GST Notes
GST Notes
The origin of Goods and Services could be traced back to July 17, 2000, when the
Government of India set up the Empowered Committee of State Finance Ministers with the
Hon’ble State Finance Ministers of West Bengal, Karnataka, Madhya Pradesh, Maharashtra,
Punjab, Uttar Pradesh, Gujarat, Delhi and Meghalaya as members with the following
objectives:
(i) to monitor the implementation of uniform floor rates of sales tax by States and Union
Territories;
(ii) to monitor the phasing out of the sales-tax based incentive schemes; to decide
milestones and methods of States to switch over to VAT; and
(iii)to monitor reforms in the Central Sales Tax system existing in the country.
Subsequently, Hon’ble State Finance Ministers of Assam, Tamil Nadu, Jammu & Kashmir,
Jharkhand and Rajasthan were also notified as the members of the Empowered Committee.
On August 12, 2004, the Government of India decided to reconstitute the Empowered
Committee with all the Hon’ble State Finance/Taxation Ministers as its members.
Here is a brief flash back mentioning the key milestones of the journey of GST in India:
1. Amaresh Baghchi Report, 1994 suggests that the introduction of “Value Added Tax
(VAT) ‘will act as root for implementation of Goods and Services Tax in India
2. Ashim Dasgupta, 2000 empowered committee, which introduces VAT System in 2005,
which has replaced old age taxation system in India.
3. Vijay Kelkar Task Force 2004, it strongly recommended that the integration of indirect
taxes into the form of GST in India.
4. February, 2007: An announcement was made by the then Hon’ble Union Finance
Minister in the Central Budget (2007- 08) to the effect that GST to be implemented by 1st
April, 2010 after successfully implementation of VAT system in India and suggestion of
various committees and task forces on GST, the Union Government first time in Union
Budget 2006 announced that the GST would be applicable from 1st April, 2010.
5. September, 2009: The government has formed various Joint Working Groups of state
finance ministers to study the impact of GST on the revenue of various States.
7. Task force of Finance Ministers has submitted their report in December, 2009 on
structure of GST in India.
8. November, 2009: Government of India has issued first discussion paper in November,
2009.
9. March, 2011: Constitution (115th Amendment) Bill introduced on 22nd March, 2011
and same was referred to Parliamentary Standing Committee on Finance for discussion.
The Constitution (One Hundred and Fifteenth Amendment) Bill, 2011 to give concurrent
taxing powers to the Union and States was introduced in Lok Sabha. The Bill suggested
the creation of Goods and Services Tax Council and a Goods and Services Tax Dispute
10. November, 2012: A “Committee on GST Design”, consisting of the officials of the
Government of India, State Governments and Empowered Committee (EC) was
constituted.
11. March, 2013: A not for profit, non-Government, private limited company was
incorporated in the name of Goods and Services Tax Network (GSTN) as special purpose
vehicle setup by the Government primarily to provide IT infrastructure and services to the
Central and State Government(s), tax payers and other stakeholders for implementation
of the Goods and Services Tax (GST).
12. August, 2013: The Parliamentary Standing Committee submitted its Report to the Lok
Sabha. The recommendations of the Empowered Committee (EC) and the
recommendations of the Parliamentary Standing Committee were examined by the
Ministry in consultation with the Legislative Department. Most of the recommendations
made by the Empowered Committee and the Parliamentary Standing Committee were
accepted and the Draft Amendment Bill was suitably revised.
13. June, 2014: The draft Constitution Amendment Bill in March, 2014 was sent to the
Empowered Committee after approval of the new Government.
14. December, 2014: The Constitution (One Hundred and Twenty-Second Amendment)
Bill, 2014 seeking to amend the Constitution to introduce the Goods and Services Tax
(GST) and subsume state Value Added Tax, octroi and entry tax, luxury tax, etc. was
introduced in the Lok Sabha on December 19, 2014 by the Hon’ble Minister of Finance, Mr.
Arun Jaitley.
15. May 2015: Constitution Amendment (122nd) Bill was passed by Lok Sabha on May 06,
2015. In Rajya Sabha, Bill was referred to a 21-member Select Committee of Rajya Sabha.
16. July 2015: Select Committee submitted its report to Rajya Sabha on July 22, 2015.
17. June 2016: On June 14, 2016, the Ministry of Finance released draft model law on
GST in public domain for views and suggestion.
18. August, 2016: On August 03, 2016, the Constitution (122ndAmendment) Bill, 2014
was passed by Rajya Sabha with certain amendments.The changes made by Rajya Sabha
were unanimously passed by Lok Sabha, on August 08, 2016.
