The complete guide to GST in India (2026 edition)

Goods and Services Tax is a destination-based, multi-stage, value-added tax on the supply of goods and services in India. The word that does the most work in that sentence is destination: the tax accrues to the State where the supply lands, not where it is produced. Pre-GST, India ran a hybrid origin/destination regime with overlapping levies — Central Excise on manufacture, Service Tax on services, VAT on intra-state sale, CST on inter-state sale, Octroi on entry into a municipality. Each had its own credit chain, its own filing portal, and its own way of falling out of sync with the others. The 101st Constitutional Amendment Act of 2016 collapsed all of that into a single, dual-levied GST.

GST is dual because both the Centre and the States retain the power to tax. Every intra-state supply attracts Central GST (CGST, collected by the Centre) and State GST (SGST, collected by the State or UTGST in a Union Territory with a legislature) — split equally so the combined rate matches the published rate slab. Every inter-state supply attracts a single Integrated GST (IGST), levied and collected by the Centre, which is then apportioned between the Centre and the destination State. Imports of goods attract Basic Customs Duty plus IGST; imports of services attract IGST under reverse charge.

GST is multi-stage because it is collected at every value-add link in the chain — manufacturer to wholesaler, wholesaler to retailer, retailer to consumer — but it is value-added because each link gets a credit for the GST paid on its inputs. The economic incidence falls on the final consumer; everyone in between is effectively a tax collector. This is what makes Input Tax Credit (ITC) the most important concept in the regime: break the credit chain at any link and you turn GST from a value-added tax into a cascading tax on tax, which is exactly what GST was supposed to abolish.

The rate structure has five primary slabs — 0%, 5%, 12%, 18%, 28% — plus special rates (0.25% on rough diamonds, 3% on gold, silver, and platinum), a Compensation Cess on demerit and luxury goods (cigarettes, aerated drinks, certain automobiles), and a small set of exempt and nil-rated items. The 18% slab covers the bulk of services and a large share of goods; the 28% slab is reserved for luxury, sin, and certain durables. The rate for any particular item is decided by its Harmonised System of Nomenclature (HSN) code for goods or its Services Accounting Code (SAC) for services. The 18% rate is the single most common point of confusion in invoicing — see the e-invoicing and invoicing sections below.

Governance is split between the Centre and the GST Council. The Council, chaired by the Union Finance Minister with State Finance Ministers as members, recommends rates, exemptions, threshold changes, and law amendments — its decisions are not binding under Article 279A but in practice are followed unanimously. The Central Board of Indirect Taxes and Customs (CBIC) issues central notifications and circulars; each State issues its mirror notifications. The single national portal at gst.gov.in hosts every taxpayer's registration, returns, ledgers, and notices.

Two structural quirks of Indian GST trip up newcomers. First, the State-by-State registration rule: a business operating in multiple States must obtain a separate GSTIN per State, file separate returns per GSTIN, and treat inter-branch transfers as taxable supplies under Schedule I. Second, the place-of-supply rules — codified in Sections 10–13 of the IGST Act — frequently produce results that contradict billing intuition. A consultant in Bengaluru advising a client headquartered in Delhi but performing the work onsite at the client's Chennai factory does not necessarily issue an IGST invoice to Delhi; the place of supply depends on whether the service is in relation to immovable property, the registration status of the recipient, and several other carve-outs. Get the place of supply wrong and the recipient cannot claim ITC.

Registration is the gate to the system. You cannot legally collect GST from a customer without a GSTIN, cannot claim ITC, cannot issue a tax invoice (only a bill of supply), and — crucially — cannot supply on most e-commerce marketplaces. The threshold below which registration is optional depends on what you sell and where:

Special-category States for this purpose are Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Uttarakhand, and Puducherry. The thresholds are based on aggregate turnover, which is the total value of all taxable supplies (excluding inward supplies on which RCM is paid), exempt supplies, exports, and inter-state supplies of persons having the same PAN — computed all-India, not State-by-State.

