Chapter 1 – GST (An Introduction)

In India taxes are collected on Dual model basis i.e Direct Tax and Indirect Tax. Direct Tax are basically
linked with income and Indirect tax are linked with goods and services. Here we will discuss about the
indirect Taxation.

In India,Indirect Tax generate 53% of govt tax revenue.In Our Syallabus we will cover the GST and
Custom.

I.

In the year 2000, the then Prime Minister The Constitution

2006 Aug 2016
introduced the concept of GST and set up a (122nd Amendment) Bill was
committee to designa GST model for the country. introduced in the Lok Sabha.

2000 2014
Announcement by Union Finance The Constitution
Minister, during budget of 2006- (101st Amendment)
07 that GST would introduced Act was enacted
from 1 April 2010.
GST Council
Recommends CGST,
SGST, IGST, UTGST &
GST Council Apr 2017 Sept 2016
recommends Compensation CessBill.
all the rules.

MAY 2017 CGST, IGST, UTGST And MARCH 2017 1st Council GST
Compensation Cess Acts Meeting
passed.
All States
except J & K passed
theirSGST Act 30 June 2017

8 July 2017
GST Launched Journey
SGST Act passed by J&K;CGST
Countinues
and IGST Ordinances
promulgated to extend GST to
J&K.
1 July 2017

GST is a path breaking indirect tax reform which attempts to create a common national market. GST has
subsumed multiple indirect taxes like excise duty, service tax, VAT, CST, luxury tax, entertainment
tax, entry tax, etc.

CA. Puneet Agrawal 1 GST- An Introduction

 II. CONCEPT OF GST

Only the value added at

Supplier at each stage is
GST offers each stage is taxed
permitted to avail
GST is a value added comprehensive and under GST, there is no
credit of GST paid on
tax levied on supply continuous chain of tax tax on tax or cascading
the purchase of goods
credit of taxes under GST
and/or services
system

III. DEFICIENCIES IN VALUE ADDITION TAXATION SYSTEM

There were several taxes in

Certain transactions were
the States, such as, Luxury
subject to double taxation Cascading of taxes on
Tax, Entertainment Tax,
and were taxed as both account of (i) levy of Non-
etc. which were not
goods and services, since VATable CST and (ii)
subsumed in the VAT.
under the earlier regime, inclusion of CENVAT in
Hence for a single
distinction between goods the value for imposing
transaction, multiple taxes
and services was often VAT
in multiple forms were
blurred.
required to be paid.

III. FRAMEWORK OF GST AS INTRODUCED IN INDIA

Legislative Framework - There
Dual GST - Centre and States
is single legislation – CGST Act,
simultaneously levy GST on Classification of goods and
2017 – for levying CGST.
taxable supply of goods or services - HSN is used for
States and Union territories
services or both which, takes classifying the goods under the
with their own legislatures have
place within a State or Union GST
their own GST legislation for
Territory.
levying SGST.

Registration- Every supplier of

Composition Scheme - for
goods and/or services is required Seamless flow of credit - Since
providing relief to small businesses,
to obtain registration in the GST is a destination-based
making intra-State supplies, a
State/UT from where he makes consumption tax, revenue of SGST
simpler method of paying taxes is
the taxable supply if his aggregate ordinarily accrues to the consuming
prescribed, known as composition
turnover exceeds the threshold States.
levy
limit during a FY.

GST – A tax on goods and

GST Common Portal - Common
Compensation Cess - A GST services - GST is levied on all
GST Electronic Portal –
Compensation Cess at specified goods and services, except
www.gst.gov.in – a website
rate has been imposed under alcoholic liquor for human
managed by Goods and Services
the GST Act 2017 on specified consumption and petroleum
Network (GSTN) is set by the
luxury items & dermerit goods. crude, diesel, petrol, ATF and
Government.
natural gas.

Please note – Tobacco is subject to GST as well as central excise duty . Opium, Indian hemp and
other narcotic drugs and narcotics are subject to GST as well as State excise duties. GST will
not be levied on sale/purchase of immovable property.

