Handbook on GST Compliance and Audit

I.P. PASRICHA & Co.
Chartered Accountants

GST Compliances & Audit
3
HANDBOOK ON GST
COMPLIANCES AND AUDIT
Silent features of Handbook:
 Impact assessment and Audit issues on sectors like:
 BFSI
 Power
 Real Estate & Infrastructure
 GST Audit Checklist

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DISCLAIMER
This handbook/ book/ professional referencer/ publication are only for internal/
external knowledge and training purposes of I.P. Pasricha & Co ―IPC‖ members/
staff/ associates or its clients or anyone I.P. Pasricha & Co ―IPC‖ wishes to share
with. This handbook is not for selling purposes.
This publication contains information in abridged form and is therefore intended for
general guidance and training only. Although content is prepared with utmost care in
this handbook/ publication, is not intended to be a substitute for detailed research/ study
or professional advice. Therefore, by reading this publication, you/ anyone agree that
no liability for correctness, completeness will be assumed. It is solely the responsibility
of the readers to decide whether and in what form the information made available is
relevant for their purposes. Neither I.P. Pasricha & Co ―IPC‖ nor any of its members
accepts any responsibility. It is suggested that to avoid any doubt the reader should
cross-check all the facts, law and contents of the handbook/ publication with original
Government content and/ or law and/ or rules and/ or notifications. On any specific
matter/ clarification/ query, reference should be made to the appropriate advisor. Please
obtain professional guidance prior to using the information provided in this report for
any decision making. There is no tax or other business advice provided in this
Handbook/ Publication.
The views expressed in this handbook are of the GST team member of ―IPC‖ who
compiled data sourcing from various legal reliable sources including data available
freely on internet. The I.P. Pasricha & Co ―IPC‖ may not necessary subscribe to the
views expressed by the member(s). The information cited in this handbook/ publication
has been drawn primarily from the www.cbec.gov.in and other sources.
Illustrations, if any, stated in this book of any person or entity is only for proper
understanding in the context of the discussion and does not intend to mean anything
else. Assumptions stated are to be understood in the context of the discussion and
cannot be applied to a real time situation mutatis mutandis.
While every effort has been made in this handbook to avoid any kind of errors or
omissions or mistake or oversight or lapses or blunder. Despite meticulous effort
having been put in, it is possible that errors may have crept in. Any mistake, error or
discrepancy noted by anyone may bring to the notice of I.P. Pasricha & Co ―IPC‖ and
thereafter, if required, suitable edits / corrections shall be effected in the next edition.
It is suggested that to avoid any doubt the reader should cross-check all the facts, law
and contents of the publication with original Government publications or notifications.

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WHY THIS HANDBOOK
It has been a year since the Narendra Modi government rolled out the Goods and
Services Tax (GST), on 1 July, 2017. The introduction of the indirect tax regime
marked the end of over a decade of squabbling, when politicians struggled to build
accord across party lines. It is one year since the introduction of the goods and services
tax (GST). Heralded as India‘s greatest tax reform, the GST aims to free Indians from
multiple taxes, setting the base for a unified common market. One Nation, One Tax,
One Market.
With the introduction of GST came the challenges in implementation both at the
country level and at the organisation level. Certain common challenges that
organizations face post GST implementation:
 Processes
 Tax positions
 Transition
 Compliances
 Pricing
To ensure the unbroken implementation of GST law on notified entities, government
has entrusted on Chartered Accountants to conduct audit and submit report under
notified form. Section 35(5) read with Section 44 and Rule 80(3) of Goods and
Services Tax (GST) Laws provides that every registered person, whose aggregate
turnover during a financial year exceeds two crore rupees, is required to get his/her
accounts audited. The copy of audited annual accounts and a reconciliation statement,
duly certified, in Form GSTR-9C has to be submitted on or before the 31st Day of
December by the tax payer. In this regard, the Government has notified Form GSTR-
9C on 13th September, 2018 comprising Reconciliation Statement and Certification,
which needs to be certified by the Chartered Accountants.
In view of the importance of the matter, we at I.P. Pasricha & Co ―IPC‖ have come out
with ‗Handbook on GST Compliances and GST Audit‘. This handbook has been
comprehensively designed and contains analysis of GST compliances and GST Audit.
We are confident that this handbook will be of great significance and will provide
assistance on the critical issues arising while conducting audit.

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HOW WE CAN HELP
Indirect taxes impact every area of a company‘s business. Their impact on revenue,
costs, cash flow, profitability and, ultimately, on shareholder value is an important
element to stay ahead in competition.
Our team comprises indirect tax professionals. We provide comprehensive advice and
assistance on Goods and Services Tax. We had worked closely with clients in the
implementation of GST.
You can be rest assured to overcome the GST problems with us on your side. We can
assist your GST team with following services:-
Advisory
 Advising on applicability of taxes on transactions, classification, valuation, place of
supply, admissibility of tax benefits and exemptions and on claim of tax credits
 Giving opinions on other indirect tax issues
 Formulating indirect tax efficient business models
Indirect tax Audit/ reviews/ health checks/ due diligence reviews
 Undertaking comprehensive reviews of business operations to identify tax planning
opportunities and compliance gaps
 Conducting detailed indirect tax due diligence reviews (buy side and sell side)
 Review of the GST implementation done by the company
Compliance support and outsourcing
 Providing indirect tax compliance support or outsourcing on an all-India basis
 Assistance in audits/investigations carried out by tax authorities
Litigation support
 Drafting appeals, submissions and replies to notices
 Appearing before adjudication and appellate authorities up to the tribunal
 Appearing before anti-dumping authorities
 Briefing senior counsel

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WHY I.P. Pasricha & Co
I.P. Pasricha & Co has a strong history of assisting companies in delivering various
services under indirect taxes. The firm is aware of the essentials of what it takes to
succeed as taxation consultant. Our tax consultants help businesses like yours to
evaluate the pros and cons of any taxation strategy. We demystify the process, examine
the alternatives and help you prepare. Our market- based insights can help your
business achieve its potential.
People make the difference in any professional relationship. The IPC team has:
 Extensive experience of helping companies in taxation matter across sectors
 Significant experience helping clients navigate through the taxation compliance and
litigation journey
 Quicker response to your most pressing issues
―We believe in doing the right things in the best possible manner‖ I.P. Pasricha & Co.
laid foundations in the year 1978 with vision of ―provide services with responsibility‖
by its ambitious, industrious and tenacious partner Mr. Inderpal Singh Pasricha, who
has been the backbone of the organization since its inception. At present our firm
provides services with five multi-talented partners and experienced professionals. With
more than 40 years of service, I.P. Pasricha & Co is focused on providing expert and
timely services to the clients that includes various sectors such as Audit & Assurance,
Direct Taxation and Indirect Taxation services that reflect their needs. Our services are
available on PAN India basis having offices located in New Delhi, Ludhiana,
Gurugram and Mumbai.
Today, I.P. Pasricha & Co. is a well-equipped, fully capable and a renowned firm of
chartered accountants serving distinguished clients in varied industries. Our firm is a
trust based organization that leverages research and knowledge to deliver premium
services, high value, and a unique employer proposition. We partner entrepreneurs in
their critical decision makings by providing them various solutions customized as per
their requirement in cost effective means.
Since last 40 decades, we are growing strong and continue to travel extra miles to serve
our clients. We firmly believe that integrity has no substitute. Following our moto, we
are heading towards providing best services in the best possible manner.

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INDEX
CHAPTER-1: ACCOUNTS UNDER GST
 Background of taxation laws in India
 Taxes Incorporated in Goods and Services Tax Act, 2017 and cesses abolished
 Introduction on maintenance of books of account
 Meaning of registered person, or principal place of business documents, books or
accounts and electronic records
 Maintenance of Records
 Who must maintain accounts and other record under GST Act, 2017?
 Period of Preservation of Accounts
CHAPTER-2: GST RETURNS (COMPLIANCES)
 Introduction
 Meaning of GST Return?
 Purpose of filings GST Returns
 Who should file GST Returns?
 The different classes of GST Returns and when should they be field
 Implication of late filings of GST Returns
CHAPTER-3: ANNUAL RETURNS UNDERS GST
 Introduction
 Legal provisions of GST Annual Returns
 Points to note on Annual Returns
 Consequences of failure to submit the Annual Return and not getting the accounts
audited
CHAPTER-4: AUDIT UNDER GST
 Introduction
 Definition of the term audit – section of the CGST act
 To whom GST audit is applicable?
 Definition of Aggregate Turnover (sec.2(6) of the CGST Act)
 Due date for GST Audit
 Type of Applicable Audits
 How to conduct GST Audit?
 Non-Taxable Supplies

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 Composite and Mixed Supply
 Payment of tax under reverse charge mechanism
 Goods under Reverse Charge Mechanism
 Payment of tax in case of inward supply if taxable goods/services effected from
unregistered dealers
 Compliance with the provisions of time of supply
 Change in rate of tax on goods or services
 List if notifications with respective dates in relation to change in rate of goods &
services
 Supply cessed prior to completion of supply
 Goods sent on approval basis
 Place of supply
 Value of taxable supply liable to tax
 Treatment of discount
 Value of supply – rule 27-31 of CGST rules
 Concept of Pure Agent
 Tax liability on account of bad debts
 Input tax credit
 Ineligible input tax credit
 ITC in case of banking/ financial/NBFC
 Transitional credit
 Exports
 Job work
 Payments-electronic cash ledger and electronic credit ledger [section 49(1&2)].
 Liability of interest on delayed payment of taxes and in case of undue or excess
claim of input tax credit
CHAPTER-5: GST AUDIT FOR FINANCIAL SECTOR
 Overview
 GST challenges in financial sector (Bank/NBFC‘s/Financial Sector)
 Relevant exemption under GST
 Rule of GST
 Time of supply under GST
 Place of supply under GST
 Valuation of taxable supply under GST
 GST on Income Earned
 GST on Expenses Incurred
 Input Tax Credit