Beyond the threshold, Sec 24 of the CGST Act lists the categories required to register from the first rupee:

• Persons making any inter-state taxable supply (with an exemption for small service-only suppliers below the threshold per Notification 10/2017-IGST and 65/2017-CT).
• Casual taxable persons.
• Persons required to pay tax under reverse charge.
• Persons making taxable supplies through e-commerce operators (with the post-2023 exemption for intra-state goods suppliers below the threshold who comply with Notification 34/2023-CT).
• Non-resident taxable persons.
• Persons required to deduct TDS u/s 51 of the CGST Act.
• E-commerce operators required to collect TCS u/s 52.
• Input Service Distributors.
• Persons who supply through an e-commerce operator that is required to collect TCS.
• Persons supplying online information and database access or retrieval services (OIDAR) from outside India to an unregistered person in India.

2.1 The 15-character GSTIN, decoded

Every successful registration produces a Goods and Services Tax Identification Number: a 15-character alphanumeric that encodes the State, the entity's PAN, and a check digit. Take 22ABCDE1234F1Z5:

• 22 — State code (22 = Chhattisgarh; 27 = Maharashtra; 09 = Uttar Pradesh; full list per Sch IX of the Indian Constitution).
• ABCDE1234F — the entity's PAN.
• 1 — entity number for that PAN within the State (1–9 then A–Z, so a single PAN can hold up to 35 registrations per State).
• Z — default reserved character.
• 5 — alphanumeric check digit, computed by the GSTN using the MOD-36 algorithm.

The state code must match the address State on the registration certificate. Validating the GSTIN structure at the point of entering a customer or vendor master is the cheapest possible compliance investment — a single mistyped digit can suspend the recipient's ITC for the entire period.

2.2 The registration workflow

Registration is fully online via Form GST REG-01 on gst.gov.in. The process has two parts. Part A captures PAN, mobile, email, and State; it issues a Temporary Reference Number (TRN). Part B captures the constitution of business, place(s) of business, authorised signatory, bank account, and HSN/SAC of top items. Aadhaar authentication of the primary authorised signatory and one promoter is mandatory under Rule 8(4A); if you decline Aadhaar authentication, the GST officer must complete physical verification of the premises before approval. With Aadhaar authentication, the GSTIN is typically issued within 7 working days; without it, up to 30.

Documents needed: PAN of business; Aadhaar of promoters; partnership deed or incorporation certificate; rent agreement or NOC for premises; latest utility bill; bank statement or cancelled cheque; authority letter for the authorised signatory; photographs of promoters. For e-commerce sellers, you will also need a No-Objection Certificate from your warehouse host.

2.3 Amendments, cancellation, and revocation

Non-core amendments (e-mail, mobile, additional place of business) are filed via REG-14 and are processed automatically. Core amendments (legal name, principal place of business, partner change) require GST officer approval. Cancellation of registration is by REG-16 — voluntary, on closure, or because turnover dropped below the threshold; the officer may also cancel suo motu under Sec 29(2) for non-filing of returns for 6 consecutive months (3 for composition). A cancelled registration can be revoked within 30 days under Sec 30; the time limit was extended to 90 days by the Finance Act 2023.

Once you cross the threshold (or voluntarily register below it), you choose between two schemes. The default is the regular scheme: charge GST on outward supplies, claim ITC on inward supplies, file GSTR-1 and GSTR-3B monthly or quarterly. The alternative — the Composition Scheme under Sec 10 — is a simplified scheme for small taxpayers, with no ITC and a flat rate of tax on turnover.

3.1 Composition: who can opt in

• Goods and restaurants — previous-FY aggregate turnover ≤ ₹1.5 crore (₹75 lakh in special-category States: Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Uttarakhand).
• Services (other than restaurants) under Sec 10(2A) introduced in 2019 — previous-FY aggregate turnover ≤ ₹50 lakh, available across all States.

