Goods and Service Tax

GST is not just a tax reform, But is a step towards

economic reform

- Narendra Modi
Prime Minister of India
 Concept of GST
 The implementation of GST has brought about a fundamental shift in
the financial relations between the Central Government and the State
Governments in India. GST is a unified tax system that replaced
multiple indirect taxes levied by both the Central and State
Governments. Under GST, both the Central and State Governments
share the authority to levy and collect taxes on goods and services.
This has led to greater harmonization and uniformity in the tax
structure across States, promoting economic integration
 Goods and Services Tax (GST) is a consumption-based tax system that
replaces multiple indirect taxes in a country. It is designed to
streamline taxation by levying a single tax on the supply of goods and
services. GST has different slabs for different goods and services, and
it aims to eliminate cascading effects, promote transparency, and
simplify tax compliance.
 GST system follows a dual structure, comprising Central GST (CGST)
and State GST (SGST), levied concurrently by the Central and State
governments, respectively. Additionally, an Integrated GST (IGST) is
levied on interstate supplies and imports, which is collected by the
Central Government but apportioned to the destination state.
 Features of GST
 One Nation, One Tax: GST replaced multiple indirect taxes levied by
the Central and State Governments, such as excise duty, service tax,
value-added tax (VAT), and others. It brought uniformity in the tax
structure across India, eliminating the cascading effect of taxes.
 Dual Structure: GST operates under a dual structure, comprising the
Central GST (CGST) levied by the Central Government and the State
GST (SGST) levied by the State Governments. In the case of Inter-
state transactions, Integrated GST (IGST) is applicable, which is
collected by the Central Government and apportioned to the
respective State. Import of goods or services would be treated as
inter-state supplies and would be subject to IGST in addition to the
applicable customs duties.
 Destination-based Tax: GST is a destination-based tax, levied at each
stage of the supply chain, from the manufacturer to the consumer. It
is applied to the value addition at each stage, allowing for the
seamless flow of credits and reducing the tax burden on the end
consumer.
 Input Tax Credit (ITC): GST allows for the utilization of input tax
credit, wherein businesses can claim credit for the tax paid on
inputs used in the production or provision of goods and services.
This helps avoid double taxation and reduces the overall tax liability.
 GST would apply on all goods and services except Alcohol for
human consumption. GST on five specified petroleum products
(Crude, Petrol, Diesel, ATF & Natural Gas) would by applicable from
a date to be recommended by the GSTC. Tobacco and tobacco  Composition Scheme: The composition scheme is
products would be subject to GST. In addition, the Centre would
have the power to levy Central Excise duty on these products. available for small taxpayers with a turnover below a
Exports are zero-rated supplies. Thus, goods or services that are prescribed limit (currently ₹ 1.5 crores and ₹ 75 lakhs
exported would not suffer input taxes or taxes on finished for special category state). Under this scheme,
products. businesses are required to pay a fixed percentage of
 Threshold Exemption: Small businesses with a turnover below a their turnover as GST and have simplified compliance
specified threshold (currently, the threshold is ₹ 20 lakhs for requirements.
supplier of services/both goods & services and ₹ 40 lakhs for
supplier of goods (Intra–Sate) in India) are exempt from GST. For  Online Compliance: GST introduced an online portal,
some special category states, the threshold varies between ₹ 10-20 the Goods and Services Tax Network (GSTN), for
lakhs for suppliers of goods and/or services except for Jammu & registration, filing of returns, payment of taxes, and
Kashmir, Himachal Pradesh and Assam where the threshold is ₹ 20 other compliance-related activities. It streamlined the
lakhs for supplier of services/both goods & services and ₹ 40 lakhs
for supplier of goods (Intra–Sate). This threshold helps in reducing process and made it easier for taxpayers to fulfill their
the compliance burden on small-scale businesses. obligations.
 Anti-Profiteering Measures: To ensure that the
benefits of GST are passed on to the consumers,  Sector-specific Exemptions: Certain sectors,
the government established the National Anti- such as healthcare, education, and basic
Profiteering Authority (NAA). The NAA necessities like food grains, are given either
monitored and ensured that businesses do not exempted from GST or have reduced tax
engage in unfair pricing practices and rates to ensure affordability and accessibility.
profiteering due to the implementation of GST.
All GST anti-profiteering complaints are now  Accounts would be settled periodically
dealt by the Competition Commission of India between the Centre and the States to ensure
(CCI) from 1st December, 2022. that the credit of SGST used for payment of
IGST is transferred by the Exporting State to
 Increased Compliance and Transparency: GST the Centre. Similarly, IGST used for payment
aims to enhance tax compliance by bringing of SGST would be transferred by the Centre
more businesses into the formal economy. The to the Importing State. Further, the SGST
transparent nature of the tax system, with the portion of IGST collected on B2C supplies
digitization of processes and electronic records, would also be transferred by the Centre to
helps in curbing tax evasion and increasing the destination State. The transfer of funds
transparency. would be carried out on the basis of
information contained in the returns filed by
the taxpayers.
 CHRONOLOGY OF EVENTS
LEADING TO ENACTMENT OF
GST LAW
 2000 Setting up of empowered committee of finance minister to design GST
for India by Vajpayee Government
 2004 partial integration of excise and service tax legislation
 2005 introduction of national vat in majority of states
 2007 finance minster announces implementation of GST by April 1 2010
 2009 EC releases the first discussions paper on GST with a blueprint for GST
 2011 introduction of Constitution Amendment bill and set up of GST network
 2012 - Introduction of Negative list based taxation of service and Place of
provision of service rules
 2014 - Reintroduction of Constitution Amendment Bill, 2014
 2015 - Constitution Amendment Bill, 2014 passed by Lok Sabha
on 6th May,
 2016- Constitution Amendment Bill, 2014 passed by Rajya
Sabha on 3rd August,2016.
 2016 - Ratification of GST Bill by States August 12 to September
1, 2016..Requirement of ratification by 50% of the states
completed.
 2016 - Assent to the Bill by the President of India. On With the introduction of GST, India has become a
09.09.2016 President Mr. Pranab Mukherjee gave his assent to fully integrated economy after 57 years its
the GST political integration" as a constitutional republic.

