& = Meaming of Goods and Services Tax (GST) / “France was the first country to implement GST in the year a Within 62 years of its advent, about 160 countries across the world have adopted GST-because this tax has the capacity to raise revenue in the most transparent and neutral manner. GST is a comprehensive indirect tax, which is to be levied on the manufacture, sale, and consumption _of goods and services. It is applicable to the whole of India. This tax will replace all the central and state government taxes. The introduction ofIntroduction to GST maa GST is a significant reform of the indirect tax structure of India. Under the GST method, all the central and state government taxes are merged into a single tax, which will reduce cascading or the double taxation effect. GST will is levied _at each stage of sale or purchase of goods and services throughout India based on the input tax credit method, wherein manufactures and traders can get tax credits on the expenses incurred for inputs or goods purchased for the purpose of manufacture or resale. Under this method, all the GST registered businesses will be eligible to claim the tax credit. Tho main aim in introducing GST is to abolishall indirect taxes. Every person who is providing or supplying services is liable to charge for the GST. tae ae agen GST is a tax on goods and services with comprehensive and continuous chain of set-off benefits from the producer’s point and service provider's point upto the retailer's level. It is essentially a tax only on value addition at each stage, and a supplier at each stage is permitted to set-off, through a tax credit mechanism, the GST paid on the purchase of goods and services as available for set-off on the GST to be paid on the supply of goods and services. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages. GST can be explained with the help of following example: PRODUCT sold from* Lee. PRODUCT sold from ‘Mumbai to Nagpur. oo Mumbai to Nagpur. « PRICE=% 1000” ea PRICE=% 1000 and CGST @ 5% == 50 VAT @ 10% = 100 1 SGST @ 5% =7 50 Product sold from Nagpur to Chennai. ch 1100 F 1000 SELL PRICE =% 2100 ost @ 104-20) TOTAL COST of product = % 2310 “ TOTAL COST of product = % 2210 aL =< In the above example, you can note that the tax paid on sale within state can be claimed against tax paid on sale outside state in GST system, which was not possible in Pre-GST regime. Timeline of the GST Bill Year GST Development aaa Prime Minister Atal Bihari Vajpayee set up a committee to design single tax model. 2005 (February) Finance Minister P. Chidambaram mentioned need of’ single tax in budget speech.Aon poets save uo ABEND. ef kes WINE! UIE LegLe s GST Model in India In the conventional model of GST, tax is charged by the central government on all the transactionIntroduction to ggy and later proceeds are system of C distributed among, centre and state in certain proportion, Such centralize implementation wow imply states’ to Jose their fiscal autonomy in levying tod collection of taxes, Howey nit much successful in India, both thy Centre and State h, ent powers to tax the various transactions. In fact, this was one of thy, ial opposition against the introduction of C Therefore, the Tay mean both conne d that the GST to be implemented in India would be ‘dual’ in nature, That levied by thee States will levy the tax concurrent (would consist of two components: ng ae “Re (CCST) andtanother levied by the States and Union Territgries (SCSI). Howeve, the base of tax levy would be ite tical. International experience shows that such models of day value added taxes have been sucee. ful in other federal countries like Brazil and Canada. The Ggp system in India ch is concurren take the form of “dual GSI”. which is concurrently levied by central and State Semmens, 7 —— Wt aan ta et, this conventional model of C n aS Concur main reasons behind the § Force has re ate ‘commende: and s Intra-state Inter state ‘movement movement I Central GST] State GST | | integrated GST (cast) (sasT) (est) Under the old system Article 246 distributed the power to levy taxes between Centre and State Governments. As the Governments at Centre and State levels had distinct powers to levy and collect taxes to meet their revenue requirements, hence a system was needed where concurrent powers were given to Centre and State Governments to levy taxes. Due to this reason constitution was amended and following four legislations were enacted * The Central Goods and services Act, 2017. * The Integrated Goods and Services Act, 2017, * The Union Territory Goods and Services Act, 2017. + The GST (Compensation to States ) Act, 2017. + _Séhtral Goods & Service Tax (CGST): As per the Central Goods & Services CGST is the centralized part of GST that subsumes thi present central taxations and Jevies_ Central Sales Tax, Central Excise Duty, Services Tax, Excise Duty under Medical & Toiletries Preparation Act, Additional Excise Duties Countervailing Duty (CVD), Additional Custom Duty and other centralized taxations. CGST is applicable on the supply of goods and services of standard services and commodities which can be amended periodically by a specialized body under the central government. The revenue collected under CGST belongs to the central