Detailed Agenda Note Volume 2 - 49th GSTCM

Agenda for
49th GST Council Meeting
Agenda for
GST Council Meeting
18th February 2023
Confidential
GST Council Meeting
Agenda for 49th GSTCM Volume 1
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Agenda for 49th GSTCM Volume 1
GST Council Secretariat
Subject: Notice for the 49th Meeting
February, 2023
The undersigned is directed to refer to the subject stated above and to convey that the 4
Meeting of the GST Council will be held on
The schedule of the Meeting is as follows:
• Saturday, 18th February, 2023
2. The agenda items and other details for the
communicated in due course of time.
3. Keeping in view the logistical constraints, it is requested that participation from each State/UT
may be kept limited to two (02) officers in addition to the Hon'ble Member of the GST Council.
4. Kindly convey the invitation to Hon’ble Member
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, 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 a
above said meeting.
4. Chairman, CBIC, North block, New Delhi, as a permanent invitee to the proceeding of the
Council.
5. CEO, GST Network.
Page 3 of 359
GST Council Secretariat
New Delhi
5
th Floor, Tower-II, Jeevan Bharti Building, New Delhi
02nd February, 2023
OFFICE MEMORANDUM
Meeting of the GST Council scheduled to be convened
ndersigned is directed to refer to the subject stated above and to convey that the 4
Meeting of the GST Council will be held on 18th February, 2023 at Vigyan Bhawan, New Delhi
The schedule of the Meeting is as follows:
February, 2023: 11:00 A.M. onwards
and other details for the 49th Meeting of the GST Council will be
communicated in due course of time.
ogistical constraints, it is requested that participation from each State/UT
may be kept limited to two (02) officers in addition to the Hon'ble Member of the GST Council.
Kindly convey the invitation to Hon’ble Members of the GST Council to attend the
(Sanjay Malhotra
Secretary to the Govt. of India and ex-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 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.
ries 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 a
Chairman, CBIC, North block, New Delhi, as a permanent invitee to the proceeding of the
Jeevan Bharti Building, New Delhi
February, 2023
convened on 18th
ndersigned is directed to refer to the subject stated above and to convey that the 49
th
3 at Vigyan Bhawan, New Delhi.
Meeting of the GST Council will be
ogistical constraints, it is requested that participation from each State/UT
may be kept limited to two (02) officers in addition to the Hon'ble Member of the GST Council.
nd the Meeting of
Sd/-
Sanjay Malhotra)
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
PS to the Hon’ble Minister of State (Finance), Government of India, North Block, New Delhi
ries 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
Chairman, CBIC, North block, New Delhi, as a permanent invitee to the proceeding of the
Agenda for 49th GSTCM Volume 1
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Agenda for 49th GSTCM Volume 1
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TABLE OF CONTENTS
Agenda
No.
Agenda Item Page No.
1 Confirmation of Minutes of 48th GST Council Meeting held on 17th
December, 2022
07-113
2 Report of Group of Ministers on constitution of Goods and Services Tax
Tribunal
114-130
3 Ratification of the Notifications, Circulars and Orders issued by the GST
Council
131-133
4 Issues recommended by the Law Committee for the consideration of the
GST Council
i Amendment in Section 23 of the CGST Act, 2017 134-135
ii Proposal to extend time period mentioned in Section 62(2) of the
CGST Act, 2017
136-138
iii Change in Place of Supply of transportation of goods under
Section 13(9) of the IGST Act, 2017
139-140
iv Rationalisation of late fee for FORM GSTR-9 and amnesty
for non-filers of FORM GSTR-4, FORM GSTR-9 and FORM GSTR-10
141-147
v Amendment in CGST Rules and Notification for biometricbased Aadhaar authentication of registration applicants
148-152
vi Extension of time limit for application for revocation of
cancellation of registration
153-156
5
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
157-162
b) Issues where no change has been proposed by the Fitment Committee
in relation to goods – Annexure-II
163-164
c) Issues deferred by the Fitment Committee for further examination in
relation to goods – Annexure-III
165-169
d) Recommendations made by the Fitment Committee for making
changes in GST rates or for issuing clarifications in relation to services –
Annexure-IV
170-172
6 Report of Group of Ministers (GoM) on Capacity Based Taxation and
Special Composition Scheme in certain sectors on GST
173-189
7 Closure of Group of Ministers (GoM) on levy of Covid Cess on Pharma
and Power in Sikkim
190-190
8 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.
191-192
9 Issues recommended by GSTN :
1. Proposed Changes in HR Policies and Transition Management
from GSTN
193-200
2. Proposal for Changes in the Revenue Model of GSTN and
transition to the new Revenue Model
201-202
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3. Waiver of Interest on delayed receipt of Advance User Charges
(AUC) from a few states and CBIC
203-204
4. Data Archival Policy for the GST System 205-205
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.
206-284
10 Recommendations of the 17th IT Grievance Redressal Committee for
approval/decision of the GST Council
285-356
11 Agenda on Report of Committee of Officers (CoO) on GST Audit along
with Draft Model All India GST Audit Manual
356-359
12 Any other agenda with the permission of the Chair -
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Discussion on Agenda Items
Agenda Item 1: Draft Minutes of the 48th Meeting of GST Council held on 17th December, 2022
The 48th meeting of the GST Council was held on 17th December, 2022 through video
conferencing under the Chairpersonship of the Hon’ble Union Finance Minister, Smt. 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, States, Union Territories with legislature, GST Council
Secretariat and GSTN who attended the meeting is at Annexure-2.
1.2 The following agenda items were listed for discussion in the 48th meeting of the GST Council
as stated below:
TABLE OF CONTENTS
Agenda
No.
Agenda Item
1 Confirmation of Minutes of 47th GST Council Meeting held on 28th& 29th June, 2022
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
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
b) Issues where no change has been proposed by the Fitment Committee in relation to
goods – Annexure-II
c) Issues deferred by the Fitment Committee for further examination in relation to goods
– Annexure-III
d) Recommendations made by the Fitment Committee for making changes in GST rates
or for issuing clarifications in relation to services – Annexure-IV
e) Issues where no change has been proposed by the Fitment Committee in relation to
services – Annexure-V
f) Issues deferred by the Fitment Committee for further examination in relation to
services – Annexure-VI
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.
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)
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along with monthly performance report for the months of October and November,
2022 for the information of the Council
6 Ad-hoc Exemptions Orders issued under Section 25(2) of the Customs Act, 1962 to be
placed before the GST Council for information
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
ii. Refund to unregistered persons
iii. Decriminalization of the CGST Act, 2017
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 the applicant
v. Clarifying the manner of re-determination of demand in terms of sub-section (2)
of Section 75 of the CGST Act, 2017
vi. Amendment in the CGST Rules, 2017
I. Amendment in sub-rule (3) of Rule 12
II. Amendment in sub-rule (1) of Rule 37
III. Insertion of Rule 37A
IV. Amendment in Rule 46
V. Amendment in Rule 46A
VI. Insertion of proviso in sub-rule (8) of Rule 87
VII. Amendment in Rule 108 and Rule 109
VIII. Insertion of Rule 109C
IX. Deletion of clause (d) of sub-rule (14) of Rule 138
X. Amendment in entry (5) of Annexure appended to sub-rule (14) of Rule 138
XI. Substitution of FORM GST REG-19

XII. Amendment in FORM GST REG-17
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XIII. Amendment in FORM GST DRC-03
vii. Supplies by unregistered person and composition dealers through e-commerce
operators
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
B. Amendment to Section 23 to provide overriding effect over Sections 22(1) & 24
C. Amendments in the CGST Act, 2017 to restrict filing of returns / statements after
completion of specified time in view of data archival policy
D. Proposal for amendment of sub-section (6) of Section 54 of CGST Act, 2017
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
x. Retrospective applicability of paras 7, 8(a) and 8(b) of Schedule III of the CGST
Act, 2017
xi. Mechanism to deal with differences in liabilities between GSTR-1 and GSTR3B, along with draft rules and proposed FORM DRC-01B for implementing the
same
xii. Clarification on various issues in GST
A. Clarification on taxability of No Claim Bonus offered by Insurance companies
B. Clarification on applicability of e-invoicing w.r.t an entity
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
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
xv. Amendment in provisions related to OIDAR Services under the IGST Act, 2017
xvi. Amendment in Section 17 of the CGST Act, 2017 regarding ITC in respect of
CSR (Corporate Social Responsibility) expenditure
xvii. Issues related to place of supply in terms of the proviso to Section 12(8) of the
IGST Act, 2017
8 Issues recommended by GSTN:
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1. Proposed Changes in HR Policies and Transition Management from GSTN
2. Proposal for Changes in the Revenue Model of GSTN and transition to the new
Revenue Model
3. Waiver of Interest on delayed receipt of Advance User Charges (AUC) from a
few states and CBIC
4. Data Archival Policy for the GST System
5. Implementation of facility to Generate Document Identification Number in GST
Back Office for Model 2 States incompliance with the Hon’ble Supreme Court
judgement in W.P 320 of 2022.
9 Report of Group of Ministers on constitution of Goods and Services Tax Tribunal
10 Closure of Group of Ministers (GoM) on levy of Covid Cess on Pharma and Power in
Sikkim
11 Closure of Group of Ministers (GoM) to examine the feasibility of implementation of eway bill requirement for movement of gold and other precious stones.
12 GST Data sharing with Ministries and Departments
13 Review of revenue position under Goods and Services Tax
14 Final Report of Group of Ministers (GoM) on Capacity Based Taxation and Special
Composition Scheme in certain sectors on GST
15 Recommendations of the 17th IT Grievance Redressal Committee for approval/decision
of the GST Council
16 Agenda on Report of Committee of Officers (CoO) on GST Audit along with Draft
Model All India GST Audit Manual
i. Report of the Committee of Officers (CoO) on GST Audit 2022 (Annexure A)
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)
iii. Model All India GST Audit Manual (Annexure II)
iv. Report of the sub-committee constituted to broadly outline the procedural aspects
of joint and thematic audit (Annexure III)
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)
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)
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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)
17 Any other agenda with the permission of the Chair.
1.3 The meeting started with greetings from Hon’ble Members to the Hon’ble Chairperson. The
Hon’ble Chairperson welcomed and introduced the new Revenue Secretary, Sh. Sanjay Malhotra to
the Hon’ble Members of the Council and thanked ex Revenue Secretary, Sh. Tarun Bajaj for his
contribution.
1.4 With the permission of the Chair, the Secretary to the GST Council welcomed all the Hon’ble
Members of the Council and participating officers to the 48th meeting of the GST Council.
The Secretary, on behalf of the Council, thanked the following former Hon’ble Members of the
Council for their immense contribution –
1. Shri Tarkishore Prasad, ex Member from Bihar
2. Shri AjitPawar, ex Member from Maharashtra
3. Shri Sukh Ram Chaudhary, ex Member from Himachal Pradesh
He further extended a warm welcome to the incoming Hon’ble Members of the GST Council
to the 48th meeting of the GST Council1. Sh. Devendra Fadnavis, Hon’ble Deputy Chief Minister, Maharashtra
2. Sh. Vijay Kumar Chaudhary, Hon’ble Finance and Commercial Tax Minister, Bihar
and thanked ex. Revenue Secretary, Sh. Tarun Bajaj for his contributions.
1.5 The Secretary stated that in its 47th meeting at Chandigarh, the Council had formed a GoM on
Goods and Services Tax Appellate Tribunal with Sh. Dushyant Chautala, Hon’ble Deputy Chief
Minister of Haryana as the Convener and Hon’ble Ministers from States of Andhra Pradesh, Goa,
Rajasthan, Uttar Pradesh and Odisha as Members. He stated that the GoM had submitted their
recommendations in the form of a report which was placed as an agenda before the Council. He
thanked all the Hon’ble Members of the GoM for their valuable recommendations.
1.6 Further, he stated that the GST Council had formed a GoM on Capacity based taxation and
Special Composition Scheme in certain Sectors on GST with Sh. Niranjan Pujari, Hon’ble Minister of
Finance, Odisha as the Convener and Hon’ble Ministers from Delhi, Haryana, Kerala, Madhya
Pradesh, Uttar Pradesh and Uttarakhand as Members. The GoM had submitted its report which was
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placed before the Council for deliberations. He thanked all the Hon’ble Members of this GoM for their
valuable recommendations.
1.7 The Secretary further stated that in this Council meeting, there were agendas for closure of
GoM on movement of Gold and Precious Stones and GoM on Levy of Covid Cess on power and
pharma sector in Sikkim. He thanked all the Hon’ble Members of these two GoMs for their valuable
contributions.
1.8 The Secretary informed that the GST Revenue had set new records this year. The gross GST
revenue collected in the month of November, 2022 was Rs. 1,45,867 crore which was 11 % higher
than the GST revenue in the same month last year. The gross GST revenue collected in the month of
October, 2022 was Rs. 1,51,718 crore which was 14 % higher than the GST revenue in the same
month last year. GST collections have crossed Rs.1.40 lakh crore mark for the 8th time at a stretch
since March, 2022. He thanked all the States, Central GST formations and Union Territories for their
remarkable efforts in revenue augmentation.
1.9 He further informed the Council that he had held a meeting with the officers of the States/UTs
on 16th December, 2022 and had a very frank and fruitful discussion on various agenda items which
would immensely help the Council in steering the agenda of this meeting. He sought the permission
of the Chair to proceed with the discussions on the agenda.
1.10 The Hon’ble Chairperson requested the Hon’ble Members to offer comments, if any, before
proceeding with the agenda items.
1.11 The Hon’ble Member from Tamil Nadu suggested that the meeting could be concluded by
01:30 p.m. and all agenda items that could not be discussed, could be rolled over to the upcoming
Council meeting to be discussed in physical mode. He explained that due to budget session
approaching, Hon'ble Members would be pre-occupied. Hon'ble Members from Telangana, Gujarat,
Karnataka, Maharashtra etc. agreed with this suggestion and many States like Gujarat, Haryana,
Kerala and Andhra Pradesh suggested that items could be prioritized and the Tribunal agenda could be
discussed on priority. Hon’ble Member from West Bengal stated that she was agreeable with any
decision taken by the Council in that regard.
1.12 The Secretary stated that the majority view appears to be that the meeting could be concluded
by 01:30p.m. He informed that the officers meeting on 16th December was concluded by 03:00 p.m.
even when the Law Committee agenda was discussed at length. He suggested that a call could be
taken around 1:30 p.m. as the meeting progressed. The Hon’ble Chairperson accorded permission to
start with the agenda.
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2. Agenda Item 1: Confirmation of the Minutes of the 47th Meeting of the GST Council
The first agenda item pertained to confirmation of the minutes of the 47th GST Council
meeting held on 28th and 29th June, 2022 at Chandigarh. The Secretary stated that some comments had
been received from few States which were basically editorial changes which had been carried out and
the revised minutes incorporated in the agenda and circulated to all the Hon’ble Members.
The Council adopted the Minutes of the 47th meeting of the GST Council.
3. 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
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
Committee (GIC) for the information of the Council. He stated that the GIC decisions are also
implemented through Notifications, Circulars, and Orders. Principal Commissioner, GST Policy Wing
informed the Council that subsequent to release of the Agenda, Notification No. 25/2022-Central Tax
was issued on 13th December, 2022 pursuant to the decision of GIC to provide relief to the taxpayers
affected by cyclone 'Mandous' by extending the due date for furnishing Form GSTR-1 for November,
2022 for registered persons whose principal place of business is in specified districts of Tamil
Nadu. The Council took note of the decisions of the GST Implementation Committee (GIC) and
ratified the Notifications, Circulars and Orders issued. Further, the Notifications, Circulars and Orders
issued by the States which were parimateria with above Notifications, Circulars and Orders were also
ratified.
4. Agenda item 3: Recommendations of the Fitment Committee for the consideration of the GST
Council
4.1 The Secretary introduced the agenda item relating to the recommendations of the Fitment
Committee. These recommendations had been given in six (06) 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 or clarification was being recommended; the second Annexure
listed items (goods) where no tax rate changes were being recommended and the third Annexure listed
items (goods) where the recommendations would be given by the Fitment Committee after further
deliberations and approval of the Council would be sought. Categorization on similar lines had been
made in fourth, fifth and sixth Annexures pertaining to the services.
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4.2 The Secretary to the Council stated that the recommendations of the Fitment Committee were
discussed in detail in the Officer’s Meeting on 16.12.2022 and most of recommendations were agreed
to by all. Then the Secretary asked JS, TRU to take the Council through a brief presentation on the
recommendations of the Fitment Committee.
4.3 Joint Secretary, TRU stated that the agenda note dealt with proposals regarding GST rates and
clarifications relating to supply of goods and services. The proposed changes emanated from the
recommendations made by the Fitment Committee on the basis of representations received from
various stakeholders including Ministries and other offices of Centre and States, seeking changes in
GST rates/ issuance of clarifications regarding classification and GST rates applicable on supply of
certain goods and services.
4.4 She further informed that the Fitment Committee had examined the representations on on 12th
& 23rd September, 2022 and 28th October, 2022. After examination, the Fitment Committee had
recommended changes in GST rates or issue of clarifications, in relation to certain goods and services.
Further, the Fitment Committee had 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 and thus those issues had been deferred.
4.5 Accordingly, Fitment Agenda for consideration of the GST Council was summarized in six
Annexures (I to VI). There were a total of 19 issues relating to goods out of which the Fitment
Committee had recommended rate changes or issue of clarifications in case of nine items (Annexure-I
of the Agenda Volume-I), not recommended any change for 8 items (Annexure-II of the Agenda
Volume-I) and deferred two issues (Annexure-III of the Agenda Volume-I) for further examination. In
case of services, there were a total of 27 issues, out of which the Fitment Committee had
recommended rate change in 7 (Annexure-IV of the Agenda Volume-I), not recommended any change
for 16 services (Annexure-V of the Agenda Volume-I) and deferred 4 issues (Annexure-VI of the
Agenda Volume-I) for further examination.
4.6 Thereafter, JS,TRU presented the Fitment agenda. (Annexure-3)
4.7 The first item of discussion was the proposal for deletion of ‘pencil sharpener’ from entry no.
180 of Schedule II mentioned at Sl. No. 1 of Annexure-I. She stated that in the 47th meeting of the
Council, it was decided to increase the rate on this item from 12% to 18% on the recommendation of
the GoM on Rate Rationalization. That rate change was carried out by omitting entry 188 in Schedule
II. However, inadvertently in entry 180 of the Schedule II, the tax rate pertaining to pencil sharpener
remained at 12%. This agenda had been brought before the Council in order to remove this
inconsistency.
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4.8 The Hon’ble Member from Punjab, West Bengal and Puducherry requested not to increase
GST rate from 12% to 18% on pencil sharpener as the item pertains to education of young children.
4.9 JS, TRU then presented the agenda pertaining to by-products of milling of dal/pulses like
Kanda, Churi (also known as Chuni), Chilka wherein the Fitment Committee had recommended that
in view of the dual use of these products with differential GST rate (Nil when supplied as cattle feed
and 5 % when supplied as cattle feed ingredients), till the GoM on Rate Rationalization takes a view
on rationalization of tax 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, these products could be exempted from GST, irrespective of their end use.
Fitment Committee also recommended that a clarification be issued to regularize the matter of the
intervening period on as is basis from the date of issuance of the last Circular (that is, consequent to
47th GST Council Meeting) on account of genuine doubts.
4.10 The Hon’ble Member from Madhya Pradesh supported the proposal to exempt the by-products
of milling of dal/pulses like Kanda, Churi (also known as Chuni), Chilka from GST, irrespective of
their end use.
4.11 The Hon’ble Chairperson suggested that there could be full presentation on agenda 3 (a) and
then the floor would be opened for discussion.
4.12 JS, TRU then presented the issue relating to SUV cars wherein doubts had been raised as to
whether all four conditions viz. engine capacity exceeding 1500 cc, popularly known as SUV, a
motor vehicle of length exceeding 4000 mm and having ground clearance of 170 mm and above need
to be satisfied for levying higher cess rate as per entry 52 B of Compensation Cess Notification No.
1/2017 – Compensation Cess (Rate) dated 28.6.2017 or the conditions in Explanation to the entry are
optional. Fitment Committee recommended that a clarification be issued to clarify that all four
conditions need to be fulfilled for levy of higher compensation cess rate of 22%.
4.13 JS, TRU further explained that interim Report of the Group of Ministers (GoM) on capacitybased 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. Now, a request had been made to also include Mentha arvensis, classifiable under HSN Code
3301 25 90, in Notification No. 10/2021- Central Tax (Rate) dated 30.9.2021 under Reverse Charge
Mechanism. The Fitment Committee had recommended to include Mentha arvensis, classifiable under
HSN Code 3301 25 90, under Reverse Charge Mechanism.
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4.14 The next issue was regarding clarification on applicable GST rate and 6/8 digit HS code of
carbonated beverages of fruit drink or carbonated beverages with fruit juice. JS TRU explained that in
the 45th Meeting, the GST Council had approved a separate entry for carbonated beverages as long as
they are carbonated (irrespective of whether carbon dioxide is added as a preservative or additive).
The Fitment Committee recommended that 2202 99 is the appropriate 6 digit code and that to remove
any ambiguity, an exclusion be created for such beverages in entry No. 48 of Schedule II of
Notification 1/2017- Central Tax( Rate) which deals with fruit pulp or fruit juice based drinks.
4.15 JS, TRU stated that the next issue was to clarify the classification of Rab (Rab- Salawat). The
Fitment Committee noted that Rab (Salawat) being in liquid or semi-solid form did not qualify to be
classified under HSN 1701, which dealt with solid form of cane or beet sugar and chemically pure
sucrose, and since its chemical composition was different from that of molasses, that was not
classifiable under HSN 1703. Therefore, the Fitment Committee had recommended to clarify that Rab
(Rab-Salawat) falls under HSN 1702 attracting 18% GST.
4.16 The next item presented pertained to issuance of clarification regarding products such as
fryums manufactured using the process of extrusion. The Fitment Committee recommended to clarify
that the item ‘fryums’ manufactured using the process of extrusion would fall under CTH 1905
attracting GST @ 18%.
4.17 She presented the next issue regarding clarification sought on applicable IGST rate on items
imported for petroleum operations under Notification No. 3/2017-Integrated Tax (Rate) wherein the
Fitment Committee had noted that the said Notification provided a concessional rate of duty to such
products which attracted a higher rate of GST when those goods were imported for petroleum
operations. The Fitment Committee recommended that a clarification could be issued that a taxpayer
could claim the lower rate for specific items as given in the Schedule.
4.18 The next item presented was for extending concessional rate of 5% on Ethyl alcohol supplied
to refineries for blending with motor spirit (petrol). JS TRU stated that the National Policy on Biofuels
– 2018 provided an indicative target of 20% ethanol blending under the Ethanol Blended Petrol (EBP)
Program by 2030. 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. The concessional GST rate of 5% was available only to Oil Marketing
Companies (OMCs) like IOCL, BPCL and HPCL under entry 102A of Schedule I of Notification No.
1/2017-Central Tax (Rate) dated 28.6.2017. She submitted before the Council that keeping in view the
implementation of the Ethanol Blending Programme, and since concessional GST benefit was already
given to OMCs for blending ethanol with petrol, the proposal was to provide the same concessional
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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. She submitted that Fitment Committee had recommended that
the said entry 102A of Schedule I might be amended to include refineries in addition to Oil Marketing
Companies.
4.19 JS, TRU then informed the Council about agenda 3 (b) which pertained to the list of goods
where no change in GST rate had been recommended by the Fitment Committee.
4.20 The Hon’ble Chairperson then opened the floor for discussion except for pencil sharpeners and
by-products of milling of dal/pulses on which comments had already been made by the Hon’ble
Members.
4.21 The Hon’ble Member from Haryana stated that as per proposal on SUVs, a higher rate of
Compensation Cess would be applicable on motor vehicles which were popularly known as SUVs
‘and’ which satisfied all the other three conditions, viz. (i) the engine capacity exceeds 1500 cc (ii) the
length exceeds 4000 mm; and (iii) the ground clearance was 170 mm and above. He suggested that in
case a sedan car which fulfilled all three conditions after and may also be called an SUV so as to avoid
any confusion, he suggested to remove the word ‘and’ in the clarification being recommended by the
Fitment Committee. He requested for a clarification in that regard.
4.22 JS, TRU clarified that the definition of SUV had been carried forward from the Central Excise
regime and a vehicle to be called SUV, all four conditions need to be fulfilled and would not cover
sedan car accordingly.
4.23 The Secretary clarified that that proposal was for vehicles which were popularly known as
‘SUV’ and also fulfilled remaining three conditions to be classified as a SUV.
4.24 The Hon’ble Member from Haryana further stated that there was a category of cars like Multi
Utility Vehicle (MUV), which might also fulfil above conditions, but would not attract a higher rate of
tax since that was not called a SUV.
4.25 The Hon’ble Chairperson asked JS TRU from where the definition of SUV was derived. JS,
TRU responded that the definition of SUV was carried forward from the Central Excise regime. The
Hon’ble Chairperson enquired about how the issue of compensation cess in case of other variants of
vehicles like MUV that were available in the market would be addressed. JS, TRU responded that that
aspect was yet to be seen.
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4.26 The Chairman, CBIC suggested that other types of vehicles could also be included which
satisfy the other three conditions as pointed out by the Hon’ble Member from Haryana. The Hon’ble
Chairperson further enquired about the treatment of MUVs under that proposal.
4.27 The Chairman, CBIC suggested that MUVs might also be included in the Explanation for levy
of higher rate of compensation cess @ 22% like SUVs. The Hon’ble Chairperson enquired whether
the suggestion of Chairman, CBIC would satisfy the query of the Hon’ble Member from Haryana. The
Hon’ble Member from Haryana responded that there was a need to restudy this proposal and bring that
back in the future GST Council meetings to avoid any instances of tax evasion.
4.28 The Hon’ble Chairperson proposed that an additional line might be inserted in the clarification
that that was applicable only to SUVs and as regards other descriptions of vehicle like MUVs, the
matter should be studied and brought back before the Council in the upcoming meetings. The Hon’ble
Member from Karnataka supported the view taken by the Hon’ble Chairperson.
4.29 The Hon’ble Member from Uttar Pradesh, referring to the agenda item on ‘Rab’ suggested that
both Jaggery and ‘Rab’ were made from sugarcane juice and were mostly used by poor people. Thus
the rate of GST on both Jaggery and Rab should be kept the same. He further stated that Rab was not a
raw material for liquor preparation, so that should not attract GST rate of 18%.
4.30 The Hon’ble Chairperson clarified that the issue brought before the Council was only to clarify
the classification of Rab. And that the clarification was necessitated as certain States had issued
notices classifying Rab as similar to molasses under Chapter 1703 demanding 28% GST. No new tax
had been proposed on Rab. If the Hon’ble Member from Uttar Pradesh wanted to propose a lower rate
than 18% on Rab due to genuine reasons, that could be brought back before the Council as a separate
agenda in the upcoming meetings.
4.31 The Secretary clarified that the proposal was only for the purpose of clarification on
classification and applicable tax rate on Rab, as divergent tax rates were being made applicable on that
item across the States. As already stated by the Hon’ble Chairperson, the suggestion for a lower tax
rate on Rab could be brought back before the Council as a separate agenda in the upcoming meetings.
4.32 The Hon’ble Member from Punjab stated that the tax rate on ethyl alcohol should not be
decreased to 5% as that would lead to tax evasion in the States.
4.33 The Secretary clarified that the concessional GST rate of 5% was available only to Oil
Marketing Companies (OMCs). The proposal was 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, keeping in view the implementation of the Ethanol Blending Programme.
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4.34 The Secretary to the Council also clarified that the rate on Pencil Sharpener was increased
from 12% to 18% on the basis of recommendation of GoM to rectify inverted duty structure and to
address the inconsistency. The Hon’ble Chairperson further clarified that the proposal was only for
removal of inversion in duty rate structure and to streamline the tax structure on the item. She stated
that the inversion scenario on the item, quantum of refunds being given etc. could be examined in
detail by the Fitment Committee and then a fresh proposal brought as to whether a lower rate of GST
on pencil sharpeners could be considered.
4.35 Further, the Secretary stated that the Council may approve the existing proposals in Agenda-3
(a) whereas the issues raised by the Members regarding the lower tax rate on pencil sharpener;
compensation cess on vehicles which were similar to SUV and fulfilling the mandated conditions; and
lower GST rate on Rab would be taken up in the upcoming GST Council meetings after detailed
deliberation by the Fitment Committee.
4.36 The Hon’ble Chairperson instructed that issues regarding enhanced Compensation Cess on
vehicles which were similar to SUV, rate of tax on Rab and on pencil sharpeners because of duty
inversion would be examined by the Committee again and brought back to the Council for decision as
fresh proposals.
The Council approved the proposals as detailed in Agenda 3(a).
4.37 JS, TRU further informed the Council that no change was being proposed in the tax rates of
items mentioned in agenda 3(b), while agenda 3(c) contained list of goods on which decision has been
deferred for upcoming GST Council meetings.
4.38 The Hon’ble Member from Puducherry requested to reduce the GST rates from 18% to 12%
on the items like water pump set, kitchen ware and spoon mentioned in agenda 3(b) respectively as
farmers are totally dependent on ground water and no other source of water is available with them
while kitchen items are used by common public specially by the women.
4.39 The Secretary clarified that these tax rates were adopted on the recommendations of the
GoM/Fitment Committee to remove the inverted duty structure and he requested the Hon’ble
Members that such issues should not be reopened so early with a view to providing certainty and
consistency in tax policy.
4.40 The Hon’ble Member from Puducherry stated that the current system did not provide a
mechanism to States/UTs to present their views and concerns before the Fitment Committee or GoM.
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4.41 The Hon’ble Chairperson stated that the Hon’ble Member from Puducherry could raise his
concerns to the Council in writing and the Fitment Committee would examine these concerns afresh in
detail. As of now the agendas 3 (b) and 3 (c) could be approved.
The Council approved the proposals as detailed in Agendas 3 (b) and 3(c).
4.42 JS, TRU further presented the agenda 3(d) i.e., Recommendations made by the Fitment
Committee for making changes in GST rates or for issuing clarifications in relation to services. She
presented the following issues-
 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
 Omission of 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.
 To clarify the applicability of GST on revenue apportioned by Indian Railways (IR) to SPVs
and O&M costs charged by Indian Railways from SPVs.
 To clarify applicability of GST on Air Force Officers Mess.
 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.
 To clarify the applicability of GST when the residential dwelling is rented by a person who is
the proprietor of a proprietorship firm in his personal capacity for use as his own residential
dwelling. The proposal was to amend the entry as well as insert an Explanation to the entry
No. 12 of Notification No. 12/2017-CTR
 To specify a positive list of services under Sr. No. 3 & 3A of Notification No. 12/2017-
Central Tax (Rate).
4.43 The Secretary informed the Council that on the issue of clarificatory circular regarding
applicability of GST on Air Force Officers’ Mess, a suggestion was received during the officers’
meeting to include similarly placed messes also. He stated that if the Council agrees, the proposed
circular may be suitably amended to include similarly placed messes.
4.44 JS, TRU informed the Council that pursuant to the suggestions received in the Officers’
meeting it was proposed that only Explanation could be inserted in entry No. 12 of Notification No.
12/2017-CTR and the same could be issued only in respect of proprietorship concern, if agreed to by
the Council. Further, it could be clarified that incentives paid to banks under the scheme for promotion
of RuPay Debit Cards and BHIM-UPI transactions were in the nature of subsidies and thus, not
taxable.
4.45 The Hon’ble Member form Tamil Nadu informed that in the meeting at Chandigarh, the State of
Tamil Nadu had raised some concerns and submitted a list of concerns in writing also regarding
positive list of services. He stated that where all States, Central and Local bodies service procurements
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were exempt, then imposing a list of positive services would result in additional expenditure and that
might be seen as discriminatory against the local Self-Governance Principle. He suggested to leave the
entire schedule as exempt for States, Central and Local bodies rather than specifying a positive list.
4.46 The Hon’ble Member from Maharashtra suggested that a positive list of services should be
specified to avoid ambiguity. Otherwise, States would have to come to Council every time for
clarification.
4.47 The Hon’ble Member from Telangana sought exemption for minor irrigation
work/maintenance services of minor irrigation tanks from GST as State of Telangana had around
46,000 minor irrigation tanks through which 25 lakh acres of land was being irrigated every year
which attracted meagre or almost NIL material component. He further requested exemption of the
Public Distribution System (PDS) related services like custom milling and transportation services
from GST.
4.48 The Hon’ble Member from Delhi requested to follow the lists of functions enumerated in the
Eleventh and Twelfth Schedules to Article 243G and Article 243W respectively and if there were
instances of tax evasion then the Council can issue some clarifications rather than pruning the said
lists. He stated that bringing a positive list would create a lot of ambiguity and confusion.
4.49 The Hon’ble Member from Karnataka suggested that if there were any other additional
services then the Council should take that as specific cases. However, all the services which are as per
the Constitution should be kept untouched.
4.50 The Hon’ble Member from West Bengal also suggested that there was no requirement to prune
the list of services and all functions as listed out in Articles 243G and 243W of the Constitution should
be exempted.
4.51 The Hon’ble Member from Uttar Pradesh, Gujarat, Goa, Tripura and Assam supported the
proposal of the Fitment Committee to have a positive list of specified Services.
4.52 The Hon’ble Member from Andhra Pradesh requested to exempt pure manpower services
which were hired by the Government or Government agencies and that in case of local bodies, entire
services mentioned in Eleventh and Twelfth Schedules of the Constitution should be exempted.
4.53 The Hon’ble Member from Kerala suggested to take the issue later as it required more
discussion.
4.54 The Secretary stated that in GST regime there were no end use-based exemption in case of
supply of goods to Government. However, in case of services during the Service Tax regime, the tax
was collected by the Centre and appropriated by the Centre. Thus, there were certain end use-based
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exemptions available in case of specific services rendered to Central and State Governments. Under
GST regime, the distinction between the Goods and the Services had been removed. He opined that
end use exemption in the case of services should also be not there. He stated that the list of 12 services
identified by the Fitment Committee covers 90% of the services rendered by the local authorities.
Further, he suggested that certain works like construction of tanks etc. had more component of goods
and including them would make it difficult for the tax authorities to ascertain whether it was supply of
goods or services. Accordingly, the Council had recommended to come up with a pruned list of
services under positive list.
4.55 The Hon’ble Member from Tamil Nadu stated that he did not agree that there was consensus
on the issue and suggested that vote might be taken on the matter. He also requested that his dissent
might be taken on record.
4.56 The Hon’ble Members from Delhi, Kerala, Andhra Pradesh and West Bengal stated that they
did not agree with the proposal of the Fitment Committee to specify a positive list of services under
Sr. No. 3 & 3A of Notification No. 12/2017-Central Tax (Rate).
4.57 The Hon’ble Chairperson, after duly considering the views of the Hon'ble Members, decided to
postpone the discussion on the positive list of services for upcoming Council meetings.