Several categories are ineligible regardless of turnover: persons making inter-state outward supplies, suppliers of non-taxable goods, e-commerce sellers on platforms required to collect TCS, casual taxable persons, non-resident taxable persons, manufacturers of specified goods (ice cream, pan masala, aerated water, tobacco, fly-ash bricks), and ISDs. A composition dealer holding inter-state outward supplies even once during the year triggers automatic exit from the scheme.

3.2 The flat-rate structure

Composition rates apply on turnover in the State, not on taxable supplies only — and you cannot collect this from the customer. The invoice issued is a Bill of Supply, not a Tax Invoice, and it must carry the text "Composition taxable person, not eligible to collect tax on supplies." All inward supplies attract regular GST, none of which can be claimed as ITC. The arithmetic only works if your purchase-side ITC is small relative to the savings on compliance and on the rate spread (e.g., a trader paying 1% composition on turnover vs roughly 18% GST less ITC under regular).

3.3 Composition returns

Composition dealers file CMP-08 quarterly (18th of the month after each quarter) as a payment-cum-summary challan, and GSTR-4 annually (30 June of the next FY, post Notification 12/2024-CT). E-way bills still apply for goods moved above the threshold. CMP-08 carries a flat late fee of ₹200 per day (₹100 CGST + ₹100 SGST), capped at ₹5,000.

3.4 Opting in, opting out

Opt-in for a new FY by 31 March of the previous FY via Form CMP-02. Opt-out can be voluntary (CMP-04) or automatic — if turnover crosses the limit mid-year, the taxpayer must shift to regular within the same FY and file ITC-01 within 30 days to claim ITC on the closing stock and capital goods.

The single most important rule in GST invoicing: the place of supply, not the customer's billing address, decides whether you charge CGST + SGST or IGST. The place of supply is governed by Sec 10 of the IGST Act for goods and Sec 12 (domestic services) and Sec 13 (cross-border services) for services. Get it right and the invoice flows through to your customer's GSTR-2B and they claim ITC. Get it wrong and you've collected the wrong tax — a refund-cum-corrective-invoice cycle that takes months.

4.1 Place of supply — goods

• Movement involved — the place where movement of goods terminates for delivery to the recipient.
• No movement — the location of the goods at the time of delivery.
• Bill-to-ship-to (Sec 10(1)(b)) — third-party delivery: place of supply is the location of the third party who directed the supply (the "bill-to" party), even though the goods physically reach a different state. This is the rule that catches accountants out the most.
• Imports — place of supply is the location of the importer.
• Exports — outside India (zero-rated).

4.2 Place of supply — services

• Default rule for B2B — location of the recipient (Sec 12(2)). If recipient is registered, their address on the GST registration certificate; if not, the location of the recipient when the supply is received, defaulting to the supplier's location if not known.
• Immovable property services — location of the immovable property (Sec 12(3)).
• Restaurant and catering, personal grooming, fitness — location where service is performed.
• Training and performance appraisal — B2C — location where service is performed.
• Admission to events — location of the venue.
• Transportation of goods — B2C — place where goods are handed over for transportation.
• Passenger transportation — place where the passenger embarks on the conveyance.
• Telecom services — multiple sub-rules based on type (postpaid, prepaid, leased circuit, internet) — Sec 12(11).
• Banking and financial services — location of the recipient on the records of the supplier; default to supplier's location if not on records.

For cross-border services (Sec 13), the default for most is the location of the recipient, but there are extensive carve-outs for performance-based services, admission to events, and OIDAR. Export of services is zero-rated only if all five conditions in Sec 2(6) IGST Act are met: supplier in India, recipient outside India, place of supply outside India, payment in convertible foreign exchange (or INR where permitted by RBI), and supplier and recipient are not merely establishments of a distinct person.