overnment. Central GST (CGSTKis levied by Central Government on the Intra State transaction that is transactions in which supply is from one place in a state to other place inwae 4 person from Punjab to another person in Punjab fn mple suppl other words it is share of central gj within the same state. vernment which they charge on transactions taking place State Goods & Services Tax 1): SGST is an important part of GST. It stands for State Goods & Services Tax. Various taxations and levies under the state authority are subsumed by SGST as one uniform taxation. It includes the amalgamation of State Sales Tax, Luxury Tay, Entertainment Tax, Levies on Lottery, Entry Tax, Octroi and other taxations related to the movement of commodities and services under state authority through one uniform taxation SGST. Revenue collected under SGST belongs to the State Government. However, the mainstream framework of the state governing body will be supervised by the central government, Each state will be having their own State Authority to collect SGST. State GST (SGST) is levied by State Government on the Intra State transaction that is transactions in which supply is from one place in a state to other place in the same state for example supply by a person from Punjab to another person in Punjab. In other words it is share of state government which they charge on transactions taking place within the same state. «Integrated Goods & Services Tax (IGST): GST focuses on the concept of one tax, one nation. IGST stands for Integrated Goods and Services Tax which is charged on the supply of commodities and services from one state to another state. Under Article 269A of the Indian Constitution, the inter-state trade and commerce activities that involve the movement of commodities and services shall be levied with an integrated tax (IGST) under the GST regime. The Government of India will collect the revenue under IGST. Further changes can be made by the Goods and Services Tax Council of India. Integrated GST (IGST) is levied by Central Government on inter-State supply of goods and that is transactions in which supply is from one place in a state to other place in some other state for example supply by a person from Punjab to another person in Haryana. * Union Territory Goods & Services Tax (UTGST): As we have already learned about CGST and.SGST which are intra-state taxations and IGST: which is inter-state, the union territories in India are accounted under a specialized taxation called Union Territory Goods and Services Tax as per the GST regime 2016, It will subsume the various taxations, levies and duties with one uniform taxation in Union Territories as well. Delhi (India’s Capital Territory), Chandigarh, Dadra & Nagar Haveli, Andaman & Nicobar Islands, Daman & Diu, Lakshadweep and Puducherry are the prominent union territories in India, UTGST account for all the taxations under these union territories in India. ‘Three types tax structure is implemented to help taxpayers take the credit against each other thus ensuring “One nation one tax”. GST is basically a consumption based tax. In other words, GST can be implemened by the state where the goods or services are acquired, and not in the state where goods get manufactured. —-—— —_——— Example, ifa dealer in Punjab sells goods to a person in the Punjab of worth & 10,000, the GS 18%. This includes 9% of CGST and 9% of SGST. So, the dealer collects & 1800 of which % 900 will reach the hands of central government and ¥ 900 will go to the Punjab government.¥ ¥ Eu Introduction to gg, On the other hand, if the dealer in Punjab has sold goods worth & 10,000 to a person in Gujara the IGST will be 18 percent. So, here, the dealer ought to impose & 1,800 as IGST. And the entire Icsy will reach the hands of the centre. If a manufacture (dealer a) in Maharashtra sells % 10,000 worth goods to another dealer jn Maharashtra itself (dealer b), and if this dealer b sells the same to a trader (dealer c) in Rajasthan forg 15,000, and this dealer c in turn sells the same to the end user in Rajasthan for & 20,000.1f rate of CGsq imposed is 9% and SGST is 9% and hence IGST is total of 18%. Between dealer a and b, the deal ge over within the same state and hence the CGST 9% and SGST 9% is charged. Whereas with dealer and dealer cit is interstate transaction involving two states and hence IGST will be 18%. Now again, the dealer c sells the good to end user within the same state and hence the CGST and SGST will bot, be 9%. Further when dealer B sells goods to dealer C, he can get input tax credit of CGST and SGsy paid by him against IGST payable by him. Similarly when Dealer C sells goods to end user he om, take input credit of IGST paid by him against CGST and SGST payable by him. However, IGST will first be adjusted against CGST apd balance if any against SGST. | GastGst cost) | State GST(SGST) | _Integratea Gst IGS) Full Form Full form of CGST is Central | Full form of SGST is State | Full form of IGST is Goods and Services Tax. Goods and Services Tax. Integrated - Goods and SENG ee Services Tax. Scope CGST.is charged by central | SGST is charged by ‘State | ICGST is charged by Government for supply | Government . for. supply | central. Government for within state. ¢ within state ‘supply from one state to ; : another. Levying It is charged: by central.