What is GST?
‘G’ – Goods
‘S’ – Services
‘T’ – Tax
GST is a tax on goods and services with comprehensive and
continuous chain of setoff benefits from the Producer’s point
and Service provider’s point up to the retailer level.
Under GST structure, all different stages of production and
distribution can be interpreted as a mere tax pass through and
the tax essentially sticks on final consumption within the
Currently, a manufacturer needs to pay tax when a finished
product moves out from the factory, and it is again taxed at the
retail outlet when sold. The taxes are levied at the multiple
stages such as CENVAT, Central sales tax, State Sales Tax,
Octroi, etc. will be replaced by GST to be introduced at Central
and State level.
All goods and services, barring a few exceptions, will be brought into the
GST base. There will be no distinction between goods and services.
Under GST, the taxation burden will be divided equitably between
manufacturing and services, through a lower tax rate by increasing the
tax base and minimizing exemptions.
Proposed Tax Structure in India
Indirect Tax = GST
GST TO UNIFY INDIRECT TAXES
The Goods and Services Tax (GST) is
potentially a game-changing indirect
tax reform. Apart from simplifying the
current indirect tax structure, GST
should help create ‘One’ India by
While short-term macroeconomic
implications of GST would be mixed,
longer-term implementation should
lift the growth and enable greater
general government fiscal
consolidation, said the report, India
Goods and Services Tax: Making
India needs GST to get rid of the problems
of indirect taxes. As multiple taxes like
CENVAT, central sales tax, state sales tax,
octroi, etc. will not exist and will be
replaced by GST, improve tax compliance.
The complexity in determining nature of
transactions, the inability of state to levy
tax on service, lack of uniformity in
provision and rates, complexities in
administration, all could be withdrawn to
an extent with the implementation of GST.
More than 150 countries have adopted GST
as it has the potential to raise revenue with
more transparency and neutrality.
Why do we need GST
The existing tax regime is
married by significant
As the business process have evolved,
the existing lines between the state
list and the central list have started to
blur, leading to double taxation and
The central and state taxes are not
fungible against each other, nor are
the state taxes fungible inter-se,
leading to a cascading effect.
While the state laws were conceptualized so as to have uniform application, over a period of
time with various amendments made by respective governments, each state’s law now has to be
implemented and interpreted separately, resulting in a multiplicity of a compliance
The current tax regime is an origin based taxation system, as opposed to the destination-based
system prevalent the world over, leading to significant disparities in revenue distribution to
various states .
The situation have led many to move towards a unified
GST/VAT model as is followed by Canada, Australia and
the EU. However, considering that India has a federal
structure, an Indian flavor of GST has been proposed- the
dual GST .
Under the contemplated tax regime, the central and state
government would be empowered to currently levy GST
on both goods and services . The GST to be levied by the
central government and state government would be called
central GST (CGST) and state GST (SGST), respectively.
GST AS A SOLUTION
The introduction of GST would not only lead to the simplicity of
tax regime, but would help remove its inherent defects. Some of
the critical flaws like multiplicity of laws and Taxes, the cascading
effect of taxes, the non-fungibility of credits between goods and
services, the possibility for taxpayers to shift their base only to take
advantage of a low tax regime, among other factors, would be
addressed in due course by this new system. GST would result in a
widening of the tax base, as well as increasing tax compliance and
In the case of inter- state supplies (that is , supplies from one state to another), an
integrated goods and service tax ‘(IGST) would be applicable.
In India, there are three types of GST.
•CGST, Central Goods and Service Tax :-
1. CGST means Central Goods and Service Tax, one of the three categories
under Goods and Service Tax (CGST, IGST and SGST) with a concept of one
tax one nation. CGST falls under Central Goods and Service Tax Act 2016.
2. For easy understanding, when CGST is being introduced, the present
central taxes of Central Excise Duty, Central Sales Tax CST, Service Tax,
Additional excise duties, excise duty levied under the medical and toiletries
preparation Act, CVD (Additional Customs duty – Countervailing Duty), SAD
(Special Additional Duty of customs) surcharges and cesses are subsumed.
3. CGST is charged on the movement of goods and services of standard
commodities and services which can be amended time to time by a separate
body. The revenue collected under CGST is for Centre. However, input tax
credit on CGST is given to states and such input tax could be utilized only
against the payment of Central GST.
• SGST, State Goods and Service Tax :-
SGST means State Goods and Service Tax, one of the three categories under Goods
and Service Tax (CGST, IGST and SGST) with a concept of one tax one nation. SGST
falls under State Goods and Service Tax Act 2016. For easy understanding, when
SGST is being introduced, the present state taxes of State Sales Tax, VAT, Luxury
Tax, Entertainment tax (unless it is levied by the local bodies), Taxes on lottery,
betting and gambling. The revenue collected under SGST is for State Government.
