Chapter 29: Industry-Specific GST Applications

The manufacturing industry forms the backbone of India’s supply chain economy, and GST has substantially simplified its tax structure compared to the pre-GST era of Excise, VAT, and CST.

1.1 Tax Structure and Applicability

GST applies on supply of goods, replacing excise duty on “manufacture.”

Time of supply determined by issue of invoice or receipt of payment, whichever earlier.

Place of supply = location of goods at the time of delivery.

1.2 Key Provisions for Manufacturers

1.3 Sectoral Issues

Branch Transfers: Taxable as “supply” between distinct persons (Sec. 25(4)).

Stock Transfers: Require invoice + e-way bill; ITC eligible if goods used for business.

Waste/Scrap Sales: Taxable under GST even if by-products or process waste.

Example: A manufacturer purchases steel at 18% and sells fabricated parts at 12%. Refund under inverted duty structure is available.

The service industry constitutes nearly 60% of India’s GDP, covering professional, IT, telecom, and consultancy services.

2.1 Taxability and Key Rules

Supply of services taxed under Schedule II (e.g., lease, works contract, online services).

Place of supply crucial for determining whether intra-State (CGST+SGST) or inter-State (IGST).

Export of services treated as zero-rated supply if:

Recipient located outside India.

Payment in foreign currency.

Service not performed in India.

2.2 Key Considerations

Example: A consultancy firm provides advice to a Singapore client → zero-rated export of services (LUT required).

The real estate sector is one of the most complex under GST due to multi-stage taxation, composite supplies, and transition from the old Service Tax/VAT regime.

3.1 Applicability

Construction of complex/building intended for sale is supply of service (Schedule II).

GST payable at 5% or 1% (for affordable housing) without ITC on new projects (post 1 April 2019).

3.2 Key Provisions

3.3 ITC and Reversal (Rule 42/43):

ITC blocked for residential projects post-rate change (2019).

For mixed projects (residential + commercial), proportionate ITC reversal required monthly and at completion.

3.4 Ongoing Projects Transition:

Option available to continue under old (12%/8%) rate with ITC, or shift to new rates without ITC. Declaration to be filed by 10 May 2019 (Notification 03/2019–CTR).

The banking and financial sector deals primarily in exempt supplies (interest, loans, deposits) but also taxable ones (processing fees, forex, credit cards).

4.1 Nature of Supplies

4.2 Special Compliance Points

Registration: Required in every State with branch operations.

Input Tax Credit (Rule 38): Only 50% of eligible ITC can be availed automatically each month; balance lapses.

Reverse Charge: Applicable on legal services, GTA, etc.

Place of Supply: Determined by location of recipient in most cases.

4.3 Common Issues:

Interest income forms part of exempt turnover → affects ITC reversal under Rule 42.

Cross-utilization of credit across States not permitted (distinct persons).

Example: A bank’s Mumbai branch avails input service from its Delhi branch — treated as supply between distinct persons, taxable under GST.

These sectors enjoy social importance, and GST law provides broad exemptions to prevent increased burden on end consumers.

5.1 Healthcare Services

Notification No. 12/2017–CTR (Sl. No. 74):

Exemption for services by:

Clinical establishments (hospitals, clinics).

Authorized medical practitioners.

Paramedics.

Taxable Areas:

Cosmetic surgery (non-essential).

Room rent in hospitals exceeding ₹5,000 per day (Notification 03/2022–CTR, w.e.f. 18 July 2022).

Ambulance services — exempt.

5.2 Education Services

Exemptions under Notification No. 12/2017–CTR (Sl. No. 66):

Services by:

Educational institutions (pre-school to higher secondary).

Degree-granting universities recognized by law.

Institutions providing education as part of curriculum for qualification.

Taxable Areas:

Coaching institutes, skill training, online courses (not recognized by law).

Auxiliary services like canteen, transport, or printing (taxable unless provided by the institution itself).

5.3 Key Compliance Points

No ITC allowed on inputs used exclusively for exempt services (Rule 42).

Healthcare and education institutions providing both taxable and exempt supplies must maintain segregated records.

Example: A university offering both degree courses (exempt) and short-term certification programs (taxable) must proportionately reverse ITC.