| It is charged by state | It is charged by central ‘Authority government: government government | Taxes subsumed | It has ‘replaced’ taxes like | It has replaced taxes like’ It has replaced taxes like Central ‘Excise and Service | Value Added Tax (VAT). Central Sales Tax. Tax. ) Against CGST, SGST and IGst + Tax Revenue “| Central government State government Shared between state and seid central governiients. Input Tax Credit | Against CGST and IGST | Against SGST and Ist Following are few examples that will make the concept clear. Example 1: (Intra State Supply) Mr. Bimal a businessman located in Jalandhar sells goods to a person located in Patia® Determine the nature of supply & GST applicable on such supply? Answer. sol aos ft he Location of Supplier ~ Jalandhar (Punjab) cus! gust corre™ Nature Salient feat vd ures of GST in India ‘nsiering the federal structure of the country, the GSI in India is having two components: one levied by the Centre (Central GST), and the other levied by the States (State GST). However, the basic ‘eatures of law such as chargeability, definition of taxable event and taxable person, measure of levy ‘including valuation provisions, basis of clasifcation etc. are uniform under both the laws. Following oe e are some of salient features of GST in India. © Destination base Consumption Tax - GST is levied at the place where goods and services are consumed. GST is based on the principle of destination that is tax is charged at a place where goods are supplied as against the earlier principle of origin based taxation. This can Ae? + potentially give more revenues to consuming states such as UP, Kerala and West Bengal a compared to producing or industrialized states such as Maharashtra, Gujarat or Tamil Nadu. St Dual GST Model ~ India has adopted a dual GST model with the Centre and the States simultaneously levying tax. The GST levied by the Centre is called Central GST (CGST) and that to be levied by the is called State GST(SGST). /* IGST/CGST/SGST/UGST - GST in India comprises of Central Goods and Service Tax (CGST) - levied and collected by Central Government, State Goods and Service Tax (SGST) - levied and collected by State Governments/Union Territories with State Legislatures and Union Territory Goods and Service Tax(UTGST) - levied and collected by Union Territories without State Legislatures, on intra-State supplies of taxable goods and/or services. Inter- State supplies of taxable goods and/or services are subject to Integrated Goods and Service Tax (IGST). IGST is approximately the sum total of CGST and SGST/UTGST and is levied by Centre on all inter-State supplies.gntroduction t0 GST EEA 4, Seamless Flow of Credit - Since GST is a destination based consumption fax, revenue of 7, SCS ordinarily accrues to the consuming States. The inter-State supplier in the exporting State is allowed to set off the available credit of IGST, CGST and SGST/UTGST (in that order) against the IGST payable on inter-State supply made by him. Similarly the buyer in the importing State is allowed to avail the credit of IGST paid on inter-State purchase made by him. Thus, unlike the earlier scenario where the credit chain used to break in case of inter-State sales on account of non-VATable CST, under GST regime there is a seamless credit flow in case of inter-State supplies too. (5, Concept of Supply - GST is applicable on “supply” of goods or services as against the present concept of tax on the manufacture of goods or on sale of goods or on provision of services. It means GST will be charged if goods are covered in the definition of supply even though no sale is made e.g. supply of goods to own branch. (6Amport of Goods and Services - Import of goods or services is treated as inter-State supply under GST and would be subject to IGST in addition to the applicable custom duties. 7. Comprehensive - The GST is very comprehensive Act and covers almost all goods and rvices. GST is applicable to all goods other than alcoholic liquor for human consumption and five petroleum products, viz. petroleum crude, motor spirit (petrol), high speed diesel, natural gas and aviation turbine fuel. It is also applicable to all services except a few to be mentioned in negative list. 8. GST Common Portal - A website managed by Goods and Services Network (GSTN) has ‘been set by the Government to establish a uniform interface for the tax payer and a common and shared IT infrastructure between the Centre and States. A common GST system provides linkage to all State’ UT Commercial Tax Departments, Central Tax authorities, Taxpayers, Banks and other stakeholders. GSTN provides three main services to the users namely registration, payment and return filing. 9. Registration: Every supplier of goods and/ or services is required to obtain registration in the State/UT from where he makes the taxable supply if his aggregate turnover exceeds & 40 lakh during a FY. However, the limit of * 40 lakh will be reduced to * 10 lakh if the person is carrying out business in the Special Category States 10. Subsuming all Taxes: GST subsume all major indirect taxes levied by the Central Government ie. central excise, customs and service tax and majority of the taxes levied by the State Government i.e. VAT, luxury tax, entertainment tax, etc. 11. Input Tax Credit: GST is levied on supply of goods and services and the supplier is allowed credit for the GST paid on purchases. The credit is seamless except that the credit of CGST paid is not allowed for set-off against SGST payable and vice versa. 