 2017 - GST Legislations approved by Lok Sabha and Rajya The goods and services tax (GST) has finally
Sabha in March-April, 2017. become a reality.

 2017 - 1st July, GST Law introduced in India. The overarching goal of Article 301 of the
Constitution was always to ensure that "trade,
 2017 - The State of J & K legislated the GST Law 7th July, 2017 commerce and intercourse throughout the
which made the GST in India a true "One Nation, One Tax“ territory of India shall be free" and now it has
been achieved.
Introduction of GST in India required the
ratification of GST Bill by 2/3rd of the states in
India. Assam was the first state to ratify the GST
Bill.
 BENEFITS of GST

➢ BENEFIT TO THE GOVERNMENT

1. Expansion of tax base
 BENEFITS FOR BUSINESSES
2. increased in revenue
1. Reduced resources, cost and time
3. streamlining of administration
2. Reduction in litigation
4. Reduced administrative and collection cost
3. Efficient structuring of operations
4. Self assessment
5. Seamless flow of credit
6. Boost to exports
 BENEFITS TO CONSUMER
1. Possibility of availability of goods at cheaper price
2. Access to more goods and services at uniform prices
Types of Excise Duty ❖ Special Excise

In a broader sense, there are 3 distinct types of Duty This category of tax is levied on those goods
excise duty, namely – listed under the Second Schedule of the Central
Excise Tariff Act, 1985.
❖ Basic Excise Duty
One must note that individuals are exempted
This type of excise duty is levied on goods that come from paying taxes. However, such a benefit can
under schedule one of the Central Excise Tariff Act, be availed based on –
1985. It is imposed on all excisable goods except salt.
• Value of turnover in a given financial year.
❖ Additional Excise Duty • Raw materials used.
• Process involved.
It is a tax levied on all goods that are scheduled
under Section 3 of the 'Additional Duties of Excise
Act’ of 1957. This tax collected is shared between the
state and central government and is levied instead of
sales tax.
CENTRAL EXCISE
Excise duty is a tax levied on domestically produced goods. Generally, it is charged
on their production and sale and is also known as CENVAT or Central Value Added
tax. Central Excise duty is an indirect form of taxation and is collected from a
customer by a retailer or an intermediary. It is paid when goods are transferred from
the production unit to a warehouse. This particular tax is governed by two sets of
acts – Central Excise Act, 1944 and Central Excise Tariff Act, 1985. Ideally, the Central
Board of Excise and Customs is responsible for the collection of excise duty. With the
introduction of GST, several indirect taxes have been subsumed, including excise tax.
Nonetheless, it is still applicable to a few items like petroleum, liquor, etc.

