1.
GOODS AND SERVICE
TAX

2.
INTRODUCTION
The goods and service tax bill (GST Bill) is also called The Constitution (122nd Amendment) Bill 2014, would be
Value Added Tax which will be implemented from April 2016 as the bill is a pending bill. GST Bill stands for
Goods and Service Tax bill that is a comprehensive indirect tax to be levied on manufacture, sale or consumption
of goods and services all over India.
PRESENT TAX STRUCTURE
EXCISE DUTY SERVICE TAX SALES TAX /VAT CUSTOM DUTY
ENTRY NO 84 ENTRY NO 97 ENTRY NO 54 ENTRY NO 83

3.
NEED FOR GST/ SHORTCOMINGS OF PRESENT
STRUCUTRE
1. Tax Cascading: Partial coverage by Central & State taxes is significant factor of need of GST. The exempt
sectors are not allowed to claim CENVAT or Service tax paid by them.
2. Levy of excise duty at manufacturing point: Taxable event at manufacturing point itself forms a narrow
base. For example, valuation as per excise valuation rules of a product, whose consumer price is Rs. 100/-,
is, say, Rs. 70/-. In such a case, excise duty as per present tax law will be applicable on Rs. 70/- and not
100/-.
3. Complexity in determining the nature of transaction: Sale vs. Service (e.g. Declared service)
4. Inability of states to levy tax on services: The state has no power to levy tax on income of fastest growing
components of consumer expenditure, and have to rely almost exclusively on compliance improvements or
rate increases for any buoyancy in their own source revenue.
5. Lack of uniformity in provisions and rates
6. Fixation of Situs: Local sale vs. central sale
7. Interpretational issues: Whether an activity is a sale or work contract; sale or service, is not free from doubt
in many cases.
8. Narrow base
9. Complexities in administration

4.
IGST
Levied and collected by
central authority
Tax collected is divided
between center and
state
In manner specified
by parliament on
Supplies in course of
inter-state trade or
commerce.
Integrated Goods and
Service Tax
over
Recommendation of
GST council
THE IGST

5.
GST COUNCIL
The council is to be constituted by the
president within sixty days of this Act
coming into force
Members of the council:
1. Chairman: union
finance minister
2. Union minister of state in
charge of Revenue or Finance
The minister in charge of
Finance or Taxation or any other
as nominated by each State Govt.
Aim to develop harmonized national
market of goods and services.
Functions of the Council is to recommend on:
1. taxes, cesses, and surcharges levied by the
centre, states and local bodies which may be
subsumed in the GST
2. goods and services which may be subjected to
or exempted from GST;
3. model GST laws, principles of levy,
apportionment of IGST and principles that
govern the place of supply
4. the threshold limit of turnover below which
goods and services may be exempted from
GST
5. rates including floor rates with bands of GST
6. special rates to raise additional resources during
any natural calamity
7. special provision with respect to Arunachal
Pradesh, Jammu and Kashmir, Manipur,
Meghalaya, Mizoram, Nagaland, Sikkim,
Tripura, Himachal Pradesh and Uttarakhand;
and
8. others

6.
THREE PRIME
MODELS OF GST
CENTRAL GST
GST is to be levied
by Centre
STATE GST
DUAL GST
GST is to be levied
by States
GST is to be levied
by Centre and
states concurrently
MODELS OF GST
Expected model in India: Dual GST model applicable on all goods and services with exceptions and
exemptions.

7.
FEATURES OF GST
1. It is based on principal of VAT and either “input tax method” or “subtraction method”
2. It is a comprehensive levy and collection on both goods an services at the same rate with the benefit of input tax
credit and subtraction of value of penultimate(single) transaction value.
3. Minimum number of floor rates of tax, generally not more than two.
4. No scope of levy of cess, re-sale tax, additional tax, special tax, turnover tax, etc.
5. No scope of multiple levy of tax on goods and services, such as, entry tax, octroi, entertainment tax, luxury tax,
etc.
6. Zero rating of exports and inter state sales of goods and supply of services .
7. Taxing of capital goods and inputs whether goods and services relatable to manufacture at lower rate, so as to
reduce inventory carrying cost and cost of production.
8. A common law and procedures throughout the country under single administration
9. It follows destination principal and is levied at single point at the time of consumption of goods and services by
the ultimate consumer.

8.
NON APPLICABILITY & RESTRICTIONS
GST has a basic threshold limit of turnover of Rs 10 Lacks below which no tax shall be applicable
and turnover with Rs 50 lakh will need to pay the tax only at a rate lower rate than the standard GST
rate. It is not applicable on Alcoholic liquor for human consumption, petroleum crude, high speed
diesel, motor spirit (petrol), natural gas, and aviation turbine fuel. It also subsumes the indirect taxes
like Central Excise Duty, CVD, Service Tax, VAT, etc.
The Constitution imposes certain restrictions on states on the imposition of tax on the sale or
purchase of goods. The Bill amends this provision to restrict the imposition of tax on the supply of
goods and services and not on its sale.
Railways and construction centre might be included. Also, it has not been decided whether stamp duty
will be part of GST.

9.
EFFETCS OF IMPLICATION OF GST
An additional tax (not to exceed
1%) on the supply of goods in
the course of inter-state trade or
commerce would be levied and
collected by the centre. Such
additional tax shall be assigned
to the states for two years, or as
recommended by the GST
Council.
Parliament may, by law, provide
for compensation to states for
revenue losses arising out of the
implementation of the GST, on
the GST Council’s
recommendations. This would
be up to a five year period.
GST Rate : today one pays Excise duty @ 12%, VAT @ 14% (totaling to 26 %) Service Tax @ 12%, the rate will be
somewhere between 12% - 26%. The rate worldwide for GST is around 18% (being average)

10.
ADVANTAGES
1. By amalgamating a large number of Central and State taxes into a single tax, it would mitigate cascading
or double taxation in a major way and pave the way for a common national market.
2. From the consumer point of view, the biggest advantage would be in terms of a reduction in the overall
tax burden on goods, which is currently estimated at 25%-30%.
3. Introduction of GST would also make Indian products competitive in the domestic and international
markets.
4. Studies show that this would instantly spur economic growth.
5. Tax collected by local tax bodies would not be subsumed in proposed GST system.
As per proposed GST regime, the input of Central GST can be utilized only for payment of CGST & the
input of State GST can be utilized only for payment of SGST. Cross utilization will not be allowed.
6. Last but not the least, this tax, because of its transparent character, would be easier to administer.