FAQs on GST

CENTRAL BOARD OF EXCISE & CUSTOMS
FREQUENTLY ASKED QUESTIONS (FAQs)
ON
GOODS AND SERVICES TAX (GST)
2nd Edition. 31st March, 2017

1. Overview of Goods and Services Tax (GST)

Q 1. How will the goods and services be classified under GST regime?

Ans. HSN (Harmonised System of Nomenclature) code shall be used for classifying the goods under the GST regime. Taxpayers whose turnover is above Rs. 1.5 crores but below Rs. 5 crores shall use 2-digit code and the taxpayers whose turnover is Rs. 5 crores and above shall use 4-digit code. Taxpayers whose turnover is below Rs. 1.5 crores are not required to mention HSN Code in their invoices. Services will be classified as per the Services Accounting Code (SAC)

Q 2. How will imports be taxed under GST?

Ans. Imports of Goods and Services will be treated as inter-state supplies and IGST will be levied on import of goods and services into the country. The incidence of tax will follow the destination principle and the tax revenue in case of SGST will accrue to the State where the imported goods and services are consumed. Full and complete set-off will be available on the GST paid on import on goods and services.

Q 3. How will Exports be treated under GST?

Ans. Exports will be treated as zero rated supplies. No tax will be payable on exports of goods or services, however credit of input tax credit will be available and same will be available as refund to the exporters. The Exporter will have an option to either pay tax on the output and claim refund of IGST or export under Bond without payment of IGST and claim refund of Input Tax Credit (ITC).

2. Levy of and Exemption from Tax

Q 1. Whether supplies made without consideration will also come within the purview of supply under GST?

Ans. Yes, but only those activities which are specified in Schedule I to the CGST Act / SGST Act. The said provision has been adopted in IGST Act as well as in UTGST Act also.

Q 2. Will giving away essential commodities by a charitable institution be taxable activity?

Ans. In order to be a supply which is taxable under GST, the transaction should be in the course or furtherance of business. As there is no quid pro quo involved in supply for charitable activities, it is not a supply under GST.

Q 3. How to compute ‘aggregate turnover’ to determine eligibility for composition scheme?

Ans. The methodology to compute aggregate turnover is given in Section 2(6). Accordingly, ‘aggregate turnover’ means value of all outward supplies (taxable supplies +exempt supplies +exports + inter-state supplies) of a person having the same PAN and it excludes taxes levied

under central tax (CGST), State tax (SGST), Union territory tax (UTGST), integrated tax(IGST) and compensation cess. Also, the value of inward supplies on which tax is payable under reverse charge is not taken into account for calculation of ‘aggregate turnover’.

3. Registration

Q 1. What is aggregate turnover?

Ans. As per section 2(6) of the CGST/SGST Act “aggregate turnover” includes the aggregate value of:

1. all taxable supplies,
2. all exempt supplies,
3. exports of goods and/or service, and,
4. all inter-state supplies

of a person having the same PAN.

The above shall be computed on all India basis and excludes taxes charged under the CGST Act, SGST Act, UTGST Act, and the IGST Act. Aggregate turnover shall include all supplies made by the Taxable person, whether on his own account or made on behalf of all his principals.

Aggregate turnover does not include value of supplies on which tax is levied on reverse charge basis, and value of inward supplies.

Q 2. Which are the cases in which registration is compulsory?

Ans. As per Section 24 of the CGST/SGST Act, the following categories of persons shall be required to be registered compulsorily irrespective of the threshold limit:

1. persons making any inter-State taxable supply;
2. casual taxable persons;
3. persons who are required to pay tax under reverse charge;
4. electronic commerce operators required to pay tax under sub-section (5) of section 9;
5. non-resident taxable persons;
6. persons who are required to deduct tax under section 51;
7. persons who supply goods and/or services on behalf of other registered taxable persons whether as an agent or otherwise;
8. Input service distributor (whether or not separately registered under the Act)
9. persons who are required to collect tax under section 52;
10. every electronic commerce operator
11. every person supplying online information and data base retrieval services from a place outside India to a person in India, other than a registered person; and,
12. such other person or class of persons as may be notified by the Central Government or a State Government on the recommendations of the Council.

Q 3. Who is a Casual Taxable Person?

Ans. Casual Taxable Person has been defined in Section 2 (20) of the CGST/SGST Act meaning a person who occasionally undertakes transactions involving supply of goods and/or services in the course or furtherance of business, whether as principal, or agent or in any other capacity, in a State or a Union territory where he has no fixed place of business.

Q 4. Whether the job worker will have to be compulsorily registered?

Ans. No, a Job worker is a supplier of services and will be obliged to take registration only when his turnover crosses the prescribed threshold of 20/10 Lakhs.

Q 5. What will be the time limit for the decision on the on line registration application?

Ans. If the information and the uploaded documents are found in order, the State and the Central authorities shall have to respond to the application within three common working days. If they communicate any deficiency or discrepancy in the application within such time, then the applicant will have to remove the discrepancy / deficiency within 7 days of such communication. Thereafter, for either approving the application or rejecting it, the State and the Central authorities will have 7 days from the date when the taxable person communicates removal of deficiencies. In case no response is given by the departmental authorities within the said time line, the portal shall automatically generate the registration.

4. Meaning and Scope of Supply

Q 1. What is a taxable supply?

Ans. A ‘taxable supply’ means a supply of goods or services or both which is chargeable to goods and services tax under the GST Act.

Q 2. Import of Goods is conspicuous by its absence in Section 7. Why?

Ans. Import of goods is dealt separately under the Customs Act, 1962, wherein IGST shall be levied as additional duty of customs in addition to basic customs duty under the Customs Tariff Act, 1975.

Q 3. What do you mean by “supply made in the course or furtherance of business”? Ans. “Business” is defined under Section 2(17) include any trade, commerce, manufacture, profession, vocation etc. whether or not undertaken for a pecuniary benefit. Business also includes any activity or transaction which is incidental or ancillary to the aforementioned listed activities. In addition, any activity undertaken by the Central Govt. or a State Govt. or any local authority in which they are engaged as public authority shall also be construed as business. From the above, it may be noted that any activity undertaken included in the definition for furtherance or promoting of a business could constitute a supply under GST law.

Q 4. What is a mixed supply?

Ans. 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. For example, a supply of package consisting of canned foods, sweets, chocolates, cakes, dry fruits, aerated drink and fruit juice when supplied for a single price is a mixed supply. Each of these items can be supplied separately and it is not dependent on any other. It shall not be a mixed supply if these items are supplied separately.

5. GST Payment of Tax

Q 1. What happens if the taxable person files the return but does not make payment of tax?

Ans. In such cases, the return is not considered as a valid return. Section 2(117) defines a valid return to mean a return furnished under sub-section (1) of section 39 on which self-assessed tax has been paid in full. It is only the valid return that would be used for allowing input tax credit (ITC) to the recipient. In other words, unless the supplier has paid the entire self-assessed tax and filed his return and the recipient has filed his return, the ITC of the recipient would not be confirmed.

6. Electronic Commerce

Q 1. What is Electronic Commerce?

Ans. Electronic Commerce has been defined to mean the supply of goods or services or both, including digital products over digital or electronic network.

Q 2. Who is an e-commerce operator?

Ans. Electronic Commerce Operator has been defined to mean any person who owns, operates or manages digital or electronic facility or platform for electronic commerce.

Q 3. Is it mandatory for e-commerce operator to obtain registration?

Ans. Yes. The benefit of threshold exemption is not available to e-commerce operators and they would be liable to be registered irrespective of the value of supply made by them.

Q 4. Whether a supplier of goods or services supplying through e-commerce operator would be entitled to threshold exemption?

Ans. No. The threshold exemption is not available to such suppliers and they would be liable to be registered irrespective of the value of supply made by them. This requirement, however, is applicable only if the supply is made through such electronic commerce operator who is required to collect tax at source.

Q 5. Will an e-commerce operator be liable to pay tax in respect of supply of goods or services made through it, instead of actual supplier?

Ans. Yes, but only in case of certain notified services. In such cases tax shall be paid by the electronic commerce operator if such services are supplied through it and all the provisions of the Act shall apply to such electronic commerce operator as if he is the person liable to pay tax in relation to supply of such services.

Q 6. Will threshold exemption be available to electronic commerce operators liable to pay tax on notified services?

Ans. No. Threshold exemption is not available to e-commerce operator who are require to pay tax on notified services provided through them.

Q 7. It is very common that customers of e-commerce companies return goods. How these returns are going to be adjusted?

Ans. An e-commerce company is required to collect tax only on the net value of taxable supplies. In other words, value of the supplies which are returned are adjusted in the aggregate value of taxable supplies.

Q 8. What is meant by “net value of taxable supplies”?

Ans. The “net value of taxable supplies” means the aggregate value of taxable supplies of goods or services or both, other than the services on which entire tax is payable by the e-commerce operator, made during any month by all registered persons through such operator reduced by the aggregate value of taxable supplies returned to the suppliers during the said month.

Q 9. Is every e-commerce operator required to collect tax on behalf of actual supplier?

Ans. Yes, every e-commerce operator is required to collect tax where consideration with respect to the supply is being collected by the e-commerce operator.

Q 10. At what time should the e-commerce operator make such collection?

Ans. The e-commerce operator should make the collection during the month in which supply was made.

7. Job Work

Q 1. Whether goods sent by a taxable person to a job worker will be treated as supply and liable to GST? Why?