When Should You Pay Excise Duty ?

Excise duty must be paid at the time the items are removed. Assesses must
pay excise duty on items manufactured or produced. Excise duty should be
paid on the fifth day of the following month from the date the products
were taken from the warehouse or factory for the purpose of sale, according
to Rule no. 8 of the Central Excise (Amendment) Rules, 2002. If excise duty is
paid online through net banking, the payment is due on the sixth day of the
next month. If the payment is paid in March, it must be made by March 31.
Penalty of Not Paying Excise Duty
If you fail to pay excise tax or commit an infraction
involving an excisable commodity, the duty
chargeable on that product exceeds Rs.50 lakh, then
the defaulter faces imprisonment for a term of up to 7
years.
Customs duties
Customs duties are charges levied on goods when they
A fine will also be levied against the defaulter.
cross international borders.
Depending on the circumstances, the sentence might
be up to three years in prison, with or without a fine.
Customs duties are charged by special authorities and
bodies created by local governments and are meant to
protect local industries, economies, and businesses.
Different products, as well as different countries of
origin, may have different customs duties associated
with them.
 Difference between Excise duty and Custom duty

Parameters Excise duty Custom duty

Place of manufacture It is levied on goods that are produced in It is levied on goods that are sold in India but
India are produced in another country

Payer The manufacturer of goods bears it. The importer of goods bears it.
 Difference between Excise duty and GST
Parameters Excise duty GST
1. Tax base i. This tax is levied on manufactured goods. It is i. It is levied on goods and services. However, GST is
implemented at the time of removal of goods from levied at the time of supply of goods and services.
the production unit.
ii. GST returns have to be filed monthly or quarterly.
2. Filing of returns ii. Monthly or annual returns have to be filed before On the other hand, the annual return has to be filed
the 30th of April. prior to the 30th of September.

3. Rate of tax iii. As per the norms of Central Excise Tariff – the iii. As per GST norms, the rate of taxes are - 0%, 5%,
current rate of excise duty is 12.36% (it, however, 12%, 18% and 28%.
depends on the produced goods).

4. Invoice matching iv. The concept of invoice matching does not exist iv. The input tax credit is given based on invoice
under the purview of excise duty. The input tax matching.
credit can be claimed based on the self-assessed
return filed by taxpayers.

5. Input tax credit v. Taxpayers can avail credit on the tax that is levied v. Input credit can be availed on both products and
on input products and services. services. One must note that GST credit can be
availed on IGST, SGST or CGST.
 The Objectives of GST
Various Forms of GST The Goods and Services Tax (GST) is implemented in various
countries with several key objectives, which include:
In India, four different forms of GST are imposed on goods and
services. They include the following. • Simplify Taxation: GST aims to simplify the indirect tax system
by replacing multiple taxes, such as excise duties, service tax,
• Central Goods and Services Tax (CGST) - This is charged by and value-added tax (VAT), with a single, comprehensive tax.
the Central Government of India on intra-state transactions This simplification reduces the complexity of tax compliance
involving goods and services. for businesses.

