Manufacturer and ascertaining applicability of CGST, SGST/UTGST and IGST on various categories of transactions types listed under the ‘As Is’ phase of work, based on the GST law.
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Manufacturer under GST Law
1. Manufacturer under GST law
BAGRECHA & ASSOCIATES (CHARTERED ACCOUNTANTS)
F-7, 2nd Floor, Butte Patil Pride, Near Shivaji Statue,Chandannagar,
Pune -411 014 Phone 020-2701 9233 / 91-94046 95907
Website:- http://www.bagrechaassociates.com
Tax Blog:- http://www.indiantaxhome.com
2. Definition of Manufacturer under GST
• The GST law does not define the word ‘manufacture’ or ‘manufacturer’ per se. However section 2(72) defines manufacture as under which includes
“manufacturer” and manufacturer shall have the meaning assigned to it by the Central Excise Act, 1944 (1 of 1944).
• Section 2(f) of Central Excise Act, 1944 defines manufacture and the said definition also includes the definition of manufacturer. It reads as under:
“manufacture” includes any process, -
( i ) incidental or ancillary to the completion of a manufactured product;
(ii) which is specified in relation to any goods in the Section or Chapter notes of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) as
amounting to manufacture; or
(iii) which, in relation to the goods specified in the Third Schedule, involves packing or repacking of such goods in a unit container or labelling or
re-labelling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to
render the product marketable to the consumer,
• and the word “manufacturer” shall be construed accordingly as per Section 2(72) of the CGST ACT and shall include not only a person who
employs hired labour in the production or manufacture of excisable goods, but also any person who engages in their production or manufacture on his
own account.
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3. Definition of Manufacturer under GST
• “Manufacturer” shall include not only a person who employs hired labour in the
production or manufacture of excisable goods, but also any person who engages in
their production or manufacture on his own account.
• Accordingly it may be construed that a person shall be deemed to be a
manufacturer if he is engaged in production or manufacture of goods either
through hired labour or through himself.
• Under GST only the trader and manufacturer are eligible for composition.
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4. Levy and exemption under GST
• Sub-section (1) of Section 9 provides for levy of tax called Central/State Goods and Services tax on all intra-State
supplies of goods and services. This sub-section would be applicable to all manufacturers supplying goods within the
same State.
• Provisions relating to levy of tax on supply of goods or services on making inter State supplies are contained in Section
5 of IGST Act, 2017. For this purpose, "supply of goods or services in the course of inter State trade or commerce”
means any supply where the location of the supplier and the place of supply are in different States. Even supply of goods
or services in the course of import into the territory of India is also deemed to be supply in the course of inter State trade
or commerce.
• Sub-section 5 of Section 7 of IGST Act, 2017 provides that any supply of goods or services in the taxable territory
shall be deemed to be a supply in the course of inter State trade or commerce if it is not a intra State supply and
is not covered else where in Section 5 of IGST Act, 2017.
• In the case of supply of goods or services where the supplier is located in India and the place of supply is outside
India/SEZ developer/SEZ unit, it shall be deemed to be the supply of goods/services in the course of inter- State
trade or commerce.
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5. Supply of Goods
• Under GST law, the taxable event is ‘supply of goods’. Section 2(52) defines goods as under:
“goods” means every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be
severed before supply or under a contract of supply;
This definition has the following parts:
Means
Excludes
Includes.
• Therefore, according to the GST ACT, goods are of following kinds:
(a) Every kind of movable property
(b) Excluding money and Securities
(c) Including actionable claims
(d) Growing crops grass and things attached to or forming part of the land.
(e) Which are agreed to be severed before supply.
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6. Supply of Goods
• Section 7 of the CGST law defines the word ‘supply’ as under:
For the purposes of this Act, the expression “supply” includes––
(a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange,
licence, rental, lease or disposal made or agreed to be made for a consideration by a person in
the course or furtherance of business;
(b) import of services for a consideration whether or not in the course or furtherance of business;
(c) the activities specified in Schedule I, made or agreed to be made without a consideration; and
(d) the activities to be treated as supply of goods or supply of services as referred to in Schedule
II.
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7. Supply of Goods
• Section 2(74) defines the word ‘mixed supply’ as under:
“mixed supply” means two or more individual supplies of goods or services,or any
combination thereof, made in conjunction with each other by a taxable person for a
single price where such supply does not constitute a composite supply.
• Illustration.— A supply of a package consisting of canned foods, sweets,
chocolates, cakes, dry fruits, aerated drinks and fruit juices when supplied for a
single price is a mixed supply. Each of these items can be supplied separately and is
not dependent on any other. It shall not be a mixed supply if these items are
supplied separately;
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8. Time of Supply
The time of supply refers to the point when the liability of CGST/SGST/IGST arises.
