used to carry
employees to office / factory / work site.
Whether ITC is allowable in such cases?
No, ITC is not allowable in this case also.
ii. Food, beverages, outdoor catering, beauty treatment etc (valid up
to 31.01.2019)
EXHIBIT 36
Example: A company pays tax on procurement on some input services as
follows:
a. Rs.15,000/- on food and beverages for factory workers.
b. Rs.2,500/- for outdoor catering for picnic of office employees
c. Rs.3,500/- for health-related services to employees
d. Rs.3000/- on rent-a-cab services for guests,
e. Rs.10,000/- for purchase of GI policy for workers (150 workers),
f. Rs.12,000/- for health insurance policies of office staff
g. Rs.4,000/- for membership and other expenses of club
h. Rs.5,000/- for travel benefit to employees for visiting different sites.
i. Rs.2,600/- for travel benefit to employees going on leave.
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Calculation of eligible ITC.
Group insurance to workers is obligatory on the part of the employer as per
Workmen Compensation Act. Therefore, ITC is admissible on such input
service. Travel benefit is restricted only during leave. Thus, input tax credit for
procurement of services under sl. No. ‗e‘ and ‗h‘ above are only eligible for
availing.
iii. Motor vehicles and other conveyances (valid w.e.f. 01.02.2019)
EXHIBIT 37
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Subsequent to amendment of Section 17(5) the ambit of availability of ITC on
motor vehicles is expanded. Prior to 01.02.2019, passenger vehicles, goods
vehicles and other conveyances were treated at par and ITC was available for
specific purposes only as mentioned above in Table in (i) above. However,
subsequent to the amendment w.e.f. 01.02.2019, ITC is made available for
goods vehicles. In respect of the passenger vehicles, ITC has been denied for
vehicles with seating capacity not more than 13 persons including the driver.
This means that, ITC is available on passenger vehicles with seating capacity
more than 13 persons including the driver w.e.f. 01.02.2019. However, doubts
may prevail in respect of availability of ITC in respect of construction
machineries like tractor, crane, road roller, tippers and dumpers etc. i.e.
Whether they can be classified as motor vehicles?
It may be noted that, most of the earth moving machineries require
registration under MV Act as motor vehicle. Since, earth moving machineries
like tractor, crane, road roller, tippers, dumpers etc are also considered as
motor vehicles, they are not outside the restriction clause in section 17(5).
It may further be noted in this regard that, fulfilment of conditions specified in
section 16 and 17 of the CGST/SGST Act may not be sufficient sometimes for
availing of ITC. Certain restrictions in respect of availability of ITC are also
provided in the rate notifications.
Illustration–
Tax paid on purchase of a goods vehicle by a GTA would otherwise be
available as ITC, but as per rate notification no.13/2017 – CT(R)
dt.28.06.2017, services of a GTA in relation to transportation of goods is
taxable @ 5% provided that the ITC on goods and services used in supplying
the service has not been taken
iv. Food, beverages, outdoor catering, beauty treatment etc (w-e-f
01.02.2019)
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EXHIBIT 38
Hence, w-e-f 01.02.2019, ITC would be available in respect of the aforesaid
services if it is obligatory on the part of employer to provide the same to its
employees under any law for the time being in force.
v. Works Contract Service used for immovable property other than
plant & machinery but including repair maintenance and renovation to
the extent of capitalization
EXHIBIT 39
Works contract is defined under section 2(119) as a contract for building,
construction, fabrication, completion, erection, installation, fitting out,
improvement, modification, repair, maintenance, renovation, alteration or
commissioning of any immovable property wherein transfer of property in
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goods (whether as goods or in some other form) is involved in the execution
of such contract.
Works contract as defined under section 2(119) though being a composite
supply is treated as a supply of services as per Para 6(a) of Schedule II of
the CGST/SGST Act, 2017. If a registered person avails of works contract
service as input service for further supply of works contract service, then in
such a scenario he would be eligible to avail of the ITC on such service
procured by him.
Illustration- A taxpayer is constructing his new factory for manufacture of
taxable goods. Contractor ‗A‘ supplies construction services and another
vendor ‗B‘ supplies ‗Plant & Machinery‘. The taxpayer also procures goods
and services on his own account to develop the boundary wall of the factory
premises.
In this case, the taxpayer is not in the business of supplying works contract
service. Therefore, he is not eligible to claim ITC in respect of tax paid on
inward supplies of works contract service. He is eligible to claim ITC on
plant & machinery. The taxpayer is also not eligible to claim ITC on tax paid
on procurement of goods and services on his own account for building the
boundary wall.
However, if contractor ‗A‘ engages a subcontractor, he is eligible to claim
ITC on procurement of works contract service from the sub-contractor since
the same is procured for further supply of works contract service.
Plant and Machinery may also be of the nature of immovable property in
certain cases when affixed permanently to the earth. It may be noted that,
when a works contract service is procured for construction of plant and
machinery, ITC would be available to the recipient, since works contract
service procured for construction of plant and machinery is excluded from
the negative list.
For the purpose of Input Tax Credit “plant and machinery‖ means
apparatus, equipment, & machinery fixed to earth by foundation or
structural support that are used for making outward supply of goods or
services or both and includes such foundation and structural supports but
excludes—
(i) land, building or any other civil structures;
(ii) telecommunication towers; and
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(iii) pipelines laid outside the factory premises.
vi. Other unavailable credit –
EXHIBIT 40
ITC is blocked in respect goods lost, stolen, destroyed, written off or disposed off
by way of free gift or free samples. Confusion may arise that whether those goods
are only inputs and capital goods or also manufactured end product or any
intermediary products. Since, there is no such condition, so whether those goods
are inputs, capital goods, finished product or any intermediary products ITC is
required to be reversed when such goods are lost, stolen, destroyed, written off or
disposed off by way of free gift or free samples.
l. Availability of credit in special circumstances:
a. Sec 18(1) and 18(2) -
Supplier
Stock held as
Stock to be
considered as on
Inputs or
Inputs
contained
in semifinished/
finished
goods
Input
Services
Capital
Goods
Person, who has
applied for
registration within
30 days from the
date of incurring
liability for
registration and who
has been granted
such registration
ITC available
Stock of
service is
not
possible.
ITC not
available
ITC not
available
The day immediately
preceding the date
from which he
becomes liable to pay
tax
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Voluntarily
Registered ITC available ITC not
available
ITC not
available
The day immediately
preceding the date
from which supplier is
liable to pay tax
under the regular
scheme.
Person ceases to
pay tax under the
composition
scheme
ITC available ITC not
available
ITC
available
The day immediately
preceding the date
from which supplier is
liable to pay tax
under the regular
scheme.
Exempt supplies
become taxable
ITC available
on inputs
relatable to
such exempt
supply
ITC not
available
ITC
available
on capital
goods
exclusively
used for
such
exempt
supply
The day immediately
preceding the date
from which exempt
supplies become
taxable.
Note:
a. ITC in respect of inputs or inputs contained in semi-finished/ finished
goods or capital goods held in stock as noted in the above table would be
available only within one year from the date of issuance of the tax invoice
related to such supply.
b. The credit on capital goods shall be reduced by five percentage points
per quarter or part thereof from the date of invoice.
b. Transfer of credit in special circumstances [Sec 18(3)]
EXHIBIT 41
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c. Other circumstances provided under section18
EXHIBIT 42
EXHIBIT 43
d. ITC in respect of inputs and capital goods sent for job work.
EXHIBIT 44
If the inputs/ capital goods sent for job work are not received back by the principal
after completion of job work or otherwise or are not supplied from the place of
business of the job worker (Sec 19)
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EXHIBIT 45
● The above time period for returning back inputs/ capital goods from job
workers to the principal shall not apply to moulds and dies, jigs and fixtures,
or tools sent out to a job worker for job work.
● Principal means a registered person referred to in section 143(1)
● For the purposes of job work, input includes intermediate goods arising
from any treatment or process carried out on the inputs by the principal or the
job worker
e. Manner of distribution of credit by Input Service Distributors.
EXHIBIT 46
a. Conditions for distribution of Credit by ISD
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▪ “relevant period” for the purposes of Section 20 shall be–
(i) if the recipients of credit have turnover in their States or UTs in the financial
year preceding the year during which credit is to be distributed, the said
financial year; or
(ii) if some or all recipients of the credit do not have any turnover in their
States or UTs in the financial year preceding the year during which the credit
is to be distributed, the last quarter for which details of such turnover of all the
recipients are available, previous to the month during which credit is to be
distributed
▪ “recipient of credit” means the supplier of goods or services or both
having the same Permanent Account Number as that of the Input Service
Distributor;
▪ “turnover”, in relation to any registered person engaged in the supply
of taxable goods as well as goods not taxable under this Act, means the value
of turnover, reduced by the amount of any duty or tax levied under entries 84
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and 92A of List I of the Seventh Schedule to the Constitution and entry 51
and 54 of List II of the said Schedule.
Example of distribution of ITC by ISD:
A company has 6 numbers of GSTIN under a single PAN in the following
States:
i. In Delhi as normal taxpayer
ii. In Delhi as ISD
iii. In West Bengal as normal taxpayer
iv. In Bihar as normal taxpayer
v. In Uttar Pradesh as normal taxpayer
vi. In Punjab as normal taxpayer
The ISD received invoices from different vendors as follows:
a. Factory building renovation in West Bengal involving IGST of
Rs.1,00,000/- (renovation works duly capitalized in the books in HQ Delhi)
b. Advertisement in all the above States involving input tax of Rs.30,000/-
as IGST.
c. Repairing of plant & machinery at Delhi and UP involving input tax of
Rs.10, 000/- as CGST and Rs.10, 000/- as SGST.
d. Tax audit in Punjab involving input tax of Rs.20, 000/- as IGST.
Turnover of previous year of the above GSTINs was as follows:
Delhi UP Punjab MP WB Bihar
Turnover 10 Cr 10 Cr 4 Cr 5 Cr 8 Cr 1 Cr
Pro-rata
ratio 25% 25% 10% 12.5% 20% 2.5%
The ISD distributed ITC as follows:
Invoice
wise total
credit
(Rs.)
Delhi UP Punjab MP WB Bihar
Inv. a
1,00,000
IGST=10000
0
Inv. b
30000
CGST=375
0
SGST=375
0
IGST=7500 IGST=3000 IGST=375
0 IGST=6000 IGST=750
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Inv. c
20000
CGST=500
0
SGST=500
0
IGST=1000
0
Inv. d
20000
IGST=2000
0
Distribution of ITC by the ISD as appeared in the above tables is correctly
done except in respect on Inv. a. for which ITC is blocked as per provisions of
section 17(5) of the CGST/SGST Act. Now, the question arises how and from
whom that can be recovered? Let us go through the provisions of section 21
below.
EXHIBIT 47
Thus, the credit distributed in excess to West Bengal by the ISD as IGST of
Rs.1,00,000/- for renovation of factory building which has been capitalized can
be recovered under section 73 or 74 as applicable along with interest from the
distinct person in West Bengal as he was the recipient in this case.
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Annexure 12: Important Changes in GST Laws and Rates
during 2017-18 & 2018-19 (p.49)
EXHIBIT 48
EXHIBIT 49
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Changes in Reverse Charge Mechanism (RCM)
Reverse charge is a mechanism under which the recipient of the goods or
services is liable to pay the tax instead of the provider of the goods and
services. Under the normal taxation regime, the supplier collects the tax
from the buyer and deposits the same after adjusting the output tax liability
with the input tax credit available. But under reverse charge mechanism
(RCM), liability to pay tax shifts from supplier to recipient.
In respect of RCM u/s 9(3) of the SGST/CGST Acts, 2017, the CGST
Notification no. 04/2017-CT(Rate), dt.28.06.2017 and CGST Notification no.
13/2017-CT (Rate), dt.28.06.2017 notify certain specified Goods and Services
for the supply of which tax is payable under RCM.
In respect of section 9(4) of CGST/SGST Act and section 5(4) of IGST Act the
original provision has been amended as follows:
 If the amount of inward supplies of goods or services or both, received
in a day by a registered person from all unregistered suppliers, does not
exceed Rs.5000/-, no tax is payable on RCM under section 9(4) by a
registered recipient.
 If a registered person receives inward supplies of goods or services or
both exceeding Rs. 5000/- in a day from all unregistered suppliers, he is
liable to pay tax on RCM basis on entire amount of such supplies received
by him.
From 13.10.2017 the provisions of section 9(4) of SGST/CGST Act and
section 5(4) of IGST Act have been kept suspended.
Finally, the provision has been amended w.e.f. 01.02.2019 as below:
―Govt. may specify by notification a class of Registered recipients who shall
pay tax on RCM on supply received from an unregistered supplier.‖
It may be noted that, w.e.f. 01.04.2019 CGST Notification no. 03/2019 CTR
dt.29.03.2019 have been issued on certain specific conditions and situations
of ―Construction Services‖ where tax is to be paid under reverse charge
mechanism.
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Composition levy
 Threshold limit for opting Composition Levy was 75 lakh rupees at the
advent of GST. Said threshold has been extended to 1 Crore rupees.
[CGST Notification No. 46/2017-CT, dated13.10.17]
 Option for Composition Levy in the middle of 2017-18 has been allowed
by inserting sub-rule (3A) to rule 3.
[CGST (Ninth Amendment) Rules, 2017 issued vide Notification No.
45/2017-CT, dated 13.10.17]
 Restaurants, eateries etc. shall not be barred from Composition Levy
even if it supplies any exempt services including services by way of extending
deposits, loans or advances
[RoD Order issued vide CGST Order No. 01/2017-CT, dated 13.10.17]
 Rate Reduction with effect from 01.01.2018:
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 Rate of Composition Levy for manufacturers has been reduced from
one (01) per cent. of turnover in the State to half (0.5) per cent. of turnover in
the State.
 Rate of Composition Levy for traders has been reduced from half (0.5)
per cent. on turnover in the State to half (0.5) per cent. of the turnover of
taxable supplies of goods in the State
[CGST (1st Amendment) rules, 2018 issued vide notification No. 03/2018-CT, dated
24.01.2018]
Tax on Advance received
Section 12(2) of the SGST/CGST Act:
―The time of supply of goods shall be the earlier of the following dates,
namely:
(a) the date of issue of invoice by the supplier or the last date on which he is
required, under section 31, to issue the invoice with respect to the supply; or
(b) the date on which the supplier receives the payment with respect to the
supply:‖
 So, in terms of the above provisions, tax is payable when advance
payment is received for supply of both goods or services.
 But taxpayers having aggregate turnover in the preceding financial year
upto 1.5 crore are exempted from payment of tax on Advance received in
case of supply of goods with effect from 13.10.2017
[CGST Notification No. 40/2017-CT, dated 13.10.17]
 The above benefit has been extended to all taxpayers from 15.11.2017.
[CGST Notification No. 66/2017-CT, dated 15.11.17]
Changes in SGST/CGST Act relevant for 2017-18 & 2018-19
 Import of services without consideration by a taxable person from a
related person or from any of his other establishments outside India, in the
course or furtherance of business has been treated a supply as per para. 4 of
Schedule I. Such provision is amended so that it will be applicable not only to
a taxable person, but to any person. [w.e.f. 01.07.17]
 Scope of No supply extended w.e.f. 01.02.2019 by amending Schedule
III:
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 Supply of goods from non-taxable territory to another non-taxable
territory without entering into India. (Para. 7)
 Supply of warehoused goods to any person before clearance for home
consumption; and
 Supply of goods by the consignee to any other person, by endorsement
of 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. [In common parlance HIGH SEAS SALE] (Para. 8)
Input Tax Credit:
 Where the services are provided by the supplier to any person on the
direction and on account of a registered person, for the purpose of
entitlement of input tax credit it shall be deemed that the said registered
person has received services [Explanation to Sec. 16(2)(b) of SGST/CGST Act
amended w.e.f. 01.02.2019]
 Subject to conditions, Input tax credit in respect of invoices or invoice
relating to such debit notes for supplies made during 2017-18 can be
availed till the due date of furnishing return (GSTR-3B) for the month of
March, 2019 i.e. 23.04.2019 (as extended by Notification No. 09/2019–C.T./GST
dated 22.04.2019)
 Condition: Details of such invoices or debit notes are uploaded by the
supplier in GSTR-1 till the due date for furnishing GSTR-1 for the month of
March, 2019.
[Proviso added to section 16(4) by ROD Order No. 2/2018 dated 31.12.2018]
 ITC can be transferred on obtaining separate registration for multiple
places of business within the State w.e.f. 01.02.2019 [rule 41A inserted, dated
29.01.2019]
 Order of utilisation of ITC changed:
 Existing provision (from 01.07.17 to 31.01.19): For payment of State
tax/central tax, ITC of State tax/central tax has to be debited first, then ITC of
integrated tax can be debited
 New provision: ITC of State tax/central tax shall be utilised for
payment of integrated tax or State tax/central tax, only after the ITC of
integrated tax has first been utilized fully towards such payment. [New section
49A inserted w.e.f. 01.02.2019.
Important Changes in the IGST Act in relation to export of services and
place of supply made by IGST (Amendment) Act, 2018
❖ Export of services [sec. 2(6)(iv)]:
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 Original provision [01.07.17 to 31.01.19]: One of the condition to be
satisfied for export of services is that the payment has to be received in
convertible foreign currency
 Changed provision from 01.02.19: Now even if payment is received in
Indian rupees wherever permitted by the RBI, if other conditions are satisfied
such supply would be treated as export of services
 Place of supply:
 Original provision [01.07.17 to 31.01.19]: POS of services by way of
transportation of goods to a registered person, shall be the location of such person, and
that to an unregistered person, shall be the location at which such goods are handed over
for their transportation. [section 12(8) of the IGST Act]
 Changed provision from 01.02.2019: Where the transportation of goods is to a
place outside India, POS shall be the place of destination of such goods [proviso added to
section 12(8)]
 Original provision [01.07.17 to 31.01.19]: Subject to other conditions, POS of
services supplied in respect of goods temporarily imported into India for repairs is the
location of the recipient
 Changed provision from 01.02.2019: Now, POS of services supplied in respect
of goods temporarily imported into India for repairs or for any other process or
treatment also is the location of the recipient [Second proviso to section 13(3)(a)
substituted].
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Annexure 13: Due dates and extension of due dates of
submission of various returns (p.58)
Financial Year (2017-2018)
a. Return type – Form GSTR - 3B
Month
Due
date/Extended
due date
Submit
ted on
Days
of
delay
Late fee
payable
per day
Total
Late fee
payable
Remarks
July, 17 25.08.20171 Waived
(CGST Notification No,
28/2017-CT, dt.
01.09.2017)
July, 17 28.08.20172
Aug‘17 20.09.2017 Waived
(CGST Notification No,
50/2017-CT, dt.
24.10.2017)
Sep‘17 20.10.2017
Oct‘17 20.11.2017 @Rs. 25/day (Where
total amount of tax
payable in a return is nil,
Rs. 10/day) subject to
max of Rs. 5000/- under
each of the CGST/SGST
Act from the due date of
return, till the date on
which return is filed.
(CGST Notification No,
64/2017-CT, dt.
15.11.2017)
Nov‘17 20.12.2017
Dec‘17 22.01.2018
Jan‘18 20.02.2018
Feb‘18 20.03.2018
Mar‘18
20.04.2018
Total late fee payable
Total late fee paid
Late fee due
1. for all registered dealers other than those specified in 2 below. [06–C.T./GST dt.
21.08.17]
2. for registered dealers entitled to avail ITC and opting to file GST TRAN-1 (conditions
apply)
[05–C.T./GST dt. 17.08.17]
a.1 Conditional waiver of late fee for delayed furnishing of return in Form
GSTR-3B
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Tax period Late fee waived Condition
October,
2017 Waived in full
❖ Return in FORM GSTR-3B was
submitted but not filed on the common portal,
after generation of the application reference
number.
[CGST Notification No. 41/2018-CT, dt.
04.09.2018]
July, 2017 to
March, 2018 Waived in full
❖ If the said return is furnished between the
period from 22nd December, 2018 to 31st
March, 2019.
[ CGST Notification No. 76/2018-CT, both dt.
31.12.2018]
a.2 Conditional waiver of late fee for delayed furnishing of return in Form GSTR-3B
Tax period
Return in GSTR-3B
furnished between
01.07.2020
to 30.09.2020
Return in GSTR-3B furnished after
30.09.2020
July, 2017
to
March, 2018
❖ Maximum Rs.
250/- under each of the
CGST/SGST Act for
each return period.
❖ Nil where the total
amount of tax payable in
the return for a tax
period is nil.
❖ @ Rs. 25 / day subject to
maximum of Rs. 5000/- under each of the
CGST/SGST Act from the due date of
return, till the date on which return is filed
❖ Where total amount of tax payable in
a return is nil:
@ Rs. 10 / day subject to a maximum of
Rs. 5000/- under each of the CGST/SGST
Act from the due date of return, till the
date on which return is filed
[CGST notification no. 52/2020-CT, dt.
10.07.2020]
b. Return type – Form GSTR - 9
Period Due date Submit
on
Days of
delay
Late fee
payable per
day
Total Late
fee
payable
2017-18
07.02.2020
[01/2020-
C.T./GST, dt.
18.03.2020]
Rs. 100 per day
max. quarter per
cent. of turnover
in the state
Total late fee payable
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Total late fee paid
Late fee due
c. Form GSTR - 1
Period (Month
/ Quarter) Due date Submitted
on
Days
of
delay
Late fee
payable per
day
Total Late
fee
payable
Jul‘17 31.10.2018 @Rs. 25/day
(Where total
amount of tax
payable in a
return is nil,
Rs.10/day)
subject to max of
Rs. 5000/- under
each of the
CGST/SGST Act
from the due date
of return, till the
date on which
return is filed.
( CGST
Notification no.
04/2018-CT dt.
23.01.2018)
Aug‘17 31.10.2018
Sep‘17 31.10.2018
Oct‘17 31.10.2018
Nov‘17 31.10.2018
Dec‘17 31.10.2018
Jan‘18
31.10.2018
Feb‘18
31.10.2018
Mar‘18 31.10.2018
Total late fee payable
Total late fee paid
Late fee due
Amnesty: No late fee is payable for the registered persons who failed to furnish FORM
GSTR-1for the months/quarters from July, 2017 to September, 2018 by the due date but
furnishes FORM GSTR-1 between the period from 22nd December, 2018 to 31st
March 2019 [CGST Notification no. 75/2018, dt. 31.12.2018]
No late fee is payable for the registered persons who failed to furnish FORM GSTR-1for
the months/quarters from July, 2017 to November, 2019 by the due date but furnishes
FORM GSTR-1 between the period from 19th December, 2019 to 17th January, 2020
[CGST Notification no. 74/2019-CT dt. 26.12.2019 read with CGST Notification no.
04/2020, dt. 17.01.2020]
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Financial Year (2018-2019)
a. Return type – Form GSTR - 3B
Month Due date /
Extended due
date
Submit
on
Days
of
delay
Late fee payable
per day
Total Late
fee payable
Apr‘18 22.05.2018
@Rs. 25/day
(Where total
amount of tax
payable in a return
is nil, Rs.10/day)
subject to max of
Rs. 5000/- under
each of the
CGST/SGST Act
from the due date
of return, till the
date on which
return is filed.
(CGST Notification
no. 64/2017-CT,
both dt. 15.11.2017)
May‘18 20.06.2018
Jun‘18 20.07.2018
Jul‘18 24.08.2018
Aug‘18 20.09.2018
Sep‘18 25.10.2018
Oct‘18 20.11.2018
Nov‘18 20.12.2018
Dec‘18 20.01.2019
Jan‘19 22.02.2019
Feb‘19 20.03.2019
Mar‘19 23.04.2019
Total late fee payable
Total late fee paid
Late fee due
a.1 Conditional waiver of late fee for delayed furnishing of return in Form GSTR3B
Tax period Late fee waived Condition
April, 2018 to
Sept, 2018
Waived in full ❖ If the said return is furnished between the
period from 22nd December, 2018 to 31st
March, 2019. [CGST Notification no. 76/2018-
CT, dt. 31.12.2018]
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a.2 Conditional waiver of late fee for delayed furnishing of return in Form GSTR3B
Tax period
Return in GSTR-3B
furnished between
01.07.2020
to 30.09.2020
Return in GSTR-3B furnished after
30.09.2020
April, 2018
to
March, 2019
❖ Maximum Rs.
250/- under each of the
CGST/SGST Act for
each return period.
❖ Nil where the total
amount of tax payable in
the return for a tax
period is nil.
[ CGST notification no.