• State Goods and Service Tax (SGST) - Charged by the State • Create a Unified Market: GST fosters economic integration by
Governments in India, SGST is levied on intrastate creating a single market within a country. It eliminates tax
transactions along with CGST. barriers at state or regional borders, allowing for the
seamless movement of goods and services throughout the
• Union Territory Goods and Service Tax (UGST) - Charged by nation. This promotes trade and economic growth.
the Union Territories in India, UGST is imposed on
transactions within their territories, in combination with • Broaden the Tax Base: By including a broader range of goods
CGST. and services within its scope, GST widens the tax base. This
reduces the scope for tax evasion and increases tax
• Integrated Goods and Service Tax (IGST) - This tax is imposed collections, which can be used for public welfare and
on inter-state transactions. IGST is the total amount of CGST development.
and SGST/UGST The revenue collected' under IGST is shared
between the central and state governments.
• Eliminate Cascading Effect: GST eliminates the cascading
effect of taxes, where taxes are levied on top of taxes. It
• Rationalize Tax Rates: GST allows for a structured approach
allows businesses to claim credits for taxes paid on inputs,
to tax rates, with multiple tax slabs to accommodate
resulting in a more efficient tax system and lower overall
different types of goods and services. This rationalization
tax costs for businesses.
ensures that essential items are taxed at lower rates while
luxury items are taxed at higher rates.
• Boost Economic Growth: GST is expected to boost
economic growth by reducing transaction costs, creating a
• Harmonize State and Central Taxes: In federal countries, like
unified market, and improving the ease of doing business. A
India, GST harmonizes tax systems between the central and
simplified tax system can stimulate economic activity and
state governments. This ensures better coordination and
investment.
reduces conflicts over tax revenue.
• Promote Transparency: GST promotes transparency
• Improve Export Competitiveness: GST provides a mechanism
through digital record-keeping and online tax filing. This
for exporters to claim refunds on taxes paid on inputs,
transparency reduces corruption and ensures better
making exports more competitive in the global market.
governance by making financial transactions more visible
and accountable.
• Benefit Consumers: Consumers benefit from GST as it often
leads to reduced tax rates on goods and services, making
• Reduce Tax Evasion and Black Money: With its transparency
them more affordable. Additionally, the elimination of
and digitalization, GST is expected to help reduce tax
hidden taxes and the cascading effect can result in cost
evasion and the generation of black money. It becomes
savings for consumers.
harder for individuals and businesses to engage in illicit
financial activities.

These objectives collectively aim to create a more efficient, equitable, and

transparent tax system that benefits businesses, governments, and consumers
while fostering economic growth and development
Person liable to pay GST
Following categories of persons will be liable to
A 'taxable person' under GST, is a person pay GST:
who carries on any business at any place in
India and who is registered or required to be • Persons registered under GST and making
registered under the GST Act. Any person taxable supplies under GST.
who engages in economic activity including
trade and commerce is treated as a taxable • Persons registered under GST required to
person. make payment of tax under reverse charge
mechanism.
'Person' here includes individuals, HUF,
company, firm, LLP, an AOP/BOl, any • E-Commerce operators registered under GST
corporation or Government company, body and through whom certain categories of
corporate incorporated under laws of foreign notified supplies are made.
country, co-operative society, local authority,
government, trust, artificial juridical person. • Persons registered under GST and required
to deduct Tax (TDS)

• E-Commerce Operators registered under

GST and required to collect tax (TCS)
 Dual GST
Dual gst means that gst law will be GST will replace the existing indirect taxes and shall be split
imposed simultaneously by the center into three type of taxes :
and state governments. Dual GST is a
system of gst in which both center 1. The first tax shall be called the Central Goods & services
and state government levy GST Tax (CGST) replacing the existing central indirect taxes
separately, rather than center alone of Excise Duty, Customs Duty (except Customs Duty),
levying the taxes and sharing the Service Tax and Central Sales Tax. The CGST revenue will
revenue with the states. accrue to the central government
2. The second tax shall be called the State Goods &
Services Tax (SGST) replacing the existing state indirect
taxes of VAT, Entry Tax, Entertainment Tax, Luxury Tax,
Octroi, etc. (Municipal level octroi and other taxes may
still continue). The SGST will accrue to the respective
state governments.
3. The third tax shall be called the Integrated Goods &
Services Tax (IGST) and shall be charged on inter-state
transaction in goods and services. Arithmetically, IGST
would be the sum total of CGST and SGST.
 BENEFITS OF DUAL GST
The Dual GST is expected to be a simple and NECESSITY FOR DUAL GST
transparent tax with one or two CGST and
SGST rates. The dual GST is expected to result India is a federal country where both the Centre and
in- the States have been assigned the powers to levy
• Reduction in the amount of total taxes at and collect taxes through appropriate legislation.
both the Central and State level.
• Reduction in tax rate for many goods and Both the levels of Government have distinct
services responsibilities to perform according to the division
• Removal of the current cascading effect of of powers prescribed in the Constitution for which
taxes. they need to raise resources. A dual GST will,
• Reduction of compliance costs of the therefore, be in keeping with the Constitutional
taxpayers through simplified tax requirement of fiscal federalism.
compliance system.
• Increased tax collections due to wider tax
base.
• Transparent system.
 Difference between
GST structure and previous tax structure

Before GST was implemented, the VAT system was being

followed in the country. There are numerous differences
between GST and the previous system ranging from the
levies, taxes, exemptions, validations, and more.

