Year: 2020

An Act to consolidate and amend the law relating to customs.

Be it enacted by Parliament in the Thirteenth Year of the Republic of India as follows. 

Short Title Extent and Commencement:

(1) This Act may be called the Customs Act, 1962.

(2) It extends to the whole of India.

(3) It shall come into force on such date 2 as the Central Government may by notification in the Official Gazette, appoint.

Definitions.

In this Act, unless the context otherwise requires, (1) “adjudicating authority” means any authority competent to pass any order or decision under this Act, but does not include the Board Commissioner (Appeals) or Appellate Tribunal;

(1A) “aircraft” has the same meaning as in the Aircraft Act, 1934 (22 of 1934);

(1B) “Appellate Tribunal” means the Customs, Excise and Gold (Control) Appellate Tribunal constituted under section 129;

(2) “assessment” includes provisional assessment, reassessment and any order of assessment in which the duty assessed is nil;

(3) “baggage” includes unaccompanied baggage but does not include motor vehicles;

(4) “bill of entry” means a bill of entry referred to in section 46;

(5) “bill of export” means a bill of export referred to in section 50;

(6) “Board” means the Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963 (54 of 1963);

(7) “coastal goods” means goods, other than imported goods, transported in a vessel from one port in India to another;

(7A) “Commissioner (Appeals)” means a person appointed to be a Commissioner of Customs (Appeals) under sub-section (1) of section 4;

(8) “Commissioner of Customs”, except for the purposes of Chapter XV, includes an Additional Commissioner of Customs;

(9) “conveyance” includes a vessel, an aircraft and a vehicle;

(10) “customs airport” means any airport appointed under clause (a) of section 7 to be a customs airport;

(11) “customs area” means the area of a customs station and includes any area in which imported goods or export goods are ordinarily kept before clearance by Customs Authorities;

(12) “customs port” means any port appointed under clause (a) of section 7 to be a customs port and includes a place appointed under clause (aa ) of that section to be an inland container depot;

(13) “customs station” means any customs port, customs airport or land customs station;

(14) “dutiable goods” means any goods which are chargeable to duty and on which duty has not been paid;

(15) “duty” means a duty of customs leviable under this Act;

(16) “entry” in relation to goods means an entry made in a bill of entry shipping bill or bill of export and includes in the case of goods imported or to be exported by post, the entry referred to in section 82 or the entry made under the regulations made under section 84;

(17) “examination”, in relation to any goods, includes measurement and weighment thereof;

(18) “export”, with its grammatical variations and cognate expressions means taking out of India to a place outside India;

(19) “export goods” means any goods which are to be taken out of India to a place outside India;

(20) “exporter”, in relation to any goods at any time between their entry for export and the time when they are exported, includes any owner or any person holding himself out to be the exporter;

(21) “foreign-going vessel or aircraft” means any vessel or aircraft for the time being engaged in the carriage of goods or passengers between any port or airport in India and any port or airport outside India, whether touching any intermediate port or airport in India or not, and includes –

( i ) any naval vessel of a foreign Government taking part in any naval exercises;

(ii) any vessel engaged in fishing or any other operations outside the territorial waters of India;

(iii) any vessel or aircraft proceeding to a place outside India for any purpose whatsoever;

(21A) “Fund” means the Consumer Welfare Fund established under section 12C of the Central Excises and Salt Act, 1944 (1 of 1944);

(22) “goods” includes:

(a) vessels, aircrafts and vehicles;

(b) stores;

(c) baggage;

(d) currency and negotiable instruments; and

(e) any other kind of movable property;

(23) “import”, with its grammatical variations and cognate expressions, means bringing into India from a place outside India;

(24) “import manifest” or “import report” means the manifest or report required to be delivered under section 30;

(25) “imported goods” means any goods brought into India from a place outside India but does not include goods which have been cleared for home consumption;

(26) “importer”, in relation to any goods at any time between their importation and the time when they are cleared for home consumption, includes any owner or any person holding himself out to be the importer;

(27) “India” includes the territorial waters of India;