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CHAPTER-6: GST AUDIT FOR POWER SECTOR
 GST overview on Power Sector
 The NTPC Model & Reliance Power Model
 Relevant exemption under GST
 Rate of GST on Power Sector
 Time of supply under GST
 Place of supply for power sector
 Income earned by power sector
 Input Tax Credit
CHAPTER-7: GST AUDIT FOR REAL ESTATE AND INFRASTUCTURE SECTOR
 GST overview on real estate
 Relevant changes to ponder upon
 Impact on workings capital in supplies from unregistered person
 Taxability of transfer development rights
 Works contract services
 Reversal of ITC under works contract
 Other receipts
 Impact of restricting ITC benefit for assets for lease
 Levy
 Registration
 Rate
CHAPTER-8: GST AUDIT CHECKLIST

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CHAPTER -1
ACCOUNTS UNDER GST
Background of taxation laws in India:
It is true that the regime of indirect taxes in India , till 30th June 2017 was based upon
the three lists in Seventh Schedule to Constitution of India i.e Union List, State List
and Concurrent List through which powers of the Central Government, State
Governments and Local Bodies were unambiguously defined. These lists had the basis
of Government of India Act, 1935 and therefore were formulated based on the situation
prevailing in 1935. This structure became outdated due to changes in situations,
technology etc.
Taxes incorporated in Goods and Services Tax Act, 2017 and
Cesses abolished
Central Taxes:
 Central Excise Duty
 Additional Excise Duties on Goods of special importance, Textile
 Countervailing Duty and Special Additional Duty levied under Customs Act
 Excise Duty levied under the Medicinal and Toilet preparations (Excise Duties)
Act, 1955
 Service Tax
 Central Surcharges and Cesses on Excise/Service tax States Taxes
 State VAT/Sales Tax, Purchase Tax
 Entertainment tax (unless it is levied by the local bodies), Central Sales tax (levied
by Centre and collected by States)
 Octroi and Entry Tax, Luxury Tax, Taxes on lottery, betting and gambling
 State Surcharges and Cesses
Introduction on Maintenance of books of account
Maintenance of books of account and documentation are one of the most crucial and
significant requirement for the compliance requirements under any tax law. As result,
the taxpayer or assessee is required to record all transactions in his books of account
and keep all the documents in safe custody up to a particular period of time. Different
tax laws specify different periods for which records, documents, etc., should be
preserved. Further, the correct assessment, audit, verification of compliances are based
on proper maintenance of books of account and records.

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The purpose of maintaining proper books of accounts under the GST law or for that
matter any other law is to render a record of the business done by a particular business
entity, enterprise or a professional individual in a given financial year. This can only be
done by maintaining proper and fair records of accounts in the form of financial
statements by the assessee.
Now, for our understanding it is important to note that accounting mechanisms under
pre and post GST regime are similar.
This implies that input tax should be debited and output tax liability should be credited.
From accounting perspective, changes have been introduced in nomenclatures of
accounts. For example, earlier the nomenclature was Input Service Tax, but now under
the GST regime, it needs to be changed to Input GST.
Goods and Services Tax (GST) is mainly self-assessment based system where the
registered person is required to assess his liability and discharge the same by filing
applicable returns. The basis for this is underlying records for a particular transaction.
The GST law also prescribes the documents required to be issued by different kinds of
suppliers under various situations/types of transactions. Chapter VIII of the Central
Goods and Services Act, 2017 discusses about accounts and records requirement under
GST law for a registered person along with rules prescribed under the Central Goods
and Services Act, 2017.
Meaning of Registered Person, Principal Place of Business
Documents, Books of Account and Electronic Records
The CGST Act, 2017 provides an inclusive definition of ‗registered person‘, ‗principal
place of business‘, 'documents' and ‗electronic records‘. Further, 'books of account',
'book or paper' and 'documents' have been defined under the Companies Act, 2013 as
well. Following are some crucial definitions for our understanding:
 As per section 2(94) of the CGST Act, 2017, ―registered person means a person
who is registered u/s 25 but does not include a person having a Unique Identity
Number‖.
 As per Section 2(89) of the CGST Act, 2017, ―Principal place of business means
the place of business specified as the principal place of business in the certificate of
registration‖.
 As per Section 2(47) of the CGST Act, 2017, "document includes written or printed
record of any sort and electronic record as defined in clause (t) of section 2 of the
Information Technology Act, 2000."
 According to Section 2(t) of the Information Technology Act, 2000, "electronic
record' means data, record or data generated, image or sound stored, received or
sent in an electronic form or micro-film or computer generated microfiche."
 Section 2(12) of the Companies Act 2013 defines book and paper as 'book or paper'
includes books of account, deeds, vouchers, writings, documents, minutes and
registers maintained on paper or in electronic form.

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 As per Section 2(36) of the Companies Act 2013, "document includes summons,
notice, requisition, order, declaration, form and register, whether issued, sent or
kept in pursuance of this Act or under any other law for the time being in force or
otherwise, maintained on paper or in electronic form."
Therefore, based upon the definitions given above, it may be summarised that the
'document', 'record' and 'books of account' have a wide scope. The terms 'documents'
will include all data, records, forms, registers, legal documents like notices, summons,
deeds, declarations, orders, etc., maintained under any law, whether in written, printed
or in electronic form. Similarly, 'books of account' is also a very wide term.
Accordingly, it includes all the records maintained in respect of money, sales,
purchases, assets, liabilities and items of cost. For example, 'books of account' includes
fixed asset register, journals, sales ledger, purchase ledger, cash book, etc.
Maintenance of records
The records under GST law may be maintained in physical form as well as in
electronic form. In case it is maintained in electronic form, the GST law requires that it
shall be authenticated by digital signature. The books of account include any electronic
form of data stored on any electronic device. In case there is any change in the registers
and other documents maintained electronically, a log of every entry edited or deleted is
required to be maintained. Further, proper electronic back up of all the records is
required to be maintained and preserved so that in case of destruction of such records
due to any reason, it may be restored within a reasonable period of time. The person
maintaining electronic records is to submit the relevant records, documents in hard
copy or in electronic readable format, duly authenticated by him to the appropriate
authority if demanded. Further, the details of files stored electronically, password of
such files and explanation for codes used, etc., are also required to be provided on
demand.
Who must maintain Accounts and other records under GST Act,
2017
Every registered person under GST is required to keep and maintain all specified
Accounts and records at his principal place of business.
Section 35 of the CGST Act, 2017 has cast the responsibility on the owner or operator
of warehouse or godown or any other place used for storage of goods and on every
transporter to maintain specified records.
Every registered person whose turnover during a financial year exceeds the prescribed
limit (i.e. 2 crore) will get his accounts audited by a chartered accountant or a cost
accountant.

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Period of preservation of accounts
Every registered person who is required to keep and maintain books of account or other
records as per GST law must preserve the same till the expiry of seventy two months
(six years) from the due date of furnishing the annual return. The due date of filing of
annual return is 31st December from the end of the relevant financial year. As per the
GST Act, every registered taxable person must maintain the accounts books and
records for at least 72 months (6 years). The period will be counted from the last date
of filing of Annual Return for that year.
Such accounts and records must be kept at every related place of business mentioned in
the certificate of registration.

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CHAPTER-2
GST RETURNS
Introduction:
Goods and Services Tax is a single indirect tax levied on the supply of goods and
services from the manufacturer/ service provider to the consumer. Input tax credits paid
at each stage will be made available in the following stage of value addition. GST is
basically a tax levied on value addition at each stage. Therefore, the consumer has to
pay only the GST charged by the last dealer or supplier in the supply chain.
All individuals registered under the GST Act have to furnish the details of the sales/
supplies and purchases of goods and services along with the tax collected and paid.
This shall be done by filing online returns. GST Returns are the Goods and Services
Tax Return forms that taxpayers of all types have to file with the income tax authorities
of India under the new GST rules.
Meaning of GST Return
A return is a document containing details of business transactions which a taxpayer is
required to file with the tax authorities. This is used by tax authorities to calculate tax
liability.
Under GST, a registered dealer has to file GST returns that include:
 Purchases
 Sales
 Output GST (On sales)
 Input tax credit (GST paid on purchases)
To file GST returns, GST compliant sales and purchase invoices are required.
Purpose of filing GST Returns
Every person registered under the GST Act has to periodically furnish the details of
sales and purchases along with tax collected and paid thereon, respectively, by filing
online returns. Before filing the return, payment of tax due is compulsory otherwise
such return will be invalid.
The requirement to file GST Returns is so that by way of implementation of a
comprehensive Income Tax system like GST in India taxpayer are ensured services
such as registration, returns, and compliance procedures in a transparent and
straightforward manner. Individual taxpayers would be using 4 forms for filing their
returns such as the return for supplies, return for purchases, monthly returns, and

