Get short notes on GST in India | GST Short Notes

Get short notes on GST in India. GST full form is Goods and Services Tax. GST is a indirect tax in India. Before we know about GST, we should know what is tax & what is the tax structure in India. Learn more about GST

What is Tax?

  • Tax is nothing but money that people have to pay to the Government to use for the public services.
  • A tax is not a voluntary payment or donation, it is an enforced contribution.

Types of Taxes in India

  1. Direct Tax
  2. Indirect Tax

What is Direct Tax?

  • Direct tax is a tax which is imposed directly on the taxpayers. Taxpayers have to pay directly this tax to Government.
  • In India, Direct tax is known as Income Tax. It cannot be shifted to another.

What is Indirect Tax?

  • Indirect tax is a tax which can be shifted by the taxpayer to someone else.
  • It is also known as consumption tax because all consumers have to bear the brunt of the indirect tax.
  • So many indirect taxes were levied in India. These taxes are VAT, CST, Excise Duty, Custom Duty, service tax, entry tax, purchase tax, entertainment tax etc.
  • But now i.e 1st July 2017 onwards a single tax is introduced, namely Goods and Services Tax (GST).
  • Custom Duty is in Post-GST regime.

What is GST?

GST is an indirect tax which is levied on the supply of goods and services. GST has Replaced many indirect Taxes which has previously existed in India.

Such Indirect taxes are:

Central Indirect taxes:

  • Central Excise duty
  • Excise duty levied under Medicinal and Toilet preparations (Excise duty) Act, 1955
  • Service Tax
  • CVD on import
  • Spl. CVD on import
  • Central surcharge
  • Central Cesses

State Indirect Taxes:

  • State Value Added Tax
  • Entertainment tax
  • Central Sales Tax
  • Entry tax
  • Purchase tax
  • Luxury tax
  • Betting and Gambling tax
  • State surcharges
  • State Cesses

History of GST:

The Kelkar Task Force strongly recommended fully integrated GST on national basis in 2004.

In 2006, The Union Finance Minister P.Chidambaram at the time of presenting Central Budget 2006-07 announced that GST would be introduced from 1st July 2010. But it was missed by several deadlines.

In 2014, The NDA Government tabled the GST Constitution (122nd Amendment) Bill, 2014.

Constitution (122nd Amendment) Bill, 2014 received the assent of the President of India on 8th September 2016 and became Constitution (101st Amendment) Act, 2016 which paved the way for introduction of GST in India.

On 27th March 2017, the following bills are introduced in Lok Sabha:

  • Central Goods and Service Tax Bill, 2017
  • Integrated Goods and Service Tax Bill, 2017
  • Union Territory Goods and Service Tax Bill, 2017
  • Goods and Service Tax Bill 2017, Compensation to States.

and Lok Sabha passed these bills on 29th March 2017. In 12th April 2017 these bills are received the assent of President of India and Became an Act.

The Central Government notified 1st July 2017 as the date from which the awaited indirect tax reform in India i.e. Goods and Service Tax will be implemented.

Goods and Service Tax has been implemented in India w.e.f. 1st July 2017.

France was the first country to implement GST in the year 1954. Within 62 years of it about 160 countries have adopted GST around the World because this tax has the capacity to raise revenue in the most transparent and neutral manner.

Concept of GST

GST is a Value added Tax: GST is a value added tax levied on manufacture, sale and consumption of of goods and services.

Continuous chain of Tax credit: GST offers comprehensive and continuous chain of tax credit from the producer/service provider’s point to retailer/consumer’s point.

Burden of Tax borne by the final Consumer: The Supplier of each stage is permitted to avail credit of GST. Only the final consumer bears the GST charged by the last supplier in the supply chain, with set off benefits at all the previous stage.

No Cascading of Tax: Under GST, there is no tax on taxes under GST system. GST avoids cascading effect as the tax is calculated only on the value-add at each stage of transfer of ownership.

GST is a destination based tax: If goods manufactured in Delhi and these are sold to the consumer in Madhya Pradesh. Then Goods & Service Tax is levied at the point of consumption, in this case, the entire tax revenue will go to Madhya Pradesh.

Advantages of GST

  • One Nation One Tax.
  • Removal of bundled indirect taxes such as VAT, CST, Service tax, CAD, SAD, and Excise.
  • Removal of cascading effect of taxes i.e. removes tax on tax.
  • Boost to make in India initiative.
  • It will boost export and manufacturing activity, generate more economic growth.

What is the need for GST in India ?

  • GST Creates unified National market. GST aims to make India a common market with common tax rates and procedures and remove the economic barriers thus paving the way for an integrated economy at the national level.
  • GST gives Boost to Make in India initiative. GST will give a major boost to the Make in India initiative by making goods and services produced in India competitive in the National market as well as International market.
  • GST eliminates the cascading effect of tax. Cascading effect means tax on tax.

GST Framework in India

Dual GST Model

India has adopted dual GST model. GST has imposed concurrently by the Central and State i.e. both Central and State has the power to levy Tax.

Central Goods and Services Tax Act, 2017 (CGST):

CGST levied and collected by Central Government. It is a revenue source to the Central Government of India, on intra-state supplies of taxable goods or services or both.

State Goods and Services Tax Act, 2017 (SGST):

SGST levied and collected by State Governments/Union Territories with State Legislatures (Delhi and Pondicherry) on intra-state supplies of taxable goods or services or both. It is a revenue source of the respective State Government.

Union Territory Goods and Services Tax Act, 2017 (UTGST):

UTGST levied and collected by Union Territories without State Legislatures, on intra-state supplies of taxable goods or services or both.

