CS Executive · Tax Laws and Practice

Concept of Indirect Taxes at a Glance: formula sheet

Full chapter guide

Key formulas

Direct tax test: Impact = Incidence (same person); The person liable to pay the tax also bears the burden. Burden cannot be shifted.
Indirect tax test: Impact on supplier or importer; Incidence on consumer; Tax is first paid to the government by the supplier, then passed on through the price.
Basis of levy: Direct tax: income or wealth. Indirect tax: supply, import or consumption; Use this to classify any given tax.
Nature of rates: Direct: usually progressive. Indirect: tends to be regressive; Indirect tax takes a higher share of a low income, as the tax on a purchase is the same for every buyer.
Value of supply under IGST Act (Section 20, proviso): Value of supply includes taxes, duties, cesses, fees and charges under other laws, if charged separately by the supplier; Excludes taxes under the IGST Act itself and the GST (Compensation to States) Act.
Article 246A: Parliament + State legislatures: GST on goods and services; Parliament alone: inter-State supplies; Concurrent power, but inter-State supply is exclusive to Parliament.
Article 269A: Inter-State GST: levied and collected by the Centre, then apportioned between Union and States; Import of goods or services is deemed to be inter-State supply.
Article 279A: composition: Chairperson = Union Finance Minister; members = Union MoS (Revenue or Finance) + one Minister (finance, taxation or other) from each State; Members choose a Vice-Chairperson from among the State Ministers.
Quorum: Quorum = one-half of total members of the Council; Needed for a valid meeting.
Voting weight: Centre = 1/3 of votes cast; all States together = 2/3; Each State's vote is of equal weight within the States' share.
Decision rule: Decision = at least 3/4 of weighted votes of members present and voting; Centre can block (1/3 > 1/4). States together cannot pass anything alone (2/3 < 3/4).
Customs power: Entry 83, Union List: duties of customs including export duties; Customs duty is outside GST and is levied under the Customs Act, 1962.
Intra-State supply: Tax = CGST + SGST (or UTGST in a Union territory); Supplier location and place of supply are in the same State or Union territory. Rates of CGST and SGST are normally equal halves of the total rate.
Inter-State supply, import, export: Tax = IGST; Supplier location and place of supply are in different States or Union territories. IGST equals the combined CGST plus SGST rate.
Net GST payable: Net tax = Output tax − Input tax credit; Shows why GST taxes only value addition at each stage.
Taxable event: Event = Supply (goods, services or both); Replaces separate events of manufacture, sale and service provision.
Credit note (Section 34(1)): Credit note when value or tax charged exceeds payable, goods returned, or supply deficient; Issued by the registered supplier to the recipient. Details are declared in the return of the month of issue, within the time limit in Section 34(2).
Debit note (Section 34(3)): Debit note when value or tax charged is less than payable; Debit note includes a supplementary invoice. Details are declared in the return for the month of issue.
Section 59 rule: Registered person → self-assesses tax payable + furnishes return for each tax period (section 39); Applies to every registered person. This is the default mode of assessment under the CGST Act.
Provisional assessment (section 60): Request in writing → order within 90 days → final order within 6 months of the order; Used when you cannot determine the value or the rate of tax. Needs a bond with surety or security. Extension: Joint/Additional Commissioner up to a further 6 months; Commissioner up to a further 4 years.
Non-filers (section 62): Best judgment assessment order within 5 years from the due date of the annual return for the relevant financial year; Applies after notice under section 46. If you file a valid return within 60 days of service of the order, the order is deemed withdrawn; interest and late fee continue. A further 60 days is allowed with an additional late fee of ₹100 per day.
Summary assessment (section 64): Evidence of liability + belief that delay harms revenue + prior permission of Additional/Joint Commissioner; The taxable person may apply within 30 days of receipt of the order for withdrawal.
Customs self-assessment (section 17): Importer/exporter self-assesses duty → officer may verify → may re-assess → speaking order within 15 days if contrary to self-assessment; No speaking order is needed if the importer or exporter accepts the re-assessment in writing. Verification cases are chosen mainly on risk evaluation.
Customs duty: what it taxes: Customs duty = tax on goods imported into or exported from India (Customs Act, 1962); Import duty applies on entry; export duty applies on exit. It remains outside GST.
Transhipment without duty (section 54(2)): Goods shown in manifest or import report as for transhipment outside India → may be allowed without duty, subject to section 11; A bill of transhipment is presented to the proper officer. Under the proviso, a declaration is used for treaty or bilateral agreement cases.
Transhipment within India (section 54(3)): (a) Goods meant for a major port, the customs airports at Mumbai, Calcutta, Delhi or Chennai, or another port or airport notified by the Board; or (b) goods meant for any other customs station and the proper officer is satisfied they are bona fide intended for transhipment there → proper officer may allow without duty on prescribed conditions; The bona fide satisfaction test applies to clause (b). Conditions ensure due arrival of the goods at the destination station.
Deemed exports (section 147, CGST Act): Notified supply of goods + goods do not leave India + payment in INR or convertible foreign exchange + goods manufactured in India; Notification is by the Government on the Council's recommendation. All conditions must be met.
Information return (section 150, CGST Act): Specified person → furnishes return as prescribed; defect → 30 days to rectify; default → notice allows up to 90 days; If a defect is not rectified in time, the return is treated as not furnished.