(28) “Indian customs waters” means the waters extending into the sea up to the limit of contiguous zone of India under section 5 of the Territorial Waters, Continental Shelf, Exclusive Economic Zone and Maritime Zones Act, 1976 (80 of 1976) and includes any bay, gulf, harbour, creek or tidal river;

(29) “land customs station” means any place appointed under clause(b) of section 7 to be a land customs station;

(30) “market price”, in relation to any goods, means the wholesale price of the goods in the ordinary course of trade in India;

(31) “person-in-charge” means, –

(a) in relation to a vessel, the master of the vessel;

(b) in relation to an aircraft, the commander or pilot-in-charge of the aircraft;

(c) in relation to a railway train, the conductor, guard or other person having the chief direction of the train;

(d) in relation to any other conveyance, the driver or other person-in-charge of the conveyance;

(32) “prescribed” means prescribed by regulations made under this Act;

(33) “prohibited goods” means any goods the import or export of which is subject to any prohibition under this Act or any other law for the time being in force but does not include any such goods in respect of which the conditions subject to which the goods are permitted to be imported or exported have been complied with;

(34) “proper officer”, in relation to any functions to be performed under this Act, means the officer of customs who is assigned those functions by the Board or the Commissioner of Customs;

(35) “regulations” means the regulations made by the Board under any provision of this Act;

(36) “rules” means the rules made by the Central Government under any provision of this Act;

(37) “shipping bill” means a shipping bill referred to in section 50;

(38) “stores” means goods for use in a vessel or aircraft and includes fuel and spare parts and other articles of equipment, whether or not for immediate fitting;

(39) “smuggling”, in relation to any goods, means any act or omission which will render such goods liable to confiscation under section 111 or section 113.

(40) “tariff value”, in relation to any goods, means the tariff value fixed in respect thereof under sub-section (2) of section 14;

(41) “value”, in relation to any goods, means the value thereof determined in accordance with the provisions of sub-section (1) of section 14;

(42) “vehicle” means conveyance of any kind used on land and includes a railway vehicle;

(43) “warehouse” means a public warehouse appointed under section 57 or a private warehouse licensed under section 58;

(44) “warehoused goods” means goods deposited in a warehouse;

(45) “warehousing station” means a place declared as a warehousing station under section 9.

Methods of Valuation:

According to the Customs Valuation Rules, 1988, the Customs Value should normally be the “Transaction Value”, i.e., the price actually paid or payable after adjustment by Valuation Factors (see below) and subject to (a) Compliance with the Valuation Conditions (see below) and (b) Customs authorities being satisfied with the truth and accuracy of the Declared Value.

Transaction Value:

Rule 3(i) of the Customs Valuation Rules, 1988 states that the value of imported goods shall be the transaction value. Rule 4(i) thereof states that the transaction value of imported goods shall be the price actually paid or payable for the goods when sold for export to India, adjusted in accordance with the provisions of Rule 9.

The price actually paid or payable is the total payment made or to be made by the buyer to the seller or for the benefit of the seller for the imported goods. It includes all payments made as a condition of sale of the imported goods by the buyer to the seller or by the buyer to a third party to satisfy an obligation of the seller.

If objective and quantifiable data do not exist with regard to the Valuation Factors, if the Valuation Conditions are not fulfilled, or if Customs authorities have doubts concerning the truth or accuracy of the declared value in terms of Rule 10A of the Customs Valuation Rules, valuation has to be carried out by another method in the following hierarchical order:

Comparative Value Method – Comparison with Transaction Value of Identical goods (Rule 5);

Comparative Value Method – Comparison with Transaction Value of Similar goods (Rule 6);

Deductive Value Method – Based on sale price in the importing country (Rule 7); Computed Value Method – Based on cost of materials, fabrication and profit in the country of production (Rule 7A);

Fallback Method – Based on previous methods with greater flexibility (Rule 8).

Valuation Factors:

Valuation Factors are the various elements which must be taken into account by addition (Dutiable factors) to the extent these are shown to be not already included in the price actually paid or payable or deduction (Non-dutiable factors) from the total price incurred in determining the Customs Value, for assessment purposes.