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annual return. Small taxpayers who have opted for composition scheme will have to
file quarterly returns. All filing of returns will be done online.
Who should file GST Returns
Filing returns under GST is mandatory for registered businesses. Returns constitute the
formal process of determining the tax liability and communicating with the Tax
department. It doesn't matter whether your business is active or not. Every person
registered under GST will have to file returns in some form or other. A registered
person will have to file returns either monthly (normal supplier) or quarterly basis
(Supplier opting for composition scheme). An ISD will have to file monthly returns
showing details of credit distributed during the particular month. A person required to
deduct tax (TDS) and persons required to collect tax (TCS) will also have to file
monthly returns showing the amount deducted/collected and other details as may be
prescribed. A non-resident taxable person will also have to file returns for the period of
activity undertaken. A Return needs to be filed even if there is no business activity (i.e.
Nil Return) during the said tax period of return ie., Entities dealing in exempt/nil rated
goods or services or export of goods & services also need to file returns.
There is no threshold limit for filing returns. Registration is the only criteria. This
amounts to 37 returns in a year. A striking feature of the system is that one has to
manually enter details of one monthly return – GSTR-1. The other two returns – GSTR
2 & 3 will get auto-populated by deriving information from GSTR-1 filed by you and
your vendors.
There are separate returns required to be filed by special cases such as composition
dealers.
However, Government entities / PSUs , etc. not dealing in GST supplies or persons
exclusively dealing in exempted / Nil rated / non –GST goods or services would
neither be required to obtain registration nor required to file returns under the GST law.
But, State tax authorities may assign Departmental ID to such government departments
/ PSUs / other persons and will ask the suppliers to quote this ID in the supply invoices
for all inter-State purchases being made to them.
UN agencies etc. will have unique GST ID and will file return for the month (in
simpler form) during which they make purchases. They would not be required to file
regular return. They would submit their purchase statements (without purchase
invoices) as per the periodicity prescribed for claim of refund.
In other words, Since, GST law has been framed on the principle of self-assessment of
tax by the taxpayer this process operates with adequate checks and balances therefore;
the GST law requires sequential filing of the returns.
Thus, every ―registered taxable person‖ needs to file returns unless exempted from
registration. However the number of returns to be filed varies depending on the nature
of business carried on by the taxable person.

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Further, filing of Return is mandatory even if there has been no business activity during
the relevant period.
The different classes of GST Returns and when should they be filed
The list of various returns prescribed under GST Act read with Chapter VIII- Returns
of the CGST Rules, 2017 along with due dates for them to be filed are as follows:-
Please note: The due dates to file the forms mentioned below are subject to change by
Notifications /orders that may be passed by the GST Council.
 Any regular business:
Return
Form
Particulars Interval Due Date Applicable to
GSTR 1 Details of
outward supplies
of taxable goods
and/or services
effected
Monthly
And
Quarterly
in case of
less than
1.5 cr
turnover
11th of the
next month
31st day of
next month
Normal /
Regular
Taxpayer
Communication
to supplier of
goods and
services for any
addition/deletion/
modification
made by the
recipient in
FORM GSTR-2
(Accept or reject)
before 17th
of the
succeeding
tax period
GSTR-2 Details of inward
supplies of
taxable goods
and/or services
effected claiming
input tax credit.
Monthly* 15th of the
next month
Normal /
Regular
Taxpayer
GSTR-3 Return on the
basis of
finalization of
Monthly* Normal /
Regular
Taxpayer

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details of outward
supplies and
inward supplies
along with the
payment of
amount of tax.
GSTR-3B Provisional return Monthly 20th of the
next month
All registered
persons (other
than Input
Service
Distributor
(ISD), person
liable to deduct
TDS and
personal liable
to collect tax at
source).
GSTR-9 Annual Return Annually 31st
December
of next
financial
year
Normal tax
payer (other
than casual tax
payer)
GSTR-9C Annual return
along with the
copy of audited
annual accounts
and a
reconciliation
statement
Annually 31st
December
of the next
Financial
Year
Normal tax
payer having
aggregate
turnover of more
than ` 2 crores
 A dealer opting for composition scheme:
A composition dealer will enjoy the benefits of lesser returns & compliance along with
payment of taxes at nominal rates. A composition dealer will file only 2 returns:
Return
Form
GSTR-4 Return for
compounding
Quarterly 18th of the
month
Composition

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taxable person succeeding
quarter
taxpayer
GSTR-9A Annual Return Monthly 31st
December
of next
financial
year
Composition
taxpayer
 Returns to be filed by certain specific registered dealers:
Return
Form
GSTR-5 Return for Non-
Resident foreign
taxable person
Monthly 20th of the
next month
Non-Resident
taxpayer
GSTR-5A Return for Non-
resident persons
providing
OIDAR services
Monthly 20th of the
next month
Online
information and
database access
or retrieval
services
GSTR-6 Return for Input
Service
Distributor,
Monthly 13th of the
next month
Input Service
Distributor
GSTR-7 Return for
authorities
deducting tax at
source,
Monthly 10th of the
next month
Tax Deductor

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GSTR-8 Details of
supplies effected
through e-
commerce
operator and the
amount of tax
collected
Monthly 10th of the
next month
E-Commerce
Operator
GSTR-10 Final Return Once. When
registration
is cancelled
or
surrendered
within
three
months of
the date of
cancellatio
n or date of
cancellatio
n order,
whichever
is later.
Registered
Person whose
registration has
been cancelled
GSTR-11 Details of inward
supplies to be
furnished by a
person having
UIN and
claiming refund
Monthly 28th of the
month
following
the month
for which
statement is
filed.
Person having
UIN

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Implications of late filings of GST Returns
Under section 47 of the Central Goods and Services Act, 2017, if the GST Returns are
not filed within time, the defaulter is liable to pay interest and a late fee.
Interest charged would be @18% per annum. It has to be calculated by the taxpayer on
the amount of outstanding tax to be paid. The time period will be from the next day of
filing (26th/ 29th Aug) to the date of payment. Late fee would be chargeable @ Rs. 50
per day per Act. Thus, it would be Rs. 50 under Central Goods and Services Act, 2017
& Rs. 50 under State Goods and Services Act, 2017. Total penalty would amount to
Rs. 100/day. Maximum penalty chargeable would be Rs. 5,000.
Further, there is no late fee on IGST.

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CHAPTER-3
ANNUAL RETURN UNDER GST
Introduction
The Introduction of Goods and Services Tax was a revolutionary move in the context
of commodities and services tax. It has brought about a paradigm shift in the
methodology of levy and collection of taxes. It is an internationally recognized
multipoint tax system providing for levy of tax on goods as well as services on the
value addition occurring at every stage of business activity with the availability of
cross credits (services credit for goods & vice versa). On a macro note it may be said
that GST is a mechanism which supports self-compliance where in the assessees assess
the taxes payable by them. To ensure the correctness and veracity of the reported
information annual returns and GST audit are required. It becomes essential to have
counter checks and balances to ensure that there is no seepage of exchequer‘s revenue.
GST principles embrace information technology and reduce the interaction with the tax
administrators. The responsibility has been given to the Chartered Accountants and
cost accountants for performing the audit functions considering their expertise in the
arena.
GST law needs all entities who are registered to the initial mechanism of returns
required the filing of the following for a regular registered person.
1. GSTR 1 – Furnishing of Details of Outward Supplies (Section 37)
2. GSTR 2 – Furnishing of Details of Inward Supplies (Section 38) (dispensed with
from August 2017 onwards)
3. GSTR 3 – Furnishing of the returns (Section 39) (was envisaged but has not been
introduced since beginning)
However, GSTR 3B was introduced by virtue of Sub Rule 5 of Rule 61 owing to the
postponement of GSTR 2 and 3.
In case of a Composition Registered Person GSTR 4 is the prescribed return. Further
the concept of Annual returns has been effectuated under GST. Although the concept
of Annual return was in vogue by virtue of VAT Statutes in certain states, the same
wasn‘t there in the Service Tax Statute as well as the Excise Law.
Legal provisions of GST Annual Returns
In order to understand the gamut of the GST Annual returns and its requirement, it
would be relevant for us to understand the legal provisions relevant for GST Annual
Returns. Two important provisions which are relevant and important in this context are
Section 35(5) and Section 44(1) of CGST Act, 2017. In terms of section 35(5) ―every
registered person whose turnover during a financial year exceeds the prescribed limit
shall get his accounts audited by a chartered accountant or a cost accountant and shall

23
submit a copy of the audited annual accounts, the reconciliation statement under
subsection (2) of section 44 and such other documents in such form and manner as may
be prescribed‖.
Section 44(1) requires that every registered person, other than an Input Service
Distributor, a person paying tax under section 51 or section 52, a casual taxable person
and a non-resident taxable person, shall furnish an annual return for every financial
year electronically in such form and manner as may be prescribed on or before the
thirty-first day of December following the end of such financial year. This form is
notified by the government vide Notification 39/2018 on 4th September 2018.
In terms of Rule 80(1) of the CGST Rules, 2017 ―Every registered person, other than
an Input Service Distributor, a person paying tax under section 51 or section 52, a
casual taxable person and a non-resident taxable person, shall furnish an annual return
as specified under sub -section (1) of section 44 electronically in FORM GSTR-9
through the common portal either directly or through a Facilitation Centre notified by
the Commissioner:
Provided that a person paying tax under section 10 shall furnish the annual return in
FORM GSTR9A.‖
Further, Section 44(2) mandates every registered person who is required to get his
accounts audited in accordance with Section 35(5) to furnish the copy of audited
annual accounts and a reconciliation statement reconciling the value of supplies
declared in the annual return with such audited annual financial statements.
In terms of Section 44(2), Rule 80(3) requires every registered person whose aggregate
turnover during a financial year exceeds two crore rupees shall get his accounts audited
as specified under sub-section (5) of section 35 and he shall furnish a copy of audited
annual accounts and a reconciliation statement, duly certified, in FORM GSTR-9C,
electronically through the common portal either directly or through a Facilitation
Centre notified by the Commissioner.
Points to Note in Annual Return
1. Every registered person is required to file annual return on or before 31st December
of the year succeeding the financial year in form GSTR-9. Example – For F.Y 2017-18
annual return would be filed on 31st December 2018
2. Person paying tax under composition scheme is required to file annual return in form
GSTR9A – Proviso to Sub Rule (1) of Rule 80.
3. Every electronic commerce operator who is required to collect tax at source under
section 52 shall furnish annual statement in form GSTR - 9B – Sub Rule 2 of Rule 80.
4. Nil Annual Return- A person registered under GST but having no transactions
during the year is still required to file a Nil Annual Return. A person who has got his
registration cancelled during the year is also required to file the respective Annual
returns.
5. A Registered person who has opted in or opted out of composition is required to file

