Author: Infinite On Tax

The concept of place of supply in GST is of paramount importance to determine the taxable jurisdiction considering whether the transaction is intra state or inter state on the basis of which tax (IGST or CGST and SGST/UTGST) is to be levied. GST is a destination based i.e. the supply of goods or services will be taxed at the place where they are consumed and the consumption state will have the right to collect.

Significance of correct determination of place of supply in GST

If an inter state transaction is wrongly treated as an intra state transaction, then the taxpayer will have to pay the tax correctly again and claim the refund of the wrongly deposited tax. Therefore, to avoid any such confusion, it is crucial that there is correct determination of place of supply in GST.

Separate Rules for B2B and B2C transactions

Before we analyze the relevant sections of place of supply in GST, we must understand that there are separate rules for place of supply for B2B and B2C transactions.

In B2B transactions, the recipient being a registered person avails ITC for paying his taxes and no real revenue accrues to the Government. Therefore, in B2B transactions, the place of supply in GST is usually the location of the recipient.

However, in B2C transactions, the supply is made to an unregistered person who consumes the same and cannot avail ITC, therefore, the taxes paid actually reach the government.

Separate Rules for Place of Supply in GST for – Goods and Services

Goods are usually tangible and thus there is no difficulty in ascertaining the place of supply in GST, on the other hand, services are intangibles and the place of supply of services under GST depends on the manner of delivery, billing address, etc. Thus, the place of supply of goods in GST is governed by Section 10 and 11 and the place of supply of services under GST are governed separately by Section 12 and 13.

Place of Supply in GST – Goods u/s 10 related to domestic transactions

As per Section 10 of the IGST Act, 2017 governs the place of supply of goods other than supply of goods imported into or exported outside India i.e. domestic transactions. The detailed analysis of the section with examples is as under:-

Transaction I – Where the supply involves movement of goods either by the supplier or the recipient or the transporter.

Place of Supply in GST – The location of the goods at which the movement of goods terminates for delivery to the recipient.

Example – M/s Ajay Plywood from Kota sells 10 chairs to M/s Mahesh Traders which has to be delivered at their shop at Jaipur. Thus, the Place of Supply is Jaipur.

Transaction II – Where the goods are delivered by the supplier to a recipient or any other person on the direction of a third person, whether acting as an agent or otherwise, commonly known as ‘bill to ship to’ transactions.

Place of Supply in GST – The important point to note here is that this section captures only the first supply between supplier and third person. Therefore, the place of supply is the principal place of business of the third person and not the actual recipient or the original buyer.

Example – Mr. Kailash of Maharashtra purchased goods from Mr. Suresh of Haryana which on the instruction of Mr. Kailash has to be delivered by Mr. Suresh to Mr. Rajendra of Chennai. Thus, there are 3 parties here:-

Mr. Suresh – Supplier

Mr. Rajendra – Recipient

Mr. Kailash – Third party on whose instructions goods are being delivered.

Therefore, the place of supply will be Maharashtra i.e. the principal place of business of the third person.

Transaction III – Where the supply involves no movement of goods either by the supplier or the recipient

Place of Supply in GST – The location of such goods at the time of delivery to the recipient.

Example – This is usually in the case of sale and lease back transactions. ABC from Mumbai had leased out its plant for production of bottles to XYZ from Noida. Later, XYZ purchased the same plant from ABC and continued the production as it is. Thus, there was no actual movement of the plant on account of the sale transaction and the place of supply will be Noida i.e. the location of the plant at the time of sale.

Transaction IV – Where the supply involves installation or assembly of goods

Place of Supply in GST – The assembly or installation site.

Example – Tanya from New Delhi purchased chimneys from M/s Deluxe Equipments for installation at her restaurants in Chandigarh. Here, the place of supply of the chimneys will be the installation site i.e. Chandigarh.

Transaction V – Where the supply of goods is on board for conveyance

Place of Supply in GST – The location where the goods are taken on board.

Example – Mr. Patel boarded the New Delhi-Bangalore superfast express from New Delhi. He was carrying some goods for sale during the journey when he boarded the train at New Delhi, however, since the train had maximum passengers boarding from Bhopal, he started selling his goods only when the train had reached Bhopal. However, irrespective of where the goods on board are sold, the place of supply will be the location where the goods are taken on board i.e. New Delhi.

