Unit 1

INTRODUCTION TO GST
GST is a Comprehensive, multistage, destination-based tax which is levied on every value
addition. It is a single tax on the supply of goods and services. The concept of GST subsumed
Central Excise Law, Service Tax Law, VAT, Entry Tax, Octroi, etc. Multiple indirect taxes that
the Central and State Governments imposed on suppliers and consumers were amalgamated
in GST with an aim of making the country a unified common market..GST has brought the
Indian Taxation framework under its unique ideology 'One nation, one tax'.
GST is expected to bring together state economies and improve over all economic growth of
the nation. GST is an agreeable indirect tax levy on manufacture, sale and consumption of
goods as well as services at the national level.

History of GST
o 2000- The then Prime Minister introduced the concept of GST and set up a committee
to design a GST model for the country.
o 2003- the Central Government formed a taskforce on Fiscal Responsibility and Budget
Management under Vijay Kelkar.
o 2004 - Task force recommended GST to replace the existing tax regime by introducing
a comprehensive tax on all goods and services replacing Central level VAT and State
level VATs.
o 2006 - First announcement of GST was made by the Union Minister during the 2006-
2007 budget, that it would be introduced on April 1, 2010.
o 2009 - Empowered Committee released the first Discussion Paper.
o 2011 - 115th Amendment Bill was introduced and subsequently lapsed
o 2014 - 122nd Amendment Bill was introduced in Lok Sabha
o August 2016 - One Hundred and First Amendment Act was enacted September 2016 -
The first GST Council Meeting wasconducted
o March 2017 - CGST, SGST, IGST, UTGST and Compensation Cess Act was
recommended by GST Council.
o April 2017 - CGST, SGST, IGST, UTGST and Compensation Cess Act were passed
o 1 July 2017 - GST laws, Goods and Services Tax was launched all over India (as per
101st Amendment).
o 7 July 2017 - Jammu and Kashmir state legislature passed its GST
five different tax rates.
o A 0% tax rate applied to certain foods,books, newspapers, home spun cotton cloth and
hotel services under Rs. 1000.
o A rate of 0.25% applied to rough industrial diamonds.
o A 5% tax rate applied to apparel below Rs. 1000, packaged food items, footwear under
Rs. 500, etc.
o A 12% tax rate applied to apparel over Rs. 1000,frozen meats, cutlery, sugar, bio-
diesel, etc.
o An18% tax rate applied to certain luxury items including makeup, pastries, swimming
pools, footwear costing more than Rs. 500, etc.
o The final bracket,taxing goods at 28%, applied to 50 luxury products and those deemed
"sinful," including sunscreen, ceramic tiles, bidis (Indian cigarettes), cars,
motorcycles, etc.
Salient features of GST
1. GST is applicable on supply of goods or services as against the present concept on the
manufacture of goods or on sale of goods or on provision of services.
2. GST is based on the principle of destination-based consumption taxation as against the
present
 3. It is a dual GST with the Centre and the States simultaneously lewing tax on a
common base. GST to be levied by the Centre would be called Central GST (CGST) and
that to be levied by the States would be called State GST (SGST).
4. An Integrated GST (IGST) would be levied an inter-state supply (including stock
transfers) of goods or services. This shall be levied and collected by the Government of
India and such tax shall be apportioned between the Union and the States in the
manner as may be provided by Parliament by Law on the recommendation of the GST
Council
5. 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.
6. CGST, SGST & IGST would be levied at rates to be mutually agreed upon by the Centre
and the States. The rates would be notified on the recommendation of the GST Council.
In a recent meeting, the GST Council has decided that GST would be levied at four
rates viz. 5%, 12%, 16% and 28%.
7. A cess would be imposed on "demerit" goods to raise resources for providing
compensation to States as States may lose revenue owing to the implementation of
GST.
8. GST would replace the following taxes currently levied and collected by the Centre: -
1. Central Excise Duty
2. Duties of Excise (Medicinal and Toilet Preparations)