Dutiable Factors:

Commissions and brokerage, except buying commissions;

The cost of containers which are treated as being one for Customs purposes with the goods in question;

The cost of packing whether for labour or materials;

The value, apportioned as appropriate, of the following goods and services where supplied directly or indirectly by the buyer free of charge or at reduced cost for use in connection with the production and sale for export of the imported goods, to the extent that such value has not been included in the price actually paid or payable:

• Material, components, parts and similar items incorporated in the imported goods;
• Tools, dies, moulds and similar items used in the production of the imported goods;
• Materials consumed in the imported goods;
• Engineering, developing, artwork, design work, and plans and sketches undertaken elsewhere than in the importing country and necessary for the production of imported goods;
• Royalties and license fees related to goods being valued that the buyer must pay either directly or indirectly, as a condition of sale of the goods being valued, to the extent that such royalties and fees are not included in the price actually paid or payable;
• The value of any part of the proceeds of any subsequent resale, disposal or use of the goods that accrues directly or indirectly to the seller;
• Advance payments;
• Freight charges up to the place of importation;
• Loading, unloading and handling charges associated with transporting the goods;
• Insurance.

Non-dutiable Factors:

• The following charges provided they are separately declared in the commercial invoice:
• Interest charges for deferred payment;
• Post-importation charges (e.g. inland transportation charges, installation or erection charges, etc.);
• Duties and taxes payable in the importing country.

Cases where transaction value may be rejected:

The transaction value may not be accepted for customs valuation in the following categories of cases as provided in Rule 4(2):

If there are restrictions on use or disposition of the goods by the buyer. However, the transaction value not to be rejected on this ground if restrictions:

• Are imposed by law or public authorities in India;
• Limit geographical area of resale;
• Do not affect the value of the goods substantially.

If the sale or price is subject to a Condition or consideration for which a Value cannot be determined. However, conditions or considerations relating to production or marketing of the goods shall not result in rejection.

If part of the proceeds of the subsequent resale, disposal or use of the goods accrues to the seller, unless an adjustment can be made as per valuation factors.

Buyer and seller are related; unless it is established by the importer that:

• The relationship has not influenced the price;
• The importer demonstrates that the price closely approximates one of the test values.

The transaction price declared can also be rejected in terms of Rule 10A, when the proper customs officer has reasons to doubt the truth or accuracy of the value declared & if even after furnishing of further information/documents or other evidence produced, proper officer is not satisfied & has reasonable doubts about the value declared.

Basic Customs Duty

Basic custom duty is the duty imposed on the value of the goods at a specific rate. The duty is fixed at a specified rate of ad-valorem basis. This duty has been imposed from 1962 and was amended from time to time and today is regulated by the Customs Tariff Act of 1975. The Central Government has the right to exempt any goods from the tax.

Countervailing Duty (CVD)

This duty is imposed by the Central Government when a country is paying the subsidy to the exporters who are exporting goods to India. This amount of duty is equivalent to the subsidy paid by them. This duty is applicable under Sec 9 of the Customs Tariff Act.

Additional Customs Duty or Special CVD

To equalize imports with locals’ taxes like service tax, VAT and other domestic taxes which are imposed from time to time, a special countervailing duty is imposed on imported goods. Hence, is imposed to bring imports on an equal track with the goods produced or manufactured in India. This is to promote fair trade & competition practices in our country.

Safeguard Duty

To make sure that no harm is caused to the domestic industries of India, a safeguard duty is imposed to safeguard the interest of our local domestic industries. It is calculated on the basis of loss suffered by our local industries.

Anti-Dumping Duty

Often, large manufacturer from abroad may export goods at very low prices compared to prices in the domestic market. Such dumping may be with intention to cripple domestic industry or to dispose of their excess stock. This is called ‘dumping’. To avoid such dumping, Central Government can impose, under section 9A of Customs Tariff Act, anti-dumping duty up to margin of dumping on such articles, if the goods are being sold at less than its normal value. Levy of such anti-dumping duty is permissible as per WTO agreement. Anti-dumping action can be taken only when there is an Indian industry producing ‘like articles.

National Calamity Contingent Duty

This duty is imposed by Sec 129 of the Finance Act. The duty is levied on goods like tobacco, pan masala or any items that are harmful for health. The rate of the tax varies from 10% to 45% and different rates are applied for different reasons.