4.3 Cross-utilisation of CGST / SGST / IGST

ITC is held in three separate ledgers — CGST, SGST/UTGST, and IGST — each with its own utilisation order under Sec 49B and Rule 88A:

1. IGST credit must be utilised in full first — against IGST output, then either CGST or SGST output (any order).
2. CGST credit can be used only against IGST or CGST output. Never against SGST.
3. SGST credit can be used only against IGST or SGST output. Never against CGST.
4. Cess credit can be used only against cess output.

The cardinal rule: CGST and SGST credits never cross. Trying to set off CGST against SGST will leave you carrying SGST liability with surplus CGST credit, which is real cash locked away. The order matters in audits — if a taxpayer was to utilise CGST first instead of IGST, the IGST balance accumulates and triggers refund-rejection queries.

ITC is what makes GST a value-added tax. The four conditions of Sec 16(2) — invoice, receipt of goods/services, supplier-paid tax reflected in GSTR-2B, recipient-filed GSTR-3B — sound simple. In practice they hide most of the working-capital risk in any growing business.

5.1 The four Sec 16(2) conditions

1. Possession of a tax invoice or debit note issued by a registered supplier under Sec 31.
2. Receipt of the goods or services. For goods received in instalments, ITC arises on the last instalment.
3. Tax has actually been paid to the government, evidenced by the invoice appearing in your GSTR-2B (auto-generated from suppliers' GSTR-1 / IFF / GSTR-5 / GSTR-6 filings).
4. You have furnished the GSTR-3B for the tax period in which the credit is being claimed.

A fifth condition is hidden in the proviso to Sec 16(2): the recipient must pay the supplier within 180 days of the invoice date — failing which the ITC must be reversed with interest and can be re-availed only when payment is made.

5.2 Time limit for claiming ITC

Sec 16(4) bars ITC after the earlier of: (a) 30 November of the following FY (extended from 30 September by the Finance Act 2022); or (b) the date of furnishing the annual return. This is a hard cliff — an invoice dated 1 April 2025 that does not reach your GSTR-3B by 30 November 2026 is permanently lost. Build a monthly GSTR-2B reconciliation into the books.

5.3 Blocked credits under Sec 17(5)

Sec 17(5) blocks ITC on a list of categories regardless of business purpose. The most-cited:

• Motor vehicles for transportation of persons (seating capacity ≤ 13) — unless used for further supply, transportation of passengers, or driving training.
• Food, beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery — unless used for outward supply of the same category or as part of a notified employer obligation.
• Membership of a club, health and fitness centre.
• Travel benefits to employees on vacation (LTA / home travel concession).
• Works contract services for construction of immovable property (other than plant and machinery), unless used for further supply of works contract.
• Goods or services used for construction of immovable property on own account (excluding plant and machinery).
• Goods or services received from a composition dealer.
• Goods or services used for personal consumption.
• Goods lost, stolen, destroyed, written off, or disposed of by way of gift or free samples.
• Tax paid under Sec 74 (fraud cases), Sec 129 (detention), Sec 130 (confiscation).

5.4 Proportionate reversal under Rule 42 / 43

A taxpayer making both taxable and exempt supplies (or supplies for both business and non-business purposes) must reverse ITC proportionate to the exempt/non-business share. Rule 42 applies to inputs and input services; Rule 43 applies to capital goods (spread over 60 months). The formula is documented step by step in the rules and must be computed monthly with an annual true-up by the date of GSTR-3B for the following September (now November).

5.5 ITC under reverse charge

When you pay GST under RCM (e.g., legal services from an advocate, GTA freight, director's sitting fees), the tax must be paid in cash through GSTR-3B Table 3.1(d) — it cannot be paid by setting off ITC. Once paid, the same GST is available as ITC in the same return (subject to the standard Sec 16 conditions and not blocked under Sec 17(5)).