Place of Supply in GST – Goods u/s 11 related to import and export of goods

As per Section 11 of the IGST Act, 2017 governs the place of supply of goods imported into or exported outside India. The detailed analysis of the section with examples is as under:-

Transaction I – Where the goods are imported into India

Place of Supply in GST – The location of the importer

Example – Mr. Vikas is a manufacturer of heavy machinery in Chennai. For his production activities, he required some accessory parts from Japan. He imported the goods from Japan to his factory in Chennai. Thus, the place of supply will be Chennai.

Transaction II – Where the goods are exported from India

Place of Supply in GST – Location outside India

Example – Mr. Shekhar is a manufacturer of machines in Haryana. He has sold his machines to buyers in Singapore. The place of supply will be outside India.

Circular No. – 33/2017-Cus dated 01.01.2018 – Regarding taxation of high seas sales of imported goods

High Seas Sale is a transaction whereby the original importer sells the goods to a third person before the goods are entered for custom clearance. Doubts arise whether original importer as well as the buyer purchasing on high seas both liable to pay IGST. In this regard, circular no.33/2017-Cus dated 01.01.2018 issued to clarify that IGST on High Sea Sale transactions of imported goods shall be levied and collected only at the time of importation i.e. the buyer of high seas sale shall only be liable to pay IGST at the time of clearance of imported gods.

High seas seller (original importer) won’t be liable to pay IGST. Buyer shall pay IGST on the final purchase value as per last High Sea Transaction envisaging all margins earned by all persons who made High Sea Sales of such goods.

FAQs related to place of supply in GST

Q1. What is the jurisdiction of the National (& Regional Benches) & the State (& area benches) of the Tribunal?

A1. The National Bench or Regional Benches of the Appellate Tribunal shall have 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. The State Bench or Area Benches 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 cases where the issues involved relates to the place of supply.

Q2. Whether questions relating to place of supply can be asked under Advance Ruling Mechanism?

A2. No, the questions relating to place of supply cannot be asked under Advance Ruling Mechanism.

There are specific rules regarding determining the eway bill validity, computing the eway bill distance based on the type of vehicle used for conveyance and consequences of failure to follow the eway bill rules laid down by the GST law. E-way bill is an electronic document generated online on the GST portal when there is movement of goods as the undisputed and unambiguous evidence of such movement, details of goods and the parties involved. It is an effective tool to reduce the instances of fake invoices, taking benefit of fake ITC without actual supply and reducing the tax frauds.

As per Circular No. 47/21/2018-GST dated 08.06.2018 – It is important to note that eway bill generation is not dependent on whether a supply is inter-state or not, but on whether the movement of goods is inter-state or not. Therefore, if the goods transit through a second state while moving from one place in a State to another place in the same State, an eway bill is required to be generated.

Computing eway bill distance and validity

Eway bill distance to be covered has to be determined from the place where the movement of the goods starts to the place of delivery of such goods under the same invoice. Since the validity of the eway bill depends on the eway bill distance coverage, it is important that there is no error in determining the distance between the two places as per the invoice and the eway bill. For the ease of the users, the eway bill portal now has the feature of automatically calculating the eway bill distance based on the PIN codes entered by the users.

Once the determination of the eway bill distance has been made correctly, the validity of the eway bill has to be ascertained based on eway bill distance as per the table below :-

Nature of the Conveyance	Validity Period based on eway bill distance
Over dimensional cargo	1 day for any distance upto 20 kms and thereafter additional one day for every 20 kms or part thereof
Other than Over Dimensional Cargo	1 day for any distance upto 200 kms and thereafter additional one day for every 200 kms or part thereof
For multimodal Shipment i.e. in which at least one leg involves transport by ship	Same as for over dimensional cargo i.e. 1 day for any distance upto 20 kms and thereafter additional one day for every 20 kms or part thereof

Over Dimensional Cargo refers to cargo carried as a single indivisible unit and which exceeds the dimensional limits prescribed in rule 93 of the Central Motor Vehicle Rules, 1989.  Over Dimensional Cargo refers to the cargo which extends beyond the dimensions (Length or Breadth or Height) prescribed for a vehicle under the said Rules.Over Dimensional Cargo refers to cargo carried as a single indivisible unit and which exceeds the dimensional limits prescribed in rule 93 of the Central Motor Vehicle Rules, 1989.  Over Dimensional Cargo refers to the cargo which extends beyond the dimensions (Length or Breadth or Height) prescribed for a vehicle under the said Rules.