Ans. It will be treated as a supply as supply includes all forms of supply such as sale, transfer, etc. However, the registered taxable person (the principal), under intimation and subject to such conditions as may be prescribed send any inputs and/or capital goods, without payment of tax, to a job worker for job work and from there subsequently to another job worker(s) and shall either bring back such inputs/capital goods after completion of job work or otherwise within 1 year/3years of their being sent out or supply such inputs/capital goods after completion of job work or otherwise within 1 year / 3 years of their being sent out, from the place of business of a job worker on payment of tax within India or with or without payment of tax for export.

8. Assessment and Audit

Q 1. Who is the person responsible to make assessment of taxes payable under the Act?

Ans. Every person registered under the Act shall himself assess the tax payable by him for a tax period and after such assessment he shall file the return required under section 39.

Q 2. When can a taxable person pay tax on a provisional basis?

Ans. As a taxpayer has to pay tax on self-assessment basis, a request for paying tax on provisional basis has to come from the taxpayer which will then have to be permitted by the proper officer. In other words, no tax officer can suo-moto order payment of tax on provisional basis. This is governed by section 60 of CGST/SGST Act. Tax can be paid on a provisional basis only after the proper officer has permitted it through an order passed by him. For this purpose, the taxable person has to make a written request to the proper officer, giving reasons for payment of tax on a provisional basis. Such a request can be made by the taxable person only in such cases where he is unable to determine:

1. the value of goods or services to be supplied by him, or
2. determine the tax rate applicable to the goods or services to be supplied by him.

In such cases the taxable person has to execute a bond in the prescribed form, and with such surety or security as the proper officer may deem fit.

Q 3. What is the latest time by which final assessment is required to be made?

Ans. The final assessment order has to be passed by the proper officer within six months from the date of the communication of the order of provisional assessment. However, on sufficient cause being shown and for reasons to be recorded in writing, the above period of six months may be extended:

1. by the Joint / Additional Commissioner for a further period not exceeding six months, and
2. by the Commissioner for such further period as

he may deem fit not exceeding fours.

Thus, a provisional assessment can remain provisional for a maximum of five years.

Q 4. Where the tax liability as per the final assessment is higher than in provisional assessment, will the taxable person be liable to pay interest?

Ans. Yes. He will be liable to pay interest from the date the tax was due to be paid originally till the date of actual payment.

Q 5. What recourse may be taken by the officer in case proper explanation is not furnished for the discrepancy detected in the return filed, while conducting scrutiny under section 61 of CGST ACT?

Ans. If the taxable person does not provide a satisfactory explanation within 30 days of being informed (extendable by the officer concerned) or after accepting discrepancies, fails to take corrective action in the return for the month in which the discrepancy is accepted, the Proper Officer may take recourse to any of the following provisions:

1. Proceed to conduct audit under Section 65 of the Act;
2. Direct the conduct of a special audit under Section 66 which is to be conducted by a Chartered Accountant or a Cost Accountant nominated for this purpose by the Commissioner; or
3. Undertake procedures of inspection, search and seizure under Section 67 of the Act; or
4. Initiate proceeding for determination of tax and other dues under Section 73 or 74 of the Act.

 Q 6. If a taxable person fails to file the return required under law (under section 39 (monthly/quarterly), or 45 (final return), what legal recourse is available to the tax officer?

Ans. The proper officer has to first issue a notice to the defaulting taxable person under section 46 of CGST/SGST Act requiring him to furnish the return within a period of fifteen days. If the taxable person fails to file return within the given time, the proper officer shall proceed to assess the tax liability of the return defaulter to the best of his judgement taking into account all the relevant material available with him. (Section 62).

Q 7. Under what circumstances can a best judgment assessment order issued under section 60 be withdrawn?

Ans. The best judgment order passed by the Proper Officer under section 62 of CGST/SGST Act shall automatically stand withdrawn if the taxable person

furnishes a valid return for the default period (i.e. files the return and pays the tax as assessed by him), within thirty days of the receipt of the best judgment assessment order.

Q 8. What is the time limit for passing assessment order u/s 62 (Best Judgment) and 63 (Non-filers)?

Ans. The time limit for passing an assessment order under section 62 or 63 is five years from the due date for furnishing the annual return.

Q 9. What is the legal recourse available in respect of a person who is liable to pay tax but has failed to obtain registration?

Ans. Section 63 of CGST/SGST Act provides that in such a case, the proper officer can assess the tax liability and pass an order to his best judgment for the relevant tax periods. However, such an order must be passed within a period of five years from the due date for furnishing the annual return for the financial year to which non-payment of tax relates.

Q 10. Under what circumstances can a tax officer initiate Summary Assessment?

Ans. As per section 64 of CGST/SGST Act, Summary Assessments can be initiated to protect the interest of revenue when:

1. the proper officer has evidence that a taxable person has incurred a liability to pay tax under the Act, and
2. the proper officer believes that delay in passing an assessment order will adversely affect the interest of revenue. Such order can be passed after seeking permission from the

Additional Commissioner / Joint Commissioner.

Q 11. Other than appellate remedy, is there any other recourse available to the taxpayer against a summary assessment order?

Ans. A taxable person against whom a summary assessment order has been passed can apply for its withdrawal to the jurisdictional Additional/Joint Commissioner within thirty days of the date of receipt of the order. If the said officer finds the order erroneous, he can withdraw it and direct the proper officer to carry out determination of tax liability in terms of section 73 or 74 of CGST/SGST Act. The Additional/Joint Commissioner can follow a similar course of action on his own motion if he finds the summary assessment order to be erroneous (section 64 of CGST/SGST Act).

Q 12. Is summary assessment order to be necessarily passed against the taxable person?

Ans. No. In certain cases, like when goods are under transportation or are stored in a warehouse, and the taxable person in respect of such goods cannot be ascertained, the person in charge of such goods shall be deemed to be the taxable person and will be assessed to tax (proviso to Section 64 of CGST/SGST Act).

Q 13. Who can conduct audit of taxpayers?

Ans. There are three types of audit prescribed in the GST Act(s) as explained below:

1. Audit by Chartered Accountant or a Cost Accountant: Every registered person whose turnover exceeds the prescribed limit, shall get his accounts audited by a chartered accountant or a cost accountant. (Section 35(5) of the CGST/SGST Act)
2. Audit by Department: The Commissioner or any officer of CGST or SGST or UTGST authorized by him by a general or specific order, may conduct audit of any registered person. The frequency and manner of audit will be prescribed in due course. (Section 65 of the CGST/SGST Act)
3. Special Audit: If at any stage of scrutiny, inquiry, investigations or any other proceedings, if department is of the opinion that the value has not been correctly declared or credit availed is not with in the normal limits, department may order special audit by chartered accountant or cost accountant, nominated by department. (Section 66 of the CGST/SGST Act)

Q 14. Whether any prior intimation is required before conducting the audit?

Ans. Yes, prior intimation is required and the taxable person should be informed at least 15 working days prior to conduct of audit.

Q 15. What is the period within which the audit is to be completed?

Ans. The audit is required to be completed within 3 months from the date of commencement of audit. The period is extendable for a further period of a maximum of 6 months by the Commissioner.

Q 16. What is meant by commencement of audit?

Ans. The term ‘commencement of audit’ is important because audit has to be completed within a given time frame in reference to this date of commencement. Commencement of audit means the later of the following:

1. the date on which the records/accounts called for by the audit authorities are made available to them, or
2. the actual institution of audit at the place of business of the taxpayer.

Q 17. What are the obligations of the taxable person when he receives the notice of audit?

Ans. The taxable person is required to:

1. facilitate the verification of accounts/records available or requisitioned by the authorities,
2. provide such information as the authorities may require for the conduct of the audit, and
3. render assistance for timely completion of the audit.

Q 18. What would be the action by the proper officer upon conclusion of the audit?

Ans. The proper officer shall, on conclusion of audit, within 30 days inform the taxable person about his findings, reasons for findings and the taxable person’s rights and obligations in respect of such findings.

Q 19. Under what circumstances can a special audit be instituted?

Ans. A special audit can be instituted in limited circumstances where during scrutiny, investigation, etc. it comes to the notice that a case is complex or the revenue stake is high. This power is given in section 66 of CGST /SGST Act.

Q 20. Who can serve the notice of communication for special audit?

Ans. The Assistant / Deputy Commissioner is to serve the communication for special audit only after prior approval of the Commissioner.

Q 21. Who will do the special audit?

Ans. A Chartered Accountant or a Cost Accountant so nominated by the Commissioner may undertake the audit.

Q 22. What is the time limit to submit the audit report?

Ans. The auditor will have to submit the report within 90 days or within the further extended period of 90 days.

Q 23. Who will bear the cost of special audit?

Ans. The expenses for examination and audit including the remuneration payable to the auditor will be determined and borne by the Commissioner.

Q 24. What action the tax authorities may take after the special audit?

Ans. Based on the findings / observations of the special audit, action can be initiated under Section 73 or Section 74 of the CGST/SGST Act.+

9. Refunds

Q 1. Is there any time limit for sanctioning of refund?

Ans. Yes, refund has to be sanctioned within 60 days from the date of receipt of application complete in all respects. If refund is not sanctioned within the said period of 60 days, interest at the rate notified will have to be paid in accordance with section 56 of the CGST/SGST Act.

However, in case where provisional refund to the extent of 90% of the amount claimed is refundable in respect of zero-rated supplies made by certain categories of registered persons in terms of sub-section (6) of section 54 of the CGST/SGST Act, the provisional refund has to be given within 7 days from the date of acknowledgement of the claim of refund.

Q 2. Can refund be withheld by the department?

