Levy and Collection of GST under CGST Act, IGST Act and UTGST Act.

Taxable event and point of time for payment of tax were two different aspects under indirect tax law in preGST era. In this chapter we shall only be dealing with the subject of levy under GST regime i.e. taxable event for  the purpose of levy of GST.

In any fiscal statute, the most important section is the Charging Section of such statute. Under GST Regime  subject of levy is dealt in—

— Section 9 of the Central Goods and Services Tax Act [CGST Act]/State Goods and Services Tax Act  [SGST]

and

— Section 5 of the Integrated Goods and Services Tax Act, 2017 [IGST Act].

Thus, section 9 of CGST Act/SGST Act and Section 5 of IGST Act are the Charging Sections for the  purposes of levy of GST.

CGST and SGST shall be levied on all intra-state supplies of goods and/or services and IGST shall be levied  on all inter-state supplies of goods and/or services respectively.

1.  Levy and Collection of GST under CGST Act [Section 9]

(1) Levy of central goods and service tax [Section 9(1)]:

Under  CGST Act, central tax called as the central goods and services tax  (CGST) shall be levied on all intra-State supplies of goods or  services or both, except on the supply of alcoholic liquor for  human consumption.

It shall be levied on the value determined under section 15 and  at such rates, not exceeding 20%, as may be notified by the  Government on the recommendations of the Council and collected  in such manner as may be prescribed and shall be paid by the  taxable person. [Similar rates have been prescribed under  SGST/UTGST]

(2) Central tax on petroleum products to be levied from the  date to be notified [Section 9(2)]:

The central tax on the supply of  petroleum crude, high speed diesel, motor spirit (commonly known  as petrol), natural gas and aviation turbine fuel shall be levied with  effect from such date as may be notified by the Government on the  recommendations of the Council.

(3) Tax payable on reverse charge basis [Section 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.

Further, 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.

(4) Tax payable on reverse charge if the supplies are made to a  registered person by unregistered person [Section 9(4)]:

The  central 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. [Section 9(4) has been deferred till  30.6.2018]

(5) Tax payable on intra-State supplies by the electronic commerce operator on notified services  [Section 9(5)]

As per section 2(45) of the CGST Act, 2017, “electronic commerce operator” means any person who owns,  operates or manages digital or electronic facility or platform for electronic commerce.

Further, “electronic commerce” means the supply of goods or services or both, including digital products over  digital or electronic network.

Thus, Electronic Commerce Operators (ECO), like flipkart, uber, makemy-trip, display products as well as  services which are actually supplied by some other person to the consumer, on their electronic portal. The  consumers buy such goods/services through these portals. On placing the order for a particular product/service,  the actual supplier supplies the selected product/service to the consumer. The price/consideration for the  product/service is collected by the ECO from the consumer and passed on to the actual supplier after the  deduction of commission by the ECO.

The Government may, on the recommendations of the Council, by notification, specify categories of services  the tax on intra-State supplies of which shall be paid by the Electronic Commerce Operator (ECO), if such services  are supplied through it.

Further, all the provisions of this Act shall apply to such electronic commerce operator (ECO) as if he is the  supplier liable for paying the tax in relation to the supply of such services.

However, where an electronic commerce operator (ECO) does not have a physical presence in the taxable  territory, any person representing such electronic commerce operator (ECO) for any purpose in the taxable  territory shall be liable to pay tax.

Where an electronic commerce operator (ECO) does not have a physical presence in the taxable territory and  also he does not have a representative in the said territory, such electronic commerce operator shall appoint a  person in the taxable territory for the purpose of paying tax and such person shall be liable to pay tax.

The Government vide Notification No. 17/2017 CT (R) dated 28.06.2017 has notified the following  categories of services supplied through ECO for this purpose—

(a)        services by way of transportation of passengers by a radio-taxi, motorcab, maxicab and motor cycle;

(b)        services by way of providing accommodation in hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes, except where the person supplying such service through electronics commerce operator is liable for registration under section 22(1) of the CGST Act.