52/2020-CT, dt.
10.07.2020]
❖ @ Rs. 25 / day subject to maximum
of Rs. 5000/- under each of the
CGST/SGST Act from the due date of
return, till the date on which return is filed
❖ Where total amount of tax payable in
a return is nil:
@ Rs. 10 / day subject to a maximum of
Rs. 5000/- under each of the CGST/SGST
Act from the due date of return, till the date
on which return is filed
b. Return type – Form GSTR 9
Period Due date Submit
on
Days
of
delay
Late fee payable per
day
Total Late
fee
payable
2018-19
31.12.2020
[12/2020-
C.T./GST, dt.
04.11.2020]
Rs. 100 per day
max. quarter per cent.
of turnover in the state
Total late fee payable
Total late fee paid
Late fee due
c. Form GSTR - 1
Period (Monthly/
Quarterly Due date Submitted
on
Days
of
delay
Late fee payable
per day
Total Late
fee
payable
Apr‘18 31.10.2018
@Rs.25/day
(Where total
amount of tax
payable in a return
May‘18 31.10.2018
Jun‘18 31.10.2018
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Jul‘18 31.10.2018 is nil, Rs.10/day)
subject to max of
Rs. 5000/- under
each of the
CGST/SGST Act
from the due date
of return, till the
date on which
return is filed.
(CGST Notification
no. 04/2018-CT, dt.
23.01.2018)
Aug‘18 31.10.2018
Sep‘18 31.10.2018
Oct‘18 11.11.2018
Nov‘18 11.12.2018
Dec‘18 11.01.2019
Jan‘19 11.02.2019
Feb‘19 11.03.2019
Mar‘19 11.04.2019
Apr-Jun 2018 31.10.2018
Jul-Sept 2018 31.10.2018
Oct-Dec 2018 31.01.2019
Jan-Mar 2019 30.04.2019
Total late fee payable
Total late fee paid
Late fee due
Amnesty:
No late fee is payable for the registered persons who failed to furnish FORM GSTR-1 for
the months/ quarters from July, 2017 to September, 2018 by the due date but furnishes
FORM GSTR-1 between the period from 22nd December, 2018 to 31st March 2019
[CGST Notification no. 75/2018, dt. 31.12.2018]
No late fee is payable for the registered persons who failed to furnish FORM GSTR-1 for
the months/ quarters from July, 2017 to November, 2019 by the due date but furnishes
FORM GSTR-1 between the period from 19th December, 2019 to 17th January, 2020
[CGST Notification no. 74/2019-CT dt. 26.12.2019 read with CGST Notification no.
04/2020, dt. 17.01.2020]
Financial Year (2019-2020)
a. Return type – GSTR 3B
Due date
Due date
(Aggr.
T.O. up to
Rs. 5
Crore)
Submi
t on
Days
of
delay
Late fee
payable per
day
Total Late
fee
payable
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Apr‟19 20.05.2019
@Rs. 25/day
(Where total
amount of tax
payable in a
return is nil,
Rs.10/day)
subject to max
of Rs. 5000/-
under each of
the
CGST/SGST
Act from the
due date of
return, till the
date on which
return is filed.
(CGST
Notification no.
64/2017-CT, dt.
15.11.2017)
May‘19 20.06.2019
Jun‘19 20.07.2019
Jul‘19 22.08.2019
Aug‘19 20.09.2019
Sep‘19 20.10.2019
Oct‘19 20.11.2019
Nov‘19 23.12.2019
Dec‘19 20.01.2020
Jan‘20 22.02.2020 24.02.202
0
Feb‘20 20.03.2020 24.03.202
0
Mar‘20 20.04.2020 24.04.202
0
Total late fee payable
Total late fee paid
Late fee due
a-1 Conditional waiver of late fee for delayed furnishing of return in Form GSTR3B
Tax period
Return in GSTR-3B
furnished between
01.07.2020
to 30.09.2020
Return in GSTR-3B furnished after
30.09.2020
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April, 2019
to
March, 2020
❖ Maximum Rs.
250/- under each of the
CGST/SGST Act for
each return period.
❖ Nil where the
total amount of tax
payable in the return
for a tax period is nil.
[CGST notification no.
52/2020-CT, dt.
10.07.2020]
❖ @ Rs. 25 / day subject to maximum
of Rs. 5000/- under each of the
CGST/SGST Act from the due date of
return, till the date on which return is filed
❖ Where total amount of tax payable in
a return is nil:
@ Rs. 10 / day subject to a maximum of
Rs. 5000/- under each of the CGST/SGST
Act from the due date of return, till the date
on which return is filed
b. Return type – Form GSTR - 9
Period Due date Submit
on
Days of
delay
Late fee payable per
day
Total
Late fee
payable
2019-20 31.12.2020
Rs. 100 per day
max. quarter per cent.
of turnover in the state
Total late fee payable
Total late fee paid
Late fee due
c. Form GSTR - 1
Period (Month
/ Quarter) Due date Submit
on
Days of
delay
Late fee payable
per day
Total
Late fee
payable
Apr‘19 11.05.2019 @Rs. 25/day
(Where total
amount of tax
payable in a
return is nil,
Rs.10/day)
subject to max of
Rs. 5000/- under
each of the
CGST/SGST Act
from the due date
May‘19 11.06.2019
Jun‘19 11.07.2019
Jul‘19 11.08.2019
Aug‘19 11.09.2019
Sep‘19 11.10.2019
Oct‘19 11.11.2019
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Nov‘19 11.12.2019 of return, till the
date on which
return is filed.
(CGST Notification
no. 04/2018-CT, dt.
23.01.2018)
Dec‘19 11.01.2020
Jan‘20 11.02.2020
Feb‘20 11.03.2020
Mar‘20 11.04.2020
Apr-Jun 2019 31.07.2019
Jul-Sept 2019 31.10.2019
Oct-Dec 2019 31.01.2020
Jan-Mar 2020 30.04.2020
Total late fee payable
Total late fee paid
Late fee due
Amnesty:
1. No late fee is payable for the registered persons who failed to furnish FORM
GSTR-1 for the months/ quarters from July, 2017 to September, 2018 by the due date
but furnishes FORM GSTR-1 between the period from 22nd December, 2018 to 31st
March 2019[CGST Notification no. 75/2018, dt. 31.12.2018]
2. No late fee is payable for the registered persons who failed to furnish FORM
GSTR-1 for the months/ quarters from July, 2017 to November, 2019 by the due date but
furnishes FORM GSTR-1 between the period from 19th Dec, 2019 to 17th January,
2020 [CGST Notification no. 74/2019-CT dt. 26.12.2019 read with CGST Notification no.
04/2020, dt. 17.01.2020]
3. No late fee is payable for the registered persons who failed to furnish FORM
GSTR-1 for the month March, 2020 and for the quarter Jan-Mar 2020 by the due date but
furnishes FORM GSTR-1 on/before 10.07.2020 and 17.07.2020 respectively. [CGST
Notification no. 53/2020-CT dt. 10.07.2020 read with CGST Notification no. 04/2020, dt.
17.01.2020]
4. The months of Return filing as shown in the Tables below are based on
all months of any FY. However, the audit officer should consider the months
applicable for the period under audit.
a. Return type – GSTR 3B
Period
(Month /
Quarter)
Due date Submitted on Days of
delay
Late fee
payable
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Apr
May
Notes: System generally automatically
calculates late fee during submission of return.
However, for the return periods of different FYs
various extensions of due dates and conditional
extensions of due date were allowed.
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Total late fee payable
Total late fee paid
Late fee due
b. Statement in GSTR 1
Period
(Month /
Quarter)
Due date Submitted on Days of
delay
Late fee
payable
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Total late fee payable
Total late fee paid
Late fee due
c. Return type – GSTR 9 / 9A
Period Due date Submitted on Days of
delay
Late fee
payable
FY…..
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Total late fee payable
Total late fee paid
Late fee due
Part D [Correctness of turnover in State (monthly statement)]
Turnover
disclosed in
GSTR 3B
(Rs.)
Turnover
disclosed in
GSTR 1
(Rs.)
Turnover disclosed
in
GSTR 9 / 9A
(Rs.)
Turnover as
in P/L account
(Rs.)
Differenc
e
(Rs.)
Reconciliation statement with supporting documents needs to be examined.
Any other supply which is not disclosed in any of the above
fields but disclosed at the time of audit.
Additional information from the books / other sources to examine correctness of the
turnover disclosed finally at the time of audit (monthly statement):
Areas of concern
Exam
inatio
n
Value of
supply
Discl
osed
in
retur
n
(Y/N)
Additional tax liability
(if any)
I
n
t
r
a
-
S
t
a
t
e
(
S
)
Int
erSta
te
(I)
wit
h
PO
S
(St
ate
Co
de)
*
St
at
e
ta
x
C
en
tr
al
ta
x
In
te
gr
at
ed
ta
x
Ces
s
Other/Misc. income
Whether in the pre-GST or in the GST regime, ―Other Income‖ ledger has always
been an important ledger to examine. It is important to go through every transaction
reflected in this ledger to confirm as to whether GST is applicable on any transaction
for which tax compliance has not been made. For example, penal interest, penalty /
damages recovered etc.
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Stock transfer to other State(s)/UT
(s)
Stock transfer to distinct persons in the State and other States never form part of turnover in
P/L account in consolidated books of accounts. In the erstwhile VAT regime, stock transfer to
branches and consignment agents in other States were nil rated subject to production of
declarations in Form F under the CST Act, 1956. In GST, stock transfers to distinct persons
are taxable. Therefore, it is very important to check the stock transfer value (both inwards and
outwards) to ascertain the compliance. There is a specific rule for valuation in this regard. If
any auditee takes the benefit of the 2nd proviso of Rule 28 then the audit officer should check
whether such has been taken properly or not.
An example is given below for proper understanding of the Audit Officers:
e.g: A banking company purchased 4 cars and dispatched those to 4 branches in 4 States (1
car / branch) by raising tax invoice where value of each car is shown at a nominal price of
Rs.10,000/-. On being asked, the auditee bank may reply that valuation has been done as per
rule 28 of CGST Act, 2017. Is it a correct valuation done by the bank?
As per the 2nd proviso of rule 28, the value declared in the invoice shall be deemed to be the
open market value where the recipient is eligible for full input tax credit. In the instant case,
the recipient is not eligible to avail of ITC and therefore, the value declared cannot be
accepted as open market value.
Sale of assets
Sale of assets is always taxable in GST.
Moreover, permanent transfer or disposal of
business assets on which input tax credit has
been availed is also considered as supply even
if no consideration is received (Sch. I of Sec
7).
Donation of business assets or scrapping or
disposal in any other manner (other than as a
sale – i.e., for a consideration) would also
qualify as ‗supply‘, where input tax credit has
been claimed.
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Goods sent on approval basis Goods Sent on approval basis before 1st July,
2017(but not more than six months earlier from
1.7.2017) if returned within 6 months (2 months
more in case of sufficient cause) from GST
implementation, then no tax is payable by the
person returning the goods. If it is returned after the
time limit, then GST is payable by the person who
returned the goods [sec 142 (12)]. If the goods are
not returned within above time limit, the person who
sent the goods is liable to pay GST.
In GST regime: The invoice with respect of goods
sent on approval basis has to be issued at the
earliest of – (i) Before or at the time of supply, (ii) 6
months from the date of removal of goods from
factory / godown etc. If the goods are not approved
within 6 months, it will be deemed that sale of the
said goods has taken place by the person who has
sent the goods for approval. [S. 31(7) read with S.
12(2)]
Goods sent to job workers
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Inputs sent for job work are not received back
by the principal after completion of job work or
otherwise not received within 01 year of their being
sent out, it shall be deemed that such inputs had
been supplied by the principal to the job worker on
the day when the said inputs were sent out [sec
143(3)]. In such cases liability to pay interest
will also arise
Capital goods, other than moulds and dies, jigs
and fixtures, or tools, sent for jobwork are not
received back by the principal after completion of
job work or otherwise not received within 03 years
of their being sent out, it shall be deemed that such
capital goods had been supplied by the principal to
the job worker on the day when the said capital
goods were sent out [sec 143(4)]. In such cases
liability to pay interest will also arise
Any waste and scrap generated during the job
work may be supplied by the job worker directly
from his place of business on payment of tax, if
such job worker is registered, or by the principal, if
the job worker is not registered [sec 143(5)].
Disposal of assets without any
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consideration [Entry 1 of Sch – I].
Supply of goods or services to
related person or to distinct person
even without consideration) [Entry 2
of Sch – I]
Note: When the related persons are
employee
and employer then the next row is
applicable.
There is no doubt that disposal of business assets
against consideration is a supply. But, if ITC on any
business asset is taken then disposal of such
business assets even made without consideration
is also to be treated as supply.
Suppose XYZ Ltd., is in the business of Hotel. He
purchased AC for business purposes and availed
ITC and a car for which no ITC has been claimed.
After 2 years, he permanently transfers the AC to
one director and the car to another director without
any consideration. Though there is no consideration
in case of transfer of AC machine still it shall be a
supply as per schedule I and supplier has to pay an
amount determined according to sec 18(6). In the
case of permanent transfer of the car, it will not be
treated as supply since no ITC has been claimed
on the same.
Supply of goods or services to
related person or to distinct person
(even without consideration) [Entry 2
of Sch – I] When the related persons
are employee
and employer.
Distinct person is defined in Sec 25(4) and related
person is defined in Explanation to sec 15.
This issue needs careful examination because in
most of the cases there may not be any reflection of
transactions with related or distinct persons in P/L
account or in any ledger. In the case of goods
there may be an audit trail of transactions among
the distinct or related person without any
consideration. But in the case of services, such
trails may not be found in the books of accounts.
The auditor needs to study the particular business
pattern of the auditee and should try to find out
probable areas. Valuation of such supply needs
examination.
Expenses accounts to ascertain if
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there are any expenses for free gift
or facility (free holiday package, etc.)
to any employee for value exceeding
Rs. 50,000/- in a year.
This is another important area where the auditee
may fail to comply with the provisions [entry no.2 of
Sch I of sec 7]. Most of such supplies may be found
in different expense ledgers like misc. expenses /
other expenses, wages-salary-allowances, benefits
to the employees, directors‘ remunerations, etc.
Commission agent of goods (both the
commission and the supply value of
goods on behalf of the principal will
form part of supply value) [Entry 3 of
Sch – I].
As per the provisions of the GST Laws, in the case
of supply through agent both the principal and the
agent are liable to pay tax. So, the value of supply
of goods made or received through an agent as
prescribed in Rule – 29 needs proper examination.
Income from land and building
Many transactions are linked with Land; e.g. sale of
land and building subject to entry no.5 of sch. III,
rent, lease, easement, licence to occupy land,
development, transfer of tenancy right, transfer of
development right, and building apart from sale of
under construction real estate property etc.
Agreeing to the obligation –
i. to refrain from an act
ii. to tolerate an act or a situation
iii. to do an act
Section 7(1A) of the CGST/SGST Act, 2017,
includes activities referred to in Schedule II in the
scope of supply. Clause 5(e) to Schedule II
provides that ‗agreeing to the obligation to refrain
from an act, or to tolerate an act or a situation, or to
do an act‘ shall be treated as supply of service.
Any other areas of concern
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The above Tables may not be exhaustive for an
audit officer in respect of particular auditee and
there may be other areas of concern. The audit
officer should mention his detection in this
table. These would include adjustments on
account of unbilled revenue (at the beginning
and at the end of the year) and adjustments on
account of advances received in respect of
services
Total undisclosed supply value
Tax involvement on undisclosed supply
*Refer to next table for list of State Codes
LIST OF STATE CODES: For noting Places of supply
STATE/UNION
TERRITORY CODE STATE/UNION TERRITORY CODE
Jammu and Kashmir 1 Jharkhand 20
Himachal Pradesh 2 Odisha 21
Punjab 3 Chhattisgarh 22
Chandigarh 4 Madhya Pradesh 23
Uttarakhand 5 Gujarat 24
Haryana 6 Daman and Diu 25
Delhi 7 Dadra and Nagar Haveli 26
Rajasthan 8 Maharashtra 27
Uttar Pradesh 9 Andhra Pradesh(before division) 28
Bihar 10 Karnataka 29
Sikkim 11 Goa 30
Arunachal Pradesh 12 Lakshadweep 31
Nagaland 13 Kerala 32
Manipur 14 Tamil Nadu 33
Mizoram 15 Puducherry 34
Tripura 16 Andaman and Nicobar Islands 35
Meghalaya 17 Telangana 36
Assam 18 Andhra Pradesh (new) 37
West Bengal 19 Ladakh 38
Part E (Correctness of purchase / procurement for which tax is payable
u/s 9(3) & 9(4) of the SGST/CGST Act and u/s 5(3) & 5(4) of the IGST
Act)
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As disclosed in
GSTR 3B
(Rs.)
As disclosed in
GSTR 9/9A
(Rs.)
As disclosed in
P/L
(Rs.)
Difference
(Rs.)
Reconciliation statement with supporting documents needs to be examined.
Any other supply which is not disclosed in any of the above
fields but disclosed at the time of audit.
Additional information from the books / other sources to examine correctness of the
finally disclosed liability to pay tax u/s 9(3) & 9(4) of the SGST/CGST Act and u/s 5(3)
and 5(4) of the IGST Act (month wise statement):
Relevant
section Areas of concern
E
x
a
m
in
at
io
n
Taxable value
(Rs.)
Discl
osed
in
retur
n
(Y/N)
Additional tax
liability (if any)
Intra
-
Stat
e (S)
InterState
(I) with
POS
(State
Code)
St
at
e
ta
x
C
e
nt
ra
l
ta
x
I
n
t
e
g
r
a
t
e
d
t
a
x
C
e
s
s
9(3) of SGST
/ CGST Act
Goods under Notification
no.4/2017 (R) dt.28.6.2017.
5(3) of IGST
Act
Goods under Notification
no. 4/17-IT(R) dt.28.6.17.
Normally a supplier collects tax from
the buyer and deposits the same
after adjustment of the output tax
liability with the input tax credit
available. Liability to pay tax shifts
from supplier to recipient under
reverse charge mechanism (RCM),
Apart from this, in the case of import
of goods and/or services also, the
recipient is liable to pay tax except in
some specific cases like OIDAR
services from outside the territory of
India to non-taxable person in India.
9(3) of SGST
/ CGST Act
Services under Notification
no.13/17 (R) dt.28.6.17
5(3) of IGST
Act
Services under Notification
no.10/17-IT(R) dt.28.6.17.
7(1)(c) of
SGST /
CGST Act
and sec 20
of IGST Act
[Entry 4 of
sch – I]
Import of services (with or
without consideration) from
related person in the
course or furtherance of
business.
7(1)(b) of
SGST/ CGST
Act
Import of services for a
consideration.
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Proviso of
Sec 5(1) of
IGST Act
Import of goods
9(4) of SGST
/ CGST Act
Intra-state procurement of
goods and services from
unregistered person where
daily amount of such
purchase is more than
Rs.5000/- [applicable for
01.07.17 to 12.10.17]
5(4) of IGST
Act
Inter-state procurement of
goods and services from
unregistered person where
such purchase is more than
Rs.5000/- per day
[applicable for 01.07.17 to
12.10.17].
Residual Any other areas of concern
Total undisclosed supply value
Tax involvement on undisclosed supply
*Refer to previous page for list of State Codes
Part F (Correctness of claim of Input Tax Credit)
Details of ITC
[month-wise]
Integrated
Tax
Central
Tax
State
Tax Cess
A
s
p
er
3
B
As
per
au
dit
A
s
p
er
3
B
A
s
p
er
a
u
di
t
A
s
p
er
3
B
A
s
p
er
a
u
di
t
A
s
p
er
3
B
A
s
p
er
a
u
di
t
(1) (2) (3) (4) (5) (6) (7) (8) (9)
a. Import of goods
b. Import of Services
c. Inward supplies liable to Reverse Charge
(except a, b above)
In GST, ITC can be availed by
every registered taxable person
d. on all inputs, input services and Inward supplies from ISD
e. All other ITC including ITC on TRAN
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A. ITC available (a+b+c+d+e) capital goods used or intended to
be used in the course of or for the
furtherance of business with a few
exceptions.
However, there are conditions to
avail such ITC. The situation
becomes more complex when
there is common credit used in
business and non- business, or
used in taxable supply and
exempt supply.
f. ITC required to be reversed as per Rule 42 &
43
g. Other ITC required to be reversed
B. ITC required to be Reversed (f+g)
C. Net ITC Available [A-B]
h. Ineligible ITC as per Sec. 17(5)
i. Other ineligible ITC
D. Ineligible ITC
E. Net eligible ITC[C-D]
Part G (Payment of Tax)
Month Type Apr Ma
y
Ju
n
July Aug Sep Oct Nov Dec Jan Feb Mar Total
Tax paid
upon
setting
off ITC
IGST
CGST
SGST
Cess
Tax paid
in cash
IGST
CGST
SGST
Cess
Total tax
paid as
per
GSTR3B
IGST
CGST
SGST
Cess
Total
Month
Tax paid as per GSTR-3B or
otherwise* Tax payable as per Audit Balance Tax payable
CGS
T
SGS
T
IGST Cess CGS
T
SGST IGST Cess CGST SGST IGST Cess
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Total
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*payment made by any other instrument like DRC-03, payment against DRC-07 etc.
Part H (Correctness of Payment of Interest)
1. Interest payable due to late payment of tax
Particulars Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Total
Amount of tax paid
Due Date of payment
Date of payment
Default period (days)
Rate of Interest
Interest payable
2. Interest payable due to non/short payment of tax
Particulars Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Total
Amount of non/ short
payment of tax
Due Date of payment
Date of FAR
Default period (days
upto the date of
FAR)*
Rate of Interest
Interest payable
*The actual interest payable shall be calculated till the date on which such interest is actually paid.
3. Interest payable due to excess ITC availed
Particulars Apr May Ju
n
Ju
l
Au
g
Sep Oct Nov Dec Ja
n
Feb Mar Total
Amount of excess ITC
availed
Date of claim
Date of FAR
Default period (days
upto the date of FAR)*
Rate of Interest
Interest payable
*The actual interest payable shall be calculated till the date on which such interest is actually paid.
4. Interest payable due to excess amount Refunded
Particulars Apr May Ju
n
Ju
l
Au
g
Sep Oct Nov Dec Ja
n
Feb Mar Total
Amount of excess
refund
Date of receipt of
refund
Date of FAR
Default period (days
upto the date of FAR)*
Rate of Interest
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Interest payable
*The actual interest payable shall be calculated till the date on which such interest is actually paid.
Particulars Amount (Rs.)
Total Interest payable (as observed upon audit)
[Sum of Interests payable under Tables 1 to 4 above]
(-) Interest paid [as disclosed in GSTR-3B]
(-) Interest paid [as voluntarily through DRC-03 or through GSTR-9 or in the course of
audit, other than any payment made in compliance of Sec. 73 or 74]
Interest Due
*
The actual interest due shall be calculated till the date on which such interest is actually
paid.
Part I (Correctness of Any other amount due)
Particulars Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Total
Any other amount due
Due date of payment
of such amount
Date of FAR
Default period (days
upto the date of FAR)*
Rate of Interest
Interest payable
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Annexure 14: Ratio Analysis & Trend Analysis (p.53)
The relative values of one
data field when compared with
another could help to detect
potential errors or areas of noncompliance. It also helps to detect
wrong Input Tax Credit availed,
wrong valuation, claiming of input
tax credit on inputs used in
exempted goods / services,
availment of ITC without
receipt/actual use of input, etc.
EXHIBIT 50
Example 1
Audit Officer finds that the RTP (auditee) has a tax liability of Rs. 72 lakh
out of which Rs. 70 lakh has been paid upon setting off ITC from his credit
ledger and only Rs. 2 lakh has been paid in cash.
In this case, the Officer should apply the ratio of [ITC availed : Total tax
paid through Electronic cash ledger + tax paid through Electronic credit
ledger].
In this case,
The result is 70/(2+70) = 70/72 = 0.972, i.e. 97.2%.
The result on such higher side may be of various reasons including
accumulation of high stock resulting in accumulation of ITC.
But, if the RTP is a reseller without having significant warehouses, or if the
goods dealt in are perishable in nature, the issue of stock holding will not
stand good.
This should ring a bell in the audit officer‘s head that there may be a case
of:
 wrong availment of input tax credit on goods/services in excess
including claiming of input tax credit on inputs used in exempted products.
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 under valuation of goods as value-addition should involve adequate
difference between the two.
 or suppression of sales.