Ans. Yes, refund can be withheld in the following circumstances:

1. If the person has failed to furnish any return till he files such return;
2. If the registered taxable person is required to pay any tax, interest or penalty which has not been stayed by the appellate authority/Tribunal/ court, till he pays such tax interest or penalty; The proper officer can also deduct unpaid taxes, interest, penalty, late fee, if any, from the refundable amount – Section 54(10) (d) of the CGST/SGST Act

iii. The Commissioner can withhold any refund, if, the order of refund is under appeal and he is of

the opinion that grant of such refund will adversely affect revenue in the said appeal on

account of malfeasance or fraud committed - Sec.54 (11) of the CGST/SGST Act.

10. Demands and Recovery

Q 1. Which are the applicable sections for the purpose of recovery of tax short paid or not paid or amount erroneously refunded or input tax credit wrongly availed or utilized?

Ans. Section 73 deals with the cases where there is no invocation of fraud/suppression/mis-statement etc. Section 74 deals with cases where the provisions related to fraud/suppression/mis-statement etc. are invoked.

Q 2. What if person chargeable with tax, pays the amount along with interest before issue of show cause notice under section 73?

Ans. In such cases notice shall not be issued by the proper officer. {sec.73 (6)}

Q 3. If show cause notice is issued under Section 73 and thereafter the noticee makes payment along with applicable interest, is there any need to adjudicate the case?

Ans. If the person pays the tax along with interest within 30 days of issue of notice, no penalty shall be payable and all proceedings in respect of such notice shall be deemed to be concluded. {sec.73 (8)}

Q 4. What is the relevant date for issue of Show Cause Notice?

Ans.

(i) In case of section 73(cases other than fraud/ suppression of facts/willful misstatement), the relevant date shall be counted from the due date for filing of annual return for the financial year to which demand relates to.

The SCN has to be adjudicated within at period of three years from the due date of filing of annual return. The SCN is required to be issued at least three months prior to the time limit set for adjudication. {sec.73(2&10)}

(ii) In case of section 74(cases involving fraud/ suppression of facts/willful misstatement), the relevant date shall be counted from the due date for filing of annual return for the financial year to which demand relates to. The SCN has to be adjudicated within at period of five years from the due date of filing of annual return. The SCN is required to be issued at least six months prior to the time limit set for adjudication. {sec.74(2&10)}

Q 5. Is there any time limit for adjudication the cases?

Ans:

(i) In case of section 73(cases other than fraud/ suppression of facts/willful misstatement), the time limit for adjudication of cases is 3 years from the due date for filing of annual return for the financial year to which demand relates to or the date of erroneous refund/ITC wrongly availed. {sec.73(10)}

(ii) In case of section 74(cases of fraud/suppression of facts/willful misstatement), the time limit for adjudication is 5 years from the due date for filing of annual return for the financial year to which demand relates to or the date of erroneous refund/ITC wrongly availed. {sec.74(10)}

Q 6. Is there any immunity to a person chargeable with tax in cases of fraud/suppression of facts/ willful misstatement, who pays the amount of demand along-with interest before issue of notice?

Ans. Yes. Person chargeable with tax, shall have an option to pay the amount of tax along with interest and penalty equal to 15% percent of the tax involved, as ascertained either on his own or ascertained by the proper officer, and on such payment, no notice shall be issued with respect to the tax so paid. {sec. 74(6)}

Q 7. If notice is issued under Section 74 and thereafter the noticee makes payment, is there any need to adjudicate the case?

Ans. Where the person to whom a notice has been issued under sub-section (1) of section 74, pays the tax along with interest with penalty equal to 25% of such tax within 30 days of issue of notice, all proceedings in respect of such notice shall be deemed to be concluded. {sec.74 (8)}

Q 8. In case a notice is adjudicated under Section 74 and order issued confirming tax demand and penalty, does the noticee have any option to pay reduced penalty?

Ans. Yes. if any person pays the tax determined by the order along with interest and a penalty equivalent to 50% of such tax within thirty days of the communication of order, all proceedings in respect of the said tax shall be deemed to be concluded. {sec.74 (11)}

Q 9. What will happen in cases where notice is issued but order has not been passed under section 73 & 74 within time specified for adjudication under these sections?

Ans. Section 75 (10) provides for deemed conclusion of the adjudication proceedings if the order is not issued within time limit prescribed under these sections.

Q 10. What happens if a person collects tax from another person but does not deposit the same with Government?

Ans. It is mandatory to pay amount, collected from other person representing tax under this act, to the government. For any such amount not so paid, proper officer may issue SCN for recovery of such amount and penalty equivalent to such amount. {Sec.76 (1&2)}

Q 11. In case the person does not deposit tax collected in contravention of Section 76(1), what is the proper course of action to be taken?

Ans. SCN may be issued and if so, an order shall be passed following Principles of natural justice within one year of date of issue of such notice. {sec.76 (2 to 6)}

Q 12. What is the time limit to issue notice in cases under Section 76 i.e. taxes collected but not paid to Government?

Ans. There is no time limit. Notice can be issued on detection of such cases without any time limit.

Q 13. What are the modes of recovery of tax available to the proper officer?

Ans. The proper officer may recover the dues in following manner:

1. Deduction of dues from the amount owned by the tax authorities payable to such person.
2. Recovery by way of detaining and selling any goods belonging to such person;
3. Recovery from other person, from whom money is due or may become due to such person or who holds or may subsequently hold money for or on account of such person, to pay to the credit of the Central or a State Government;
4. Distrain any movable or immovable property belonging to such person, until the amount payable is paid. If the dues not paid within 30days, the said property is to be sold and with the proceeds of such sale the amount payable and cost of sale shall be recovered.
5. Through the Collector of the district in which such person owns any property or resides or carries on his business, as if it was an arrear of land revenue.
6. By way of an application to the appropriate Magistrate who in turn shall proceed to recover the amount as if it were a fine imposed by him.
7. Through enforcing the bond /instrument executed under this Act or any rules or regulations made thereunder.
8. CGST arrears can be recovered as an arrear of SGST and vice-versa.

{sec.79 (1,2,3,4)}

Q 14. Whether the payment of tax dues can be made in installments?

Ans. On receipt of any such request, Commissioner/Chief Commissioner may extend the time for payment or allow payment of any amount due under the Act, other than the amount due as per the liability self-assessed in any return, by such person in monthly installments not exceeding twenty four, subject to payment of interest under section 50 with such limitations and conditions as may be prescribed. However, where there is default in payment of any one installment on its due date, the whole outstanding balance payable on such date shall become payable and recovered without any further notice. {sec.80}

Q 15. What is the course of recovery in cases where the tax demand confirmed is enhanced in appeal/ revision proceedings?

Ans. The notice of demand is required to be served only in respect of the enhanced dues. In so far as the amount already confirmed prior to disposal of appeal/revision, the recovery proceedings may be continued from the stage at which such proceedings stood immediately before such disposal of appeal/revision. (Sec.84(a))

Q 16. If a taxable person with pending tax dues, transfers his business to another person, what would happen to the tax dues?

Ans. The person, to whom the business is transferred, shall jointly and severally be liable to pay the tax, interest or penalty due from the taxable person up to the time of such transfer, whether such dues has been determined before such transfer, but has remained unpaid or is determined thereafter. {Sec. 85(1)}

 Q 17. What happens to tax dues where the Company (taxable person) goes into liquidation?

Ans. When any company is wound up, every appointed receiver of assets (“Liquidator”) shall give intimation of his appointment to Commissioner within 30 days. On receipt of such intimation Commissioner may notify amount sufficient to recover tax liabilities/dues to the liquidator within 3 months. {Sec. 88(1,2)}

Q 18. What is the liability of directors of the Company (taxable person) under liquidation?

Ans: When any private company is wound up and any tax or other dues determined whether before or after liquidation that remains unrecovered, every person who was a director of the company during the period for which the tax was due, shall jointly and severally be liable for payment of dues unless he proves to the satisfaction of the Commissioner that such non-recovery is not attributed to any gross neglect, misfeasance or breach of duties on his part in relation to the affairs of the company. {Sec.88(3),89}

Q 19. What is the liability of partners of a partnership firm (Taxable person) to pay outstanding tax?

Ans. Partners of any firm shall jointly and severally be liable for payment of any tax, interest or penalty.

Firm/ partner shall intimate the retirement of any partner to the Commissioner by a notice in writing.

Liability to pay tax, interest or penalty up to the date of such retirement, whether determined on that date or subsequently, shall be on such partner.

If no intimation is given within one month from the date of retirement, the liability of such partner shall continue until the date on which such intimation is received by the Commissioner. {Sec.90}

Q 20. What happens to the tax liability of a taxable person, whose business is carried on by any guardian/ trustee or agent of a minor?

Ans. Where the business in respect of which any tax is payable is carried on by any guardian / trustee / agent of a minor or other incapacitated person on behalf of and for the benefit of such minor/incapacitated person, the tax, interest or penalty shall be levied upon and recoverable from such guardian / trustee / agent. {Sec.91}

Q 21. What happens when the estate of a taxable person is under the control of Court of Wards?

Ans. Where the estate of a taxable person owning a business in respect of which any tax, interest or penalty is payable is under the control of the Court of Wards/ Administrator General / Official Trustee / Receiver or Manager appointed under any order of a Court, the tax, interest or penalty shall be levied and recoverable from such Court of Wards/Administrator General / Official Trustee / Receiver or Manager to the same extent as it would be determined and recoverable from a taxable person. {Sec.92}

11. Appeals, Review and Revision in GST

Q 1. Whether any person aggrieved by any order or decision passed against him has the right to appeal?

Ans. Yes. Any person aggrieved by any order or decision passed under the GST Act(s) has the right to appeal under Section 107. It must be an order or decision passed by an “adjudicating authority”.