Quick revision

Direct tax: the person on whom it is levied bears it; indirect tax: the burden is passed on to the consumer.
Indirect taxes are collected by an intermediary, such as a supplier, and paid to the government.
GST is a tax on supply of goods and services, with central and State components.
Taxable event under GST is supply; learn the exact meaning from the CGST Act.
Section 59: every registered person shall self-assess the taxes payable under the Act.
Under Section 59, the registered person furnishes a return for each tax period as specified under section 39.
Self-assessment means you compute and declare your own tax, not wait for an officer's order.
Customs duty is levied on import and export of goods, not on domestic supplies.
GST has subsumed many earlier indirect taxes, but customs duty continues alongside it.
Paper 7 Part II (GST and Customs) carries 40 marks; Part I Direct Tax carries 60.
Write every answer as provision, analysis, conclusion and cite the section where it matters.

Common mistakes

Treating impact and incidence as the same thing. Fix: Impact is where the tax first falls. Incidence is where the burden finally rests. Only in direct tax are they the same.
Saying indirect tax is paid by the consumer to the government. Fix: The supplier or importer deposits the tax. The consumer bears it through the price.
Saying Article 279A is the article giving power to levy GST. Fix: Link 246A to 'levy' (A for authority) and 279A to 'Council'.
Stating that States have no power over inter-State GST and also none over intra-State GST. Fix: Only inter-State supply is exclusively Parliament's. Intra-State GST can be levied by both the Centre and the State.
Saying GST is an origin-based tax. Fix: Write that GST is destination-based: revenue goes to the State of consumption.
Applying SGST in a Union territory. Fix: In a Union territory use UTGST. SGST belongs to States.
Saying the officer assesses the tax first under GST. Fix: Remember that section 59 puts the duty on the registered person. The officer acts only afterwards or in special cases.
Applying section 59 to unregistered persons. Fix: The text says 'every registered person'. Use that exact phrase.
Saying customs duty is subsumed in GST. Fix: Remember that customs duty stays under the Customs Act, 1962. IGST is charged additionally on imports.
Treating all transhipment as automatically duty-free. Fix: Note the conditions: manifest or import report must mention transhipment, section 11 applies, and for transhipment within India the officer must allow it on prescribed conditions.

Exam tips

Write distinctions in numbered points. It is quicker to read and to mark.
Always use the terms impact and incidence. They show you understand shifting of burden.
When asked for merits and demerits, give both sides, even if the question stresses one.
Quote Indian examples such as income tax, GST and customs duty.
Cite Section 20 of the IGST Act only when the question concerns the value of supply or the application of CGST provisions.
Write the Article number with the rule. A bare Article number earns little; a rule without the Article loses the citation mark.
For 'Constitutional provisions on GST' questions, cover 246A, 269A, 279A and 366(12A) in that order, then the exclusions.
Keep a list of what stays outside GST: alcohol for human consumption, tobacco excise under Entry 84, and customs duty under Entry 83.