Example 2
The auditee deals with both exempted goods and taxable goods. Total
supply in the audit period is of Rs. 10 crore out of which exempted supplies
amount to Rs. 6.5 crore.
In this case, the Audit Officer should apply the ratio of [Value of exempted
outward supply: value of total outward supplies made]. This ratio helps to
identify:
 outward supplies made in the guise of exempted supplies.
 supply of essential parts of outward supply as exempted supplies.
 under valuation of outward supplies by overvaluing exempted
outward supply
As in this case, the ratio comes out as 0.65 or 65%.
If the audit officer is satisfied that the figures pertain to actual supply of
exempted goods, it should be thoroughly examined whether the supplier
has availed any ITC on inputs related to such exempted supplies. In such
case, including cases of availing common credit, proportionate ITC is to be
reversed.
Example 3
Ratio analysis for over a continuous period, say 3 years gives a holistic
picture of the trend of the RTP. Taking an example, if the ratio of [Amount
of input tax credit availed on inward supply : Total tax liability on outward
supply] is studied over a period of 3-4 years, and if the ratio is increasing
there is the possibility of the following irregularities:-
 Rendering of unaccounted outward supply;
 Under valuation of outward supply;
 Showing outward supply income as non-taxable outward supply
income.
 Inflation of inward supply credit.
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Some of the indicative ratio analysis and trend analysis as follows
may be carried out by the audit officer
RATIO ANALYSIS
I.BASED ON RETURN DATA
Sl. RATIO 2017-18 2018-19 2019-20
i) Inward supply value : outward supply value
ii) EWB value of inward supply : EWB value of outward
supply
iii) Non-GST Turnover : Total Turnover
iv) Exempted Supply value: Total Turnover
v) Value of Goods Sent for Job Work : Total Turnover
vi) ITC on inward supply : Total inward supply
vii) Total ITC available : Total GST payable
viii) ITC availed on capital goods purchased during the
years : addition to capital goods
ix) ITC availed on Capital Goods : Total ITC availed
x) Transitional ITC availed : ITC availed in the year
xi) Tax payable: Total turnover
xii) Total Ineligible & Reversed ITC : Total ITC Availed
xiii) Tax payment by ITC : Total Tax paid
xiv) Tax paid in cash : Tax paid on setting off ITC
II. BASED ON FINAL ACCOUNTS DATA
Sl. RATIO 2017-18 2018-19 2019-20
i) Inward supply value : outward supply value
ii) Other income : outward supplies
iii) Gross profit : Gross revenue
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iv) Power consumption/fuel consumption (Qty) : production
quantity as per P&L Account
v) Production of Goods : Scrap
Scrap: Production of goods
vi) Quantity of Actual production : installed capacity
vii) Cost of Major input: Value of outward supplies
viii) Consumables value: Value of taxable supplies.
ix) Net profit : Value of outward supplies
x) Capital employed : Value of outward supplies
TREND ANALYSIS
I.GENERAL TRENDS
Sl. PARTICULARS 2017-18 2018-19 2019-20
a) Total Turnover
b) Total Zero Rated (Exports) Supply,
c) Supply to SEZ
d) Deemed Export
e) Total Exempted Supply
f) Total NIL rated Supply
g) Total Non-GST Supply
h) Total Taxable Outward Supply
i) Total Inward Supply subject to Reverse Charge
j) Total Tax payable on Outward Supplies
k) Additional Tax paid by DRC-03 (Annual Return)
l) GST of a particular goods/service vis-a-vis overall growth
of that industry. (%)
m) Trend in proportion of value of exempted goods/services
to the total value of goods/services. (%)
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n) Gross operating profit
o) GST paid by debit in Electronic Cash ledger vis-à-vis
GST paid by debit in Electronic Credit Ledger
p) GST paid by debit in Electronic Credit ledger vis-à-vis
Total GST paid
q) Value of outward supplies made to related person vis-avis total value of supplies. (%)
r) Inter unit transfers /sales to related party as per Balance
Sheet
s) Total refund claimed
t) Total refund sanctioned
u) Demand raised (if any)
v) Value of EWB outward
w) Value of EWB inward
II.ANALYSIS FOR MANUFACTURER OF GOODS
Sl. PARTICULARS 2017-18 2018-19 2019-20
a) Cost of production of major finished Goods (as per cost
record)
b) Quantity of inputs consumed in the production of
Finished Goods
c) Value of inputs consumed in the production of Finished
Goods
d) Production of finished goods compared to outward
supplies
e) Production of scrap compared to Production of finished
goods
f) Production of taxable outward supplies vis-a-vis
exempted supplies
g) Movement of inward supplies vis-a-vis total production
h) Movement of inward supplies for goods manufactured on
job-work vis-a-vis total production
III.ANALYSIS FOR MANUFACTURER AS WELL AS RESELLER OF GOODS
Sl. PARTICULARS 2017-18 2018-19 2019-20
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a) Difference in ITC taken & ITC available on purchase of
raw materials
b) Job work income as per P&L Account or Trial balance
c) Movement of inward supplies vis-a-vis total outward
supply
IV. ANALYSIS FOR SUPPLIER OF SERVICES
Sl. PARTICULARS 2017-18 2018-19 2019-20
a) Difference in ITC taken & ITC available on input
services
b) Cost of procurement of major services provided (as per
books)
V.ITC TREND ANALYSIS
Particulars 2017-18 2018-19 2019-20
Opening balance
Total ITC availed on Inputs
Total ITC availed on Input Services
Total ITC availed on Capital Goods
Total ITC received from ISD
TRAN credit claimed
Total ITC eligible & availed
Ineligible ITC, Not availed
Credit utilized for payment of tax (Debit entries in e-credit
ledger)
ITC reversed
Closing balance
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VI.TURNOVER TREND ANALYSIS
Year
Turnover as per
P&L A/c or Trial
Balance
Other
Income
Value of
Taxable
Supplies
Total
GST paid
GST paid
in cash
GST paid
by setting of
ITC
2017-18
2018-19
2019-20
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Annexure 15: Study of Profit and Loss Account and Balance
sheet (p.51)
Financial Statement, Accounts and GST
i. Every business organization draws up financial statements in respect of
any financial year comprising (a) the Balance Sheet as on the last day of the
financial year {summarising the value of "owings" (what it owns) and "owings"
(what it owes) or the value of assets, liabilities and capital} of the entity as on
the said last date, (b) the Profit and Loss Account or the Income Statement
{summarising the revenue receipts during the year from its business operations
(does not include receipts of a capital nature) and the expenses incurred for
earning the said revenue during the year}.
ii. The aforesaid financial statements are generally referred to as the final
accounts of the entity and are prepared for every distinct legal entity (as
opposed to a "distinct person" in terms of Section 25). Thus, branch offices of a
company/entity having business operations in more than one State will have
consolidated financial statements in respect of all its transactions across the
country, unless the different State "Units" ("distinct person" in terms of Section
25) are independent profit centres recognized as such by the company itself.
Thus, in cases where the different State Units are not recognized as
independent profit centres, the returns filed by the entity in a particular State
cannot be mapped on to the financial statements on a one-to-one basis. In such
cases (and even otherwise) every unit prepares a trial balance as at the end of
the year (which also forms the basis for preparation of financial statement); the
trial balance comprises balances/totals in respect of each item of revenue,
expenditure, capital receipts, capital expenditure, assets/properties and
liabilities/obligations. Thus, wherever the audited final accounts, i.e. profit and
loss account and balance sheet are not available, the reconciliation of the return
with books of accounts should be carried out vis-a-vis the trial balance. It may
be noted that the trial balance may not be readily available in respect of
individual units of a multi-location entity (viz. some Pan-India entities with
centralised control on debtors, creditors and payments) operating on a
SAP/ERP platform where the vendors, customers or the bank accounts are
operated centrally. In such cases the trial balance has to be extracted with
some effort.
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iii. Different kinds of businesses entities like companies, banking companies,
insurance companies, public utility (e.g. electricity generation/transmission/
distribution) companies, etc. are governed by different statutes which have
generally prescribed formats for the preparation of final accounts and also the
information to be contained in such accounts. By and large, the formats and
content prescribed under the Companies Act vis-a-vis final accounts for
companies is a standard document in the accounting world and all relatively
large undertakings, whether or not companies, adopt the same.
iv. Schedule III to the Companies Act, 2013 prescribes the norms, content
and format of the balance sheet and the profit and loss account of a limited
company. The Schedule also contains instructions for preparation of the
financial statements.
v. An important component of the financial statements is the Notes to
accounts which contain detailed information and break-up regarding different
items of the information and contents of the Balance Sheet and the Profit and
Loss Statement.
vi. The most important of which, for our purposes, is the Statement of Profit
and Loss (Part-II of the said Schedule III). This statement comprises information
regarding "Total Revenue" which has two significant and separate components
viz. "Revenue from Operations" and "Other Income". This statement also has
information regarding "Cost of materials consumed", "Purchases of Stock-inTrade", "Changes" in inventory levels, "Employee" costs, "Finance costs",
"Depreciation" and "Other" expenses. On the basis of this information, the
operating profit is derived and disclosed; it is from this profit that adjustments
towards prior periods and exceptional items, tax, effect of discontinuing
operations are made and the net resultant earnings are derived.
vii. The general instructions for preparing this Statement (as contained in this
Part) specify that companies (other than finance companies i.e. those generally
engaged in financing operations of other business entities or
extending/accepting loans/deposits) are required to separately disclose in the
Notes to the Accounts, revenue from sale of goods/products, sale/supply of
services and other operating revenues and the said Notes are to also
separately disclose Excise Duty (now GST). In respect of finance companies,
the revenue from operations shall include revenue from Interest and Other
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financial services. In case of supply of services, supplies under broad heads are
to be separately disclosed.
viii. Each such category of supply would refer to an "outward" supply in terms
of GST and the values of such supplies as appearing in the financial
statement/trial balance should be traced to the respective ledger accounts in the
books of accounts. The business operations of an entity may comprise different
kinds of goods/services and transactions involving them may be recorded
differently in the books by different entities. For instance, an entity engaged in
supply of readymade garments may have separate ledger accounts for supply
of hosiery, shirts/trousers, kids clothing, woollen garments and accessories.
These items may attract different rates of tax, depending on their classification.
In such a case, the validation of outward supplies declared in the return may
ideally begin with seeking a break-up of the aggregate value of each category of
outward supply declared in the said returns into its various items/sub-items i.e.
hosiery, shirts/trousers, kids clothing, woollen garments and accessories. The
value of each such item/sub-item (separately recorded by the auditor in a
document forming part of his working papers) may be validated by the auditor
through the profit and loss statement/trial balance. The scheme of validation to
be adopted by the auditor has to depend on (and, ideally, follow) the scheme of
classification of his activities/transactions and the level of detail adopted by the
supplier in the ordinary course of his business.
ix. The details regarding "Other Income" in the Profit and Loss Statement are
to be classified in the Notes as "Interest income" (in case of other than finance
companies), "Dividend", net gain/loss on sale of investments (i.e. shares,
debentures, bonds, etc.), and other non-operating income. It is this component
of "Other Income" which is of particular significance in verifying whether all
'other supplies' (transactions that are incidental or connected, whether related
or unrelated, to the primary operations of the entity) have been disclosed
properly in the GST returns or not. Hence, the details of this component should
be carefully examined by the auditor and every item should be co-related to the
corresponding entry in the trial balance and from there be verified from the
appropriate ledger accounts in the books of accounts maintained by the entity.
x. In the process of seeking a break-up of the aggregate value of each
category of outward supply as referred to in Para above, the auditor may
encounter categories of such supplies which are not in the nature of the primary
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activities of the business entity. For instance, the said entity engaged in the
supply of readymade garments may have, during the said period, sold
off/disposed empty cartons in which it may have received the items that it sells.
It may also have sold off/disposed old furniture or old air
conditioners/computers. The entity is engaged in the business of selling
readymade garments and the supply of empty cartons (related to its main
business), air conditioners/computers (not so related) is not part of its main
activity; but it is connected to/incidental therewith. The supply of these items is
also leviable to tax and has been clubbed together in the outward supplies
declared in Table 3.1 of GSTR-3B. But the same will not appear in the
"Revenue from operations" component of its profit and loss statement; rather,
the same will be disclosed as "Other Income" component. Accordingly, each
such item may be verified with respect to the ledger accounts.
xi. The auditor should pay particular attention to the mapping of every item of
revenue recorded in the books of accounts (appearing on the 'income' side of
the profit and loss statement or 'credit' side of the trial balance) on to the breakup of outward supplies referred to above. Care should be taken to ensure that
every item of income appearing in the profit and loss statement/trial balance
(except the "no supplies" referred to below) plus the "deemed supplies"
explained below is included in some item of the break-up of outward supplies as
derived from Table 3.1 of GSTR-3B and the aggregate value of all such items of
income appearing in the profit and loss statement/trial balance (as adjusted for
―no supplies‖ and ―deemed supplies‖) matches with that of the aggregate value
of outward supplies declared in Table 3.1 of GSTR-3B. If not, it is indicative of
supplies on which tax not being paid/short paid.
xii. It is important to note that the outward supplies reported in Table 3.1 of
GSTR-3B may include values of supplies for which no corresponding values are
available in the profit and loss statement and/or trial balance (except where any
asset has been permanently alienated, in which case there will be a
"write/written off" account/balance in the profit and loss statement/trial balance
and also a reduction/disposal in the fixed asset account, in case of such an
asset). These are the "deemed supplies" of Schedule I of the Act. The major
transactions in this category are transfers of goods or cross-charge on account
of services to other branch offices/depots/agents/units (this will reflect as ITC in
case of receipts under similar circumstances). In the case of goods, such
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transactions are easily verifiable from the stock register/statements and/or
goods transfer register. The valuation in such cases is not a problem if the
same is a B2B transaction where credit is fully available; the value in the invoice
suffices. However, in case of B2C transactions of this nature, valuation rules 27-
31 will have to be applied. Transactions in services under such circumstances
present a different problem, however. Where centrally procured services have
not been dealt with in accordance with the ISD mechanism, there could be
entries (and tax invoices) relating to supply of services by the Head Office (HO)
to a Branch Office (BO) or by one BO to another Bo or by BO/s to HO (who are
all distinct persons within the meaning of section 25). It is in such cases that the
auditor has to tread with caution as even the fact that whether services have
actually been supplied as claimed or the issuance of tax invoices is just an
attempt to move credit around from one such entity to another entity in view of
the second proviso to rule 28. The auditor should carefully examine and seek
evidence/documents to validate whether the ‗supplier‘ has the wherewithal and
has deployed the quantum of resources necessary for the generation of
services claimed to have been so provided to other units because no service
can be supplied unless it is ‗generated‘ through some resources or method.
xiii. There is another category of transactions which are reflected in the profit
and loss statement/trial balance but are not part of supplies liable to tax as
reflected in Table 3.1 of GSTR-3B. These are the "no supplies" of Schedule III.
Of particular importance in this category are supplies of land, supplies of
building (before completion certificate), high sea sales or supply of goods in the
customs area before filing a bill of entry. These are all business transactions
involving goods or services between different persons with consideration and,
as such, they are recorded in the books of accounts (and reflected in the profit
and loss statement/trial balance) but they have been declared as not being
leviable to GST and, hence, they will not appear in GSTR-3B.
xiv. The value of 'inward supplies liable to reverse charge', as disclosed in
Table 3.1 of GSTR-3B may also be sought to be dis-aggregated similarly with
reference to supplies of goods and/or services on which payment on reverse
charge has been notified. This can be validated with reference to entries on the
debit side of the trial balance or the expenditure side of the profit and loss
statement. While very few goods have been notified as taxable on reverse
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charge basis, there is a long list of services on which tax is payable on reverse
charge by the recipient.
xv. Accordingly, the value shown at serial (d) of Table 3.1 of GSTR-3B should
be broken-up into its separate components. An illustrative list could be as
follows:-
Goods Services
Description Value Tax Description Value Tax
Import of the
Goods
Import of Services
Separately for
each item dealt
in (e.g. cashew,
biri leaves, etc.)
(separately
for InterState and
Intra state)
(separately
For IGST,
CGST,
SGST,
Cess)
Services received
from GTA
(separate ly
for Interstate and
Intra- state)
(separately
for
IGST
,
CGST,
SGST,
Cess)
Legal Services
Services received
from Government/
LT
(service-wise
separately)
TDR or FSI a
Long term lease of
land
Add rows for other
RCM services if
received
xvi. Each of the above items (except possibly in case of goods) will
correspond to different entries in the trial balance from where they can be
referred back to the respective ledger accounts. The value of import of goods is
separately disclosed in the Notes to accounts. Receipt of certain services (e.g.
services from Government, import of services, TDR/FSI, etc.) may not be
available as separate headings in the trial balance. These have to be
ascertained from the ledger of the personal accounts to whom payments have
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been made e.g. Government, Builder, Foreign Supplier, etc. The values in
respect of each of the above items is to be validated with reference to the
ledger accounts and/or purchase register, where available, via the trial balance.
xvii. The ITC availed is to be validated with reference to Table 4 of GSTR-3B.
The ITC availed on account of import of goods, import of services and other
inward supplies liable to tax on reverse charge basis is to be validated in the
manner specified above. ITC availed on account of receipts from ISD is not
readily verifiable from the trial balance or profit and loss statement (except
where HQ- Branch/Branch-HQ/Inter-Unit services are billed on cross-charge
basis), since this does not involve any monetary consideration. Thus, ISD credit
is to be verified with reference to the Journal book in which they are specifically
entered. There are other means of verification of such ISD credit, particularly
the GSTR-2A.
xviii. By far, the largest component of ITC is reported at serial (e) of Table 4 of
GSTR-3B under the head "All other ITC". This is the most frequent and most
widely availed ITC since it pertains to purchase/receipt of goods and/or services
in the normal, primary and routine course of business, relating to the essential
activities of the business entity.
xix. This item too should be segregated by the auditor under its various
components viz. inputs, input services, capital goods and each of these
components may be further segregated into each of its various heads (e.g.
'inputs' into different goods, HSN wise, 'input services' into various services,
again HSN wise and 'capital goods' into each of different category of capital
goods). In so far as 'inputs' are concerned, these are generally recorded
separately category-wise and may be traced back from the dis-aggregated
GSTR-3B to the separate ledger accounts via the trial balance. 'Input services'
too can be validated similarly. In this context, it must be remembered that no
credit is availed on account of anything that is not recorded in the books of
accounts and is not reflected in the profit and loss statement/trial balance
(except in case of receipt of ―deemed supplies‖ or ISD). If so, it would be
indicative of a case of credit being "wrongly availed".
xx. As explained above while every item of income/receipt (including "deemed
supplies" but excluding "no supplies") is to appear in the outward supplies of
GSTR-3B, failing which it would be indicative of tax being not/short paid.
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However, every item of expenditure will not appear in Table 4 of GSTR-3B
since credit is not available in certain cases (Section 17(5) of the Act). However,
where the credit is not otherwise blocked under Section 17(5), and if it is still not
availed it may be indicative of the credit availment being either deferred to a
future period or the credit not being availed in which case it may be indicative of
the purchase/receipt being suppressed; this needs to be investigated further.
Examples of some types of Account that require thorough examination
S
l.
N
o
.
Exampl
es of
some
types of
Accoun
t that
require
thoroug
h
examin
ation
Remarks
1
.
Introduct
ory
Director‘
s Report
and
Auditor‘s
Notes
The Annual Report prepared by a
company inter alia contains the
following:
a) Director‟s Report: This gives
information like overall financial
results of the company, important
happenings during the year and
future plans of the company.
Information in respect of advance
received and order booked. Some of
the important happenings like fire and
loss of material in the company,
details of new products launched,
change in the marketing pattern etc.
reported in the report may be useful
to the auditor. It will help to know the
business model of the company. It
may contain certain details such as:
฀ Classification of goods and
services dealt with. It will help audit
officers to determine applicable rate
of tax. So, audit officer shall have
adequate knowledge in classification
of goods and services disclosed by
the auditee. Incorrect classification of
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goods or services can lead to
incorrect GST payment.
฀ Foreign Exchange earned during the
year;
฀ Foreign Exchange paid during the year,
e.g. may be on account of taxable
services received by the Auditee where he
is liable to pay GST under reverse charge
mechanism.
฀ Advance received. Audit officer should
then concentrate on operational liability
(current & recurring) where such advance
is accounted for.
฀ Information on the operations
carried out by the Auditee during the
year under report. This may help in
finding the exact nature of services
provided by the Auditee.
฀ It may show some of the
Directors having commission and
some having received sitting fees.
Are these receipts liable to GST? If,
yes what will be the value of supply?
Besides sitting fees if other facilities
like car, flat, club membership etc are
provided whether all such will be part
of consideration or not? Audit officers
should follow provisions of sec 15
read with rule 27 of the CGST/SGST
Act, 2017.
฀ If any Director helped the
company by standing as a guarantor
in taking a loan whether that will be
treated as supply or not?
฀ We may get information in
respect of Seconded by Foreign
entity to render services to an Indian
Entity not as employee of Indian
entity. This importation of service is
treated as supply as per entry no.4 of
Sch.I appended to section 7 of the
CGST/SGST Act, 2017.
b) Auditor‟s Report:
฀ These may be reports of
Statutory auditor or Internal auditor or
C & AG Audit. In the case of statutory
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audit, a separate report under CARO
(Companies Auditor‘s Report Order,
2003/2015) is required to be given.
The same should be studied to find
out any qualified/adverse opinion
given by the auditors which may have
impact on GST liability. For example,
Auditor may report that goods meant
for outward supply, available in stock
were not reconciled or provision for
obsolete items have not been made
during the year. Tax auditor may like
to examine such opinion in detail.
฀ Company Auditor‟s Report
Order (CARO) may be studied to find
out whether the fixed assets records
have been maintained properly or
whether physical verification of inward
supply and goods meant for outward
supply was under taken and whether
any discrepancies were noticed on
such verification or whether the
company has maintained proper
records for unserviceable or damaged
goods. It also shows disputed tax
liabilities separately for Customs,
Income Tax, GST etc. Cases booked
under Income Tax may be examined
to find out any implication on GST.
฀ In the case of Public Sector
unit, C & AG report and comment of
the company available in the Annual
Report should be examined.
฀ Disclosure of accounting
policies followed in the
presentation of financial
statement – Auditor‘s Notes may
contain accounting standards with
the disclosure of significant
accounting policies followed in the
preparation and presentation of
financial statements. Such policies
often give additional valuable
information, e.g. The auditee may
disclose revenue as per AS 7,
where the principles of accrual
system of revenue are
acknowledged. But, the auditee for
GST purpose may disclose supply
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value from works contract on
certified bill basis.
2
.
P & L
A/c
Profit & Loss Account:
The Profit and Loss Account shows
major items of expenditure and
income. This is one of the important
documents used during desk review
to find out the overall working of the
unit. In the main body of the Profit
& Loss Account, only major heads
of expenditure and income are
given and the constituents of these
headings are given in a separate
annexure. The said annexure
should be studied in detail.
P/L account may be studied for the
following purposes:
฀ The most important step of
audit is to determine the Total
Turnover in the State and the tax
liability of the auditee. This
information in the P&L A/c may be
available as Sale or Operating
Revenue or in any other similar
nomenclature. However, this part
denotes only the operating income,
i.e. income from the main activity of
business.
฀ The auditee may have other
incomes like scrap, insurance claims
receipt, profit on sale of fixed assets,
commission received, erection and
commissioning, freight and insurance
recovered etc. which may be
examined in detail to find out the
exact nature of such incomes and
whether these have any bearing on
the valuation or whether these are
liable for GST. They should carefully
study the nature of business income –
some of which may have accrued
from the supply of taxable services
and the balance from the supply of
non-taxable services. The exact
nature of these services may be
determined from the supporting
documents such as vouchers, bills or
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contracts.
฀ The primary documents to be
examined in this case are: Supply
Invoices; Bank Statement; Debtors
Ledger; Party-wise customer list. To
ascertain the veracity of the figure
reported in the Sale A/c vis-à-vis the
Turnover disclosed in the Returns,
additional documents like Sale
contracts, Delivery Challan, Material
Transfer Notes may be examined.
3
.
General
Ledger
A/cs for
various
expense
s
Scrutiny of expenses ledger is very
important for an Audit Officer as the
expenditure accounts have direct
impact on availment of ITC,
valuation of finished goods and
payment of GST on the taxable
value, value of inward supply on
which GST is pay able under Reverse
Charge. (e.g. Expense Accounts:
Purchase, Packing and Forwarding
Expenses, Advertisement
Expenses, Transportation/Freight
Charges, Outward supply
Expenses, Sale Promotion, benefits
to employees, entertainment
expenses etc.)