The Council decided that all proposals under agenda item 3(d) were approved except the issue
of specifying a positive list of services under Sr. No. 3 & 3A of Notification No. 12/2017-Central
Tax (Rate) which was deferred.
4.58 JS, TRU then presented Agenda 3(e) where no changes were recommended by the Fitment
Committee in respect of certain services.
4.59 The Secretary requested for comments from the Hon’ble Members on Agenda item 3(e).
4.60 The Hon’ble Member from Maharashtra raised the issue of GST rate on under construction
apartments. In the same building, there were both residential units where no ITC is available as well as
commercial units where ITC is available. He informed that it was very difficult to keep proper
accounting in this scenario. He suggested that in case of residential building with mixed use, there
should be uniform 10% GST with ITC on construction service.
The Council approved the proposals in Agenda 3(e).

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4.61 JS, TRU further informed the Council that agenda 3(f) was regarding four issues which had
been deferred.

The Council approved the proposals in Agenda 3(f).

4.62 The Hon’ble Members from Odisha and Telangana requested to exempt the levy of GST of
18% on Tendu leaves because it was a matter involving the livelihood of tribal people. Further, the
Tendu leaves were used only in Bidi making which was leviable to GST @ 28% and there was no
possibility of inverted duty structure.
4.63 The Hon’ble Chairperson requested the Hon’ble Members from Odisha and Telangana to
forward their submissions to the Fitment Committee which in turn would study the issue in detail.
5. Agenda item 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
The Secretary presented the Agenda No. 4 pertaining to the 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 and informed that this agenda was presented by the
Joint Secretary, GST Council Secretariat during the officers meeting held on 16.12.2022 and there was
unanimous acceptance by everyone on the proposal being made in that agenda (The detailed
presentation attached as Annexure-5).
The Council took note of the same and approved the agenda.
6. Agenda item 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, 2022 and November, 2022 for
the information of the Council
The Secretary presented the Agenda No. 5 regarding performance report of National AntiProfiteering Authority (NAA) 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 and informed the Council that work of NAA had
been shifted to Competition Commission of India from 01.12.2022 as per the decision of the GST
Council in its 45th meeting.
The Council took note of the same and approved the agenda.
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7. 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

7.1 The Secretary presented the Agenda No. 6 i.e., Ad-hoc exemption orders issued under Section
25(2) of the Customs Act, 1962 to be placed before GST Council for information. He informed that in
the 26th meeting of the GST Council held on 10.03. 2018, it was decided that all ad-hoc exemption
orders issued with the approval of the Hon’ble Finance Minister as per the guidelines contained in
Circular No. 09/2014-Customs dated 19.08. 2014 as was the case prior to the implementation of GST,
shall be placed before the GST Council for information. The Secretary informed the Council that three
Ad-hoc exemption orders had been issued since last meeting of the GST Council.

7.2 The Hon’ble Member from Tamil Nadu suggested the word ‘for information’ be replaced with
‘deemed ratification’ in case of ad-hoc exemption orders.
7.3 The Hon’ble Member from Goa suggested that it would not make any fundamental difference
whether it was ‘for information’ or ‘deemed ratification’. He suggested that present practice of placing
ad-hoc exemption orders issued under Section 25(2) of the Customs Act, 1962 before the GST
Council for information could be continued.
The Council took note of the ad-hoc exemption orders issued.

8. Agenda Item 7: Issues recommended by the Law Committee for the consideration of the GST
Council
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 16th December, 2022 and there was an agreement in the Officers’ meeting
on most of the issues. He stated that in the Officers’ meeting, concerns were raised on the agenda item
pertaining to deletion of clause (d) of sub-rule (14) of Rule 138 of CGST Rules which was proposed
for providing a uniform threshold for intra-state movement of goods and it was suggested that the
agenda item need not be considered for approval by the Council. He requested Principal
Commissioner, GST Policy Wing to make a presentation on the recommendations of the Law
Committee and the discussions held in Officers’ meeting on 16th December, 2022 on the same. The
Principal Commissioner, GST Policy Wing accordingly made the detailed presentation (attached as
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Annexure-4) giving overview of the recommendations made by the Law Committee and the
discussions in Officers’ meeting on the said agenda.
8.1 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
8.1.1 Principal Commissioner, GST Policy Wing informed that Rule 8 (4A) of the CGST Rules,
2017 inserted vide Notification No. 94/2020-Central Tax dated 22.12.2020 provided for biometricbased Aadhaar authentication but the said provision is yet to be notified. He informed that the GoMon
GST System Reforms in its first report had approved the proposal to improve the registration process
by using mandatory biometric authentication for high-risk applicants for registration under GST and
the pilot project is to be conducted in the State of Gujarat. The GoM had recommended mandatory
physical verification only in case of high-risk applicants in cases where the Aadhaar authentication is
not opted for or has failed. The issue was deliberated by the Law Committee and it had recommended
mandatory physical verification in all cases where the Aadhaar authentication is not opted for or has
failed.
8.1.2 Law Committee recommended substitution of Rule 8 (4A) of the CGST Rules, 2017 in order
to mandate biometric-based Aadhaar authentication for high-risk applicants who opt for authentication
of Aadhaar number. Further, Law Committee recommended insertion of sub-rule (4B) in Rule 8 of the
CGST Rules, 2017 to provide for exemption from biometric-based Aadhaar authentication in
States/UTs where the pilot project is not being undertaken. It also recommended amendment of subrule (5) of Rule 8 of the said Rules in order to provide that acknowledgement shall be issued to the
applicant only after completion of biometric-based authentication. In addition, Law Committee
recommended amendment to said Rule 9 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. The Principal Commissioner, GST Policy Wing
further mentioned that Law Committee had also recommended that the above amendments to Rules
8(4A), 8(5) and 9 may be made only in Gujarat SGST Rules, 2017 and in the CGST Rules, 2017 at
this stage. He added that Rule 8(4B) needs to be introduced only in the CGST Rules, 2017 and that
Centre will need to issue a Notification under Rule 8(4B) for specifying all States and UTs, except
State of Gujarat, where provisions of Rule 8(4A) will not apply.
8.1.3 The Hon’ble Member from Haryana stated that at present, the time limit for verification of
registration applications in non-Aadhaar cases is 30 days and he requested that the time limit for such
non-Aadhar based verification be raised to 90 days as many fake companies get deemed registered
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after a period of 30 days. He requested the council to increase the time limit for verification to either
90 days or to 60 days in order to enable the officers to physically verify those companies.
8.1.4 The Secretary clarified that the time limit for processing of the application of registration in
cases, where Aadhaar number was not authenticated, had been kept at 30 days in line with ease of
doing business for providing registration as quickly as possible.
B. Incorporation of details of electricity bill and property registration in FORM GST REG01
8.1.5 Principal Commissioner, GST Policy Wing informed that the Group of Ministers on GST
System Reforms in its first report had approved the proposal to include Electricity Bill meta data (CA
No.) as a data field during registration by new taxpayers and that the CA Number shall be verified to
improve the quality of registered address. The States of Maharashtra and Madhya Pradesh had agreed
to carry out the pilot project for the same. Besides, the State of Madhya Pradesh had also volunteered
for the pilot project for validation of the property registration details from the Land Revenue
department.
8.1.6 The issue was deliberated by the Law Committee and recommended that the details of
Electricity consumer account number (CA Number) and Property registration be sought under State
Specific Information at Sl. No. 24 of FORM GST REG-01. It further recommended that the details of
Electricity CA Number could be notified under said Sl. No. 24 by the State of Maharashtra and details
of Electricity CA Number and property registration could be notified under said Sl. No. 24 by the
State of Madhya Pradesh.
8.1.7 The Hon’ble Member from Madhya Pradesh thanked the Council for considering their
proposal to make the registration process effective. He further submitted that if the documents such as
electricity bill or documents related to place of registration submitted by the applicant during the
registration process were verified through API, then that would curb the practice of obtaining
registration through forged documents. The Hon’ble Member from Madhya Pradesh thanked the
Council for including their State in the pilot project. He further stated that as most of the applications
of new registration were received from urban areas, therefore, there was a need to utilize the database
of Land Revenue department as well as Urban Development department for verification of place of
registration and thus, that was advisable to include Urban Development department in point no. 5 & 6
(3) of Agenda item 7(i)(b).
8.1.8 The Secretary informed the Hon’ble Member that this issue was also discussed during the
Officers’ meeting and that the suggestion of Madhya Pradesh had been taken note of for doing the
needful.
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C. Enhancement in GST Registration to restrict misuse of PAN
8.1.9 Principal Commissioner, GST Policy Wing informed that at present GST Registration was
PAN-based. However, OTP-based verification in Part-A of FORM GST REG-01 was done to verify
only the mobile number and email address provided by the authorized signatory and no intimation was
sent to the mobile number and email address of the PAN holder when a GST registration was applied
for. It was stated that that communication gap might result in misuse of PAN of a person, without his
knowledge, by unscrupulous elements.
8.1.10 The issue was deliberated by the Law Committee and it recommended that PAN-linked mobile
number and email address (fetched from CBDT database) might be captured and recorded in FORM
GST REG-01 and further, OTP based verification in Part-A of FORM GST REG-01 might be done
only on PAN-linked mobile and email address, instead of authorised signatory’s self-declared mobile
number and email address.
8.1.11 Accordingly, Law Committee proposed amendments in CGST Rules and FORM GST REG-01
as detailed in the agenda note.
The Council agreed with the said recommendations of the Law Committee in agenda
item 7(i).
8.2 Agenda Item 7(ii): Refund to unregistered persons
8.2.1 Principal Commissioner, GST Policy Wing stated that representations had been received from
unregistered buyers/recipients 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/buildings or on termination of long-term insurance policy
etc. wherein they had paid the consideration/premium in full/part, along with the applicable tax.
8.2.2 Those issues were discussed in the Law Committee and it was observed that under Section
54(1) of CGST Act, 2017, there was no restriction under GST law for any unregistered person from
claiming refund. Further, it was observed that Section 54(8)(e) of the said Act, provides that the
refund 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. GSTN had also
introduced a new functionality which allowed unregistered persons to take a temporary registration
and apply for refund under the category ‘Refund for Unregistered person’. The Law Committee
recommended amendments in CGST Rules, 2017 as detailed in the agenda note and for issuance of a
Circular for clarifying the procedure for filing application by the unregistered persons for refund of
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amount of tax borne by them in the event of cancellation of the contract/agreement for supply of
service of construction of flats/buildings or on termination of long-term insurance policy and
processing of such refunds.
8.2.3 Principal Commissioner, GST Policy Wing also mentioned that in case of refund by a person,
other than the supplier, the relevant date for filing refund application would be the date of receipt of
goods or services as per clause (g) of Explanation (2) under Section 54 of the CGST Act. The Law
Committee observed that in respect of cases where the supplier and the unregistered person had
entered into a long-term contract/agreement for the supply, with the provision of making payment in
advance or in installments but if the contract was cancelled/ terminated before supply of service,
partially or fully, for any reason, there might be no date of receipt of service, to the extent supply had
not been made/rendered. In this regard, Law Committee recommended that for the purpose of
determining relevant date in such cases 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 might be considered as the date of receipt of the services by the applicant.
The Council agreed with the recommendations of the Law Committee detailed in agenda
item 7(ii), along with the proposed amendments in CGST Rules, 2017 and the proposed
Circular.
8.3 Agenda Item 7 (iii): Decriminalization of the CGST Act, 2017
8.3.1 Principal Commissioner, GST Policy Wing informed that 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 also
deliberated that there might be a need to examine whether any enhancement was required in the
threshold for prosecution of offences under Section 132 of the Central Goods and Services Tax Act,
2017.
8.3.2 Accordingly, Law Committee 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. The Law
Committee proposed several amendments in GST law as detailed out in the agenda note for
decriminalizing various provisions of the GST Act.
8.3.3 The Law Committee recommended that the offences specified in clauses (g), (j) and (k) of
sub-section (1) of Section 132 are specifically covered and are punishable under Indian Penal Code,
and therefore, these types of offences may be excluded from prosecution under the CGST Act, 2017. It
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further recommended deletion of clause (iii) of sub-section (1) of Section 132 of the CGST Act, 2017
so that the monetary limit for prosecution is raised to Rs two crore from the current Rs one crore. The
Law Committee also recommended to reduce the range of compounding amount to minimum of 25%
of the tax amount to maximum of 100% of tax amount in the CGST Act, 2017. The Principal
Commissioner, GST Policy Wing informed the Council that during the Officers’ meeting, the States of
Punjab and Tamil Nadu were of the view that the threshold for prosecution might not be changed for
issuers of fake invoices. He stated that detailed deliberations took place on that proposal in the
officers’ meeting wherein general view was that the proposal made in the agenda note, as
recommended by Law Committee, might be agreed to at present and in future, if any misutilization of
those provisions was noticed, then the same would be re-visited.
8.3.4 The Hon’ble Member from Tamil Nadu stated that they agreed with proposal for
decriminalization of GST Law, except in respect of bill traders who are a bane on the system. He
stated that increasing the monetary limit for prosecution to Rs two crore from the current Rs one crore
will have serious implications on revenue. He mentioned that in their State, they had detected 471
cases under Rs. one crore with a revenue implication of Rs. 222 crore. He stated if the limit is raised
from Rs. one crore to Rs. two crore, only 241 cases could be prosecuted with a revenue implication of
Rs. 350 crore. He stated that since bill trading causes greatest revenue loss, therefore bill trading upto
Rs. 2 crore should not be decriminalized and threshold should be retained at Rs. one crore as indicated
by the data. He further stated that that was quite difficult to prosecute such bill traders as civil cases
and that was much more effective to prosecute them as criminal cases.
8.3.5 The Hon’ble Member from Puducherry stated that they completely agreed with the views of
State of Tamil Nadu and added that in small UTs like Puducherry, it would not be possible for them to
book cases if the threshold for prosecution was raised to Rs. two crore.
8.3.6 The Hon’ble Member from Goa stated that if the threshold for prosecution was increased to
Rs. two crore then many cases would go out of the prosecution net. He stated that the threshold should
be maintained at Rs. one crore so that there was some fear in dodging the payment of GST especially
in case of trading of invoices.
8.3.7 The Hon’ble Member from Kerala stated that the limit for prosecution should continue at the
present threshold, especially with regard to the bill trading. He suggested that the existing provisions
could be continued as of now and the enhancement of threshold might be considered at a later stage.
8.3.8 The Hon’ble Member from Punjab stated that it would be desirable if the limit for
prosecution for fake invoices cases could be brought down to 10 lakh rupees.
8.3.9 The Secretary presented before the Council the statistics of arrest and prosecution cases made
by CBIC formations. He informed that a total of 1074 cases of arrest were made by CBIC and that
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majority of cases were more than Rs. 50 crore i.e. 254 cases and in Rs. 30-50 crore limit, there were
106 cases Thus, the majority of cases pertained to high evasion cases involving amounts of more than
Rs 2 crore. The Secretary stated that the Council could consider these statistics while deciding on the
issue of threshold limit for prosecution of cases.
8.3.10 The Hon’ble Member from Tamil Nadu stated that besides CBIC, States were also filing
prosecutions for GST offences. He also mentioned that whether prosecuted or not, the deterrence
value of criminality was a significant component for deciding about the threshold for prosecution. He
mentioned that as per his understanding, all the members who had spoken on the agenda item,
appeared to be in favour of either keeping the limit at Rs. one crore or lowering that further. He
mentioned that offence of issuance of fake bills came under a separate sub-section and therefore, there
should not be any difficulty in imposing different limit for prosecution of Rs. one crore for bill trading
and Rs. two crore for other violations. The Member further stated that at the end of the day, the GST
Council, which comprised elected representatives of the different governments, should be the deciding
body. The Hon’ble Member stated that that was his humble submission that once the Committee had
submitted the report then the decision should be that of the Members and in cases where there was
unanimous view from Members then that should be taken as consensus.
8.3.11 The Hon’ble Chairperson thanked the Member from Tamil Nadu for his inputs and assured
him that when the Law Committee or Fitment Committee recommendations were brought to the
Council then that was for the Council to decide on the recommendations. The Hon’ble Chairperson
further stated that she would like to gently remind the Council that even if there were one or two
voices that were different then that was her understanding that until everyone was convinced there was
no unanimity. The Hon’ble Chairperson added that she was conscious that in the meeting there was no
majority or unanimity of opinion on the agenda item and that there were voices on both sides.
8.3.12 The Hon’ble Member from Maharashtra stated that they totally supported the proposal made
by the Law committee as statistics given by the Secretary held true even for the State of Maharashtra.
The Hon’ble Member further elaborated that that was often seen that although that had deterrence
value, that was impractical to prosecute so many people. He further stated that when the whole
country was moving towards decriminalization, that was a very valid decision to raise the threshold
for prosecution in GST to Rs. two crore.
8.3.13 The Hon’ble Member from Chhattisgarh stated that that was a very wise decision for the
Chairperson to call for unanimity and he stated that they would go by the decision of the Hon’ble
Chairperson.
8.3.14 The Hon’ble Member from Goa stated that there were valid points on both sides and the
decision on the said agenda could be left to the decision of the Chairperson of the Council.
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8.3.15 The Hon’ble Member from Kerala stated that the Council could continue with the present
threshold and in future the matter could be relooked at. He further stated that their State was dealing
with large number of cases on bill trading, therefore, deterrence must be there.
8.3.16 The Hon’ble Member from Jharkhand stated that there was no disagreement with the
proposal in the said agenda.
8.3.17 The Hon’ble Chairperson stated that while threshold for prosecution might be increased from
Rs 1 crore to Rs 2 crore for all other offences, however, for issuance of fake invoices, the threshold
limit could be retained at Rs. one crore, instead of raising that to Rs. two crore. The Hon’ble
Chairperson left the decision open to the Council and requested the members to speak.
8.3.18 The Hon’ble Member from Tamil Nadu stated that he fully agreed with the Hon'ble
Chairperson.
The Council agreed with the recommendation of the Law Committee in agenda item
7(iii) with modification that the threshold for prosecution be increased to Rs 2 crore from Rs 1
crore for all offences, other than the offence pertaining to issuance of fake invoices.
8.4 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.
8.4.1 Principal Commissioner, GST Policy Wing informed that the provisions of Section 56 of the
CGST Act, 2017, Rule 94 of the CGST Rules, 2017 and Para 34 of the Master Circular No.
125/44/2019-GST dated 18.11.2019 did not provide for any exceptions from payment of interest in
cases of delayed refunds, where the delay in sanction or payment of refund was attributable to the
applicant, as detailed in the agenda note, on account of not filing reply in prescribed time limit or
seeking additional time to file documents/reply or for personal hearing. Further, there could be
instances where the refund was sanctioned 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 or wrong details of
bank account submitted by the applicant.
8.4.2 The Law Committee deliberated on that issue and recommended amendment in Section 56 of
the CGST Act, 2017 in order to provide enabling provision 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. The Law Committee also recommended amendment in Rule 94 of the said Rules for prescribing
the manner of computation of period of delay for purpose of calculation of interest payable on delayed
refund.
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The Council agreed with the recommendation of the Law Committee in agenda item
7(iv).