Example 1 : Normal Cargo carrying goods of value Rs. 75,000/- from New Delhi (PIN Code – 110004) to Varanasi (PIN Code – 221004). Date of start of movement : 01.07.2023.

Step 1 :- First, we determine the eway bill distance from New Delhi (PIN Code – 110004) to Varanasi (PIN Code – 221004). This, comes to approximately 850 km.

Step 2 :- Since a normal cargo is being used for transportation of the goods, the validity period will be calculated keeping in mind the validity period i.e. 1 day for any eway bill distance upto 200 kms and thereafter additional one day for every 200 kms or part thereof.

Therefore, Number of days = 850/200 = 4.25 days i.e. 5 days.

Step 3 :- Validity of the eway bill is till = 06.07.2023 i.e. (01.07.2023 + 5 days).

Example 2 : Over dimensional Cargo carrying goods of value Rs. 2,55,000/- from New Delhi (PIN Code – 110001) to Jaipur (PIN Code – 302001). Date of start of movement: 15.07.2023.

Step 1 :- First, we determine the eway bill distance from New Delhi (PIN Code – 110001) to Jaipur (PIN Code – 302001). This, comes to approximately 250 km.

Step 2 :- Since an over dimensional cargo is being used for transportation of the goods, the validity period will be calculated keeping in mind the validity period i.e. 1 day for any eway bill distance upto 20 kms and thereafter additional one day for every 20 kms or part thereof.

Therefore, Number of days = 250/20 = 12.5 i.e. 13 days.

Step 3 :- Validity of the eway bill is till = 28.07.2023 i.e. (15.07.2023 + 13 days).

Where multiple vehicles are used for transportation of the same goods

In case the goods are being transported via multiple vehicles, ONE eway bill shall be prepared bearing details of all the vehicles and transporters in Part B of the eway bill. However, there is no need to update these details when the movement is intra-state and the eway bill distance is upto 50 kms only.

Provisions for extending the Validity Period of EWay Bill

Where, under circumstances of an exceptional nature, including trans-shipment, the goods cannot be transported within the validity period of the e-way bill, the transporter may extend the validity period after updating the details in Part B of FORM GST EWB-01.
The validity of the eway bill may be extended within eight hours from the time of its expiry.

As per Circular No. 61/2018-GST dated 04.09.2018 pertaining to eway bill in case of storing of goods in the godown of a transporter, a per rule 138 of the CGST Rules, 2017 e-way bill is a document which is required for the movement of goods from the supplier’s place of business to the recipient taxpayer’s place of business. Therefore, the goods in movement including when they are stored in the transporter’s godown (even if the godown is located in the recipient taxpayer’s city/town) prior to delivery shall always be accompanied by a valid e-way bill.

Thus, in case the consignee/ recipient taxpayer stores his goods in the godown of the transporter, then the transporter’s godown has to be declared as an additional place of business by the recipient taxpayer. In such cases, mere declaration by the recipient taxpayer to this effect with the concurrence of the transporter in the said declaration will suffice. Where the transporter’s godown has been declared as the additional place of business by the recipient taxpayer, the transportation under the e-way bill shall be deemed to be concluded once the goods have reached the transporter’s godown (recipient taxpayer’ additional place of business). Hence, e-way bill validity in such cases will not be required to be extended.

FAQs on eway bill

Q1. Whether an eway bill is required if the goods are moving within 10 kms?

A1. In intra-state movement of goods, an eway bill is not required if the distance being covered is upto 10 kms. However, in inter-state movement of goods, eway bill has to be generated even if the eway bill distance is within 10 kms.

Q2. In a case where the invoice has been raised but the goods have not been transported yet, how is the validity of the eway bill extended?

A2. Every eway bill has 2 parts – Part A bearing the details of the supplier, recipient, goods sold, invoice details and Part B has the details of the transporter and vehicle used for transportation. Once an invoice has been generated Part A of the eway bill should be generated incorporating all the required details.