24
both GSTR 9 & GSTR 9A for the relevant periods.
6. The exceptions to filing of the Annual return applies to the following category of
registered persons
 Input Service Distributor
 A person required to deduct TDS
 Casual Taxable Person
 Non-Resident Taxable Person
In case of the regular registered persons whose aggregate turnover exceeds Rs. 2 Crore,
they are required to furnish the following
 GSTR 9 - The Annual Return
 Audited Annual Accounts
 GSTR 9C – A reconciliation statement mapping the annual returns Vs. the Audited
Annual Accounts
Summary
Annual Return
Section Registered
Person : Rule
80(1)
Composition
Dealer : Rule
80(1)
TCS : Rule
80(2)
Audit TO
> 2 crores
: Rule
80(3)
Form GSTR 9 GSTR 9A GSTR 9B GSTR 9C
Consequences of failure to submit the annual return and not
getting the accounts audited
1. Notice to defaulters
Section 46 of the CGST Act provides where a registered person fails to furnish a return
under section 39 or section 44 or section 45, a notice shall be issued requiring him to
furnish such return within fifteen days in such form and manner as may be prescribed.
2. Late Fee for delayed filing
Section 47(2) of the CGST Act provides for levy of a late fee of Rs. 100/- per day for
delay in furnishing annual return in Form GSTR 9, subject to a maximum amount of
quarter percent (0.25%) of the turnover in the State or Union Territory. Similar
provisions for levy of late fee exist under the State / Union Territory GST Act, 2017.
On a combined reading of Section 47(2) and Section 44 (1) of the CGST Act, 2017 and
State / Union Territory GST Act, 2017 a late fee of Rs.200/- per day (Rs. 100 under

25
CGST law +Rs. 100/- under State / Union Territory GST law) could be levied which
would be capped to a maximum amount of half percent (0.25% under the CGST Law +
0.25% under the SGST / UTGST Law) of turnover in the State or Union Territory.
3. General Penalty for Contravention of Provisions –
Any person, who contravenes any of the provisions of this Act or any rules made there
under 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. An equal amount of penalty
under the SGST/UTGST Act would also be applicable. To sum up a penalty of up to
Rs.50,000/- could be levied.
4. Conclusion
The GST Annual Return being mandatory it would be pertinent to understand the
various elements of the Form. In order to assist the readers in filling the form a
detailed analysis of the form is presented in the ensuing chapters.

26
CHAPTER-4
AUDIT UNDER GST
Introduction:
The Goods and Services Tax regime is radical change in indirect taxation regime. It has
brought about a paradigm shift in the approach of levy and collection of taxes. It is a
globally recognized multipoint tax system providing for levy of taxes on goods as well
as services on the value addition made at every stage of business activity.
Now it has been more than one year since the introduction of GST, it‘s critical to start
focusing on various compliances such as input and output reconciliations, preparation
and filing of annual return and GST audit certification. All of these compliances will
form an important basis for the first audit/scrutiny/assessment under the GST law. The
law prescribes multiple audits conducted by the authorities, an external auditor
appointed by the authorities or audit certification by a person appointed by the
company. To ensure compliance of GST law various measures have been adopted by
the government and audit is one of them.
It‘s important that companies start preparing for these audits in order to avoid any loss
of credits, applicability of interest/penalties, etc. Some of the key aspects to be
considered by companies are as follows:
 Reconciliations: Ensure reconciliations of output tax/input tax between the books
of accounts, returns and e-waybills issued (output side)/ tax discharged by the
vendors (input side).
 Tax positions: Review the tax positions adopted by the company and also whether
these are correctly reflected in documentation.
 Credits: Review if any ineligible credits have been availed (including review of
credits availed) and in the process also ensure completeness of credits.
 Applicability of other provisions like free of cost services/goods, valuation, and
cross-charges between related persons/distinct persons.
In order to ensure effective compliance with the various GST provisions and to bring
transparency, audit provisions have been incorporated under the GST Acts/Rules.

27
Definition of the term “Audit” – Section 2(13) of the CGST Act
This is probably for the first time in the history of an indirect tax statute the term audit
has been defined ―Audit‖ means the examination of records, returns and other
documents maintained or furnished by the registered person under the GST Acts or
the rules made there under 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 compliance with the provisions of the GST Acts or the
rules made thereunder.
The following 3 types of audits are prescribed under the GST laws:
1. The first type of audit is to be done by a chartered accountant or a cost
accountant u/s 35(5) where turnover exceeds certain threshold specified in
Rule 80(3) i.e. 2 crores;
2. Second type of audit is to be done by the commissioner or any officer
authorised by him in terms of Section 65 of the CGST Act, 2017 read with
Section 20(xiv) of the IGST Act, 2017 and Section 21(xv) of UTGST Act,
2017.
3. The third type of audit is called the Special Audit and is to be conducted
under the mandate of Section 66 of CGST Act, 2017 read with Rule 102 of
CGST Rules, 2017
We shall elaborate on first type of audit viz. annual GST audit in terms of section
35(5), section 44(2) of the CGST Act read with rule 80(3) of CGST rules to be
performed by chartered accountant or a cost accountant.
To whom GST Audit is applicable
Sub-section 5 of section 35 of the CGST Act, sub-section (2) of section 44 of the
CGST Act and sub-rule (3) of rule 80 are the applicable section is respect of GST
annual audit, which prescribes the basic criteria such as:
 Turnover limit to identify the person whose accounts are liable to get audited under
GST;
 Period for which audit is to be conducted;
 Time limit by when audit report is to be furnished;
 Documents or other information like reconciliation statement to be furnished along
with audit report in desired format as will be notified soon etc.

28
The relevant provisions in respect of GST have been provided below:
Section 35(5) Section 44(2) Rule 80(3)
Every registered person
whose turnover during a
financial year exceeds
the prescribed limit shall
get his accounts audited
by a chartered
accountant or a cost
accountant and shall
submit a copy of the
audited annual accounts,
the reconciliation
statement under sub-
section (2) of section 44
and such other
documents in such form
and manner as may be
prescribed.
Every registered person who is
required to get his accounts
audited in accordance with the
provisions of sub-section (5) of
section 35 shall furnish,
electronically, the annual
return under sub-section (1)
along with a copy of the
audited annual accounts and
a reconciliation statement,
reconciling the value of
supplies declared in the return
furnished for the financial year
with the audited annual
financial statement, and such
other particulars as may be
prescribed.
Every registered person
whose aggregate turnover
during a financial year
exceeds two crore rupees
shall get his accounts
audited as specified under
sub-section (5) of section
35 and he shall furnish a
copy of audited annual
accounts and a
reconciliation statement,
duly certified, in FORM
GSTR-9C, electronically
through the common
portal either directly or
through a Facilitation
Centre notified by the
Commissioner.
Definition of Aggregate Turnover (Sec. 2(6) of the CGST Act):
―Aggregate Turnover‖ means the aggregate value of
 all taxable supplies (excluding the value of inward supplies on which tax is
payable by a person on reverse charge basis),
 exempt supplies,
 exports of goods or services or both and
 inter-State supplies
of persons having the same Permanent Account Number, to be computed on all India basis
but excludes-
 Central tax,
 State tax,
 Union territory tax,
 Integrated tax and

29
 Cess.
Let‘s assume, a company is registered in three different states with same PAN,
engaged in making taxable supplies, exempt supply, export and interstate supply.
Total turnover of different registration is Rs.1.90 cr., 40 lakhs and 5 lakhs
respectively. Here, aggregate turnover will be computed on all India basis and it shall
be computed as Rs.2.35 cr. Thus, in accordance with above mentioned provisions, the
company is required to comply with GST Audit in all three states. It is also to be
noted here that registered person majorly affecting exempt supply and having
turnover Rs.2.3 cr. (comprising exempt supply of Rs.1.90 cr. and taxable supply Rs.40
lakhs), is also required to comply with GST Audit, eg: school, hospitals etc.
Due Date for GST Audit
The matter of discussion here is whether first GST audit is to be conducted for FY
April 2017 to March 2018 or July 2017 to March 2018. We are of the view that GST
has been implemented from 1st day of July, hence, audit under GST should be
conducted for period covered under GST regime and aggregate turnover should also be
computed for July 2017 to March 2018.
In accordance with the above mentioned provisions, due date of furnishing of annual
return and audit for a financial year is 31st of December of succeeding financial year.
Also, as per section 16(4) the maximum period for rectification of invoices and other
relevant documents for the benefit of ITC is due date of furnishing of return of the
month of September of succeeding financial year (i.e. 25th October 2018) for the FY
2017-18. Further, it is pertinent to mention here that in Income Tax Laws, due date of
furnishing of tax audit and income tax return is 30th September respectively and
hence, period beyond this date has of no relevance after finalization of accounts.
Therefore, GST audit should also be completed before that date only.
Types of applicable audits
Most enterprises are subject to various audits throughout their financial year. But one
common question that arises in the mind of every such entrepreneur is that why are
they subject to different audits? Since it is all related to tax shouldn‘t it be one audit?
So, here we bring to you the difference between the three common audit types that your
organization may be subject to,- Statutory Audit, Tax Audit and GST Audit.