8.5 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.
8.5.1 Principal Commissioner, GST Policy Wing informed that in cases where the Appellate
Authority/Appellate Tribunal/Court held that the notice under sub-section (1) of Section 74 of CGST
Act, 2017 was not sustainable for the reason that the charges of fraud or wilful misstatement or
suppression of facts to evade tax had not been established against the person to whom the notice was
issued and directed the proper officer to determine the tax payable by such person deeming the notice
to be issued under sub-section (1) of Section 73 of CGST Act, 2017, field formations were seeking
clarification regarding the time limit within which the proper officer was 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 the time limit for issuance of order as per sub-section (10) of Section 73 was already
over. Doubts had 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.
8.5.2 The Law Committee deliberated on the issue and recommended issuance of a circular for
clarifying the doubts. The draft Circular had been placed as annexure to the detailed agenda note.
8.5.3 The Hon’ble Member from Madhya Pradesh stated that they agreed with the Circular. He
further informed that as per existing provisions of the Act, there were different time limits to issue
notices under Sections 73 and 74 respectively and that many cases were being unearthed due to
advanced techniques of Data Analytics and various GST related portals and accordingly to protect the
revenue interest of the state, tax administration was issuing many notices under Section 73 . Keeping
those circumstances into consideration, the time limit for issuing notices under Section 73 needed to
be increased from present time limit of 3 years to 5 years, as had been prescribed for Section 74.
The Council agreed with the recommendation of the Law Committee made in agenda
item 7(v), along with the proposed Circular.
8.6 Agenda Item 7 (vi): Amendment in the CGST Rules, 2017
8.6.1 Principal Commissioner, GST Policy Wing informed that in the Officers’ meeting, there was a
general agreement on proposed amendments in respect of various Rules except on the proposal
regarding deletion of clause (d) of sub-rule (14) of Rule 138 of CGST Rules. He further informed that
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States of Tamil Nadu, Punjab, Rajasthan, Maharashtra, Delhi, Kerala and Chhattisgarh had expressed
reservation on the proposal to delete clause (d) of sub-rule (14) of Rule 138 of CGST Rules and
therefore, it was recommended that the agenda in respect of deletion of clause (d) of sub-rule (14) of
Rule 138 of CGST Rules, 2017 might not be considered for approval.
He also informed thatparimateria changes would also be required in the respective SGST
Rules. He then proceeded to discuss various proposals in the agenda in detail.
I. Amendment in sub-rule (3) of Rule 12
8.6.2 Principal Commissioner, GST Policy Wing informed that references had been received from
trade that there was no option available 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 was also no option
presently for a TDS registrant to apply for cancellation of TDS registration.
8.6.3 The Law Committee deliberated on the issue and 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 Council agreed with the recommendation of the Law Committee.
II. Amendment in sub-rule (1) of Rule 37
8.6.4 Principal Commissioner, GST Policy Wing informed that the secondproviso to Section 16 (2)
of the CGST Act, 2017 provides for 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.
8.6.5 He mentioned that such recipients had to follow the procedure prescribed in Rule 37(1) of the
CGST Rules, 2017. However, the said Rule had been amended with effect from 01.10.2022 vide
Notification No. 19/2022 - CT dated 28.09.2022 and the amended Rule 37(1) required the said
recipient to pay an amount equal to the input tax credit availed in respect of such supply. That gave an
impression that the whole of ITC pertaining to such supply was to be reversed even though a part of
the payment could have been made by the recipient to the supplier. That appeared to be an inadvertent
departure from the principle of proportionate reversal under the original rule. To rectify the anomaly,
the Law Committee recommended that sub-rule (1) of Rule 37 be amended retrospectively with effect
from 01.10.2022 to provide for reversal of an amount of input tax credit proportionate to the amount
not paid by the recipient to the supplier vis a vis the invoice value.
The Council agreed with the recommendation of the Law Committee.
III. Insertion of Rule 37A
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8.6.6 Principal Commissioner, GST Policy Wing informed that sub-section (2) of Section 41 of the
CGST Act, 2017, as substituted by Notification No. 18/2022-CT, provides for reversal of input tax
credit availed by recipient of such supplies where tax payable has not been paid by supplier and reavailment of the said ITC after payment of tax by the said supplier. The Law Committee had
deliberated the manner in which such ITC could be reversed and re-availed and after considering the
various practical issues in the implementation of the said provision and for ease of doing business, the
Law Committee recommended insertion of a new Rule 37A in CGST Rules, 2017 detailing out the
mechanism for such reversal of credit and re-availment thereof. Principal Commissioner, GST Policy
Wing stated that while there was agreement on this agenda in Officers’ Committee meeting, a
suggestion was made by State of Bihar that GSTN may provide a functionality for making the data
pertaining to Rule 37A available to the tax officers and the same was agreed to.
The Council approved the recommendation made by the Law Committee.
IV. Amendment in Rule 46
8.6.7 Principal Commissioner, GST Policy Wing informed that in case of supply of services to
unregistered persons through online platforms, in particular, recipients’ addresses were not properly
captured, which affected flow of revenue to the appropriate destination states.
8.6.8 Law Committee had deliberated on that issue and recommended insertion of a proviso to
clause (f) of Rule 46 of CGST Rules, 2017 to ensure mandatory recording of address of unregistered
recipients of service along with the PIN code when the said services were provided through online
platform by a registered person even if the value of taxable supply was less than fifty thousand rupees.
8.6.9 The Hon’ble Member from Telangana welcomed the amendment to the tax invoice rules under
Rule 46, but he stated that they had some concerns on the said issue especially in relation to Telecom
sector. He added that in case of telecom services, the addresses of consumers were not provided by
telecom operators to their distributors such as PhonePe, Paytm, BillDesk etc. He further stated that
when the consumers purchased data from the said distributors, those distributors were not allowed to
collect the address and the operators did not provide those details to distributors due to TRAI Rules.
The Hon’ble Member stated that the TRAI Rules neither allowed the collection of details of addresses
nor did that allowed sharing of addresses. He added that the State of Telangana received about Rs. 600
crore on such business transactions and therefore, requested intervention of the Council to address the
issue. The Hon’ble Member further cited the example of BillDesk, which was a payment gateway and
distributor for telecom, who had declared the Place of supply as their State for last 5 years (July, 2017
– April, 2022) and he stated that after much persuasion the telecom operators had shared the State of
consumer and thereafter, BillDesk started paying IGST from May, 2022 onwards. He submitted that
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the State was then receiving Rs. 8 crore per month from the tax payer. Therefore, he emphasized that
there might be cases of similarly placed taxpayers in the State. The Hon’ble Member requested GSTN
and Law committee to take note of that issue and to come up with some rectification/clarification.
8.6.10 The Secretary clarified that the present proposal in the agenda item was to take care of such
cases and that after the amendment proposed in that agenda item, the name, address and other details
of recipient i.e. user would be required to be provided by the supplier of services on the tax invoice if
the services were rendered through online platform.
The Council agreed with the recommendation of the Law Committee.
V. Amendment in Rule 46A
8.6.11 Principal Commissioner, GST Policy Wing mentioned that Rule 46 of the CGST/SGST Rules,
2017 prescribes the particulars that a tax invoice issued by a registered person should contain and Rule
49 of the said Rules prescribes the particulars that are to be included in a bill of supply issued by a
supplier. Rule 54 of the said Rules further prescribes the particulars in respect of tax invoices issued
in special cases. Rule 46A of the CGST/SGST Rules 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-cum-bill 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”.
8.6.12 The said issue was deliberated by the Law committee, and it was felt that Rule 46A needed to
be amended accordingly to make that obligatory on the part of a registered person, who was 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 a
single “invoice-cum-bill of supply”. The proposed amendment to Rule 46A is detailed in the agenda
note.
The Council agreed with the recommendation of the Law Committee.

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VI. Insertion of proviso in sub-rule (8) of Rule 87
8.6.13 Principal Commissioner, GST Policy Wing informed that in cases where bank fails to
communicate the CIN details of taxes paid through e-payment mode to GST System for updating the
Electronic Cash Ledger (ECL), the ECL of such taxpayers are updated next day on the basis of RBI eScroll file containing the successful payment made against the CINs as shared by banks with RBI.
However, there is presently no provision in the CGST Rules, 2017 providing for such updation of
ECL based on e-Scroll of RBI. In this regard, CAG has highlighted the need for having a specific
provision in law for updation of ECL on the basis of e-Scroll of RBI.
8.6.14 The issue was deliberated by the Law committee and in order to regularize the process of
updating ECL of the taxpayer on the basis of e-Scroll data received from the RBI in the cases where
payment has been received successfully but bank fails to share the signed CIN with GST System, the
Law Committee had recommended for amendment of Rule 87 of CGST Rules by inserting a new
proviso to sub-rule (8) of Rule 87 of the CGST Rules, 2017. The proposed amendment to Rule 87 is
detailed in the agenda note.
The Council agreed with the recommendation of the Law Committee.

VII. Amendment in Rule 108 and Rule 109
8.6.15 Principal Commissioner, GST Policy Wing further mentioned that in terms of Section 107 (1)
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 CGST Act 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.
8.6.16 Further, as per Rule 108 (3) of the CGST Rules, in respect of an appeal filed in terms of the
provisions of Section 107 (1) 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. The date of filing appeal in case where certified copy is submitted
within seven days of filing appeal is the date of issuance of provisional acknowledgement, otherwise it
is the date of submission of the certified copy.
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8.6.17 Similarly, Rule 109 (2) 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.
8.6.18 Law Committee deliberated on the issue and observed that 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. 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. 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 from entertaining the same.
8.6.19 Law Committee accordingly 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 might be made in sub-rule (3) of Rule 108 and in Rule 109
of the CGST Rules, 2017 and Form GST APL-02. The details of the same are provided in the agenda
note.
The Council agreed with the recommendation of the Law Committee.
VIII. Insertion of Rule 109C
8.6.20 Principal Commissioner, GST Policy Wing informed that while Sections 107(1) & 107(2) of
CGST Act, 2017 provide for filing of appeal before first appellate authority against decision or orders
of adjudicating authority by aggrieved person or authorized officer respectively. However, there was
no provision in the CGST Act/Rules for withdrawal of such an appeal either by aggrieved person or
authorized officers.
8.6.21 The issue was deliberated by the Law Committee and it recommended insertion of Rule 109C
in CGST Rules, 2017 to provide for withdrawal of appeal before the issuance of SCN or Order under
Section 107 (11), whichever is earlier. Further, Law Committee 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 Council agreed with the recommendation of the Law Committee.

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IX. Deletion of clause (d) of sub-rule (14) of Rule 138
8.6.22 The Principal Commissioner, GST Policy Wing informed the Council that in the Officers’
meeting held on 16th December 2022, the officers from the States of Tamil Nadu, Punjab, Rajasthan,
Maharashtra, Delhi, Kerala and Chhattisgarh had expressed reservation on the proposal to delete
clause (d) of sub-rule (14) of Rule 138 of CGST Rules. Accordingly, it was proposed that the agenda
might not be considered by the Council for approval.
The Council did not take up this agenda item for consideration.
X. Amendment in entry (5) of Annexure appended to sub-rule (14) of Rule 138
8.6.23 Principal Commissioner, GST Policy Wing further informed that entry nos. 4 & 5 of the
Annexure appended to clause (a) of sub-rule (14) of Rule 138 of the CGST/SGST Rules, 2017 exempt
the generation of e-way bill for transportation of goods falling under Chapter 71 of First Schedule to
the Customs Tariff Act, 1975, including imitation jewellery. In the interest of revenue, field
formations had suggested to mandate requirement of generation of e-waybill for movement of
consignments of imitation jewellery, an item which was prone to tax evasion. Further, security
concerns associated with transportation of gold, silver and other precious metals are not applicable to
the transportation of imitation jewellery.
8.6.24 Law Committee 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.
The Council agreed with the recommendation of the Law Committee.
XI. Substitution of FORM GST REG-19
8.6.25 Principal Commissioner, GST Policy mentioned that Rule 22(3) of CGST Rules, 2017
provides for an order of cancellation of registration under FORM GST REG-19. The Form contains a
list of options to choose from to bring out reason for cancellation of registration. However, it was felt
that there could be more scenarios based on whether the reply to the show cause notice had been
submitted or not and whether the concerned person had appeared for personal hearing or not to include
more scenarios. Further, FORM GST REG-19 also provided for a table for “Determination of amount
payable pursuant to cancellation”, which may create confusion if no amount was filled in the said table
by the officer.
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8.6.26 The Law Committee deliberated on the issue and recommended that FORM GST REG-19 may
be substituted to include a more elaborate list of options to clarify the order of cancellation and also to
include certain other compliances due such as furnishing the pending returns and the final return. The
Law Committee also recommended to remove the table for “Determination of amount payable
pursuant to cancellation” from FORM GST REG-19.
The Council agreed with the recommendation of the Law Committee made in agenda
item.
XII. Amendment in FORM GST REG-17
8.6.27 Principal Commissioner, GST Policy mentioned that under Rule 22(1) of CGST Rules, 2017,
FORM GST REG-17 is regarding 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 deliberated on this issue and has recommended
incorporating the proposal made by GSTN at the end of FORM GST REG-17.
The Council agreed with the recommendation of the Law Committee.
XIII. Amendment in FORM GST DRC-03
8.6.28 Principal Commissioner, GST Policy mentioned that Circular No. 174/06/2022-GST dated
06.07.2022 prescribes the manner for re-credit of amount of erroneous refund deposited by the
taxpayer, in terms of provisions of sub-rule (4B) of Rule 87 of CGST Rules, 2017 in electronic credit
ledger using FORM GST PMT-03A. In this regard, GSTN had been requested to make certain
amendments in FORM GST DRC-03 to include more options in the drop-down regarding cause of
payment as detailed in the agenda note. GSTN had also 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 recredit of amount so deposited by the taxpayer in his electronic credit ledger as prescribed under
Circular No. 174/06/2022-GST dated 06.07.2022 in terms of provisions of sub-rule (4B) of Rule 87.
8.6.29 Accordingly, GSTN had proposed certain amendments in FORM GST DRC-03 before the
Law Committee and after discussion, the Law Committee had recommended the requisite changes in
FORM GST DRC-03 as detailed out in the agenda.
The Council agreed with the recommendation of the Law Committee.
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8.7 Agenda Item 7(vii): Supplies by unregistered person and composition dealers through ecommerce operators
8.7.1 Principal Commissioner, GST Policy informed that the GST Council in its 47th meeting held
on 28th-29th June had given in-principle approval for relaxation in the provisions for supplies by
unregistered person and composition dealers making supplies through e-commerce Operators (ECOs),
as detailed in the agenda. The Council had also mandated Law Committee to work out the details of
the scheme.
8.7.2 The Law Committee deliberated on the requisite legal changes required to implement the
recommendations of the Council. It recommended that for unregistered persons, 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 e-commerce operators, subject to certain
conditions. Further, two separate notifications needed to be issued under Section 148 of the CGST
Act, 2017 for providing special procedure to be followed by the electronic commerce operators, one in
respect of supplies of goods through them by unregistered persons and second, in respect of supplies
of goods through them by composition taxpayers. Law Committee also recommended that FORM
GSTR-8 might be amended for capturing the information of supplies made by unregistered suppliers
through e-commerce operators by insertion of two tables in FORM GSTR-8. In addition, it also
recommended that Rule 67(2) of CGST Rules, 2017 might 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 the supplies by unregistered persons do not attract TCS. For composition taxpayers, to
remove the condition restricting registered persons engaged in supplying through electronic commerce
operators from opting for the Composition Levy, Law Committee recommended that clause (d) to subsection (2) and clause (c) to sub-section (2A) of Section 10 of CGST Act, 2017 might be amended.
Law Committee further recommended insertion of sub-section (1B) in Section 122 of CGST Act,
2017 providing for penal provisions in cases of violation of compliances on part of the e-commerce
operators in respect of the supplies made by unregistered persons and Composition taxpayers through
them.Further, Law Committee also recommended that considering the time required for development
of requisite functionality on the portal as well as preparedness by ECOs, the implementation of
scheme might be deferred to 01.10.2023.
8.7.3 The Hon’ble Member from Haryana stated that there was requirement for a validation on the
portal that an unregistered supplier should not be able to get enrolment on the portal from more than
one State. Principal Commissioner, GST Policy Wing clarified that GSTN would be requested to put
such a validation on the portal, so as to ensure that an unregistered person does not get enrolled in two
or more States.
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The Council agreed with the recommendation of the Law Committee along with the draft
Notifications.
8.8 Agenda Item 7(viii): Amendments in the CGST Act, 2017
A. Amendment in second proviso to Section 16 of CGST Act to align with GSTR-1/3B
8.8.1 Principal Commissioner, GST Policy Wing mentioned that in the 42nd GST Council meeting,
held in October 2020, it was recommended that the GST laws be amended to make the present GSTR1/3B return filing system as the default return filing system. Accordingly, amendments were carried
out vide the Finance Act, 2022 and were notified w.e.f. 01.10.2022. In this regard, Law Committee
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 as detailed in the agenda.
The Council agreed with the recommendation of the Law Committee.
B. Amendment to Section 23 to provide overriding effect over Sections 22(1) & 24
8.8.2 Section 22 of 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. However, existing Section 23 does not have any clause overriding the registration
requirement imposed vide Section 24 and Section 22(1). Therefore, it was discussed that doubts had
arisen as to whether provisions of compulsory registration under Section 24 prevail over the
exemption under Section 23.
8.8.3 Accordingly, the Law Committee deliberated on this issue and 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 detailed in agenda.
The Council agreed with the recommendation of the Law Committee.
C. Amendments in CGST Act, 2017 to restrict filing of returns/statements after completion of
specified time in view of data archival policy
8.8.4 Principal Commissioner, GST Policy mentioned that GST System has completed more than
five years. GSTN has informed that 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. Therefore,
GSTN proposed a data archival policy for the smooth functioning of the GST Portal and also to
provide superior experience to the taxpayers.
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8.8.5 While deliberating on the proposed data archival policy for GST portal, the Law Committee
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 be amended by inserting sub-section (5) in
Section 37 and sub-section (11) in Section 39 of the CGST Act, 2017. Law committee also
recommended inserting sub-section (2) in Section 44 and sub-section (15) in Section 52 of the CGST
Act, 2017.
The Council agreed with the recommendation of the Law Committee.
D. Proposal for amendment of sub-section (6) of Section 54 of CGST Act, 2017
8.8.6 Sub-section (6) of Section 54 of the CGST 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. The concept of ‘provisionally
accepted input tax credit’ was related to the GSTR-1-2-3 system of return filing which was never
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 an undertaking in relation to Sections
16(2)(c) and 42(2) of the CGST Act, 2017. Further, Section 41 of the CGST Act, 2017 provided for
availing eligible input tax credit as self-assessed in the return on a provisional basis in terms of GSTR1-2-3 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.
8.8.7 Accordingly, it was proposed that as the provision relating to availment of input tax credit on
provisional basis has been done away with, the words “excluding the amount of input tax credit
provisionally accepted,” in sub-section (6) of Section 54 of the CGST Act might be omitted. The
Law Committee deliberated on this issue and recommended the proposed amendment in sub-section
(6) of Section 54 of the CGST Act.
The Council agreed with the recommendation of the Law Committee.
8.9 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.
8.9.1 Principal Commissioner, GST Policy Wing mentioned that 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
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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.
8.9.2 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
e-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 operators in their respective returns in FORM GSTR-3B. However, there is no
separate table in FORM GSTR-1 to furnish the aforementioned details.
8.9.3 The issue was deliberated by the Law Committee which recommended certain changes in
FORM GSTR-1 to capture details of the supplies made through e-commerce operators attracting TCS,
as well as those on which e-commerce operator is required to pay tax under sub-section (5) of Section
9 of CGST Act, 2017. The changes recommended by the Law Committee in FORM GSTR-1 are
enclosed as Annexure to the agenda note.
The Council agreed with the recommendation of the Law Committee in relation to
FORM GSTR-1.
8.10 Agenda Item 7(x): Retrospective applicability of paras 7, 8(a) and 8(b) of Schedule III of
the CGST Act, 2017
8.10.1 Principal Commissioner, GST Policy Wing further mentioned that Para 7 of Schedule III to
CGSTAct, 2017 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. Para 8(a) of Schedule III of CGST Act, 2017 provides
that supply of warehoused goods to any person before clearance for home consumption will be treated
neither as a supply of goods nor a supply of services. Similarly, as per Para 8(b) of Schedule III of
CGST Act, High Sea Sales are to be treated neither as a supply of goods nor a supply of services. The
said paras were inserted in Schedule III of CGST Act vide the Central Goods and Services Tax
(Amendment) Act, 2018 and were made applicable vide Notification No. 02/2019-Central Tax dated
29.01.2019 with effect from 01.02.2019. 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. However, taxpayers were of view that amendment made in Paras 7, 8(a) & 8(b)
of Schedule III to Central Goods and Services Tax Act, 2017 (CGST Act), all of which are activities
to be treated as neither supply of goods or services, with effect from 01.02.2019, should be made
applicable with effect from 01.07.2017. The detailed discussion is provided in the agenda.
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8.10.2 Law Committee deliberated on this issue and felt that 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 Paras 7, 8(a) and 8(b) of Schedule III of CGST Act, 2017 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. The Law
Committee recommended that Paras 7, 8(a) and 8(b) in Schedule III should have retrospective effect
w.e.f. 01.07.2017. The Law Committee also recommended that in cases where any tax has already
been paid in respect of transactions/supplies covered under Paras 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.
The Council agreed with the recommendations of the Law Committee.
8.11 Agenda Item 7 (xi):- Mechanism to deal with differences in liabilities between GSTR-1 and
GSTR-3B, along with draft rules and FORM DRC-01B for implementing the same.
8.11.1 Principal Commissioner, GST Policy Wing presented the agenda item before the Council and
stated that Law Committee had deliberated upon the ways to safeguard revenue by finding a
mechanism for dealing with difference in liability reported in statement of outward supplies between
FORM GSTR-1 and FORM GSTR-3B. Further, he informed that the Law Committee felt that the
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. After deliberation, the Law Committee recommended that where
the tax liability as per FORM GSTR-1 for a tax period exceeds the tax liability as per FORM GSTR3B for that period by more than a specified extent, the registered person could be intimated on the
portal of such difference and be directed to either pay the differential tax liability along with interest,
or explain the difference and unless the taxpayer either deposits the amount specified in the said
intimation or furnishes a reply explaining the reasons for any amount remaining unpaid, such a person
should not be allowed to file FORM GSTR-1/ invoice furnishing facility for the subsequent tax
period.
8.11.2 In this regard, Law Committee recommended insertion of a new Rule 88C in CGST Rules,
2017 for giving intimation to the taxpayer through the portal of difference in liability in FORM
GSTR-1 and FORM GSTR-3B and to request payment of the differential liability or explain the
difference. To begin with, it was recommended that 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 lakh may
be taken for the purpose of intimation under proposed Rule 88C(1). Law Committee also
recommended for insertion of FORM GST DRC-01B as required under Rule 88C(1).
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8.11.3 Further, Law Committee recommended insertion of a new clause (d) in sub-rule (6) of Rule 59
of CGST Rules, 2017 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.
8.11.4 It was further informed that Law Committee would be formulating 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.
8.11.5 The Hon’ble Member from Haryana stated that the issue of FORM GST DRC-01B was also
discussed in the Officers’ Meeting. He thereafter stated that there is provision for blocking the filing
of GSTR-1 if the differential amount involved is more than Rs. 25 Lakh and 20% and requested that
the filing of GSTR-1 might be unblocked only after verification by the officer. He further stated that
there may be scenarios wherein the filing of GSTR-1 for subsequent tax period could be allowed even
if the taxpayer uploads a blank paper without proper details. He proposed that such cases should be
verified by a GST officer as there may be a possibility that the registration can be used for claiming
more Input Tax Credit in the later stages.
8.11.6 The Principal Commissioner, GST Policy Wing informed that as also explained in the agenda,
a separate procedure would be worked out by the Law Committee for examination and verification of
such cases by the tax officers, 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.
8.11.7 The Hon’ble Chairperson stated that it would be desirable that verification by the officers
should not be insisted upon at this stage for filing of GSTR-1 for the subsequent tax period and
verification of the response of the taxpayer may be a separate exercise, as suggested by the Law
Committee.
The Council agreed with the recommendation of the Law Committee.

8.12 Agenda Item 7(xii): Clarification on various issues in GST.
A. Clarification on taxability of No Claim Bonus offered by Insurance companies
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8.12.1 Principal Commissioner, GST Policy Wing presented the agenda item before the council and
stated that various representations had been received from General Insurance Council and various
insurance companies seeking clarity on treatment of No Claim Bonus (‘NCB’) under GST. It had 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 field formations/ investigation agencies were treating NCB as a supply by the
customer to the insurance company.
8.12.2 Clarity was sought as to whether NCB is a consideration paid to the customer by the insurer for
agreeing to the obligation to refrain from the act of lodging insurance claim during the policy period
and therefore, tax would be payable by the insurance company on the gross amount without deducting
NCB from the premium amount; or alternatively, whether it should be treated as a discount by
insurance company, to be deducted from the gross premium, for the purpose of calculation of value of
supply made by insurer to the insured.
8.12.3 The Law Committee had recommended that it might be clarified through a Circular that NCB is
not a consideration in respect of any service rendered by the insured to the insurance company, rather
it is an upfront discount from the premium payable by the insured for the supply of insurance services
by the insurance company to the insured; and therefore, NCB is deductible for the purpose of
calculation of value of supply of insurance services under Section 15 of CGST Act, 2017.
B. Clarification on applicability of e-invoicing with respect to an entity
8.12.4 Principal Commissioner, GST Policy Wing presented the agenda item before the Council and
stated that Notification No. 13/2020-Central Tax dated 21.03.2020, as amended, provides the class of
registered persons for whom e-invoicing shall be applicable under Rule 48(4) of the CGST Rules,
2017. SEZ units, government departments, local authority and those referred in sub-rules (2), (3), (4)
and (4A) of Rule 54 of the CGST Rules, 2017 have been exempted from e-invoicing.
8.12.5 Representations had been received from banking companies for clarifying the matter as banks
were being subject to investigation by some tax authorities on grounds that e-invoices were required to
be generated by banks for movement of goods, including bullion. Tax officers are also claiming 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 goods or for the Banking Company as a whole.
8.12.6 Law Committee had recommended that it could 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, so as to provide clarity to the trade and field
formations and remove ambiguity on these issues.
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The Council agreed with the recommendation of the Law Committee along with the
draft Circular.

8.13 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
8.13.1 Principal Commissioner, GST Policy Wing presented the agenda item before the Council and
stated that during the initial period of implementation of GST, especially during the financial years
2017-18 and 2018-19, many suppliers had failed to furnish the correct details of outward supplies in
their FORM GSTR-1. Because of such discrepancies, FORM GSTR-2A of their recipients remained
incomplete. However, the concerned recipients might have availed input tax credit on the said supplies
in their returns in FORM GSTR-3B, as restrictions in availment of ITC up to certain specified limit
beyond the ITC available to the registered persons as per FORM GSTR-2A were provided under Rule
36(4) of CGST Rules, 2017 only with effect from 9.10.2019.
8.13.2 Such discrepancies between the amount of ITC availed in FORM GSTR-3B and the amount
available in FORM GSTR-2A of the registered person were being noticed by the tax officers during
proceedings such as scrutiny/ audit/ investigation etc. and were being considered by them as
representing ineligible ITC availed by the registered persons. Various representations had been
received from the trade as well as the tax authorities, seeking clarification regarding the manner of
dealing with such discrepancies.
8.13.3 The Law Committee had recommended that 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 exceeded 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 had
actually been made by the supplier to the said registered person and the tax on such supplies had been
paid by the said supplier in his return in FORM GSTR 3B. Certificate issued by CA or CMA shall
contain UDIN. 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 was 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 had actually been made by him to the said
registered person and the tax on said supplies had been paid by the said supplier in his return in
FORM GSTR 3B.
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8.13.4 Law Committee had recommended issuance of a Circular for detailing the procedure for
verification of ITC availed by the registered persons in such cases and for providing clarity to the trade
and field formations.
The Council agreed with the recommendation of the Law Committee along with the
draft Circular.
8.14 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 finalized under the
Insolvency and Bankruptcy Code, 2016.
8.14.1 Principal Commissioner, GST Policy Wing presented the agenda item before the Council and
stated that in cases where proceedings are initiated under Insolvency and Bankruptcy Code, 2016
(IBC) against corporate debtor, claims should be filed by the tax officers in respect of government
dues pending against such person before the appropriate authority under IBC. On finalization of
proceedings under IBC, the amount of government dues, payable by the said taxpayer, could be totally
extinguished or could be reduced vis-à-vis the amount claimed by the tax officer. Doubts were being
raised by tax authorities regarding the modalities for implementation of the order of the
adjudicating/appellant authority under IBC, after finalization of the proceedings thereof, with respect
to demand for recovery against such corporate debtor under CGST Act, 2017.
8.14.2 Law Committee deliberated on the issue and was of the view that in cases where a confirmed
demand for recovery had been issued by the tax authorities for which a summary had been issued in
FORM GST DRC-07/DRC 07A against the corporate debtor, and where the proceedings had been
finalized 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 should 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 were pending.
8.14.3 Law Committee had recommended issuance of a Circular clarifying that the proceedings
conducted under IBC also adjudicate the Government dues pending under the CGST Act, 2017 or
under existing laws against the corporate debtor, therefore, the same are covered under the term ‘other
proceedings’ in Section 84 of CGST Act, 2017 and that in case the Government dues under the CGST
Act, 2017 are extinguished or reduced in IBC proceedings, an intimation should be issued in FORM
GST DRC-25 by Commissioner under Section 161 of CGST Rules, 2017 for reducing the said dues.
Law Committee also recommended amendment in Rule 161 to align the same with Section 84 of the
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CGST Act, 2017 and also recommended that FORM GST DRC 25 be amended, to specifically include
the authorities under IBC in the said form.
The Council agreed with the recommendation of the Law Committee.
8.15 Agenda Item 7(xv): Amendment in provisions related to OIDAR Services under the IGST
Act, 2017.
8.15.1 Principal Commissioner, GST Policy Wing presented the Agenda item before the Council and
stated OIDAR services are digitally supplied services, the nature of which renders their supply
impossible in the absence of Information Technology. With the growth of digital economy, the
OIDAR services are expected to grow immensely in volume and accordingly, more measures would
be required to be taken in due course for improving compliance under GST for OIDAR services
supplied by persons located in non-taxable territory.
8.15.2 To ensure compliance under GST by OIDAR service providers, the Law Committee opined
that amendments were required in existing provisions of law so as to reduce the scope of interpretation
for deciding whether the said supply is covered under the scope of OIDAR services or not for taxation
under GST.
8.15.3 Law Committee deliberated on these issues and recommended amendment in the definition of
“non-taxable online recipient” under Section 2(16) of the IGST Act, 2017. Currently, for a service to
be classified as OIDAR services under Section 2(17) of the IGST Act, 2017, an essential condition
was that the supply of such service must be essentially automated and should involve minimal human
intervention. However, there was lack of clarity on the meaning of the term “minimal human
intervention” and it was opined that restricting the scope of GST on cross border supply by nonresident suppliers only to those services with minimal human intervention did not provide a level
playing field and also gave rise to legal disputes. In view of this, Law Committee recommended
amending the definition of OIDAR services under Section 2(17) of the IGST Act, 2017 as detailed in
the agenda.
The Council agreed with the recommendation of the Law Committee.