12, GST Identification Number - Every registered person under GST (including Exporters and Importers) are given a PAN based GST number which is common to the both the State GST and Central GST.Introduction to GST y cE 13. GSPS/ASP: GST Suvidha Providers nteracting with the GSTN, ‘They facilita nd aet as a single stop shop for GST related services. € 's (ASPs) who act as a link between taxpayers and clnology companies, to be called GSTN has selected certain IV and financial Ps). GSPs develop applications to be used by taxpayers for + the tax payers in uploading invoices as well as P's may take the filing of retur help of Application Service Provid s to SEZ ~ Exports and supplies to SEZ are treated as. zer0-rated im its refund or 14. Exports and suppli supplies. The exporter have an option to either pay output tax and cla export under bond without tax and claim refund of Input Tax Credit. 15. Harmonised System of Nomenclature ~ HSN (Harmonised System of Nomenclature) code are used for classifying the goods under the GST regime. Taxpayers whose turnover is above € 1.5 crore but below €5 crore use 2-digit code and the taxpayers whose turnover ig @5 crore and above use 4-digit code. Taxpayers whose turnover is below @ 1.5 crore are not required to mention HSN Code in their invoices. 16. Threshold Limit - GST Act provides exemption for small manufacturers or service Providers. Taxpayers with an aggregate turnover of & 40 lakhs aree exempted from tax. For, North Indian states and Sikkim, the exemption is € 10 lakhs. 17. Composition Scheme ~ Every supplier of goods whose aggregate turnover from business on pan-India basis is less than %1.50 crore will be cligible to avail composition scheme, Under composition scheme businessman can pay tax at concessional rate but he will not be eligible for input tax credit. Under composition scheme rate for manufacturer is 1%, for restaurants it is 5% and for others it is 2%. Compensation to States - The GST Laws provides for payment of compensation to the States for loss of revenue, if any, arising out of implementing of the Goods and Services Tax 18. for a period of 5 years. The GST Council - The Council is a quasi - judicial body of States and the Centre, represented by the State Finance Ministers or Taxation Ministers and the Finance Minister of India. The key role of this Council is to make recommendations on various provisions of 2, GST Laws to the State and the Centre. Anti-Profiteering Measures ~ It is expected the GST Laws will bring down the prices of goods and services. To ensure the pass of such benefits to end users or the customers, the government has put anti-profiteering measures under GST. Uniform Procedures - To the extent feasible, uniform procedure for collection of both Central GST and State GST are prescribed in the respective legislation for Central GST and State GST. 20. 21. Difference Between GST and VAT The indirect taxation regime in India has undergone many changes in the past few decades. Some tese changes include introduction of MODVAT scheme in 1986, transfer of credit between Excist| Total amount | 4700) wy 5 Taxes subsumed in ask The “One Nation, One Tax”, which is necessary fo do away with multi-tax regimes that lead to inefficiencies such as cascading taxes. GST is one indirect tax for the whole nation, converting India into the single unified market. GST is a single tax onthe supply of goods and services, right from the manufacturer to the consumer. Previously, Goods ise Duty, VAT,r Central Sales Tax, d under various categories such as Exci levied by the Central government, and others by the state most important notion which GST represents is and Services were taxe service Tax. Some of these taxes are ar’ Under GST regime all these taxes are Subsumed with GST, which means that these government ies are no more in existance and are merged with GST. Following are the taxes subsumed with cst. () Taxes currently levied and collected by the Centre: (a) Central Excise duty (b) Duties of Excise (Medicinal and Toilet Preparations)LE Tntrodci, (Goods of Special Importance) (Textiles and Textile Products) -ommonly known as CVD) (SAD) (oc) Additional Duties of Excise (&) Additional Duties of Excise (ec) Additional Duties of Customs (ci () Special Additional Duty of Customs (g) Service Tax (ht) Central Surcharges and Cesses 5° far as they relate to supply of goods _ d under the GST are: Seryi (ii) State taxes that would be subsume (a) State VAT (b) Central Sales Tax (Q) Luxury Tax (a) Entry Tax (all forms) (e) Entertainment and Amusement Tax (except when levied by the local bodies) (f) Taxes on advertisements g- Purchase Tax (g) Taxes on lotteries, betting and gambling (h) State Surcharges and Cesses so far as they relate to supply of goods and service, I. Central Excise. - eee Sae ta | ‘Service Tax SAD [i ND. | AED FESaud Nae “Luxury Tax La beeury Tax |