• IGST, Integrated Goods and Service Tax :-
IGST means Integrated Goods and Service Tax with a concept of one tax one nation.
IGST falls under Integrated Goods and Service Tax Act 2016.
IGST is charged when movement of goods and services from one state to another.
For example, if goods are moved from Tamil Nadu to Kerala, IGST is levied on such
goods. The revenue out of IGST is shared by state government and central
government as per the rates fixed by the authorities.
As per GST Law Under the GST regime, an Integrated GST (IGST) would be
levied and collected by the Centre on inter-State supply of goods and services.
PAN mandatory to obtain
registration except for non-
State based registrations; concept
of centralized registration done
THE TAXPAYER WOULD NEED TO SUBMIT PERIODICAL
RETURNS TO BOTH THE CENTRAL GST AUTHORITY AND TO
THE CONCERNED STATE GST AUTHORITIES.
COMMAN STANDARDIZED RETURN FOR ALL TAXES (with
different account heads for CGST, SGST IGST) CAN COME INTO
COMMAN STANDARDIZED CHALLANS FOR ALL TAXES (with
different account heads for CGST, SGST IGST) CAN COME INTO
There shall be levied a tax called the Central/State Goods and Services Tax (CGST/SGST)
on all intra-State supplies of goods and/or services on the value determined under section
The rates as may be notified by the Central/State Government in this behalf, but not
exceeding fourteen percent, on the recommendation of the Council and collected in such
manner as may be prescribed.
The CGST/SGST shall be paid by every taxable person in accordance with the provisions
of this Act.
The Central or a State Government may, on the recommendation of the Council, by
notification, specify categories of supply of goods and/or services the tax on which is
payable on reverse charge basis.
Levy of Tax
And the tax thereon shall be paid by the recipient of such
goods and/or services.
The Central or a State Government may, on the
recommendation of the Council, by notification, specify
categories of services the tax on which shall be paid by the
electronic commerce operator.
Alcohol, tobacco, petroleum products are likely to be out of the GST regime.
Tax on items containing Alcohol: Alcoholic beverages would be kept out of the purview of GST.
Sales Tax/VAT could be continued to be levied on alcoholic beverages as per the existing
practice. In case it has been made VA table by some States, there is no objection to that. Excise
Duty, which is presently levied by the States may not also be affected.
Tax on Petroleum Products: Petroleum and petroleum products have also been constitutionally
brought under the GST. However, it has also been provided that petroleum and petroleum
products shall not be subject to the levy of GST till notified at a future date on the
recommendation of the GST Council.
Download Source- www.taxguru.in
Exemption of Goods and Services
Tax on Tobacco products: Tobacco products would be subjected to GST
with ITC. Centre may be allowed to levy excise duty on tobacco products
over and above GST with ITC.
Taxation of Services: As indicated earlier, both the Centre and the States
will have concurrent power to levy tax on goods and services.
In the GST regime, for any intra-state supply, taxes to
be paid are the Central GST (CGST, going into the
account of the Central Government) and the State GST
(SGST, going into the account of the concerned State
For any inter-state supply, tax to be paid is Integrated
GST (IGST) which will have components of both CGST
Payments to be made in GST
GST TAXES PAID BY YOU
We all will pay GST on every product or service we buy.
Since all indirect taxes levied by the States and the Centre will be merged into one
GST, we would exactly know how much tax we pay which at present is difficult to
No distinction would be made between imported or Indian goods and they would
be taxed at the same rate.
The sellers or service providers collect the tax from their customer.
Through debit of Credit Ledger
of the taxpayer maintained on
the Common Portal- ONLY Tax
can be paid.
Interest, Penalty and Fees
cannot be paid by debit in the
Tax payers shall be allowed to
take credit of taxes paid on
inputs (input tax credit) and
utilize the same for payment of
How payment can be made
Electronically generated challan from GSTN Common
Portal in all modes of payment and no use of manually
prepared challan .
Convenience of making payment online.
Faster remittance of tax revenue to the Government Account.
Features of GST payment features
Registered person entitled to credit of tax charged
on goods / services used / intended to be used for
business (nexus), irrespective of place of supply.
Restrictions on input tax credits (similar to current
regime) no credit on inputs/ input services used for
private or personal Consumption.
Credit available in respect of inputs / capital goods
directly sent to job-worker subject to conditions,
however credit not available in respect of input
services used by job-worker.
No provision for adjustment of tax in case of bad
Credit to be availed within one year from date of
invoice; subject to earlier of filing of annual return
(31st December) or return for month of September
(20th October) following end of financial year.