5.6 ITC on job-work

Inputs sent to a job-worker under Sec 143 must be received back within 1 year (3 years for capital goods, other than moulds, dies, jigs, fixtures, tools). If not received, the supply is deemed to have happened on the date the inputs were sent out, with GST and interest payable. Track every challan via ITC-04, filed half-yearly for AATO > ₹5 crore and annually otherwise (Notification 35/2021-CT).

GST in 2026 still uses the original 2017 return architecture: a transactional outward return (GSTR-1), a summary tax-payment return (GSTR-3B), and an annual reconciliation return (GSTR-9). The 2019 "new return" architecture (RET-1/SAHAJ/SUGAM) was deferred indefinitely. There is also an auto-generated GSTR-2B that is not filed but is consumed.

6.1 GSTR-1: outward supplies

GSTR-1 is the invoice-level statement of outward supplies. It feeds the recipient's GSTR-2B and is therefore the source of truth for the entire chain. Sections include:

• Table 4 — B2B supplies (invoice-level).
• Table 5 — B2C-large (inter-state, invoice value > ₹2.5 lakh).
• Table 6 — Exports and SEZ supplies.
• Table 7 — B2C-small (rate-wise summary).
• Table 8 — Nil-rated, exempt, non-GST supplies.
• Table 9 — Amendments to prior returns (B2B, B2CL, exports).
• Table 10 — Amendments to B2C-small (state and rate-wise).
• Table 11 — Advances received and adjusted.
• Table 12 — HSN/SAC summary.
• Table 13 — Documents issued summary.

Due dates: 11th of the next month for monthly filers (turnover > ₹5 crore or non-QRMP). 13th of the month after each quarter for QRMP filers, with an optional Invoice Furnishing Facility (IFF) on the 13th of the first two months of each quarter for B2B invoices up to ₹50 lakh per month. Late filing of GSTR-1 blocks the next period's GSTR-1 — a forcing function that has dramatically improved on-time filing.

6.2 GSTR-3B: summary return and tax payment

GSTR-3B is a self-declared summary of outward supplies, ITC claimed, and net tax payable. Since 2022 it has been increasingly auto-populated from GSTR-1 (outward) and GSTR-2B (ITC), with the taxpayer editing only where amendments are needed. Sections:

• Table 3.1 — outward supplies (taxable, nil-rated, exempt, non-GST, RCM, inter-state to unregistered).
• Table 3.2 — inter-state supplies made to unregistered persons, composition taxpayers, and UIN holders (place-of-supply summary).
• Table 4 — eligible ITC, ineligible ITC, and reversals. Table 4A auto-populates from GSTR-2B; 4B is for reversals (Rule 42/43, Sec 17(5)); 4C is for ITC reclaimed.
• Table 5 — exempt, nil-rated and non-GST inward supplies.
• Table 6 — tax payment.

Due date: 20th of the next month for monthly filers; for QRMP filers, 22nd or 24th of the month after each quarter depending on the State group. QRMP filers still pay tax monthly via PMT-06 on the 25th, but file the GSTR-3B quarterly. Once filed, GSTR-3B cannot be revised — corrections flow into the next period's return.

6.3 GSTR-2B: the auto-drafted ITC statement

GSTR-2B is a static, monthly ITC statement generated on the 14th of every month based on suppliers' GSTR-1 / GSTR-5 / GSTR-6 / IFF filings up to the 13th. It is the only authoritative source for ITC eligibility from Jan 2022 onwards — Rule 36(4)'s old 5% tolerance was retired in favour of strict GSTR-2B matching. ITC claimed in GSTR-3B should equal the matched 2B; mismatches trigger automated DRC-01C notices.

6.4 GSTR-9 and GSTR-9C: annual return and reconciliation

GSTR-9 consolidates the FY's monthly/quarterly filings — outward supplies, ITC claimed, ITC reversed, taxes paid, demands, refunds, and HSN summary. Due date: 31 December of the next FY. Applicable to every regular taxpayer with aggregate turnover > ₹2 crore (Notification 47/2019-CT made it optional below ₹2 crore — extended every year since).