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8.16 Agenda Item 7(xvi): In Section 17 of the CGST Act, 2017 regarding ITC in respect of CSR
(Corporate Social Responsibility) expenditure.
8.16.1 Principal Commissioner, GST Policy Wing presented the agenda item before the Council and
stated that doubts had been raised by trade as well field formations in respect of availability of input
tax credit on CSR expenditure incurred by companies in accordance with the provisions of Companies
Act, 2013 due to various contradictory advance rulings. One view was that CSR expenditure is
incurred to meet the obligations under section 135(5) of the Companies Act, and non-compliance on
this count attracts penal action. Accordingly, input tax credit should be available in respect of inputs
and input services for CSR activities in terms of Section 16(1) of CGST Act. However, another view
was that CSR does not include activities undertaken in pursuance of normal course of business of the
company and input tax credit should not be available to the registered person on CSR expenditure
under Section 16(1) of CGST Act. Further, 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.
8.16.2 Law Committee had recommended that ITC in respect of CSR expenditure incurred by
Companies under section 135 of Companies Act may not be allowed. Further, it recommended that to
unambiguously state such position, such CSR expenditure may be included in the list of blocked
credits under Section 17(5) of the CGST Act, 2017.
The Council agreed with the recommendation of the Law Committee.
8.17 Agenda Item 7(xvii): Issues related to place of supply in terms of the proviso to Section
12(8) of the IGST Act, 2017.
8.17.1 Principal Commissioner, GST Policy Wing presented the agenda item before the Council and
stated that 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 Section 12(8) of the IGST
Act, 2017. Further, Proviso to the section 12(8), inserted w.e.f. 01.02.2019, provides that where the
transportation of goods is to a place outside India, the PoS shall be the place of destination of such
goods, i.e. foreign country. Accordingly, IGST would be payable on the said supply. As the PoS is
different from the location of the recipient of services in such cases, doubts are being raised in respect
of the admissibility of input tax credit (ITC) to the recipient of such services.
8.17.2 Law Committee had recommended issuance of a Circular for clarifying that in such case ITC
would be available to the registered person located in India, in respect of such receipt of services of
transportation of goods, where place of supply is outside India in terms of proviso to Section 12(8),
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subject to fulfilment of other conditions of Sections 16 and 17 of CGST Act, 2017. Also, PoS is to be
declared in FORM GSTR-1 on the common portal under the State code “96- Foreign Country” (and
not under “97-Other Territory”).
8.17.3 Law Committee had also recommended omission of the proviso to Section 12(8) of IGST Act,
2017, as no useful purpose is being served by insertion of the proviso to Section 12(8) of IGST Act,
2017 w.e.f. 01.02.2019.
The Council agreed with the recommendations of the Law Committee.
9. Agenda Item 12: GST Data sharing with Ministries and Departments
9.1 The Secretary then presented Agenda No. 12 regarding Data Sharing with Ministries and
Departments and requested Additional Secretary, DoR to brief the Council regarding the agenda.
9.2 Additional Secretary, DoR informed that the agenda was for sharing of the GST Data which
masked individual taxpayer data for the benefit of the Centre and State Government Departments and
Agencies. The view behind Data sharing was that a lot of services could be rendered if the GST Data
i.e. both aggregated and dis-aggregated data was shared between the Centre/States’ departments and
agencies through API. He further informed that States had requested to share individual taxpayer data
also in the officers meeting and that would be taken up later.
9.3 The Hon’ble Member from Punjab voiced his concern and sought clarification on how the
GST data would be shared between different departments and agencies.
9.4 The Secretary clarified that the GST data would be mutually shared between the Centre/States’
departments and agencies. The Hon’ble Member from Punjab agreed to the agenda after the
clarification.
9.5 The Hon’ble Member from West Bengal enquired about the agencies with which GST data
would be shared.
9.6 The Secretary clarified that the GST data would be shared among the Centre/State
Departments and agencies.
9.7 The Hon’ble Member from Puducherry raised concerns about the leakage of GST Data in case
the same was shared with multiple departments and agencies.
9.8 The Hon’ble Chairperson clarified that the GST data sharing would be with State and Central
Government Departments and their agencies only.
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9.9 The Hon’ble Member from Andhra Pradesh supported sharing of GST data base but requested
for sharing of other data base from Income Tax Department, Customs and NHAI Toll Data base.
9.10 The Hon’ble Chairperson clarified that GST Council had authority to share State/Centre GST
data but the data sharing of Income Tax and Customs was outside the purview of Council.
9.11 The Hon’ble Member from Delhi stated that both the Centre and State were performing survey
and investigations. In situations when any investigation is going on in one state for example in Uttar
Pradesh and any lead related to other states like Delhi emerges from that investigation, then this data
might be shared between the States through GSTN. There should be a mechanism in GSTN that such
references might be auto populated or through online mechanism.
9.12 The Secretary took the note of the suggestions from the Hon’ble Member from Delhi and
stated that there should be a system to share GST data regarding surveys and investigations between
States and Centre and States.
9.13 The Secretary stated that from the deliberations, we can infer that the agenda on data sharing has
the approval of the Council.
The Council approved the agenda on GST Data sharing with Ministries and Departments.
10. The Hon’ble Member from Haryana requested to take agenda on GST Tribunal. He further
stated that if that agenda was delayed, the GST Tribunal would not see light for another one year.
10.1 The Hon’ble Chairperson assured that the GST Council would meet at the earliest.
10.2 The Secretary stated that the meeting could be concluded as per request of many of the Hon’ble
Members. In the meeting the Council had discussed Agenda Items 1,2,3,4,5,6,7 and 12. Since, there
were requests to end the meeting by 01.30 p.m., the remaining agendas would be taken up in the
upcoming meetings of the Council.
10.3 The Secretary thanked the Hon’ble Chairperson, Hon’ble MoS, Hon’ble Members and all
officers for attending the 48th meeting of the GST Council.
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Annexure-1
List of Hon'ble Ministers from States/Uts who participated in the 48th Meeting of the GST Council held on
17th December, 2022
S. No. Centre/States/Uts Name of Hon'ble
Minister Charge
1 GOI Smt. Nirmala Sitharaman Union Finance Minister
2 GOI Shri. Pankaj Chaudhary Minister of State for Finance
3 Andhra Pradesh Shri
BugganaRajendranath
Minister for Finance, Planning, Legislative
Affairs, Commercial Taxes and Skill
Development & Training
4 Assam Smt. Ajanta Neog Finance Minister
5 Chhattisgarh Shri T.S.Singh Deo Minister, State Tax (Commercial Tax)
6 Delhi Shri Manish Sisodia Deputy Chief Minister and Finance Minister
7 Goa Shri. MauvinGodinho Minister for Transport, Industries, Panchayat
and Protocol.
8 Gujarat Shri Kanubhai Desai Minister for Finance
9 Haryana Shri Dushyant Chautala Deputy CM and Excise & Taxation Minister
10 Jammu and Kashmir Shri Rajeev Rai
Bhatnagar
Advisor to Hon'ble Lieutenant Governor, UT
of J&K
11 Jharkhand Dr Rameshwar Oraon
Minister for Planning cum Finance,
Commercial Taxes and Food, Public
Distribution and Consumer Affairs
12 Karnataka Shri Basavaraj Bommai Chief Minister
13 Kerala Shri K N Balagopal Finance Minister
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14 Madhya Pradesh Shri Jagdish Devda Minister for Finance, Commercial Tax,
Planning and Statistics
15 Maharashtra Shri Devendra Fadnavis Deputy Chief Minister
16 Manipur Dr.Sapam Ranjan Singh
Minister for Medical, Health & Family
Welfare Department and Publicity &
Information Department
17 Meghalaya Shri James K Sangma Taxation Minister
18 Odisha Shri Niranjan Pujari Finance and Parliamentary Affairs Minister
19 Punjab Shri Harpal Singh
Cheema Finance Minister
20 Puducherry Shri. K.
Lakshminarayanan Minister for Public Works
21 Rajasthan Shri Shanti Kumar
Dhariwal
Minister of Local Self Government, Urban
Development & Housing
22 Sikkim Shri B. S. Panth Minister of 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, Health, Medical &
Family Welfare
25 Tripura Shri Jishnu Dev Varma Deputy Chief Minister
26 Uttarakhand Shri Prem Chand Agarwal
Minister for Finance, Urban Development,
Housing, Legislative & Parliamentary Affairs,
Reorganization & Census
27 Uttar Pradesh Shri Suresh Kumar
Khanna Minister of Finance, Parliamentary Affairs
28 West Bengal Smt. Chandrima
Bhattacharya Minister of State for Finance

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Annexure-2
List of Officers from Centre and the States/Uts who participated in the 48th Meeting of the GST Council
held on 17th December, 2022
S.No. Centre/States/Uts Name of the Officer Designation/Charge
1 Government of India Shri Sanjay Malhotra Revenue Secretary
2 Government of India Shri Vivek Johri Chairman, CBIC
3 Government of India Ms. V Rama Mathew Member (GST & Tax Policy),CBIC
4 Government of India Shri Sanjay Kumar
Agarwal Member(Compliance Management),CBIC
5 Government of India Shri Vivek Aggarwal Additional Secretary (Revenue)
6 Government of India Shri Pankaj Kumar Singh Additional Secretary (GST Council
Secretariat)
7 Government of India Shri Ritvik Pandey Joint Secretary
8 Government of India Shri Sanjay Mangal Principal Commissioner
9 Government of India Ms. LimatulaYaden Joint Secretrary
10 GSTN Shri Manish Kumar Sinha CEO
11 GSTN Shri Dheeraj Rastogi Off. EVP (Support) & SVP (Services)
12 Government of India Sh Sanjeev Shrivastava Pr. Chief Controller of Accounts
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13 Government of India Ms Seema Arora Pr. Director General (Audit)
14 Government of India Dr. Amandeep Singh Additional Director General(Audit)
15 Government of India Ms. Ashima Bansal Joint Secretary
16 Government of India Ms. B.Sumidaa Devi Joint Secretary
17 Government of India Shri S.S. Nakul PS to FM
18 Government of India Shri Deepak Kapoor OSD to Revenue Secretary
19 Government of India Shri D. P. Misra OSD to Chairman, CBIC
20 Government of India Dr Puneeta Bedi Additional Commissioner
21 Government of India Shri Alok Kumar Additional Commissioner
22 Government of India Shri Pramod Kumar Director
23 Government of India Shri Rakesh Dahiya Deputy Secretary
24 Government of India Ms. Amreeta Titus Deputy Secretary
25 Government of India Shri Nitesh Gupta Deputy Commissioner
26 Government of India Ms. Rajni Sharma Deputy Commissioner
27 Government of India Shri Amit Samdariya Deputy Commissioner
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28 Government of India Ms. Neha Yadav Deputy Commissioner
29 Government of India Shri Rahul Kumar Under Secretary
30 Government of India Shri Rajeev Ranjan Under Secretary
31 Government of India Shri Gaurav Shukla Under Secretary
32 Government of India Ms. Smita Roy Technical Officer
33 Government of India Ms. Anna Sosa Thomas Technical Officer
34 Government of India Ms. Soumya OSD
35 Government of India Shri RushikeshKodgi Dy. Controller of Accounts
36 GST Council Secretariat Shri Kshitendra Verma Director
37 GST Council Secretariat Shri Harish Kumar Deputy Secretary
38 GST Council Secretariat Shri S.S.Shardool Deputy Secretary
39 GST Council Secretariat Shri Joginder Singh Mor Under Secretary
40 GST Council Secretariat Ms. Reshma R. Kurup Under Secretary
41 GST Council Secretariat Ms. Priya Sethi Superintendent
42 GST Council Secretariat Shri Dharambir Superintendent
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43 GST Council Secretariat Shri Niranjan Kishore Superintendent
44 GST Council Secretariat Shri Rakesh Joshi Inspector
45 GST Council Secretariat Shri Vijay Malik Inspector
46 GST Council Secretariat Shri Padam Singh Inspector
47 Andhra Pradesh Shri N. Gulzar Secretary Finance(CT)
48 Andhra Pradesh Shri M. Girija Shankar Chief Commissioner(ST)
49 Andhra Pradesh Shri K. Ravi Sankar Commissioner(ST) Policy
50 Arunachal Pradesh Shri Kanki Darang Commissioner of Commercial Taxes
51 Arunachal Pradesh Shri Tapas Dutta Deputy Commissioner of State Taxes
52 Arunachal Pradesh Shri NakutPadung Superintendent
53 Assam Shri Samir K Sinha Principal Secretary, Finance Department
54 Assam Shri Jayant Narlikar Commissioner & Secretary, Finance
Department
55 Assam Shri Rakesh Agarwala Principal Commissioner of State Tax
56 Assam Md. Shakeel Saadullah Additional Commissioner of State Tax
57 Bihar Dr Pratima Commissioner cum Secretary Commercial
Taxes Department
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58 Bihar Shri Arun Kumar Mishra Tax Expert Commercial Taxes
59 Bihar Shri Sanjay Kumar
Mawandia Special Commissioner State Tax
60 Chhattisgarh Shri Him Shikhar Gupta Special Secretary, State Tax (Commercial Tax)
61 Chhattisgarh Shri Bhim Singh Commissioner, State Tax (Commercial Tax)
62 Chhattisgarh Shri T.L. Dhruw Additional Commissioner of State Tax
63 Delhi Shri Ashish Chandra
Verma
Pr. Secretary Finance and Secretary to Deputy
Chief Minister
64 Delhi Dr. S. B. Deepak Commissioner DT & T
65 Delhi Shri. Awanish Kumar Special Commissioner DT & T
66 Goa Ms. Sarita Gadgil Additional Commissioner of State Tax
67 Goa Shri Saba Krishna Parab Nodal Officer GST
68 Gujarat Shri. J.P. Gupta Principal Secretary, Finance Department
69 Gujarat Shri. Milind Torawane Chief Commissioner of State Tax
70 Gujarat Shri DilipThaker Deputy Secretary(Tax)
71 Gujarat Shri Milind Kavatkar Joint Commissioner (Legal)
72 Haryana Shri Anurag Rastogi Addl. Chief Secretary to Government, Excise
and Taxation Department.
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73 Haryana Shri Ashok Kumar Meena Excise & Taxation Commissioner-cumSecretary to Government
74 Haryana Shri Siddharth Jain Additional Commissioner, GST, Excise and
taxation Department
75 Himachal Pradesh Shri Subhasish Panda Principal Secretary (Excise & Taxation)
76 Himachal Pradesh Shri Yunus Commissioner of State Tax and Excise
77 Himachal Pradesh Shri Rakesh Sharma Additional Commissioner of State Tax and
Excise
78 Jammu and Kashmir Dr. Rashmi Singh Commissioner of State Taxes
79 Jammu and Kashmir Ms. Namrita Dogra Additional Commissioner of State Taxes
80 Jammu and Kashmir Shri Waseem Raja Assistant Commissioner of Taxes
81 Jharkhand Ms. Aradhana Patnaik Secretary (Commercial Tax)
82 Jharkhand Shri Santosh Kumar Vatsa Commissioner of Commercial Taxes
83 Karnataka Shri ISN Prasad Additional Chief Secretary , Finance
Department
84 Karnataka Ms. C. Shikha Commissioner of Commercial Taxes
85 Karnataka Dr. M.P. Ravi Prasad Additional Commissioner of Commercial
Taxes
86 Karnataka Ms. C Pushpalatha Additional Commissioner of Commercial
Taxes
87 Kerala Shri. Bishwanath Sinha Additional Chief Secretary (Finance)
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88 Kerala Dr.Rathan U Kelkar Secretary (Taxes)
89 Kerala Shri. Ajit Patil Commissioner of State Tax
90 Kerala Dr. S Karthikeyan Special Commissioner
91 Kerala Shri. Abraham Renn S Additional Commissioner
92 Madhya Pradesh Ms. Deepali Rastogi Principal Secretary (Department of
Commercial Taxes)
93 Madhya Pradesh Shri Lokesh Kumar Jatav Commissioner Commercial Tax
94 Maharashtra Shri Manoj Sounik Additional Chief Secretary (Finance)
95 Maharashtra Ms Shaila A Secretary (Financial Reforms)
96 Maharashtra Shri Rajeev Mital Commissioner of State Tax
97 Maharashtra Shri Rajendra Adsul Joint Commissioner of State Tax
98 Maharashtra Ms VishakhaBorse Joint Commissioner of State Tax, HQ-V
99 Manipur Ms. Mercina R. Panmei Commissioner of Taxes
100 Manipur Shri Y. Indrakumar Singh Assistant Commissioner of Taxes
101 Meghalaya Ms S ASynrem Commissioner & Secretary, Excise,
Registration, Taxation and Stamp Department
102 Meghalaya Shri. L Khongsit Additional Commissioner of State Taxes
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103 Meghalaya Shri. B Wahlang Deputy Commissioner of State Taxes
104 Meghalaya Shri. J L Kharwanlang Assistant Commissioner of Taxes
105 Meghalaya Shri M C Sangma Assistant Commissioner of Taxes
106 Meghalaya Shri. V R Challam Assistant Commissioner of Taxes
107 Meghalaya Shri. M K Phanbuh Assistant Commissioner of Taxes
108 Meghalaya Shri. TrysterSangma Superintendent
109 Meghalaya Shri. BhutoMarak Superintendent
110 Mizoram Shri VanlalChhuanga Principal Secretary, Taxation Department
111 Mizoram Shri R. Zosiamliana Additional Commissioner of State Taxes
112 Mizoram Shri Hrangthanmawia Assistant Commissioner of Taxes
113 Nagaland Shri. C Lima Imsong Additional Commissioner of State Taxes
114 Nagaland Ms. N Areni Patton Joint Commissioner of State Tax
115 Odisha Shri Sanjay Kumar Singh Commissioner of Commercial Tax and GST
116 Punjab Shri Ajoy Sharma Secretary (Taxation)
117 Punjab Shri Kamal Kishor Yadav Commissioner of State Taxes
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118 Punjab Shri Ravneet Khurana Additional Commissioner of State Taxes
(Audit)
119 Puducherry Shri. M. Raju Commissioner-cum-Secretary to Government -
Finance
120 Puducherry Shri. M. RajeSaker Commissioner of State Tax
121 Rajasthan Shri K. K. Pathak Finance Secretary (Revenue)
122 Rajasthan Dr. Ravi Kumar Surpur Chief Commissioner of State Tax
123 Rajasthan Shri Satish Kumar
Upadhyay Additional Commissioner of State Taxes
124 Rajasthan Shri Arvind Mishra Additional Commissioner of State Taxes
125 Sikkim Shri Manoj Rai Commissioner to the Commercial Taxes
126 Tamil Nadu Shri N. Muruganandam Additional Chief Secretary (Finance)
127 Tamil Nadu Ms B. Jothi Nirmalasamy Secretary to Government, Commercial Tax &
Registration
128 Tamil Nadu Shri Thiru Dheeraj Kumar Principal Secretary/Commissioner of
Commercial Taxes
129 Telangana Shri Somesh Kumar Chief Secretary/Special Chief Secretary,
Revenue(CT& Excise )Department
130 Telangana Ms Neetu Prasad Commissioner of Commercial Taxes
131 Telangana Shri N Sai Kishore Additional Commissioner of State Taxes
132 Telangana Ms. K Rupa Soumya Deputy Commissioner of State Taxes
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133 Telangana Ms. VDN Sravanthi Deputy Commissioner of State Taxes
134 Tripura Shri Brijesh Pandey Secretary, Finance
135 Tripura Shri Ashin Barman Nodal Officer (GST)
136 Uttarakhand Dr. Ahmed Iqbal Commissioner of State Tax
137 Uttarakhand Shri I. S. Brijwal Additional Commissioner of State Taxes
138 Uttarakhand Shri Anil Singh Additional Commissioner of State Taxes
139 Uttarakhand Shri Amit Gupta Additional Commissioner of State Taxes
140 Uttarakhand Dr. Sunita Pandey Joint Commissioner of State Taxes
141 Uttarakhand Shri Anurag Mishra Joint Commissioner of State Taxes
142 Uttarakhand Shri Praveen Gupta Joint Commissioner of State Taxes
143 Uttarakhand Shri S.S. Tiruwa Deputy Commissioner of State Taxes
144 Uttarakhand Shri Ranjit Singh Assistant Commissioner of State Taxes
145 Uttar Pradesh Shri Nitin Ramesh
Gokaran Principal Secretary, State Tax
146 Uttar Pradesh Ms. Ministhy S Commissioner of State Tax
147 Uttar Pradesh Shri Harilal Prajapati Joint Commissioner(GST), State Tax HQ
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148 Uttar Pradesh Shri Paritosh Kumar
Mishra Deputy Commissioner(GST), State Tax HQ
149 West Bengal Shri Rajib Sankar
Sengupta Senior Joint Commissioner of State Taxes
150 West Bengal Shri JoyjitBanik Senior Joint Commissioner of State Taxes
151 West Bengal Shri BarunGayen Assistant Commissioner of State Taxes
152 West Bengal Shri Shantanu Naha OSD to Minister
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Agenda Item 2: 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 47thmeeting 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. ShBugganaRajendranath Finance, Planning, Commercial Taxes,
Skill Development & Training and
Legislative Affairs Minister, Andhra
Pradesh
Member
3. ShMauvinGodinho 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.TheGoM 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.TheGoM 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 2022in 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.TheGoM 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 7thGST 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”.TheGoM 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 parimateria 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.TheGoM 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.TheGoM 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. Compositionof 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.TheGoM 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.TheGoM 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.TheGoM
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.TheGoM 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’.TheGoM 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 GoMis 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
decided based on the requirement of this Tribunal. The GoM discussed that the retirement age and reAgenda for 49th GSTCM Volume 1
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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 Presidentand 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 GoMand 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 Presidentwas also considered by the GoM.TheGoM
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 3: Ratification of the Notifications, Circulars issued by the GST 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 48thmeeting
held on 17th December 2022, the GST Council had ratified all the notifications, circulars and orders
issued up to 13.12.2022.
2. In this respect, the following notifications and circulars issued after 13.12.2022 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 CGST
Act / CGST
Rules
Notifications
under UTGST
Central
Tax
1. Notification No.
26/2022-Central Tax
dated 26.12.2022
Seeks to make fifth amendment (2022) to
the CGST Rules, 2017
2. Notification No.
27/2022-Central Tax
dated 26.12.2022
Notification under sub-rule (4B) of
rule 8 of CGST Rules, 2017
Central
Tax (Rate)
1. Notification No.
12/2022-Central Tax
(Rate), dated
30.12.2022
Seeks to amend notification No. 1/2017-
Central Tax (Rate)
2. Notification No.
13/2022-Central Tax
(Rate), dated
30.12.2022
Seeks to amend notification No. 2/2017-
Central Tax (Rate)
3. Notification No.
14/2022-Central Tax
(Rate), dated
30.12.2022
Seeks to amend notification No. 4/2017-
Central Tax (Rate)
4. Notification No.
15/2022-Central Tax
(Rate), dated
30.12.2022
Seeks to amend notification No.
12/2017- Central Tax (Rate)
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Act / UTGST
Rules
Union
Territory
Tax (Rate)
1. Notification No.
12/2022- Union
Territory Tax (Rate),
dated 30.12.2022
Seeks to amend notification No. 1/2017-
Union Territory Tax (Rate)
2. Notification No.
13/2022- Union
Territory Tax (Rate),
dated 30.12.2022
Seeks to amend notification No. 2/2017-
Union Territory Tax (Rate)
3. Notification No.
14/2022- Union
Territory Tax (Rate),
dated 30.12.2022
Seeks to amend notification No. 4/2017-
Union Territory Tax (Rate)
4. Notification No.
15/2022- Union
Territory Tax (Rate),
dated 30.12.2022
Seeks to amend notification No.
12/2017- Union Territory Tax (Rate)
Notifications
under IGST
Act / IGST
Rules
Integrated
Tax (Rate)
1. Notification No.
12/2022-Integrated
Tax (Rate), dated
30.12.2022
Seeks to amend notification No. 1/2017-
Integrated Tax (Rate)
2. Notification No.
13/2022- Integrated
Tax (Rate), dated
30.12.2022
Seeks to amend notification No. 2/2017-
Integrated Tax (Rate)
3. Notification No.
14/2022- Integrated
Tax (Rate), dated
30.12.2022
Seeks to amend notification No. 4/2017-
Integrated Tax (Rate)
4. Notification No.
15/2022- Integrated
Tax (Rate), dated
30.12.2022
Seeks to amend notification No. 9/2017-
Integrated Tax (Rate)
Circulars under CGST Act
1. Circular No.
183/15/2022-GST
dated 27.12.2022
Clarification to deal with difference in
Input Tax Credit (ITC) availed in FORM
GSTR-3B as compared to that detailed in
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FORM GSTR-2A for FY 2017-18 and
2018-19
2. Circular No.
184/16/2022-GST
dated 27.12.2022
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 Integrated Goods and
Services Tax Act, 2017
3. Circular No.
185/17/2022-GST
dated 27.12.2022
Clarification with regard to
applicability of provisions of section
75(2) of Central Goods and Services
Tax Act, 2017 and its effect on
limitation
4. Circular No.
186/18/2022-GST
dated 27.12.2022
Clarification on various issue
pertaining to GST
5. Circular No.
187/19/2022-GST
dated 27.12.2022
Clarification regarding the treatment
of statutory dues under GST law in
respect of the taxpayers for whom the
proceedings have been finalised under
Insolvency and Bankruptcy Code,
2016
6. Circular No.
188/20/2022-GST
dated 27.12.2022
Prescribing manner of filing an
application for refund by unregistered
persons
7. Circular No.
189/01/2023-GST
dated 13.01.2023
Clarification regarding GST rates and
classification of certain goods
8. Circular No.
190/02/2023-GST
dated 13.01.2023
Clarification regarding GST rates and
classification of certain services
3. The GST Council may grant ratification to the notifications and circulars as detailed in para 2
above.
*****
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Agenda Item 4: Issues recommended by the Law Committee for the consideration of the GST
Council
Agenda Item 4(i): Amendment in Section 23 of the CGST Act, 2017
In the 47th meeting of GST Council, the Council gave in-principal approval for allowing intra-state
supply of goods by unregistered persons and composition taxpayers through e-commerce operators
(ECOs), subject to certain conditions and restrictions, and mandated the Law Committee to draft the
requisite changes for implementation of the said scheme. Subsequently, this issue was deliberated by
the GST Council in its 48th meeting, wherein the recommendations of the Law Committee for
implementation of the scheme were deliberated vide Agenda item number 7(vii) of Vol.-I of the
Agenda for the said meeting. It was also felt that there is a need to overcome the requirement of
compulsory registration in respect of such persons, which is mandated by clause (ix) of Section 24 of
CGST Act, for any person making supplies through ECOs who are required to collect tax at source
under section 52 of CGST Act. It was, accordingly, proposed that a notification under section 23(2) of
CGST Act will be required to be issued for conditional exemption from registration in respect of such
persons making intra-State supply of goods through ECOs, with turnover within the threshold limit
specified under section 22 of CGST Act.
2. It was observed that there is no non-obstante clause in section 23 of CGST Act and therefore
some doubts/ ambiguities may emerge as to whether exemption granted by section 23 overrides the
requirement of mandatory registration under section 24 of CGST Act. The recommendation of the
Law Committee to make amendment in section 23 retrospectively to provide overriding effect to the
same over sub-section (1) of section 22 and section 24 of CGST Act was put up for the approval of the
Council vide Agenda item number 7(viii) of Vol.-I of the Agenda for the 48th meeting of the Council.
3. The aforesaid agenda was approved by the Council in its 48th meeting and, consequently,
amendmentin section 23 of CGST Act has been proposed vide the clause 131 of the Finance Bill,
2023.The said clause reads as under:-
‘131. For section 23 of the Central Goods and Services Tax Act, the following section shall be
substituted and shall be deemed to have been substituted with effect from the 1st day of July,
2017, namely:––
“23. Persons not liable for registration. Notwithstanding anything to the contrary contained
in sub-section (1) of section 22 or section 24,––
(a) the following persons shall not be liable to registration, namely:––
(i) 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, 2017;
(ii) an agriculturist, to the extent of supply of produce out of cultivation of land;
(b) the Government may, on the recommendations of the Council, by notification, subject to
such conditions and restrictions as may be specified therein, specify the category of persons
who may be exempted from obtaining registration under this Act.”.’
4. However, subsequent to presentation of Finance Bill, 2023, in post-Budget interactions with
various stakeholders, doubtshave been expressed regarding the impact of this amendment on taxpayers
who are liable to pay tax on reverse charge basis. It is to be noted that clause (iii) of Section 24 of the
Act mandates compulsory registration of persons required to pay tax under reverse charge irrespective
of their turnover. The said provision reads as under:-
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“24. Compulsory registration in certain cases.-Notwithstanding anything contained in subsection (1) of Section 22, the following categories of persons shall be required to be
registered under this Act,-
(i) ……..
(ii) ……..
(iii) persons who are required to pay tax under reverse charge;
……”
4.1 It has been pointed out that after the amendment in section 23 of CGST Actproposed
vide clause 131 of the Finance Bill, 2023 referred in para 3 above, a person dealing exclusively in
exempt goods and/or services is no longer required to obtain registration under the Act even if he is
liable to pay tax under reverse charge on some supply of goods or services received by him. It may be
noted that this was never the intention behind proposing the amendments in Section 23. As stated in
Para 1 and 2 above, the reason why the aforesaid amendment was proposed is to overcome the
requirement of mandatory registration in respect of such small suppliers,with turnover less than the
threshold, making intra-State supply of goods through ECOs.
5. The issue was deliberated by the Law Committee in its meeting held on 08.02.2023. The Law
Committee recommended that in order to avoid the interpretation issues arising out of the said
proposed amendment in section 23 of CGST Act as highlighted in Para 4.1 above, the proposed
amendment in Section 23 be limited to giving over-riding effect to sub-section (2) of section 23 over
sub-section (1) of section 22 and section 24 of CGST Act. Law Committee observed that the overriding effect of sub-section (2) of section 23 over sub-section (1) of section 22 and section 24 of
CGST Act is required to ensure that a person specifically exempted from registration vide a
notification issued under sub-section (2) of section 23 of CGST Act, subject to the conditions
specified in the said notification, may not be subjected to the requirement of the provisions of subsection (1) of section 22 and section 24 of CGST Act for taking registration, as the same may in effect
nullify the effect of the said notification.
6. The Law Committee,accordingly, recommended that the following further amendment may be
made in the proposed amendment in section 23 of CGST Act vide clause 131 of Finance Bill, 2023:-
‘131. Insection 23 of the Central Goods and Services Tax Act, sub-section (2) thereof shall be
amendedand shall be deemed to have been amendedwith effect from the 1st day of July, 2017,
namely:––
“23. Persons not liable for registration.Notwithstanding anything to the contrary contained
in sub-section (1) of section 22 or section 24,––
(1)(a)Tthe following persons shall not be liable to registration, namely:––
(i) 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, 2017;
(ii) an agriculturist, to the extent of supply of produce out of cultivation of land;
(2)(b)Not withstanding anything to the contrary contained in sub-section (1) of section 22 and
section 24, the Government may, on the recommendations of the Council, by notification,
subject to such conditions and restrictions as may be specified therein,specify the category of
persons whomay be exempted from obtaining registration under this Act.”.’
7. The agenda is placed before the Council for approval.
Agenda for 49th GSTCM Volume 1
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Agenda Item 4(ii): Proposal to extend time period mentioned in Section 62(2) of the CGST Act,
2017
Sub-section (1) of Section 62 of CGST Act provides for best judgment assessment of the tax liability
of a registered person, where the said registered person fails to furnish the return under Section 39 or
Section 45 of CGST Act, even after service of a notice under Section 46 thereof. Sub-section (2) of
Section 62 provides that if the said registered person furnishes a valid return within 30 days of the
service of the assessment order issued under sub-section (1) of section 62, the said assessment order
shall be deemed to have been withdrawn.Section 62 of CGST Act is reproduced as below-