However, some decisions or orders (as provided for in Section 121) are not appealable.

Q 2. What is the time limit to file appeal to Appellate Authority (AA)?

Ans. For the aggrieved person, the time limit is fixed as 3 months from the date of communication of order or decision. For the department (Revenue), the time limit is 6 months within which review proceedings have to be completed and appeal filed before the AA

Q 3. Whether the appellate authority has any powers to condone the delay in filing appeal?

Ans. Yes. He can condone a delay of up to one month from the end of the prescribed period of 3/6 months for filing the appeal (3+1/6+1), provided there is “sufficient cause” as laid down in the section 107(4).

Q 4. Whether the appellate authority has any powers to allow additional grounds not specified in the appeal memo?

Ans. Yes. He has the powers to allow additional grounds if he is satisfied that the omission was not wilful or unreasonable.

Q 5. The order passed by Appellate Authority has to be communicated to whom?

Ans. Appellate Authority has to communicate the copy of order to the appellant, respondent and the adjudicating authority with a copy to jurisdictional Commissioner of CGST and SGST / UTGST.

Q 6. What is the amount of mandatory pre-deposit which should be made along with every appeal before Appellate Authority?

Ans. Full amount of tax, interest, fine, fee and penalty arising from the impugned order as is admitted by the appellant and a sum equal to 10% of remaining amount of tax in dispute arising from the order in relation to which appeal has been filed.

Q 7. Can the Department apply to AA for ordering a higher amount of pre-deposit?

Ans No

Q 8. What about the recovery of the balance amount?

Ans. On making the payment of pre-deposit as above, the recovery of the balance amount shall be deemed to be stayed, in terms of section 107(7)

Q 9. Whether in an appeal the AA can pass an order enhancing the quantum of duty/ fine/ penalty/ reduce the amount of refund/ITC from the one passed by the original authority?

Ans. The AA is empowered to pass an order enhancing the fees or penalty or fine in lieu of confiscation or reducing the amount of refund or input tax credit provided the appellant has been given reasonable opportunity of showing cause against the proposed detrimental order. (First Proviso to Section 107(11)).

In so far as the question of enhancing the duty or deciding wrong availment of ITC is concerned, the AA can do so only after giving specific SCN to the appellant against the proposed order and the order itself should be passed within the time limit specified under Section 73 or Section 74. (Second Proviso to Section 107(11)).

Q 10. Does the AA have the power to remand the case back to the adjudicating authority for whatever reasons?

Ans. No. Section 107(11) specifically states that the AA shall, after making such inquiry as may be necessary, pass such order, as he thinks just and proper, confirming, modifying or annulling the decision or order appealed against, but shall not refer the case back to the authority that passed the decision or order.

Q 11. Can any CGST/SGST authority revise any order passed under the Act by his subordinates?

Ans. Section 2(99) of the Act defines “Revisional Authority” as an authority appointed or authorised under this Act for revision of decision or orders referred to in section 108. Section 108 of the Act authorizes such “revisional authority” to call for and examine any order passed by his subordinates and in case he considers the order of the lower authority to be erroneous in so far as it is prejudicial to revenue and is illegal or improper or has not taken into account certain material facts, whether available at the time of issuance of the said order or not or in consequence of an observation by the Comptroller and Auditor General of India, he may, if necessary, he can revise the order after giving opportunity of being heard to the noticee.

Q 12. Can the “revisional authority” order for staying of operation of any order passed by his subordinates pending such revision?

Ans. Yes.

Q 13. Are there any fetters to the powers of “revisional authority” under GST to revise orders of subordinates?

Ans. Yes. The “revisional authority” shall not revise any order if

1. the order has been subject to an appeal under section 107 or under section 112 or under section 117 or under section 118; or
2. the period specified under section 107(2) has not yet expired or more than three years have expired after the passing of the decision or order sought to be revised.
3. the order has already been taken up for revision under this Section at any earlier stage.

Q 14. When the Tribunal is having powers to refuse to admit the appeal?

Ans. In cases where the appeal involves –

• tax amount or input tax credit or
• the difference in tax or the difference in input tax credit involved or
• amount of fine, fees or amount of penalty determined by such order,

does not exceed Rs 50,000/-, the Tribunal has discretion to refuse to admit such appeal. (Section 112(2) of the Act)

Q 15. What is the time limit within which appeal has to be filed before the Tribunal?

Ans. The aggrieved person has to file appeal before Tribunal within 3 months from the date of receipt of the order appealed against. Department has to complete review proceedings and file appeal within a period of six months from the date of passing the order under revision.

Q 16. Can the Tribunal condone delay in filing appeal before it beyond the period of 3/6 months? If so, till what time?

Ans. Yes, the Tribunal has powers to condone delay of a further three months, beyond the period of 3/6 months provided sufficient cause is shown by the appellant for such delay.

Q 17. What is the time limit for filing memorandum of cross objections before Tribunal?

Ans. 45 days from the date of receipt of appeal.

Q 18. Whether interest becomes payable on refund of pre-deposit amount?

Ans. Yes. As per Section 115 of the Act, where an amount deposited by the appellant under sub-section (6) of section 107 or under sub-section (8) of section 112 is required to be refunded consequent to any order of the Appellate Authority or of the Appellate Tribunal, as the case may be, interest at the rate specified under section 56 shall be payable in respect of such refund from the date of payment of the amount till the date of refund of such amount.

Q 19. An appeal from the order of Tribunal lies to which forum?

Ans. Appeal against orders passed by the State Bench or Area Benches of the Tribunal lies to the High Court if the High Court is satisfied that such an appeal involves a substantial question of law. (Section 117(1)). However, appeal against orders passed by the National Bench or Regional Benches of the Tribunal lies to the Supreme Court and not High Court. (Under section 109(5) of the Act, only the National Bench or Regional Benches of the Tribunal can decide appeals where one of the issues involved relates to the place of supply.)

Q 20. What is the time limit for filing an appeal before the High Court?

Ans. 180 days from the date of receipt of the order appealed against. However, the High Court has the power to condone further delay on sufficient cause being shown.

12. Advance Ruling

Q 1. What is the meaning of Advance Ruling?

Ans. As per section 95 of CGST/SGST Law and section 12 of UTGST law, ‘advance ruling’ means a decision provided by the authority or the Appellate Authority to an applicant on matters or on questions specified in section 97(2) or 100(1) of CGST/SGST Act as the case may be, in relation to the supply of goods and/or services proposed to be undertaken or being undertaken by the applicant.

Q 2. Which are the questions for which advance ruling can be sought?

Ans. Advance Ruling can be sought for the following questions:

1. classification of any goods or services or both;
2. applicability of a notification issued under provisions of the GST Act(s);
3. determination of time and value of supply of goods or services or both;
4. admissibility of input tax credit of tax paid or deemed to have been paid;
5. determination of the liability to pay tax on any goods or services under the Act;
6. whether applicant is required to be registered under the Act;
7. whether any particular thing done by the applicant with respect to any goods or services amounts to or results in a supply of goods or services, within the meaning of that term.

Q 3. What is the objective of having a mechanism of Advance Ruling?

Ans. The broad objective for setting up such an authority is to:

1. provide certainty in tax liability in advance in relation to an activity proposed to be undertaken by the applicant;
2. attract Foreign Direct Investment (FDI);
3. reduce litigation;
4. pronounce ruling expeditiously in transparent and inexpensive manner.

Q 4. What will be the composition of Authority for advance rulings (AAR) under GST?

Ans. ‘Authority for advance ruling’ (AAR) shall comprise one member CGST and one member SGST/ UTGST. They will be appointed by the Central and State government respectively.

Q 5. Is it necessary for a person seeking advance ruling to be registered?

Ans. No, any person registered under the GST Act(s) or desirous of obtaining registration can be an applicant. (Section 95(b))

Q 6. At what time an application for advance ruling be made?

Ans. An applicant can apply for advance ruling even before taking up a transaction (proposed supply of goods or services) or in respect of a supply which is being undertaken. The only restriction is that the question being raised is already not pending or decided in any proceedings in the case of applicant.

Q 7. In how much time will the Authority for Advance Rulings have to pronounce its ruling?

Ans. As per Section 98(6) of CGST/SGST Act, the Authority shall pronounce its ruling in writing within ninety days from the date of receipt of application.

Q 8. What is the Appellate authority for advance ruling (AAAR)?

Ans. Appellate authority for advance ruling (AAAR), shall be constituted under the SGST Act or UTGST Act and such AAAR shall be deemed to be the Appellate Authority under the CGST Act in respect of the respective state or Union Territory. An applicant, or the jurisdictional officer, if aggrieved by any advance ruling, may appeal to the Appellate Authority.

Q 9. How many AAR and AAAR will be constituted under GST?

Ans. There will be one AAR and AAAR for each State.

Q 10. To whom will the Advance Ruling be applicable?

Ans. Section 103 provides that an advance ruling pronounced by AAR or AAAR shall be binding only on the applicant who sought it in respect of any matter referred to in 97 (2) and on the jurisdictional tax authority of the applicant. This clearly means that an advance ruling is not applicable to similarly placed taxable persons in the State. It is only limited to the person who has applied for an advance ruling.

Q 11. Whether the advance ruling have precedent value of a judgment of the High Court or the Supreme Court?

Ans. No, the advance ruling is binding only in respect of the matter referred. It has no precedent value. However, even for persons other than applicant, it does have persuasive value.

Q 12. What is the time period for applicability of Advance Ruling?

Ans. The law does not provide for a fixed time period for which the ruling shall apply. Instead, in section 103(2), it is provided that advance ruling shall be binding till the period when the law, facts or circumstances supporting the original advance ruling have changed. Thus, a ruling shall continue to be in force so long as the transaction continues and so long as there is no change in law, facts or circumstances.