GSTR-9C is a reconciliation statement between the audited financial statements and the GSTR-9. Since FY 2020-21 it is self-certified by the taxpayer (no CA certification mandatory). Applicable above ₹5 crore aggregate turnover. The biggest reconciliation items: unbilled revenue, deferred revenue, related-party adjustments, discounts not recorded in invoices, reversals of ITC, and goods returned across years.

Late fees for GSTR-9 are graded by turnover under Notification 07/2023-CT: ₹50/day capped at 0.04% of state turnover for AATO ≤ ₹5 crore; ₹100/day capped at 0.04% for ₹5–20 crore; ₹200/day capped at 0.5% above ₹20 crore.

E-invoicing was rolled out in phases starting October 2020 and has progressively dragged the turnover threshold down. As of August 2023, every business with previous-FY aggregate turnover of ₹5 crore or more — including any preceding FY since 2017-18 — must e-invoice all B2B, SEZ, export, and credit/debit notes (not B2C). The threshold is structural: once you cross it in any FY, you remain in scope for all subsequent years even if turnover falls back.

7.1 The IRN workflow

1. Generate invoice JSON in the GSTN schema (INV-01).
2. POST to the Invoice Registration Portal (IRP) — six are live, run by NIC and authorised GSPs.
3. The IRP validates against ~150 business rules (GSTIN status, place of supply consistency, tax computation, HSN validity).
4. The IRP returns an Invoice Reference Number (IRN — a 64-character hash) and a signed QR code containing the IRN, GSTINs, value, HSN, and tax break-up.
5. You print the QR and IRN on the customer-facing invoice. The invoice is now legally valid.

The legal effect of e-invoicing: no IRN = no valid invoice = no ITC for the recipient and no auto-population into GSTR-1. The IRP also automatically pushes the invoice into the recipient's GSTR-2B, eliminating the GSTR-1-to-2B lag.

7.2 The 30-day IRP time limit

Per GSTN advisory (May 2023), taxpayers with AATO ≥ ₹100 crore must report invoices to the IRP within 30 days of invoice date. The advisory was extended on its scope: the threshold was lowered to ₹10 crore from 1 November 2023, and the time window was set at 30 days. Beyond 30 days, the IRN cannot be generated — which means the invoice cannot be issued at all. Build the 30-day SLA into your invoicing workflow.

7.3 Cancellation and amendment

E-invoices can be cancelled on the IRP within 24 hours of generation. Beyond 24 hours, you can only amend the invoice via a credit/debit note (also subject to IRN generation). The IRP rejects re-use of an invoice number once an IRN has been generated against it.

7.4 Who is excluded from e-invoicing

• SEZ Units (SEZ Developers are required to e-invoice).
• Insurance, banking and financial institutions including NBFCs.
• Goods transport agencies (GTA).
• Passenger transport service providers.
• Supplier of services by way of admission to cinematograph films.
• Government departments and local authorities.

An e-way bill is required whenever goods of value > ₹50,000 are moved (₹1,00,000 in select states for intra-state movements, per State-specific notifications). The threshold is per consignment, not per invoice; a single vehicle carrying multiple consignments needs an EWB per consignment.

8.1 Part A vs Part B

• Part A — consignment details: GSTIN of supplier and recipient, invoice number and date, value, HSN, place of dispatch and delivery. Filled by the supplier.
• Part B — vehicle/transporter details: mode (road/rail/air/sea), vehicle number, transporter ID. Filled before movement begins (vehicle owners and transporters can update Part B mid-trip when changing vehicle).

8.2 Validity

One day per 200 km (rounded up). Over-dimensional cargo is one day per 20 km. Validity starts from the time Part B is filled in. Extensions can be filed 8 hours before or 8 hours after expiry (Rule 138(10)). Beyond that, a fresh EWB is needed.