Section 62 of CGST Act, 2017:
62. Assessment of non-filers of returns-
(1) Notwithstanding anything to the contrary contained in section 73 or section 74, where a
registered person fails to furnish the return under section 39 or section 45, even after the
service of a notice under section 46, the proper officer may proceed to assess the tax liability
of the said person to the best of his judgement taking into account all the relevant material
which is available or which he has gathered and issue an assessment order within a period of
five years from the date specified under section 44 for furnishing of the annual return for the
financial year to which the tax not paid relates.
(2) Where the registered person furnishes a valid return within thirty days of the service of the
assessment order under sub-section (1), the said assessment order shall be deemed to have
been withdrawn but the liability for payment of interest under sub-section (1) of section 50
orfor payment of late fee under section 47 shall continue.
2. It has been brought to the notice that in number of cases, the registered person furnishes the
returnunder section 39 or section 45after the period of 30 days of service of the assessment order
issued under sub-section (1) of section 62 and therefore, such assessment order and the liability
created by such order are not withdrawn and remain valid. Therefore, such liabilities remain as
recoverable arrears in the books of the tax authorities and are liable to be recovered. The only option
available with the registered person in such cases is to file appeal against the said assessment order
under section 107 of CGST Act, after depositing the pre-deposit as per sub-section (6) of section 107.
3. Hon’ble Kerala High Court in the case of Softouch Health Care Pvt. Ltd. Vs. State Tax
Officer, 1st circle, SGST Deptt. Tripunithura, has also observed that if the registered person failsto
file return within the period specified under sub-section (2) of section 62, the assessment order issued
under sub-section (1) of section 62 cannot be set aside and the only remedy available with the
registered person is to approach the statutory appellate authority against the said assessment order.
4. Representations have been received from various stakeholders to increase this time period of
30 days specified in Section 62(2) of CGST Act, 2017, as this will not only provide relief to the
registered persons, who subsequently file their returns,without adversely affecting the interests of the
revenue, but will also help in reducing the multiplicity of cases at appellate level.It has also been
represented that a one-time amnesty may also be provided in respect of such past cases where the
taxpayers have furnished returns after 30 days of the service of the assessment order under Section
62(1) of CGST Act, 2017.
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5. The matter was deliberated by the Law Committee in its meeting held on 12.10.2022,30.01.23
and 08.02.2023.After detailed deliberations, the Law Committeerecommended the following:
a) Time period of 30 days specified under section 62(2) may be increased to 60 days.
b) A proviso may be inserted to section 62(2) to provide that assessment order shall also be
deemed to have been withdrawn if the concerned returns are filed beyond this period of 60
days but within an additional period of 60 days, with an additional late fee of Rs. 100 per
day during this additional period.
c) An amnesty scheme may be provided through a notification under section 148 of CGST
Act for deemed withdrawal of assessment orders for the past cases where the concerned
returns have been filed along with due interest and late fee, and irrespective of whether
appeal has been filed or not against the said assessment order, or whether or not the said
appeal has been decided or is still pending.
6. The Law Committee recommended the following amendmentsinSection 62 of CGST Act,
2017:
62. Assessment of non-filers of returns-
(1) Notwithstanding anything to the contrary contained in section 73 or section 74, where a registered
person fails to furnish the return under section 39 or section 45, even after the service of a notice
under section 46, the proper officer may proceed to assess the tax liability of the said person to the
best of his judgement taking into account all the relevant material which is available or which he has
gathered and issue an assessment order within a period of five years from the date specified under
section 44 for furnishing of the annual return for the financial year to which the tax not paid relates.
(2) Where the registered person furnishes a valid return within thirty sixty daysof the service of the
assessment order under sub-section (1), the said assessment order shall be deemed to have been
withdrawnbut the liability for payment of interest under sub-section (1) of section 50 or for payment of
late fee under section 47 shall continue:
Provided that where the registered person fails to furnish a valid return within sixty daysof the service
of the assessment order under sub-section (1), but furnishes the same within a further period of sixty
days, along with payment of an additional late fee of one hundred rupees for each day of delay in
furnishing such return beyond sixty days of the service of the said assessment order, such assessment
order shall be deemed to have been withdrawn, but the liability for payment of interest under subsection (1) of section 50 or for payment of late fee under section 47 shall continue.
6.1 The law Committee also recommendedissuance of a Notification under section 148 of CGST Act
as enclosed as Annexure “A”.
7. Accordingly, the recommendations of the Law Committee as detailed in para 6 and 6.1 above are
placed before the GST Council for approval.

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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
NOTIFICATIONNO. --/2023 – CENTRAL TAX
New Delhi, the -- February, 2023
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 in this notification referred to as the said Act), the
Central Government, on the recommendations of the Council, hereby notifies the registered person
who has failed to furnish a valid return within a period of thirty days of the service of the assessment
order issued on or before 31st day of January, 2023 under sub-section (1) of Section 62 of the said Act,
as the class of registered persons, in respect of whom the said assessment order shall be deemed to
have been withdrawn, if such registered person follows the special procedure specified hereinbelow,
namely,-
(i) the said registered person furnishes the aforesaid return on or before 31st day of May 2023,
(ii) the return referred to in clause (i) above is accompanied by payment of interest due under
sub-section (1) ofSection 50 of the said Act and the late fee payable under Section 47 of the said
Act,
irrespective ofwhether or not an appeal had been filed against the said assessment order under Section
107 of the said Act or whether or not the appeal, if any, filed against the said assessment order has
been decided.
[F. No. CBIC-20006/24/2021-GST]
(Alok Kumar)
Director
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Agenda Item 4(iii): Change in Place of Supply of transportation of goods under Section 13(9) of
the IGST Act, 2017
Representation has been received from Indian National Shipowners’ Association (INSA)
mentioning that while export freight charged by Indian Shipping Line (ISL) to Indian exporter is
taxable, the same charged by Foreign Shipping Line (FSL) is not taxable as supply by FSL to Indian
exporter for transport of goods to a place outside India is neither an inter-state nor an intra state
supply. As a result, Indian exporters would prefer FSL over ISL. INSA has also pointed out that a
similar disparity exists in case of import freight service supplied to foreign consignors. ISLs charge
GST on services supplied by them to foreign exporters for transportation of goods from outside India
to India, whereasFSLs are not required to charge the same and therefore, the foreign consignors prefer
to award contracts only to FSLs. INSA has inter alia requested to change the place of supply for such
services under section 13 of IGST Act from ‘place of destination of goods’ to the ‘location of recipient
of service’. This request of INSA has been endorsed by the Ministry of Ports, Shipping and
Waterways.
2. Section 13(9) of IGST Act, 2017 states that in cases where one of the supplier of the services
or the recipient of services is located outside India, “the place of supply of services of transportation
of goods, other than by way of mail or courier, shall be the place of destination of such goods”.
3. Import of Services has been defined under Section 2(11) of IGST Act as “supply of any
service, where –
(i) the supplier of service is located outside India;
(ii) the recipient of service is located in India; and
(iii) the place of supply of service is in India.”
4. In case of supply of goods transportation services provided by FSL to the Indian exporter for
transportation of goods from India to outside India, as per provision of section 13(9) of IGST Act,
Place of Supply (PoS) is outside India, and therefore, the same does not constitute import of service. It
is thus not an inter-state supply in terms of Section 7(4) of IGST Act, 2017. It is also not an inter-state
supply or intra-state supply in terms of any other provision of Section 7 or 8 of IGST law.As a result,
transport services provided by a foreign shipping line located outside India to an Indian exporter for
transport of goods from India to outside India is neither an inter-state supply nor an intra-state supply
and is thus outside tax net.
5. While it is true that exporters based in India would be entitled to input tax credit on the tax
paid by the ISL on the supply of goods transportation services by ISL to them for transportation of
goods outside and would be able to claim either the refund of accumulated ITC if export is made
without payment of tax, or will be able to claim refund of IGST paid on export goods. However, it is
likely that they would prefer hiring foreign shipping lines rather than going through the process of first
claiming ITC of tax paid by ISL and then claiming refund of the accumulated ITC or IGST paid.
6. The provision of section 13(9) of IGST Act, which declares PoS of transport services as the
place of destination of goods, is also creating some other anomalies, such as the following:
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Supply of transport services by an Indian Shipping Line located in Mumbai to an exporter
located in New York for transporting goods from New York to Mumbai, is treated as an intrastate supply (as place of supply of such services is place of destination of goods, i.e. Mumbai)
even though the service is provided to a recipient located outside India.
7. The matter was deliberated by the Law Committee in its meeting held on 30.01.2023 and
08.02.2023. The Law Committee took a view that in order to resolve the issue, Section 13(9) of the
IGST Act may be amended to change the place of supply of transportation of goods from ‘destination
of goods’ to the default rule under section 13(2) of IGST Act, i.e. ‘location of the recipient’ of
services. This would ensure that both Indian Shipping Lines and Foreign Shipping Lines have
identical liability to pay or to not pay IGST on transportation of goods by vessel from India to outside
India and vice versa. Law Committee recommended that Section 13(9) of IGST Act, 2017 may
accordingly be omitted so that the place of supply of transportation of goods is determined under the
default rule of section 13(2) of IGST Act, i.e. ‘location of the recipient’ of services.
8. The matter is placed before the GST Council for approval.

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Agenda Item 4(iv): Rationalisation of late fee for FORM GSTR-9 and amnesty for non-filers of
FORM GSTR-4, FORM GSTR-9 and FORM GSTR-10
In GST regime, timely filing of relevant returns / statements forms the cornerstone of
voluntary compliance. Taxpayers are required to furnish returns such as FORM GSTR-4 (Return for
financial year of registered person who has opted forcomposition levy) and FORM GSTR-9(Annual
Return). Besides, every registered person who is required to furnish a return under sub-section (1) of
section 39 of CGST Act and whose registration has been cancelled is required to furnish final return in
FORM GSTR-10.
2. Owing to a variety of reasons, a number of taxpayers failed to furnish such returns. Under
section 47 of the CGST Act, such persons become liable to levy of late fee, as under:
Section 47. Levy of late fee. –
(1) Any registered person who fails to furnish the details of outward or supplies required
under section 37 or returns required under section 39 or section 45 or section 52 by the due
date shall pay a late fee of one hundred 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 or Union territory.
3.1 Requests have been received from various stakeholders thatan Amnesty Scheme may be
provided for non-filers of FORM GSTR-4, FORM GSTR-9 and FORM GSTR-10 so as to enable
them to file the said returns without the burden of high late fee and allow them to continue their
business by declaring their due tax liability. It has beenrepresented that during the initial period of
implementation of GST, small taxpayers failed to furnish thesereturns due to lack of knowledge or due
to lack of funds. It has also been represented that during the COVID pandemic, small taxpayers faced
difficulties in compliances despite certain relaxations extended during that period. Many such
taxpayers have requested that heavy burden of late fee is now prohibiting them from furnishing the
said returns and as a result, they continue to remain defaulters, which is adversely affecting their
businesses.
3.2 Similarly, requests have also been received from tax authorities that continued noncompliance by such taxpayers is affecting revenues as well as compliance discipline and it has been
requested that an amnesty scheme may be provided for non-filers of such returns.
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3.3 Representations have also been received from various stakeholders that though late fee under
section 47 of CGST Act has been rationalized for delayed filing of FORM GSTR-1, FORM GSTR3B, FORM GSTR-4 and FORM GSTR-7, by linking the same with the turnover as well as tax
liability of the taxpayers, so as to reduce the burden of late fee on the smaller taxpayers. However, no
such rationalization of late fee has been done for delayed filing of annual return in FORM GSTR-9. It
has been represented that late fee under section 47 of CGST Act may also be rationalized for delayed
filing of annual return in FORM GSTR-9 so as to reduce burden of late fee on MSMEs.
4.1 In this regard, it may be noted that the following amnesty has been extended earlier for nonfilers of FORM GSTR-4:
(i) Late fee for delay in furnishing FORM GSTR-4 for the quarters of July, 2017 to
September, 2018 was waived, if the said return was filed between the period from
22.12.2018 to 31.03.2019.
(ii) Late fee was waived in excess of Rs. 500/- (Rs. 250/- + Rs. 250/-),and fully waived where
the total amount of central tax payable in the said return is nil, for the registered persons
who failed to furnish the return in FORM GSTR-4 for the quarters/ period from July,
2017 to March, 2020 by the due date but furnished the said return between the period
from 22th day of September, 2020 to 31st day of October, 2020.
4.2 However, no amnesty has been provided in respect of late filing of FORM GSTR-9 and
FORM GSTR-10 till now.
5.1 The issue was deliberated by the Law Committee in its meetings held on 30.01.2023,
08.02.2023 and 09.02.2023. The Law Committee took a view that despite previous amnesty schemes
as detailed above, many taxpayers, especially MSMEs, have remained non-filers. This is affecting
revenue as well as compliance discipline. An opportunity may be provided to such taxpayers to
furnish pending returns in FORM GSTR-4, FORM GSTR-9 and FORM GSTR-10 and thereby
regularise their businesses.
5.2 The Law Committee also felt that in line with the earlier rationalization of late fee for delayed
filing of FORM GSTR-1, FORM GSTR-3B, FORM GSTR-4 and FORM GSTR-7, there is also a
need to rationalize the late fee under section 47 of CGST Act in respect of delayed filing of annual
return in FORM GSTR-9, so as to reduce the burden of such late fee on MSMEs.
6.1 Accordingly, the Law Committee recommended as under:
(a) Amnesty for non-filers of FORM GSTR-4:Late fee may be waived which is in excess of
Rs. 500/- (Rs. 250/- under CGST and Rs. 250/- under SGST) and may be fully waived where the total
amount of central tax payable in the said return is nil, for the registered persons who failed to furnish
Agenda for 49th GSTCM Volume 1
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the return in FORM GSTR-4 for the quarters from July, 2017 to March 2019 or for Financial years
from 2019-20 to 2021-22 by the due date but furnish the said return between the period from 1st day
of May, 2023 to 31st day of July, 2023.
(b) Rationalisation of late fee for FORM GSTR-9:Late fee for annual return amounts to Rs
200/- (Rs. 100/- under CGST and Rs. 100/- under SGST/ UTGST) for every return subject to a
maximum of 0.5% (0.25% under CGST and 0.25% under SGST / UTGST) of his turnover in the State
or Union territory. No rationalisation of such late fee has been done, unlike late fee for FORM
GSTR-1, FORM GSTR-3B, FORM GSTR-4 and FORM GSTR-7. Accordingly, late fee for
delayed filing of annual return in FORM GSTR-9 may be rationalised for the financial year 2022-
23 onwards as under:
S. No.
(1)
Class of registered persons
(2)
Amount of late fee
(3)
1. Registered persons having an
aggregate turnover of up to rupees
5 crores in the said financial year
Twenty-five rupees per day, subject
to a maximum of an amount
calculated at 0.02 per cent. of his
turnover in the State or Union
territory.
2. Registered persons having an
aggregate turnover of more than
rupees 5 crores and up to rupees
20 crores in the said financial
year
Fifty rupees per day, subject to a
maximum of an amount calculated
at 0.02 per cent. of his turnover in
the State or Union territory.
(c) Amnesty for non-filers of FORM GSTR-9: For the registered persons who failed to
furnish the annual return by the due date for any of the financial years 2017-18, 2018-19, 2019-20,
2020-21 or 2021-22, but furnish the said return between 1st day of May, 2023 to 31st day of July,
2023, the total amount of late fee may be waived which is in excess of Rs. 20,000/- (Rs. 10,000/-
under CGST and Rs. 10,000/- under SGST / UTGST).
(d) Amnesty for non-filers of FORM GSTR-10:Late fee may be waived which is in excess
of Rs. 1000/- (Rs. 500/- under CGST and Rs. 500/- under SGST) for the registered persons who failed
to furnish the final return in FORM GSTR-10 by the due date but furnish the said return between the
period from 1st day of May, 2023 to 31st day of July, 2023.
6.2 Accordingly, the following notifications may be issued to implement the aforementioned
recommendations of the Law Committee:
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(i) Amnesty fornon-filers of return in FORM GSTR-4 as per draft notification at Annexure
I
(ii) Rationalisation of late fee for annual return in FORM GSTR-9 and amnesty for nonfilers of annual return in FORM GSTR-9 as per draft notification at Annexure II
(iii) Amnesty for non-filers of return in FORM GSTR-10 as per draft notification at
Annexure III
7. Accordingly, the proposal at para 6.1 and 6.2 is placed for approval of the Council.
Agenda for 49th GSTCM Volume 1
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ANNEXURE I
[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. --/2023 – CENTRAL TAX
New Delhi, the -- February, 2023
G.S.R.....(E).— In exercise of the powers conferred by section 128 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 makes the following further
amendments in the notification of the Government of India in the Ministry of Finance (Department of
Revenue), No. 73/2017– Central Tax, dated the 29th December, 2017, published in the Gazette of
India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R. 1600(E), dated the 29th
December, 2017, namely: —
In the said notification, after the sixth proviso, the following proviso shall be inserted, namely: —
“Provided also that late fee payable under section 47 of the said Act, shall stand waived which
is in excess of two hundred and fifty rupees and shall stand fully waived where the total amount of
central tax payable in the said return is nil, for the registered persons who failed to furnish the return in
FORM GSTR-4 for the quartersfrom July, 2017 toMarch 2019 or for Financial years from 2019-20 to
2021-22 by the due date but furnish the said return between the period from 1stday of May, 2023 to
31stday of July, 2023.”.
[F. No. CBIC-20006/24/2021-GST]
(Alok Kumar)
Director
Note: The principal notification No. 73/2017– Central Tax, dated the 29th December, 2017 was
published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R.
1600(E), dated the 29th December, 2017 and was last amended vide notification number 12/2022 –
Central Tax, dated the 5th July, 2022, published in the Gazette of India, Extraordinary, Part II, Section
3, Sub-section (i) vide number G.S.R. 785(E), dated the 5th July, 2022.
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ANNEXUREII
[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. --/2023 – CENTRAL TAX
New Delhi, the -- February, 2023
G.S.R.....(E).— In exercise of the powers conferred by section 128 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 waives the amount of late fee
payable under section 47 of the said Act, which is in excess offive hundred rupees for the registered
persons who failed to furnish the final return in FORM GSTR-10 by the due date but furnish the said
return between the period from 1st day of May, 2023 to 31st day of July, 2023.
[F. No. CBIC-20006/24/2021-GST]
(Alok Kumar)
Director

Agenda for 49th GSTCM Volume 1
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ANNEXURE III
[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. --/2023 – CENTRAL TAX
New Delhi, the -- February, 2023
G.S.R.....(E).– In exercise of the powers conferred by Section 128 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 waives the amount of late fee payable
under section 47 of the said Act in respect of a return to be furnished under section 44 of the said
Actfor the financial year 2022-23 onwards, which is in excess of an amount as specified in column (3)
of the Table given below, for the class of registered persons mentioned in the corresponding entry in
column (2) of the said Table, who fails to furnish the said return by the due date, namely: —
Table
S. No.
(1)
Class of registered persons
(2)
Amount
(3)
1. Registered persons having an
aggregate turnover of up to rupees 5
crores in the said financial year
Twenty-five rupees per day, subject to a
maximum of an amount calculated at 0.02 per
cent. of his turnover in the State or Union
territory.
2. Registered persons having an
aggregate turnover of more than
rupees 5 crores and up to rupees 20
crores in the said financial year
Fifty rupees per day, subject to a maximum of
an amount calculated at 0.02 per cent. of his
turnover in the State or Union territory.
Provided that for the registered persons who failed to furnish the return under section 44 of the
said Act by the due date for any of the financial years 2017-18, 2018-19, 2019-20, 2020-21 or 2021-
22, but furnish the said return between the period from the 1st day of May, 2023 to the 31st day of July,
2023, the total amount of late fee under section 47 of the said Act payable in respect of the said return,
shall stand waived which is in excess of ten thousand rupees:
[F. No. CBIC-20006/24/2021-GST]
(Alok Kumar)
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Agenda Item 4(v): Amendment in CGST Rules and Notification for biometric-based Aadhaar
authentication of registration applicants
On the recommendations of the GST Council in its 48th meeting held on 17.12.2022, rules 8 and 9 of
CGST rules have been amended w.e.f. 26.12.2022 vide Notification No. 26/2022-CT dated
26.12.2022 inter alia as under:
(i) to mandate biometric-based Aadhaar authentication for high-risk applicants who opt for
authentication of Aadhaar number, sub-rule (4A) of rule 8 has been 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 sub-rule 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) has been inserted in rule 8 of CGST
Rules, as under:
“(4B) The Central Government may, on the recommendations of the Council, by notification
specify the States 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 has been 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.”
(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 has been 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,
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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 sub-rule (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 sub-rule (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
Agenda for 49th GSTCM Volume 1
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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.
…”
2. Moreover, Notification No. 27/2022-CT dated 26.12.2022 has also been issued under Rule
8(4B) for specifying that the provisions of sub-rule (4A) of rule 8 shall not apply in all the States and
Union territories except the State of Gujarat.
3.1. It has been noticed that the said sub-rule (4A) was earlier substituted w.e.f. 01.04.2020 vide
Notification No. 62/2020-CT dated 20.08.2020 as under:
(4A) Where an applicant, other than a person notified under sub-section (6D) of section 25,
opts for authentication of Aadhaar number, he shall, while submitting the application under
sub-rule (4), with effect from 21st August, 2020, undergo authentication of Aadhaar number
and the date of submission of the application in such cases shall be the date of authentication
of the Aadhaar number, or fifteen days from the submission of the application in Part B of
FORM GST REG-01 under sub-rule (4), whichever is earlier.
3.2. Subsequently, vide Notification No. 94/2020-CT dated 22.12.2020, the said sub-rule (4A) was
to be substituted w.e.f. a date to be notified as under:
(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.”
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3.3. However, the said substitution of sub-rule (4A) vide Notification No. 94/2020-CT dated
22.12.2020 has not been notified. The net effect is that before substitution of sub-rule (4A),vide
Notification No. 26/2022-CT dated 26.12.2022, sub-rule (4A) existed as below:
(4A) Where an applicant, other than a person notified under sub-section (6D) of section 25,
opts for authentication of Aadhaar number, he shall, while submitting the application under
sub-rule (4), with effect from 21st August, 2020, undergo authentication of Aadhaar number
and the date of submission of the application in such cases shall be the date of authentication
of the Aadhaar number, or fifteen days from the submission of the application in Part B of
FORM GST REG-01 under sub-rule (4), whichever is earlier.
4. It has been noticed that due tosubstitution of sub-rule (4A) vide Notification No. 26/2022-CT
dated 26.12.2022, inadvertently, the mandate to undergo authentication of Aadhaar number while
submitting the application under sub-rule (4) by an applicant, other than a person notified under subsection (6D) of section 25, who opts for authentication of Aadhaar number, has been done away
with.As a result, there is no requirement for authentication of Aadhaar now, other than high-risk
applicants (identified by the portal), who have opted for authentication of Aadhaar Number, where
Biometric authentication of Aadhaar will be required. Also, the provision that the date of submission
of the application in such cases shall be the date of authentication of the Aadhaar number, or fifteen
days from the submission of the application in Part B of FORM GST REG-01 under sub-rule (4),
whichever is earlier, has also been omitted.
5. Since Notification No. 27/2022-CT dated 26.12.2022 issued under Rule 8(4B) specifies that
the provisions of sub-rule (4A) of rule 8 shall not apply in all the States and Union territories except
the State of Gujarat, it emerges that there does not remain any requirement of Aadhaar authentication
in all the States and Union territories other than Gujarat. Further, even in the State of Gujarat,
authentication of Aadhaar is not required now, other than the cases of high-risk applicants (identified
by the portal) where Biometric authentication of Aadhaar will be required. This was never the
intention while going ahead with the said amendment.
6. In order to rectify this inadvertent omission, the Law Committee in its meeting held on
30.01.2023 has recommended introducing the following amendmentswith effect from 26.12.2022:
(i) substitution of sub-rule (4A) of rule 8 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
Agenda for 49th GSTCM Volume 1
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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.
(4A) Where an applicant, other than a person notified under sub-section (6D) of section 25,
opts for authentication of Aadhaar number, he shall, while submitting the application under
sub-rule (4), undergo authentication of Aadhaar number and the date of submission of the
application in such cases shall be the date of authentication of the Aadhaar number, or fifteen
days from the submission of the application in Part B of FORM GST REG-01 under sub-rule
(4), whichever is earlier.
Provided that 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 sub-rule and the application shall be deemed to be complete only after
completion of the process laid down under this proviso.
(ii) amendment of sub-rule (4B) of rule 8 as under:
(4B) The Central Government may, on the recommendations of the Council, by notification
specify the States or Union territories wherein the provisions of proviso to sub-rule (4A) shall
not apply.
(iii) amendment in notification no. 27/2022-CT dated 26.12.2022 as under:
In pursuance of the powers conferred by sub-rule (4B) of rule 8 of the Central Goods and
Services Tax Rules, 2017, the Central Government, on the recommendations of the Council,
hereby specifies that the provisions of proviso to sub-rule (4A) of rule 8 of the said rules shall
not apply in all the States and Union territories except the State of Gujarat.
7. Accordingly, the proposal at para 6 is placed for approval of the Council.