Integrated Goods and Services Tax Act, 2017 (IGST):

IGST levied and collected by the Central Government on all inter-State transactions of taxable goods or services. IGST is the Total of CGST and SGST/UTGST.

Legislative Framework

For levying CGST, there is a single legislation for CGST ACT 2017.

For Levying and collecting SGST, there are multiple SGST legislation.

Union Territories without Sate legislature, the Parliament has the powers under Article 246(4) to make laws.

The President of India may use his general powers to formulate such laws.

The following are Union Territories without Legislature:

  • Chandigarh
  • Lakshadweep
  • Daman and Diu
  • Dadra and Nagar Haveli
  • Andaman and Nicobar Islands

State and Union Territories with their own legislature have their own GST legislation for levying GST.

Such Union Territories are Delhi and Puducherry.

Classification of Goods and Services

  • HSN (Harmonised System of Nomenclature) Code is used for classifying goods under GST.
  • SAC (Service Accounting Code) is used for various services.

Each group consists of various Codes.

Registration under GST

Every Supplier of Goods and Services is required to registered under State/UT GST if his aggregate turnover exceeds Rs.20 lakh.

The limit of Rs.20 lakh will be reduced to Rs.10 lakh in case of business carrying in Special Category States.

There are 11 Special Category States specified in Article 279A(4)(g) of the Constitution.

These states are states of Arunachal Pradesh, Assam, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand.

Composition Scheme:

In GST Regime, for providing relief to small business making intra-state supplies, a simpler method of paying taxes and accounting is also prescribed, it is known as Composition Levy.

Utilisation of ITC

  • Input Tax Credit (ITC) is available throughout the supply chain.
  • CGST Credit can be utilised for IGST but can not be utilised for SGST/UTGST.
  • SGST/UTGST can be utilised for IGST but can not be utilised for CGST.
  • IGST can be utilised for CGST/SGST/UTGST.

GST Common Portal

Common GST Electronic Portal –– a website managed by Goods and Services Network (GSTN).

It has been set by the government to establish a uniform interface for the tax payer and a common and shared IT infrastructure between the States and Centre.

GSTN is a company incorporated under the provision of section 8 of the Companies Act 2013.

The GST portal is one single common portal for all GST related services. It is accessible over internet and Intranet by tax Officials(Tax payers and their CA/Tax Advocates)

GSTN provides 3 front end services to the tax payers namely:

  • Registration
  • Payment
  • Return

Functions of GSTN includes:

  • Facilitate Registration
  • Filling Returns
  • Computation and Settlement of IGST
  • Providing various MIS reports to the Central and State Governments based on the Tax payers Return Information.
  • Reclaim of Input Tax Credit.

Constitutional Provisions

The constitution of India is the Supreme Law of India. It consists of a preamble, 25 parts containing 448 articles and 12 schedules.

Power to levy and collect taxes whether direct or indirect emerges from the Constitution of India.

The significance provisions of the constitution relating to taxation are given below:

Article 265

Article 265 prohibits arbitary collection of tax. It states that ”no tax shall be levied or collected except by authority of law”.

Article 245

As per this article,

  • Parliament may make laws for the whole or any part of the territory of India and
  • The States legislature may make laws for the whole or any part of the State.

Article 246A – Power to make laws with respect to Goods and Services Tax

This Article grants power to Centre and State Governments to make laws with respect to GST.

The power to impose tax on sale of the following products is still provided to the State Governments:

  • Petroleum crude;
  • High speed diesel;
  • Motor spirit (commonly known as petrol);
  • Natural gas;
  • Aviation turbine fuel; and
  • Alcoholic liquor for human consumption.

Article 269A

  • Article 269A of Constitution of India provides that the import of goods or services will be deemed as supply of goods or services or both in the course of inter-State trade or commerce.
  • In case of import of goods IGST will be levied along with the Basic Customs duty.
  • It means IGST is levied in replacement of CVD + Spl. CVD. In case of import of servies only IGST will be levied.
  • Principles for determining the place of supply and when a supply takes place in the course of inter-state trade or commerce shall be decided by the Parliament.

Article 366

  • The term “Goods and Service Tax” “Services” and “State” have been defined under this article.
  • “Goods and Services Tax” means any tax levied on supply of all goods and services except alcoholic liquor for human consumption.
  • “Services” means any thing other-than goods.
  • “State” includes a Union Territory with Legislature.
  • “Goods” includes all materials, commodities and articles.

Artcle 279A – GST Council:

As per this Article;

  • The President of India is empowered to constitute a joint forum of the centre and states namely Goods and Services Tax Council.
  • The President of India constituted the GST Council on 15th September, 2016.

The GST Council shall consist of:

  • The Union Finance Minster as a Chairperson,
  • The Union Minister of State in charge of Finance/Taxation as a member
  • The State Finance Minister or State Revenue Minister or any other Minister nominated by each State as a member of the Council.
  • The GST Council shall select one of them as Vice Chairperson of Council.

Guiding principle of the GST Council:

The mechanism of GST Council would ensure harmonisation on different aspects of GST between the Centre and the States as well as among States.

It has been provided in the Constitution (101st Amendment) Act, 2016 that the GST Council, in its discharge of various functions, shall be guided by the need for a harmonised structure of GST and for the development of a harmonised national market for goods and services.

Functions of the GST Council:

GST Council is to make recommendations to the Central Government and the State Governments on:

  • tax rates,
  • exemptions,
  • threshold limits,
  • dispute resolution,
  • GST legislation including rules and notifications etc.

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