8.3 Cancellation and exemptions

An EWB can be cancelled within 24 hours of generation if the goods are not moved or the EWB is incorrect — provided it has not been verified in transit. Exempt categories: goods specified in Rule 138(14) (LPG for domestic, kerosene through PDS, postal baggage, jewellery, used personal/household effects, currency, etc.), goods within the customs port area, and goods being transported under customs bond.

8.4 EWB ↔ e-invoice integration

For invoices that go through the IRP, Part A of the EWB is auto-populated from the e-invoice JSON. The taxpayer only adds Part B before movement. Reject rate at the EWB portal has dropped from ~15% pre-integration to under 2% since auto-population.

A refund under GST is your money the government is sitting on — most commonly because you exported (zero-rated supply with accumulated ITC), because your output rate is lower than your input rate (inverted duty structure), or because you have a credit balance in the electronic cash ledger that you no longer need.

9.1 Export refunds

Two routes for exporters under Sec 16 of the IGST Act:

1. Pay IGST on exports, then claim refund of IGST. The shipping bill is treated as the refund application; ICEGATE shares data with GSTN; refund is sanctioned and credited to the bank account on file. No separate RFD-01 needed. This route is closed for some exempt-category exporters and for those whose IGST refund is held under risky-exporter rules.
2. Export under Letter of Undertaking (LUT) without payment of IGST, and claim refund of unutilised ITC via RFD-01. LUT is filed annually on the portal in Form RFD-11; it replaces the older bond requirement for most exporters.

Provisional refund: 90% of the claim is granted within 7 days of acknowledgment if the taxpayer is Aadhaar-authenticated, has filed all returns, and has not been flagged as risky. Final order in 60 days; failing which interest at 6% per annum applies from the 61st day.

9.2 Inverted duty structure refund

If the GST rate on inputs is higher than the rate on outward supply, ITC accumulates faster than it can be utilised. Refund of the unutilised portion is allowed under Sec 54(3)(ii), with a Formula B prescribed in Rule 89(5). Notable exclusions: refunds on input services are not allowed (Supreme Court in Union of India v. VKC Footsteps, 2021); construction services with effective rate < output rate; specified categories under Notification 5/2017-CT(R).

9.3 Other refund categories

• Excess balance in electronic cash ledger.
• Tax paid on supply not provided (no invoice issued, contract cancelled).
• Refund to UN bodies, foreign diplomatic missions, and CSD canteens.
• Refund of tax wrongly collected (CGST/SGST paid on what should have been IGST or vice versa) under Sec 77.
• Tax paid on supply notified for refund under Sec 55 (e.g., supplies to deemed-export categories).

9.4 Time limit

Two years from the "relevant date" (defined in Sec 54 Explanation 2). For exports: date of shipping bill (goods) or receipt of foreign exchange (services). For ITC accumulation due to inverted duty: end of the FY in which the claim arises. For excess cash balance: date of payment. The clock cannot be paused; file before the cliff.

There are three principal audit and adjudication tracks under GST: departmental audit u/s 65, special audit u/s 66 (rare), and assessment proceedings u/s 73 / 74 / 75 (the common one).

10.1 Departmental audit (Sec 65)

The Commissioner or an authorised officer may audit a registered taxpayer at the place of business or in the office. ADT-01 notice is issued at least 15 days in advance. Audit must be completed within 3 months of commencement, extendable by 6 months. ADT-02 communicates findings; any short payment or wrong ITC flows into a Sec 73/74 notice.

10.2 Special audit (Sec 66)

If, during scrutiny or inquiry, an officer believes the value declared is incorrect or the credit availed is not within the normal limits, the Commissioner may direct a special audit by a nominated Chartered Accountant or Cost Accountant. The expense is borne by the department. Rare in practice but high-stakes when it happens.