The General Ledger may contain
various accounts depending upon
the scale of business of the auditee.
Hence, selection of account for
scrutiny is an important task for an
auditor. For this purpose, accounts
should be selected from the Trial
Balance (if available) which gives
names of all the accounts
maintained by a unit.
While making the detail
examination -
฀ All the important Purchase
accounts need to be checked to find
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out whether any rejection of raw
material or short receipt of input
have taken place which will have
impact on the ITC availed by the
auditee.
฀ Raw material consumption
account may also be verified to find
out with regard to writing off
obsolete material.
฀ Expenditure accounts where
recovery of expenses is possible
like Packing and Forwarding
Expenses Account, Advertisement
Expenses Account,
Transportation/Freight Charges
Account, Outward supply Expenses
Account etc. may be scrutinized in
order to find out any recoveries
being made from the customer.
฀ From the Trial Balance, the
income accounts (these types of
accounts will have credit balances)
should be selected for scrutiny and
the exact nature of such income‘s
accounts should be found out from
the study of the documents
mentioned in the relevant ledger
accounts. Some of these accounts
might have direct impact on the
valuation of finished goods or it may
also affect the GST liability.
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4
.
Income
Tax
Audit
Report
The Tax Audit Report is given by
Chartered Accountant. The said
report is given in the form 3 CD and
it is required to be enclosed along
with the Income tax return filed by
the taxable person.
Depreciation statement as per the
provisions of Income Tax Act
enclosed with Tax Audit Report may
be verified to confirm the
correctness of availment of ITC on
capital goods.
As per Clause 27(a) of the said
report, amount of ITC availed or
utilised during the year and its
treatment in the Profit & Loss
Account and treatment of
outstanding ITC in the account is
required to be given. Tax Auditor
may compare the said information
with the information as per taxable
value records.
As per clause 35(a) to 35(c), details
like opening stock, purchases,
outward supply and closing stock of
trading activities and in the case of
manufacturing unit quantitative
details or principal items of raw
materials, finished goods and byproducts showing opening stock,
purchases, consumption, outward
supply, closing stock, yield of
finished goods, percentage of yield
and shortages/excesses is required
to be given. This information may be
used by Tax Auditor to verify the
input-output ratio. The reasons for
excessive shortage/ excesses and
whether GST has been paid on the
outward supply of raw material as
reported in the tax audit report may
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be inquired into.
6
.
Internal
Audit
Report
This is the report submitted by
internal auditors appointed by the
company which looks into day-today activities and the systems
followed by the unit.
This report can be used for cross
verification of loss of any input,
excess availment of ITC, collection
of additional consideration.
Also the implications on the past
period for any short payment or nonpayment of tax can be examined
from this report.
Internal Auditor also reports about
stock verification and in case of
shortages the ITC availment needs
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to be examined.
7
.
Fixed
Asset
Schedul
e
[availabl
e in
Balance
Sheet]
This schedule contains the details of
addition, deletion to the asset and
depreciation charged thereupon.
The examination thereof has
multiple impact – in terms of
turnover arising out of
miscellaneous income and reversal
of ITC under certain conditions.
An asset can be deleted upon
various circumstances – it may lose
its working condition and hence may
be written off. In such case, it may
yield a scrap value.
Whether any consideration has
been received in this case can be
verified from the Other
Income/Miscellaneous Income A/c.
This will have an impact on the
Turnover.
An old asset may also be
permanently transferred to any
related or distinct person. In such
case, the matter should be looked
into from the angle of Schedule I of
Sec 7 of the SGST/CGST Acts,
2017. In case ITC has been availed
on such asset, such has to be
reversed.
Furthermore, running assets are
depreciated in prescribed rates. In
case depreciation has been charged
on a value inclusive of GST, such
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ITC has to be reversed. Verification
of the claim of depreciation on
capital goods should be made from
the Income tax return filed by the
taxable person or from the Income
Tax Audit Report (Form 3CD).
There may also be possibilities of
recording both expenses as well as
income relating to a particular asset
in the same account, thus affecting
the net balance of such account. In
this case, each Ledger Account for
individual assets need to be
checked to ascertain whether there
are any sale or disposal or transfer
of such asset hidden in such
account. Presence of such may
have impact on the tax liability of the
auditee.
8
.
Other
Income/
Miscella
neous
Income
Other income/Miscellaneous Income
as reported in the P & L A/c
comprises of income from all those
sources which do not form its
operating revenue.
A supplier in GST has its
operational revenue generating from
supply of goods or service or both.
But there are other sources from
which he may earn something more
which is not booked under the A/c
heads of Sales or Services or
Revenue, as the case may be.
Such incomes in a consolidated
manner are known as Other
incomes/Miscellaneous Income.
Some major sources of
other/miscellaneous income are
income from:
 Sale of scrap
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 Receipt of insurance claim
 Profit on sale of fixed assets
 Commission received
 Penalty / demurrage/
compensation received from
employee/customers/suppliers
 Rental income
 Interest from Bank
 Interest from debtors for late
payment
 Revaluation gain on fixed
assets
 Gain on exchange rate
 Discount received
 Dividends
 Freight and insurance
recovered etc.
Many of such incomes are subject
to GST such as sale of scrap or sale
of fixed assets, as the nomenclature
sale suggests. But there are many
other account heads forming part of
miscellaneous income (except a
few) which also qualify as supply
and should be forming a part of the
GST Aggregate Turnover. Thus,
these incomes are required to be
examined in detail to find out the
exact nature of such incomes and
whether these have any bearing on
the valuation or whether these are
liable for GST.
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9 Unbilled
revenue
Un-billed revenue is actually
recorded in the books of account
and reflected in the financial
statements, but in different
accounting periods and it arises
mainly in the context of supply of
services. This arises from the
concept of revenue recognition i.e.
the question as to when should
revenue in respect of a transaction
or activity be recognized and
recorded as such in the books of
accounts and taken therefrom to the
financial statements. Accounting
Standard 9, issued by the Institute
of Chartered Accountant of India,
deals with revenue recognition and
states that, generally:
"Revenue from sales or service
transactions should be recognised
when the requirements as to
performance ...... are satisfied,
provided that at the time of
performance it is not unreasonable
to expect ultimate collection. If at the
time of raising of any claim it is
unreasonable to expect ultimate
collection, revenue recognition
should be postponed."
It may so happen that the terms of
the contract stipulate that the
invoice in relation thereto may be
issued on the happening of a certain
milestone, say the seventh day of
the month following the month in
which the work has been certified.
But in such a case the revenue
accrues on certification even though
the invoice should be issued next
month. If such an event were to
happen in the last month of the
financial year, the books of accounts
and the financial statements would
recognize the revenue on this count
and the turnover declared in the
financial statement would include
this. However, since the invoice is
issued in the next year, this turnover
would be reported in the GST return
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for the next year. Thus, for the
purpose of reconciling the turnover
declared in the returns for any year
(say, Y1), the value of unbilled
revenue in respect of the preceding
year (Y-1) shall be added to the
turnover declared in the financial
statements of Y1. Similarly, the
unbilled revenue as at the end of
financial year Y1 should be
deducted from the turnover declared
in the financial statements of Y1.
This information is also available in
rows A and I of Table 5 in Part II of
Form GSTR-9C. The exact amount
of unbilled revenue as at the
beginning and as at the end of any
financial year can be verified from
the financial of the relevant years;
however, in respect of 2017-18, this
exercise would have to be carried
out separately for the period
between April, 2017 to June, 2017
since this information may not be
readily available from the financial
statements as such.
1
0
Unadjuste
d
Advanc
es
Un-adjusted Advances in respect
of which GST has been paid during
the financial year in accordance with
the provisions of Section 12 and 13
of the Act also need to be added to
(where such advances have been
received during the current financial
year) or deducted from (where
such advances have been received
during the preceding financial year)
the turnover declared in the financial
statements for the current financial
year. This adjustment is necessary
for reconciliation since GST liability
on advances received has been
discharged in the year in which such
advances has been received while
the revenue in respect of the said
advances has been recognized in
the books of accounts/financial
statements of either the preceding
or succeeding year;
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1
1
Other
adjustm
ents
Other adjustments are also
required to be carried out to the
turnover as declared in the books of
accounts/ financial statements
drawn from such books of accounts
in order to reconcile the said
turnover with the turnover declared
in the GST returns. Such
adjustments have been listed at
serial numbers 5E to 5O, except
serial numbers 5H and 5I thereof
(which have already been discussed
above, of the Reconciliation
Statement in Form GSTR-9C. It may
be noted that although, in
accordance with the provisions of
section 35(5) read with section 44(2)
of the Act, the reconciliation
statement may not be required in
cases where the annual turnover is
below Rs. 2 crores, the aforesaid
adjustments will apply to every
taxpayer the turnover declared by
whom in his returns is to be
compared with the turnover
declared in his books of accounts
and the financial statements drawn
on the basis of such books of
accounts. The adjustments noted
here in this para, and the preceding
paras, should be recorded
separately in a Tabular manner
showing clearly the nature of the
adjustments (e.g. unbilled revenue,
credit notes, advances, etc.), the
value as per the returns, the value
as reflected in the books of
accounts or financial statements
and the difference, if any. That there
will be differences in the turnover as
per the return and the turnover as
per the books/financial statements is
inevitable and the two can be
reconciled within the framework of
preparation of financial statements
and maintenance of books of
accounts and the framework of the
GST Law. However, where the
turnover as declared in the returns
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does not reconcile with that
recorded in the accounts even after
carrying out the aforesaid
adjustments, the reasons for such
difference may be examined in the
light of the evidence and records
presented to the auditor and
explanations may be sought from
the taxpayer. The tax implications of
such unreconciled differences may
be worked out, the workings and
documentation should be made part
of the working papers/file/record of
audit and should form part of the
audit team‘s report which is also
made available to the taxpayer.
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Annexure 16: Indian Accounting Standard in the perspective of GST
(p.49)
Indian Accounting Standards (Ind
ASs) are Standards prescribed
under Section 211(3C) of the
Companies Act, 1956. This
Standard prescribes the basis for
presentation of general purpose
financial statements to ensure
comparability both with the
entity‘s financial statements of
previous periods and with the
financial statements of other
entities.
EXHIBIT 51
It sets out overall requirements for the presentation of financial statements,
guidelines for their structure and minimum requirements for their content.
There are various fields where the manner of the accounting and provisions
under GST may vary. GST in India is a paradigm shift with complete business
change, which impacts finance, accounting and reporting functions.
The following illustrative examples are for primary understanding before
conducting audit and there could be many more cases of differences in the
turnovers between the financial statements and the GST Law when the
auditor will audit in practical field.
1. AS 1 / IND AS 1: DISCLOSURE OF ACCOUNTING POLICIES
AS 1 deal with the disclosure of significant accounting policies followed in the
preparation and presentation of financial statements. It states that an
enterprise needs to disclose significant accounting policies followed by it to
prepare and present its financial statements.
The following are a few examples of the areas in which different accounting
policies may be adopted by different enterprises.
a) Methods of depreciation, depletion and amortisation
b) Treatment of expenditure during construction
c) Conversion or translation of foreign currency items
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d) Valuation of inventories
e) Treatment of goodwill
f) Valuation of investments
g) Treatment of retirement benefits
h) Recognition of profit on long-term contracts
i) Valuation of fixed assets
j) Treatment of contingent liabilities.
e.g.1: Supplies on behalf of the principal are not reflected in the financial
statements of the agent and only commission is shown as the revenue of the
agent. Under the GST Law, such turnover would be treated as part of the
agent‘s turnover also [Ref: Sch I under sec 7].
e.g.2: Disposal of business assets without any consideration – Suppose
assets of a company are damaged due to flood. The company claimed
insurance and also received the claim amount. The company disposed of
such damaged assets. If no consideration is received on such disposal of
business asset then also it will be considered as sale of assets in GST if input
tax credit has been availed on such business assets [Ref: Entry no. 1 of Sch I
under sec 7].
e.g.3: Other income from penal interest
The interest may be for various reasons like bank interest against deposit,
penal interest received for payment received beyond interest free credit
period, etc. So, when examining such other income, the audit officer should
check whether such interest is taxable or exempted. In the present case
interest received from bank against deposit is exempted but interest received
from the recipient of goods and/or services for late payment is taxable if the
supplied goods and/or services were taxable [Ref: sec 15(2)(d)].
e.g.4: Sometimes auditee may prepare his final statement by showing
certain income in different head of expenses. The following are a few
examples of expenses in which supply may be involveda) Printing & Stationery,
b) Repairing of office and godown,
c) Repairing of furniture & Fixture,
For example, the auditee incurred expenses for purchase of office stationery
and at the same time also received some sale proceeds against sale of old
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office stationeries. This sale proceeds may be accounted as other income or
may be treated as credit entry in the printing & stationery head. So, the audit
officer should check such expenses account to identify whether any supply is
also clubbed in such expenses account or not.
e.g.5: Accrual accounting: The auditee may disclose revenue as per
Accounting Standard 7 (AS 7), where the principles of accrual system of
revenue are acknowledged. But, the auditee for GST purpose may disclose
supply value from such works contract on certified bill basis. In this situation
there may be difference in turnover as per books and as disclosed in GST
return. While dealing with these cases the audit officer should know the exact
provisions of time of supply and time limit to issue tax invoice to ensure
whether there is any under reporting of supply value or not [Ref: Sec 13, Sec
31 and Rule 47].
e.g.6: As per Ind AS, excise duty is included in value of supply but, GST is
not included [Sec 15(2)(a) of CGST/SGST Act]. For the first three months of
2017-18 revenue would be presented at Gross for Excise Less Excise Duty
paid, and for the subsequent period it would be shown only the net.
2. AS 2 / IND AS 2: VALUATION OF INVENTORY
As per AS-2 the costs of purchase of inventories comprise the purchase
price, import duties and other taxes (other than those subsequently
recoverable by the entity from the taxing authorities), and transport, handling
and other costs directly attributable to the acquisition of finished goods,
materials and services. Trade discounts, rebates and similar items are
deducted in determining the costs of purchase.
In the CGST/SGST Act several provisions are there for the availment of input
tax credit and refund of input tax credit in specified situations. Thus, to the
extent credit is available or refund is available, it would not form part of the
cost of inventory. But, in following situations input tax is not available for
credit:
(i). Input / input services /capital goods are used for other than business
purposes.
(ii). Tax paid on inward supplies by the composition tax payers.
(iii). Restricted credits u/s 17(5) of the CGST/SGST Act;
(iv). Depreciation claimed on tax element;
(v). Input/input services/capital goods used for exempted supply.
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(vi). Any other ineligible input tax credit.
Thus, a systematic evaluative process is required to determine ―what‖ credit is
claimed and ―what is‖ part of the cost of inventory as per the applicable
accounting standard.
e.g.1: Goods and or services are procured where basic value is Rs.
1,00,000/- and tax paid @ 18% is of Rs. 18,000/-. Now, if ITC is available for
set off against this inward supply, the cost would be recorded to the tune of
Rs. 1,00,000/- only in the books whereas if availability of ITC is restricted u/s
17(5), the entire bill value of Rs. 1,18,000/- will be recorded as cost in the
books as per AS 2.
e.g.2: A proprietor of a business having purchased face-masks distributes
some to his office staffs and keeps a few for his home consumption. In that
case, as per the AS2, the cost of such goods for business use as well as for
personal use cost needs to be segregated keeping in mind that ITC is not
available for goods used for personal use. Accordingly, the cost of goods is to
be calculated and recorded in the books.
3. AS 3 / IND AS 7: CASH FLOW STATEMENTS
The AS 3 deals with the provision of information about the historical changes
in cash and cash equivalents of an enterprise by means of a Cash Flow
Statement which classifies cash flows during the period from operating,
investing and financing activities.
The Cash Flow Statement reports the cash flows during the period for the
following activities:
(i).Operating activity: Principal revenue producing activities and other activities
that are not investing or financing activities.
(ii).Investing activity: Acquisition and disposal of long-term assets and other
investments not included in cash equivalents.
(iii).Financing activity: Activities that result in changes in the size and
composition of the owners‘ capital (including preference share capital in the
case of a company) and borrowing.
However, out of the operating activities as stated above, the principal revenue
producing activities and other activities that are not investing or financing
activities, i.e. sale of goods or services or both will have GST implication
except in a case where purely money is dealt with. This is because money is
not goods as per the CGST/SGST Act(s).
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Again, relating to investing activities, permanent transfer or disposal of
business assets where input tax credit has been availed on such assets have
been termed as an activity to be treated as supply even if made without
consideration.
Furthermore, where financing activities are concerned, services by way of (a)
extending deposits, loans or advances in so far as the consideration is
represented by way of interest or discount (other than interest involved in
credit card services) and (b) inter se sale or purchase of foreign currency
amongst banks or authorised dealers of foreign exchange or amongst banks
and such dealers are exempted from GST.
As per the GST Laws, interest means interest payable in any manner in
respect of any moneys borrowed or debt incurred (including a deposit, claim
or other similar right or obligation) but does not include any service fee or
other charge in respect of the moneys borrowed or debt incurred or in respect
of any credit facility which has not been utilised.
So, acquisition of capital, taking a loan, payment/receipt of interest or
dividend will not attract GST, but any service charge or /processing fee
incurred at the time of a loan will attract GST.
e.g.1: A business firm receives Rs. 10,00,000/- as dividend from its
investments in share capital. This will be reflected in the cash flow statement
as per AS 3 but will not have any GST implication.
e.g.2: A business firm borrows Rs. 10 crore from the bank for its business
expansion. It pays Rs. 10 lakh as processing charge and starts repaying the
loan with principal and interest components. Both the inflow of fund (as loan)
and outflow (as EMI and processing charge) will be reflected in the cash flow
statement as per AS 3 out of which, the firm has to pay GST only on the
service charge part.
4. AS 4 / IND AS 10: CONTINGENCIES AND EVENTS OCCURRING
AFTER THE BALANCE SHEET DATE
A contingency is a condition or situation, the ultimate outcome of which, gain
or loss, will be known or determined only on the occurrence or
nonoccurrence, of one or more uncertain future events.
A contingent asset is a potential asset that is associated with a potential gain.
The asset and gain are contingent because they are dependent upon some
future event occurring or not occurring.
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For example, Company X has filed a lawsuit claiming for Rs. 1 crore from
another Company Y. Even if it is probable that Company A will win the lawsuit
it cannot be held as certain till a favourable judgement is declared. Thus, the
probable gain of Rs. 1 crore is a contingent asset and a contingent gain. As
such, it will not be recorded in Company A's general ledger accounts until the
lawsuit is settled.
As per AS 4, a contingency gain is reported only when realised/earned. If a
specific event causing such gain occurs and the gain is realised, then only
the gain is disclosed.
In terms of GST, in this case, the contingent gain of Rs. 1 crore will be against
services provided by Company X to Company Y as agreeing to the obligation
to refrain from an act, or to tolerate an act or a situation, or to do an act and
will be subject to GST only after actual occurrence of the event.
Similarly, contingent Liability is that kind of a liability which is non-existent as
on date, but it may become an actual liability in the future.
For example, a customer has filed a suit against the company for
compensation. This can become an actual liability in the future if the firm
loses the case. However, as on date, it is not a liability as the outcome is not
known today. Now, let's assume that the company's legal department thinks
that the claimant has a strong case, and the business estimates a Rs. 2 lakh
loss if the firm loses the case.
Since this liability is estimated, the firm will disclose this liability in its books as
a footnote below balance sheet.
Product warranties given by the company can also be considered a
contingent liability, since there is no certainty about the exact number of units
that will be returned by customers for repair or replacement.
5. AS 5/ IND AS 8 : NET PROFIT OR LOSS FOR THE PERIOD, PRIOR
PERIOD ITEMS AND CHANGES IN ACCOUNTING POLICIES
AS 5 mainly deals with the following items:
(i). Net Profit or Loss for the Period – These can be categorized into Profit/Loss
from ordinary activities and from extraordinary activities.
(ii). Prior Period Items - While preparing the financial statements, there are
certain items which actually correspond to prior accounting periods. The
income or losses due to these items are a result of error or omission in the
financial statements of the prior period. By nature, these items are not
frequent.
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Now, Profit or loss from ordinary activities is such which arise in the normal
course of business, i.e. they are a part of business and related activities.
Examples: Profit/loss on sale of goods, services.
Profit or loss from extraordinary activities is such which do not arise under the
normal course of business. These activities do not occur regularly. Example:
– Profit on sale of fixed assets, Loss due to theft.
As, profit out of normal business activities have GST implication, the point of
concern can be whether the goods/services dealt with are exempted or
taxable and whether the turnover for which such profit element has been
disclosed is at par with the Turnover on which GST liabilities have been
fulfilled or not.
Similar is the case for profit out of extraordinary activities. Even if such
activities are extraordinary, they will form a part of the Turnover for GST Audit
and accordingly tax should be paid.
However, it may be stated that permanent transfer/disposal of fixed assets
will be treated as supply even if made without consideration where input tax
credit has been availed on such assets.
Again, availment of ITC will be blocked for goods lost, stolen, destroyed,
written off.
So, any profit/loss arising out of extraordinary events will indicate a countercheck of such transactions from the GST angle.
Furthermore, there are certain estimates which are used while preparing the
financial statements for any period. For example estimate on the useful life of
machinery, estimate on the realisable value of an item in inventory. At times,
these estimates are required to be revised due to any reason Accounting
policies are the accounting principles and method of applying those principles
while preparing the financial statements. A change in accounting policy
should be undertaken only in two cases: (i) If the change is required by law or
accounting standard; or (ii) If the change helps in better presentation of
financial statements
Any change in an accounting policy which has a substantial/material effect is
also disclosed as per AS 5.
e.g. 1, There was a theft of goods in the warehouse of ABC Pvt. Ltd. in the
2018-19 amounting to Rs. 40 lakh. The same has been detected in the year
2019-20 at the time of physical verification of inventory. The theft is not
expected to take place on a frequent or regular basis and is not in a normal
course of business of ABC Pvt. Ltd. Thus, the same qualifies to be an
extraordinary item. Also, the theft took place in the financial year 2018-19 but
was discovered in 2019-20. This suggests that although the loss related to
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prior period, it was not shown and the profit was overstated by such amount
i.e. Rs. 40 lakh. While taking the effect of such loss in the current year, this is
a prior period item. Thus, such loss will be disclosed in the current year‘s
financial statements as per AS 5. Accordingly, appropriate ITC already
enjoyed on such goods is to be reversed as per GST Laws.
e.g. 2, the rate of depreciation of a particular asset is changed from 7% to
10% due to a statutory change. The business firm charges depreciation in his
books which is inclusive of GST. Such tax portion depreciated is not entitled
for ITC. Accordingly in the changed scenario where the depreciation amount
will be enhanced as per AS 5, the amount of ITC reversal will also increase
as per the GST Laws.
6. AS 6 & 10/ IND AS 16: PROPERTY, PLANT AND EQUIPMENT (PPE)
& DEPRECIATION ACCOUNTING AND ACCOUNTING FOR FIXED
ASSETS
As per AS 6 & 10, at the time of recognition, an item of property, plant and
equipment (PPE) that qualifies for recognition as an asset should be
measured at its cost.
Elements of cost include Purchase cost i.e. purchase price including import
duties after deducting applicable discounts/rebates + Directly attributable and
necessary costs to bring the asset to the location and condition necessary for
it to be operating + costs of dismantling and restoration.
Some examples of directly attributable costs are – (i) Costs of employee
benefits arising directly from the construction or acquisition of the item of
PPE; (ii) Costs of site preparation; (iii) Initial delivery and handling costs; (iv)
Installation and assembly costs; (v) Professional fees; (vi) Costs of testing
whether the asset is functioning properly , after deducting the net proceeds
from selling any items produced while bringing the asset to that location and
condition (such as samples produced when testing equipment) Administration
and other general overhead expenses are usually excluded from the cost of
fixed assets because they do not relate to a specific fixed asset. However, in
some circumstances, such expenses as are specifically attributable to the
construction of a project or to the acquisition of a fixed asset or bringing it to
its working condition, may be included as part of the cost of the construction
project or as part of the cost of the fixed asset.
In this case, three sections of the GST laws, viz. S. 16(1), S. 16(3) and S.
17(5) need to be referred to. S. 16(1) of the CGST/SGST Act(s) mandates
that to enjoy ITC on the asset (i.e. PPE in terms of the AS), the related goods
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or services or both need to be of the nature of being used or intended to be
used in the course or furtherance of business. This is also to mention that
business is also defined in the GST Laws.