Agenda for 49th GSTCM Volume 1
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Agenda Item 4(vi): Extension of timelimit for application for revocation of cancellation of
registration
The GST law provides for cancellation of registration forvarious reasons including non-filing
of returns for a continuous period of 6 months or more. The registrations of a number of small
taxpayers, who could not file timely returns for 6 or more months, due to COVID-19 pandemic or due
to various other reasons, get cancelled. Such taxpayers are required to file their application for
revocation of cancellation of registration for getting their registrations revived again.
2. It is to be noted that section 30 of the CGST / SGSTAct provides only30 days for these
taxpayers to apply for revocation. This period is further extendable by a period of 30 days by the
Additional or Joint Commissioner and further 30 days by the Commissioner.Further as per proviso to
Rule 23 of CGST Rules, 2017,where the registration has been cancelled due to non-filing of returns,
such application for revocation can be filed only after such returns have been furnished and the due
amount of tax, interest, penalty and late fee in respect of such returns has been paid. However, many
small taxpayers could not file their pending returns within the time specified for filing of the
application of revocation due to lack of funds or other reasons. Consequently, such taxpayers could
not apply in time for revocation of cancellation of their registration.
3. The Law Committee in its meetings held on 30.01.2023 and 08.02.2023 deliberated upon the
issue and noted that the time period of 30 days to apply for revocation is insufficient especially in
cases where the registration is cancelled for non-filing of returns. In such cases, lack of funds for
furnishing returns leads to delay in applying for revocation.Further, multi-stage extension of time
period to file application for revocation of cancellation of registration by 30 and 60 days by senior
officers causes delay in processing applications for revocation. Moreover, no significant benefit
appears to accrue to the department by such procedure of graded extensions by senior officers.
4. The Law Committee accordingly recommended that:
(i) the time limit for making an application for revocation of cancellation of registration may
be raised from 30 days to 90 days.
(ii) where the registered person fails to apply for revocation of cancellation of registration
within 90 days, the said time period may be extended by the Commissioner or an officer
authorised by him in this behalf, not below the rank of an Additional / Joint Commissioner, on
sufficient cause being shown, and for reasons to be recorded in writing, for a further period
not exceeding 180 days.
5. The Law Committee also took a view that such timelines for filing application of revocation
of cancellation of registration and extension of the same, if any, may not be hard-coded in the Act and
instead, there may be prescribed through the Rules only. Accordingly, the Law Committee
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recommended that the enabling provision may be provided in sub-section (1) of section 30 of CGST
Act for prescribing the time limit, manner, conditions and restriction for filing application of
revocation of cancellation of registration through CGST Rules and thereafter, such time period,
manner, conditions and restriction may be prescribed under Rule 23 of CGST Rules.
6. Accordingly, the Law Committee recommended that sub-section (1) of section 30 of the
CGST Act may be amended as under:
Section 30. Revocation of cancellation of registration.-
(1) Subject to such conditions as may be prescribed, any registered person, whose registration
is cancelled by the proper officer on his own motion, may apply to such officer for revocation
of cancellation of the registration in such manner, within such time and subject to such
conditions and such restrictions, as may be prescribedthe prescribed manner within thirty
days from the date of service of the cancellation order.
Provided that such period may, on sufficient cause being shown, and for reasons to be
recorded in writing, be extended,-
(a) by the Additional Commissioner or the Joint Commissioner, as the case may be,
for a period not exceeding thirty days;
(b) by the Commissioner, for a further period not exceeding thirty days, beyond the
period specified in clause (a).
6.1. The Law Committee has also recommended that sub-rule (1) of rule 23 of the CGST Rules
may be amended as under:
Rule 23. Revocation of cancellation of registration. –
(1) A registered person, whose registration is cancelled by the proper officer on his own
motion, may subject to the provisions of rule 10B submit an application for revocation of
cancellation of registration, in FORM GST REG-21, to such proper officer, within a period
of thirty ninety days from the date of the service of the order of cancellation of
registration,orwithin such time period as extended by the Additional Commissioner or the
Joint Commissioner or the Commissioner, as the case may be, in exercise of the powers
provided under the proviso to sub-section (1) of section 30,at the common portal, either
directly or through a Facilitation Centre notified by the Commissioner:
Provided that such period may, on sufficient cause being shown, and for reasons to be
recorded in writing, be extended by the Commissioner or an officer authorised by him in this
Agenda for 49th GSTCM Volume 1
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behalf, not below the rank of Additional Commissioner or Joint Commissioner, as the case
may be, for a further period not exceeding one hundred and eighty days.
Providedfurther that no application for revocation shall be filed, if the registration has been
cancelled for the failure of the registered person to furnish returns, unless such returns are
furnished and any amount due as tax, in terms of such returns, has been paid along with any
amount payable towards interest, penalty and late fee in respect of the said returns:
Provided furtheralso that all returns due for the period from the date of the order of
cancellation of registration till the date of the order of revocation of cancellation of
registration shall be furnished by the said person within a period of thirty days from the date
of order of revocation of cancellation of registration:
Provided also that where the registration has been cancelled with retrospective effect, the
registered person shall furnish all returns relating to period from the effective date of
cancellation of registration till the date of order of revocation of cancellation of registration
within a period of thirty days from the date of order of revocation of cancellation of
registration.
6.2 Law Committee further recommended that an amnesty scheme may be provided for filing of
application of revocation of cancelation of registration in all past cases where registrations have been
cancelled upto31st December, 2022 by allowing such persons to file application for revocation of
cancellation of registration by 30th June, 2023. Law Committee recommended for issuance of a
notification under section 148 of CGST Act in respect of such cases as detailed in Annexure-A.
7. Accordingly, the proposals at para 6, 6.1 and 6.2are placed for the approval of the Council.

Agenda for 49th GSTCM Volume 1
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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. --/2023 – CENTRAL TAX
New Delhi, the --February, 2023
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 notifies a registered person, whose registration has been
cancelled under clause (b) or (c) of sub-section (2) of section 29 of the said Act on or before 31st day
of December, 2022, and who has failed to apply for revocation of cancellation of such registration
within the time period specified in section 30 of the said Act, as the class of registered persons who
shall follow the following special procedure in respect of revocation of cancellation of such
registration:
(i) such registered person may apply for revocation of cancellation of such registration upto30th day of
June, 2023;
(ii) the extension of time period for filing application for revocation of cancellation of registration as
per proviso to sub-section (1) of section 30 of the said Act shall not be applicable for such application;
(iii) such application for revocation shall be filed only after furnishing of all the returns due upto the
effective date of cancellation of registration, and after payment of any amount due as tax, in terms of
such returns, along with any amount payable towards interest, penalty and late fee in respect of the
said returns;
Explanation: For the purpose of this notification, the person who has failed to apply for revocation of
cancellation of registration within the time period specified in section 30 of the said Act includes a
person whose appeal against the order of cancellation of registration or the order rejecting application
for revocation of cancellation of registration under section 107 of the said Act has been rejected on the
ground of failure to adhere to the time limit specified under sub-section (1) of section 30 of the said
Act read with proviso thereof.
[F. No. CBIC-20006/24/2021-GST]
(Alok Kumar)
Director
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Agenda Item 5: 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 stake
holders 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 3rd and 7th February, 2023 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 issues. On one
issue, 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 Rab
(1702)
18% Nil/
5% (prepackaged and
labelled)
1) Based on the recommendations of the GST
Council in its 48th Meeting held in December
2022, a clarification was issued that rab is
classifiable under heading 1702 attracting GST
rate of 18% (S. No. 11 in Schedule III of
notification no. 1/2017-Central Tax (Rate),
dated the 28th June, 2017).
2) A request has been received to create a special
entry for rab and to treat rab on similar lines of
jaggery stating that it is a liquid form of
jaggery.
3) Currently, jaggery attracts nil rate of GST if
sold in loose form and 5% if sold in prepackaged and labelled form.
4) Fitment Committee recommended that the GST
rate on rab may be reduced to 5% if sold in prepackaged and labelled form and nil, if sold in
loose form.
5) Fitment Committee also recommended
clarifying that the issue for the past periods may
be regularized on as is basis.
Agenda for 49th GSTCM Volume 1
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S.
No Description/HSN Present
GST rate
Requested
GST rate Comments
2 Pencil Sharpener
(8214)
18% 12% 1) Based on the report of GOM on Rate
Rationalization, GST Council in its 47th
Meeting recommended to increase GST rate on
Pencil Sharpeners (falling under CTH 8214)
from 12% to 18% in order to remove the
inverted duty structure.
2) To remove an anomaly relating to pencil
sharpener which continued to reflect the rate of
12% in another entry, on the recommendations
made by GST Council in its 48th meeting, the
anomalous entry for pencil sharpeners covered
under Sr. No. 180 of Schedule II of GST Rate
Notification No. 1/2017-Central Tax (Rate) was
amended to remove pencil sharpener from that
entry.
3) However, during discussion in 48th meeting, a
few members of the Council requested to reconsider the recommendations to increase the
GST rate of pencil sharpener on the ground that
these are items used by school children. The
Council directed that the same may be
examined by the Fitment Committee and
presented in the next meeting.
4) Accordingly, the issue was examined by
Fitment Committee.
5) A domestic manufacturer has also represented
that although the supply of erasers attract 5%
and pencils, pastels, drawing charcoal etc
attract 12%, due to 18% rate on pencil
sharpener, they have to discharge 18% when
sharpeners are supplied together along with
pencils, erasers as this constitute a mixed
supply. Accordingly, the rate applicable on
pencil pack (including pencils, erasers and
sharpeners) is now 18% as pencil sharpeners
will now have the highest rate of tax of 18%,
resulting in rise in prices of basic stationary
item. It has also been stated that for a mixed
pack costing INR 125, the price of sharpener is
in the range of INR 3 to INR 5, but GST on
entire pack would be 18%. It has also been
stated that domestic manufacturers would have
to look at the option of removing the sharpener
from the pencil pack and only sell it as an
individual product which may not be in the
interest of consumers.
6) Currently, GST rates on supply of pencils,
erasers and sharpeners are as follows:
S.
No.
Product
(CTH)
GST
Rate
GST
Notifica
tion
Agenda for 49th GSTCM Volume 1
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S.
No Description/HSN Present
GST rate
Requested
GST rate Comments
1. Pencils
(including
propelling or
sliding
pencils),
crayons,
pastels,
drawing
charcoals
and tailor’s
chalk (9608/
9609)
12% Sr. No.
233
of
Schedule
II of GST
Rate
Notificati
on No.
1/2017-
Central
Tax
(Rate)
2. Slate pencils
and chalk
sticks(9609)
Nil Sr. No.
145
of GST
Rate
Notificati
on No.
2/2017-
Central
Tax
(Rate)
3. Erasers
(4016)
5% Sr. No.
191
of
Schedule
I of GST
Rate
Notificati
on No.
1/2017-
Central
Tax
(Rate)
4. Pencil
Sharpeners
(8214)
18% Sr. No.
302A
of
Schedule
III of
GST Rate
Notificati
on No.
1/2017-
Central
Tax
(Rate)
5. Mathematica
l boxes,
geometry
boxes and
colour boxes
(7310 or
7326)
12% Sr. No.
180
of
Schedule
II of GST
Rate
Notificati
Agenda for 49th GSTCM Volume 1
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S.
No Description/HSN Present
GST rate
Requested
GST rate Comments
on No.
1/2017-
Central
Tax
(Rate)
6. Pencil pack
including
pencils,
erasers and
sharpeners
18% Mixed
Supply
7) Fitment Committee recommended that GST
rate on Pencil Sharpeners (falling under CTH
8214) may be reduced from 18 % to 12%.
3 Tags-Tracking
Devices and Data
loggers for durable
Containers
[8526 91]
18 % Nil 1) Notification No. 104/94- Customs dated
16.03.1994 provides exemption from Customs
Duty and IGST to imported containers of
durable nature provided the same are reexported within a period of 6 months.
2) Request has been received from shippers stating
they are planning to import Tags-Tracking
Devices and Data loggers and equip its
container fleet with these tracking devices.
They have sought exemption from Customs
duty and IGST as is available to import of
containers under Notification 104/94-Customs
on the ground that these goods will be
fixed/installed on containers.
3) They have made two requests – (i) exemption
when these devices are imported for fixing on
the containers and (ii) exemption after such
devices are affixed/installed on containers.
4) The GST rate on goods falling under CTH 8526
91 described as “Radio-navigational aid
apparatus” is 18%.
5) Fitment Committee observed that the principle
of similarity with respect to container does not
apply when these tracking devices are imported
separately to be installed on containers.
Therefore, the request for ‘Nil’ IGST on these
devices imported separately for affixing on the
containers does not merit consideration.
6) However, Fitment Committee recommended
that the issue may be clarified by way of
inserting a proviso in the notification that if
such duty paid devices are affixed with
containers, no separate IGST shall be levied on
the affixed devices and the ‘Nil’ IGST
treatment available for the containers under
notification No. 104/94-Customs shall also be
available subject to existing conditions.
Agenda for 49th GSTCM Volume 1
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S.
No Description/HSN Present
GST rate
Requested
GST rate Comments
4 Coal rejects
(27)
- - 1) Currently, vide Sl. no. 41A of notification no.
1/2017-Compensation Cess (Rate), exemption
from compensation cess has been provided on
coal rejects supplied by a coal washery arising
out of coal, provided compensation cess has
been paid on raw coal and no input tax credit
thereof has been availed by any person.
2) Principal users like power companies pay
compensation cess on entire quantity of raw
coal purchased and send the raw coal to coal
washeries for beneficiation. Washed coal is sent
back to the principal user while the coal rejects
are sold by the power companies to the
washeries which disposes off the coal rejects.
3) Representation has been received regarding the
demand of compensation cess on coal rejects
sold by the principal user to the washery. In
certain cases, the principal user has been
availing credit of compensation cess to
discharge the liability of compensation cess on
coal rejects supplied to the coal washeries.
4) However, in such a case, the washery is not
able to get benefit of the exemption as principal
user has availed input tax credit.
5) The exemption was given to the washery to
avoid a double taxation on coal on which
compensation cess had already been paid.
Payment of compensation cess again on coal
rejects on which no ITC is available will be a
cost to the washeries.
6) Fitment Committee has recommended to amend
the entry at Sl. No. 41A of notification No.
1/2017-Compensation Cess (Rate), so that
exemption benefit covers both coal rejects
supplied to and by a coal washery, arising out
of coal on which compensation cess has been
paid and no input tax credit thereof has been
availed by any person.
5 Millet-based health
mix products
consisting at least
70% of millets
18% Nil/
5% (prepackaged and
labelled)
1) Currently, there is no specific entry for milletbased health mix products. Therefore, this
product currently attracts GST rate at 18%
under the residual entry, i.e. Sl. No. 453 of
Schedule III of notification No. Central Tax
(Rate) – 1/2017 for goods covered under any
chapter.
2) Representation has been received for reduction
of tax rate on millet- based health mix products
made on firewood stoves in village households.
Agenda for 49th GSTCM Volume 1
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S.
No Description/HSN Present
GST rate
Requested
GST rate Comments
The product predominantly consists of millets,
whether or not germinated, which are roasted.
Small quantities of flour, meal or powder of
products such as groundnuts, pulses etc, roasted
in the same manner as millets, are added to the
millets. Certain goods such as cardamom,
pepper etc may also be added in minute
quantities just to add flavour. All these products
are mixed, powdered and packed for sale.
3) The request is to keep these products on par
with sattu/ chhatua (HS 1106).
4) Circular 80/54/2018-GST dated 31.12.18
clarified that Chhatua or Sattu is a mixture of
flour of ground pulses and cereals which
includes the flour, meal and powder made from
peas, beans or lentils(dried leguminous
vegetables falling under 0713).
5) In the instant case, the product contains not
only millets or pulses but also cardamom,
pepper etc to enhance the flavour. Therefore,
the product is a food preparation of flour,
groats, meal etc.
6) HS Explanatory Notes show that HS 1901
covers food preparation of flour, meal and
grouts of Chapter 11 but it excludes flour, meal
or powder of dried vegetables (heading 0712),
of potatoes (heading 1105) or of dried
leguminous vegetables (heading 1106). In case
pulses (covered under heading 1106) are added
to the millets during preparation, then the
product may be classified under HS 2106,
which covers food preparations not elsewhere
specified or included. Thus, depending on the
substances added to the millet flour, goods may
be appropriately classifiable under 1901 or
2106.
7) Since UN is celebrating the International Year
of the Millets in 2023, the Fitment Committee
recommended to reduce the rate to nil if any
millet-based health mix consisting at least 70%
of millets is sold in loose form and 5%, if it is
sold in pre-packaged and labelled form.
8) Further, the Fitment Committee recommended
that the goods may be appropriately classified
under HS 1901 or 2106.
Agenda for 49th GSTCM Volume 1
Page 163 of 359
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
Requeste
d GST
rate
Comments
1 Bidi
wrapper
leavesTendu
(14049010)
18%
(RCM on
supply by
agriculturi
st to any
registered
person)
Nil 1) Representation has been received for reduction in GST
rate on tendu leaves stating that GST rate of 18% is
affecting the tendu trade which is a minor forest
produce.
2) Currently, supply of tendu leaves by an agriculturist to
any registered person attracts 18% GST under reverse
charge mechanism.
3) GST rate on tendu leaves had been discussed in the
14th and 15th GST Council meetings. Though Fitment
Committee had proposed the GST rate of 5%, the GST
Council decided in its 15th meeting to tax tendu leaves
at 18%.
4) The matter of rate reduction was also placed before the
Council in its 22nd and 37th meetings but the Council
did not recommend any change in the rate.
5) During the Fitment Committee meeting, the members
felt that all the affected States should be invited to
present their case for the Fitment Committee to
examine the issue. Accordingly, the States of Orissa,
Chhattisgarh and Madhya Pradesh were invited to
make a presentation.
6) The State of Orissa presented that tax rate on tendu
leaves pre- GST was 5.91% and that the tendu trade is
being affected with the high GST rate.
7) The State of Madhya Pradesh reiterated their stand that
tax rate on tendu leaves should not be reduced. It was
presented that they have a three-tier cooperative system
of collection of leaves which works on a profit -sharing
model where almost 60-70% of the profit is given back
to the tendu leaf pluckers and the average procurement
of tendu leaves has increased compared to pre-GST era.
8) Similarly, Chhattisgarh represented that status-quo be
maintained. It was stated they also have a three-tier
cooperative system of collection of leaves and that
prices are passed on to tendu leaf pluckers as bonuses.
9) After consideration of the views, the FC recommended
to maintain status quo.
2 Ships and
vessels for
breaking up
[HSN 8908
18% Less than
10%
1) Currently, vessels and ships for breaking up attract GST
@ 18%. This rate was recommended by the GST
Council in its 14th meeting based on the pre-GST tax
incidence.
2) Ministry of Shipping has represented that the cost of
Agenda for 49th GSTCM Volume 1
Page 164 of 359
S.
No
Description
/HSN
Present
GST rate
Requeste
d GST
rate
Comments
00 00] ship breaking in India has gone up since Indian ship
breaking yards have upgraded to EU standards and are
also now in consonance with the Hongkong
Convention. This is making India un-competitive vis-àvis neighbouring countries like Bangladesh and
Pakistan and emerging ship breaking yards in countries
like Turkey. The final product of ship breaking activity
is ferrous waste and scrap, which also attracts GST @
18%. Thus, if the GST on ships/vessels for breaking up
is reduced to less than 10%, it would not lead to an
inverted duty structure.
3) The Fitment Committee observed that the ITC of the
GST paid while importing ships for breaking up is
available to the shipbreakers and the same can be used
to set off the liability which arises when the
shipbreaker sells the scrap generated from the ship
breaking process.
4) Accordingly, the Fitment Committee recommended to
maintain status quo.

Agenda for 49th GSTCM Volume 1
Page 165 of 359
c) Issues deferred by the Fitment Committee for further examination in relation to goods –
Annexure-III
Annexure – III
S.
No
Descriptio
n/HSN
Present
Compensation
cess rate
Requested
compensation
rate
Comments
1 Utility
vehicles
like
SUV/MUV
22%
for SUV with
specifications
22%
for other utility
vehicles apart
from SUVs and
all motor vehicles
with length
>4000mm, ground
clearance of 170
mm and engine
capacity >1500cc
by whatever name
called shall be
charged with
compensation cess
rate of 22%.
1) During the discussion in 48th meeting of
GST council on agenda relating to
issuance of clarification on
compensation cess leviable on SUVs, it
was suggested by few of the members to
deliberate about compensation cess on
other utility vehicles such as MUV,
XUV etc. State of Haryana was to
submit a proposal which the Council
desired that the Fitment Committee may
examine.
2) Accordingly, the issue was taken up by
the Fitment Committee.
3) 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 specifications.
4) This was done by inserting Entry No.
284A in the Central Excise tariff as
below:
S.
No
Heading Description Rate
28
4A
8703 Motor vehicles
of engine
capacity
exceeding
1500cc,
popularly
called as Sports
Utility
Vehicles
(SUV)
including
utility vehicles.
Explanation:
For the
purposes of this
30%
Agenda for 49th GSTCM Volume 1
Page 166 of 359
S.
No
Descriptio
n/HSN
Present
Compensation
cess rate
Requested
compensation
rate
Comments
entry, SUV
includes a
motor vehicle
of length
exceeding
4000mm and
having ground
clearance of
170mm and
above.
5) The GST Council in its 21st Meeting
held in Sept, 2017 had recommended a
higher rate of compensation cess of 22%
for SUVs. The 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%.
6) Based on the said recommendation of
the GST Council, the same was notified
and the entry No. 52B of compensation
cess rate notification No. 1/2017-
Compensation Cess (Rate) dated
28.06.2017 (as amended) reads as under:
S.
No
Heading Description Rate
of
Com
pensa
tion
Cess
52
B
8703 Motor
vehicles of
engine
capacity
exceeding
1500cc,
22%
Agenda for 49th GSTCM Volume 1
Page 167 of 359
S.
No
Descriptio
n/HSN
Present
Compensation
cess rate
Requested
compensation
rate
Comments
popularly
called as
Sports Utility
Vehicles
(SUV)
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.
7) Thus, the current entry for Compensation
Cess in the GST regime is the same as
entry in erstwhile Central Excise regime.
8) State of Haryana presented two issues.
(i) Inclusion of all utility vehicles in
the said entry 52 B
(ii) Inclusion of all vehicles currently
attracting 20% Compensation
Cess under Entry 52A in the
entry 52B covering Sports Utility
Vehicles for charging higher
compensation cess of 22%.
S.
No
Heading Description Rate
of
Com
pensa
tion
Cess
52A 8703 Motor vehicles
of engine
20%
Agenda for 49th GSTCM Volume 1
Page 168 of 359
S.
No
Descriptio
n/HSN
Present
Compensation
cess rate
Requested
compensation
rate
Comments
capacity
exceeding
1500 cc, other
than motor
vehicles
specified
against entry at
Sl no. 52B.
The following examples of some other
utility vehicles that satisfy the conditions
of Length greater than 4000 mm, Engine
capacity greater than 1500 cc and
Ground clearance more than 170 mm,
but are popularly called as Multi Utility
Vehicles (MUV) or Crossover Utility
Vehicles (XUVs) include the Toyota
Innova (Length: 4755mm, Engine
capacity: 1987cc, Ground clearance:
176mm), Kia Carnival (Length:
5115mm, Engine capacity: 2200cc,
Ground clearance: 180mm), Isuzu Vcross and Hi-Lander (Length: 5295
mm, Engine capacity: 1898cc, Ground
clearance: 210 mm) etc. However, owing
to them being not popularly called as
SUVs, the segment of vehicles
mentioned in above para are not being
charged a compensation cess at a rate of
22%. They also raised the issue of that
there is no clarity on whether ground
clearance mentioned in the notification is
laden weight or un-laden weight.
9) Fitment Committee examined the matter
in detail in meeting dated 03.02.2023
and 07.02.2023 including with respect to
the issue that all utility vehicles provided
they satisfy the specifications of engine
capacity > 1500cc, length > 4000mm
and ground clearance > 170mm and also
other motor vehicles covered under 52A
, for levy of compensation cess rate of
22%.
10) After deliberation, Fitment Committee
recommended that the issue need to be
decided only after detailed study in
Agenda for 49th GSTCM Volume 1
Page 169 of 359
S.
No
Descriptio
n/HSN
Present
Compensation
cess rate
Requested
compensation
rate
Comments
consultation with all stakeholders and
accordingly, recommended it to be
deferred.
***

Agenda for 49th GSTCM Volume 1
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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 Fitment Committee and its
recommendations
1. To exempt
services
supplied by
National Testing
Agency (NTA)
by way of
conduct of
entrance
examinations for
admission to
educational
institutions.
Ministry of Higher
Education has
requested for a
clarification whether
National Testing
Agency (NTA) which
conducts entrance
examinations for
admission to
educational institutions
is exempt from
payment of GST.
NTA has stated that it
is incurring heavy
expenditure on account
of GST being charged
by the vendors for
various services
(Technical Support for
Registration of
Application/ Issuance
of Admit Card/Score
Card, CBT, CCTV,
Mobile Jammers, Third
Party Audit, etc.)
provided by them for
conduct of various
examinations. NTA has
requested for GST
exemption on entrance
examinations
conducted by it as well
as the input services
procured for conduct of
such examinations
along the lines given to
Central and State
educational boards.
1. Conduct of entrance examinations by
educational institutions is exempt from GST.
[Notification No. 12/2017-CT(R) dated
28.06.2017 S.No. 66 (aa)]
2. Conduct of entrance examinations by Central
and State Educational Boards for admission to
educational institutions is also exempt form
GST.
3. The exemption to Central and State
Educational Boards was extended by inserting
an explanation in the said notification in 2018
that “the Central and State Educational Boards
shall be treated as Educational Institutions for
the limited purpose of providing services by
way of conduct of examination to the students.”
4. As a result, entrance examinations conducted
by both Government and private universities
and colleges as well as by Central and State
Educational Boards are exempt from GST.
However, entrance examinations conducted by
NTA such as JEE (Mains), NEET (UG),
CMAT, GPAT for admission to educational
institutions are not exempt from GST. NTA has
been set up as a registered society.
5. It is also relevant to mention in this regard
that exams like JEE and NEET for admission to
engineering and medical colleges were earlier
conducted by CBSE. State educational boards
continue to conduct entrance examinations to
the educational institutions under the State
Governments.
6. In view of the above, conduct of entrance
examinations by NTA for admission to
educational institutions merits exemption on the
grounds of parity.
7. The 28th GST council meeting which had
Agenda for 49th GSTCM Volume 1
Page 171 of 359
Sr.
No. Proposal Details of Request Discussions in Fitment Committee and its
recommendations
extended the said exemption to Central and
State Educational Boards decided to do so
through insertion of an explanation in the
notification so that field formations do not issue
demand notices for the past period. NTA has
not paying GST on the entrance fee collected
for entrance examinations conducted by them
so far.
8. In view of the above, an explanation may be
inserted in notification No. 12/2017-CT(R)
dated 28.06.2017 along the following lines:
“For removal of doubts, it is clarified that any
authority, board or a body set up by the Central
Government or State Government for conduct
of entrance examination for admission to
educational institutions shall be treated as an
‘educational institution’ for the limited purpose
of providing services by way of conduct of
entrance examination for admission to
educational institutions.”
2. To examine
whether the
services
supplied by
Courts/Tribunals
can be taxed
under Reverse
Charge
Mechanism
(RCM).
Asst. Registrar cum
DDO of the Hon’ble
Supreme Court has
requested to clarify
whether registration
under GST is required
to be obtained by the
Hon’ble Supreme Court
of India for rendering
services of renting.
During the meeting of
officials with Registrar
of the Apex Court,
clarification on
following two noncore activities of the
Hon’ble Court were
sought:
(i) Renting of space
1. Services by Courts and Tribunals have been
declared as neither a supply of goods nor a
supply of service. [Schedule III, para 2 of
CGST Act, 2017]
2. Courts and Tribunals besides judicial
functions, also perform certain commercial
activities such as renting of their premises to
telecommunication companies for installation
of telecommunication towers, renting of
chambers to lawyers etc.
3. Law Committee has recommended that
while services supplied by courts and tribunals
in exercise of their judicial functions are not
taxable, those in the nature of commercial
activities such as renting of immovable
property are taxable. While making this
recommendation, the Law Committee has
suggested that the Fitment Committee may
Agenda for 49th GSTCM Volume 1
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Sr.
No. Proposal Details of Request Discussions in Fitment Committee and its
recommendations
within court's premise
to various lawyer's
chambers for which a
monthly/annual-license
fees is collected by the
office of the Registrar,
Hon'ble Supreme Court
of India.
(ii) Renting out space
to telecom companies
for installation of
telecom towers within
court premises in lieu
of certain fees.
examine whether the services supplied by
Courts/Tribunals can be taxed under Reverse
Charge Mechanism (RCM).
4. Relevant facts in this regard are as under:
 Services supplied by government to
business entities are taxable under RCM
with a few exceptions such as services by
way of transportation of goods and
passengers, postal services and renting of
immovable property.
 Ministry of Railways and Department of
Posts pay GST on their services under
Forward Charge.
 GST on renting of immovable property
by Central or State Governments or local
authorities to unregistered persons is
taxable under Forward Charge.
 GST on renting of immovable property
by Central Government, State
Government, or local authority to a
registered person is taxed under Reverse
Charge Mechanism.
5. In its 31st GST Council meeting dated
22.12.2018, it was decided that the
dispensation with regard to payment of GST
under RCM as available to Central and State
Governments may be extended to Parliament
and State Legislatures.
6. In view of the above, we may extend the
same dispensation with regard to payment of
GST under RCM as available to Central and
State Governments to the courts and tribunals
also.
***
5. The proposals, as contained in para 4 above are placed before the GST Council for
consideration.
Agenda for 49th GSTCM Volume 1
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Agenda Item 6: 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.