• In case of supply of goods by the manufacturer, supply is earliest of the following:-
(i) The date of issue of invoice by the supplier of goods or the last date when he is required to issue invoice with respect to the said supply.
(ii) The date on which the manufacturer receives the payment with respect to the said supply.
• It would be noticed that under the GST law, the manufacturer would be liable for payment of tax even on receipt of payment in advance as against the earlier
provisions of payment of tax on clearance/sale of goods.
• Under the GST regime, manufacturers may be liable to pay tax on reverse charge basis on receipt of goods. The time of supply shall be the earliest of
the following dates:-
(i) Date of receipt of goods, or
(ii) Date on which payment is made, or
(iii) Date immediately following 30 days from the date of issue of invoice by the supplier.
In case it is not possible to determine the time of supply of goods in the aforesaid manner, the time of supply of goods shall be the date of entry in the books of
account of the recipient of supply.
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9. Time of Supply
• The aforesaid provisions contained in section 12 of CGST ACT can be summarized In the following tabular form :-
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S.No. Requirement Time of Supply
A Supply of goods Earlier of the following:-
(i) The date on which supplier issues an invoice with respect to supply or the last date on which he is
required to issue invoice.
(ii) (ii) The date on which supplier receives the payment with respect to supply.
B Reverse charge on receipt of
goods
Earlier of:
Date of receipt of goods or
Date of making payment or
Date immediately following 30 days from the date of issue of invoice
C Supply of vouchers Earlier of the following:
(a) Date of issue of voucher( where supply is identifiable at that point; or
(b) Date of redemption of voucher (other cases).
D Unable to determine as above Due date for filing return
Date of payment of tax
10. Place of Supply of Goods
• Supplies of goods in the course of inter-State trade or commerce
Supply of goods in the course of inter-State trade or commerce means any supply where the location of the supplier and the
place of supply are in different States. E.g.- if a manufacturer located in Delhi supplies goods in Lucknow (Uttar Pradesh), it
would be an inter-state supply.
• Supplies of goods in the course of intra-State trade or commerce
Intra-state supply of goods means any supply where the location of the supplier and the place of supply are in the same State.
E.g. - A manufacturer located in Jaipur supplies goods in Jodhpur. As the location of manufacturer and place of supply are in
the State of Rajasthan, it is an intra-State supply.
• However, supply of goods in following cases shall not be considered as intra-State supply:-
(i) Supply of goods to or by a SEZ developer.
(ii) Supply of goods to or by a SEZ unit.
(iii) Supply of goods brought into India in the course of import, till they cross the customs frontiers of India.
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11. Place of Supply of Goods
• All intra State supplies of goods shall be liable for payment of CGST (Central Goods and Services Tax)
and SGST (State Goods and Services Tax). In these cases, both types of taxes would be simultaneously
levied. SGST shall go to the credit of State Government and CGST shall go to the credit of the Central
Government.
• All inter-state supplies of goods would be liable to IGST (Integrated Goods and Services Tax). Basically it
would be sum total of CGST (Central Goods and Services Tax) and SGST (State Goods and Services Tax).
• Broadly, where the location of the supplier and the place of supply are in the same State, it will be intra
State and where it is in different States, it will be inter-State supply.
• Section 10(1) of IGST Act provides that where the supply involves movement of goods, the place of
supply of goods shall be the location of goods at the time at which the movement of goods
terminates for delivery to the recipient. The said movement can be affected by the suppliers of goods or
by the recipients or any other person. The sum and substance of this sub section is that the destination of
goods is the place of supply.
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12. Place of Supply of Goods
• Place of supply of Goods Imported
a) The place of supply of goods imported into India shall be the location of the
importer. IGST would be payable on all imports of goods.
• Place of supply of Goods Exported
a) The place of supply of goods exported from India shall be the location outside
India.
b) A manufacturer would essentially be involved in supply of goods. Therefore,
provisions relating to place of supply of services are not being elaborated here.
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13. Place of Supply of Goods
(BRANCH TRANSFER)
• Explanation 1 ––For the purposes of this Act, where a person has,
(i) an establishment in India and any other establishment outside India;
(ii) an establishment in a State or Union territory and any other establishment outside that State
or Union territory; or
(iii) an establishment in a State or Union territory and any other establishment being a business
vertical registered within that State or Union territory,
then such establishments shall be treated as establishments of distinct persons.
Explanation 2.––A person carrying on a business through a branch or an agency or a
representational office in any territory shall be treated as having an establishment in that
territory.