However, Part B can be generated only when the actual movement of goods takes place since the details of the transporter and vehicle have to be included. As per the GST law, the validity of the eway bill starts from the date when Part B is entered, thus, even if the invoice has been raised but there is delayed delivery, the eway bill will still be valid and will require no extension.

What is eway bill? Eway Bill Rules – As per the Press Release by the Ministry of Finance on 31.01.2023, 8.3 crore eway bills were generated which was higher than the previous high of 7.9 crore in November, 2022. In August, 2023, eway bill generation reached a record high of 9.34 crores as per the data from GSTN. Thus, the concept of eway bill has helped the department to effectively track movement of goods in compliance with all the GST laws pertaining to such movement. However, before working on the generation of eway bills, we must understand what is eway bill and the eway bill rules.

E-way bill is an electronic document generated online on the GST portal when there is movement of goods as the undisputed and unambiguous evidence of such movement, details of goods and the parties involved. It is an effective tool to reduce the instances of fake invoices, taking benefit of fake ITC without actual supply and reducing the tax frauds. Eway bills are invoice based i.e. separate eway bills have to be made for each invoice.

Instances of tax frauds plugged in by the concept of eway bills

Case 1

A supplier makes actual supply of goods to the recipient without generating invoice. The recipient pays the supplier in cash and thus earlier this transaction would have evaded tax and would not have come in the radar of the GST department. However, now since eway bill is required for movement of such goods, the parties will not be able to evade the tax and the compliance on the same.

Case 2

A supplier generates an invoice without making any supply of goods. Since an invoice has been generated there is the risk of parties taking the benefit of fake ITC. However, now as per the eway bill rules, since eway bill is required for movement of such goods, the parties will not be able to claim any such fake ITC.

Eway Bill Rules

Applicability

As per the Eway bill rules, the concept of eway bill is on movement of goods and not supply of goods.

1. Eway bills have to issued only for goods and not for services.
2. As per the eway bill rules, eway bill has to be generated only when the value of the goods is exceeding Rs. 50,000/-. In this case, the meaning of ‘value of goods’ does not mean the assessable value of goods rather it means the ‘invoice value of goods’.

Exception :- There are 2 exceptions for this limit of Rs. 50,000/- for generating eway bills

• When the movement of goods is inter-state between the principal and the job worker or vice-versa, or
• Inter-state movement of goods by a dealer exempted from GST registration

However, where the movement of goods is from a DTA unit to a SEZ unit or vice versa located in the same state, there is no requirement to generate an eway bill, if the same has been exempted under Rule 138(14)(d) of the CGST Rules.

Who has to generate the eway bill?

As per the Eway Bill Rules, the eway bill has to generated when the value of the goods in movement exceeds Rs. 50,000/- to or from a registered person. Unregistered persons are also required to generate e-Way Bill. However, where a supply is made by an unregistered person to a registered person, the receiver will have to ensure all the compliances are met as if they were the supplier. Transporters carrying goods by road, air, rail, etc. also need to generate e-Way Bill if the supplier has not generated an e-Way Bill.

The supplier, recipient or transporter can get enrollment numbers by the GST department based on their PAN card or Aadhar card to generate eway bills even if they are not registered.

Eway Bill – Details to be mentioned

The eway bill contains 2 parts – Part A and Part B.

Part A contains the details of the supplier, recipient, goods in movement, invoice or transfer challan details.

Part B contains the details of the transporter and the legs of movement of such goods.

Generally, Part A is filled by the supplier or the recipient and Part B is filled by the transporter if not filled already by the supplier or the recipient.

Bulk eway bills and Consolidated eway bills

As per the Eway bill rules, Eway bills are invoice based i.e. separate eway bills have to be generated for each invoice. However, to ease this process, the concept of generating Bulk eway bills has been introduced. A bulk eway bill is generated when the person wants to generate eway bills in a single shot.

The person will have to download the JSON template from the portal and upload the particulars for all the eway bills to be generated and the separate eway bills will be generated in one shot.

Consolidated eway bill is used when there are multiple eway bills already generated that are being carried in one conveyance. The person will have to download the JSON template from the portal and upload the details of the eway bill numbers and the consolidated eway bill will be generated.