INPUT TAX CREDIT
Claim of Input Tax Credit ('ITC')
Input tax credit to be allowed basis electronic ledger.
Every taxable person to upload details of all inward & outward supplies electronically.
Provisional entitlement of tax credit basis self-assessment.
Matching of ITC claim based on inward supplies with corresponding outward
Recipient liable to pay tax if miss-match arises; in month of communication of such
Upon rectification by supplier, output tax liability of recipient reduced to extent of
Matching of output tax liability reduction claim of supplier with corresponding
reduction of input tax credit by recipient.
Proposed Flow of ITC Credit-ITC credit of SGST is not available for CGST or vice-a-versa.
INPUT TAX CREDIT
Refund of unutilized input tax credits
allowed in cases where: goods / services
exported outside India or; Inverted duty
Refund application can be filed within
two years of the relevant date; time limit
not applicable in respect of deposits made
In case of multi state operations,
application to be filed in respective states;
instead of single application as done
Provision to withhold or deduct refund
claim in case of non-filing of return or
pending tax demand but not stayed by any
court or appellate authority.
To provide greater authority to states in tax
collection, this bill amends the constitution
to provide the same.
Parliament and state legislatures will have
concurrent powers to make laws on GST.
Only Centre may levy & collection of IGST
on interstate supply of goods and services,
Alcohol for human consumption has been
exempted from GST. Parliament may, by
law, provide compensation to states for any
loss of revenue up to a period of 5 years.
Since it is an constitution amendment bill,
The govt. requires the support of 2/3rd of the
members in both the houses (Lok Shaba and
Raja Shaba ) of the parliament.
WHAT IS ROLE OF STATE IN
HIGHLIGHT OF THE BILLS
Key Features contd.
Goods and Services Tax Council (GSTC) -
proposed Article 279A
To be constituted by the President within
60 days from the coming into force of the
Consists of Union FM & Union MOS (Rev).
Consists of all State Ministers of Finance.
Quorum is 50% of total members.
Decisions by majority of 75% of weighted
votes of members present & voting.
1/3rd weighted votes for Centre & 2/3rd
for all States together.
GST COUNCIL STATE
1 Goods and service tax is consumption based tax. It means that the state GST
(SGST) will accrue to the state in which the goods and service are consumed
rather than where they originated.
2 Hence the states which have large number of consumer( Delhi , up , Bihar ,
west Bengal , etc. ) are likely to gain from GST , while the states which have
high production but low consumption would loose.
3 The states which are mainly the producing states (like Tamil Nadu,
Maharashtra, Gujarat) may lose some revenue because they presently get 2%
CST on the interstate sale of goods manufactured in their state but sold in other
states, which would not be available to them.
4 Hence, there would not be much loss of revenue to any state.
Further, the Central Government has promised to compensate the state for any
loss of revenue on account of GST.
LOSS OF STATE REVENUE
1 The states currently don’t have the power to tax services.
After GST comes into the picture, the state governments will
also get a share from the taxes you pay while eating in
restaurants or while staying in a hotel.
2 GST will reduce tax evasion. A lot of people previously
avoiding to pay taxes will now have an incentive to sell their
products with an invoice. As a result of this, the tax collection
3 Although tax on exported products is now not available, let
us not forget that states now have the power to tax goods which
are imported into the state. This going to be beneficial for the
net importing states, and will help to compensate the revenue
loss for the overall exporter states.
4 The fact that GST is based on consumption is good because
it would ensure that states with higher population get more
taxes. In the present system, Gujarat gets more taxes which
enables the government to provide more services to encourage
even more investments. However, Bihar gets less taxes because
of which they can’t provide enough infrastructure to encourage
WHAT REASONS GST NOT RESULT INTO TAX LOSS
Draft Model GST law
discussion on 14 June
Raja Shaba approved
bill (August 2016)
by Lok Shaba (August
President gave assent
to the bill in Sept 2016
Creation of GST
council in Sept 2016
1 Producing state governments (Tamilnadu , Karnataka, Maharashtra and Gujarat)
will lose revenue to the extent of 25–30% while consuming state governments will get
revenue boost to similar extent. However since center will compensate for 5 years and
Tax:GDP ratio would have improved by then, states will not see any significant
difference. Although states would share tax revenue on goods with the center , they
would be getting revenue from taxing services which is growing very fast. Also since
GST rates would be revenue neutral no net gain or loss in revenue is expected.
HOW CENTRAL GOVERNMENT COMPENSATE
STATE GOVE TAX LOSS
STATE WISE TAX COLLECTION (RS.BILLIONS)