30
Basis of
Difference
Statutory Audit Tax Audit GST Audit
Governing Act Companies Act,
2013 or any other
statute governing
the entity.
Income Tax Act,
1956
Goods &
Service Tax,
Act
Applicability All Companies All All
Conditions All Companies Any entity whose
business has a
turnover of more than
Rs. 1 Crore
Any entity
whose business
has a aggregate
turnover of
more than Rs.
2 Crore or if
directed by the
Dept.
Audit Type To check the
whether all the
have been made
according to the
Companies Act
To check all the
income, expenses and
all tax has been
calculated fairly and
all the disclosures are
proper.
To check the
whether all the
disclosures and
the GST Act
and that the
taxes on the
same have
been duly paid.
Auditor Chartered
Accountant
Chartered
Accountant
Chartered
Accountant or
Cost
Accountant
Report
Submission
Shareholders Income Tax
department
CBIC
Nature of Audit Mandatory Conditional (As per
Section 44AB)
Conditional
(As per section
35(5) & 44(2)
and rule 80(3).

31
How to conduct GST Audit
Levy & Collection of Tax:
Whether the supplies affected by the registered person have been
considered in returns?
Section 7: Scope of Supply
(1) For the purposes of this Act, the expression “supply” includes––
(a) all forms of supply of goods or services or both such as sale, transfer,
barter, exchange, license, rental, lease or disposal made or agreed to be made for
a consideration by a person in the course or furtherance of business;
(b) import of services for a consideration whether or not in the course or furtherance
of business;
(c) the activities specified in Schedule I, made or agreed to be made without a
consideration; and
(d) the activities to be treated as supply of goods or supply of services as referred
to in
Schedule II.
(2) Notwithstanding anything contained in sub-section (1),––
(a) activities or transactions specified in Schedule III; or
(b) such activities or transactions undertaken by the Central Government, a State
Government or any local authority in which they are engaged as public
authorities, as may be notified by the Government on the recommendations of the
Council, shall be treated neither as a supply of goods nor a supply of services.
(3) Subject to the provisions of sub-sections (1) and (2), the Government
may, on the recommendations of the Council, specify, by notification, the
transactions that are to be treated as -
(a) a supply of goods and not as a supply of services; or
(b) a supply of services and not as a supply of goods.
SCHEDULE I: ACTIVITIES TO BE TREATED AS SUPPLY EVEN IF MADE
WITHOUT CONSIDERATION
1. Permanent transfer or disposal of business assets where input tax credit has been
availed on such assets.
2. 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:
Provided that gifts not exceeding fifty thousand rupees in value in a financial
year by an employer to an employee shall not be treated as supply of goods or
services or both.

32
3. Supply of goods—
(a) by a principal to his agent where the agent undertakes to supply such goods on
behalf of the principal; or
(b) by an agent to his principal where the agent undertakes to receive such goods on
behalf of the principal
4. Import of services by a taxable person or from any of his other establishments
outside India, in the course or furtherance of business.
SCHEDULE II: ACTIVITIES TO BE TREATED AS SUPPLY OF GOODS OR
SUPPLY OF SERVICES
1. Transfer
(a) Any transfer of the title in goods is a supply of goods;
(b) Any transfer of right in goods or of undivided share in goods without the
transfer of title thereof, is a supply of services;
(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 goods.
2. Land and Building
(a) any lease, tenancy, easement, license to occupy land is a supply of services;
(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.
3. Treatment or process:
Any treatment or process which is applied to another person's goods is a supply of
services.
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 directions of the person carrying on the business so as no longer to
form part of those assets, whether or not for a consideration, such transfer or disposal
is a supply of goods by the person;
(b) where, by or under the direction of a person carrying on a business, goods held or
used for the purposes 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,
whether or not for a consideration, the usage or making available of such goods is a
supply of services;
(c) where any person ceases to be a taxable person, any goods forming part of the

33
assets of any 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.
5. Supply of services
The following shall be treated as supply of service, namely:—
(a) renting of immovable property;
(b) construction of a complex, building, civil structure or a part thereof, including a
complex or building intended for sale to a buyer, wholly or partly, except where the
entire consideration has been received after issuance of completion certificate, where
required, by the competent authority or after its first occupation, whichever is earlier.
Explanation.—For the purposes of this clause—
(1) the expression "competent authority" means the Government or any authority
authorized to issue completion certificate under any law for the time being in force and
in case of non- requirement of such certificate from such authority, from any of the
following, namely:—
(i) an architect registered with the Council of Architecture constituted under
the
Architects Act, 1972; or
(ii) a chartered engineer registered with the Institution of Engineers (India); or
(iii) a licensed surveyor of the respective local body of the city or town or
village or development or planning authority;
(2) the expression "construction" includes additions, alterations,
replacements or remodelling of any existing civil structure;
(c) temporary transfer or permitting the use or enjoyment of any intellectual property
right;
(d) development, design, programming, customization, adaptation, up gradation,
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; and
(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.
6. Composite supply
The following composite supplies shall be treated as a supply of services, namely:—
(a) works contract as defined in clause (119) of section 2;
(b) 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

34
(other than alcoholic liquor for human consumption), where such supply or service is
for cash, deferred payment or other valuable consideration.
7. Supply of Goods
The following shall be treated as supply of goods, namely:-
Supply of goods by any unincorporated association or body of persons to a member
thereof for cash, deferred payment or other valuable consideration.
The auditor is required to check the nature of supply as provided in section 7 of the
CGST Act i.e. sale, barter, transfer, exchange, license, rental, lease or disposal made
and comment upon nature of supply under different heads, if not complied in returns.
In respect of activities specified in Schedule I we need to examine carefully as such
transactions are difficult to track from the books of the registered person. Relevant
table number of GSTR-1 and 3B along with explanations has been tabulated below for
quick reference:-
Details of
Outward
Supplies
Relevant
Table in
GSTR-1
Relevant
Table in
GSTR-3B
Explanation in relation to
GSTR-1
Taxable
Supplies (Sale,
Transfer, Barter,
Exchange,
License, Rental,
Lease, etc
Disposal etc
4A, 4B, 4C,
6B, 6C
3.1 B2B Invoices - Details of
invoices of Taxable supplies
made to other registered
taxpayers
Taxable
Supplies
(Sale, Transfer,
Barter, Exchange,
License, Rental,
Lease, Disposal
Etc.)
5A, 5B 3.1 B2C (Large) Invoices -
Invoices for Taxable
outward supplies to consumers
where:
a) The place of supply is
outside the state where the
supplier is registered and
b) The total invoice value
is more that Rs 2,50,000
Taxable
Supplies (Sale,
Transfer, Barter,
Exchange,
License, Rental,
Lease, Disposal
Etc.)
7 3.1 B2C (Small) Invoices -
Supplies made to consumers
and unregistered persons of the
following
nature: a) Intra-State: any value
b) Inter-State: Invoice value Rs
2.5 lakh or less

35
Exports 6A 3.1 Exports supplies including
supplies to SEZ/SEZ
Developer or deemed exports
Non-taxable supplies
Whether non-taxable supplies have been reported in the return?
Section 2(78) of the CGST Act:
―non-taxable supply‖ means a supply of goods or services or both which is not
leviable to tax under this Act or under the Integrated Goods and Services Tax Act;
Examples of Non-taxable supply:
 petroleum crude, high speed diesel, motor spirit (commonly known as petrol),
natural gas and aviation turbine fuel
 alcoholic liquor for human consumption
Here, the auditor will be required to check and comment whether value of non-taxable
supplies like liquor, petroleum, high speed diesel, natural gas, turbine fuel, motor
spirit, (high sea sales) or any other non-taxable supplies have been reported in return.
Details of
Exempt/ Nil -
Rated
Supplies
Relevant
Table in
GSTR-1
Relevant
Table in
GSTR-3B
Explanation in relation to GSTR-1
Exempt/ Nil
- Rated
Supplies
8A, 8B, 8C,
8D
3.1 Details of Nil Rated, Exempted and
Non-GST Supplies made during the tax
period
Transactions covered under Schedule III or Not Covered by
definition of Supply.
Whether it is ensured that transactions of the transactions
covered under Schedule III of the Act & not covered by definition
of supply have not been reported in the return?
a) Schedule III to Section 7:
1. Services by an employee to the employer in the course of or in relation
to his employment.

36
2. Services by any court or Tribunal established under any law for the time being in
force.
3. (a) the functions performed by the Members of Parliament, Members of
State Legislature, Members of Panchayats, Members of Municipalities and Members of
other local authorities;
(c) the duties performed by any person who holds any post in pursuance of the
provisions of the Constitution in that capacity; or
(d) the duties performed by any person as a Chairperson or a Member or a Director
in a body established by the Central Government or a State Government or local
authority and who is not deemed as an employee before the commencement of this
clause.
4. Services of funeral, burial, crematorium or mortuary including transportation of
the deceased.
5. Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of
building.
6. Actionable claims, other than lottery, betting and gambling.
Explanation.—For the purposes of paragraph 2, the term "court" includes District
Court, High
Court and Supreme Court.
b) Transactions not covered by definition of supplies
Transactions which are not in the course of business or commerce
Transactions covered under Schedule III (mentioned above) and supply of goods or
services not covered under the definition of supply (if any) like dividend, interest of
fixed deposits, interest on saving account etc. are not required to be reported in periodical
returns. The Auditor is required to review and report the fact, if any reported in
respective returns.
Composite and Mixed Supply
Whether the tax liability has been determined in accordance with
Section 8 of the CGST Act, 2017?
Section 8: Tax liability on composite and mixed supplies
The tax liability on a composite or a mixed supply shall be determined in the following
manner, namely:-
a) a composite supply comprising two or more supplies, one of which is a principal
supply, shall be treated as a supply of such principal supply; and
b) a mixed supply comprising two or more supplies shall be treated as a supply of
that particular supply which attracts the highest rate of tax.