Education Cess on Customs Duty

At the prescribed rate is levied as a percentage of aggregate duties of customs. If goods are fully exempted from duty or are chargeable to nil duty or are cleared without payment of duty under prescribed procedure such as clearance under bond, no cess would be levied.

Protective Duties

Tariff Commission has been established under Tariff Commission Act, 1951. If the Tariff Commission recommends and Central Government is satisfied that immediate action is necessary to protect interests of Indian industry, protective customs duty at the rate recommended may be imposed under section 6 of Customs Tariff Act. The protective duty will be valid till the date prescribed in the notification.

Calculating Custom Duty

Custom duty can be calculated on either a specific or an ad valorem basis. The value of goods, for the latter, is determined by Rule 3(i) of the Customs Valuation Rules, 2007. If there is no quantifiable data w.r.t. valuation factors, then the valuation of the items is done using other means based on a system of hierarchy, as follows:

• Comparative Value Method: This method compares transaction values of items similar in nature (Rule 4)
• Comparative Value Method: This method compares transaction values of items similar in nature (Rule 5)
• Deductive Value Method: This method uses the sale price of items in the importing country (Rule 7)
• Comparative Value Method: This method uses costs related the fabrication, materials as well as profit in the production country (Rule 8)
• Fallback Method: This method is based on the earlier methods that offer higher flexibility (Rule 9)

Custom Duty Rates

These rates can either be specific or ad valorem. The duty, in general, varies from the range 0-150%. The average rate, however, is 11.90%. There is a list to refer to for goods that are exempted from this duty.

There are other types of fee that are applicable to custom duty. Thy include:

• LC: Landing charge – 1% CIF
• CVD: Countervailing Duty – 0%, 6% or 12% (CIFD + LC)
• CEX: Education and Higher Education Cess – 3% CVD
• CESS: Education + Higher Education – 3% (Duty + CEX (Education and Higher Education Cess) + CVD)
• Additional CVD: 4% (CIFD + LC + CVD + CESS + CEX)

Customs valuation is the process where customs authorities assign a monetary value to a good or service for the purposes of import or export. Generally, authorities engage in this process as a means of protecting tariff concessions, collecting revenue for the governing authority, implementing trade policy, and protecting public health and safety. Customs duties, and the need for customs valuation, have existed for thousands of years among different cultures, with evidence of their use in the Roman Empire, the Han Dynasty, and the Indian sub-continent. The first recorded customs tariff was from 136 in Palmyra, an oasis city in the Syrian desert. Beginning near the end of the 20th century, the procedures used throughout most of the world for customs valuation were codified in the Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade (GATT) 1994.

Transaction value

The primary basis for customs valuation under the Agreement is “transaction value” as defined in Article 1. Article 1 defines transaction value as “the price actually paid or payable for the goods when sold for export to the country of importation.” Article 1 must be read together with Article 8, which lets Customs authorities make adjustments to the transaction value in cases where certain specific parts of the good – considered to be a part of the value for customs purposes – are incurred by the buyer but are not actually included in the price paid or payable for the imported goods. Article 8 also allows for the inclusion in transaction value of exchanges (“considerations”) between the buyer and seller in forms other than money. Articles 2 through 7 provide methods of determining the customs value whenever it cannot be determined under the provisions of Article 1.

The methods of customs valuation, in descending order of precedence, are:

• Transaction Value of Merchandise in Question – price actually paid or payable for the goods sold. (Art. 1)
• Transaction Value of Identical Merchandise (Art. 2)
• Transaction Value of Similar Merchandise (Art. 3)
• Deductive Value (Art. 5)
• Computed Value (Art. 6)
• Derivative Method (Art. 7)

This hierarchy is codified in domestic legislation.

The rates of customs duties leviable on imported goods (& export items in certain cases) are either specific or on ad valorem basis or at times specific cum ad valorem. When customs duties are levied at ad valorem rates, i.e., depending upon its value, it becomes essential to lay down in the law itself the broad guidelines for such valuation to avoid arbitrariness and to ensure that there is uniformity in approach at different Customs formations. Section 14 of the Customs Act, 1962 lays down the basis for valuation of import & export goods in the country. It has been subject to certain changes basic last change being in July-August, 1988 when present version came into operation. Briefly the provisions are explained in the following paragraphs.