The previous tax structure has been replaced by GST and a

number of changes have taken place as a result. Here are
the most prominent differences between the VAT
structure and GST:
PARAMETER VAT GST
Structure Under the old taxation system, the central taxes applicable Under GST, all the central and state taxes will be
were custom duty/central excise duty, central sales tax on subsumed and a single tax will be levied on all
commodities and services, surcharge and cesses. The state commodities and services apart from motor spirit,
taxes included state VAT, WCT, entertainment tax, luxury tax, petroleum, natural gas and high-speed diesel.
tax on gambling, betting and lottery, sales tax deducted at
source, and surcharge and cesses.

Basis of Levy Under VAT, tax will be levied at the place where goods are Under GST, tax will be levied at the place of
manufactured or sold, or the place at which services are consumption, like a destination-based tax.
rendered.

Registration Under VAT, the registration is decentralised under state and Under GST, there will be uniform e-registration
central authorities. depending upon the PAN of the entity.

Validation Under VAT, the system will partly validate the returns, and Under GST, the validation will take place on the
full verification will be subject to assessments by state or system, and consistency checks will be carried out on
central authorities. input credit availed, tax payments, and utilization.

Filing of Returns and Under the old scenario, service tax and central excise were Under GST, the process is uniform and the dates for
Collection of Tax uniform, but VAT varied from state to state. collecting or depositing tax and filing returns are
common.
Parameter VAT GST

Service Tax Under VAT, the centre charges service tax on a list of Under GST, the State GST subsumes service tax
services under the Finance Act on provision/payment basis. depending upon rules relating to Place of Supply.

State VAT Under VAT, all commodities apart from those exempt are Under GST, the State GST subsumes this tax.
taxed.

Excise Duty Under VAT, excise duty will be levied up to the point of Under GST, the excise duty will be replaced by
manufacturing Central GST and tax will be levied up to retail
level.

Basic Customs Duty Under VAT, the centre charges tax on imports under a No change.
separate act

Special Additional Under Vat, the centre charges tax on imports separately. Under GST, this duty is subsumed by State GST.

Duty Under VAT, entry tax is charged by certain states for inter- Under GST, entry tax is not applicable, but an
state transfers, detained as import in local area. additional 1% will be levied as tax on inter-state
supply of certain commodities.

Entry Tax Under VAT, CST is charged at a concessional rate of 2% so Under GST, the Integrated GST subsumes CST.
far as inter-state transfers are concerned against C-Forms.
The full rate applicable otherwise ranges from 5% to 14.5%.
Cascading Effect Under VAT, credit between service tax Under GST, credit available on the
and excise duty is available, but there is whole amount of taxes up to retailer.
no set-off against VAT on excise duty.
 Interesting facts about GST in India

Which is the first state to implement GST in India ?

Assam was the first state in India to pass the GST bill. Interesting facts about the introduction of GST law

• France was the first nation to implement the GST system.

The Central Government designated 1st July as GST Day. • The Canadian GST system serves as the foundation for the
GST system in India.
Every year on 1st July, GST Day is observed by the • Atal Bihari Vajpayee is often known as the father of GST.
central government to celebrate the • The idea for the new indirect tax system was proposed and
implementation of this significant tax reform. given the go-ahead in 1999.
• Amitabh Bachchan is the brand ambassador for GST.
• The tax rates under the Indian GST system are 5%, 12%, 18%,
Its implementation is considered the largest tax reform and 28%. However, there are also nil-rated goods and
in the history of independent India, and GST Day is services, as well as special rates levied for high-value items
celebrated to commemorate this significant milestone. like gold and diamonds, amongst others.

GST day is celebrated to mark the anniversary of the

implementation of GST in India.