37
„Composite Supply‟ means a supply
 made by a taxable person
 to a recipient
 consisting of two or more taxable supplies of goods or services or both, or any
combination thereof,
 which are naturally bundled and
 supplied in conjunction with each other in the ordinary course of business,
 one of which is a principal supply.
Illustration of Composite Supply: Where goods are packed and transported with
insurance, the supply of goods, packing materials, transport and insurance is a
composite supply and supply of goods is the principal supply.
a) Supply of musical instrument and its carry case;
b) Supply of equipment and installation of the same
c) Supply of repair services on television along with the requisite parts;
d) Supply of health care services along with the medicaments
„Mixed Supply‟ “Mixed supply‖ means-
 two or more individual supplies of goods or services, or any combination
thereof,
 made in conjunction with each other
 by a taxable person
 for a single price
 where such supply does not constitute a composite supply.
Illustration of Mixed Supply: A supply of a package consisting of canned foods,
sweets, chocolates, cakes, dry fruits, aerated drinks and fruit juices when supplied for a
single price is a mixed supply. Each of these items can be supplied separately and is
not dependent on any other. It shall not be a mixed supply if these items are supplied
separately;
The purpose behind review of mixed or composite supply is to evaluate whether
correct GST has been charged at correct rate i.e. rate of principal supply or highest rate
of tax, as applicable. Where taxability of any supply comprising such supply, has not
been determined in accordance with the provisions of section 8 of the CGST Act
mentioned above, the auditor is required to give his views and to provide details of
such supplies.

38
Payment of tax under reverse charge mechanism
Whether tax under reverse charge has been remitted on
inward supply of goods or services liable to tax under reverse
charge mechanism under section 9(3) of the CGST Act read with
section 5(3) of the IGST Act?
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.
Section 5(3) of the IGST Act:
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.
The relevant sub-sections provided that on specific supply goods or services, recipient
of supply is liable to pat tax under reverse charge mechanism. The auditor is
required to check such inward supply of goods or services which are covered
under reverse charge mechanism, whether tax has been remitted by the registered
person in capacity of recipient of supply, where required. If tax under reverse charge
mechanism has not been remitted, the same shall be reported in audit report. The
auditor is also required to review where supplier has offered the tax instead of recipient
in case of reverse charge mechanism.

39
S. No. Service Provider of
service
Percentage of
tax payable by
service
provider
Recipient of Service Percentage of tax
payable by any person
other than the service
provider
1 Taxable services provided or agreed to
be provided by any person who is
located in a non-taxable territory and
received by any person located in the
taxable territory other than non-assessee
online recipient
Any person
who is located
in a non-
taxable
territory
Nil Any person located in the
taxable territory other than
non-assessee online
recipient (Business
Recipient)
100%
2 Services provided or agreed to be
provided by a goods transport agency
(GTA) in respect of transportation of
goods by road
Goods
Transport
Agency (GTA)
NIL (a) any factory registered
under or governed by the
Factories Act, 1948;
(b) any society registered
under the Societies
Registration Act, 1860 or
under any other law for the
time being in force in any
part of India;
(c) any co-operative society
established by or under any
law;
100%

40
(d) any person registered
under CGST/SGST/UTGST
Act;
(e) anybody corporate
established, by or under any
law; or
(f) any partnership firm
whether registered or not
under any law including
association of persons.
(g) Casual taxable person
provided by an individual advocate or
firm of advocates by way of legal
services, directly or indirectly
An individual
advocate or
firm of
advocates
Nil Any Business Entity 100%
provided by an arbitral tribunal
An arbitral
tribunal
Nil Any Business Entity 100%
5 Sponsorship services Any person Nil Anybody corporate or
partnership firm.
100%

41
provided by Government or local
authority excluding, -
(1) renting of immovable property, and
(2) services specified below-
(i) services by the Department of Posts
by way of speed post, express parcel
post, life insurance, and agency services
provided to a person other than
Government;
(ii) services in relation to an aircraft or a
vessel, inside or outside the precincts of
a port or an airport;
(iii) transport of goods or passengers.
Government or
local authority
Nil Any business entity. 100%
provided by a director of a
company or a body corporate to the said
company or the body corporate;
A director of a
company or a
body corporate
Nil A company or a body
corporate.
100%

42
provided by an insurance agent to any
person carrying on insurance business
An insurance
Agent
Nil Any person carrying on
insurance business.
100%
provided by a recovery agent to a
banking company or a financial
institution or a non-banking financial
company.
A recovery
Agent
Nil A banking company or a
financial institution or a
non-banking financial
company.
100%
10 Services by way of transportation of
goods by a vessel from a place outside
India up to the customs station of
clearance in India
A person
located in non-
taxable
territory to a
person located
in non-taxable
territory
Nil Importer as defined under
clause (26) of section 2 of
the Customs Act, 1962.
100%
11 Transfer or permitting the use or
enjoyment of a copyright covered under
clause (a) of sub-section (1) of section
13 of the Copyright Act, 1957 relating
to original literary, dramatic, musical or
artistic works
Author or
music
composer,
photographer,
artist, etc
Nil Publisher, Music company,
Producer
100%
12 Radio taxi or Passenger Transport
Services provided through electronic
commerce operator
Taxi driver or
Rent a cab
operator
Nil Any person 100% by Electronic
Commerce Operator

43
Goods under RCM:
(i) Cashew nuts, not shelled or peeled
(ii) Bidi wrapper leaves (tendu)
(iii) Tobacco leaves
(iv) Silk yarn
(v) Used vehicles, seized and confiscated goods, old and used goods, waste and scrap,
supplied by Central Government, State Government, Union territory or a local
authority to any registered person
(vi) Raw Cotton (w.e.f. 15th November‘ 2017)
(vii) Priority Sector Lending Certificates
Payment of tax in case of inward supply of taxable goods/ services
effected from unregistered dealers
Whether tax has been remitted under reverse charge in case of
goods or services purchased from unregistered dealers under section
9(4) of the CGST Act read with section 5(4) of the IGST Act
The central tax in respect of
 the supply of taxable goods or services or both
 by a supplier, who is not registered,
 to a registered person
 shall be paid by such person on reverse charge basis as the recipient and
 all the provisions of this Act shall apply to such recipient as if he is the person liable for
paying the tax in relation to the supply of such goods or services or both.
Section 5(4) of the IGST
Act:
The 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.

44
GST law has been introduced with a new concept of reverse charge mechanism in case of
procure of supply from unregistered dealer. The auditor is required to check the inward
supply of goods or services which are procured from unregistered supplier and therefore,
covered under reverse charge mechanism in terms of section 9(4) of the CGST Act &
section 5(4) of the IGST Act, and where tax is required to be remitted by the registered
person. If tax under reverse charge mechanism has not been remitted, the same shall be
reported in audit. However, for Financial Year 2017-18, Section 9(4) of the CGST Act and
Section 5(4) of the IGST Act is applicable till 12.10.2017 and after this provision is deferred
till 30.09.2019.
Compliance with the provisions of Time of Supply
Whether tax has been paid in accordance with section 12 and 13
read with section 31 of the CGST Act?
Section 12 – Time of supply of
Goods
1) The liability to pay tax on goods shall arise at the time of supply, as
determined in accordance with the provisions of this section.
2) The time of supply of goods shall be the earlier of the following dates,
namely:
i) The date of issue of invoice by the supplier or
ii) the last date on which he is required, under sub-section (1) of section 31, to issue the
invoice with respect to the supply; or
Clause 1 and 4 of Section 31 (Tax Invoice)
1) A registered person supplying taxable goods shall, before or at the time of,—
a) Removal of goods for supply to the recipient, where the supply
involves movement of goods; or
b) delivery of goods or making available thereof to the recipient, in any other case,
issue a tax invoice showing the description, quantity and value of goods, the tax
charged thereon and such other particulars as may be prescribed:
Provided that the Government may, on the recommendations of the Council, by notification,
specify the categories of goods or supplies in respect of which a tax invoice shall be
issued, within such time and in such manner as may be prescribed

45
Section 31(4) Says that in case of continuous supply of goods, where successive
statements of accounts or successive payments are involved, the invoice shall be
issued before or at the time each such statement is issued or, as the case may be,
each such payment is received.
b) the date on which the supplier receives the payment with respect to the supply:
Provided that where the supplier of taxable goods receives an amount up to one
thousand rupees (up to Rs. 1,000/-) in excess of the amount indicated in the tax
invoice, the time of supply to the extent of such excess amount shall, at the option of
the said supplier, be the date of issue of invoice in respect of such excess amount.
However, vide Notification no. 40/2017 – Central Tax dated 13 October 2017
read with Notification no. 66/2017 – Central Tax dated 15 November 2017, the
supplier of goods has to make payment of tax upon issuance of invoice only under
Section 12(2)(a).
Explanation 1.––For the purposes of clauses (a) and (b), ―supply‖ shall be deemed
to have been made to the extent it is covered by the invoice or, as the case may be, the
payment.
Explanation 2.––For the purposes of clause (b), ―the date on which the supplier
receives the payment‖ shall be the date on which the payment is entered in his
books of account or the date on which the payment is credited to his bank account,
whichever is earlier.
3) In case of supplies in respect of which tax is paid or liable to be paid on
reverse charge basis, the time of supply shall be the earliest of the following dates,
namely:—
a) the date of the receipt of goods; or
b) the date of payment as entered in the books of account of the recipient or the
date on which the payment is debited in his bank account, whichever is earlier; or
c) the date immediately following thirty days from the date of issue of invoice or any
other document, by whatever name called, in lieu thereof by the supplier:
Provided that where it is not possible to determine the time of supply under clause (a)
or clause (b) or clause (c), the time of supply shall be the date of entry in the books of
account of the recipient of supply.
4) In case of supply of vouchers by a supplier, the time of supply shall be—
a) the date of issue of voucher, if the supply is identifiable at that point; or b) the date
of redemption of voucher, in all other cases.