At the same time, S. 17(5), lays down conditions where ITC is not available.
So, although an asset may be booked and accordingly depreciated as per AS
6 & 10, the same may not qualify for ITC.
e.g. Company X manufacturing processed food receives works contract
service for constructing a warehouse. The same property will be recognized
in the books as per AS 6 & 10, but ITC on the same will not be available as
per Sec. 17(5) of the CGST/SGST Act(s).
Now, as per AS 6 & 10, the cost of Fixed Assets is the amount of cash paid or
the fair value of the other considerations given to acquire an asset at the time
of its acquisition or construction. Where applicable, that amount recorded as
per the books may be the amount attributable to that asset when initially
acquired in accordance with the specific requirement of other Indian
accounting standards.
From the GST perspective, as per Section 16(3) where the registered person
has claimed depreciation on the tax component of the cost of capital goods
and plant and machinery under the provisions of the Income-tax Act, 1961,
the input tax credit on the said tax component shall not be allowed. In
nutshell, Input tax credit shall not be allowed on the tax component of the cost
of capital goods and plant and machinery if depreciation on such tax
component has been claimed under the provisions of the Income Tax Act,
1961.
7. AS 7/ IND AS 11: CONSTRUCTION CONTRACT
AS 7 Construction Contract describes the accounting treatment of the
revenue and of a construction contract. There are different types of
construction contract like fixed price contract, cost-plus contract etc. Fixed
price contract is very common where the contract between the contractee and
contractor is agreed against a fixed price. In some cases, there may be a
clause of escalation in the contract which is mutually agreed for various
reasons like increase of the cost of raw materials, delay in completion etc.
Divisible contract and indivisible contract: In divisible contract the elements of
each contracts are clearly segregated. But in indivisible contract both the
contractor and contractee agree lump-sum consideration for the entire
contract. The word ―Turnkey" is commonly used in the construction industry
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in case of indivisible contract. It represents an indivisible composite contract
with ―single point Turnkey responsibility‖. According to this single point
turnkey responsibility the Contractor undertakes all the things necessary for
the project implementation from design to procurement of materials and
construction of Works, from inception to completion, and makes ready for the
use of the Owner. Here, only one entity takes the total responsibility for
design, supply and execution of a project and provides a fully-equipped
facility, ready for operation ―at the ‗turn of the key‘.
Revenue of a contract and costs of a contract are two important areas for the
audit officers. Revenue of a contract includes agreed initial revenue as well as
revenue from escalation. In cost plus remuneration or cost plus a margin type
of agreement both the cost and the remuneration and percentage amount on
such cost will form part of revenue. Even claim of incentive for completion of
project before time or for various reasons will also form part of revenue. The
treatment of such revenue may vary in GST.
e.g.1: A contractor received mobilization advance of Rs.50 lakh on
30.08.2017. it will form part of GST revenue. The time of supply is the date of
raising receipt voucher or 30.08.2017 whichever is earlier. If, this advance is
adjusted with any RA bill within one year it will be treated as liability of the
contractor though it is a revenue in GST.
e.g.2: A contractor maintaining books as per AS 7 booked revenue for FY
2017-18 for Rs.1.5 Cr for which revenue accrued on 25.11.2017 but no
invoice is generated (commonly known as unbilled revenue). Whether it will
be part of GST Turnover for the FY 2017-18?
Yes, it will be part of GST turnover. As per provisions of sec 13 read with sec
31 and rule 47 the time of supply of this service is this case is the date of
payment or provisions of service whichever is earlier. Provision of service is
made on 25.11.2017. As per provisions of rule 47 the contractor was
supposed to raise invoice within 30 days of provisions of service. But, he
failed. So, 25.11.2017 is the time of supply.
e.g.3: A contractor received an incentive of Rs.55 Lakh due to completion of
construction project before the agreed time. Whether it will be part Turnover
in GST? Then which type of supply is this?
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Yes, it will form part of turnover in GST, since there is a supply of service.
But, this is not any construction service. This is nothing but ‗agreeing to the
obligation to do an act‘ which is a kind of service as per 5 (e) of Sch. II under
sec 7 of the CGST/SGST Act.
e.g.4: There may be a situation when the contractee may claim a penalty from
the contractor for various reasons like delay in completion, inferior quality of
works, construction machinery used not as per specification of the agreement
etc. Whether this penalty will also be part of turnover in GST? If so, then what
kind of service is it and who is the supplier of service?
Yes, it will form part of turnover in GST, since there is a supply of service.
But, this is not any construction service. This service is nothing but ‗agreeing
to the obligation to tolerate an act‘ which is a kind of service as per 5 (e) of
Sch. II under sec 7 of the CGST/SGST Act. The contractee is the supplier of
such service to the contractor in this case.
Work-in-progress – As per AS 7 when a contractor incurs costs that relate to
future activity in a contract. Such costs are recognized as an asset if it is
probable that they will be recovered.
In such cases the RTP as a contractor is eligible to claim ITC on such costs
subject to fulfillment of conditions and restrictions of the Acts and Rules made
there under.
8. AS 13/ IND AS 40: ACCOUNTING FOR INVESTMENTS
A business entity may have investments for various diverse reasons such as,
operations, where the assessment of the performance of the business may
largely, or solely, depend on the results of such investment activity.
Some investments are intangible e.g., shares while others exist in a physical
form e.g., land & buildings. By nature, an investment may be in the form of a
debt, other than a short- or long-term loan or a trade debt, representing a
monetary amount owing to the holder and usually bearing interest. Again, it
may be in the form of results and net assets of an enterprise such as equity
shares.
As per this AS 13, the financial accounts are required to disclose the
acquisition and disposal of all the investments.
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Accordingly, the P/L A/c is required to include the following items:
 Income from interest & dividends;
 Profits and losses on disposal of current investments;
 Profits and losses on disposal of investments;
Now, as money is not covered under goods as per the GST Act(s).
Again, relating to investing activities, permanent transfer or disposal of
business assets where input tax credit has been availed on such assets have
been termed as an activity to be treated as supply even if made without
consideration.
Furthermore, where financing activities are concerned, services by way of (a)
extending deposits, loans or advances in so far as the consideration is
represented by way of interest or discount (other than interest involved in
credit card services) and (b) inter se sale or purchase of foreign currency
amongst banks or authorized dealers of foreign exchange or amongst banks
and such dealers are exempted from GST.
As per the GST Laws, interest means interest payable in any manner in
respect of any moneys borrowed or debt incurred (including a deposit, claim
or other similar right or obligation) but does not include any service fee or
other charge in respect of the moneys borrowed or debt incurred or in respect
of any credit facility which has not been utilized.
So, acquisition of capital, taking a loan, payment/receipt of interest or
dividend will not attract GST, but any service charge or /processing fee
incurred at the time of a loan will attract GST.
9. AS 15/ IND AS 19: EMPLOYEE BENEFITS
The objective of this Standard is to prescribe the accounting treatment and
disclosure for employee benefits in the books of employers except employee
share-based payments.
Employee benefits are all forms of consideration given by an enterprise in
exchange for service rendered by employees. This may be in the form of
long/short term employee benefits, post-employment benefits,
termination/retirement benefits etc.
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Now, as per entry no. 1 of Schedule III, Services by an employee to the
employer in the course of or in relation to his employment, is an activity which
is treated neither as a supply of goods nor as a supply of services. Thus the
employee benefits provided to an employee and recorded as per AS 15, does
not come under the purview of GST.
e.g. 1, Mr. A receives an arrear payment of Rs. 70,000/- after retiring from
Company X. Here, the expense will be recorded as post-employment benefit
as per AS 15. From the GST perspective it may be said that, although at the
time of recording of such expense, there exists no employer-employee
relation between A & X, the said expense will not attract any GST as it is an
accrued expense for Company X in terms of employer-employee relation
only.
The guiding factor in this case will be the term ―employee‖. If the expenses
are borne on a person who is not an employee as per the pay-roll, the same
will be treated as a consideration paid against receipt of supply of services
from that person.
e.g. 2, Salary paid to a full-time Director of a company is a consideration paid
to him out of employer-employee relationship. Hence such will not attract
GST. But, remuneration paid to independent director and remuneration other
than salary to employee director (such as, sitting fees) are not considerations
out of employer-employee relationship. Hence, such will be treated as
consideration paid against receipt of supply of services as per the GST Act(s)
and will be taxable @ 18%.
Furthermore, as per the provision to entry no. 2 of Schedule I, gifts of value
upto Rs. 50,000/- in a financial year by an employer to an employee shall not
be treated as supply of goods or services or both. Otherwise, such gift whose
value exceeds Rs. 50,000/- will be treated as a supply even though made
without a consideration.
e.g. 3, Company X gives a mobile phone worth Rs. 25000/- to each member
of its sales team as a gift in 2018-19. This will not be treated as a supply. But
if the same Company X gives a high-end laptop worth Rs. 60,000/- to the
head of the sales team, the same will be treated as a supply.
10. AS 16/ IND AS 23: BORROWING COSTS
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This Standard is applied in accounting for borrowing costs. Borrowing costs
are interest and other costs incurred by an enterprise in connection with the
borrowing of funds. This includes:
 Interest and commitment charges on borrowings
 Discounts and premiums related to borrowings
 Ancillary costs incurred in connection with arrangement of borrowings
 Finance charges in respect of assets acquired under finance lease
 Exchange differences arising from foreign currency borrowings to the
extent they are regarded as adjustment to interest costs.
In this case, this is to mention that detailed discussions regarding GST
implication on interests, other financial fees (processing fees etc) and that on
foreign exchange have already been made in Paras 3 & 9 respectively.
11. AS 17/ IND AS 108: SEGMENT REPORTING
The objective of this Standard is to establish principles for reporting financial
information, about the different types of products and services an enterprise
produces and the different geographical areas in which it operates.
If a single financial report contains both consolidated financial statements and
the separate financial statements of the parent, segment information needs to
be presented only on the basis of the consolidated financial statements.
Here, the concept of related person and distinct person comes in under the
GST Laws.
As per entry no. 2 of Schedule I, Supply of goods or services or both between
related persons or between distinct persons as specified in section 25, when
made in the course or furtherance of business is an activity to be treated as
supply even if made without any consideration.
In the explanation provided to Section 15(5) of the CGST/SGST Act(s),
persons will be ―related‘‘ if:
 such persons are officers or directors of one another‘s businesses;
 such persons are legally recognised partners in business;
 such persons are employer and employee;
 any person directly or indirectly owns, controls or holds 25% or more of
the outstanding voting stock or shares of both of them;
 one of them directly or indirectly controls the other;
 both of them are directly or indirectly controlled by a third person;
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 together they directly or indirectly control a third person; or
 they are members of the same family.
Again, as per Section 25(4) of the CGST/SGST Act(s), a person who has
obtained or is required to obtain more than one registration, whether in one
State or Union territory or more than one State or Union territory shall, in
respect of each such registration, be treated as ―distinct persons‖.
This means that two separate branches, or cost centres, or business
segments (as per AS 17) of the same Company having two different GST
registration numbers will be treated as related and distinct persons.
In this case, if such segmented accounting happen to be of two different cost
centres having one single GST registration, special care needs to be taken to
ensure that the summation of the segmented accounts have been duly
reported in the GST Returns under the single registration and accordingly tax
liability has been discharged.
12. AS 20/ IND AS 33: EARNINGS PER SHARE
AS 20 prescribes principles for the determination and presentation of
earnings per share for comparison of performance among different
enterprises for the same period and among different accounting periods for
the same enterprise.
In common parlance, earnings from shares means dividend. The term
‗dividend‘ has not been defined under the GST law. However, Section 2(35)
of the Companies Act, 2013 defines the term ‗dividend‘ to include any interim
dividend. It is an inclusive and not an exhaustive definition. In common
parlance, ‗dividend‘ means the profits of a company, not retained in the
business but distributed among the shareholders in proportion to the amount
paid-up on the shares held by them.
The Supreme Court in CIT vs. Girdhardas & Co. (Private) Ltd. [1967 SCR (1)
777] observed that the expression ―dividend‖ has two meanings-
 As applied to a company which is a going concern, it ordinarily means the
portion of the profits of the company which is allocated to the holders of
shares in the company.
 In case of a winding up, it means a division of the realised assets among
the creditors and contributories according to their respective rights.
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Now, as per S. 2(52) of the CGST/SGST Acts, ―goods‘‘ 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.
Thus, dividend Income may be treated as not being in the ambit of GST as
such is a money income and money is excluded from goods.
Also, Section 17(3) of the CGST/SGST Act provides that the value of exempt
supply under Section 17(2) shall be as prescribed and shall include supplies
on which the recipient is liable to pay tax on reverse charge basis,
transactions in securities, sale of land and, subject to clause (b) of paragraph
5 of Schedule II, sale of building.
It is pertinent to note that Section 2(101) of the said Acts provides that
―securities‖ shall have the same meaning as assigned to it in Section 2(h) of
the Securities Contracts (Regulation) Act. The term ‗dividend‘ in itself is not
included in the said definition. However, it becomes relevant to examine if the
earning of dividend on account of holding shares (qualifying as ‗security‘
under the definition) is in any manner connected to the expression,
―transaction in security‖.
The above examples and discussion on accounting standards are indicative
only. Audit officer may go through other accounting standards also if required.

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ANNEXURE 17 (p.xi)
Recommendations for Model GST Audit Best Practices and
Procedure as per the report of the sub-committee on point No,
1 of the Terms of Reference for the CoO on GST Audit
Recommendation – 01
Basis for selection of cases for audit
Identification of cases for audit is of threefold:
Based on risk assessment:
Selection of cases on the basis of compliance risks is very essential and
integral to GST audit. Currently, the returns data of taxpayers i.e., GSTR-3Bs
are being considered by various States and the Centre. The guiding principle
of audit envisages selection of taxpayers for audit based on certain risk
parameters. The Commissioner/Appropriate authority by a general or specific
order may select any registered person for audit of his books of accounts for
a specific period. on certain parameters as he may deem fit.
The Commissioner/
Appropriate Authority may
fix the criteria of selection
basis This turnover limit
while fixing the selection
criteria may vary from
State to State, in different
Zonal levels of a particular
State and also for service
sector when compared to
that for goods.

EXHIBIT 52
All risk parameters are required to be identified and all probable aspects need
to be considered to identify non- compliance and non-payment / short
payment of tax, interest, late fee, penalty etc. availment of credit and claims
for refund and evasion of tax. The taxpayers may be classified into three
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segments, Large/Medium/Small based on the total turnover. The States can
also be divided into three Categories, viz. I II and III based on the taxpayer‘s
spread across various segments. By and large, the categorization may be
uniform across the States subject to the availability of more risky taxpayers in
a particular category. Example for categorization is given below. This may
vary from State to State and in the Centre. An illustrative scheme of
classification is discussed hereinbelow:
Large - taxpayers with turnover more than Rs. 40 Crore for category 1
Commissionerates, Rs. 30 Crores for category 2 Commissionerates and Rs.
20 crores for category 3 Commissionerates.
Medium – taxpayers with turnover Rs.10 Crores to Rs.40 Crores for category
1 Commissionerates, Rs. 7.5 Crores to Rs. 30 Crores for category 2
Commissionerates and Rs. 5 Crores to Rs.20 crores for category 3
Commissionerates.
Small – taxpayers with turnover below Rs. 10 Crores for category 1
Commissionerates, below Rs. 7.5 Crores for category 2 Commissionerates
and below Rs. 5 Crores for category 3 Commissionerates.
The above schema is only indicative and should be adapted keeping in view
the risk profiles, revenue involved and the resources available to conduct the
audit.
The turnover includes total taxable, exempt and zero rated supplies of goods
and services but excludes non-GST supplies during a financial year.
To select the taxpayers for audit in an effective manner, secondary data
source (such as VAT/Service Tax/Central Excise/Custom data, Income Tax
data etc.) may be considered along with the primary data source (i.e. GST
data).
The weightage of each parameter may vary depending upon its importance in
selection of taxpayers for audit. Based on the average weight, considering all
the parameters, a final score may be calculated on the basis of which the final
selection may be done.
The final selection of taxpayers to be audited may be done based on the
descending order of the final score thus calculated. In case, more than one
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RTP has the same final score, the parameter of declared liability will then be
considered and a taxpayer with more declared liability will be selected first.
A Selection Committee may be constituted to identify various risk parameters
for selection for audit considering all the aspects where there are chances of
lack of compliance of the Act resulting in short payment of tax etc. such as:
Entity level risks (e.g. Turnover, Tax, ITC, Refund, Commodity such as Iron &
Steel, Paints & Chemicals, Textiles, Cement, Medicine, Footwear, Branded
food grain, Automobiles etc., Service: Works contract, Real Estate,
Information Technology, Consultancy service, Manpower service, Hospitality,
Travel & Tourism, Leasing etc.).
Risks associated with compliance behaviour (e.g. late filing of return, nonsubmission of Form GSTR-1, Form GSTR-3B, Form GSTR-9 Form GSTR9C).
Certain representative selection criteria that can be considered for risk
assessment are given below:-
1. Ratio of Taxable turnover – present year vis-à-vis previous year.
2. Ratio of ITC reversed vis-à-vis Total ITC availed during the year.
3. Ratio of total ITC availed in this year vis-à-vis previous year. Ratio of
IGST payment at the time of import vis-à-vis Total
4. ITC availed ({Col.2 of table 4(A) (1) & (2) of GSTR-3B} in corresponding
period).
5. Ratio of tax paid through ITC to total tax liability
6. Ratio of nil/exempt supplies (Col.2 of Table 3.1(C) of GSTR- 3B) to total
turnover (excluding non GST supplies ) (col.2 of Table 3.1(a) + (b) + (c) of
GSTR-3B).
7. Ratio of Zero-rated supplies (col.2 of Table 3.1(b) of GSTR-3B) to total
turnover (excluding non-GST supplies) (col.2 of Table 3.1 (a)+(b) + (c) of
(GSTR-3B).
8. Ratio of Non-GST supplies to total turnover. {(Col.2 of Table 3.1(e) /
(col.2 of Table 3.1 (a) + (b) +(c) of GSTR-3B)}.
9. Ratio of inward supplies (liable to reverse charge) to total turnover [col.2
of Table 3.1(d)}/Col.2 of 3.1 (a)+(b)+(c) of GSTR-3B)].
10. Ratio of ITC shown in Table 4A(5) of GSTR 3B and ITC as per GSTR2A.
11. Ratio of tax paid under reverse charge (as per {Col.3+4+5+6 of Table
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3.1(d)} to ITC taken on import of services/other reverse charge (other than
import of goods) {Col.2+3+4+5 of Table 4A (2+3) of GSTR 3-B}.
12. Ratio of ISD credit {Col.2+3+4+5 of Table 4A (4) of GSTR-3B) to total
ITC taken {Col.2+3+4+5 Table 4A of GSTR-3B}.
13. Ratio of ITC reversed {Col.2+3+4+5 of table 4(B) of GSTR 3B} to ITC
taken {Col.2+3+4+5 of table 4(A) of GSTR-3B}.
14. Ratio of zero-rated supply to SEZ as per Table 6(B) of GSTR-1 to total
GST turnover.
15. Ratio of deemed exports as per Table 6(C) of GSTR-1 to total GST
turnover.
16. Turnover declared in Form GSTR-3B vis-à-vis Form GSTR-1.
17. Claim of ITC from cancelled RTPs, aggregate turnover in GST return
vis-à-vis Turnover disclosed in Income Tax return.
18. Turnover declared by RTP in Form GSTR-3B compared to turnover on
which TDS deducted as reflected in Form GSTR-7 submitted by TDS
deductor.
19. Turnover declared by RTP in Form GSTR-3B compared to turnover on
which TCS collected as reflected in Form GSTR-8 submitted by TCS
collector.
20. Refund claimed against purchase from taxpayer having no autopopulation of ITC in Form GSTR-2A.
21. Purchases from non-existent RTPs.
22. RTPs having adverse reports in VAT/Service Tax/Central Excise who
are operative in GST etc.)
23. In case, the RTP selected for audit has multiple registrations under the
same PAN / TAN in the State, it is suggested that all such registration
numbers may be selected for audit.
24. 10% of the selection of the taxpayers may be done on a random basis.
25. Relating to compliance behaviour-based risk (e.g. late filer of return)–
RTPs defaulting in filing GSTR-3B for 3 months will be marked 5, those
defaulting for 2 months will be marked 3.33 & those defaulting by 1 month will
be marked 1.67.
26. Taxpayers claiming ITC of more than the amount from eligible ITC.
27. Taxpayers who have filed all returns and tax adjusted from cash ledger
is less than an amount.
28. Taxpayers who have filed all returns and difference in tax liability in
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GSTR-1 > GSTR-3b by n amount.
29. Composition tax payers having turnover more than 1.25 crore.
30. Newly registered taxpayers with high turnover more than an amount.
31. Newly registered taxpayers with turnover exceeding a pre-decided
threshold and cash payout percentage below a certain threshold
32. Taxpayers with (a) multiple use of pan (b) multiple use of email id (c)
multiple use of mobile no.
33. Refund amount is greater than the amount.
34. Shipping bill/export proof submitted by taxable person not verified from
Ice gate.
35. Turnover declared in GSTR 3b must be compared with TDS/TCS
deducted (it should be more than 100 times than TCS deducted and more
than 50 times than TDS deducted).
36. Taxable persons dealing in evasion-prone commodities/services as per
HSN/SAC code.
37. High spike by n amount in e-way bill value in n months.
38. Ratio of Output Tax paid in cash to the total turnover in the current year
is n percentage higher to the ratio of the same in the previous year.
39. Ratio of Output Tax paid to Net Profit in the current year is ―n‖ percent
higher to the ratio of the same in the previous year.
40. Taxable Person whose Turnover is less than ―n‖ percentage of turnover
from previous year.
41. Ratio of expenses to turnover in the current year is greater than by ―n‖
percent than the ratio of the same in the previous year.
42. Inward supply from bogus dealers.
43. Zero cash set-off against tax liability.
44. Inward supply received but no outward supply.
45. GSTR-1 submitted but GSTR-3B not submitted.
46. Manufactures whose cash set-off is less than 5 per cent.
47. Three or more cases apprehended by mobile squad.
48. Cancellation of E-way bill is more than 2 per cent.
Based on Local Risk parameters/wild card entry:
Several State GST Departments have mobile squads for checking the
correctness of the documents carried in support of the goods transported in
the state and it is an integral part of their enforcement activity to supplement
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their efforts to prevent and check tax evasion. It is the experience of the
States that tax is evaded by businesses by transporting goods without
documents or with fake/ invalid documents or by recycling of old documents
that were not checked earlier, enabling them not to record and declare the
corresponding transactions in their books. Apart from the seller and
purchaser, unscrupulous transporters also form part of the network indulging
in tax evasion. Based on the inputs gathered from mobile squad vigilance,
risk parameters can be identified by the Officers of Anti-evasion/Enforcement
wings and the corresponding tax payers may be selected for audit based on
the above risk assessment. Percentage of taxpayers that may be selected on
the basis of the above risk assessment may be left to the decision of the
State GST Departments.
Random selection:
Tax payers (roughly around 10%) may also be selected randomly on the
basis of local intelligence networks which otherwise may not be covered
strictly by the overall risk parameter selection. The discretion for selecting
cases may rest with the appropriate authority of a Zone or a Division.
Recommendation – 02: Scope of audit
Whether restricted to only the flagged risk parameters or all business
transactions of the auditee.
Risk parameters are meant for determining the total risk score based on
which registered persons would be selected for audit. When, once a
registered person is selected, the audit should be carried out as per definition
of ‗Audit‘ (under Section 2(13) of the CGST Act/ KGST Act). Thus, audit
would not be restricted only to the flagged risk parameters and audit should
be taken up based on desk review conducted by the audit team and audit
plan prepared accordingly. An efficient and effective Audit system in all
aspects based on a checklist will increase voluntary compliance. A focused
audit increases taxpayers‘ cooperation, shortens audit and improves audit
yield.
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Recommendation – 03: Norms for audit and co-ordination
among audit officers.
Audit of all or some of the other related registered persons in the value chain
based on audit findings in selected primary cases. Norms for such action i.e.,
whether to have the same audit officer for all cases, approach for coordination
among different audit officers, oversight etc.