Exemption from generating Eway bills

As per the Eway bill rules, in the following cases, it is not required to generate eway bills :-

1. When the movement of goods is through non-motorized vehicles
2. Goods transported from Customs port, airport, air cargo complex or land customs station to Inland Container Depot (ICD) or Container Freight Station (CFS) for clearance by Customs.
3. Goods transported under Customs supervision or under customs seal
4. Goods transported under Customs Bond from ICD to Customs port or from one custom station to another.
5. Transit cargo transported to or from Nepal or Bhutan
6. Movement of goods caused by defence formation under Ministry of defence as a consignor or consignee
7. Empty Cargo containers are being transported
8. Consignor transporting goods to or from between place of business and a weighbridge for weighment at a distance of 20 kms, accompanied by a Delivery challan.
9. Goods being transported by rail where the Consignor of goods is the Central Government, State Governments or a local authority.
10. Goods specifed as exempt from E-Way bill requirements in the respective State/Union territory GST Rules.
11. Transport of certain specified goods- Includes the list of exempt supply of goods, Annexure to Rule 138(14), goods treated as no supply as per Schedule III, Certain schedule to Central tax Rate notifications.

It is important for businesses to understand the GST Composition Scheme Rules to carefully evaluate their eligibility and weigh the advantages against any potential limitations associated with this simplified tax structure. The GST Composition Scheme is aimed at providing a supportive framework for small businesses, contributing to ease of compliance and fostering their growth within the GST regime.

GST Composition Scheme Rules – How to opt?

If a taxpayer is eligible for the GST Composition scheme and opts to avail the scheme, the person has to file an application under Form GST – CMP – 02 prior to the beginning of the financial year to opt for the GST Composition Scheme.

If the Form GST – CMP – 02 is filed during the year, then the scheme will be applicable for the person from the month succeeding the month in which the form was filed.

Example – A tax payer opts for the GST Composition scheme by filing the Form GST CMP – 02 in December, 2022, then it will be applicable for the person from January, 2023.

GST Composition Scheme Rules – Form CMP – 02

As per the GST Composition scheme rules, Form GST – CMP – 02 is an intimation that the person wants to pay tax under the GST Composition scheme.

Steps to file Form GST – CMP – 02

• Login to the portal
• Go to Services > Registration > Application to opt for composition levy
• In the form, fill the ‘Name of the authorized signatory’ and the ‘Place’
• Select ‘Composition Declaration’ and ‘Verification’
• For companies and LLPs, form can be submitted by using DSC only. However, other persons can submit the form using DSC, EVC or e-signature.
• Click on ‘Proceed’
• You will receive an acknowledgment on your registered e-mail address and phone number.

After filing Form GST – CMP – 02, the person will have to file Form GST – CMP – 03 within 90 days from the date of submission of Form GST – CMP – 02.

GST Composition Scheme Rules – Form CMP – 03

As per the GST Composition scheme rules, in Form GST – CMP – 03, the person has to submit details of the stock in hand as on the date of opting into the scheme.

Once the taxpayer has opted for the GST Composition scheme and the person has submitted Form GST CMP – 02, the person as to file Form GST – CMP – 03 within 90 days.

Steps to file Form GST – CMP – 03

• Login to the portal
• Go to Services > Registration > Application for Composition levy
• Download the template in excel and open the file
• Enter your GSTIN and insert the required number of rows
• In Point no. 7, put the details of purchases from registered dealers
• In Point no. 8, put the details of purchases from unregistered dealers
• Validate the sheet and post validation, generate the file to upload
• Login to the portal again
• Again Go to Services > Registration > Application for Composition levy
• Select the option ‘Choose the file’ and upload and validate the file
• On uploading the file, Tax Payable on the stock is calculated and displayed under ‘Details of tax paid’. Click on ‘Update Ledger Balance’.
• Thus the tax payable in the E – Liability ledger will increase which has to be paid by the E- Cash ledger
• Fill in the details of the authorized signatory and sign the form with the DSC or EVC and submit Form GST – CMP – 03. An Application Reference Number (ARN) will be generated.

Once the application for GST Composition scheme is approved, the person can start carrying out business as a composition dealer.

Returns to be filed as per the GST Composition scheme rules

As per the GST Composition scheme rules, the composition dealer has to file quarterly returns in a challan-cum-statement format in Form GST – CMP – 08 by the 18^th of the month succeeding the quarter end and an annual return in Form GSTR – 4.

