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CHAPTER – 1
INTRODUCTION TO GOODS AND
SERVICES TAX (GST)
Goods and Services Tax (GST) was introduced
as the Constitution (One Hundred and First Amendment)
Act 2016. In persuance of the above constitution
amendment, the GST Act came into force from 1
July 2017. It is governed by GST Council and its
Chairman is Union Finance Minister of India.
GST is a comprehensive indirect tax on
manufacture, sale and consumption of goods and
services throughout India to replace the taxes levied
by the Central and State governments.
GST allows the GST-registered businesses to
claim tax credit to the value of GST they paid on the
purchase of goods or services as part of their business
activities.
Administrative responsibility rests with a single
authority to levy tax on goods and services.
Exports are considered as zero-rated supply and
imports are levied the same taxes as domestic goods
and services at the destination place in addition to
the Customs Duty which is separate and not connected
with the GST in any way.
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Introduction of Goods and Services Tax (GST) is a
significant step in the reformation of indirect taxation in
India.
GST has amalgamated several Central and State
taxes into a single tax. It avoids double taxation, thus
facilitating a common national market.
The simplicity of levy and collection of tax has led
to an easier administration and enforcement.
From the consumer point of view, the biggest
advantage is in terms of a reduction in the overall tax
burden on goods, which is currently estimated at 25%-
30%. Further, there can be free movement of goods from
one State to another without stopping at state borders
for hours together for payment of state tax or entry tax.
In addition, there is reduction in paperwork to a large
extent.
HISTORY:
In India, the reform process in indirect tax was
started in 1986 by Vishwanath Pratap Singh, the then
Prime Minister of India. He introduced ‘Modified Value
Added Tax’ (MODVAT).
Goods and services tax (GST) has subsumed various
indirect taxes.
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The following taxes are replaced by the GST:
1. Central Excise Duty
2. The Service Tax
3. The Countervailing Duty
4. The Special Countervailing Duty
5. The Value Added Tax (VAT)
6. The Central Sales Tax (CST)
7. The Octroi
8. The Entertainment Tax
9. The Entry Tax
10. The Purchase Tax
11. The Luxury Tax
12. The Advertisement taxes
13. The Taxes applicable on lotteries.
GST is levied on all transactions such as sale,
transfer, barter, lease, or import of goods and/or
services.
India has now adopted a dual GST model, meaning
that taxation is administered by both the Central and
the State Governments.
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Transactions made within a single state are levied
with two GSTs namely Central GST (CGST) by the Central
Government and State GST (SGST) by the concerned
State Government.
For inter-state transactions and imported goods or
services, an Integrated GST (IGST) is levied by the
Central Government.
GST is a consumption based tax. Therefore, taxes
are paid to the State where the goods or services are
consumed and not the State in which they were
produced.
IGST has simplified tax collection for State
Governments by enabling them to collect the tax owed
to them directly from the Central Government. Under
the previous system, a State had to deal with multiple
state governments in order to collect tax revenue, which
is no longer there.
GST IN INDIA:
GST is an integrated indirect tax which is levied
on the Supply of Goods and Services. There is dual GST
with the Centre and State simultaneously levying it on
the common tax base. The CGST and SGST are charged
on intra-state supplies whereas IGST is charged on
inter-state supplies.
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The small businesses with turnover less than Rs.
20 Lakhs are ex empted from GST. All the other
taxpayers having the turnover of more than Rs. 20
Lakhs (Rs 10 Lakhs in northeast States) are required
to register and pay GST. The Commerce and finance
graduates can become GST Return Preparer (GST
Practitioner) to file returns on behalf of taxpayers.
EFFECTS OF GST:
The Central Government has assured States of
compensation for any revenue losses incurred by them
from the date of introduction of GST for a period of five
years.
GST ON EXPORTS:
Under the GST Law, export of goods or services are
treated as Zero rated supplies. Therefore, GST is not
charged on the export of goods or services. The credit
on inputs used for making export supplies is available to
the exporter. The exporters have two options either to
export goods under Bond and claim refund of input credit
or to export goods under ‘rebate claim’ and claim refund
of output tax.
GST LEGISLATION:
India has a federal constitution. Therefore, GST
could be implemented concurrently both by the Central
Government and State Governments.
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Section 9 is the charging Section for CGST (Central
Goods and Services Tax Act, 2017) and it gives power to
Central Government to levy tax on intra state taxable
supply.
There is no GST on the sale and purchase of
securities. It is governed by the Securities Transaction
Tax (STT).
GOODS AND SERVICES TAX NETWORK (GSTN):
Goods and Services Tax Network (GSTN) is a non
profit organization formed to create a platform for all
the concerned parties i.e. stakeholders, government,
taxpayers to collaborate on a single portal.
The portal is accessible to the Central Government,
which tracks down every transaction on its end, while
the taxpayers are having a vast service to file their tax
returns and maintain the details.