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14. Job Work
• Section 2 (68) of the CGST Law defines job work as under –
“job work” means any treatment or process undertaken by a person on goods
belonging to another registered person and the expression “job worker” shall
be construed accordingly;
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15. Provisions relating to job work
• (1) A registered person (hereafter in this section referred to as the “principal”) may under intimation and subject to such
conditions as may be prescribed, send any inputs or capital goods, without payment of tax, to a job worker for job work
and from there subsequently send to another job worker and likewise, and shall,––
(a) bring back inputs, after completion of job work or otherwise, or capital goods, other than moulds and dies, jigs and
fixtures, or tools, within one year and three years, respectively, of their being sent out, to any of his place of
business, without payment of tax;
(b) supply such inputs, after completion of job work or otherwise, or capital goods, other than moulds and dies, jigs and
fixtures, or tools, within one year and three years, respectively, 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, as the case may be: Provided
that the principal shall not supply the goods from the place of business of a job worker in accordance with the
provisions of this clause unless the said principal declares the place of business of the job worker as his additional place
of business except in a case—
(i) where the job worker is registered under section 25; or
(ii) where the principal is engaged in the supply of such goods as may be notified by the Commissioner
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16. Provisions relating to job work
• The responsibility for keeping proper accounts for the inputs or capital goods shall lie with the principal.
• Where the inputs sent for job work are not received back by the principal after completion of job work or otherwise in accordance with the
provisions of clause (a) of sub-section (1) or are not supplied from the place of business of the job worker in accordance with the provisions
of clause (b) of sub-section (1) within a period of one year of their being sent out, it shall be deemed that such inputs had been supplied by
the principal to the job worker on the day when the said inputs were sent out.
• Where the capital goods, other than moulds and dies, jigs and fixtures, or tools, sent for job work are not received back by the principal in
accordance with the provisions of clause (a) of sub-section (1) or are not supplied from the place of business of the job worker in accordance
with the provisions of clause (b) of sub-section (1) within a period of three years of their being sent out, it shall be deemed that such
capital goods had been supplied by the principal to the job worker on the day when the said capital goods were sent out.
• Notwithstanding anything contained in sub-sections (1) and (2), any waste and scrap generated during the job work may be supplied by the job
worker directly from his place of business on payment of tax, if such job worker is registered, or by the principal, if the job worker is not
registered
• Explanation.––For the purposes of job work, input includes intermediate goods arising from any treatment or process carried out on the
inputs by the principal or the job worker
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17. Payment of Tax & Manner and Utilisation of Credit
• Every registered manufacturer is eligible to take input tax credit in respect of inputs, input services and
capital goods. Tax payable on outward supply of goods can be paid out of the said credit, to the extent credit
is available therein. Remaining amount of tax has to be paid through banking system by way of challan in
Form GST PMT-4 (Given in Annexure-1 to this Chapter.)
• The Manufacturer may make deposits towards tax, interest, penalty, fee or any other amount through internet
banking or by using credit/ debit cards or through NEFT or RTGS or by any other mode. The Government
may prescribe the conditions and restrictions as may be considered necessary. The amount so paid shall be
credited to the electronic cash ledger of the registered manufacturer, which shall be maintained in Form
GST PMT-3
• The date of deposit in the electronic cash ledger shall be deemed to be the date when it is credited to the
account of the appropriate government.
• The amount of input tax credit allowable to the manufacturer shall be credited to his electronic credit ledger,
to be maintained in Form GST PMT-2
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18. Payment of Tax & Manner and Utilisation of Credit
The manner of utilization of the input tax credit (ITC) shall be as under–
• ITC of IGST shall be first utilized towards payment of IGST and the remaining
amount may be utilized for the payment of CGST and SGST.
• ITC of CGST shall be first utilised towards payment of CGST and the remaining
amount may be utilised for the payment of IGST.
• ITC of SGST shall be first utilised towards payment of SGST and the remaining
amount may be utilised for the payment of IGST.
• ITC of SGST cannot be used for the payment of CGST and vice versa.
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19. Payment of Tax & Manner and Utilisation of Credit
• The amount available in the electronic cash ledger may be utilized for making any payment towards tax, interest, penalty, fee or any other amount payable
under the Act. The amount available in electronic credit ledger may be utilized for payment towards output tax only. It cannot be utilized for payment of
penalty, interest, fee etc.
• All liabilities towards tax, interest, penalty etc of a registered manufacturer shall be recorded and maintained in an electronic liability register, which is to be
maintained in Form GST PMT-1 The Credit available in electronic cash ledger and electronic credit ledger is to be utilised for payment of taxes and other
dues in the following order-
Self assessed tax, and other dues related to the returns of previous tax periods,
Self assessed tax, and other dues related to the return of current tax period.
Any other amount payable under the Act or the Rules made thereunder including the demand determined under respective sections.
• Every registered manufacturer is liable for the payment of interest for delay in payment of tax as per prescribed rate. Similarly, in case of excess claim of
input tax credit or short declaration of output tax liability, the manufacturer is liable to pay interest for the period during which the credit has been
excessively utilised or liability has been short declared.