State audit jurisdictions do not have an annual scheduling of Audit for a
financial year. Such elasticity in planning Audit of related registered persons
in the value chain based on audit findings in selected primary cases is
possible. Whereas, in the CGST audit manual, the annual Schedule for audits
for a financial year would be drawn at the beginning of the year and there is a
need to adhere to such schedule, taking up the audits of other registered
persons in the value chain based on audit findings, may not be possible
during the same year. Furthermore, taking up audit of other persons in the
value chain may not always yield good results unless they are part of a fake
credit chain. However, if the risk scores of such registered persons in the
value chain are identified to be higher, the same can be taken up for audit
during subsequent audit years. Whether to have the same Audit Officer for all
such cases including monitoring the same may be left to the discretion of the
divisional heads or any officer authorized by the State Commissioner.
Recommendation – 04: Open ended assignment for Audit.
Audit of other years of the same auditee based on audit findings in
selected cases.
In general, when a registered person is selected for audit based on risk
scores arrived at for a financial year or multiples thereof, the audit is to be
taken up for the entire period for which previous audit (GST audit) is not
covered. It need not be restricted to a particular financial year, a complete
audit by clubbing more than one financial year is to be done. In other words, a
taxpayer may be subject to Audit from the un-audited period till the last return
filed up to the date of visit. The Parameters to analyze data base can be
ascertained by adopting the following method as -
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Recommendation 05 - Authorization for Audit.
Authorization of the officers for
selection of cases for audit and
the process for final approval
of a case for audit i.e.,
administrative system of audit
in a State including the
assignment issuing authority.
Commissioner/Additional Commissioners in-charge of Audit work or any other
wing entrusted with the task of monitoring audit mechanism in a State may
finalize a list of 70% of the taxpayers to be taken up for audit by each Joint
Commissioner (Divisional Head), based on risk scores arrived at State level.
Joint Commissioner (Divisional Head), may be authorized to select 20% of
the tax payers for audit based on local risk parameters and 10% of the tax
payers at random based on local intelligence network. However, all such
selections must be ratified by the Commissioner/Pr. Commissioner head of
Audit before the audit is authorised. The issue of overall number of cases that
could be taken up for audit is dealt separately. These numbers may be
changed from one year to the next based on audit detections and recoveries
in each of these categories.
Note: The practice followed in CGST Audit is as under:-
The registered persons are selected on the basis of assessment of the risk to
revenue. This process, which is an essential feature of audit selection, is
known as ‗Risk Assessment‘. It involves ranking of the registered persons
according to a quantitative indicator of risk known as a ‗risk parameter‘. Risk
Assessment Programme jointly run by DG (Audit) & DGARM. Lists of
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category– wise taxpayers provided by DGARM. Allocation of units as per
Large, Medium and Small amongst the audit teams. Allot to the Audit teams
70% of the taxpayers out of the 80% list of Taxpayers provided by DGARM.
Allot 10 % of taxpayers out of the Random list of Taxpayers amongst the
Audit Teams. The remaining 20% of the taxpayers to be audited should be
selected by the Audit Commissionerate based on local risk factors, after
obtaining approval from the jurisdictional Chief Commissioner.
Recommendation – 06 -Basis/criteria for allocation of cases for auditcadre, turnover
Taxable turnover-wise allocation of cases or pecuniary jurisdiction for audit
may be considered based on the corresponding State‘s GST department‘s
administrative architecture. Audit officers in many States are in the cadres of
Deputy Commissioner, Assistant Commissioner and Commercial/State Tax
Officer, while it may not be so in others. In keeping with the hierarchical
structure in a State, taxpayers for audit may be assigned to the officers.
Allocation of cases for audit may be based on the turnover as may be decided
by the appropriate authority.
Recommendation – 07 Numerical targets for Audit
Fixing numerical targets, both upper and lower limits, on the number of
cases that are to be audited in a year by the State
For conduct of audits in a State, targets may be fixed for every year
depending upon the number of officers allocated/available for conduct of
audits. The calculation of target can be made by taking into account the total
number of working days in a year, the norms for number of days required to
complete the audit of different years and the working strength of the audit
officers.
Recommendation – 08: Time limit for completion of Audit
Time limit for completion of audit of various sectors: large, medium, small etc.,
(lesser than that mandated by the Act).
Section 65 (4) of the CGST Act/ SGST Act specifies that the audit initiated
shall be completed within three months from the date of Commencement. The
word commencement of audit as explained under the said subsection is the
date on which the records and other documents called for by the authorities
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are made available by registered person or date of actual institution of audit
whichever is earlier. However, it would be reasonable to fix a lesser duration
for Audit depending upon the volume and complexity so that the limited audit
resources are utilised optimally. Reliance on documents already available in
the system and devising a simpler procedure for audit for certain classes of
taxpayers, such as small taxpayers would also enable earlier completion of
audit.
Recommendation – 09: Feedback mechanism
Feedback mechanism and its functioning – in selection of cases for audit, in
the process and conduct of audit and in the acceptance of final audit report.
Feedback mechanism under the GST Audit is an important component of the
GST eco-system itself; feedback obtained from the taxpayer fraternity in
regard to the strength and weakness of the audit system itself will go a long
way in not only fixing the rough edges, but also establishing a vibrant and
robust audit system. Feedback exercise should be a regular feature in the
GST administrative calendar in each and every State. Feedback can be
through various modes of taxpayer engagement, such as Third Party surveys,
analysis of social media feeds for keywords related to taxpayer‘s experience
of audit, interactive online and physical sessions with taxpayers through
industry chambers and associations etc.
Further feedback from each exercise should also be made systematically
available to their tax managers in order to enable refinement of targeting
practises, increasing audit quality and performance, and to identify areas in
which audit capacity can be augmented.
Recommendation – 10: Audit Monitoring Committee
Post-audit process –
(i) Committee for review of the audit report
(ii) recommendation for adjudication and the adjudicating authority.
Audit is treated to be completed, when an audit report which may contain
objections detected during the audit is finalised by the Department. But before
finalising the objections, the initial objections being raised by the audit officer
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may be taken up for discussion by a Committee of officers in a
monthly/periodical meeting (which could be called ―Audit Monitoring
Committee‖) with regard to the sustainability/correctness or otherwise in
respect of each objection. This system of AMC that may be instituted in each
State department will probably reduce unproductive disputes and also
standardise practices. The Audit Monitoring Committee may consist of the
Joint Commissioner (Divisional Head), Deputy Commissioner, Assistant
Commissioner and GST Officer (Commercial Tax Officer, Sales Tax Officer
as the case may be). However, the constitution of such a committee may be
decided by the State Commissioner to suit the administrative architecture in
the State.
In addition to such a committee, an online exchange of Inter -zonal / Interdivisional audit insights / findings may also be a useful knowledge sharing
platform. Any zone or a division which has come across interesting audit
findings may make use of the said platform and update it once in fifteen days
(or such frequency that can be decided by State gst administration). such
information sharing would be important for identifying productive areas of
audit, documents and records required for supporting a particular line of audit
inquiry. it would also help to build capacity by enabling exchange of
knowledge.
Adjudication authority can be established as per the administrative
arrangement of each state/centre. It should be ensured that the show cause
notice for the recovery of tax as decided by the audit monitoring committee
may, preferably, be raised within a period of one month of the meeting. the
adjudication of such show cause notices maybe completed within a period of
six months. Principles of natural justice should be followed in the adjudication
proceedings.
Recommendation – 11: Post-adjudication proceedings follow- up
Mechanism for post-adjudication proceedings and follow-up of additional
demand created, ascertaining the correctness of the order for its
sustainability, putting up proper defence in appeal, etc.
Section 108 of the CGST Act/ SGST Act empowers a revisional authority to
take up review of any decision taken by his subordinate officers. a Revision or
Review wing under the supervisory control of jurisdictional Chief
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Commissioner (CGST) or the State Commissioner (SGST) should take up
review of all adjudication orders so as to ensure there is no loss of revenue
on account of some incorrect interpretations/orders. existing Revisional
Authorities in the State Administration can also be entrusted with the task of
review of adjudication orders. review should end in full, partial or nonacceptance of the adjudication orders, with appropriate subsequent action in
each of the three events.
Recommendation – 12: A Central repository of audit outcomes
CENTRAL REPOSITORY OF AUDIT OUTCOMES:
At the Central Government level, the Director General-Audit is preparing a
monthly/quarterly audit bulletin containing important audit objections raised
during each quarter. The same may be considered for circulation amongst the
audit officers of all the States too. The State of Karnataka maintains a
compilation of interesting audit paras that are discussed in the „IDEA-i Meet’
platform (Inter Divisional Exchange of Audit insights) held once in a
fortnight. Similarly, each State may have its own mechanism of maintaining
and circulating Audit outcomes. gst administrations may consider creation of
a joint knowledge sharing platform that would enable exchange of knowledge,
audit findings and other relevant information. such a repository would go a
long way in driving convergence of taxpayer experience of audit under
different GST administrations.
Recommendation – 13: Coordination between State an Central audit
officers
Coordination between State and Central audit officers - in similar cases,
similar businesses, exchange of approaches, findings, outcome in
appeals etc.
A coordination cell may be established by the GST Council consisting of
senior officers from the Centre and the State in order to have collaborative
and cohesive strategies for audit and also to share various initiatives
developed by the Centre and the State and this will certainly usher in regular
sharing of best practices.
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Recommendation – 14: E-Audit Module
Role of technology in automating audit process – Connecting
electronically every audit procedure seamlessly - the E-audit modules
developed by States, or those in the pipeline, to introduce technology in
the audit process and its interface with the audit officer and the auditee.
It is recommended that the e-audit module should attempt to capture as many
functions as possible and senior administration should be able to extract all
mis reports related to audits.
From the feedback submitted by various States, it is found that some of the
States are preparing software requirement specification for Audit backend,
based on the workflow system of Audit. Several states are also using the
audit workflow created by GSTN. Some States and CGST already have
functional audit modules. The functionalities that may be designed by the
States should cover the entire Audit processes such as Selection, Planning,
and actual conduct of Audit, Reporting, Payment, Closure and Adjudication.
Capturing the data electronically at each stage of audit will probably enhance
the performance of the Audit team and create intellectual and professional
atmosphere.
2. The Department of Commercial Taxes, Karnataka has developed an
automated online Audit module called E-Shodhane Online Audit module in
collaboration with NIC, Bengaluru, i.e.,www.gst.kar.nic.in/gstprime whereby
registered persons are selected for scrutiny based on risk evaluation method
and the audit officers seek assignment for audit electronically. It‘s an end-toend digital back office application which covers the entire audit process
starting from the selection of cases to the finalisation of audit report and
adjudication process with the exception of on-premises audits physically
carried out by designated Audit teams. To be more precise, the Audit module
is not 100% seamlessly connected electronically. Certain audit processes are
to be carried out by the audit officers physically and results of such audit
processes are to be uploaded onto the system.
3. The GSTN has also developed the GST Audit Module which is an endto-end digital back-office application that helps in carrying out the entire GST
audit process electronically (with the exception of on-premises audits
physically carried out by the designated Audit teams). Right from selection of
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taxpayers for auditing and assigning the same to various Audit Teams to
serving the Final Audit report and/or SCN to the Taxpayer, every Audit
proceeding is seamlessly connected electronically.
Some of the Model-II States are found to have adopted the GSTN Audit
Module. GST Audit Modules developed by GSTN and the State of Karnataka
broadly have the same features with minor tweaks as the GST Audit process
is partly dictated by the GST Act itself. Therefore, E-audit Modules that may
be developed by States may have these common audit tools with tweaks that
conform to their administrative structure.
AUDIT MIS APP
MIS APP is a tool which focuses on the need for sound information for
decision making and which aims to find the relationship between an audit
officer and their audit practice.
MIS and Audit processes are targeted at satisfying the information required
for appraisal of performance of Audit Divisions on a real time basis.
MIS is a system that enables the Audit Divisional head and the Head Office or
Audit Commissionerate to have access to dependable information for
planning and decision making. This information could be either qualitative or
quantitative or both depending on the method employed in the process.
An MIS APP Tool on the lines mentioned herein may be developed
exclusively for audit officers to upload the day- to-day activities with respect to
the findings of the Audit, Audit observations made, demand created, collected
and the recovery made thereof. Benefits for MIS: -
MIS plays the role of information generation, communication, decision
making, management, Administration, and operation of an organisation. The
benefits accruable from an effective MIS could be reiterated thus:
1) The MIS App fulfils the informational needs of an Individual or a group
of individuals.
2) MIS satisfies a variety of systems such as query system, analysis
system, modelling system & decision support system. The MIS helps in
strategic planning, management control and operational control.
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3) MIS helps in target setting like Audit disposals, recovery and Refund.
The MIS assists the Head Office or Audit Commissionerate in goal setting,
strategic planning , evolving audit plans and implementation of the same.
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ANNEXURE 18 (p.x)
Constitution and purpose of the Committee of Officers (CoO)
on GST Audit1
and modified Terms of reference.
Purpose of the formation of the Committee:
Committee of Officers (CoO) on GST Audit was constituted in pursuance of discussion and
decision in the 1st National GST Conference held on 25.11.2019 to have joint &
collaborative efforts for GST Audit; capacity building for audit and to follow uniform
practices for GST Audit in Centre and State Tax administration. Timeline with respect to
the Committee of Officers is presented below.
Initial Terms of Reference (ToR)

1
(From the Presentation of Ashima Bansal, Joint Secretary GST Council)
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Modified Terms of Reference (ToR):
Members (State):
Sl.
No
.
Name of the Member Designation
1 Dr. Ravi Kumar Surpur
[Co-Convenor] Commissioner of Commercial Taxes, Rajasthan
2 Smt. Shikha C. Commissioner of Commercial Taxes, Karnataka
3 Shri Samir Vakil Special Commissioner, State Tax, Gujarat
4 Shri Anil Banka Special Commissioner of State Tax, NCT of Delhi
5 Shri Amit Gupta Additional Commissioner, State Tax, Uttarakhand
6 Shri Ravi Jesuraj S. Additional Commissioner of Commercial Taxes,
Karnataka
7 Shri Arun Kumar Mishra Special Secretary, State Tax, Bihar
8 Shri Prasad Joshi Joint Commissioner, State Tax, Maharashtra
9 Shri C. Palani Joint Commissioner, State Tax, Tamil Nadu
10 Shri Narayan Chandra
Guriya Joint Commissioner, State Tax, West Bengal
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11 Shri Vivek Singh Joint Commissioner, State Tax, Uttar Pradesh
12 Shri K. Sridhar Deputy Commissioner (ST), Puducherry
Members (Centre/GSTC/GSTN)
Sl.
No
.
Name of the Member Designation
1 Dr. Amandeep Singh
[Convenor] Addl. DG, DG Audit Headquarters, CBIC - [Convenor]
2 Shri Sanjay Mangal Pr. Commissioner/ Commissioner, GST Policy Wing,
CBIC
3 Shri Rajiv Jain Pr. Commissioner, Meerut
4 Shri Nitish Kumar Sinha Principal ADG/ADG, DGGI Headquarters, CBIC
5 Shri Gurusharan Singh Pr. ADG/ADG, DG Analytics & Risk Management
6 Shri Yogendra Garg Pr. ADG/ADG, NACIN, Faridabad
7 Shri Dheeraj Rastogi EVP, GSTN
8 Smt. Ashima Bansal Joint Secretary, GST Council Secretariat
9 Shri Kshitendra Verma Director, GST Council
10 Shri Karan Chaudhary Under Secretary, GST Council
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Thematic Audit
1. Introduction
Purpose of Theme-based audit is to conduct “focused audit” instead of a “comprehensive audit”, so that available resources are directed to check/ verify compliance
of sensitive issues or sectors. The results obtained from theme based audit assists
the policy makers to assess compliance level of a particular type of service/industry
or trade sectors or areas so that compliant sectors may be extended greater facilitation and special focus may be directed to ensuring compliance on sectors with
relatively low compliance scores. It is a value-adding approach that helps the Auditors to determine, consolidate and report high-level insights in the business transactions and practices prevalent in a particular type of industry/service sector.
Theme-based audit may have both compliance and performance audit objectives.
The various scenarios which may necessitate conducting thematic audit are as follows:
• Taxpayers in the same supply chain registered in same/different states;
• Simultaneous audit of units which have same modus operandi of tax evasion
and are registered across states;
• Taxpayers dealing in supply of some goods/services which have also been determined as evasion prone.
• Thematic audit may also extend to specificity like trends in availment and utilisation of ITC in any given sector e.g. telecom sector, trends in valuation of supplies to distinct persons in the pharma sector, etc.
2. Constitution of co-ordination committee
For conducting thematic audit, GST Council may form a co-ordination committee
at all India level which should choose themes for conducting audit, constitute a
Committee of Officers for selecting taxpayers in a state for conducting thematic
audit, coordination among various Audit Authorities for evolving a common minimum audit plans for a given theme and, monitor actual audit by the field formations and disseminate audit outcome to appropriate stakeholders.
It is recommended that the co-ordination committee may be constituted with the
following as its members:
• Pr. DG/DG (Audit) or any Pr. Additional Director General (Audit) / Additional
Director General (Audit) as nominated by him;
Annexure-III
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• Joint Secretary, GST Council;
• Pr. Commissioner/ Commissioner (GST), GST Policy Wing;
• CEO, GSTN;
• Three Commissioners of SGST, as nominated by the GST Council;
• One CGST (Audit) Commissioner as nominated by the GST Council.
The co-ordination committee shall be responsible for selecting themes for conducting theme based audit at all India level in a coordinated manner. For selecting the
Audit themes, the Committee may consider using the following parameters/ data
sources:
Parameters which emerge from the systematic and methodical risk analysis conducted by GSTN, DGARM, ADVAIT and the state revenue intelligence
units/economic intelligence units.
• Economic indicators;
• Third party information from Tax authorities and other Regulatory authorities;
• Sensitive nature of the commodity and / or service;
• Risky sectors in news for frauds for e.g., E-commerce, online gaming, jewellers
etc;
• Sectors directly involved in providing services to a large consumer base, such
as banking, insurance, air and land travel, utilities etc.
• Sectoral revenue and value addition trends and variations therein
In addition to above, risky themes identified by the State and Central Tax Authorities based on local intervention can also be used for determining a local theme.
Certain risk - based parameters may also be adopted for selection of Taxpayers for
conducting theme -based audit such as:
• Taxpayers showing abnormal growth;
• High revenue contributing Taxpayers;
• Sectors/units flagged by the CAG or PAC or otherwise where credible information is available to point out that the provisions of the Act are not being followed or where issues like place of supply issues or point of taxation are cropping up;
• Taxpayers availing benefit of major exemption notification;
• Sectors with low cash pay-out
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• Taxpayers engaged in supply of risky and sensitive commodities and services
viz., advertising services, event management services, metals, chemicals, entertainment services and Health & education related auxiliary services etc.
3. Constitution of Committee of Officers
For coordination of actual audit, the Co-ordination Committee may constitute a
Committee of Officers (CoO) for each state/ UT composed of the following three
members:
• State GST Commissioner
• CGST Audit commissioner preferably located at the same station
The Committee of Officers shall select the Taxpayers based on the themes which
have been finalised by the Coordination committee. The details of the taxpayers so
selected, will be shared with Audit formations of the Central and State tax authorities for conducting audit proceedings.
4. Role of Audit field formations (of Central and State Tax) for conducting
audit
Theme-based audit of a selected Taxpayer would be conducted by the concerned
GST audit authority (i.e. the jurisdictional central or state audit officer).
Considering the importance of thematic audit, it is imperative to allocate appropriate resources/staff in each of the Audit formation. The Head of the Audit formation in the State/Centre may like to specifically earmark appropriate staff (Audit Groups) exclusively for Thematic Audit. Even separate nomenclature may be
adopted for such audit groups. It is emphasised that the Audit groups should be
provided with proper infrastructure for efficient handling of the Audit work. Audit
groups dealing with Thematic Audits should be given proper training to deal with
audit of records of the taxpayers of these themes.
5. Standard Operating Procedure (SOP) for conducting Theme based Audit.
a. The Co-ordination Committee (CC) shall select the themes for Audit and
communicate the Themes to the Committee of officers (CoO) responsible for Audit.
b. For a given theme, the committee of officers shall select the tax payers to be
audited in that particular state.
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c. Audit groups earmarked for conducting the theme based audit shall request
the selected tax payer(s) for providing necessary documents viz. Balance sheet(s),
3 CD reports(statement of particulars required to be furnished under Section 44AB
of the Income Tax Act, 1961), profit and loss statements, income tax returns etc.
The concerned audit group shall also take out various GST returns filed by the said
taxpayer and examine/scrutinise them. They will accordingly prepare the Desk
Review (DR) and also the Audit Plan (AP). As with entity-based audit discussed in
earlier section above, as much data as possible may be gathered from the documents/returns already available in the system.
d. All such Audit groups (both under Centre and State tax authorities) shall
forward the proposed audit plan so prepared by them, to the Committee of Officers
which shall examine these audit plans to ensure uniformity in approach and provide further inputs, if any. After this exercise, a common minimum Audit Plan
shall be prepared and communicated to all Audit Groups for conduct of audit.
e. The Committee of Officers shall also indicate a date on which audit of all
such taxpayers irrespective of their jurisdiction (whether under Centre or State)
shall commence.
f. After conduct of audit, all the Audit Groups shall prepare their observations
and convey to the taxpayer (s) for their written response to these observations. In
their written response, the taxpayer is expected to communicate their agreement or
disagreement as the case may be to the observations pointed out by the Audit
Group. After taking into account the written response from the taxpayer, the Audit
Group shall prepare the draft audit para(s).
g. The Audit Group shall forward their draft audit para(s) to the Committee of
Officers for approval. Before approving the draft audit para(s), the Committee of
Officers may hold a meeting (physical/virtual) with concerned audit groups. This
Committee may also point out certain additional areas which need to be looked into by the audit groups before finalising the audit paras.
h. Once draft audit para(s) are approved by the Committee of Officers, the audit group (s) shall present their draft audit report before their respective Audit Authorities for approval. The Audit Authorities may adopt a practice of holding
monthly meetings of the monitoring committee for approval of audit paras presented by their audit groups. At present, Central Tax Authorities are holding
monthly meetings of the monitoring committee consisting of Commissioner (Audit), Joint Commissioner/Additional Commissioner (Audit) and Assistant/Deputy
Commissioners heading various Audit Circles wherein audit objections are
discussed and approved.
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i. Once audit para(s) are finalised after approval of the Monitoring Committee,
the concerned audit officers/groups shall issue Final Audit Report (FAR), a
copy of which shall also be endorsed to the coordination committee for dissemination to Central Tax Audit Commissionerates /State Audit Officers across India for
information.
j. The audit paras which have been agreed upon by the taxpayer shall be
closed after payment of the due tax amount along with appropriate interest and
penalty, if any.
k. As regards unpaid/short paid GST is concerned where the taxpayer is not in
agreement with the audit para and is not willing to pay outstanding GST along
with interest and penalty, the audit groups shall prepare demand cum show cause
notice to be adjudicated by the appropriate Tax Officer. Before issue of demand
cum show cause notice, the taxpayers may be given pre-consultation so as to give
them one more opportunity to explain their point of view to the senior tax officers
before a final decision is arrived at. The Tax Authorities may also use this opportunity to explain the department’s view point to the taxpayers and encourage them
for voluntary compliance. This will reduce unnecessary litigation which is good
for both the taxpayer as well as government.
l. After adjudication proceedings, recovery action against the taxpayer shall be
taken by the appropriate jurisdictional tax authority (i.e. Central Tax Commissionerates or State Tax Jurisdictional Authority) in accordance with Section 79 of the
CGST/SGST Act read along with relevant rules and provisions issued therein.
m. The jurisdictional tax authorities shall upload the audit findings (in a predetermined format), in an Audit Utility which shall be accessible to all the Audit
formations across the country. These findings may be helpful in detecting similar
type of anomalies in similar cases across the country.
2. Joint Audit
Introduction
It is possible that some taxpayers registered on the same PAN may be spread
across multiple locations either within the same State or across States of India.
These multi-location taxpayers may fall under different tax administrations, particularly so in case of multi_state operators. Therefore, there is a need to ensure a
coordinated approach for conducting audit of such multi-location taxpayers.
It is proposed that the Coordination Committee constituted by the GST Council for
the purpose of thematic audit may also be entrusted with the work of coordinating
joint audit.
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From the available database provided by GSTN, the Coordination Committee may
select certain taxpayers under this category for joint audit. It is proposed that the
taxpayers may be selected for joint audit based on clear and mutually agreed criteria/risk parameters between different tax administrations. Examples of such criteria include:-
• Registration in two or more GST Tax administrations.