Agenda for 49th GSTCM Volume 1
FINAL REPORT
GROUP OF MINISTERS
Capacity based taxation and Special
Composition Scheme in Certain Sectors in
Page 174 of 359
FINAL REPORT
GROUP OF MINISTERS
On
Capacity based taxation and Special
Composition Scheme in Certain Sectors in
GST
Annexure
Capacity based taxation and Special
Composition Scheme in Certain Sectors in
Agenda for 49th GSTCM Volume 1
Page 175 of 359
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
Agenda for 49th GSTCM Volume 1
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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.
Agenda for 49th GSTCM Volume 1
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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
Agenda for 49th GSTCM Volume 1
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structure, without any guarantee of commensurate increase in the revenue [as was
observed in the Central Excise regime];
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, einvoicing, 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 abovementioned 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
Agenda for 49th GSTCM Volume 1
Page 179 of 359
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
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 EWay 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.
Agenda for 49th GSTCM Volume 1
22. In this Context, it was observed by the GoM th
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 25
time bound action under which India is committed to put in place a technol
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 implementat
by the GoM like a unique, secure and non
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 ware
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
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 i
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 th
associated infrastructural, systemic & legal feasibility studies to implement the same.
VI. Conversion of ad valorem compensation cess rate to specific rate
re exist greater leakages in the revenue at the later stages of the
ost of the end retailers of these products are below the threshold
n. Consequently, the GoM recommended that the compensation
ommodities like Pan masala, gutk
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
bacco 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
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.
The basic requirements of implementation of Track and Trace Mechanism was taken note of
by 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
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 subsequent purchaser; the intended shipment route, the shipment date, shipment destination,
point of departure and consignee, etc.
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
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 th
associated infrastructural, systemic & legal feasibility studies to implement the same.
compensation cess rate to specific rate
The GoM observed that t stages of the
chain of such products a the threshold
limit for mandatory GST registrat compensation
prone cco, etc., shall
at, 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
bacco products] of the WHO Framework Convention on Tobacco Control (WHO FCTC),
September, 2018. The Article 8 of the said Protocol requires a
ogy driven Track and Trace
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.
ion of Track and Trace Mechanism was taken note of
removable identification markings, such as codes or stamps
on all unit packets of tobacco; date and location of manufacture; manufacturing facility; machine used
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
housing and shipping; the identity of any
known subsequent purchaser; the intended shipment route, the shipment date, shipment destination,
in the picture below:
Source: Guidebook on Implementing Article 8: Tracking & Tracing, WHO FCTC
It was further observed that the Track and Trace is a technology driven mechanism that has
n 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
The GoM observed that there exist greater leakages in the revenue at the lat
chain of such products and most of the end retailers of these products are bel
limit for mandatory GST registration. Consequently, the GoM recommended that th
ha, chewing tob
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 recommended that the compensation cess
levied on such evasion-prone commodities like Pan masala, gutkha, chewing tobacco, etc., shall
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be changed from the current ad valorem tax to specific tax based levy to boost the first stage
[manufacturer 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 tax slabs and associated
differential tax rates.
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.
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.
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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.
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 204% 0.61R
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‘Gutkha’
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.
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Agenda Item 7: 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 8: 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 C ouncil 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 9: Issues recommended by GSTN
Agenda Item 9 (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 approvedthe proposal on
HR policies and Transition Managementin 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
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
 Outlier Management at the time of transition (FY 2022
1.7.5 Transition increment shall be based on the following table:
No Criteria
1 All existing regular employees with more
than 4 years tenure at same grade.
2
All existing regular employees with more
than 6 months (should have completed
probation period successfully) but less than
4 years at same grade.
1.7.6 Progression: The grade up to which each grade of employees in the organization can progress
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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.
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).
shall be based on the following table:
Table - 3
Particulars of Transition Increment
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 correspo
level.
All existing regular employees with more
than 6 months (should have completed
probation period successfully) but less than
Transition increment on pro rata basis
approved percentage for corresponding management
level.
: The grade up to which each grade of employees in the organization can progress
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
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
Progression along with an Increment to eligible employees at the time of
Particulars of Transition Increment
Transition increment with amount equivalent to one
as per the Remuneration Committee
approved percentage for corresponding management
Transition increment on pro rata basis - as per the RC
responding management
: 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 9(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 9(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.
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Agenda Item 9 (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.
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Agenda Item 9 (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
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):
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
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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
balance of Advance User Charges received from the respective Governments during the
years.
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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.
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3. Financial Impact of Revision in HR Policies
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.
Agenda for 49th GSTCM Volume 1
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 t
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. Howe
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
in Column (3) in following Table.
Existing
Rating Scale
(1)
A Exceeds Performance Standards
B Achieves Performance Standards
C Slightly Below Per
D Barely Achieves Performance Standards
E Needs to Improve Performance
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The eligible employees up to Senior Manager will be given one progression increment on
ext grade after completion of four years (Progression policy is explained later).
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 t
The employees at Level 2 & 3 (VP, SVP and EVP) will not be given any progression to the
The effect of progression increment shall be given as per the date approved by the GST
Council for implementing the transition.
ve 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
The grade up to which each grade of employees in the organization can progress during
transition is depicted in the chart below:
Merit points would be considered for preparing the list of eligible employees for progression as given
Table – 4
Rating
Description
(2)
Merit
Points
Exceeds Performance Standards 5
Achieves Performance Standards 4
Slightly Below Performance Standards 3
Barely Achieves Performance Standards 2
Needs to Improve Performance 1
The eligible employees up to Senior Manager will be given one progression increment on
ext grade after completion of four years (Progression policy is explained later).
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
The employees at Level 2 & 3 (VP, SVP and EVP) will not be given any progression to the
The effect of progression increment shall be given as per the date approved by the GST
ve 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
ver, on his resignation the
The grade up to which each grade of employees in the organization can progress during
list of eligible employees for progression as given
Merit
Points
(3)
Agenda for 49th GSTCM Volume 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.
Agenda for 49th GSTCM Volume 1
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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: Thenew performance management policy and itsterms & 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 PerformanceAssessment: 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 distributionto 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
Agenda for 49th GSTCM Volume 1
v) Effective percentage increase for every employee shall be based on the rating awarde
reviewing manager.
vi) Formula for the calculation is:
Effective Salary Increment Percentage = Weightage of rating (As per the Table
multiplied by X.
vii) This effective salary increment percentage will be applied to current CTC to arrive
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:
would apply to those employees
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 af
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 max
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 wo
increment.
b) This increase shall be available only for 2years.
B
C
D
Page 247 of 359
Effective percentage increase for every employee shall be based on the rating awarde
Formula for the calculation is:
Effective Salary Increment Percentage = Weightage of rating (As per the Table
This effective salary increment percentage will be applied to current CTC to arrive
annual increment amount.
Illustration for calculation of Effective salary Increment percentage based on rating is given
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.
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
essing 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.
Pull to min approach shall not be followed at the time of hiring or hired through IJP (i.e. internal
is hired against the advertised position).
If employee’s salary goes above their grade’s maximum pay while giving the
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
Such employees would be given minimum salary increase i.e. 50% based on the
rating from next financial year to offset inflation.
Performance rating awarded by reviewing manger would be used to calculate the 50%
This increase shall be available only for 2years.
0.80 Slightly Below Performance Standards
0.70 Barely Achieves Performance Standards
0.50 Needs to Improve Performance
Effective percentage increase for every employee shall be based on the rating awarded by the
Effective Salary Increment Percentage = Weightage of rating (As per the Table-4 above)
This effective salary increment percentage will be applied to current CTC to arrive at the
Illustration for calculation of Effective salary Increment percentage based on rating is given
The following guidelines
hose 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
ter 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
essing the pull to minimum cases shall be such that it is at least taking
Pull to min approach shall not be followed at the time of hiring or hired through IJP (i.e. internal
If employee’s salary goes above their grade’s maximum pay while giving the
In such cases the quantum of annual increment shall be capped at the maximum
imum pay of the grade shall be calculated inclusive of the
Such employees would be given minimum salary increase i.e. 50% based on the
uld be used to calculate the 50%
Slightly Below Performance Standards
Barely Achieves Performance Standards
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
15% 4B Associate VP / Principal Engineer
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.
Agenda for 49th GSTCM Volume 1
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
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. Sin
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:
Old
Rating
Scale
(1)
New
Rating
Scale
(2)
A A+
B A
C B
D C
E D
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The grade up to which each grade of employees in the organization can progress is
depicted in the chart below:
loyees who have been rated as per the rating scale in Column (1) till FY 2021
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
Rating
Description
(3)
Exceeds Performance Standards
Achieves Performance Standards
Slightly Below Performance Standards
Barely Achieves Performance Standards
Needs to Improve Performance
For 2, 3, and 4
For 1 – Seven years needed
The grade up to which each grade of employees in the organization can progress is
loyees 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) &
ce there is a change
in the rating scale, equivalent merit points as given in the table below shall be considered for
Merit Points
(4)
5
4
3
2
1
For 2, 3, and 4 – Four years needed
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: Theemployees 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),
Agenda for 49th GSTCM Volume 1
 The referred candidate is in the direct
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
referrer will be eligible to get referral bonus as per the grid below, subject to fulfilment of the
criteria for payment of referral
S. No.
Grade at which referred
candidate is hired
1 3 a, 3 b, 2,1
2 4 a, 4 b, 4 c
3 5 a, 5 b, 5 c
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
GSTN; salary level of existing employees similarly pl
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 t
the prospective candidates.
e. Experienced candidates for technology & non
market would be given a minimum of 20% increase from last salary drawn. Th
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 h
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The referred candidate is in the direct reporting line of the referrer
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.
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
Referral Bonus Pay-out Grid
Grade at which referred
candidate is hired
Referral Bonus (INR)
3 a, 3 b, 2,1 25,000
4 a, 4 b, 4 c 15,000
5 a, 5 b, 5 c 10,000
Following guiding principles are to be used as reference while deciding the hiring salaries of
in the respective grades:
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.
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)
drawn Compensation.
While deciding the offer, the time duration elapsed since their last appraisal or salary hike
would also be considered.
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.
Experienced candidates for technology & non- technology positions, on being hired from
market would be given a minimum of 20% increase from last salary drawn. Th
to offered salary being less than the minimum/P25 of the proposed pay range defined for
that level. This is the current industry practice.
Once the CTC offered is accepted by the candidate, the selected candidate shall be issued a
er/Intent in the prescribed format.
The selected candidate may be considered for the payment of hot skills allowance (Over
and above the CTC) and joining bonus as detailed below:
Hot skills allowance (HSA):
The niche/hot skills are compensated with a higher pay through additional premium pay in
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.
erred 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
Following guiding principles are to be used as reference while deciding the hiring salaries of
Once a candidate is finally selected and is to be recruited, the HR Recruitment SPOC shall
wise approved salary structure” of
aced and the current compensation
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)
While deciding the offer, the time duration elapsed since their last appraisal or salary hike
The salary range for future hiring of engineers at levels 4&5 shall start at P25 of the
echnology positions subject to negotiations & last drawn salary of
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
Once the CTC offered is accepted by the candidate, the selected candidate shall be issued a
The selected candidate may be considered for the payment of hot skills allowance (Over
igher 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. TypeandTenureofEngagement
a) The Engagements shall be at the level of Independent Consultants (ICs).
b) Theengagementwillbepurelyonacontractualbasis.
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) Theseengagedpersonnel shallhavethestatusofanindependent consultant vis-a-vis,
GSTN and shall not be regarded,foranypurposes,asbeingeithera'staffmember'oran
'official' of GSTN. Accordingly, nothing within or relating totheContract
shallestablish therelationship ofemployer and
employee,orofprincipalandagent,betweenGSTN and the Individual Consultants.
f) Theengagementshallbeinitiallyforaperiodoftwoyearswhichmaybe extended
uptothree years,depending ontheperformance 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. EssentialEducationQualification:
Table 1
Discipline EducationQualification*
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.
*Forthecandidateshavingdegreesfromuniversities/institutesfromoutside India, Times/OS
ranking ofsuch universities/institutes willbetaken intoaccount.
3.2 Experience, Age and remuneration:
Table 2
Position Upper Age
Limit
Post qualification
Experience Years
Relevant
experience
(No.o1years)
Young Professionals 35years Minimum0 -1year 0
Associate 45 years Minimum 1 - 3 years 1
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Consultant 50 years Minimum8years 3
Senior Consultant 65 years 15 years and above 5
*Experience includes upto 3years 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 willbe provided by GSTN except providing laptop for working in the
office with policy on laptop being applicable.The range of remunerationfor each of
the positions are as given in the table below:
Table 3
Position Remuneration per month(Rs.) IT Skills Allowance
YoungProfessional 60,000 20,000
Associate 80,000-1,45,000 30,000
Consultant 1,45,000-2,65,000 40,000
SeniorConsultant 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 Remunerationproposedin the above table for the position in which the
candidate has been selected.
ii) YearsofExperience
iii)LastPayDrawn
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,TAIDA will be admissible to Young Professional, Associate, Consultant
and Senior Consultants as are admissible to Assistant Section Officer (Level7), 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
ofevery 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 in validity 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
Consultantare not found satisfactory or found inconflict 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/ wrong at any stage, his/her
engagement will be terminated immediately and appropriateaction 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.
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
encashed 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 encashable 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 Act1961 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
Agenda for 49th GSTCM Volume 1
Assistant VP
Associate VP
experience in
Senior Manager
Manager
Assistant Manager
Executive
Note (i) * Company lease facility along with maintenance and GST may be
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:
1.3.1 EVPs and SVPs would be given an option to either
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 admis
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:
Designations
Page 280 of 359
L-11 67700-208700
L-10 (with 5 years’
experience in the level)
56100-177500
L-10 56100-177500
L-9 53100-167800
L-8 47600-151100
L-7 44900-142400
Company lease facility along with maintenance and GST may be provided by GSTN for
lease also.
The fuel allowance shall be paid to the employees on deputation at the
Table-2
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.
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
Other Allowance to be paid monthly
(Rs.)
75,000
70,000
65,000
60,000
55,000
50,000
provided by GSTN for
The fuel allowance shall be paid to the employees on deputation at the
avail a Company provided Car or opt for
The employees on deputation to GSTN are neither entitled for Leave
sible to them in the Government.
These allowances have been monetised and the same would be paid to the deputationists on a monthly
monthly
Agenda for 49th GSTCM Volume 1
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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;
Agenda for 49th GSTCM Volume 1
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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.
******
Agenda for 49th GSTCM Volume 1
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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).
Agenda for 49th GSTCM Volume 1
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2. Saving and difficulty removal during implementation
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.
****
Agenda for 49th GSTCM Volume 1
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Agenda Item 10: 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 2nd December,
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 these were unanimously approved by the Committee.
3. Recommendations of ITGRC on Agenda on reversal of interest on delayed filing of
statement in Form GSTR-8 by e-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. For April, 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 15th 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.
Agenda for 49th GSTCM Volume 1
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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.
Agenda for 49th GSTCM Volume 1
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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
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
Permanent fix will
be deployed in
production on Dec
2022.
Agenda for 49th GSTCM Volume 1
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time of Filling,
GSTR-1 summary
not generated by
the system and
there is no
consolidated
summary shown
while filling
GSTR-1.
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.
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
83 GSTR1 On Analysis it is found that AMDBL
column is present twice in
“INVOICE_DTL” table for the same
It is fixed in
production on 26th
April 2022.
Agenda for 49th GSTCM Volume 1
Page 289 of 359
INVOICE_DTL
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_DTL”
Table.
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.
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.
Agenda for 49th GSTCM Volume 1
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9 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 – Tamil
Nadu
SR#601295). Tax
officers are facing
System error while
fetching the
recovery cases for
86 CRN’s (Case
Reference
Number).
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.
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.
Issue was before
Migration of
Tamil Nadu from
Modal 1 to Modal
2. Issue was
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.
Agenda for 49th GSTCM Volume 1
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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.
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.
Agenda for 49th GSTCM Volume 1
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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
Permanent fix
on 16th Nov
2021 via
RQM: 22058
Agenda for 49th GSTCM Volume 1
Page 293 of 359
108733) is required post facto
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,
It is fixed in
production on
31st Mar
2022 via
CR:21592_A
Agenda for 49th GSTCM Volume 1
Page 294 of 359
IGST – 23801) was re credited.
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.
Agenda for 49th GSTCM Volume 1
Page 295 of 359
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.
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.
Permanent
fix is
deployed in
production on
9th Jul 2022.
Agenda for 49th GSTCM Volume 1
Page 296 of 359
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.
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
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
It is fixed on
production.
Agenda for 49th GSTCM Volume 1
Page 297 of 359
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.
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.
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.
Agenda for 49th GSTCM Volume 1
Page 298 of 359
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
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
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.
Agenda for 49th GSTCM Volume 1
Page 299 of 359
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.
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
It is fixed in
production on
31st Mar
2022 via CR:
21592_A.
Agenda for 49th GSTCM Volume 1
Page 300 of 359
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.
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.
Agenda for 49th GSTCM Volume 1
Page 301 of 359
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.
Agenda for 49th GSTCM Volume 1
Page 302 of 359
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.
Agenda for 49th GSTCM Volume 1
Page 303 of 359
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.
Agenda for 49th GSTCM Volume 1
Page 304 of 359
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. 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.
Agenda for 49th GSTCM Volume 1
Page 305 of 359
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
It is fixed in
production on
15th June
2022 via ICR:
16751
Agenda for 49th GSTCM Volume 1
Page 306 of 359
statement was filed as NIL. Invoice
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.
Agenda for 49th GSTCM Volume 1
Page 307 of 359
8. Agenda on reversal of interest on delayed filing 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.
Agenda for 49th GSTCM Volume 1
Page 308 of 359
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.
Agenda for 49th GSTCM Volume 1
Page 309 of 359
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
Agenda for 49th GSTCM Volume 1
Page 310 of 359
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.
Agenda for 49th GSTCM Volume 1
Page 311 of 359
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
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
This
happened
for only
one TP
and due
to that
code fix
was not
taken.
Agenda for 49th GSTCM Volume 1
Page 312 of 359
"Error in
Submission“.
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_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.
Data fix
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
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,
Issue
was
before
Migratio
n of
Tamil
Nadu
from
Modal 1
to Modal
2. Issue
was
permane
Agenda for 49th GSTCM Volume 1
Page 313 of 359
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).
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.
ntly
fixed by
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
This
happened
only
once so
code fix
was not
taken.
Data fix
was done
by
Utility
on 10th
Feb 2022
via
Agenda for 49th GSTCM Volume 1
Page 314 of 359
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.
ICR:148
11
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
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
It is fixed
in
productio
n on 31st
Mar
2022 via
CR:2159
2_A
Agenda for 49th GSTCM Volume 1
Page 315 of 359
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.
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
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
EVP
(Service
s)
07-
06-
2022
2 Yes Cash
Ledg
er
Kno
wn
Taxpayers having
GSTIN
18AAACH0351E1Z4
and
19ALIPD4105A1ZS
have accepted the TDS
It is fixed
in
productio
n.
Agenda for 49th GSTCM Volume 1
Page 316 of 359
entry to be
made in the
cash ledger
(Table:
CASH_LDG)
of taxpayers
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).
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.
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
It is
fixed in
productio
n on 26th
April
Agenda for 49th GSTCM Volume 1
Page 317 of 359
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.
“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.
2022.
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
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
It is fixed
on
productio
n.
Agenda for 49th GSTCM Volume 1
Page 318 of 359
was blocked. of post filing process,
transaction stuck-up 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 ”.
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
Agenda for 49th GSTCM Volume 1
Page 319 of 359
ICR.
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
It is
fixed in
productio
n on 26th
April
2022.
Agenda for 49th GSTCM Volume 1
Page 320 of 359
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.
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
Agenda for 49th GSTCM Volume 1
Page 321 of 359
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
credit on
closing stock
u/s 18(1) of
Act through
Form GST
ITC-01.
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
GST ITC-01 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.
Permane
nt fix not
required.
All
impacted
cases
were
executed
on 25th
Aug
2022 in
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
Permane
nt fix is
not
required
because
RESET
button is
removed
from
system.
Old
return
periods
data are
being
fixed by
backend
query.
Agenda for 49th GSTCM Volume 1
Page 322 of 359
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.
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
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 Adhoc
Analysis
for
permane
nt fix is
under
progress.
Agenda for 49th GSTCM Volume 1
Page 323 of 359
data is
missing.
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.
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
Issue is
fixed in
productio
n via
RQM:
RET_R7
_19111
Agenda for 49th GSTCM Volume 1
Page 324 of 359
whether it is
accepted and
filed or not.
22 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 “.
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.
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.
GSTR4
quarter
form is
disabled
in prod.
Permane
nt fix
needs to
be
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
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
Agenda for 49th GSTCM Volume 1
Page 325 of 359
filing. and will
be
deployed
on
productio
n in 29th
Nov
2022,
other
modules
may
adopt
after
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.
Agenda for 49th GSTCM Volume 1
Page 326 of 359
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.
Taxpayers are
unable to file
their further
return period
and getting
error message
as “Liability
for previous
tax period is
yet to be paid.
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.”
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)
It is fixed
in
productio
n on 31st
Mar
2022 via
CR:
21592_A
.
Agenda for 49th GSTCM Volume 1
Page 327 of 359
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
CMP-08 as
getting
'ERROR!!
Liability for
previous tax
period is yet to
be paid'.
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
clearing the liabilities
and due to this, user is
unable to file
statement in Form
GST CMP-08 for next
quarter.
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.
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
It is a
single
Taxpayer
issue,
permane
nt fix not
required.
Data fix
was done
via
ICR:184
39
executed
on 4th
Nov
2022.
Agenda for 49th GSTCM Volume 1
Page 328 of 359
to file the form as he is
unable to offset the
corresponding
liabilities.
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
ledgers by
GSTN.
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
the ITC.
Out of 27
GSTINs,
26
GSTIN
have
been
unblocke
d. Rest 1
GSTIN
(33AAJF
C7464K
1Z5) was
cancelled
and now
it is in
active
status so
we are in
process
to
unblock
this
GSTIN
as well.
Agenda for 49th GSTCM Volume 1
Page 329 of 359
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.
Agenda for 49th GSTCM Volume 1
Page 330 of 359
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
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
It is fixed in
production on
31st Mar
2022 via
CR:21592_A
Agenda for 49th GSTCM Volume 1
Page 331 of 359
Whether Correct Data KnownYES
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.
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.
Agenda for 49th GSTCM Volume 1
Page 332 of 359
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
It is fixed on
production.
Agenda for 49th GSTCM Volume 1
Page 333 of 359
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
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.
Agenda for 49th GSTCM Volume 1
Page 334 of 359
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
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
CR#21982
has been
raised for
permanent fix.
This CR is
aligned with
REAP team
but yet to be
picked up for
development.
Agenda for 49th GSTCM Volume 1
Page 335 of 359
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.
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.
Agenda for 49th GSTCM Volume 1
Page 336 of 359
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.
Agenda for 49th GSTCM Volume 1
Page 337 of 359
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,
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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.
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.
Agenda for 49th GSTCM Volume 1
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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
THANK YOU!!
Agenda for 49th GSTCM Volume 1
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Agenda Item 11: Report of Committee of Officers (CoO) on GST Audit along with Draft Model
All India GST Audit Manual
1. The Report of Committee of Officers (COO) on GST Audit along with draft Model All India
GST Audit Manual 2022 was tabled as an agenda item in the 48th GST Council Meeting. The Agenda
on Report of COO on GST Audit was rolled over to the next GST Council Meeting. The draft Model
All India GST Audit Manual 2022 was circulated to CCTs of all States/UTS vide OM dated
05.01.2023 for perusal. The States of Delhi, Telangana and Punjab have provided certain comments
on the draft Model All India GST Audit Manual 2022 and a meeting of the Committee of officers
(COO) was convened on 09.02.2023 to discuss the same and after discussions, certain changes in
Draft Model All India GST Audit Manual have been made which are annexed as Annexure-I.
2. The Draft Model All India GST Audit Manual, 2023 is placed for approval.
Agenda for 49th GSTCM Volume 1
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Annexure-I
Details of the changes carried out in the draft Model All India GST Audit Manual as per
discussions and decision in the meeting of the CoO on 09/02/2023.
**********
The comments and suggestions received on the draft Model All India GST Audit Manual, 2022 have
been discussed in the meeting of the CoO on 09.02.2023 and have been finalized. Page-wise and Parawise changes are detailed below.
Sr.
No.
Page
No.
Para No. Change carried out
1. 19. 1.3 Legal Provisions
of Audit by Tax
Authorities:
New para 1.3.16 has been added after para
1.3.15 – “Further, the authority conducting the
audit may invoke such other provisions of the
Act and the Rules framed thereunder as may be
deemed necessary, in the facts and
circumstances of the case, for conducting the
audit.”
2. 22. 2.4 Principles of
audit
Word ‘prescribed’ in para 2 replaced with the
word ‘specified'.
3. 30. 3.1 Workflow of Steps Word ‘prescribed’ in last line of step 11 replaced
with the word ‘specified’.
4. 39. 4.2 Issuance of
notice in FORM GST
ADT-01:
Word ‘15 days’ in para 1 replaced with words
‘15 working days’.
5. 51. 5.3.2 Return analysis In the bullet point 8 related to data of e-way bill
word ‘way’ substituted with word ‘e-way’ at both
places.
6. 51. 5.3.2 Return analysis In the bullet point 10 related to export with
payment of tax, for determining the value of
export line has been added “(For determining
the value of export the value may be calculated
as prescribed in rule 89(4)( C) of the CGST
Rules, 2017 i.e. the value which is 1.5 times the
value of like goods domestically supplied
by the supplier)”.
7. 52. 5.3.2 Return analysis In the bullet point 12 related to claim for refund
of unutilized ITC, Net ITC shall be defined as
per circular no. 125/44/2019 – GST dated 18th
November, 2019. The last line as reproduced
has been deleted:
" 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."
8. 57. 5.3.5.3 Maintenance “Trial balance if maintained” has been added
Agenda for 49th GSTCM Volume 1
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of books of accounts alongwith Balance Sheet.
9. 57 5.3.5.3 Maintenance
of books of accounts
In the first para below the table the line
“Regarding maintenance of accounts and
records, the same should as per the provisions
of Section 35 of the CGST Act
read with the rules made thereunder” has been
added.
10. 58. 5.3.5.3 Maintenance
of books of accounts
The last line of Example 2 as reproduced
below has been deleted.
“So, the Audit Officer should only
examine such Liability Accounts to verify
whether such tax on such advances is actually
paid or not.”
11. 61. 5.7 Final audit Report 7 working days in second para substituted
with 30 working days as prescribed under law.
12. 61. 5.7.1 Final audit
Report The following part of para 5.7.1.c)
“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).” Has been
rephrased as “the case may be taken up for
initiation of demand and recovery proceedings
under section 73/74 of the Act, as the case, may
be.”
13. 62. 6.2 Demand
and Recovery
proceedings
Para 1 has been rephrased as:
“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 the
case may be taken up for initiation of demand
and recovery proceedings under section 73/74
of the Act, as the case, may be.”
14. 67. 7.2 General
Guidelines
The last line of para 2 has been deleted.
"The jurisdictional officer should explain the
cause of not initiating action against such RTP
for such a long period to their supervisory
officer."
15. 74 Para 8.2.3 - Examples
of criteria for
In the third bullet point the word “theme –
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selection of
taxpayers for joint
audits
based audits” has been replaced with the
word “Joint Audit”
16. 89. Point f. Works
Contract:
The point, "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)." has been
deleted
17. 100. Annexure-3 Sample
questionnaire for
auditee
Point 'q' has been deleted.
"Whether any advance payment is received
towards supply of goods? If yes, whether
Tax was paid on
such transactions accordingly?"
18. 104. Annexure-4:List of
documents/statements
and books of
accounts to be
produced for the
purpose of audit.
“Trial Balance and Cost Audit Report in case
it is maintained” has been included.
Agenda for 49th GSTCM Volume 1
49
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Agenda for 49th GSTCM Volume 2
Page 2 of 21
Agenda for 49th GSTCM Volume 2
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Agenda for 49th GSTCM Volume 2
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Agenda for 49th GSTCM Volume 2
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TABLE OF CONTENTS
Agenda
No.
Agenda Item Page No.
4
(Part-II)
vii. Extension of time limit under sub-section (10) of section 73 of
CGST Act for FY 2017-18, 2018-19 and 2019-20.
07-09
Errata 10-10
13 Decision of GST Implementation Committee (GIC) for information of the
GST Council
11-11
14 Ad-hoc Exemptions Orders issued under Section 25(2) of Customs Act,
1962 to be placed before the GST Council for information
12-14
15 Review of revenue position under Goods and Services Tax 17-21
16 Any other agenda with the permission of the Chair -
Agenda for 49th GSTCM Volume 2
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Agenda Item 4(vii): Extension of time limit under sub-section (10) of section 73 of CGST Act
for FY 2017-18, 2018-19 and 2019-20.
Section 73 of the CGST Act, 2017 provides that the proper officer shall issue the order
demanding any tax that 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 wilful
misstatement or suppression of facts to evade tax, within three 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 three years from the date of erroneous refund.
2.1 The issue of extension in timelines under section 73(10) of CGST Act was earlier deliberated
by the Council in its 47th meeting held in June 2022. Considering the difficulties faced by the
taxpayers as well as tax officers during the period of Covid-19 pandemic, the Council recommended
that:
(i) 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;
(ii) 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.
2.2 Accordingly, Notification No. 13/2022- Central Tax dated 05.07.2022 was issued to
implement the above recommendations of the Council.
3. Representations have been received from some tax administrations to further extend the
timelines under section 73 of the CGST Act for FY 2017-18, 2018-19 and 2019-20 to 31.12.2024 or
to extend the timelines under section 73 to those under section 74 of the CGST Act. It has been
represented that difficulties were faced by government departments during the COVID period due to
reduced staff; with staggered timings and exemption to certain categories of employees from
attending offices during COVID period. This led to delay in process of scrutiny and audit which could
be started properly only after COVID restrictions were uplifted. It has also been represented that
though the time period for issuance of show cause notice and demand orders for FY 2017-18 has been
extended vide Notification No. 13/2022- Central Tax dated 05.07.2022 based on recommendations of
the Council made in 47th meeting, however, the same is not sufficient considering the delay in
scrutiny and audit process due to COVID.
4.1 The issue was deliberated by the Law Committee in its meeting held on 08.02.2023. The Law
Committee took the view that it may not be desirable to extend the timelines in such a manner so that
it may lead to bunching of last date of issuance of SCN/order under section 73 and section 74 for a
number of financial years. Accordingly, LC did not agree with the proposal to extend timelines under
section 73(10) of CGST Act to the timelines under section 74 of CGST Act for any financial year.
Further, LC did not agree with the proposal to extend the timelines for the FY 2017-18, 2018-19 and
2019-20 to 31.12.2024. However, LC felt that considering the delay in scrutiny, audit and assessment
process for the FY 2017-18, 2018-19 and 2019-20 due to restrictions and difficulties faced in COVID19 period, there may be a need to provide some additional time under section 73(10) of CGST Act for
Agenda for 49th GSTCM Volume 2
Page 8 of 21
the said financial years in such a manner so that there is no bunching of last dates for issuance of
SCN/order under section 73 for these financial years as well as for the subsequent financial years.
4.2 LC, accordingly, recommended that the time limit under section 73(10) of CGST Act for the
FY 2017-18, 2018-19 and 2019-20 may be extended as below by issuance of a notification under
section 168A of CGST Act:
i.
i. For FY 2017-18, the time limit under section 73(10) may be extended from the
present 30th September 2023 to 31st December 2023;
ii. For FY 2018-19, the time limit under section 73(10) may be extended from the
present 31st December 2023 to 31st March 2024;
iii. For FY 2019-20, the time limit under section 73(10) may be extended from the
present 31st March 2024 to 30th June 2024.
5. A draft notification under section 168A of CGST Act, as per the above recommendations of the
Law Committee, is placed at Annexure A.
6. In view of the above, the agenda, along with the draft notification, is placed before the GST
Council for deliberation and approval.

