GST and Indirect Tax Interface
This domain tests GST supply, registration, input tax credit and the points where indirect tax records intersect with income-tax computation.
Core rules
- GST is a destination-based tax on supply of goods or services. Intra-state supplies attract CGST and SGST; inter-state supplies attract IGST. Registration thresholds are generally ₹40 lakh for goods and ₹20 lakh for services, with lower special-category limits.
- Composition scheme offers simplified compliance for eligible small taxpayers but restricts input tax credit and inter-state supply. Regular taxpayers claim input tax credit on inputs, input services and capital goods used for business, subject to conditions such as tax invoice, receipt of goods or services, payment to supplier and matching.
- Place of supply, time of supply, value of supply and reverse charge determine the tax payable. Returns and e-invoicing requirements depend on turnover and category. GST TDS at 2% applies to specified recipients.
- For income tax, GST is not business income; GST paid is generally not deductible where input tax credit is available. Turnover reconciliation between GST returns and financial statements is a common assessment issue.
Worked example
An intra-state taxable supply is ₹1,00,000 at 18%. CGST is ₹9,000 and SGST is ₹9,000. If the supplier has eligible input tax credit of ₹5,000, the net cash GST is ₹13,000, subject to credit conditions. The ₹1,00,000 is revenue for income tax; GST collected is not income.
Traps
Do not claim ITC without a valid invoice and receipt; blocked credits are not available; composition taxpayers cannot claim ITC; place of supply can shift IGST versus CGST/SGST; reconcile GST turnover with books before filing income tax.