19. September, 2016: The Bill was adopted by majority of State Legislatures wherein
approval of at least 50%of the State Assemblies was required. Final assent of Hon’ble
President of India was given on 8th September,2016
20. In March 2017: GST Council finalizing the GST Rules and GST Rates
22. 30th June 2017 – All States except J&K passed their SGST ACT
24. 8th July 2017 – SGST Act passed by J&K; CGST and IGST Ordinances promulgated
to extend GST to J&K
25. 29th August 2018 – Amendments to CGST, IGST, UTGST and Compensation to
State Acts enacted.
India adopted a dual GST where tax imposed concurrently by the Central and States.
CGST:
CGST refers to the Central GST tax that is levied by the Central Government of India on
any transaction of goods and services tax taking place within a state. It is one of the two
taxes charged on every intrastate (within one state) transaction, the other one being
SGST (or UTGST for Union Territories). CGST replaces all the existing Central taxes
including Service Tax, Central Excise Duty, CST, Customs Duty, SAD, etc. The rate of
CGST is usually equal to the SGST rate. Both taxes are charged on the base price of the
product. See the example below to understand it better.
a. g. – When Suresh sales a product to Pradeep in the same state (Rajasthan), he has to
pay two taxes. CGST is for the central government while SGST is for the state. The rate of
CGST is 9%, same as SGST. After the application of CGST (9% of Rs 10,000), the final
cost of the product will become Rs 11,800.
As you can probably guess, all the taxes in all the conditions above are borne by the end
consumer in the final cost, not by the manufacturer or the dealer of the product or service.
Since GST is levied on consumption, the state where the product is originally
manufactured is not entitled to the tax collected. If the manufacturing state levies a tax,
the same will be transferred to the consuming state through the Central government.
SGST:
SGST (State GST) is one of the two taxes levied on every intrastate (within one state)
transaction of goods and services. The other one is CGST. SGST is levied by the state
where the goods are being sold/purchased. It will replace all the existing state taxes
including VAT, State Sales Tax, Entertainment Tax, Luxury Tax, Entry Tax, State Cesses
and Surcharges on any kind of transaction involving goods and services. The State
E.g. – Suresh from Rajasthan wants to sell some goods to Pradeep in Rajasthan. The
product, originally priced at Rs 10,000, will attract GST at 18% rate comprising of 9%
CGST rate and 9% SGST rate. The SGST tax amount here is Rs 900 (9% of Rs 10,000)
which is fully claimed by the Rajasthan State Government. The rate of the product after
SGST will be Rs 10,900.
IGST:
e.g., – Ramesh is a manufacturer in Rajasthan who sold goods worth Rs 10,000 to Suresh
in Mumbai. Since it is an interstate transaction, IGST will be applicable here. Let’s assume
the GST rate is 18% for the particular item. So, the IGST amount charged by the Central
Government will be Rs 1800 (18% of Rs 10,000), and the refined rate of the product will
be Rs 11,800.
Now, GST is a consumption tax that means only the state where the goods are actually
consumed will get the tax benefits, irrespective of the manufacturing state.
GST Council
Article 279A of the Constitution empowers the President to constitute a joint forum of the
Centre and States namely, Goods & Services Tax Council (GST Council). the GST Council
works for the enactment, procedures, modifications of laws related to GST.
The Members of the GST Council referred to clause (c) above shall, as soon as may be,
choose one amongst themselves to be the Vice Chairperson of the Council for such period
as they may decide.
The council can make recommendations to both the union and states on the following
issues and matters:
1. Taxes, cesses and surharges levied by the Union, States and local bodies
2. Goods and services may be exempt from the GST collection
3. Model of the GST laws and the principles governing the place of supply
6. any special rate or rates for a specified period, to raise additional resources during any
natural calamity or disaster;
7. Special GST provisions for the states of Arunachal pradesh, Assam, jammu and Kashmir,
Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and
Uttarakand.
8. Matters relating to GST as the council may decide.
The GST Council shall recommend the date on which the goods and services tax be levied
on petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural
gas and aviation turbine fuel.
Meeting:
Every decision of the GST Council shall be taken at a meeting, by a majority of not less
than three-fourths of the weighted votes of the members present and voting, in
accordance with the following principles, namely:
a) the vote of the Central Government shall have a weightage of one-third of the total
votes cast, and
b) the votes of all the State Governments taken together shall have a weightage of
twothirds of the total votes cast, in that meeting.
The Goods and Services Tax Council shall establish a mechanism to adjudicate any dispute