As per Notification No. 02/2023 dated 31.03.2023 regarding waiver of late fees for composition dealer, Late fees in case of FORM GSTR-4 for the periods from July-2017 till F.Y 2021-22 has been waived completely in case of NIL GST returns.

It has been reduced to Rs. 500/- in other cases provided the said returns are filed between 01.04.2023 to 30.06.2023.

GST Composition Scheme Rules – Validity

The composition dealer can continue in the scheme as long as he is eligible for the scheme as per the GST composition scheme rules.

What action can be taken by the proper officer for contravention of any provisions of composition levy and how?

Where any contravention is observed by the proper officer wherein the registered person was not eligible to pay tax under the composition scheme or has contravened the provisions of the CGST Act, 2017 or provisions of Chapter II of the CGST Rules, 2017, he may issue a notice to such person in FORM GST CMP-05 to show cause within fifteen days of the receipt of such notice as to why the option to pay tax under the composition scheme shall not be denied.

Upon receipt of the reply to the said show cause notice in FORM GST CMP-06, the proper officer shall issue an order in FORM GST CMP-07 within a period of thirty days of the receipt of such reply, either accepting the reply, or denying the option to pay tax under the composition scheme from the date of the option or from the date of the event concerning such contravention, as the case may be.

Can a person paying tax under composition levy, withdraw voluntarily from the scheme?

Yes. The registered person who intends to withdraw from the composition scheme can file a duly signed or verified application in FORM GST CMP-04.

GST Composition scheme – Compulsory withdrawal

A taxpayer who fails to opt out of the scheme within 7 days of the disqualifying event, can be removed out of the scheme by the Tax officials by issuing a Show Cause Notice to the taxpayer.

As per Section 10 of the CGST Act, 2017, the GST Composition scheme is an alternate method to pay tax for small businesses without the hassles of ITC and at lower rates than the rates under the normal tax scheme. It is an optional scheme for small businesses. GST Composition scheme is PAN based and the eligibility for availing this scheme depends on the aggregate turnover on the same PAN.

Basic Features of the GST Composition Scheme

Before opting for the GST Composition scheme, the supplier must understand the specifics of this alternate method of paying tax for small business:-

• All registrations under the same PAN will have to either opt for the GST Composition scheme or continue in the regular scheme.
• The supplier cannot avail ITC in this scheme. Moreover, the composition dealer cannot charge any tax from the customer and the composite tax paid by him will not be available as input tax for the buyer and thus the buyer will not be eligible for ITC.
• The composition dealer cannot issue a tax invoice. The supplier has to issue a Bill of supply.
• If any inward supply is taken attracting the provisions of Reverse charge mechanism (RCM), then the composite rates of GST will not be applicable.
• The composite dealer will have to file quarterly returns and payments in Form GST CMP – 08 by 18^th of the next month succeeding such quarter. An annual return in Form GSTR – 4 will also have to be filed.

Who is eligible for availing the GST Composition Scheme?

The following category of persons can avail the GST Composition scheme:-

1. Manufacturers and traders of goods
2. Restaurants (Not serving alcohol)
3. Earlier the GST Composition scheme was only for suppliers of goods, however, in the 32^nd Council Meeting notified under Notification No. 2/2019 dated 7^th March, 2019, the scheme has also been made available to service providers from 1^st April, 2019.

Composition Scheme – GST Rate

The GST rates for the composition scheme are as under:-

Eligible Person	Total rate of tax (CGST + SGST/UT-GST)	Turnover
Manufacturer	1%	All supplies with the state – Both taxable and exempted.
Restaurants not serving alcohol	5%	All supplies with the state – Both taxable and exempted.
Other Suppliers of goods	1%	Taxable turnover within the state.
Service Providers	6%	All supplies with the state – Both taxable and exempted.

GST Composition Scheme Turnover Limit

Since the intent of the scheme is to benefit the small businesses from tedious GST compliances, the eligibility for availing the scheme is based on the aggregate turnover under the same PAN.

For suppliers of goods – If the aggregate turnover is upto Rs. 1.50 crores for the preceding financial year, the person will be eligible for availing the GST composition scheme. However, for North-Eastern states and Uttarakhand, this threshold limit is Rs. 75 lakhs.