Q 13. Can an advance ruling given be nullified?

Ans. Section 104(1) provides that an advance ruling shall be held to be ab initio void if the AAR or AAAR finds that the advance ruling was obtained by the applicant by fraud or suppression of material facts or misrepresentation of facts. In such a situation, all the provisions of the GST Act(s) shall apply to the applicant as if such advance ruling had never been made (but excluding the period when advance ruling was given and up to the period when the order declaring it to be void is issued). An order declaring advance ruling to be void can be passed only after hearing the applicant.

Q 14. What is the procedure for obtaining Advance Ruling?

Ans. Section 97 and 98 deals with procedure for obtaining advance ruling. Section 97 provides that the applicant desirous of obtaining advance ruling should make application to AAR in a prescribed form and manner. The format of the form and the detailed procedure for making application will be prescribed in the Rules.

Section 98 provides the procedure for dealing with the application for advance ruling. The AAR shall send a copy of application to the officer in whose jurisdiction the applicant falls and call for all relevant records. The AAR may then examine the application along with the records and may also hear the applicant. Thereafter AAR will pass an order either admitting or rejecting the application.

Q 15. Under what circumstances will the application for Advance Ruling be compulsorily rejected?

Ans. Application has to be rejected if the question raised in the application is already pending or decided in any proceedings in the case of applicant under any of the provisions of GST Act(s) If the application is rejecte1d, it should be by way of a speaking order giving the reasons for rejection.

Q 16. What is the procedure to be followed by AAR once the application is admitted?

Ans. If the application is admitted, the AAR shall pronounce its ruling within ninety days of receipt of application. Before giving its ruling, it shall examine the application and any further material furnished by the applicant or by the concerned departmental officer.

Before giving the ruling, AAR must hear the applicant or his authorized representative as well as the jurisdictional officers of CGST/SGST/UTGST.

Q 17. What happens if there is a difference of opinion amongst members of AAR?

Ans. If there is difference of opinion between the two members of AAR, they shall refer the point or points on which they differ to the AAAR for hearing the issue. If the members of AAAR are also unable to come to a common conclusion in regard to the point(s) referred to them by AAR, then it shall be deemed that no advance ruling can be given in respect of the question on which difference persists at the level of AAAR.

Q 18. What are the provisions for appeals against order of AAR?

Ans. The provisions of appeal before AAAR are dealt in section 100 and 101 of CGST/SGST Act or section 14 of the UTGST Act.

If the applicant is aggrieved with the finding of the AAR, he can file an appeal with AAAR. Similarly, if the concerned or jurisdictional officer of CGST/SGST/UTGST does not agree with the finding of AAR, he can also file an appeal with AAAR. The word concerned officer of CGST/SGST means an officer who has been designated by the CGST/SGST administration in regard to an application for advance ruling. In normal circumstances, the concerned officer will be the officer in whose jurisdiction the applicant is located. In such cases the concerned officer will be the jurisdictional CGST/SGST officer.

Any appeal must be filed within thirty days from the receipt of the advance ruling. The appeal has to be in prescribed form and has to be verified in prescribed manner. This will be prescribed in the Model GST Rules.

The Appellate Authority must pass an order after hearing the parties to the appeal within a period of ninety days of the filing of an appeal. If members of AAAR differ on any point referred to in appeal, it shall be deemed that no advance ruling is issued in respect of the question under appeal.

Q 19. Whether Appeal can be filed before High Court or Supreme Court against the ruling of Appellate Authority for Advance Rulings?

Ans The CGST /SGST Act do not provide for any appeal against the ruling of Appellate Authority for Advance Rulings. Thus no further appeals lie and the ruling shall be binding on the applicant as well as the jurisdictional officer in respect of applicant.

However, Writ Jurisdiction may lie before Hon’ble High Court or the Supreme Court.

Q 20. Can the AAR & AAAR order for rectification of mistakes in the ruling?

Ans. Yes, AAR and AAAR have power to amend their order to rectify any mistake apparent from the record within a period of six months from the date of the order. Such mistake may be noticed by the authority on its own accord or may be brought to its notice by the applicant or the concerned or the jurisdictional CGST/SGST officer. If a rectification has the effect of enhancing the tax liability or reducing the quantum of input tax credit, the applicant or the appellant must be heard before the order is passed. (Section 102)  

13. Inspection, Search, Seizure and Arrest

Q 1. What is the meaning of the term “Search”?

Ans. As per law dictionary and as noted in different judicial pronouncements, the term ‘search’, in simple language, denotes an action of a government machinery to go, look through or examine carefully a place, area, person, object etc. in order to find something concealed or for the purpose of discovering evidence of a crime. The search of a person or vehicle or premises etc. can only be done under proper and valid authority of law.

Q 2. What is the meaning of the term “Inspection”?

Ans. ‘Inspection’ is a new provision under the CGST/SGST Act. It is a softer provision than search to enable officers to access any place of business of a taxable person and also any place of business of a person engaged in transporting goods or who is an owner or an operator of a warehouse or godown.

Q 3. Who can order for carrying out “Inspection” and under what circumstances?

Ans. As per Section 67 of CGST/SGST Act, Inspection can be carried out by an officer of CGST/SGST only upon a written authorization given by an officer of the rank of Joint Commissioner or above. A Joint Commissioner or an officer higher in rank can give such authorization only if he has reasons to believe that the person concerned has done one of the following:

1. suppressed any transaction of supply;
2. suppressed stock of goods in hand;
3. claimed excess input tax credit;
4. contravened any provision of the CGST/SGST

Act to evade tax;

a transporter or warehouse owner has kept goods which have escaped payment of tax or has kept his accounts or goods in a manner that is likely to cause evasion of tax.

Q 4. Can the proper officer authorize Inspection of any assets/premises of any person under this Section?

Ans. No. Authorization can be given to an officer of CGST/ SGST to carry out inspection of any of the following:

1. any place of business of a taxable person;
2. any place of business of a person engaged in the business of transporting goods whether or not he is a registered taxable person;
3. any place of business of an owner or an operator of a warehouse or godown.

Q 5. Who can order for Search and Seizure under the provisions of CGST Act?

Ans. An officer of the rank of Joint Commissioner or above can authorize an officer in writing to carry out search and seize goods, documents, books or things. Such authorization can be given only where the Joint Commissioner has reasons to believe that any goods liable to confiscation or any documents or books or things relevant for any proceedings are hidden in any place.

Q 6. What is meant by ‘reasons to believe’?

Ans. Reason to believe is to have knowledge of facts which, although not amounting to direct knowledge, would cause a reasonable person, knowing the same facts, to reasonably conclude the same thing. As per Section 26 of the IPC, 1860, “A person is said to have ‘reason to believe’ a thing, if he has sufficient cause to believe that thing but not otherwise.” ‘Reason to believe’ contemplates an objective determination based on intelligent care and evaluation as distinguished from a purely subjective consideration. It has to be and must be that of an honest and reasonable person based on relevant material and circumstances.

Q 7. Is it mandatory that such ‘reasons to believe’ has to be recorded in writing by the proper officer, before issuing authorization for Inspection or Search and Seizure?

Ans. Although the officer is not required to state the reasons for such belief before issuing an authorization for search, he has to disclose the material on which his belief was formed. ‘Reason to believe’ need not be recorded invariably in each case. However, it would be better if the materials / information etc. are recorded before issue of search warrant or before conducting search.

Q 8. What is a Search Warrant and what are its contents?

Ans. The written authority to conduct search is generally called search warrant. The competent authority to issue search warrant is an officer of the rank of Joint Commissioner or above. A search warrant must indicate the existence of a reasonable belief leading to the search. Search Warrant should contain the following details:

1. the violation under the Act,
2. he premise to be searched,
3. the name and designation of the person authorized for search,
4. the name of the issuing officer with full designation along with his round seal,
5. date and place of issue,
6. serial number of the search warrant,
7. period of validity i.e. a day or two days etc.

Q 9. When do goods become liable to confiscation under the provisions of CGST/SGST Act?

Ans. As per section 130 of SGST/SGST Act, goods become liable to confiscation when any person does the following:

1. supplies or receives any goods in contravention of any of the provisions of this Act or rules made thereunder leading to evasion of tax;
2. does not account for any goods on which he is liable to pay tax under this Act;
3. supplies any goods liable to tax under this Act without having applied for the registration;
4. contravenes any of the provisions of the CGST/ SGST Act or rules made thereunder with intent to evade payment of tax.

Q 10. What powers can be exercised by an officer during valid search?

Ans. An officer carrying out a search has the power to search for and seize goods (which are liable to confiscation) and documents, books or things (relevant for any proceedings under CGST/SGST Act) from the premises searched. During search, the officer has the power to break open the door of the premises authorized to be searched if access to the same is denied. Similarly, while carrying out search within the premises, he can break open any almirah or box if access to such almirah or box is denied and in which any goods, account, registers or documents are suspected to be concealed. He can also seal the premises if access to it denied.

Q 11. What is the procedure for conducting search?

Ans. Section 67(10) of CGST/SGST Act prescribes that searches must be carried out in accordance with the provisions of Code of Criminal Procedure, 1973. Section 100 of the Code of Criminal Procedure describes the procedure for search.

Q 12. What are the basic requirements to be observed during Search operations?