Taxability of Electronic Commerce Operator (ECO) for  specified services

2.  Levy and Collection of GST under IGST Act [Section 5]

The provisions  under section 5  of the IGST Act  are similar to  section 9 of  CGST Act  except—

(i)         the word  CGST has  been  substituted by  IGST under  IGST Act

(ii)        under IGST  Act, tax  called  integrated tax  is to be levied  on all interState  supplies and  on goods  imported  into India.

(iii)       maximum  rate under  section 5(1)  of the IGST  Act is 40%  (i.e. 20%  CGST + 20%  UTGST).

3.  Levy and Collection of GST under UTGST Act [Section 7]

The provisions  under section 7 of  the UTGST Act  are similar to  section 9 of CGST  Act except—

(i)         the word  CGST has been  substituted by  the word  UTGST under  the UTGST  Act.

(ii)        under UTGST  Act, tax called  UT tax is be  levied on all  intra-State  supplies,

(iii)       maximum rate  under section 7(1) of UTGST  Act is 20%.

4.  Kinds of supply of Goods or Services on which Tax is leviable under GST

Under GST, the tax has been levied on the following kinds of supply of goods and services:

(1)        Intra-State supply

(2)        Inter-State supply

Supply in the above case can be of goods or services or both.

Intra-State supplies is subject to:

(a)        Central Goods and Services Tax (CGST)

and

(b)        State Goods and Services Tax (SGST) or Union Territory Goods and Service Tax (UTGST), as the case  may be.

CGST is governed by the CGST Act, 2017, SGST is governed by respective SGST Act of the States and  UTGST is governed by UTGST Act, 2017.

On the other hand, Inter-State supplies is subject to IGST and governed by the IGST Act, 2017.

In fact, tax liability in both the cases shall be the same as CGST + SGST/UTGST shall be equal to IGST.

If the supply is Intra-State, the CGST+SGST/UTGST is required to be collected and paid by the supplier.  Whereas, if the supply is Inter-State, the IGST is required to be collected and paid by the supplier. However, in  certain cases, tax is paid by the recipient under reverse charge.

5. Levy of GST on Intra-State supply of Goods and Services

GST is a dual levy where—

— the Central Government levies and collects tax in the form of central goods and services tax [CGST]

And

— the State Government/Union Territory levies and collects tax in the form of State goods and services tax  [SGST]/ union territory goods and service tax (UTGST)

on intra-State supply of goods or services or both.

Intra-State supply of goods or supply or services have been defined separately in section 8 of the  Integrated Goods and Services Tax Act, 2017.

(A) Meaning of Intra-State supply of goods [Section 8(1) of the IGST Act]

(1) Subject to the provisions of section 10, supply of goods where the location of the supplier and the place  of supply of goods are in—

— the same State or

— the same Union territory

shall be treated as Intra-State supply.

However, the following supply of goods shall not be treated as Intra-State supply:—

(i)         supply of goods to or by a Special Economic Zone developer or a Special Economic Zone unit;

(ii)        goods imported into the territory of India till they cross the customs frontiers of India; or

(iii)       supplies made to a tourist referred to in section 15.

(B) Meaning of Intra-State supply of services [Section 8(2) of IGST Act]

Subject to the provisions of section 12, supply of services where the location of the supplier and the place of  supply of services are in the same State or same Union territory shall be treated as intra-State supply:

Thus, in the case of intra-State supply of goods or services, both—

(i)         the Central Government and

(ii)        the State Government/Union Territory

shall levy GST at a prescribed rate which is presently divided into two parts. 50% of the GST rate prescribed shall  be known as CGST and the balance 50% shall be known as SGST/UTGST.

In case of Intra State supply of goods and services or both, the location of the supplier and the place of supply  is in the same State/UT.

6.   Levy of GST on Inter-State supply of Goods or Services

In this case, GST is a single levy where the Central Government imposes integrated tax called as integrated  goods and services tax [IGST] on supply of goods or supply of services or both in the course of inter-State  trade or commerce.

However, integrated goods and services tax (IGST), so collected by the Central Government, shall be  apportioned between the Central Government and the State Governments/Union Territories in the manner  prescribed.

Inter-State supply of goods or supply of services have also been defined separately in the section 7 of the  Integrated Goods and Services Tax Act, 2017.

