Tax ( Revenue or Money)

Direct tax Indirect tax

( Is refers to the tax burden can’t ( Is refers to the tax burden can be
shifted to any one) shifted to any one)

Context Direct Tax Indirect Tax

1. Imposed on Income and profits All the goods and services
2. Who pays Individuals and businesses End-consumers
3. How much Depends on income and Same for everyone
profits
4. Transferability Not transferable Transferable
5. Tax Evasion Possible Not possible
6. Nature Progressive Regressive
7. Collections Complex Convenient
8. Common examples Income tax and securities GST, excise duty, and VAT
transaction tax
List of
 Unit- 1
Introduction to GST
Learning objectives:
• understand the present indirect tax structure, problems of indirect tax
• understand the meaning , definition & term of GST, understand the need for introduction to GST,
•To know the Commodities to kept outside GST understand the models of GST

Structure of Indian
Taxation

Direct tax Indirect tax

Income tax Wealth tax

Excise Duty:
• Duty on manufactured/ produced goods in India
• Producer liable to pay excise duty
• Article must in goods and must be movable or marketable
Central Sales Tax:
• CST is taxable on sale of goods
• Applicable in inter state sales
Custom Duty:
• Duty on Import and Export of goods
• the following types of custom duties levied in India
a) Basic custom duty
b) Countervailing duty
c) Special duty
d) Anti dumping duty
e) Education cess And protective duty
Service Tax:
• Duty on service provider
Entertainment Tax:
• Duty on Commercial shows
• Ex.. Movie tickets, sporting events, parks etc..
VAT
• Duty on Commodity passes through different stages of production and distribution
• Tax on Value addition of each stage is VAT
• Value added production to the point of sale
Entry tax
• Imposed by state Govt
• Is lived on movement of goods from one state to another state
Luxury tax
• Duty on luxury goods
• Ex.. Car , jewelry etc..
Problems on Indirect tax
Cascading Effect of tax
• It is refers to the Tax on Tax
• Consumer bear load of tax
• Results is increase the price of goods
• Increase the cost of production
Multiple duties or taxes
• Are multiplicity of taxes on goods and services
• Ex.. Excise duty on manufacture , custom duty , VAT, Entry tax, stamp duty etc,,,,
Lack of uniformity of provisions
• VAT is tremendous paper work and record keeping
• VAT is work if record keeping in proper
Double taxation
• Collection of tax on same Activity
• Both state and central
• Ex Restaurant in Service tax and VAT
Inability of state to levy tax on services
• Service sector growing rapidly but central govt. has fully authority to collect tax so state govt.
losing the revenue.
No credit of CST and VAT to service provider
• Absence of ITC in CST
• ITC available in VAT only for goods but not for services
High prices of goods or services
• Because of Cascading Effect increase in the price of goods And service
Need for Introduction to GST
Eliminates Cascading Effect:
• GST is Comprehensive indirect tax
Easy to Compliance:
• All compliance like registration , return, payment, etc,,
• Done under online
One country One tax:
• Is replaced several hidden taxes
• Instead of state tax and central tax
Boost Foreign Investment”
• Attract foreign investment by reducing the cost of capital goods
• In long run attract foreign investment
• Raise manufacture and export
• Create jobs
Boost to Make in India
• Manufacturing more Competitive
• Bec .. Cascading tax, inter state tax fragmented market
Boost to E-Commerce
• State and central levied multiple tax
• But GST frees up E- commerce
Single Economic Zone:
• GST bring SEZ
• Federalism ( where in central govt and state govt work together)
• Both work together for benefit of nation
GDP Growth
• Expected that implementation of GST 2%
 Needs / Advantages / benefits
To Government To trader/ industry To Consumers

Unified common market Mitigates cascading effect Reduction in price

Uniform rates Higher threshold for More employment and

registration more financial resources

Number of compliances is Composition scheme for One nation one tax

lesser small business (1.5 corer)

Common procedures Simple and easy online

procedure

Reducing corruption Number of compliances is

lesser

Economic growth Improved efficiency of

logistics
Meaning of GST:
It is refers to the Indirect tax levied on value of supply of goods or
services or both
or
It is refers to the Comprehensive, multi-stage, destination-based tax
that is levied on every value addition is called GST

Definition of GST:
As per Article 366(12A) Any tax on supply of goods, or services or
both except taxes on supply of the alcoholic liquor for human
consumption.

Commodities to be keep outside GST

1) Alcohol for human consumption
2) Petroleum products
3) Electricity
 DUAL MODEL OF GST
( India is federal country where both centre and state Govt. have been assigned power to levy
and collection taxes

Central GST or CGST:

• Is collected by central govt. on inter-state sales
• Is applicable on supply of goods and service
•
State GST or SGST:
• Is collected by state govt. on intra-state sales
• Tax levies under state authority
• Revenue collected under SGST belongs to state Govt.
Integrated GST or IGST
• Is collected by central govt. on inter-state sales
• Is levied on supply of goods and service
UTGST
• are Specialized taxation
•
 Union Territories with Legislatures and Union Territory Goods and Services
Tax (UTGST) - levied and collected by Union Territories without Legislatures,
on intra-State supplies of taxable goods and/or services

• There is single legislation – CGST Act, 2017 - for levying CGST.

Similarly, Union Territories without
• Legislatures [i.e. Andaman and Nicobar Islands, Lakshadweep,
Ladakh, Dadra and Nagar Haveli & Daman and Diu and
Chandigarh] are governed by UTGST Act, 2017 for levying
UTGST. States and Union territories with their own legislatures
[i.e. Delhi, Jammu and Kashmir and Pondicherry] have their
own GST legislation for levying SGST.
EX..In Ladakh, CGST and UTGST is levied on supply of goods or
services or both. In Delhi, CGST and SGST is levied on supply
of goods or services or both.
 Feature of IGST
• As per section 5(1) IGST Act, the maximum rate of IGST
can levied 40%
• Central Government levies and collects IGST in lieu of CGST
• It is levied on the inter state and cross-border transaction
• There will be uniform IGST rate
• Tax amount collected in the form of IGST will be shared by
the Centre and state
• Interstate trader will pay IGST after adjusting the available
input tax credit under IGST,SGST,CGST on the transaction.
• IGST is a destination based tax and tax will be collected by
importing state
Other indirect taxes continue post GST
• Basic custom duty
• surcharge on custom duty @ the rate of 10% on BCD.
• Customs Cess
• Safeguard duty
• Anti- dumping duty
• state excise
• stamp duty
• property tax levied by local bodies
• central excise
• VAT on petroleum
• profession tax
• License fee on entry tax of vehicles ( Cantonments act)
 GST Council
• Is Constitutional body ( Union and State)
• GST Council chaired by Union Finance Minister
• member of GST council – state finance minister
Role of GST council
• Taxes, cesses, and surcharges levied by the centre, state and local bodies
Govt
• Goods and services which may be subjected to or exempted from GST
• Model GST laws , principle of levy, apportionment of IGST
• Threshold limit of turnover below which goods and services may be
exempted from GST
• Rates including floor rates with bands of GST
• Special provision with respect to some state
• GST council shall establish a mechanism to adjudicate any dispute
• Any matter
 Prepared by
Mr. Ravi S. Kumbar
Assistant professor
KLS Gogte College of Commerce, Belagavi