NOTES ON GST

India at present has so many taxes which are levied on Goods and Services like
Service Tax, VAT, Entertainment Tax, Excise, Luxury Tax, etc. For reducing the
cascading effect and decreasing the no. of taxes and making into a single tax, GST
came into effect. Not only it came as a single tax but also to take a significant step
in the field of Indirect Tax reforms this Goods and Service Tax was introduced in
India.

What is GST?

Goods and Service Tax is known as GST. GST is an Indirect Tax that is charged
on Sale, Consumption, and manufacture of Goods and Services at the National
Level. GST Tax was introduced to boost the economic growth and to reduce the
overall tax burden on goods in the country. It is estimated that GST will almost
reduce a tax burden of 25% to 30%. Goods and Service Tax is a single tax
chargeable at every point of sale or provision of service. By introduction of GST
into tax system no need of paying VAT, Service Tax on the same product.

Explanation: Let us take an example for clear explanation of GST. Suppose you
bought a perfume for Rs. 100/- it includes VAT, Excise Duty, Customs Duty or
CST on the imported raw material or oils, etc. So you have to pay many taxes on
only one product. But by the implementation of GST, you can overcome all these
taxes.

History of Goods and Services Tax

The discussions on GST were started in 2000. It has been 14 years since the
discussions started and then in 2007, the GST Tax was conceptualised.
 Territorial India
extent

Enacted by Lok Sabha

Date passed 8 August 2016

Enacted by Rajya Sabha

Date passed 3 August 2016

Date assented to 8 September 2016

Date 1 April 2017

commenced

Legislative history

Bill introduced The Constitution (One

in the Lok Hundred and Twenty-
Sabha Second Amendment) Bill,
2014

Bill citation Bill No. 192 of 2014

Bill published 19 December 2014

on

Introduced by Arun Jaitley

Goods and Services Tax Bill

Goods and Service Tax was amended by the Constitution of India and was
introduced in Lok Sabha in December 2014, by the Constitution (One Hundred
and Twenty-Second Amendment) Bill, 2014.
Components of GST:

These are the components of Goods and Service Tax:

1. CGST.
2. SGST.
3. IGST.

CGST:

CGST means Central Goods and Service Tax. The Central Government levies this
tax. These are the following taxes that CGST will overcome:

 Additional Excise Duty.

 The Excise Duty levied under Medicinal and toiletries preparation Act.
 Central Excise Duty.
 Service Tax.
 Special Additional Duty of Customs (SAD).
 Additional Customs Duty (CVD).
 Education Cess and Secondary and Higher Secondary Education Cess.
 Surcharge.

SGST:

SGST means State Goods and Service Tax. The State Government levies this tax.
These are the following taxes included in SGST.

 State VAT/ Central Sales Tax.

 Entertainment Tax.
 Luxury Tax.
 Entry Tax.
 Purchase Tax.
  State Cess and Surcharge to the extent related to the supply of goods and
services.
 Tax on Lottery, Betting, and Gambling.

IGST:

IGST means Integrated Goods and Service Tax. This tax levied on inter-state
supplies of Goods or Services in India by the Central Government.

Integrated GST = CGST + SGST

Integrated GST applies to

1. Import of Goods and Services.

2. Interstate stock transfers of Goods and Services.

All Goods or Services covered under GST except these:

 Alcohol for human consumption: State Excise + VAT

 Electricity: Electricity duty
 Real State: Stamp duty + Property taxes
 Petroleum Products
 Tobacco Products under GST with Central Excise Duty.

Note:

 CGST and SGST are levied on Intra-State supplies of Goods or Services.

 IGST is levied on Inter-State supplies of Goods or Services.
 CGST and SGST together combined is known as “Dual GST Model” since it
is levied by both Central and State Governments.
Features of GST

 GST is a Destination Based Tax.

 There is no scope for multiple taxation on Goods & Services such as Sales
Tax, Entry Tax, Octroi, Entertainment Tax, Luxury Tax, etc.
 It will increase tax collections due to the wide coverage of Goods & Services.
 Goods and Service tax will reduce the tax burden on the assessee’s since it
will avoid the cascading effect.
 In GST tax, there is no scope to levy for resale tax, special tax, additional tax,
turnover tax, etc.
 Zero rating of exports(though taxable entities but rate of tax is nil on their
input supplies- this requires no payment of International VAT) and inter-
State sales of goods and supply of services.
 GST will reduce effective rates of tax to one or two-floor rates.
 The credit of CGST paid on inputs may be used only for paying CGST on
the output.
 The credit of SGST paid on inputs may be used only for paying For
Departmental Officers only SGST.
 ITC (Input tax credit) cannot be cross-utilized, except in specified
circumstances of inter-State supplies, for payment of Integrated GST.
 ITC of CGST allowed for payment of CGST.
 ITC of SGST allowed for payment of SGST.
 ITC of CGST allowed for payment of CGST and IGST in that order.
 ITC of SGST allowed for payment of SGST and IGST in that order.
 ITC of IGST allowed for payment of IGST, CGST, and SGST in that
order.
 Input Tax Credit of Additional Tax would not be permitted.
 It will be helpful to reduce the administrative cost for the Government.
Benefits of GST Tax

 GST aims to eliminate all Indirect Tax in India and replace them with one
unified law.
 Simplified Taxation Regime.
 Transparent and Corruption free tax administration.
 Unified Indirect Taxes for all the Retailer, Manufacturer.
 Taxation burden will be Equitably divided between manufacturing and
Services Industries.
 Similar Return filing at State and Central Level will also reduce the
complexity of taxation system.
 Uninterrupted ITC (Input Tax Credit) Chain on Inter-State transactions.

IGST Model and ITC

 Center would levy IGST levy (CGST + SGST).

 The ITC will be allowed in this transaction will be CGST, IGST, SGST as
applicable.
 Appropriate provision will be provided for consignment or Stock transfer.

GST Tax Rate

The Goods and Service Tax Rates are different for State and Central Governments
because both are eligible to charge GST. There are four GSTs - CGST, SGST,
IGST and the compensation law. Under the new system the states and the Centre
will collect identical rates of taxes on goods and services. For instance, if 18
percent is the GST rate on a good across the country, the states and the Centre will
get 9 percent each called the CGST and SGST rates. The Centre will also levy and
collect the Integrated Goods and Services Tax (IGST) on all inter-State supply of
goods and services. The IGST mechanism has been designed to ensure seamless
flow of input tax credit from one state to another. There is a four-slab structure –5,
12, 18 and 28 percent—along with a cess on luxury and `sin’ goods such as
tobacco.

Example on GST Regime

At present during VAT, Service Tax the tax calculation on a commodity or

product is as given below. If a Product priced at Rs. 100/- then the excise duty is
10% and VAT is charged at the rate of 14% then the invoice will be as follows:

Before implementation of GST:

Price of Good = Rs. 100/-

Excise Duty = 10% of Rs. 100/-

Then the subtotal = Rs. 110/-

VAT = 14% of Rs. 15.40

Total Price = Rs. 125.40/-

After implementation of GST:

Price of Good = Rs. 100/-

CGST = 10% of Rs. 100/-

SGST = 14% of Rs. 100/-

Total price of Good = Rs. 124.00/-

The difference under GST Regime = Rs 1.4/-

The Taxes that are not subsumed in GST

These are the taxes which are not subsumed in GST Tax system. These taxes are
levied as per their rates because they are not included in the GST regime.

 Exports Duty.
 Road and Passenger Tax.
 Basic Customs Duty.
 Stamp Duty.
 Property Tax.
 Toll Tax.
 Electricity Duty.