• Entities above a certain turnover aggregate threshold, for example, more than
Rs. 100 Crore.
• Taxpayers dealing in service industry, having national or multi state operations.
Inter-agency coordination failure in the aforementioned cases may lead to lack
of uniformity in interpretation of law leading to compliance hassles for the taxpayer and increased litigation for the department. Therefore, there is a need for
well-defined procedures to delineate the modalities of conducting theme-based
audit.
The Coordination Committee may also adopt any other parameters/criteria for selecting taxpayers for joint audit.
2.1 Committee of Officers (hereinafter referred to as Supervisory Committee)
For the purpose of actual audit, the Coordination Committee may constitute a
committee of officers for supervising joint audit of a multi locational taxpayer. It is
proposed that this committee may comprise the following:-
• The Commissioner (SGST/CGST) of the jurisdiction where the headquarter of
the said company/business entity is located.
• The Commissioner (SGST/CGST) of the jurisdiction having highest risk score
in the GSTINs of the company/business entity.
• The Commissioner (SGST/CGST) of the jurisdiction other than the above two
where the turnover of the GSTIN of the said PAN is the highest.
• The Commissioner (SGST/CGST) of the jurisdiction other than the above three
where the ITC utilisation of the GSTIN of the said PAN is the highest. (If it is
the same as the unit where the highest turnover is then this criteria does not
come into play)
• The Commissioner (SGST/CGST) of the jurisdiction where the selected company/business entity maintains its compliance and financial records.
2.3 Standard Operating Procedure for conducting Joint Audit
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a. The Co-ordination Committee shall select the multi-locational taxpayers for
joint audit and communicate the same to the concerned Supervisory Committee.
This should be done no later than the month of February for the next financial
year. This Committee in turn will intimate the jurisdictional Audit Authorities to
allocate the selected taxpayer to a particular audit group for conduct of audit.
b. The nominated Audit group shall request the taxpayer for providing necessary documents viz. Balance sheet(s), 3 CD reports (statement of particulars required to be furnished under Section 44AB of the Income Tax Act, 1961), profit
and loss statements, income tax returns etc. The concerned audit group shall also
take out various GST returns filed by the said taxpayer and examine/scrutinise
them. They will accordingly prepare the Desk Review (DR) and also the Audit
Plan (AP). As recommended in para 10.7 above any documents not available with
the taxpayer administration/GSTN/other regulators should be sought from the auditee.
c. All such Audit groups (both under Centre and State tax authorities) shall
forward the proposed audit plan to the Supervisory Committee which shall examine these audit plans to ensure uniformity in approach and providing further inputs,
if any. After this exercise, a common minimum Audit Plan shall be prepared and
communicated to all Audit Groups for conduct of audit.
d. The Supervisory Committee shall also indicate a date on which audit of all
such taxpayers irrespective of their jurisdiction (whether under Centre or State)
shall commence. An effort should be made to start and conclude the audit within 3
months and at any rate, within the same financial year.
e. After conduct of audit, all the Audit Groups shall prepare their observations
and convey to the taxpayer(s) for their written response to these observations. In
their written response, the tax payer is expected to communicate their agreement
or disagreement as the case may be, to the observations pointed out by the Audit
Group. After taking into account the written response of the tax payer, the Audit
Group shall prepare the draft audit para(s).
f. The Audit Group shall forward their draft audit para(s) to the Supervisory
Committee for vetting. Before vetting the draft audit para(s), this Committee may
also hold a meeting (physical/virtual) with concerned audit groups. The Committee may also point out certain additional areas which need to be looked into by the
audit groups before finalising the audit paras.
g. The Supervisory Committee shall, before finalising the audit paras, resolve
any inconsistency or conflicting interpretation on any point of law made by the
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different audit teams and recommend modification of such interpretations accordingly and the audit teams shall suitably incorporate them in their report.
h. Once draft audit para(s) are vetted by the Supervisory Committee, the audit
group(s) shall present their draft audit reports before their respective Audit Authorities for approval. The Audit Authorities may adopt a practice of holding
monthly meetings of the monitoring committee for approval of audit paras presented by their audit groups. At present, Central Tax Authorities are holding
monthly meetings of the monitoring committee consisting of Commissioner (Audit), Joint Commissioner / Additional Commissioner (Audit) and Assistant/Deputy
Commissioners heading various Audit Circles wherein audit objections are discussed and approved.
i. Where it is felt that different audit authorities are adopting different opinions with regard to approval of audit para in their respective monitoring committees, the role of the supervisory committee will come into the picture. It is proposed that they may hold meetings with all CGST Audit Commissioners/State
GST Commissioners quarterly or more frequently, if needed for establishing a uniform approach in this regard across tax jurisdictions in India.
j. Once audit para(s) are finalized after approval of the Monitoring Committee
(or Supervisory Committee), the concerned audit officers/groups shall issue Final
Audit Report (FAR), a copy of which shall also be endorsed to the Supervisory
Committee for dissemination to Central Tax Audit Commissionerates/State Audit
Officers across India for information.
k. The audit paras which have been agreed upon by the taxpayer shall be
closed after payment of the due tax amount along with appropriate interest and
penalty, if any.
l. As regards unpaid/short paid GST is concerned where the tax payer is not in
agreement with the audit para and is not willing to pay outstanding GST along
with interest and penalty, the audit group shall prepare demand cum show cause
notice to be adjudicated by the appropriate Tax Officer. Before issue of demand
cum show cause notice, the taxpayer may be given pre-consultation so as to give
him/her one more opportunity to explain his/her point of view to the senior tax officers before a final decision is arrived at. The Tax Authorities may also use this
opportunity to explain the department’s view point to the taxpayer and encourage
him/her for voluntary compliance. This will reduce unnecessary litigation which is
good for both the taxpayer as well as the government.
m. After adjudication proceedings, recovery action against the taxpayer shall be
taken by the appropriate jurisdictional tax authority (i.e. Central Tax CommissionPage 542 of 575
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erates or State Tax Officers) in accordance with Section 79 of the CGST/SGST
Act read along with relevant rules and provisions issued therein.
n. The jurisdictional tax authorities shall upload the audit findings (in a predetermined format), in an Audit Utility which shall be accessible to all the Audit
formations across the country. These findings may be helpful in detecting similar
types of anomalies in similar cases across the country.
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REPORT ON USING CAPABILITY OF DATA ANALYTIC DEVELOPED BY DGARM
FOR IDENTIFICATION OF STATE TAXPAYERS FOR AUDIT
TERMS OF REFERENCE OF THE COMMITTEE
The Committee of Officers (CoO) on GST Audit constituted as per
decisions taken in1st National GST Conference on 25.11.2019 has constituted
sub-committees to work in respect of terms of reference of the CoO on GST.
This sub-committee has been constituted to study, examine and make
suggestions on the issue of ‘using capability of Data Analytic developed by
DGARM for identification of State Taxpayers for Audit’. Consequently, a
meeting of the sub-committee was held on 04.06.2020to deliberate on the
issue.
DELIBERATIONS & DECISIONS OF THE COMMITTEE
2. As mandated by the Committee of Officers (CoO) on GST Audit, Shri
Sanjay Gupta, ADG, DGARM provided the perspective of the data analytic task
completed by DGARM. He apprised the Committee members about the
capabilities of data analytics developed by DGARM in identifying the risky
taxpayers for GST Audit.
3. He informed that a high powdered Risk Engine Committee was formed
by CBIC to identify the risk parameters. The committee discussed the trends of
tax compliance in GST regime and deliberated upon the risk scenarios and risk
parameters associated with these scenarios. The broad principles adopted by
the Risk Engine Committee for identification of risk parameters were as
follows:
a) Selection of only normal taxpayers, i.e. the taxpayers who are required
to file GSTR-1/GSTR- 3B returns.
b) Selection of only those taxpayers who had filed >04 GSTR-3B returns in
the financial year.
c) Taxpayers divided in to three segments namely Large/Medium/Small for
comprehensive coverage based on turnover.
Annexure-IV
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d) The Committee identified 28 risk parameters to identify risky taxpayers
for audit including Entity level risks, risks associated with compliance
behavior, various ratios and export details etc.
e) All risk parameters were based on internal data i.e. GST, customs and
erstwhile Central excise and Service tax
f) The weightage of each parameter varies depending upon its importance
in selection of risky taxpayers.
g) For the purpose of selection, comprehensive risk score, total score
emerging from all the risk parameters to be calculated
h) A taxpayer with higher Risk Score is considered more risky. Within the
same risk score, a taxpayer with more Declared Liability is considered
riskier.
i) The Committee identified 28 risk parameters to identify risky taxpayers
for audit including Entity level risks, risks associated with compliance
behavior, various ratios, export details
j) The risk score to be calculated annually for selection of risky taxpayers
k) 70% of the tax payers are selected for Audit based on risk scores
l) 10% of the selection of the tax payer are be done on random, using
statistical techniques, out of the remaining taxpayers
m) The jurisdictional Commissioner may also select 20% of the taxpayers for
audit based on local inputs and the criteria suggested by DG (Audit)
n) The identified taxpayers with complete details of relevant data
areshared in the form of a report through on-line portal along with
Advisory explaining the reasons for selection of each tax payer
4. Based on these parameters, about 45000 risky taxpayers were identified
and shared on online portal with the field formations of CBIC for selection to
conduct GST audits for FY 2017-18. An advisory was also issued giving reasons
for selected taxpayers.
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5. He further informed that for the GST Audit of FY 2018-19, a fresh
Committee has been constituted by CBIC to review/re-calibrate the risk
parametersin view of the relevance of certain risk parameters and availability
of comparative GST data for two FYs. The Committee has fine-tuned the earlier
parameters on the basis of learning acquired from past experience and
availability of external data source now. The present Committee has submitted
its recommendations on 23rd May 2020. The revised parameters are under
consideration of the board and likely to be approved soon.
6. He further informed that DGARM has capabilities of identifying risky
taxpayers for GST Audit falling under state jurisdiction; that for GST Audit for
FY 2017-18, DGARM identified risky taxpayers for audit for few states on
specific request and shared the output with the respective states.
7. Ongoing through the details of the identified risk parameters, the
Committee was convinced about the usefulness of risk parameters for Audit
identified by DGARM. There was a view to evolve a permanent mechanism by
DGARM to identify the risky taxpayers falling in state jurisdiction and share the
lists of risky taxpayers for audit with respective states on permanent basis. It
was also suggested to share risk parameters with the states.
8. The Committee also discussed the effectiveness of the new product
developed by NIC, i.e. ‘GST Prime’ being used by Karnataka state for risk-based
audit selectionand if there will be overlapping of risk parameters being used
therein vis-s-vis the risk parameters used by DGARM. States may choose any
other risk parameter which they consider appropriate.
9. The Committee also deliberated on the importance of local parameters visà-vis risk parameters selected by CBIC for selection of taxpayers for audit.
10. After detailed discussions & deliberations, the committee recommended
the followings: -
a) As informed by ADG, DGARM, there is capability and expertise with
them to identify the risky taxpayers for Audit falling in states’
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jurisdictionusing approved risk parameters. He also informed that
parameters for FY 2017-18 is final and for FY 2018-19, they are in very
advanced stage of finalisation. If any State wants DGARM to select the
risky taxpayers list for them, the state should make a specific request to
DGARM. DGARM will identify risky taxpayersbased on approved
parameters for them and share the list with the state along withrisk
scores and risk parameters.
b) For the states who opt, DGARM may evolve and establish permanent
mechanism to identify risky tax payers falling under their jurisdiction.
c) If any state only wants risk parameters to be shared with them and they
do not want DGARM to identify risky taxpayers for them, DGARM may
share approved risk parameters with them.
d) Risk parameters keep evolving over a period of time with feedback and
detection of newer modus operandi. Further there may be some local
risk factors relevant in their jurisdiction. Thus the States must have the
authority to select its own additional risk parameters developed from
their expertise, experience and knowledgefrom time to time. However,
if any State wants to select the taxpayers list for audit by using expertise
of DGARM, we have no objection in such matter.
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Agenda of the Sub-Committee
1. In pursuance of decision in the 1st National GST Conference held on 25.11.2019 to
have joint & collaborative efforts for GST Audit; capacity building for audit as well
as to follow uniform practices for GST Audit in Centre and State Tax administration,
a committee of Officers (CoO) on GST Audit was constituted vide OM of even no.
dated 21.02.2020.The modified Terms of reference (ToR) for Committee of Officers
(CoO) on GST Audit was issued vide Office Memorandum F. No. 350/Future
Initiative/GSTC/2019 dated 25.06.2021. Vide Office Memorandum F. No. 350/Future
Initiative/GSTC/2019 dated 27.07.21 the CoO was reconstituted. This subcommittee has been constituted to suggest measures of capacity building in Services
for focused approach on audit of services sector
2. The issues to be covered in the above ToR are-
• Training Capacity and frequency of training to be identified.
• Nodal officers from States and ZTIs of NACIN to be identified for the training needs
• Specific service sectors to be identified and its training needs and resources to be
finalised.
• A Committee of officers to be created to prepare training modules for specific
identified sectors in consultation with the states
• Access to relevant training modules in iGOT to be provided to the State
• Faculty for imparting training needs to be identified
3. Above issues are further categorized in two specific areas
1. Training and Capacity building
2. Identification of Specific Service Sectors for focused training
Annexure-V
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Training and Capacity Building
The erstwhile VAT did not have service sectors therefore it has been felt that officers of State
GST needs to be trained specifically in service sectors which needs to be identified by the
states and NACIN will draw a program to train the Master Trainers for each state based on
the requirements of those states. NACIN through its Zonal Campus are already conducting
bi-monthly training course on GST Audit & Accounting and one training program for Master
Trainers of GST Audit has already been conducted.
This training program will identify
• The frequency with which the training program needs to be conducted by NACIN for
the master trainers as well as for the other officers.
• Nomination of Nodal officers from States for identification of Training needs
• Training on specific service sector which has been identified by the respective State
GST (around top 5 services)
• Identification of officers to create proper training modules for identified specific
service sectors.
The above needs shall be identified in coordination with the State GST by the ZTI NACIN.
The identification and the program shall be continuous one where the SGST can even rotate
the master trainers and officers to create training module on specific sectors based on their
requirement.
The frequency of the training program will be shared by State GST based on their
requirements and the officers which needs to be trained.
This training program will be in addition to the regular training program on GST Audit.
Since there are multiple type of services being supplied by business entities therefore it is
also suggested that the process flow along with the case study of that service sector shall be
part of the training program. For eg, banking sector and insurance sector are giving multiple
services therefore there is a need to explain and train the officers on the overall work flow of
the services so that the holistic picture of the services being supplied is available to the
officers.
This work flow of the services needs to align with the GST Act so that the officers shall
understand the services which are taxable and which are exempted. They shall also
understand the concept of mixed and composite supply in the gamut of services being
supplied.
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Identification of Specific Service Sectors for focused training
NACIN in coordination with the State GST will identify the specific service sectors where
there is a need to train the officers for capacity building. It is also suggested that since there
are multiple services being offered by the business entities therefore there is a need to
understand the supply in accordance with the GST law and procedures. In this regard supply
of services needs to understand properly and various concepts like time of supply, place of
supply, mixed vs. Composite supply, taxable and exempted supply etc. needs to be focused
upon so that the model of the sector along with the taxability is clear to the officers.
For identification of the specific sectors it is recommended that a Committee at the zonal
level shall be formed with the following as its Members
• ADG NACIN ZTI
• Commissioners of State GST or his representative
This Committee shall decide the sectors which needs to be focused upon. Further the
committee shall meet every quarter to review the specific sector areas.
Some of the sectors which have been identified where there is a need for training are
1. Work contract
2. E commerce Services
3. IT & ITES
4. Banking & Insurance
5. Hospitality
6. Telecom
7. Online Information Database access & Retrieval(OIDAR)
It is recommended that the industry experts along with the officers may be involved in the
training program to understand the specific sector model.

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To Build Knowledge on Financial Accounting
and Focused Approach towards Interpreting
Business Contract / Agreement and
Understanding of Systems Driven Business
Process through SAP, Oracle, Tally Etc.
REPORT SUBMITTED BY
SUB - COMMITTEE ON GST AUDIT
January 2022
SANDEEP PRAKASH & NITISH KUMAR SINHA,
PRINCIPAL ADG, DIRECTORATE GENERAL OF GST INTELLIGENCE, CBIC
PRASAD G. JOSHI,
JOINT COMMISSIONER, MAHARASHTRA
SANJAY KUMAR PATHAK & ANJANI KUMAR AGRAWAL,
JOINT COMMISSIONER, UTTAR PRADESH
K SRIDHAR,
DEPUTY COMMISSIONER, PUDUCHERRY
Annexure-VI
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Table of contents
A. Agenda of the Sub-Committee - 2
B. Building Knowledge on Financial Accounting - 3
C. Interpreting Business Contract/ Agreements - 10
D Understanding System Driven Business Process
through SAP, Oracle, Tally Etc.
- 17
E. Conclusion - 20
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A. Agenda of the Sub-Committee
A.1 The Committee of Officers (CoO) on GST Audit constituted as per
decisions taken in 1st National GST Conference on 25.11.2019 has constituted
sub-committees to work in respect of terms of reference of the CoO on GST.
This sub-committee has been constituted to study, examine and make
suggestions on the issue of ‘To build knowledge on financial accounting and
focused approach towards interpreting business contract/agreement and
understanding of systems driven business process through SAP, Oracle, Tally
etc.’
A.2 Above agenda can be subdivided into three issues, namely-
● Building knowledge on financial accounting
● Focused approach towards interpreting business contract / agreement
● Understanding of systems driven business process through SAP, Oracle,
Tally etc.
A.3 Above issues are discussed in brief in the ensuing pages. The discussions
are based on the knowledge and experience gained over the past few years and
are augmented with the various sources from the web.
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B. Building knowledge on financial accounting
B.1 Introduction
B.1.1 Accounting is reporting through financial statements. It is the process of
recording, summarizing, and reporting the myriad of transactions resulting
from business operations over a period of time and results in the preparation of
Financial Statements (including Balance sheet, Profit & Loss account etc.).
B.1.2 Financial accounting is keeping track of a
company's financial transactions. Using standardized guidelines, the
transactions are recorded, summarized, and presented in a financial report
or financial statement such as an income and expenditure statement, trading
and P & L account and a balance sheet. GST Audit basically refers to
examination of various records, returns and other documents maintained or
furnished by the auditee, like
(a) Monthly/ Quarterly/ Annual Return;
(b) Copy of the audited annual financial statements;
(c) Reconciliation statement, reconciling the value of supplies declared in the
Annual return furnished for the financial year with the audited annual financial
statement in FORM GSTR 9C, etc.;
(d) Such other particulars, as may be prescribed.
B.2 Audit in GST
B.2.1 While implementing the GST Law, the GST officers come across the
financial accounts of the taxpayer. Taxpayers’ business consists of his daily
transactions of outward or inward supplies, and each transaction may have GST
implications i.e. either levy of GST or the claim of legitimate and eligible ITC or
the GST by way of RCM. Hence, the GST officers are required to have a
working knowledge of financial accounting, on the basis of which entire
business transactions are recorded and compliance is made by the taxpayer.
B.2.2 GST audit casts a huge responsibility on the auditor for detection of tax
not paid or short paid or erroneously refunded, or input tax credit wrongly
availed or utilized etc. Hence, it is very important that the auditor possess a
good understanding of accounting fundamentals as well as sufficient
accounting skills to read and analyze financial statements. Further, there are
several transactions which may not appear in the financial accounts and
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records maintained by the registered persons such as stock transfers, free
samples, services received from outside India from related parties, other
supplies made without consideration, etc. Due care must be exercised by the
auditor to identify such transactions as there may be no direct reference to
these transactions in the financial records. Another skill that is very important
is being able to link the 3 financial statements, i.e., income statement, balance
sheet, and cash flow statement.
B.2.3 Following are various aspects of financial accounting having impact on
GST, which have to be examined and analyzed by the auditor thoroughly:
– Identification of various types of Income (Taxable, Exempt, Export, SEZ
supplies, Other Income, Reimbursements etc.) of companies in respect
of Supply of Goods and Services.
– Study of various items of balance sheets that impact GST like Capital
Account (Withdrawal of assets, Debits/credits in nature of supplies),
Loans (Figures in odd amounts, standing for long, No interest, No
movement), Current liabilities (Advances, RCM, reversal of ITC), GST
paid on RCM, Mismatched Credits, Other credits in dispute, Duty Paid
on Exports and so on.
– Understanding of “Notes to Accounts” in financial statements which
would help in understanding the business of the entity, Taxes /
Contingent Liabilities, Cost or Net Realizable Value (Assistance in
valuation provision under GST), Information about related parties &
Payments made to Related Party / Key Managerial Personnel, Payments
made to Foreign subsidiaries/ Associated concerns, Valuation of
Inventory etc.
– Analysis of various accounting ratios (like Net profit ratio, Gross profit
ratio, Supplies/Turnover ratio, Creditor Turnover ratio, ITC/ gross tax
liability ratio, Non-GST expenses/GST expenses ratio, Addition to fixed
assets/Total assets ratio etc., Liquidity/Solvency ratios to indicate areas
of probing.
– Indian companies follow Indian Accounting Standards, while the
companies operating in the US follow the Generally Accepted
Accounting Principles (GAAP) and companies with international
exposure follow International Financial Reporting Standards (IFRS).
Hence, it is imperative to familiarize the Auditors to these accounting/
reporting Standards.
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– Different software tools are available for conducting an audit, and the
one appropriate to the financial accounting must be chosen or designed
for the auditor.
B.2.4 In this context, it is relevant to note that the importance of evaluating
the internal mechanism of the entity under audit cannot be over-emphasised.
Evaluation of internal control system is a very important step in the actual
conduct of audit as it enables drawing of correct samples for auditing and
effective targeting of risk areas. Internal control mechanism is actually the sum
total of all policies and procedures which are adopted by the entity in order to
achieve the objective of "orderly and efficient conduct of its business",
including safeguarding of assets, prevention and timely detection of any
fraud/error, ensuring accuracy and completeness of recording, classification
and disclosure of transactions.
B.2.5 Essentially, the efficacy and effectiveness of internal control mechanism
provides a reasonable assurance to the auditor as to the degree of reliance that
can be placed on the accounts and financial statements of the auditee. Based on
his assessment of the effectiveness of such mechanism the auditor can draw
appropriate samples for subjecting them to detailed scrutiny and verification.
B.2.6 The internal control system with regard to accounting have the
following objectives: -
→ that ALL transactions are RECORDED
→ that recorded transactions are REAL
→ that ALL transactions are RECORDED TIMELY
→ that all recorded transactions are PROPERELY VALUED
→ that all recorded transactions are PROPERELY CLASSIFIED &
POSTED
→ that all recorded transactions are PROPERELY DISCLOSED
→ that all recorded transactions are PROPERELY SUMMARISED
B.2.7 Internal control mechanism provides reasonable assurance, not only to
the auditor but also the management, that all essential aspects of all
transactions have been properly and appropriately recorded and that there are
no material errors of omission or commission. Internal control mechanism can
be evaluated through appropriate questionnaires, check lists and through a
study of the business process adopted by the entity. It is recommended that
such an exercise should be undertaken before commencing the audit and
verification process and the outcome of the evaluation exercise should be
utilized for deciding the scope and extent of audit and also for identifying
which areas of the operations the auditor must specially focus on.
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B.3 Understanding the nuance: A perspective through Accounting
Standards
B.3.1 The GST Officer, while looking into the financial statements of a
Taxpayer/ Company, should first understand the accounting standards
applicable to the Taxpayer/company. There could be differences in the
manner of the accounting and treatment of certain transactions as per
Accounting Standard in the financial statements vis-à-vis the treatment under
GST. This can lead to difference in turnover as per GST law and the principles
of accounting. This could be better understood through the following example:
B.3.2 Time of Supply Recognition from the GST Perspective:
B.3.2.1 As per the provisions of CGST Act, in respect of ‘Time of Supply of
Goods’ revenue shall be recognized as per Section 12 and in respect of ‘Time of
Supply of Services’ as per Section 13 of the said Act. The Value to be considered
for such transactions is as per the provisions of Section 15 of the CGST Act.
However, primarily GST is triggered when the entity makes supply of goods or
services or both. The definition of supply under GST is very comprehensive and
includes sale, transfer, barter, exchange, rental, lease, disposal, stock-transfer
etc.
B.3.2.2 On the contrary, in ‘financials’ revenue is recognized when the goods are
sold, or services are rendered. No revenue is recognized when the fixed assets
are sold / disposed of, except for profit on sale of such assets or when goods are
transferred to the branches.