10.3 Sec 73 (non-fraud) and Sec 74 (fraud)

Sec 73 governs cases of short payment, wrong ITC, or refund without intent to evade. SCN must be issued at least 3 months before the time limit. Time limit for order: 3 years from the due date of the annual return for that FY. Penalty: 10% of tax or ₹10,000, whichever higher (lower if paid before SCN: nil; if paid within 30 days of SCN: lower).

Sec 74 covers cases of fraud, wilful misstatement, or suppression. SCN within 4.5 years; order within 5 years. Penalty: 100% of tax. Pre-SCN payment reduces penalty to 15%; within 30 days of SCN, 25%; within 30 days of order, 50%.

The Finance Act 2024 merged Sec 73 and 74 into a single Sec 74A for FYs from 2024-25 onwards, with a uniform time limit (42 months from the annual-return due date) and a single penalty grid. Older FYs continue under the old sections.

10.4 Appeals and the GSTAT

First appeal lies with the Appellate Authority (APL-01) within 3 months of the order, with mandatory pre-deposit of 10% of disputed tax (capped at ₹20 crore per CGST/SGST). Second appeal to the GST Appellate Tribunal (GSTAT) — now constituted with the Principal Bench in New Delhi and State Benches operational since 2024 — within 3 months, with a further 20% pre-deposit (capped at ₹40 crore each). Beyond GSTAT: writ petition to the High Court, and SLP to the Supreme Court.

GST penalties are layered: late fees for return filing, interest on tax paid late, and substantive penalties under Sec 122 / 125 / 132 for offences. The friction model is intentional: most SMBs only ever encounter the first two, but the third tier exists and is enforced.

11.1 Late fees (Sec 47)

• GSTR-1 / GSTR-3B — ₹50/day (₹20/day for nil), capped at ₹5,000 per return.
• GSTR-9 / 9C — graded by turnover under Notification 07/2023-CT (₹50/day to ₹200/day; cap 0.04% to 0.5% of State turnover).
• CMP-08 — ₹200/day, cap ₹5,000.
• GSTR-4 — ₹50/day (₹20/day nil), cap ₹2,000.
• GSTR-7 (GST TDS) — ₹50/day (cap ₹1,000) for late; ₹100/day for non-furnishing of certificate (cap ₹5,000).

11.2 Interest (Sec 50)

• Tax paid late — 18% per annum from the day after due date, computed daily. Charged only on the net cash component since the Sec 50 amendment by Finance Act 2022.
• ITC wrongly availed and utilised — 24% per annum till reversed.
• Refund delayed by the department — 6% per annum from 61st day of acknowledgment (9% if refund flows from an order in appeal).

11.3 Sec 122 — substantive offences

21 specific offences (issuing invoice without supply, issuing supply without invoice, fraudulent ITC, failure to deduct/collect tax, supplying without registration, etc.) attract penalty of ₹10,000 or the tax amount, whichever higher. Section 122(1A) (added 2019) extends liability to any person who retains the benefit of a Sec 122 offence and at whose instance it was committed — i.e., directors and managers, not just the registered person.

11.4 Sec 132 — prosecution

Tax evaded, ITC wrongly availed, or refunds wrongly claimed above ₹5 crore: cognizable, non-bailable, up to 5 years imprisonment. Between ₹2 crore and ₹5 crore: up to 3 years. Between ₹1 crore and ₹2 crore: up to 1 year, bailable. Below ₹1 crore: bailable, up to 6 months. Compounding under Sec 138 is available except for the most serious offences.

11.5 Detention, seizure, and confiscation (Sec 129 / 130)

Goods in transit without valid documents (invoice, EWB) can be detained and released only on payment of: 200% of tax for owner-released goods or 50% of value (whichever higher) for goods not claimed within 7 days. Sec 130 governs confiscation in serious cases — vehicles included unless the transporter proves the offence was without their knowledge.