***






Agenda for 49th GSTCM Volume 2
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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. XX/2023 – Central Tax
New Delhi, the XXthFebruary, 2023

G.S.R.....(E).In exercise of the powers conferred by section 168A of the Central Goods and
Services Tax Act, 2017 (12 of 2017) (hereinafter referred to as the said Act) read with section 20 of
the Integrated Goods and Services Tax Act, 2017 (13 of 2017) and section 21 of the Union Territory
Goods and Services Tax Act, 2017 (14 of 2017) and in partial modification of the notifications of the
Government of India in the Ministry of Finance (Department of Revenue), No. 35/2020-
Central Tax, dated the 3rdApril, 2020,published in the Gazette of India, Extraordinary, Part II,
Section 3, Sub-section (i), vide number G.S.R. 235(E), dated the 3rd April, 2020, published in
the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R.
235(E), dated the 3rdApril, 2020 and No. 14/2021-Central Tax, dated the 1st May, 2021, published in
the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 310(E),
dated the 1st May, 2021 and No. 13/2022-Central Tax, dated the 5th July, 2022, published in the
Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 516(E), dated
the 5th July, 2022, the Government, on the recommendations of the Council, hereby, extends the time
limit specified under sub-section (10) of section 73 for issuance of order under sub-section (9) of
section 73 of the said Act, for recovery of tax not paid or short paid or of input tax credit
wrongly availed or utilized, in respect of a tax period -
(a) for the financial year 2017-18, up to the 31st day of December, 2023;
(b) for the financial year 2018-19, up to the 31st day of March, 2024;
(c) for the financial year 2019-20, up to the 30th day of June, 2024.
[F. No. CBIC-20006/24/2021-GST]
(Alok Kumar)
Director
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Errata
1) On Page 144
(i) In clause (ii), “Annexure II” may be read as “Annexure III”.
(ii) In clause (iii), “ Annexure III” may be read as “Annexure II”.

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Agenda Item 13: Decisions of GST Implementation Committee (GIC) for information of the
GST Council
The GST implementation Committee (GIC) took one decision between 48th GST Council meeting and
the upcoming 49th GST Council meeting. Due to the urgency involved, the decision was taken after
obtaining approval by circulation amongst GIC members. The details of the decision taken is given
below:

1. Decision of GIC by Circulation on 31st January, 2023 on GST Data sharing request
received from Department of Telecommunication, Ministry of Communications

a. In the agenda note it was stated that it was mentioned in the letter received from the Department
of Telecommunications (DoT) that the National Digital Communication Policy (NDCP) mandates the
DoT to increase domestic production of telecom products and hence, it is necessary to monitor annual
domestic production/ value addition in telecom sector. The policy also mentions that the share of
telecom in national GDP would be increased from 6% to 8%. In this regard, DoT has approached
GSTN for disaggregate data about the production of goods and services relating to telecom sector.
However, DoR has explained the data sharing policy position and agreed to share the aggregate level
data only. Accordingly, DoT has requested to provide anonymised aggregate data (HSN wise on
telecom equipment) without the identification of the tax payer as available with GSTN.

b. It further stated that FORM GSTR-1 has been capturing 4-6 digit HSN/SAC code for the products
and services. DoT has sent a list of products and services for which they are seeking 4-digit level
''8517''- HSN exclusively for telecom products including mobile handset and ''9984'' - SAC for
telecom services. DoT further requested that data can also be provided for combination of product
description and HSN Code.

c. It was also stated in the agenda note that since DoT has agreed to receive anonymised aggregate
level GST data for telecom products and services, GSTN may be permitted to share the data with
DoT. It may be noted that GST Council in its 48th meeting has already approved the GST data
sharing with other Ministries/Departments.

d. Accordingly, approval of GIC was sought for GST data sharing with Department of
Telecommunications, M/o Communications.

e. Decision: The Members of the GIC approved the agenda item on GST Data sharing request
received from Department of Telecommunication, Ministry of Communications

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Agenda Item 14: Ad-hoc Exemptions Order(s) issued under Section 25(2) of Customs Act, 1962
to be placed before the GST Council for information
1. 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. 01 of 20213 11th January, 2023 Request for ad-hoc exemption
on duty and taxation for the
equipment and ammunition used
for Joint Counter Terrorism
Training Exercise (Tarkash-VI)
(order copy enclosed).
AEO No. 02 of 20213 06th February, 2023 Request for ad-hoc exemption
for import of cheetahs by the
National Tiger Conservation
Authority, Ministry of
Environment, Forest & Climate
Change, Government of India
(order copy enclosed).
3. This is placed for the information of GST Council.
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Government of India
Ministry of Finance
Department of Revenue
To,
Room No. 227A, North Block, New Delhi – 110001
Dated the 06th February 2023
The Chief Commissioner of Central GST &
Customs Bhopal Zone
Sir,
Subject: Request for Ad hoc exemption for import of Cheetahs by the National
Tiger Conservation Authority, Ministry of Environment, Forest and
Climate Change, Government of India-reg.
The undersigned is directed to refer to a request dated 16.01.2023 (copy
enclosed) received from the Director General of Forests and Special
Secretary, Ministry of Environment Forest and Climate Change (MoEF&CC),
Government of India seeking exemption from payment of duty in terms of Section
25 (2) of Customs Act, 1962, for the goods received as grant from Republic of South
Africa.
2. MoEF & CC has informed that:
i. Project Tiger Division, Ministry of Environment Forest and Climate
Change, Government of India is in receipt of 12 number of live
Cheetahs in crate, accompanied with empty crates, radio collars & receivers
which are a Government of India cargo being consigned from Republic of South
Africa.
ii. The Cheetahs will be imported from Gwalior International Airport.
iii. From Gwalior the Cheetahs would proceed for final release to Kuno National Park.
iv. The exact date of arrival of the Cheetahs would be communicated in due course
2.1 MoEF & CC has requested for waiving off the customs duties and IGST
(where applicable) for the above-mentioned imported goods received as grant for
restoration of open forest and savanna system which in turn will help in conservation
of biodiversity and accrue ecosystem services.
3. In view of the exceptional circumstances as mentioned above, the
Central Government in exercise of the powers conferred by sub-section (2) of
Section 25 of the Customs Act, 1962 (52 of 1962), being satisfied that it is necessary in
F. No. 452/06/2022-Cus V
Ad-hoc Exemption Order No. 2 of 2023 Issued
under Section 25(2) of the Customs Act, 1962
Agenda for 49th GSTCM Volume 2
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Agenda for 49th GSTCM Volume 2
Page 17 of 21
Agenda Item 15: 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
Aug'22 Sep'22 Oct'22 Nov’22 Dec’22 Jan’23
CGST 24,710 25,271 26,039 25,681 26,711 29,051
SGST 30,951 31,813 33,396 32,651 33,357 36,847
IGST 77,782 80,464 81,778 77,103 78,434 80,995
Domestic 35,715 39,249 44,481 38,468 38,172 42,561
Imports 42,067 41,215 37,297 38,635 40,263 38,434
Comp Cess 10,168 10,137 10,505 10,433 11,005 10,662
Domestic 9,151 9,282 9,680 9,616 10,155 9,863
Imports 1,018 856 825 817 850 798
Total 1,43,612 1,47,686 1,51,718 1,45,867 1,49,507 1,57,554
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 1.50 1.58
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
Agenda for 49th GSTCM Volume 2
Page 18 of 21
2. Table 2 shows the IGST collected, refunded and settled/apportioned during FY2022-
23 till January, 2023.
Table 2: IGST Collection/Settlement/Apportionment/Refund in FY22-23
(Figures in Rs. Crore)
1 Collections(+) 7,81,813.42
2 Recovery from IGST Ad-hoc apportionment(+) 0
3 Refunds (-) 1,25,328.59
4 Settlement (-)
i. CGST 3,31,502.00
ii. SGST 2,78,756.00
5 Ad-hoc Settlement (-) 0
i. CGST ad hoc 24,500.00
ii. SGST ad hoc 24,500.00
6 Net (1+2-3-4-5) (2,773.17)
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 January, 2023 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 Jan)
Opening Balance 21,466 47,271 55,736 9,7341
9,344
Compensation Cess
collected (net)
62,612 95,081 95,551 85,191 1,04,609 1,03,846
Compensation
released
41,146 69,275 1,20,498 1,36,988 97,500 1,15,662
Balance 21,466 47,271 55,7362
3939 16,8443
(2,472)
Trends in Return filing

1Centre 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
2Centre 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
3Balance 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
Agenda for 49th GSTCM Volume 2
Page 19 of 21
4. 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 Dec’22. Tables5 and 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
Nov’22 78.79 59.94
Dec’22 79.82 60.02
Figure 2: GSTR-3B/GSTR-1 Filing till due date
78.55
75.85 77.2 76.87 76.14 75.14 75.91
78.79 79.82
55.14 57.35
54.5 56.12 54.61 53.41
59.09 59.94 60.02
0
10
20
30
40
50
60
70
80
90
Apr’22 May’22 Jun’22 Jul’22 Aug’22 Sep’22 Oct’22 Nov’22 Dec’22
Chart Title
GSTR-3B (%) GSTR-1(%)
Agenda for 49th GSTCM Volume 2
Page 20 of 21
Table 6: State-wise Return filing (GSTR-3B) till due date (Apr’22-Dec’22)
States Apr’22 May’22 Jun’22 Jul’22 Aug’22 Sep’22 Oct’22 Nov’22 Dec’22
1 Jammu and Kashmir 82% 78% 80% 80% 79% 79% 79% 81% 81%
2 Himachal Pradesh 81% 76% 79% 78% 76% 77% 77% 80% 83%
3 Punjab 82% 80% 80% 80% 79% 77% 78% 81% 83%
4 Chandigarh 85% 83% 82% 83% 82% 78% 82% 84% 85%
5 Uttarakhand 76% 73% 75% 73% 72% 71% 72% 75% 78%
6 Haryana 80% 78% 79% 78% 78% 75% 77% 79% 82%
7 Delhi 81% 79% 80% 78% 79% 76% 77% 80% 82%
8 Rajasthan 80% 78% 78% 78% 77% 76% 77% 81% 82%
9 Uttar Pradesh 81% 78% 78% 78% 78% 75% 77% 80% 80%
10 Bihar 69% 57% 71% 69% 68% 68% 69% 71% 73%
11 Sikkim 63% 62% 68% 62% 63% 64% 60% 62% 67%
12 Arunachal Pradesh 50% 51% 56% 53% 53% 53% 53% 55% 57%
13 Nagaland 66% 66% 67% 66% 67% 65% 65% 67% 66%
14 Manipur 55% 53% 57% 56% 54% 55% 53% 58% 61%
15 Mizoram 63% 61% 65% 64% 64% 63% 60% 62% 65%
16 Tripura 75% 73% 77% 76% 74% 73% 74% 77% 78%
17 Meghalaya 60% 60% 69% 60% 61% 67% 60% 61% 69%
18 Assam 68% 66% 68% 68% 66% 66% 67% 69% 71%
19 West Bengal 81% 79% 80% 80% 79% 78% 79% 81% 83%
20 Jharkhand 78% 76% 78% 77% 76% 75% 76% 79% 80%
21 Odisha 75% 72% 75% 74% 73% 72% 72% 76% 77%
22 Chhattisgarh 68% 66% 68% 69% 66% 68% 67% 71% 73%
23 Madhya Pradesh 78% 74% 75% 76% 74% 75% 76% 79% 79%
24 Gujarat 87% 85% 85% 85% 85% 85% 85% 87% 87%
25 Daman and Diu - - - - - - - - -
26 Dadra and Nagar Haveli 79% 75% 76% 77% 77% 75% 75% 78% 79%
27 Maharashtra 75% 73% 75% 75% 73% 74% 73% 76% 78%
29 Karnataka 78% 76% 77% 77% 76% 74% 76% 79% 80%
30 Goa 62% 60% 64% 61% 61% 65% 63% 64% 69%
31 Lakshadweep 69% 68% 70% 67% 73% 71% 67% 77% 78%
32 Kerala 77% 74% 75% 76% 73% 72% 73% 76% 77%
33 Tamil Nadu 83% 80% 80% 80% 79% 78% 80% 82% 81%
34 Puducherry 79% 75% 75% 75% 75% 72% 75% 78% 77%
35 Andaman and Nicobar
Islands 65% 62% 63% 64% 63% 64% 62% 66% 68%
36 Telangana 70% 67% 69% 67% 67% 67% 67% 70% 71%
37 Andhra Pradesh 76% 75% 76% 76% 75% 73% 76% 79% 78%
38 Ladakh 68% 68% 71% 68% 66% 72% 65% 68% 78%
97 Other Territory 76% 70% 68% 74% 73% 67% 69% 75% 75%
Average 79% 76% 77% 77% 76% 75% 76% 79% 80%
Agenda for 49th GSTCM Volume 2
Page 21 of 21
Table 7: State-wise Return filing (GSTR-1) till due date (Apr’22-Dec’22)
States Apr’22 May’22 Jun’22 Jul’22 Aug’22 Sep’22 Oct’22 Nov’22 Dec’22
1 Jammu and Kashmir 37% 41% 36% 41% 39% 38% 43% 43% 41%
2 Himachal Pradesh 56% 57% 49% 56% 54% 49% 59% 58% 55%
3 Punjab 72% 74% 69% 72% 71% 68% 74% 74% 72%
4 Chandigarh 75% 77% 73% 75% 74% 72% 77% 77% 76%
5 Uttarakhand 51% 53% 47% 50% 50% 46% 54% 55% 52%
6 Haryana 68% 70% 67% 67% 68% 65% 70% 70% 70%
7 Delhi 69% 71% 70% 69% 70% 69% 71% 70% 73%
8 Rajasthan 62% 66% 58% 63% 63% 59% 67% 68% 66%
9 Uttar Pradesh 48% 51% 46% 48% 48% 45% 52% 53% 50%
10 Bihar 27% 29% 27% 27% 27% 25% 31% 34% 32%
11 Sikkim 32% 34% 34% 34% 34% 27% 35% 36% 35%
12 Arunachal Pradesh 21% 24% 23% 23% 23% 21% 26% 28% 25%
13 Nagaland 29% 29% 29% 29% 28% 27% 29% 34% 31%
14 Manipur 21% 23% 22% 24% 22% 24% 25% 24% 26%
15 Mizoram 20% 21% 20% 20% 20% 20% 21% 21% 19%
16 Tripura 42% 46% 43% 44% 42% 38% 47% 47% 46%
17 Meghalaya 25% 26% 28% 27% 24% 24% 28% 28% 28%
18 Assam 33% 37% 33% 36% 35% 30% 39% 39% 38%
19 West Bengal 51% 53% 51% 53% 52% 47% 55% 56% 55%
20 Jharkhand 43% 43% 43% 45% 44% 41% 47% 49% 48%
21 Odisha 37% 40% 35% 38% 38% 33% 41% 43% 40%
22 Chhattisgarh 44% 48% 42% 46% 46% 42% 51% 51% 49%
23 Madhya Pradesh 48% 51% 42% 47% 47% 41% 56% 56% 51%
24 Gujarat 79% 82% 78% 79% 79% 78% 82% 82% 83%
25 Daman and Diu - - - - - - - - -
26 Dadra and Nagar Haveli 72% 73% 71% 72% 73% 72% 76% 76% 77%
27 Maharashtra 60% 63% 60% 63% 61% 60% 66% 66% 68%
29 Karnataka 52% 56% 53% 55% 53% 51% 58% 59% 60%
30 Goa 44% 47% 48% 47% 44% 51% 52% 51% 56%
31 Lakshadweep 42% 52% 52% 56% 50% 49% 54% 60% 59%
32 Kerala 56% 59% 55% 60% 50% 54% 60% 61% 60%
33 Tamil Nadu 58% 58% 57% 59% 55% 55% 61% 61% 62%
34 Puducherry 51% 52% 50% 52% 49% 50% 54% 54% 56%
35 Andaman and Nicobar
Islands 38% 42% 39% 40% 41% 38% 43% 46% 45%
36 Telangana 43% 44% 42% 43% 41% 41% 46% 48% 49%
37 Andhra Pradesh 48% 52% 49% 51% 49% 46% 54% 59% 57%
38 Ladakh 27% 31% 34% 30% 26% 35% 32% 33% 39%
97 Other Territory 74% 74% 72% 75% 73% 69% 75% 72% 76%
Average 55% 57% 55% 56% 55% 53% 59% 60% 60%
Agenda for 49th GSTCM Volume 2
i Model All India GST Audit Manual 2023: Prepared by the CoO on GST Audits
Model All India
GST Audit Manual
2023
Prepared by
The Committee of
Officers on GST Audits
GST Audit Manual 2023
ii Model All India GST Audit Manual 2023: Prepared by the CoO on GST Audits
PREFACE
GST Audit Manual 2023
iii Model All India GST Audit Manual 2023: Prepared by the CoO on GST Audits
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
GST Audit Manual 2023
iv Model All India GST Audit Manual 2023: Prepared by the CoO on GST Audits
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

GST Audit Manual 2023
v Model All India GST Audit Manual 2023: Prepared by the CoO on GST Audits
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
GST Audit Manual 2023
vi Model All India GST Audit Manual 2023: Prepared by the CoO on GST Audits
services
RCM Reverse Charge Mechanism
GSTAM GST Audit Manual
AAR Authority for Advance Ruling
AAAR Appellate Authority for Advance Ruling
GST Audit Manual 2023
vii Model All India GST Audit Manual 2023: Prepared by the CoO on GST Audits
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.
GST Audit Manual 2023
viii Model All India GST Audit Manual 2023: Prepared by the CoO on GST Audits
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
GST Audit Manual 2023
ix Model All India GST Audit Manual 2023: Prepared by the CoO on GST Audits
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.

GST Audit Manual 2023
x Model All India GST Audit Manual 2023: Prepared by the CoO on GST Audits
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
GST Audit Manual 2023
xi Model All India GST Audit Manual 2023: Prepared by the CoO on GST Audits
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.
GST Audit Manual 2023
xii Model All India GST Audit Manual 2023: Prepared by the CoO on GST Audits
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
GST Audit Manual 2023
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
1.3.16 Further, the authority conducting the audit may invoke such other
provisions of the Act and the Rules framed thereunder as may be deemed
necessary, in the facts and circumstances of the case, for conducting the
audit.
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 specified 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 specified 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 of 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 working 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 e-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 e-way bill 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. (For determining the
value of export the value may be calculated as prescribed in rule 89(4)( C) of
the CGST Rules,2017 i.e. the value which is 1.5 times the value of like goods
domestically supplied by the supplier)
 In respect of claim for refund of unutilized ITC on account of zerorated supply, adequate caution is required to be taken so that, ITC
on account of transitional credit, capital goods are not claimed for
refund.
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 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.
 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.
 The intention of these above illustrations is to create awareness of
Officers in the subject so that an Audit Officer looks into the
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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
detection /
examination
Areas of concern Action to be
taken
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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.
Example 3: Incorrect information in registration may lead to suppression of
taxable turnover and less payment / evasion of tax. Date of commencement
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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.
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
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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?
Since, the auditee being an importer / manufacturer has received medicines
from his distributor which are expired; he has to destroy such medicines.
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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 and Trial balance if maintained
 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. Regarding maintenance of accounts and records, the same should
as per the provisions of Section 35 of the CGST Act read with the rules made
thereunder.
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
the sole purpose to alert the audit officers in this regard who are also required
to go through the relevant statutory provision in detail:
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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.
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.
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
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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
that the demand is genuine. The aforesaid narration for such high dues
should be concise, to the point and self-contained.
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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.
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
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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 30 (thirty) 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 may be
taken up for initiation of demand and recovery proceedings under section
73/74 of the Act, as the case, may be.
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 and the case may be taken up for
initiation of demand and recovery proceedings under section 73/74 of the Act,
as the case, may be.
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.
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.
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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.
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 joint audits.
The Coordination Committee may also adopt any other parameters/criteria
for selecting taxpayers for joint audits.
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).
 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?
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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
 Trial Balance (in case it is maintained)
 Notes to Accounts
 Tax Audit Report
 Cost Audit Report (in case it is maintained)
 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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