Ans. The following principles should be observed during

Search:

• No search of premises should be carried out without a valid search warrant issued by the proper officer.
• There should invariably be a lady officer accompanying the search team to residence.
• The officers before starting the search should disclose their identity by showing their identity cards to the person in-charge of the premises.
• The search warrant should be executed before the start of the search by showing the same to the person in-charge of the premises and his signature should be taken on the body of the search warrant in token of having seen the same. The signatures of at least two witnesses should also be taken on the body of the search warrant.
• The search should be made in the presence of at least two independent witnesses of the locality. If no such inhabitants are available

/willing, the inhabitants of any other locality should be asked to be witness to the search. The witnesses should be briefed about the purpose of the search.

• Before the start of the search proceedings, the team of officers conducting the search and the accompanying witnesses should offer themselves for their personal search to the person in-charge of the premises being searched. Similarly, after the completion of search all the officers and the witnesses should again offer themselves for their personal search.
• A Panchnama / Mahazar of the proceedings of the search should necessarily be prepared on the spot. A list of all goods, documents recovered and seized/detained should be prepared and annexed to the Panchnama/Mahazar. The Panchnama / Mahazar and the list of goods/ documents seized/detained should invariably be signed by the witnesses, the in-charge/ owner of the premises before whom the search is conducted and also by the officer(s) duly authorized for conducting the search.
• After the search is over, the search warrant duly executed should be returned in original to the issuing officer with a report regarding the outcome of the search. The names of the officers who participated in the search may also be written on the reverse of the search warrant.
• The issuing authority of search warrant should maintain register of records of search warrant issued and returned and used search warrants should be kept in records.
• A copy of the Panchnama / Mahazar along with its annexure should be given to the person in- charge/owner of the premises being searched under acknowledgement.

Q 13. Can a CGST/SGST officer access business premises under any other circumstances?

Ans. Yes. Access can also be obtained in terms of Section

65 of CGST/SGST Act. This provision of law is meant to allow an audit party of CGST/SGST or C&AG or a cost accountant or chartered accountant nominated under section 66 of CGST/SGST Act, access to any business premises without issuance of a search warrant for the purposes of carrying out any audit, scrutiny, verification and checks as may be necessary to safeguard the interest of revenue. However, a written authorization is to be issued by an officer of the rank of Commissioner of CGST or SGST. This provision facilitates access to a business premise which is not registered by a taxable person as a principal or additional place of business but has books of accounts, documents, computers etc. which are required for audit or verification of accounts of a taxable person.

Q 14. What is meant by the term ‘Seizure’?

Ans. The term ‘seizure’ has not been specifically defined in the Model GST Law. In Law Lexicon Dictionary, ‘seizure’ is defined as the act of taking possession of property by an officer under legal process. It generally implies taking possession forcibly contrary to the wishes of the owner of the property or who has the possession and who was unwilling to part with the possession.

Q 15. Does GST Act(s) have any power of detention of goods and conveyances?

Ans. Yes, under Section 129 of CGST/SGST Act, an officer has power to detain goods along with the conveyance (like a truck or other types of vehicle) transporting the goods. This can be done for such goods which are being transported or are stored in transit in violation of the provisions of CGST/SGST Act. Goods which are stored or are kept in stock but not accounted for can also be detained. Such goods and conveyance shall be released after payment of applicable tax or upon furnishing security of equivalent amount.

Q 16. What is the distinction in law between ‘Seizure’ and ‘Detention’?

Ans. Denial of access to the owner of the property or the person who possesses the property at a particular point of time by a legal order/notice is called detention. Seizure is taking over of actual possession of the goods by the department. Detention order is issued when it is suspected that the goods are liable to confiscation. Seizure can be made only on the reasonable belief which is arrived at after inquiry/investigation that the goods are liable to confiscation.

Q 17. What are the safeguards provided in GST Act(s) in respect of Search or Seizure?

Ans. Certain safeguards are provided in section 67 of CGST/SGST Act in respect of the power of search or seizure. These are as follows:

1. Seized goods or documents should not be retained beyond the period necessary for their examination;
2. Photocopies of the documents can be taken by the person from whose custody documents are seized;
3. For seized goods, if a notice is not issued within six months of its seizure, goods shall be returned to the person from whose possession it was seized. This period of six months can be extended on justified grounds up to a further period of maximum six months;
4. An inventory of seized goods shall be made by the seizing officer;
5. Certain categories of goods to be specified under CGST Rules (such as perishable, hazardous etc.) can be disposed of immediately after seizure;
6. Provisions of Code of Criminal Procedure 1973 relating to search and seizure shall apply. However, one important modification is in relation to sub-section (5) of section 165 of Code of Criminal Procedure – instead of sending

copies of any record made in course of search to the nearest Magistrate empowered to take cognizance of the offence, it has to be sent to the Principal Commissioner/ Commissioner of CGST/ Commissioner of SGST.

Q 18. Is there any special document required to be carried during transport of taxable goods?

Ans. Under section 68 of CGST /SGST Act, a person in charge of a conveyance carrying any consignment of goods of value exceeding a specified amount may be required to carry a prescribed document as may be prescribed.

Q 19. What is meant by the term “arrest”?

Ans. The term ‘arrest’ has not been defined in the CGST/SGST Act. However, as per judicial pronouncements, it denotes ‘the taking into custody of a person under some lawful command or authority’. In other words, a person is said to be arrested when he is taken and restrained of his liberty by power or colour of lawful warrant.

Q 20. When can the proper officer authorize ‘arrest’ of any person under CGST / SGST Act?

Ans. The Commissioner of CGST/SGST can authorize a CGST/SGST officer to arrest a person if he has reasons to believe that the person has committed an offence attracting a punishment prescribed under section 132(1) (a), (b), (c), (d) or Sec 132(2) of the CGST/SGST Act. This essentially means that a person can be arrested only where the tax evasion is more than 2 crore rupees or where a he has been convicted earlier under CGST Act.

Q 21. What are the safeguards provided under CGST /SGST Act for a person who is placed under arrest?

Ans. There are certain safeguards provided under section

69 for a person who is placed under arrest. These are:

1. If a person is arrested for a cognizable offence, he must be informed in writing of the grounds of arrest and he must be produced before a magistrate within 24 hours of his arrest;
2. If a person is arrested for a non-cognizable and bailable offence, the Deputy/ Assistant Commissioner of CGST/SGST can release him on bail and he will be subject to the same provisions as an officer in-charge of a police station under section 436 of the Code of Criminal Procedure, 1973;
3. All arrest must be in accordance with the provisions of the Code of Criminal Procedure,1973 relating to arrest.

Q 22. What are the precautions to be taken during arrest?

Ans. The provisions of the Code of Criminal Procedure,

1973 (2 of 1974) relating to arrest and the procedure thereof must be adhered to. It is therefore necessary that all field officers of CGST/SGST be fully familiar with the provisions of the Code of Criminal Procedure, 1973.

One important provision to be taken note of is section 57 of Cr.P.C., 1973 which provides that a person arrested without warrant shall not be detained for a longer period than, under the circumstances of the case, is reasonable but this shall not exceed twenty four hours (excluding the journey time from place of arrest to the Magistrate’s court). Within this period, as provided under section 56 of Cr.P.C., the person making the arrest shall send the person arrested without warrant before a Magistrate having jurisdiction in the case.

In a landmark judgment in the case of D.K. Basu v. State of West Bengal reported in 1997 (1) SCC 416, the Hon’ble Supreme Court has laid down specific guidelines required to be followed while making arrests. While this is in relation to police, it needs to be followed by all departments having power of arrest. These are as under:

1. The police personnel carrying out the arrest and handling the interrogation of the arrestee should bear accurate, visible and clear identification and name tags with their designations. The particulars of all such police personnel who handle interrogation of the arrestee must be recorded in a register.
2. The police officer carrying out the arrest shall prepare a memo of arrest at the time of arrest and such memo shall be attested by at least one witness, who may be either a member of the family of the arrestee or a respectable person of the locality from where the arrest is made. It shall also be counter signed by the arrestee and shall contain the time and date of arrest.
3. A person who has been arrested or detained and is being held in custody in a police station or interrogation center or other lock up, shall be entitled to have one friend or relative or other person known to him or having interest in his welfare being informed, as soon as practicable, that he has been arrested and is being detained at the particular place, unless the attesting witness of the memo of arrest is himself such a friend or a relative of the arrestee.
4. The time, place of arrest and venue of custody of an arrestee must be notified by the police where the next friend or relative of the arrestee lives outside the district or town through the Legal Aid Organization in the District and the police station of the area concerned telegraphically within a period of 8 to 12 hours after the arrest.
5. An entry must be made in the diary at the place of detention regarding the arrest of the person which shall also disclose the name of the next friend of the person who has been informed of the arrest and the names and particulars of the police officials in whose custody the arrestee is.
6. The arrestee should, where he so requests, be also examined at the time of his arrest and major and minor injuries, if any present on his/her body, must be recorded at that time. The ‘Inspection Memo’ must be signed both by the arrestee and the police officer effecting the arrest and its copy provided to the arrestee.
7. The arrestee should be subjected to medical examination by the trained doctor every 48 hours during his detention in custody by a doctor on the panel of approved doctors appointed by Director, Health Services of the concerned State or Union Territory, Director, Health Services should prepare such a panel for all Tehsils and Districts as well.
8. Copies of all the documents including the memo of arrest, referred to above, should be sent to the Magistrate for his record.
9. The arrestee may be permitted to meet his lawyer during interrogation, though not throughout the interrogation.
10. A police control room should be provided at all district and State headquarters where information regarding the arrest and the place

of custody of the arrestee shall be communicated by the officer causing the arrest, within 12 hours of effecting the arrest and at the police control room it should be displayed on a conspicuous notice board.

Q 23. What are the broad guidelines for arrest followed in CBEC?