Tariff Value:

The Central Government has been empowered to fix values, under sub-section (2) of Section 14 of the Customs Act, 1962 for any product which are called Tariff Values. If tariff values are fixed for any goods, ad valorem duties are to be calculated with reference to such tariff values. The tariff values may be fixed for any class of imported or export goods having regard to the trend of value of such or like goods and the same has to be notified in the official gazette. Recently tariff values have been fixed in respect of import of Crude Palm Oil, RBD Palm Oil, RBD Palmolein under Notification No.36/2001-CUS (N.T.), dated 3.8.2001 and for RBD Crude Palmolein under Notification No. 40/2001-CUS (N.T.) dated 28.08.2001.

Valuation of Imported/Export Goods where no Tariff Values fixed:

Section 2(41) of the Customs Act, 1962 defines ‘Value’ in relation to any goods to mean the value thereof determined in accordance with the provisions of sub-section (1) of Section 14 thereof.

Sub-section (1) of Section 14 in turn states that when a duty of customs is chargeable on any goods by reference to their value, the value of such goods shall be deemed to be: “the price at which such or like goods are ordinarily sold, or offered for sale, for delivery at the time and place of importation or exportation, as the case may be, in the course of international trade, where the seller and the buyer have no interest in the business of each other and the price is the sole consideration for the sale or offer for sale”.

As far as export goods are concerned, provisions of sub-section (1) of Section 14 provide a complete code of valuation by itself. On the other hand, for imported goods, as per sub-section (1A) of Section 14, the value is required to be determined in accordance with rules made in this behalf. Accordingly, the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 have been framed and notified under Notification No.51/88-CUS (N.T.) dated 18.7.1988.

The provisions of sub-section (1) of Section 14 follow the provisions contained in Article VII of GATT. The Customs Valuation Rules closely follow the WTO Customs Valuation Agreement to implement Article VII of GATT. The methods of valuation prescribed therein are of a hierarchical order. The importer is required to truthfully declare the value in the B/E and provide a copy of the invoice and file a valuation declaration in the prescribed form to facilitate correct and expeditious determination of value for assessment purposes.

There are certain activities which are items not covered under GST. They are beyond the scope of GST, i.e., GST will not apply on them. These are classified under Schedule III of the GST Act as “Neither goods nor services”.

1.Services by an employee to the employer in relation to his employment

Related parties include employer-employee which raised many concerns whether employment now attracted GST.  This clarification has been brought in to clarify whether GST is not applicable on employment. An employee will still pay income tax on salary earned .

2. Court/Tribunal Services including District Court, High Court and Supreme Court

Courts will not charge GST to pass judgement.

3. Duties performed by:

• The Members of Parliament, State Legislature, Panchayats, Municipalities and other local authorities
• Any person who holds a post under the provisions of the Constitution
• Chairperson/Member/Director in a body established by the government or a local body and who is not an employee of the same

4. Services of a funeral, burial, crematorium or mortuary including transportation of the deceased

There are no taxes on funeral services for any religion.

5. Sale of land and sale of building

Construction of a new building is subject to GST (being works contract).

6. Actionable claims (other than lottery, betting and gambling)

Actionable Claims’ means claims which can be enforced only by a legal action or a suit, example a book debt, bill of exchange, promissory note. A book debt (debtor) is not goods because it can be transferred as per Transfer of Property Act but cannot be sold. Bill of exchange, promissory note can be transferred under Negotiable Instruments Act by delivery or endorsement but cannot be sold. 

Actionable claims are neither products nor services. They can be considered as something in lieu of money. So GST will not apply on these.

Lottery, betting, and gambling attract 28% GST.

7. Supply of goods from a place in the non-taxable territory to another place in the non-taxable territory without such goods entering into India*.
8. Supply in Customs port before Home consumption*:
   (a) Supply of warehoused goods to any person before clearance for home consumption;
   (b) Supply of goods by the consignee to any other person, by an endorsement of documents of title to the goods, after the goods have been dispatched from the port of origin located outside India but before clearance for home consumption.