(A) Meaning of Inter-State supply of goods [Section 7(1)]

Subject to the provision of section 10, supply of goods, where the location of the supplier and the place of  supply are in—

(a)        two different States;

(b)        two different Union territories; or

(c)        a State and a Union territory,

shall be treated as a supply of goods in the course of inter-State trade or commerce.

Further, as per section 7(2), supply of goods imported into the territory of India, till they cross the customs  frontiers of India, shall be treated to be a supply of goods in the course of inter-State trade or commerce.

(B) Meaning of Inter-State supply of services [Section 7(3)]

Subject to the provisions of section 12, supply of services, where the location of the supplier and the place of  supply are in—

(a)        two different States;

(b)        two different Union territories; or

(c)        a State and a Union territory,

shall be treated as a supply of services in the course of inter-State trade or commerce.

Further, as per section 7(4), supply of services imported into the territory of India shall be treated to be a  supply of services in the course of inter-State trade or commerce.

Further, section 7(5) defines supply of goods or services or both in the course of Inter-State trade or  commerce.

(C) Meaning of supply of goods or services or both in the course of inter-State trade or commerce [Section  7(5)]

Supply of goods or services or both in the following cases shall be treated to be a supply of goods or  services or both in the course of inter-State trade or commerce:

(a)        when the supplier is located in India and the place of supply is outside India;

(b)        supply of goods or services or both to or by a Special Economic Zone developer or a Special  Economic Zone unit; or

(c)        supply of goods or services or both in the taxable territory, not being an intra-State supply and not  covered elsewhere in this section,

7.   Zero Rated Supply of Goods or Services [Section 16 of IGST Act, 2017]

(1) Meaning of “Zero Rated Supply” [Section 16(1)]:

 “Zero rated supply” means any of the following supplies of goods or services or both, namely:—

(a)        export of goods or services or both: or

(b)        supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit.

(2) Credit of Input Tax [Section 16(2)]:

Credit of input tax may be availed for making zero-rated supplies, notwithstanding that such supply may be an exempt supply However, input tax credit is not available on certain items specified under section 17(5) of the CGST Act. See pam 10.2(D).

(3) Person making Zero Rate Supply eligible to claim refund under any of two option available [Section 16(3)]:

A registered person making zero rated supply shall be eligible to claim refund under either of the following options, namely:—

(a) he may supply goods or services or both under bond or Letter of Undertaking. subject to such conditions, safeguards and procedure as may be prescribed, without payment of integrated tax and claim refund of unutilised input tax credit: or

(b) he may supply goods or services or both, subject to such conditions, safeguards and procedure as may be prescribed, on payment of integrated tax and claim refund of such tax paid on goods or services or both supplied, in accordance with the provisions of section 54 of the Central Goods and Services Tax Act or the rules made thereunder.

Supply of goods or services or both to a Developer of SEZ or a Unit in SEZ to be treated at par with export

Supply of goods or services or both to a developer of SEZ or a unit located in SEZ shall be treated at par with Export. Such supply shall also be considered as zero rated supply. The procedure for supplying goods or services to SEZ shall be same as applicable in case of export of goods or services.

Thus, zero rated supply i.e. export of goods or services or both or. supply of goods or services or both to SEZ shall attract zero rate of tax. Ln simple words, effectively no tax shall be payable by a person engaged in making zero rated supply. Further, in view of section 16(2), the person engaged in effecting zero rated supplies shall be entitled to avail the credit of taxes paid by him on procurement of inputs and input services used or intended to be used by him in effecting zero rated supply. A person who is engaged in export of such goods or services or supply of such goods or services to SEZ which are otherwise exempt from whole of the tax leviable thereon, shall also be entitled to claim the tax credit of inputs and input services used by him. These provisions have been made in line with the motto of the Government to export the goods and services but not taxes,

Further, a person engaged in effecting zero rated supplies shall have the following two options:—

(i)         He may either export the good or services or supply to SEZ without payment of tax by furnishing a bond or a Letter Of Undertaking (LUT) and claim refund of unutilised input tax credit, or

(ii)          He may export the good or services or supply to SEZ on payment of integrated tax by utilising the input tax credit and then claim refund of tax paid on such goods or services or both.