3. Additional Duties of Excise (Goods of Special Importance)

4. Additional Duties of Excise (Textiles and Textile Products)
5. Additional Duties of Customs (commonly known as CVD)
6. Special Additional Duty of Customs (SAD)
7. Service Tax
8. Cesses and surcharge in so far as they relate to supply of goods and ser- vices.
9. State taxes that would be subsumed within the GSTare: -
1. State VAT
2. Central Sales Tax
3. PurchaseTax
4. LuxuryTax
5. Entry Tax (All forms)
6. Entertainment Tax and Amusement Tax (except those levied by the local bodies)
7. Taxes on advertisements
8. Taxes on lotteries, betting and gambling
9. State cesses and surcharges in so far as they relate to supply of goods and services.
10. GST would apply on all goods and services except Alcohol for human consumption
11. GST on 5 speciel potoleum products (Crude, Petrol, Diesel, ATF Natural Gas would by
applicable from a date to be recommended by the GSTC.
12. Tobacco and tobacco products would be subject to GST. In addition, the Centre would
have the power to levy Central Excise duty on these products.
13. Acommon threshold exemption would apply to both CGST and SGST. Taxpayers with an
annual turnover not exceeding Rs.40 lakh (Rs.20 Lakh for special category States)
would be exempt from GST. For small taxpayers with an aggregate turnover in a
financial year up to 1.5 crore (75 lakh in the case of special states), a composition
scheme is available. Under the scheme a taxpayer shall pay tax as a percentage of his
turnover in a State during the year without benefit of Input Tax Credit. This scheme will
be optional
14. The list of exempted goods and services would be kept to a minimum and it would be
harmonized for the Centre and the States as well as across States as far as possible .
15. Exports would be zero-rated supplies.
 16. Input Tax Credit (ITC) of CGST cannot be used for payment of SGST and vice versa. In
other words, the two streams of Input Tax Credit(ITC) cannot be cross utilized, except
in specified circumstances of inter-state supplies for payment of IGST.
17. Accounts would be settled periodically between the Centre and the States to ensure
that the credit of SGST used for payment of IGST is transferred by the Exporting State
to the Centre.
Similarly, IGST used for payment of SGST would be transferred by the Centre to the
Importing State, Further, the SGST portion of IGST collected on B2C supplies would
also be transferred by the Centre to the Destination State. The transfer of funds would
be carried out on the basis of information contained in the returns filed by
thetaxpayers.
18. The laws, regulations and procedures for levy and collection of CGST and SGST would
be harmonized to the extent possible.
Scope of Goods and Services Tax
1. The act is extended to whole of India including Jammu & Kashmir.
2. This tax will substitute all the indirect taxes levied by the Central and State
governments.
3. GST would apply to all goods other than specified petroleum products and
alcoholic products for human consumption.
4. GST would apply to all services barring a few to be specified.
5. The scope of GST will take the form of "Dual GST" which is concurrently levied
by the Central and State government. This will comprise of: i)Central GST
(CGST) which will be levied by Central governments. ii.)StateGST(SGST) which
will be levied by the concerned State governments. Ill) Integrated GST (IGST) —
which will be levied by the Central Government on inter-state supply
of goods andservices
6. In the case of Intra State Transactions, seller collects both CGST and SGST
from the buyer.CGST is to be deposited with Central government and SGST with
the State government.
7. In the case of Inter State transactions, IGST shall be levied on goods and
services on destination principle. Collected tax transferred to imported state.
More over it is proposed to levy an additional tax not exceeding 1% on
interstate transactions, to be collected by the Central government for a period
of 2 years and to transfer the collected sum to state at which supply originates.
Export and supply to SEZ units will be zero rated.
Goods outside the scope of GST
1) Alcoholic liquor human consumption.
2) Specified Petroleum Products
3) Tobacco and tobaccoproducts