Ans. Decision to arrest needs to be taken on case-to- case basis considering various factors, such as, nature and gravity of offence, quantum of duty evaded or credit wrongfully availed, nature and quality of evidence, possibility of evidences being tampered with or witnesses being influenced, cooperation with the investigation, etc. Power to arrest has to be exercised after careful consideration of the facts of the case which may include:

1. to ensure proper investigation of the offence;
2. to prevent such person from absconding;
3. cases involving organized smuggling of goods or
4. evasion of customs duty by way of concealment;
5. master minds or key operators effecting proxy/ benami imports/exports in the name of dummy or non-existent persons/IECs, etc.;
6. where the intent to evade duty is evident and element of mensrea/guilty mind is palpable;
7. prevention of the possibility of tampering with evidence;
8. intimidating or influencing witnesses; and
9. large amounts of evasion of duty or service tax at least exceeding one crore rupees.

Q 24. What is a cognizable offence?

Ans. Generally, as per Cr. PC, cognizable offence means serious category of offences in respect of which a police officer has the authority to make an arrest without a warrant and to start an investigation with or without the permission of a court. However, GST being a special legislation, only the officers, duly empowered under the Act can act as above.

Q 25. What is a non-cognizable offence?

Ans. Non-cognizable offence means relatively less serious offences in respect of which a police officer does not have the authority to make an arrest without a warrant and an investigation cannot be initiated without a court order, except as may be authorized under special legislation.

Q 26. What are cognizable and non-cognizable offences under CGST Act?

Ans. In section 132 of CGST Act, it is provided that the offences relating to taxable goods and /or services where the amount of tax evaded or the amount of input tax credit wrongly availed or the amount of refund wrongly taken exceeds Rs. 5 crore, shall be cognizable and non-bailable. Other offences under the act are non-cognizable and bailable.

Q 27. When can the proper officer issue summons under CGST Act?

Ans. Section 70 of CGST/SGST Act gives powers to a duly authorized CGST/SGST officer to call upon a person by issuing a summon to present himself before the officer issuing the summon to either give evidence or produce a document or any other thing in any inquiry which an officer is making. A summons to produce documents or other things may be for the production of certain specified

documents or things or for the production of all documents or things of a certain description in the possession or under the control of the person summoned.

Q 28. What are the responsibilities of the person so summoned?

Ans. A person who is issued summon is legally bound to attend either in person or by an authorized representative and he is bound to state the truth before the officer who has issued the summon upon any subject which is the subject matter of examination and to produce such documents and other things as may be required.

Q 29. What can be the consequences of non- appearance to summons?

Ans. The proceeding before the official who has issued summons is deemed to be a judicial proceeding. If a person does not appear on the date when summoned without any reasonable justification, he can be prosecuted under section 174 of the Indian Penal Code (IPC). If he absconds to avoid service of summons, he can be prosecuted under section 172 of the IPC and in case he does not produce the documents or electronic records required to be produced, he can be prosecuted under section 175 of the IPC. In case he gives false evidence, he can be prosecuted under section 193 of the IPC. In addition, if a person does not appear before a CGST/ SGST officer who has issued the summon, he is liable to a penalty up to Rs 25,000/- under section 122(3)(d) of CGST/SGST Act.

Q 30. What are the guidelines for issue of summons?

Ans. The Central Board of Excise and Customs (CBEC) in the Department of Revenue, Ministry of Finance has issued guidelines from time to time to ensure that summons provisions are not misused in the field. Some of the important highlights of these guidelines are given below:

1. summons are to be issued as a last resort where assesses are not co-operating and this section should not be used for the top management;
2. the language of the summons should not be harsh and legal which causes unnecessary mental stress and embarrassment to the receiver;
3. summons by Superintendents should be issued after obtaining prior written permission from an officer not below the rank of Assistant Commissioner with the reasons for issuance of summons to be recorded in writing;
4. where for operational reasons, it is not possible to obtain such prior written permission, oral/ telephonic permission from such officer must be obtained and the same should be reduced to writing and intimated to the officer according such permission at the earliest opportunity;
5. in all cases, where summons are issued, the officer issuing summons should submit a report or should record a brief of the proceedings in the case file and submit the same to the officer who had authorized the issuance of summons;
6. senior management officials such as CEO, CFO, General Managers of a large company or a Public Sector Undertaking should not generally be issued summons at the first instance. They should be summoned only when there are indications in the investigation of their involvement in the decision making process which led to loss of revenue.

Q 31. What are the precautions to be observed while issuing summons?

Ans. The following precautions should generally be observed when summoning a person: -

1. A summon should not be issued for appearance where it is not justified. The power to summon can be exercised only when there is an inquiry being undertaken and the attendance of the person is considered necessary.
2. Normally, summons should not be issued repeatedly. As far as practicable, the statement of the accused or witness should be recorded in minimum number of appearances.
3. Respect the time of appearance given in the summons. No person should be made to wait for long hours before his statement is recorded except when it has been decided very consciously as a matter of strategy.
4. Preferably, statements should be recorded during office hours; however, an exception could be made regarding time and place of recording statement having regard to the facts in the case.

Q 32. Are there any class of officers who are required to assist CGST/SGST officers?

Ans. Under section 72 of CGST/SGST Act, the following officers have been empowered and are required to assist CGST/SGST officers in the execution of CGST/SGST Act. The categories specified are as follows:

• Police;
• Railways
• Customs;
• Officers of State/UT/ Central Government engaged in collection of GST;
• Officers of State/UT/ Central Government engaged in collection of land revenue;
• All village officers;
• Any other class of officers as may be notified by the Central/State Government.

14. Offences, Penalties, Prosecution and Compounding

Q 1. What are the prescribed offences under CGST/SGST Act?

Ans. The CGST/SGST Act codifies the offences and penalties in Chapter XVI. The Act lists 21 offences in section 122, apart from the penalty prescribed under section 10 for availing compounding by a taxable person who is not eligible for it. The said offences are as follows: -

1. Making a supply without invoice or with false/ incorrect invoice;
2. Issuing an invoice without making supply;
3. Not paying tax collected for a period exceeding three months;
4. Not paying tax collected in contravention of the CGST/SGST Act for a period exceeding 3 months;
5. Non deduction or lower deduction of tax deducted at source or not depositing tax deducted at source under section 51;
6. Non collection or lower collection of or non- payment of tax collectible at source under section 52;
7. Availing/utilizing input tax credit without actual receipt of goods and/or services;
8. Fraudulently obtaining any refund;
9. Availing/distributing input tax credit by an Input Service Distributor in violation of Section 20;
10. Furnishing false information or falsification of financial records or furnishing of fake accounts/ documents with intent to evade payment of tax;
11. Failure to register despite being liable to pay tax;
12. Furnishing false information regarding registration particulars either at the time of applying for registration or subsequently;
13. Obstructing or preventing any official in discharge of his duty;
14. Transporting goods without prescribed documents;
15. Suppressing turnover leading to tax evasion;
16. Failure to maintain accounts/documents in the manner specified in the Act or failure to retain accounts/documents for the period specified in the Act;
17. Failure to furnish information/documents required by an officer in terms of the Act/Rules or furnishing false information/documents during the course of any proceeding;
18. Supplying/transporting/storing any goods liable to confiscation;
19. Issuing invoice or document using GSTIN of another person;
20. Tampering/destroying any material evidence;
21. Disposing of /tampering with goods detained/ seized/attached under the Act.

Q 2. What is meant by the term penalty?

Ans. The word “penalty” has not been defined in the CGST/SGST Act but judicial pronouncements and principles of jurisprudence have laid down the nature of a penalty as:

• a temporary punishment or a sum of money imposed by statute, to be paid as punishment for the commission of a certain offence;
• a punishment imposed by law or contract for doing or failing to do something that was the duty of a party to do.

Q 3. What are the general disciplines to be followed while imposing penalties?

Ans. The levy of penalty is subject to a certain disciplinary regime which is based on jurisprudence, principles of natural justice and principles governing international trade and agreements. Such general discipline is enshrined in section 126 of the Act. Accordingly—

• no penalty is to be imposed without issuance of a show cause notice and proper hearing in the matter, affording an opportunity to the person proceeded against to rebut the allegations levelled against him,
• the penalty is to depend on the totality of the facts and circumstances of the case,
• the penalty imposed is to be commensurate with the degree and severity of breach of the provisions of the law or the rules alleged,
• the nature of the breach is to be specified clearly in the order imposing the penalty,
• the provisions of the law under which the penalty has been imposed is to be specified.

Section 126 further specifies that, in particular, no substantial penalty is to be imposed for — • any minor breach (minor breach has been defined as a violation of the provisions in a case where the tax involved is less than Rs.5000), or

• a procedural requirement of the law, or
• an easily rectifiable mistake/omission in documents (explained in the law as an error apparent on record) that has been made without fraudulent intent or gross negligence.

Further, wherever penalty of a fixed amount or a fixed percentage has been provided in the CGST/SGST Act, the same shall apply.

Q 4. What is the quantum of penalty provided for in the CGST /SGST Act?

Ans. Section 122(1) provides that any taxable person who has committed any of the offences mentioned in section 122 shall be punished with a penalty that shall be higher of the following amounts:

• The amount of tax evaded, fraudulently obtained as refund, availed as credit, or not deducted or collected or short deducted or short collected, or
• A sum of Rs. 10,000/-.

Further Section 122(2) provides that any registered person who has not paid tax or makes a short payment of taxon supplies shall be a liable to penalty which will be the higher of:

• 10% of the tax not paid or short paid, or
• 10,000/-

Q 5. Is any penalty prescribed for any person other than the taxable person?