46
5) Where it is not possible to determine the time of supply under the provisions of
sub-section
(2) or sub-section (3) or sub-section (4), the time of supply shall -
a) in a case where a periodical return has to be filed, be the date on which such
return is to be filed; or
b) in any other case, be the date on which the tax is paid.
6) The time of supply to the extent it relates to an addition in the value of supply
by way of interest, late fee or penalty for delayed payment of any consideration shall
be the date on which the supplier receives such addition in value.
Section 13–Time of supply of Services
1) The liability to pay tax on services shall arise at the time of supply, as determined
in accordance with the provisions of this section:
2) The time of supply of services shall be the earliest of the following dates, namely:—
a) (i) the date of issue of invoice by the supplier, if the invoice is issued within the
period prescribed under sub-section (2) of section 31 or
(ii) the date of receipt of payment, Whichever is earlier; or
b) (i) the date of provision of service, if the invoice is not issued within the period
prescribed under sub-section (2) of section 31 or
(ii) the date of receipt of payment, whichever is earlier; or
Clause 2 and 5 of Section 31 (Tax Invoice)
(2) A registered person supplying taxable services shall, before or after the
provision of service but within a prescribed period, issue a tax invoice, showing the
description, value, tax charged thereon and such other particulars as may be
prescribed:
Provided that the Government may, on the recommendations of the Council, by
notification and subject to such conditions as may be mentioned therein, specify
the categories of services in respect of which––
a) any other document issued in relation to the supply shall be deemed to be a tax
invoice; or
b) Tax invoice may not be issued.
(5) Subject to the provisions of clause (d) of sub-section (3), in case of continuous
supply of services,––
a) where the due date of payment is ascertainable from the contract, the invoice
shall be issued on or before the due date of payment;

47
b) where the due date of payment is not ascertainable from the contract, the
invoice shall be issued before or at the time when the supplier of service
receives the payment;
c) Where the payment is linked to the completion of an event, the invoice
shall be issued on or before the date of completion of that event.
As per Rule 47 Time Limit for issuing tax invoice is under:-
1. Taxable Supply of Services- Time limit- 30 days from the date of supply of
service: The Invoice in case of taxable supply of services shall be issued within 30
days from the date of supply of service.
In case of Insurance, banks etc. - Time limit- 45 days from the date of supply of
service.
c) the date on which the recipient shows the receipt of services in his books of
account, in a case where the provisions of clause (a) or clause (b) do not apply:
Provided that where the supplier of taxable service receives an amount up to one
thousand rupees (up to Rs 1,000/-) in excess of the amount indicated in the tax
invoice, the time of supply to the extent of such excess amount shall, at the option of
the said supplier, be the date of issue of invoice relating to such excess amount.
Explanation.––For the purposes of clauses (a) and (b)–
i. the supply shall be deemed to have been made to the extent it is covered by the
invoice or, as the case may be, the payment;
ii. The date of receipt of payment‖ shall be the date on which the payment is entered
in the books of account of the supplier or the date on which the payment is credited
to his bank account, whichever is earlier.
3) In case of supplies in respect of which tax is paid or liable to be paid on
reverse charge basis, the time of supply shall be the earlier of the following dates,
namely:––
a) the date of payment as entered in the books of account of the recipient or the
date on which the payment is debited in his bank account, whichever is earlier; or
b) the date immediately following sixty days from the date of issue of invoice or any
other document, by whatever name called, in lieu thereof by the supplier:
Provided that where it is not possible to determine the time of supply under clause (a)
or clause (b), the time of supply shall be the date of entry in the books of account
of the recipient of supply:

48
Provided further that in case of supply by associated enterprises, where the supplier
of service is located outside India, the time of supply shall be the date of entry in the
books of account of the recipient of supply or the date of payment, whichever is
earlier.
4) In case of supply of vouchers by a supplier, the time of supply shall be–
a) The date of issue of voucher, if the supply is identifiable at that point; or
b) The date of redemption of voucher, in all other cases.
5) Where it is not possible to determine the time of supply under the provisions of
sub-section (2) or sub-section (3) or sub-section (4), the time of supply shall-
a) in a case where a periodical return has to be filed, be the date on which such
return is to be filed; or
b) in any other case, be the date on which the tax is paid.
6) The time of supply to the extent it relates to an addition in the value of supply
by way of interest, late fee or penalty for delayed payment of any consideration shall
be the date on which the supplier receives such addition in value.
Section 12 and 13 of the CGST Act prescribe the provisions in respect of time of
supply of goods and services to govern the time of arising taxability based on the
issuance of invoice, date of payment or date of completion of service and due of
issuance of invoice, if invoice not raised. Here, the auditor needs to check the time
of supply whether correctly determined with respect to prescribed provisions,
specifically in case where invoice has not been raised and also payment has not been
made. If not determined in accordance with said provisions then registered person is
liable to pay interest.
Supply ceased prior to completion of supply
Whether in any case supply has been ceased prior to completion of
supply, if any, whether invoice has been issued to the extent of
supply made?
Section 31(6):
In a case where the supply of services ceases under a contract before the completion
of the supply, the invoice shall be issued at the time when the supply ceases and such
invoice shall be issued to the extent of the supply made before such cessation.
In such scenario, the auditor is required to check where supply has been ceased prior

49
to completion of supply and tax has not been charged and remitted the same, like in
works contract service in respect of construction. If tax has not been remitted then the
same shall be required to furnish n audit report.
Goods sent on approval basis
Whether supply of goods involves goods sent on approval basis
exceeding the time limit of 6 months and not offered to tax
Section 142(12) – Sale on approval basis
Where any goods sent on approval basis, not earlier than six months before the
appointed day, are rejected or not approved by the buyer and returned to the seller on
or after the appointed day, no tax shall be payable thereon if such goods are returned
within six months from the appointed day:
Provided that the said period of six months may, on sufficient cause being shown, be
extended by the Commissioner for a further period not exceeding two months:
Provided further that the tax shall be payable by the person returning the goods if
such goods are liable to tax under this Act, and are returned after a period specified
in this sub-section:
Provided also that tax shall be payable by the person who has sent the goods on
approval basis if such goods are liable to tax under this Act, and are not returned
within a period specified in this sub-section.
Here, the auditor needs to check where earlier goods sent on approval basis & a
period of 6 months has been lapsed. If time period of 6 months has been completed
and still the goods are not offered to tax, then the same is required to be reported by
the auditor and shall be offered to tax along with interest.
Place of Supply
Whether the registered person has determined the place of supply
of goods or services in terms of section 10-13 of the IGST Act?
Section 10: Place of supply of Goods other than imported into, or exported from
India
1) The place of supply of goods, other than supply of goods imported into, or

50
exported from India, shall be as under,––
a) Where the supply involves movement of goods, whether by the supplier or the
recipient or by any other person, the place of supply of such goods shall be the
location of the goods at the time at which the movement of goods terminates for
delivery to the recipient;
b) 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, before or
during movement of goods, either by way of transfer of documents of title to the
goods or otherwise, it shall be deemed that the said third person has received the
goods and the place of supply of such goods shall be the principal place of business of
such person;
c) Where the supply does not involve movement of goods, whether by the supplier or
the recipient, the place of supply shall be the location of such goods at the time of the
delivery to the recipient;
d) Where the goods are assembled or installed at site, the place of supply shall be
the place of such installation or assembly;
e) Where the goods are supplied on board a conveyance, including a vessel, an
aircraft, a train or a motor vehicle, the place of supply shall be the location at which
such goods are taken on board.
2) Where the place of supply of goods cannot be determined, the place of supply shall
be determined in such manner as may be prescribed.
Section 11: Place of supply of goods imported into, or exported from India
The place of supply of goods,––
a) imported into India shall be the location of the importer;
b) exported from India shall be the location outside India.
Section 2 of the IGST Act:
―Import of Goods‖ with its grammatical variations and cognate expressions means
bringing goods into India from a place outside India.
―Export of Goods‖ with its grammatical variations and cognate expressions
means taking goods out of India to a place outside India.
Section 12: Place of supply of services where location of supplier and recipient is in
India
1) The provisions of this section shall apply to determine the place of supply of

51
services where the location of supplier of services and the location of the recipient of
services is in India.
2) The place of supply of services, except the services specified in sub-sections (3) to
(14),––
a) made to a registered person shall be the location of such person;
b) made to any person other than a registered person shall be,––
i. the location of the recipient where the address on record exists and;
ii. the location of the supplier of services in other cases.
3) The place of supply of services,––
a) directly in relation to an immovable property, including services provided by
architects, interior decorators, surveyors, engineers and other related experts estate
agents, any service provided by way of grant of rights to use immovable property or
for carrying out or co-ordination of construction work; or
b) by way of lodging accommodation by a hotel, inn, guest house, home stay, club or
campsite, by whatever name called, and including a house boat or any other vessel; or
c) by way of accommodation in any immovable property for organising any marriage
or reception or matters related thereto, official, social, cultural, religious or business
function including services provided in relation to such function at such property; or
d) any services ancillary to the services referred to in clauses (a), (b) and (c), shall be
the location at which the immovable property or boat or vessel, as the case may be, is
located or intended to be located:
Provided that if the location of the immovable property or boat or vessel is located
or intended to be located outside India, the place of supply shall be the location of the
recipient.
Explanation.––
Where the immovable property or boat or vessel is located in more than one State
or Union territory, the supply of services shall be treated as made in each of the
respective States or Union territories, in proportion to the value for services
separately collected or determined in terms of the contract or agreement entered
into in this regard or, in the absence of such contract or agreement, on such
other basis as may be prescribed.
4) The place of supply of restaurant and catering services, personal grooming, fitness,
beauty treatment, health service including cosmetic and plastic surgery shall be the
location where the services are actually performed.