B.3.2.3 For instance, from an accounting standpoint, revenue from sale of goods
is recognized when significant risks and rewards in the goods is transferred by
the seller to buyer while in case of services revenue is recognised either on
proportionate completion method or completed service contract method.
These events may not correspond to the time of supply set out in sections 12, 13
and 14 of the Act and, accordingly, revenue as per the books of accounts may
differ with that under GST law.
B.3.2.4 This leads to the concept of billed/unbilled revenues and prior period
items.
B.3.3 Value of Supply recognition from a GST perspective
B.3.3.1 Such transactions would result in difference between the revenue
reported under GST when compared to the ‘financials’.
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B.3.3.2 Value of supply of goods or services or both under Section 15 of GST law
is the transaction value i.e. the price actually paid or payable for the said supply
and would include any duties and taxes paid under any other law other than
GST, incidental expenses incurred to meet such supplies, interest charged, if
any, etc.
B.3.3.3 Valuation of contracts under Indian Accounting Standards (Ind AS)
might differ on certain aspects from GST Laws. For example, the contract value
may not include any duties and taxes paid which is refundable, interest on
delayed payment, expenditure incurred by the recipient etc. These differences
might lead to differences in valuation of contracts.
B.3.4 Supplies without consideration: As per Schedule I of the CGST Act- GST
is leviable on certain transactions even if such transactions are made without
consideration – like supply of goods from principal to agent, disposal of
business assets, supplies to related parties etc. Under Ind AS transactions
without any consideration would not form a part of the financial statements
and would be treated as a non-balance sheet item / off- balance sheet item.
B.3.5 Post sales discounts: Usually if the entity has a practice of granting
discounts to its customers on post-sale basis, then for providing such discounts
the entity may raise a financial credit note which will not be subjected to GST
but would be reported as discounts in the financial statements.
B.3.6 Hence, capacity building of tax officials in respect of financial
accounting is necessary. This can be done through:
1. Imparting Training/capacity building of officers in the field of financial
accounting from Institutions like NACIN to:
a. Analyze and examine Financial Statements, various accounting
ratios etc.;
b. Enhance skills of officers for detecting various loopholes in the
financial accounting of any company;
c. look closely at books of accounts and various returns for
detecting tax evasion;
d. Learn about different strategies used to detect tax fraud and
evasion.
2. Utilizing support of seniors and well experienced tax officers from States
and Centre. The sharing of knowledge amongst the officers of both the
tax administrations is of utmost importance as tax administrations on
both the sides have evolved over the years and both of them have certain
unique attributes which have to be factored in before devising an
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approach to GST audit. The experience of Central Tax officers in the
services and manufacturing and that of the State Tax officers in dealing
with the traders can be mutually beneficial to improve the overall
quality of the Audit systems and procedures.
3. Creation of various Checklists to be examined during the audit. The
checklists to be prepared should also be able to reflect the industry
specific factors and the domain expertise of officers from both the tax
administrations can be made use of.
4. Creating a strategy that builds the right mix of skills and experience —
IT, statistical, analytical and tax domain knowledge. Learning and
knowing the theoretical aspects of financial accounting albeit important
but it has to be backed up with the knowledge of the modern tools of
accounting software and systems.
B.4 Cash Flow - The third important financial statement
B.4.1 A cash flow statement is one of three mandatory financial reports
generated by every business organization monthly, quarterly, or yearly. It
measures the rate at which a business generates its cash so as to operate and
pay its debts. The statement of cash flow complements the other two financial
statements of the business, i.e. the income statement and the balance sheet.
B.4.2 The cash flow statement summarizes the inflow and outflow of cash and
cash equivalents pertaining to a business. Main objective of a cash flow
statement is to help a business keep track of its cash inflow and outflow.
B.4.3 As per GST law Cash flow statement is required to be disclosed as per
(Part B of GSTR 9C), though for 2017-18 and 2018-19 its optional, its verification
will be an integral part of verification by the GST Officer.
B.4.4 Further, it can also help GST officer to understand the working of a
business and its operations. It provides them with details about the business’
cash flow, from where is it coming and where it is going. Cash flow is the
indicator of the Taxpayer’s financial well-being, its liquidity, and its operating
ability.
B.4.5 The GST officer needs to calculate and reconcile the Receipts disclosed
and find out and confirm that they are appropriately disclosed and subjected to
tax.
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B.5 Sector specific approach
B.5.1 Some sectors involve complex income streams, financial reporting
mechanism etc., of which officers may not always be fully conversant. For
example, various income/revenue heads often need to be verified by the officers
during audit of Banking, Insurance and Non-Banking Financial Companies
(NBFC) sectors. The Banking sector generates income among others through
interest income, capital markets operations (e.g., sales and trading services,
underwriting services, mergers & acquisition advisory), other fee-based income
(e.g., credit card fees, savings/ current accounts charges, mutual fund revenue,
investment management fees, custodian fees). The revenues could also come
through alternative financial services, investment banking and wealth
management. Each of these aspects merit close look by the audit officers for
possible implications with regard to GST. Similarly, in the insurance sector,
various streams exist like premiums earned, reinsurance, income from
investments (e.g., interest, profit on sale/redemption of investments,
transfer/gain on revaluation/change in fair value). As these are specialised
sectors, it is necessary that the audit-related training modules focus on these
sector-specific accounting principles, accounting standards etc. for a better
appreciation of audit requirements of these sectors.
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C. Interpreting Business Contracts/Agreements
C.1 A business contract/agreement is the statement, either oral or written,
of an exchange of promises in business. It is a negotiated and legally
enforceable understanding between two or more legally competent parties
C.2 There are different types of business agreements/contracts. Scrutiny of
these contracts or agreements constitutes one of the important functions of
audit.
C.3 Foreign Technical Collaboration Agreement:
C.3.1 This agreement may be pure technical collaboration agreement or
technical-cum-financial collaboration agreement. In the later, there is an equity
participation also. Sometimes, collaboration agreements are only financial in
nature wherein only equity participation by a foreign company is involved.
C.3.2 RELEVANCE:
● Where there is equity participation, imports from the collaborator may
be subjected to scrutiny;
● Payment of royalty/technical know-how fee may involve GST liability
towards import of services including IPR;
● Whether consideration paid to the collaborator has been taken into
account in arriving at cost of production; etc.
● When the supply is from related party (a) with consideration (Sec 7), (b)
without consideration (Class-2, Schedule-I)
C.4 Joint Venture Agreement:
C.4.1 Many a times, a joint venture company is set up by Indian Companies
with equity participation. Generally, there is a joint venture agreement or
promoter’s agreement which defines various terms and conditions subject to
which joint venture has been formed.
C.4.2 RELEVANCE:
● Nature of shareholding in the company;
● If there are any clauses regarding pricing pattern for sale to one of the
joint venture partners that may have a bearing on related persons sale or
sale at arms-length. This may impact valuation;
● The agreement may contain clauses for payment for certain services
which may have tax implication;
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● There may be provisions for common Managing Director or common
Directorship indicating control/management of various companies
which may have a bearing on related persons concept; etc.
C.5 Joint Development Agreement in Real Estate Sector and GST
Audit
C.5.1 Joint Development Agreements are common in the real estate
industry wherein the Land Owner enters into an agreement with a
Builder/Developer for the development of the land in lieu of certain
consideration. The consideration in such cases can be varied- ranging from
a lumpsum payment by the builder to the land owner to a share in the
ultimately constructed flats/property or a combination of both.
C.5.2 Such agreements involve an element of transfer of land for
developmental purposes. Transfer of Development Rights (TDR) are
covered under the GST and there is no ambiguity in this regard unlike the
Service Tax period.
C.5.3 Various transactions in a JDA with concomitant GST implications
are as follows:
(i) Land Owner to Builder/Developer.
(ii) Builder/Developer to Land Owner.
(iii) Land Owner to Customers/buyers.
(iv) Builder/Developer to Customers/buyers.
(v) Retention of flats/property for own use.
C.5.4 All such transactions have GST implications like the eligibility of
ITC, Time of Supply, Rate of Tax, Value of Supply etc. which would require a
detailed reading of the various agreements entered between the concerned
parties. A case in point is the eligibility of ITC in such cases only for the
portion of the flats/property sold before a completion certificate is obtained.
The ITC availed and utilized in the flats/property sold after the completion
certificate is obtained has to be reversed. The exact liability of the GST on
such projects can be arrived at only after the details of the agreements are
studied thoroughly in consonance with the provisions of the GST Act and
Rules.
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C.6 Works Contract:
C.6.1 Works contract is an activity wherein supply of both service and goods
takes place, for example, construction of building; erection, commissioning,
installation of plant and machinery, etc. In common parlance, a works contract
relates to both ‘movable property’ and ‘immovable property’. In the Service Tax
regime, the service portion in the supply of works contract service for carrying
out construction, erection, commissioning, installation, completion, fitting out,
repair, maintenance, renovation, alteration of any ‘moveable property’ or
‘immoveable property’ was subjected to levy of Service Tax. In the GST period,
the definition of works contract has been restricted to any work undertaken for
an ‘immovable property’ only. Consequently, any composite supply (comprising
supply of goods and supply of service) on movable property (goods), for
example, a fabrication work or paint work done in automotive body shop does
not fall within the definition of works contract under the GST; and such
contracts would be treated as composite supplies and would be taxed
accordingly. Under the GST law, works contract has been treated to be supply
of services, as per Entry No. 6(a) in Schedule II of the CGST Act.
C.6.2 Relevance:
• If a works contractor has his project office in a State, he has to take
registration in that State once he crosses the threshold limit of Rs. 20
lakhs (Rs. 10 lakhs in a Special Category State).
• As the works contract has been defined to be a supply of service, the
works contractor is not entitled to avail of the Composition Scheme,
because it is available only to suppliers of goods and the restaurant
industry (not serving alcohol).
• Unlike the Service Tax and VAT regimes, no abatement from the value
of service is allowed to the works contractor under the GST law.
• ITC of tax paid on works contract service is not available when such
works contract service is supplied for construction of an ‘immovable
property’ (other than plant and machinery) except where works contract
service is an input service for a supplier of works contract service. [refer
to section 17(5)(c) of the CGST Act]. In other words, ITC of tax paid on
the works contract service can be availed only by a recipient of such
works contract service (taxable person) who is using these services for
further supply of works contract service. For example, a company, not
engaged in the supply of works contract service, cannot be entitled to
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avail of ITC of GST paid on the works contract service received from a
works contractor.
• As the supply of works contract service under the GST laws necessarily
involves immovable property, the place of supply of service would
normally be the place of where the immovable property is located.
• The value of supply of works contract service, involving transfer of
property in land or undivided share of land, as the case may be, shall be
equivalent to the ‘total amount’ (‘consideration charged for works
contract service plus the ‘amount charged for transfer of land or
undivided share of land’, as the case may be) charged for such supply
less the value of land or undivided share of land, as the case may be. The
value of land or undivided share of land, as the case may be, in such
supply shall be deemed to be one third of the ‘total amount’ charged for
such supply.
C.7 Manufacturing Agreement:
C.7.1 There can be contract / manufacturing agreements which a company
might enter into with another company, usually brand owner of repute. Such
brand owning companies usually contract out the manufacturing of finished
goods to a contract manufacturing facility under certain terms and conditions.
C.7.2 RELEVANCE:
● The payment under the contract manufacturing arrangement may be
looked into;
● What happens to the waste and scrap generated under the contract;
● If the contract manufacturer is the real manufacturer or the dummy
created for the purpose of declaration of lower assessable value;
● Whether the agreement contains any other consideration which can be
converted into monetary terms; etc.
C.8 Service Agreement:
C.8.1 There may be service agreements/MOUs on various aspects of the
business. In some businesses, Purchase Orders constitute the agreement which
contains various terms and conditions for supply of services. Specific focus
could be sector-wise service agreements in automobile, FMCG and infra
projects.
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C.8.2 RELEVANCE:
● Service given or parts supplied during AMC
● To verify the terms and conditions especially with respect to supply of
services;
● Whether the invoice is raised as per the Agreement/contract;
● To compare the total price charged in the Agreement/contract with the
GST invoice to ensure that no extra flow back is received outside the
invoice through commercial invoice/debit note;
● To study tax structure agreed upon in the Agreement/Contract;
● Any clause regarding Liquidated damages, or Penalties etc.
C.9 Job Work Agreement:
C.9.1 Job work agreements would be formal agreements or through letters
exchanged between the parties which contain the basic terms and conditions of
the job work.
C.9.2 RELEVANCE:
● Nature of job work done;
● Time period of returning job worked items as per Section 143;
● What happens to the waste and scrap generated during the job work;
● Whether there is charged an applicable rate of tax; etc.
C.10 Dealership/Distribution agreement:
C.10.1 Manufacturers/ suppliers usually market goods through a distributor or
dealer network; and enter into dealer/distribution/stockist agreement
containing various terms and conditions. Supplies by Principal and Agent as
defined in CGST Act 2017 are areas of specific focus.
C.10.2 RELEVANCE:
● Whether the agreement contains any condition or terms whereby the
dealer/distributor is to advertise on behalf of manufacturer; if so, what
are the conditions;
● Post sale discounts
● Warehousing facility
● Whether there is any provision for sharing of expenses;
● Whether the goods under supply require after sale service/warranty;
● Whether there is any separate optional warranty agreement, set to
commence immediately after the initial mandatory warranty period;
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● Is there any provision in the agreement for delivery of free gift items
through dealer;
● What is the discount pattern or incentive offered by manufacturer in the
agreement; Is it based on the commercial considerations normally
prevailing in the trade or not;
● Whether the agreement provides for any non-refundable security
deposit with or without interest; etc.
C.11 Purchase Contract:
C.11.1 Purchase of materials/goods are under specific contracts or by tenders
floated. These purchase contracts/tenders may also contain information related
to audit.
C.11.2 RELEVANCE:
● Who is the supplier; whether he is related person or not;
● Whether the delivery of goods made directly to factory or to job worker;
etc.
C.12 Lumpsum turn-key contract:
C.12.1 The assessee may have a turn key contract which may involve supply,
erection at site and commissioning of the goods.
C.12.2 RELEVANCE:
● Whether the price of the goods is inclusive of erection, commissioning
at site;
● Whether any attempt has been made to overload the erection and
commissioning charges;
● Whether the machinery is supplied by the manufacturer; etc.
● Case study of solar project (70% of value as goods @ 5% and 30% of
value as services @ 18%).
C.12.3 Apart from the above there can be many other types of
contracts/agreements such as Works Contracts, Constructions contracts,
Leasing contracts , Hire purchase agreements, Franchisee agreements, Nondisclosure agreement, Non-Competitive contract , Insurance and reinsurance
agreements / contracts, Banking contracts – to the extent of the Banking fees,
charges, penalties charged for services rendered to its customers, other banks,
etc. and the exact nature and nuances of such contracts/agreements will have
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to be understood by the officers conducting audit by factoring in the scope and
type of business activity being conducted by the taxpayer.
C.1.2.4 GST officer has to verify and ensure that the results or outcomes of
various agreements are accounted for appropriately and the appropriate
compliance is made by the taxpayer.
C.1.2.5 It is the duty of GST officer to not only plug the revenue leakages, but to
also keep a close watch on systemic tax planning that may adversely affect GST
revenues. It should be ensured that while conducting the audit, the terms and
conditions of the contracts are gone through and their impact on the value of
the supply should be ascertained appropriately so as to point out any duty
evasion. For this, conditions of contract, compliance of such terms &
conditions, scope of manipulations while performing the contract (e.g. Supplies
under Schedule-II of CGST Act, 2017), liquidated damages, penalty clause etc.
need to be checked and factored in appropriately.
C.1.2.6 At times this may also require cross-referencing between the contract(s)
and the financial statements.
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D. Understanding System Driven Business Process through SAP, Oracle,
Tally Etc.
D.1 A process is a series of tasks that are completed in order to accomplish a
goal. A business process, therefore, is a process that is focused on achieving a
goal for a business. Processes are something that businesses go through every
day in order to accomplish their mission. The better their processes, the more
effective the business. As processes grow more complex, they need to be
documented. For businesses, it is essential to do this, because it allows them to
ensure control over how activities are undertaken in their organization. It also
allows for standardization. The complex nature of the business transactions
these days has made it mandatory to make the business processes and
specifically the accounting processes to be automated and system driven.
D.2 With the advent of GST, a lot many GST software have also come to the
fore which help organizations simplify the process of GST billing, filing returns,
and generating GST invoices. An effective GST software can aid businesses in
managing their finances, accounts, inventory, purchase, sales, payroll, taxation,
and other processes efficiently.
D.3 Financial Accounting System is an accounting system where
the financial data of the organization is maintained. It is important for auditors
to be well conversant with various related software like SAP, Oracle, Tally etc.;
and alsoto various accounting methods like Cash Accounting and Accrual
Accounting methods. Hence, the auditors must be well trained in financial
accounting concepts and use of financial accounting systems that would help
them examine and analyze the accounting process, various transactions and
ledgers of the assessee while correlating the same with various GST Returns,
financial statements etc. Therefore, it is necessary to:
● Impart knowledge related to latest financial accounting systems and
methods through various training programs;
● Use of Software for identifying risk parameters similar to CAAP used in
the Central Excise regime.
● Developing software to collect back up of Financial Accounts
maintained by the Tax Payer.
D.4 Audit in an ERP Environment
D.4.1 The objective of an GST auditor is to identify and assess the risks of
material misstatement, whether due to fraud or error, at the financial
statement or entry feeding level. The auditor has to understand the nature of
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the governance structures of the entity i.e. the business structures as well as the
IT structures. The IT team is usually the custodian/owner of the application
and the business team is the custodian/owner of the data residing within that
application, therefore, it is imperative to segregate and understand the roles of
both the structures/team. The GST officer has to understand the IT systems
and related procedures within IT and business processes by which the
transactions are initiated, recorded, processed, reported in the ERP
environment. It will also be desirable for the GST officer to get a grasp of the
various access controls and rights like the Administrator role/rights, senior
management role/rights and the like so as to access data accessible only to a
certain level of officers of an entity. A company may be using a variety of
software to carry out its various functions as depicted in the table below:
Information
System
Purpose Location In-house or
Packaged
SAP/Tally Accounting, Supply
Chain, Production
USA Packaged
PayMaster Pay Roll India Packaged
Budgetking MIS, Budgeting India In-house
D.4.2 The GST officer will thus be required to have a good knowledge of the
general IT systems and the Automated Application software being used in a
business for carrying out the task of audit in an efficient and effective manner.
D.4.3 The modern tools/software like Tally. ERP9 designed specifically for the
purpose of preparing and finalizing GST Returns have in-built mechanisms to
generate various Reports. For example, the GSTR-1 returns can be generated
from Tally. ERP9 in JSON format, compressed in the .zip format and uploaded.
An advanced tool such as the Tally.ERP9 not only allows the officers to get a
summary of the various reports but also goes a long way in finding out about
the mismatches in the data. The knowledge of the ERP software will help the
GST officers in reconciling the various figures submitted on the portal with
those of the financial statements. Further, the ERP systems are designed to
cater to a multitude of taxpayer’s needs such as Profit tracking, Fixed Assets
Management, Risk Management, Multi- Currency Management and Tax
Management and therefore, the GST officer auditing an entity should be able to
understand various aspects related to these automated accounts.
D.4.4. The traditional system of bookkeeping mandated the preparation of
separate ledgers like the Purchase Ledger, Sales Ledger, Credit Ledger,
Bank/Cash Book etc. but the shift to the automated environment has done
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away with these requirements and all the transactions are now integrated. An
enterprise resource planning system inherently means that all the modules
within the system are seamlessly connected with each other and the
transactions flow through the relevant modules. Thus, there is one Primary Set
of Books and all the transactions reside here. For example, if we take 2 purchase
transactions involving 2 Vendors
Purchases Dr - Purchase Control Account
To Vendor 1 A/c - Creditors Control Account
Purchases Dr - Purchase Control Account
To Vendor 2 A/c - Creditors Control Account
In the above example, the ERP will maintain the details of transactions
separately for Vendor 1 and Vendor 2 and also have a Creditors Control Account
to capture the total of all Creditors balances.
D.4.5 In such an automated environment, while deciding on the audit
procedures the GST officer should consider the risk of material misstatement at
the assertion level (at the level of initial entry) for each class of transactions,
account balance and disclosure. Thus, the traditional way of conducting audit
may not prove to be fruitful for the department because of the inherent risks
prevalent due to the complexity of systems, use of sophisticated application
software, systems being distributed over geographies, volume of transactions,
outsourced processes and the like.
D.4.6 In view of the above cited difficulties, the GST officers will have to
mould their thought process and start relying more on what the accountants
call the “Controls Based Audit”. Some of the basic tenets of conducting audit
under systems driven approach are:
1) Design of the Audit Team- incorporation of more experts/ specialists
who can extract the data from the ERP systems. Obtaining data
independently from the software gives the officers more direct audit
evidence.
2) Use of Computer Assisted Audit techniques;
3) Preparation of customised and specialised systems in-house by the
department by using the experience of the tax administrations;
4) Use of latest technology like cloud computing;
5) Develop competence for “forensic audit”.
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E. Conclusion
E.1 For the first time, GST has brought the Central and State Tax
administration to work in tandem with each other. This is an opportunity as
well as a challenge. On the one hand, the cumulative experience of the state
and the central administration can create a vast knowledge base. On the other
hand, it may accentuate difference of practices and overlapping in audit
functions.
E.2 To overcome this issue, a better coordination and sharing of information
between the Centre and the States is required.
E.3 Standardization is the key. Appropriate Standard Operating Procedures
need to be put in place for cross-jurisdictional issues. Frequency of audit,
selection of taxpayers and number of taxpayers to be audited needs to be
decided based on risk parameters.
E.4 As the actual audit needs to be done by the field staff, the officers and
staff need to be prepared well with the help of proper training and
development. Training of auditors in financial accounting, reading of contracts,
use of accounting software etc. is imperative.
E.5 Finally, a specialized software could be developed to cull out the
relevant data from various business accounting systems so that the process of
audit is made more system oriented.
*****
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Annexure-VII
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GOVERNMENT OF INDIA
GOODS AND SERVICES TAX COUNCIL
F. No.350/Future Initiative/GSTC/2019
5
th Floor, Tower-II, Jeevan Bharati Building
Connaught Place, New Delhi
25/06/2021
OFFICE MEMORANDUM
Sub: Modified Terms of Reference (ToR) for Committee of Officers (CoO) on
GST Audit -reg.
In pursuance of decision in the 1st National GST Conference held on 25.11.2019 to
have joint & collaborative efforts for GST Audit; capacity building for audit as well as to
follow uniform practices for GST Audit in Centre and State Tax administration, a committee
of Officers (CoO) on GST Audit was constituted vide OM of even no. dated 21.02.2020.
(copy enclosed)
2. The terms of reference (ToR) for the CoO on GST Audit were also notified vide said
OM dated 21.02.2020. The terms of reference are now modified by the competent authority
and are as follows:
a. To study audit policy and practices of the Centre and the States which have already
implemented certain procedures;
b. To develop model Audit Manual, taking into account the policies and practices adopted by
Centre and States, with essential, preferred and best practices which may be adopted by States
as per administrative suitability;
c. To broadly outline the procedural aspects of joint and thematic audit, if and as and when they
undertaken with approval of Council;
d. Using capability of data analytics developed by DGARM for identification of State taxpayers
for audit;
e. To suggest measures of capacity building in Services for focussed approach on audit of
services sector; and
f. To build knowledge on financial accounting and focussed approach towards interpreting
business contract/agreement and understanding of system driven business process through
SAP, Oracle, Tally etc.
3. The CoO on GST Audit may submit its report to this office at an early date.
4. This issues with the approval of the competent Authority.
Ashima Bansal
Joint Secretary
To,
1. The Additional DG (Convenor of CoO on GST Audit)
Directorate General of Audit,
Indirect Taxes, C. R. Building,
I.P. Estate, New Delhi-110109.
File No.350/FutureInitiative/GSTC/2019
Annexure-VIII
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2. Shri Srikar M. S. (Co-convenor of CoO on GST Audit)
The Commissioner of Commercial Taxes,
Karnataka.
Copy to:
1. OSD to Revenue Secretary …….. for information to the Hon’ble Revenue Secretary
2. OSD to the Chairman, CBIC
3. The Joint Secretary (Revenue), Department of Revenue
4. PPS to Additional Secretary, GSTC
File No.350/FutureInitiative/GSTC/2019
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GST Council Meeting Category
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