Ans. Yes. Section 122(3) provides for levy of penalty extending to Rs. 25,000/- for any person who-

• aids or abets any of the 21 offences,
• deals in any way (whether receiving, supplying, storing or transporting) with goods that are liable to confiscation,
• receives or deals with supply of services in contravention of the Act,
• fails to appear before an authority who has issued a summon,
• fails to issue any invoice for a supply or account for any invoice in his books of accounts.

Q 6. What is the penalty provided for any contravention for which no separate penalty has been prescribed under CGST/SGST Act?

Ans. Section 125 of the CGST/SGST Act provides that any person who contravenes any provision of the Act or the rules made under this Act for which no separate penalty has been prescribed shall be punishable with a penalty that may extend to Rs. 25,000/-

Q 6. What action can be taken for transportation of goods without valid documents or attempted to be removed without proper record in books?

Ans. If any person transports any goods or stores any such goods while in transit without the documents prescribed under the Act (i.e. invoice and a declaration) or supplies or stores any goods that have not been recorded in the books or accounts maintained by him, then such goods shall be liable for detention along with any vehicle on which they are being transported. Where owner comes forward: - Such goods shall be released on payment of the applicable tax and penalty equal to 100% tax or upon furnishing of security equivalent to the said amount  

In case of exempted goods, penalty is 2% of value of goods or Rs 25,000/- whichever is lesser.

Where owner does not come forward: - Such goods shall be released on payment of the applicable tax and penalty equal to 50% of value of goods or upon furnishing of security equivalent to the said amount.

In case of exempted goods, penalty is 5% of value of goods or Rs 25,000/- whichever is lesser.

Q 7. What is the penalty prescribed for a person who opts for composition scheme despite being ineligible for the said scheme?

Ans. Section 10(5) provides that if a person who has paid under composition levy is found as not being eligible for compounding then such person shall be liable to penalty to an amount equivalent to the tax payable by him under the provisions of the Act i.e. as a normal taxable person and that this penalty shall be in addition to the tax payable by him.

Q 8. What is meant by confiscation?

Ans. The word ‘confiscation’ has not been defined in the Act. The concept is derived from Roman Law wherein it meant seizing or taking into the hands of emperor, and transferring to Imperial “fiscus” or Treasury. The word “confiscate” has been defined in Aiyar’s Law Lexicon as to “appropriate (private property) to the public treasury by way of penalty; to deprive of property as forfeited to the State.”

In short in means transfer of the title to the goods to the Government.

Q 9. Under which circumstances can goods be confiscated under CGST/SGST Act?

Ans. Under Section 130 of the CGST Act, goods shall be liable to confiscation if any person:

• supplies or receives any goods in contravention of any provision of this Act and such contravention results in evasion of tax payable under the Act, or
• does not account for any goods in the manner required under the Act, or
• supplies goods that are liable to tax under the Act without applying for registration, or
• uses any conveyance as a means of transport for carriage of goods in contravention of the provisions of CGST/SGST Act (unless used without knowledge of owner)
• contravenes any provision of the Act/Rules with the intention of evading payment of tax.

Q 10. What happens to the goods upon confiscation of goods by the proper officer?

Ans. Upon confiscation, the title in the confiscated goods shall vest in the Government and every Police officer to whom the proper officer makes a request in this behalf, shall assist in taking possession of the goods.

Q 11. After confiscation, is it required to give option to the person to redeem the goods?

Ans. Yes. In terms of section 130(2), the Owner or the person in-charge of the goods liable to confiscation is to be given the option for fine (not exceeding market price of confiscated goods) in lieu of confiscation. This fine shall be in addition to the tax and other charges payable in respect of such goods.

Q 12. Can any conveyance carrying goods without cover of prescribed documents be subject to confiscation?

Ans. Yes. Section 130 provides that any conveyance carrying goods without the cover of any documents or declaration prescribed under the Act shall be liable to confiscation. However, if the owner of the conveyance proves that the goods were being transported without cover of the required documents/declarations without his knowledge or connivance or without the knowledge or connivance of his agent then the conveyance shall not be liable to confiscation as aforesaid.

Q 13. What is Prosecution?

Ans. Prosecution is the institution or commencement of legal proceeding; the process of exhibiting formal charges against the offender. Section 198 of the Criminal Procedure Code defines “prosecution” as the institution and carrying on of the legal proceedings against a person.

Q 14. Which are the offences which warrant prosecution under the CGST/SGST Act?

Ans. Section 132 of the CGST/SGST Act codifies the major offences under the Act which warrant institution of criminal proceedings and prosecution. 12 such major offences have been listed as follows:

1. Making a supply without issuing an invoice or upon issuance of a false/incorrect invoice;
2. Issuing an invoice without making supply;
3. Not paying any amount collected as tax for a period exceeding 3 months;
4. Availing or utilizing credit of input tax without actual receipt of goods and/or services;
5. Obtaining any fraudulent refund)
6. evades tax, fraudulently avails ITC or obtains refund by an offence not covered under clause (a) to (e);
7. Furnishing false information or falsification of financial records or furnishing of fake accounts/ documents with intent to evade payment of tax;
8. Obstructing or preventing any official in the discharge of his duty;
9. Dealing with goods liable to confiscation i.e. receipt, supply, storage or transportation of goods liable to confiscation;
10. Receiving/dealing with supply of services in contravention of the Act;
11. tampers with or destroys any material evidence or documents
12. Failing to supply any information required of him under the Act/Rules or supplying false information;
13. Attempting to commit or abetting the commission of any of the offences at (a) to (l) above.

Q 15. What is the punishment prescribed on conviction of any offence under the CGST/SGST Act?

Ans. The scheme of punishment provided in section 132(1)

Q 16. What are cognizable and non-cognizable offences under CGST/SGST Act?

Ans. In terms of Section 132(4) and 132(5) of CGST/SGST Act

• all offences where the evasion of tax is less than Rs.5 crores shall be non-cognizable and bailable,
• all offences where the evasion of tax exceeds Rs.5 crores shall be cognizable and non- bailable.

Q 17. Is prior sanction of competent authority mandatory for initiating prosecution?

Ans. Yes. No person shall be prosecuted for any offence without the prior sanction of the designated authority.

Q 18. Is ‘mensrea’ or culpable mental state necessary for prosecution under CGST/SGST Act?

Ans. Yes. However, Section 135 presumes the existence of a state of mind (i.e. “culpable mental state” or mensrea) required to commit an offence if it cannot be committed without such a state of mind

Q 19. What is a culpable state of mind?

Ans. While committing an act, a “culpable mental state”

is a state of mind wherein-

• the act is intentional;
• the act and its implications are understood and

controllable;

• the person committing the act was not coerced and even overcomes hurdles to the act committed;
• the person believes or has reasons to believe that the act is contrary to law.

Q 20. Can a company be proceeded against or prosecuted for any offence under the CGST/SGST Act?

Ans. Yes. Section 137 of the CGST/SGST ACT provides that every person who was in-charge of or responsible to a company for the conduct of its business shall, along-with the company itself, be liable to be proceeded against and punished for an offence committed by the company while such person was in-charge of the affairs of the company. If any offence committed by the company—

• has been committed with the consent/ connivance of, or • is attributable to negligence of—

any officer of the company then such officer shall be deemed to be guilty of the said offence and liable to be proceeded against and punished accordingly.

Q 21. What is meant by compounding of offences?

Ans. Section 320 of the Code of Criminal Procedure defines “compounding” as to forbear from prosecution for consideration or any private motive.

Q 22. Can offences under CGST/SGST Act be compounded?

Ans. Yes. As per section 138 of the CGST/SGST Act, any offence, other than the following, may upon payment of the prescribed (compounding) amount be compounded and such compounding is permissible either before or after the institution of prosecution:

• Offences numbered 1 to 6 of the 12 major offences (outlined in Q. 16 above), if the person charged with the offence had compounded earlier in respect of any of the said offences;
• Aiding/abetting offences numbered 1 to 6 of the 12 major offences, if the person charged with the offence had compounded earlier in respect of any of the said offences;
• Any offence (other than the above offences) under any SGST Act/IGST Act in respect of a supply with value exceeding Rs.1 crore, if the person charged with the offence had compounded earlier in respect of any of the said offences;
• Any offence which is also an offence under NDPSA or FEMA or any other Act other than CGST/SGST;

Compounding is to be permitted only after payment of tax, interest and penalty and compounding shall not affect any proceeding already instituted under any other law.

Q 23. Are there any monetary limits prescribed for compounding of offence?

Ans. Yes. The lower limit for compounding amount is to be the greater of the following amounts: -

• 50% of tax involved, or
• 10,000.

The upper limit for compounding amount is to be greater

of the following amounts: -

• 150% of tax involved or
• 30,000.

Q 24. What is the consequence of compounding of an offence under CGST/SGST Act?

Ans. Sub-section (3) of section 138 provides that on payment of compounding amount no further proceeding to be initiated under this Act and criminal proceeding already initiated shall stand abated.

15. Overview of the IGST Act

Q 1. How will imports/exports be taxed under GST?

Ans. All imports/exports will be deemed as inter-state supplies for the purposes of levy of GST (IGST). The incidence of tax will follow the destination principle and the tax revenue in case of SGST will accrue to the State where the imported goods and services are consumed. Full and complete set-off will be available as ITC of the IGST paid on import on goods and services. Exports of goods and services will be zero rated. The exporter has the option either to export under bond without payment of duty and claim refund of ITC or pay IGST at the time of export and claim refund of IGST. The IGST on imports is leviable under the provisions of the Customs Tariff Act and shall be levied at the time of imports along with the levy of the Customs Act (Section 5 of the IGST Act)