For suppliers of services – If the aggregate turnover is upto Rs. 50 lacs for the preceding financial year, the person will be eligible for availing the GST composition scheme.

Section 10(2) – Persons not eligible to opt for GST composition scheme

As per Section 10(2) of the CGST Act, 2017, the following categories of persons are not eligible to opt for GST composition scheme even if the aggregate turnover is below Rs. 1.50 crores/Rs. 75 lacs :-

• Person making supply of any service OTHER THAN –
  • Restaurant services
  • Interest received on extending deposit loan and advances shall be ignored completely
  • As per CGST (Amendment) Act, 2018, limited value services along with main business – Maximum value : 10% of the turnover within the state/UT or Rs. 5 lacs whichever is higher i.e. if the value of these services exceeds the maximum limit then the person is not eligible for the scheme.
• Person making supply of non-taxable goods or services
• Person making INTER-STATE supply of goods/services
• Person engaged in making supplies of tobacco, pan masala, ice cream and other edible ice, fly ash bricks and blocks, bricks of fossil fuels or similar siliceous earths, building bricks, earthen or roofing tiles [Amended by Notification No. 15/2022-CT w.e.f. 18.07.2022]
• Casual taxable person or non-resident taxable person

Earlier E-commerce operators were not eligible for availing the GST Composition scheme, however CBIC vide Notification No. 36/2023-Central Tax dated 4^th August, 2023 w.e.f. 1^st October, 2023.

E-commerce operators fulfilling the following conditions will be allowed to avail the GST Composition scheme:-

• E-commerce operator shall not allow any inter-state supply of goods through it by the said person
• E-commerce operator is collecting TCS u/s 52 of the CGST Act, 2017
• E-commerce operator shall furnish the details of supplies in Form GSTR – 8 electronically on the common portal.

Therefore, if the supplier is fulfilling the basic conditions of aggregate turnover and does not fall under the ineligible category u/ 10(2) of the CGST Act, 2017, the supplier can opt for the GST Composition Scheme.

FAQs regarding GST Composition Scheme

The concept of deemed export under GST is not a new concept. This terminology is also frequently used in the Foreign Trade Policy (FTP) however, the meaning of deemed export under GST is different than the interpretation of this term in FTP. Moreover, deemed export under GST has been clearly distinguished from exports as a distinct supply under GST and thus these two terms have separate meanings and separate tax implications.

Difference between Exports and Deemed export under GST

Export of goods or services require the goods or services to be exported outside the Indian territory, however, in the case of deemed export under GST, it is pertinent to note that the goods or services are not physically exported out of India but are deemed to have been exported.

Export is a zero rated supply in GST but deemed export under GST is not a zero rated supply by default. GST is levied on all deemed exports at the point of supply.

Deemed export under GST – Meaning

Deemed export under GST refer to those transactions in which the goods supplied do not leave the country, and the payment for such supplies is received either in Indian rupees or in free foreign exchange. This means that the goods or services supplied are intended for use in the manufacturing or production of goods that are to be exported outside India.

Example – M/s ABC sells goods to M/s PQR, an EOU for further sale to M/s XYZ in New York. Here, the supply from M/s ABC to M/s PQR will be treated as deemed export under GST and the supply from M/s PQR to M/s XYZ will be treated as export under GST.

Categories of supply of goods notified as deemed export under GST

In exercise of powers conferred under Section 147 of the CGST Act, the Central Government has issued Notification no. 48/2017-Central Tax dated 18.10.2017 wherein the following categories of supply of goods has been declared as Deemed export under GST:-

• Supply of goods by a registered person against Advance Authorization
• Supply of capital goods by a registered person against Export Promotion Capital Goods Authorisation
• Supply of goods by a registered person to Export Oriented Unit
• Supply of gold by a bank or Public Sector Undertaking specified in the Notification No. 50/2017-Customs, dated the 30th June, 2017 (as amended) against Advance Authorization

Conditions to be fulfilled for classification as deemed export under GST

The following conditions must be fulfilled for the classification of these supplies as deemed export under GST:-

• Supplies covered u/s 147 of the CGST Act, 2017 as elaborated above
• Applicable only for the supply of goods (not for supply of services)
• Goods are not required to be taken outside India
• Goods must be produced or manufactured in India
• Payment can be received either in Indian currency or in free convertible foreign currency. Free convertible foreign currency means that the supplies have not been made under any bond/LUT.
• The tax must be paid at the time of supply. The refund can be claimed on such supplies thereafter.