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 IV. TAXES SUBSUMED IN GST

Central Taxes State Taxes

•Central Excise Duty & Additional •State surcharges and cesses in so far
Excise Duties as they relate to supply of goods &
•Service Tax services
•Excise Duty under Medicinal & Toilet •Entertainment Tax (except those
Preparation Act levied by local bodies)
•CVD & Special CVD •Tax on lottery, betting and gambling
•Central Sales Tax •Entry Tax (All Forms) & Purchase Tax
•Central surcharges & Cesses in so far •VAT/ Sales tax
as they relate to supply of goods & •Luxury Tax
services •Taxes on advertisement

V. BENEFITS OF GST

Boost to
Creation of unified Boost to ‘Make in investments,
national market. India' initiative exports and
employment

Automated
Ease of doing Certainty in tax
procedures with
business administration
greater use of IT

Mitigation of ill
Reduction in Benefits to
effects of
compliance costs industry
cascading

VI. CONSTITUTIONAL PROVISIONS

1. Article 265: Article 265 of the Constitution of India prohibits arbitrary collection of tax.
It states that “no tax shall be levied or collected except by authority of law”.
2. Article 246: It gives the respective authority to Union and State Governments for
levying tax.
3. Seventh Schedule to Article 246: It contains three lists which enumerate the matters
under which the Union and the State Governments have the authority to make laws
4. Article 246A: Power to make laws with respect to Goods and Services Tax:
 Notwithstanding anything contained in Articles 246 and 254, Parliament, and, subject to clause
(2), the Legislature of every State, have power to make laws with respect to goods and
services tax imposed by the Union or by such State.
 Parliament has exclusive power to make laws with respect to goods and services tax where
the supply of goods, or of services, or both takes place in the course of inter-State trade
or commerce.
5. Article 269A: Levy and collection of GST on inter-State supply.
Levy and collection of goods and services tax in course of inter-State trade or
commerce

1) Goods and services tax on supplies in the course of inter-State trade or commerce shall be
levied and collected by the Government of India and such tax shall be apportioned between
CA. Puneet Agrawal 3 GST- An Introduction
 the Union and the States in the manner as may be provided by Parliament by law on the
recommendations of the Goods and Services Tax Council.
i) Explanation — For the purposes of this clause, supply of goods, or of services, or both in
the course of import into the territory of India shall be deemed to be supply of goods, or
of services, or both in the course of inter-State trade or commerce.

2) The amount apportioned to a State under clause (1) shall not form part of the Consolidated
Fund of India.
3) Where an amount collected as tax levied under clause (1) has been used for payment of
the tax levied by a State under article 246A, such amount shall not form part of the
Consolidated Fund of India.
4) Where an amount collected as tax levied by a State under article 246A has been used for
payment of the tax levied under clause (1), such amount shall not form part of the
Consolidated Fund ofthe State.
5) Parliament may, by law, formulate the principles for determiningthe place of supply, and when
a supply of goods, or of services, or both takes place in the course of inter-State trade or
commerce.
GST Council: Article 279A
The GST Council shall consist of the following members, namely
a) The Union Finance Minister is the Chairperson;
b) The Union Minister of State in charge of Revenue or Finance is the Member;
c) The Minister in charge of Finance or Taxation or any other Minister nominated by each State
Government are the Members
GST Council shall make recommendations to the Union and the States on—
a) the taxes, cesses and surcharges levied by the Union, the States and the local bodies which may
be subsumed in the goods and services tax;
b) the goods and services that may be subjected to, or exempted from the goods and services
tax;
c) model Goods and Services Tax Laws, principles of levy, apportionment of Goods and Services
Tax levied on supplies inthe course of inter-State trade or commerce under article 269A
and the principles that govern the place of supply;
d) the threshold limit of turnover below which goods and services may be exempted from GST;
e) the rates including floor rates with bands of goods and services tax;
f) any special rate or rates for a specified period, to raise additional resources during any natural
calamity;
g) special provision with respect to the Special Category States
h) any other matter relating to the goods and services tax, as the Council may decide.

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