52
5) The place of supply of services in relation to training and performance appraisal
to,––
(a) a registered person, shall be the location of such person;
(b) a person other than a registered person, shall be the location where the services
are actually performed.
6) The place of supply of services provided by way of admission to a cultural, artistic,
sporting, scientific, educational, entertainment event or amusement park or any other
place and services ancillary thereto, shall be the place where the event is actually
held or where the park or such other place is located.
7) The place of supply of services provided by way of ,—
a) organisation of a cultural, artistic, sporting, scientific, educational or
entertainment event including supply of services in relation to a conference,
fair, exhibition, celebration or similar events; or
b) services ancillary to organisation of any of the events or services referred to in
clause
(a), or assigning of sponsorship to such events,––
i. to a registered person, shall be the location of such person;
ii. to a person other than a registered person, shall be the place where the
event is actually held and if the event is held outside India, the place of supply shall
be the location of the recipient.
Explanation––Where the event is held in more than one State or Union territory and a
consolidated amount is charged for supply of services relating to such event, the place
of supply of such services shall be taken as being in each of the respective States or
Union territories in proportion to the value for services separately collected or
determined in terms of the contract or agreement entered into in this regard or, in the
absence of such contract or agreement, on such other basis as may be prescribed.
8) The place of supply of services by way of transportation of goods, including by
mail or courier to,––
a) a registered person, shall be the location of such person;
b) a person other than a registered person, shall be the location at which such
goods are handed over for their transportation.
9) The place of supply of passenger transportation service to,—
a) a registered person, shall be the location of such person;
b) a person other than a registered person, shall be the place where the
passenger embarks on the conveyance for a continuous journey:

53
Provided that where the right to passage is given for future use and the point of
embarkation is not known at the time of issue of right to passage, the place of supply
of such service shall be determined in accordance with the provisions of sub-section
(2).
Explanation.––For the purposes of this sub-section, the return journey shall be
treated as a separate journey, even if the right to passage for onward and return
journey is issued at the same time.
10) The place of supply of services on board a conveyance, including a vessel, an
aircraft, a train or a motor vehicle, shall be the location of the first scheduled point of
departure of that conveyance for the journey.
11) The place of supply of telecommunication services including data transfer,
broadcasting, cable and direct to home television services to any person shall,—
a) in case of services by way of fixed telecommunication line, leased circuits,
internet leased circuit, cable or dish antenna, be the location where the
telecommunication line, leased circuit or cable connection or dish antenna is installed
for receipt of services;
b) in case of mobile connection for telecommunication and internet services
provided on post-paid basis, be the location of billing address of the recipient of
services on the record of the supplier of services;
c) in cases where mobile connection for telecommunication, internet service and
direct to home television services are provided on pre-payment basis through a
voucher or any other means,––
i. through a selling agent or a re-seller or a distributor of subscriber identity
module card or re-charge voucher, be the address of the selling agent or re-seller or
distributor as per the record of the supplier at the time of supply; or
ii. by any person to the final subscriber, be the location where such
prepayment is received or such vouchers are sold;
d) in other cases, be the address of the recipient as per the records of the
supplier of services and where such address is not available, the place of supply shall
be location of the supplier of services:
Provided that where the address of the recipient as per the records of the supplier of
services is not available, the place of supply shall be location of the supplier of
services:
Provided further that if such pre-paid service is availed or the recharge is
made through internet banking or other electronic mode of payment, the location of

54
the recipient of services on the record of the supplier of services shall be the place of
supply of such services.
Explanation.––Where the leased circuit is installed in more than one State or Union
territory and a consolidated amount is charged for supply of services relating to
such circuit, the place of supply of such services shall be taken as being in each of the
respective States or Union territories in proportion to the value for services
separately collected or determined in terms of the contract or agreement entered into
in this regard or, in the absence of such contract or agreement, on such other basis as
may be prescribed.
12) The place of supply of banking and other financial services, including
stock broking services to any person shall be the location of the recipient of services
on the records of the supplier of services:
Provided that if the location of recipient of services is not on the records of the
supplier, the place of supply shall be the location of the supplier of services.
13) The place of supply of insurance services shall,––
a) to a registered person, be the location of such person;
b) to a person other than a registered person, be the location of the recipient of
services on the records of the supplier of services.
14) The place of supply of advertisement services to the Central Government, a State
Government, a statutory body or a local authority meant for the States or Union
territories identified in the contract or agreement shall be taken as being in each of
such States or Union territories and the value of such supplies specific to each State
or Union territory shall be in proportion to the amount attributable to services
provided by way of dissemination in the respective States or Union territories as may
be determined in terms of the contract or agreement entered into in this regard or, in
the absence of such contract or agreement, on such other basis as may be prescribed.
Section 13: Place of supply of services where location of supplier or recipient is
outside India
1) The provisions of this section shall apply to determine the place of supply of
services where the location of the supplier of services or the location of the
recipient of services is outside India.
2) The place of supply of services except the services specified in sub-sections (3) to
(13) shall be the location of the recipient of services:

55
Provided that where the location of the recipient of services is not available in the
ordinary course of business, the place of supply shall be the location of the supplier of
services.
3) The place of supply of the following services shall be the location where the
services are actually performed, namely:—
a) services supplied in respect of goods which are required to be made physically
available by the recipient of services to the supplier of services, or to a person acting
on behalf of the supplier of services in order to provide the services
Provided that when such services are provided from a remote location by way of
electronic means, the place of supply shall be the location where goods are
situated at the time of supply of services:
Provided further that nothing contained in this clause shall apply in the case of
services supplied in respect of goods which are temporarily imported into India for
repairs and are exported after repairs without being put to any other use in India,
than that which is required for such repairs;
b) services supplied to an individual, represented either as the recipient of services
or a person acting on behalf of the recipient, which require the physical presence of
the recipient or the person acting on his behalf, with the supplier for the supply of
services.
4) The place of supply of services supplied directly in relation to an immovable
property, including services supplied in this regard by experts and estate
agents, supply of accommodation by a hotel, inn, guest house, club or campsite, by
whatever name called, grant of rights to use immovable property, services for
carrying out or co-ordination of construction work, including that of architects or
interior decorators, shall be the place where the immovable property is located or
intended to be located.
5) The place of supply of services supplied by way of admission to, or
organization of a cultural, artistic, sporting, scientific, educational or entertainment
event, or a celebration, conference, fair, exhibition or similar events, and of services
ancillary to such admission or organization, shall be the place where the event is
actually held.
6) Where any services referred to in sub-section (3) or sub-section (4) or sub-section
(5) is supplied at more than one location, including a location in the taxable
territory, its place of supply shall be the location in the taxable territory.

56
7) Where the services referred to in sub-section (3) or sub-section (4) or sub-
section (5) are supplied in more than one State or Union territory, the place of supply
of such services shall be taken as being in each of the respective States or Union
territories and the value of such supplies specific to each State or Union territory
shall be in proportion to the value for services separately collected or determined in
terms of the contract or agreement entered into in this regard or, in the absence of
such contract or agreement, on such other basis as may be prescribed.
8) The place of supply of the following services shall be the location of the supplier of
services, namely:––
a) services supplied by a banking company, or a financial institution, or a non-
banking financial company, to account holders;
b) intermediary services;
c) services consisting of hiring of means of transport, including yachts but
excluding aircrafts and vessels, up to a period of 1 month.
9) 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.
10) The place of supply in respect of passenger transportation services shall be the
place where the passenger embarks on the conveyance for a continuous journey.
11) The place of supply of services provided on board a conveyance during the course
of a passenger transport operation, including services intended to be wholly or
substantially consumed while on board, shall be the first scheduled point of departure
of that conveyance for the journey.
12) The place of supply of online information and database access or retrieval
services shall be the location of the recipient of services.
Explanation.––For the purposes of this sub-section, person receiving such services
shall be deemed to be located in the taxable territory, if any two of the following non
contradictory conditions are satisfied, namely:––
a) the location of address presented by the recipient of services through internet is in
the taxable territory;
b) the credit card or debit card or store value card or charge card or smart card or
any other card by which the recipient of services settles payment has been issued in
c) the billing address of the recipient of services is in the taxable territory;
d) the internet protocol address of the device used by the recipient of services is in

Handbook on GST Compliance and Audit

Handbook on GST Compliance and Audit

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