Taxability of deemed export under GST

As discussed above, export is a zero rated supply in GST but deemed export under GST is not a zero rated supply by default. GST is levied on all deemed exports at the point of supply. Moreover, these supplies cannot be made under any bond/LUT. Thus, the taxpayer will have to pay the tax and later on can claim the refund.

Deemed exports are exempted from payment of GST under the GST law. The supplier of goods or services can claim a refund of the GST paid on the supply of goods or services to such organizations.

Additional conditions to be fulfilled for supply to EOU/STP/HTP to be treated as deemed export under GST

• It is mandatory that an EOU/EHTP/STP/BTP unit has to give prior intimation by filing Form – A i.e. (Intimation for procurement of supplies from the registered person by Export Oriented Unit (EOU)/Electronic Hardware Technology Park (EHTP) Unit/ Software Technology Park (STP) unit/ Bio-Technology Parks (BTP) Unit under deemed export benefits under section 147 of CGST Act,2017 read with Notification No.48/2017-Central Tax dated 18.10.2017).
• The said intimation shall be given to – (a) the registered supplier; (b) the jurisdictional GST officer in charge of such registered supplier; and (c) its jurisdictional GST officer.
• The form must contain a running serial number, details of goods to be procured which is pre-approved by the Development Commissioner.
• The registered supplier thereafter will supply goods under tax invoice to the recipient EOU / EHTP / STP / BTP unit.
• On receipt of such supplies, the EOU / EHTP / STP / BTP unit shall endorse the tax invoice and send a copy of the endorsed tax invoice to – (a) the registered supplier; (b) the jurisdictional GST officer in charge of such registered supplier; and (c) its jurisdictional GST officer.
• The endorsed tax invoice will be considered as proof of deemed export supplies by the registered person to EOU / EHTP / STP / BTP unit.
• The recipient EOU / EHTP / STP / BTP unit shall maintain records of such deemed export supplies in digital form, based upon data elements contained in Form – B.

Refund Procedure for tax paid on deemed export under GST

As per 3rd proviso to Rule 89(1) of CGST Rules, 2017, application for refund in case of deemed exports can either be filed by the recipient of deemed export supplies. Alternatively, the supplier of such deemed exports supplies can also file the refund application, in cases where the recipient does not avail of input tax credit on such supplies and furnishes an undertaking to the effect that the supplier may claim the refund.

It may be noted that rule 89(4A) of the CGST Rules, 2017 as amended vide Notification no. 75/2017-Central Tax dated 29.12.2017 (w.e.f 23.10.2017), the recipient of deemed export supplies can claim refund of input tax credit availed in respect of other inputs or input services used in making zero-rated supply of goods or services or both, in case of deemed export supplies on which the supplier has availed the benefit of notification No. 48/2017-Central Tax dated 18.10.2017.

Further Rule 96(9) of the CGST Rules, 2017 as amended vide Notification no. 75/2017-Central Tax dated 29.12.2017 (w.e.f 23.10.2017) also provides that the recipient of deemed export supplies on which the supplier has availed the benefit of notification No. 48/2017-Central Tax dated 18.10.2017 cannot export on payment of integrated tax.

Time limit for filing refund claim

For obtaining refund the recipient or supplier of deemed export supplies has to file an application in FORM GST RFD-01 through the Common Portal, either directly or through a Facilitation Centre notified by the Commissioner before the expiry of two years from, the date on which the return relating to such deemed export supplies is to be furnished electronically. The application has to be accompanied by a statement containing the number and date of invoices along with such other evidences as may be notified in this behalf.

Documentation and Compliances

The supplier of goods or services must maintain proper documentation to claim the benefits of deemed export under GST. The supplier must issue a tax invoice indicating that the supply is intended for deemed export and must obtain a certificate from the recipient of goods or services confirming that the goods or services have been received for deemed export.

The supplier of goods or services must comply with various provisions of the GST law to avail of the benefits of deemed export. This includes timely filing of GST returns, payment of GST on the supply of goods or services to organizations that are not eligible for deemed export status, and maintaining proper records.