• The tax so deducted is to be paid within 10 days after end of the month in which it has been deducted. The manufacturer is required to
furnish a certificate to the supplier, mentioning therein the contract value, rate of deduction, amount deducted and amount paid to the
government. In case of failure to furnish the said certificate or delay in furnishing of certificate, the manufacturer is liable to pay late fees of
Rs. 100 per day, subject to a maximum amount of Rs. 5,000/-.
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20. Conditions for Credit allowability
Input Tax Credit can be availed only if:
• Such person possesses Tax Invoice, Debit note, Bill of Entry, ISD Invoice, or
Invoice issued by service recipient under Reverse charge mechanism
• Prescribed particulars are mentioned on the Invoice and the recipient furnishes
relevant information in Form GSTR-2
• Goods/Services have been received by such person
• Tax charged in respect to such supply has been actually paid to the Government
• Return has been furnished
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21. Blocked Credits
Input Tax Credit shall not be available in respect of the following:
• motor vehicles and other conveyances, except when they are used for providing the taxable supplies of further supply of vehicles/conveyances, transportation of
passengers/goods, or imparting training on driving, flying, navigating such vehicles/ conveyances;
• goods/services provided in relation to food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery except when used for providing
similar taxable supplies;
• membership of club, health and fitness center;
• Rent-a-cab, life insurance, health insurance (except where mandated by Government), except when they are used for providing similar services;
• Travel benefits extended to employees on vacation;
• Works contract services supplied for construction of immovable property, other than plant and machinery, except when used for similar service;
• goods/services received for construction of immovable property (excluding plant & machinery) on own account;
• goods/services on which tax has been paid under Composition scheme;
• goods/services received by a non-resident taxable person except on goods imported by him;
• goods/services used for personal consumption;
• goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples ;
• any tax not paid/credit wrongly availed by reasons of fraud/willful misstatement/suppression, etc.
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22. Interest Rates under CGST Act, 2017
prescribed
• Central Government vide Notification No. 13/2017-Central Tax, dt. 28-06-2017 has w.e.f 1st July 2017 prescribed the following rates of interest per
annum for respective sections as follows:
• Further, similar interest rates have been prescribed under IGST Act, 2017 vide Notification No. 06/2017-Integrated Tax, dt. 28- 06-2017 with regards to
section 20 of IGST Act, 2017.
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S. No CGST Act, 2017 Sections Section description Rate of interest
1. 50(1) Failure to pay tax or part thereof to the Government within period
prescribed
18%
2. 50(3) For undue or excess claim of ITC or reduction of output tax liability 24%
3. 54(12) Interest on withheld refund 6%
4. 56 Interest on delayed refunds 6%
5. Proviso to 56 Interest on refund arising from order passed by Adjudicating Authority/
Appellate Authority/ Tribunal/ Court and not refunded within 60 days
9%
23. Returns
• The Rules have prescribed following forms for filing return GSTR Forms Applicability :-
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Return Form What to file? By Whom? By When?
GSTR-1 Details of outward supplies of taxable goods
and/or services effected
Registered Taxable Supplier 10th of the next month
GSTR-2 Details of inward supplies of taxable goods and/or
services effected claiming input tax credit.
Registered Taxable Recipient 15th of the next month
GSTR-3 Monthly return on the basis of finalization of
details of outward supplies and inward supplies
along with the payment of amount of tax.
Registered Taxable Person 20th of the next month
GSTR-4 Quarterly return for compounding taxable person. Composition Supplier 18th of the month succeeding quarter
GSTR-5 Return for Non-Resident foreign taxable person Non-Resident Taxable Person 20th of the next month
GSTR-6 Return for Input Service Distributor Input Service Distributor 13th of the next month
GSTR-7 Return for authorities deducting tax at source. Tax Deductor 10th of the next month
GSTR-8 Details of supplies effected through e-commerce
operator and the amount of tax collected
E-commerce Operator/Tax Collector 10th of the next month
GSTR-9 Annual Return Registered Taxable Person 31st December of next financial year
GSTR-10 Final Return Taxable person whose registration has been
surrendered or cancelled.
Within three months of the date of cancellation or date
of cancellation order, whichever is later.
GSTR-11 Details of inward supplies to be furnished by a
person having UIN
Person having UIN and claiming refund 28th of the month following the month for which
statement is filed
24. BAGRECHA & ASSOCIATES (CHARTERED ACCOUNTANTS)
F-7, 2nd Floor, Butte Patil Pride, Near Shivaji Statue,Chandannagar,
Pune -411 014 Phone 020-2701 9233 / 91-94046 95907
Website:- http://www.bagrechaassociates.com
Tax Blog:- http://www.indiantaxhome.com
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