9. Petroleum Product, Alcohol

One of the biggest burdens for home buyers is that they will have to bear both GST and Stamp Duty. This is because Stamp Duty was not subsumed under the GST. As a result, they are paying both the taxes which is a burden.

Since GST does not cover road tax, Vehicle Tax was not subsumed under GST. So, vehicle buyers still need to pay road tax as per the Motor Vehicle Act.

In order to bring alcohol under the purview of GST, a constitutional amendment is needed. Hence, Excise on Liquor was not covered under GST.

The Tax on sale and consumption of Electricity is not covered by GST. So, states still charge VAT and centre charges Central Excise on electricity bills.

Toll Tax, environment tax and all other taxes that are directly paid by the users are still levied by the states as they do not come under GST.

Entertainment tax collected by the Local Bodies is not covered under GST. As a result, users will have to pay extra tax in addition to GST which leads to an increase in the price of things like movie tickets.

All the above taxes are a burden on the users or consumers, hence they want the government to levy a single tax to avoid double taxation.

A sales tax is a tax paid to a governing body for the sales of certain goods and services. Usually laws allow the seller to collect funds for the tax from the consumer at the point of purchase. When a tax on goods or services is paid to a governing body directly by a consumer, it is usually called a use tax. Often laws provide for the exemption of certain goods or services from sales and use tax. A value-added tax (VAT) collected on goods and services is like a sales tax.

The indirect tax imposed on selling and purchasing of goods within India is referred to as Sales Tax. It is an additional amount paid over and above the base value of the product being purchased. This tax, usually imposed on the seller by the government, enables the seller to recover the tax from the purchaser. It is usually charged from buyers at the point of purchase or the exchange of some specific goods and is chargeable at a certain percentage of the product value.

Sales Tax is levied by the Central Government as well as State Governments. It is decided by the Central Government basis its tax policies. State Sales Tax laws vary between states.

Central Sales Tax

The following are some of the key features of the Central Sales Tax Act.

• Lays down principles regarding the time of sale and purchase of goods
• Enlists goods that have special importance for trade and commerce
• Lays down regulations regarding charging, collection and distribution of taxes generated from interstate trade
• Holds the final authority for settling interstate trade disputes

State Government Taxes

State Governments in India have the power to decide on Sales Tax policies as per their unique financial requirements. This explains the reason as to why sales taxes vary from state to state. States classify businesses dealing in the sale of goods under three heads – manufacturers, dealers and sellers. Each of them require certificates to operate legally.

Exemptions from Sales Tax

The following categories are exempted from State Sales Tax and are offered to overcome double taxation, or on humanitarian grounds.

• Certain specific goods as per the list of goods that have been exempted by the state government
• Products from sellers with valid state resale certificates
• Products sold for the purpose of charities or educational institutions like schools

Sales Tax Calculation

Sales Tax rate applicable on a particular product can be calculated through a simple formula:

Total Sales Tax = Cost of item x Sales tax rate

While the formula is a simple one, sellers and manufactures need to consider the following while calculating Sales Tax on their goods:

• It is calculated as a percentage
• Be updated on the Sales Tax rate of the state and city that the manufacturer or seller belongs to, as it varies from state to state

Types of Sales Tax

Though countries across geographies have their unique Sales Tax policies, there are certain standard types of sales taxes that are applicable to most countries. They are:

Wholesale Sales Tax: Tax levied on individuals dealing with wholesale distribution of goods is referred to as Wholesale Sales Tax.

Manufacturers’ Sales Tax: Tax charged on manufacturers of some specific goods is known as Manufacturers’ Sales Tax.

Retail Sales Tax: Tax levied on sale of retail goods and directly payable by the final consumer is called Retail Sales Tax.

Use Tax: This is a tax levied on the consumer for goods bought without paying sales tax. This usually holds true when goods are bought from vendors who are not a part of the tax jurisdiction.

Value Added Tax: An additional tax levied by some central governments on all purchases is called the Value Added Tax.

Composition of Central Board of Direct Taxes

The Central Board of Direct Taxes is the administrative authority for levying and collection of sale taxes in India. It is a part of the Department of Revenue that is integral to the Ministry of Finance, and functions as per the Central Board Revenue Act, 1963.

The Central Board of Direct Taxes is composed of members who are assigned responsibilities across different departments like Income Tax, Revenue, Investigation, Legislation and Computerisation, Personnel and Vigilance, and Audit. The governing body is headed by the Chairman.

The Central Board of Direct Taxes is responsible for the following:

• Formulate policies related to direct taxes.
• Oversee administration of direct tax laws along with the Income Tax Department.
• Investigates complaints and disputes related to evasion of taxes.

According to the federal structure of Goods and Services Tax in India, the taxation system has been divided into two parts Central GST (CGST) and State GST (SGST). In this case Centre and States will simultaneously levy Goods and Services Tax across the value chain. The Goods and Services Tax will be levied on every supply of goods and services. Centre would levy and collect Central Goods and Services Tax (CGST), and States would levy and collect the State Goods and Services Tax (SGST) on all transactions within a State.

This topic concentrates on defining the concepts of GSTN. GSTN Act Commencement, Powers of Officer, Tax exemption and Levy, Time value of money and Input tax credit. Let us now start defining the concept of GSTN.

GSTN abbreviated as Goods and Services Tax Network, is a not-for-profit, non-Government Company to provide shared IT infrastructure and services to Central and State Governments, tax payers and other stakeholders. The key objectives of GSTN are to provide a standard and uniform interface to the taxpayers, and shared infrastructure and services to Central and State/UT governments. Goods and Services Tax Network (GSTN) is a Section 8 (under new companies Act, not for profit companies are governed under section 8), non-Government, private limited company. It was incorporated on March 28, 2013.

GST Act Commencement

The Goods and Services Tax Act Commencement covers Section 1 – Short title, extent and commencement

• This Act may be called the Central / State Goods and Services Tax Act, 2016.
• It extends to the whole of India / State’s name.
• It shall come into force on such date as the Central or a State Government may, by notification in the Official Gazette, appoint in this behalf:

Only if different dates may be appointed for different provisions of this Act and any reference in any such provision to the commencement of this Act shall be construed as a reference to the coming into force of that provision.

GST exemptions for goods

There is a list of goods which do not attract GST as recommended by the GST Council. The reasons for granting exemption on goods might include any of the following:

• In the interest of the public
• The exemption is as per the GST Council’s recommendation
• The exemption is granted by the Government through a special order
• The exemption is allowed on specific goods through an official notification

Moreover, there are two types of GST exemptions on goods. These are as follows:

• Absolute exemption: Under this type of exemption, the supply of specific types of goods would be exempted from GST without considering the details of the supplier or receiver and whether the good is supplied within or outside the State.
• Conditional exemption: Under this type of exemption, supply of specific types of goods would be GST exempt subject to certain terms and conditions which have been specified under the GST Act or any amendment or notification.

Here is a list of some of the most common goods which are GST exempt:

GST Exemption on services

Just like specific goods, specific services are also GST exempt. There are three types of supply of services which would qualify for GST exemption. These include the following:

• Supplies which have a 0% tax rate
• Supplies which do not attract CGST or IGST due to the provisions stated in a notification which amends either Section 11 of CGST Act or Section 6 of IGST Act
• Supplies which are defined under Section 2(78) of the GST Act which are not taxable.

Since these types of supplies are GST exempt, any Input Tax Credit which is applicable on these supplies would not be available to utilise or set off the GST liability.

Moreover, even under supply of services, there can be two types of GST exemptions which are as follows –

• Absolute exemption wherein the service would be exempted from GST without any conditions
• Conditional exemption or partial exemption wherein exemption is granted based on a condition. This condition states that if the service is supplied intra-State or if the service is supplied by a registered person to an unregistered one, GST would be exempted if the total value of such supplies received by a registered person is not more than INR 5000/day.

Here is a list of some of the services which enjoy GST exemption:

Though GST is applicable for all businesses and on the supply of goods and services, the above-mentioned exemptions are available. These exemptions reduce the GST burden and help in the socio-economic development of the country.