TOPIC: Goods and Service Tax (GST)

INDEX
Serial No. Topic
1 What is GST?
2 History of GST in India
3 How GST works?
4 Components of GST
5 Who are liable to register under GST?
6 Rate Slabs under GST
7 Requirements to opt for Composition Scheme
8 Input Tax Credit
9 How user can avail Input Tax Credit
10 Advantages of GST
11 Disadvantages of GST
12 Conclusion

What is GST?
 Indirect Tax which has replaced many indirect taxes in India.
 Passed in the Parliament on 29th March 2017.
 Came into effect on 1st July 2017.
 Comprehensive, Multi Stage, Destination Based Tax levied on every
value addition.
 One Indirect Tax for the entire country.

History of GST in India
2000: PM Vajpayee set up
a Committee to draft GST
law.
2004: Task Force
concludes GST must be
implemented to improve
tax structure.
2006: Finance Minister
proposes GST introduction
from 1st April 2010.
2007: CST to be phased
out. Rates reduced from
4% to 3%.
2008: EC finalizes dual GST
structure to have separate
levy, legislation.
2010: Project to
computerise commercial
taxes launched but GST
implementation
postponed.
2011: Constitution
Amendment Bill to enable
GST law introduced.
2012: Standing Committee
begins discussion on GST
but stalled it over clause
279B.
2013: Standing Committee
tables it report on GST.
2014: GST bill introduced
in Parliament by Finance
Minister.
2015: GST bill passed in
Lok Sabha but not in Rajya
Sabha.
2016: GSTN goes live.
2016: Amended Model
GST law passed in both
houses. President gives
Assent.
2017: Four supplementary
GST bills passed in Lok
Sabha and approved by
cabinet.
Rajya Sabha passes four
supplementary GST bills.
Final GST to be
implemented on July1,
2017.
GST is launched on July 1,
2017.

How GST Works?
GST is levied on each stage as the goods and services reaches from Manufacturer to Final Consumer
i.e. GST is levied on every value addition made in the goods and services at each stage.
Illustration:
Buying Raw
Materials
Manufactures
Goods
Sale to
Wholesale/
Warehousing
Sale to
Retailers
Final Sale to
Consumers
GST will be levied on every stage on the value made by each party in the supply chain i.e. monetary worth added
at each stage to achieve final sale to the customer.

COMPONENTS OF GST
Sale Within the State
CGST SGST
Sale to Another State
IGST
CGST:
Collected by Central Government on an Intra-State sale.
SGST:
Collected by State Government on Intra-State sale.
IGST:
Collected by Central Government for Inter-State sale.

Who is liable to register under GST?
• Any business whose turnover in a financial year exceeds Rs 20 lakhs.
• Every Person who is registered under earlier law (i.e. VAT, Excise,
Service Tax etc.).
• Anyone who drives inter-state supply of goods.
• Casual Taxable Person.
• Non-Resident taxable person.
• Agents of a supplier.
• E-commerce operator or aggregator.
• Person who supplies via e-commerce aggregator.

Rate Slabs under GST
The table below shows GST tax rate on some common items-
Tax Rates Products
5%
Household necessities such as edible oil, sugar, spices, tea, and coffee (except
instant) are included. Coal, Mishti/Mithai(Indian Sweets) and Life saving drugs are
also covered under this GST slab.
12% This includes computers and processed food
18% Hair Oil, Toothpaste and Soaps, Capital goods and industrial intermediaries are
covered in this slab.
28%
Luxury items such as small cars, consumer durable like AC and Refrigerators,
Premium Cars, Cigarettes and aerated drinks, High-end motorcycles are included
here.

Requirements to opt for composition scheme
• Any Business having annual turnover up to Rs 1 crore.
• Only Manufacturers of goods, Dealers, and Restaurants(not serving alcohol)
can opt for composition scheme.
• No need to maintain detailed records.
• Cannot avail Input Tax Credit.
• Cannot issue Tax invoice but should issue Bill of Supply.
• Furnish only one return (GSTR-4) on quarterly basis and an annual return in
form GSTR-9A.
• Composition Dealer cannot collect GST from the buyer.
• Should be supplying goods Intra-State.
Composition Scheme- Applicable GST Rate
Type of Business CGST SGST Total
Manufacturer and Traders (Goods) 0.5% 0.5% 1%
Restaurants not serving alcohol 2.5% 2.5% 5%
Service Providers are not eligible for Composition Scheme

Input Tax Credit
Supplier at the time of paying GST to the government can avail benefit of GST
he paid at the time of purchasing inputs or raw material.
In simple words,
Input Tax Credit= GST collected at the from the consumer at the time of
sale (-) GST paid on the purchase of inputs and raw materials
Input Tax Credit= Tax collected by the supplier at the time of sale of goods or providing the services(-)
Tax paid at the time of purchase of inputs or raw materials
A
•Tax paid on
purchase
of A Rs 100
B
•Tax paid on
purchase
of B Rs 120
C
•Tax paid on
Purchase
of C Rs 80
Output Input
Tax on output Rs 450
Tax to be paid by manufacturer= Rs 450 less Tax paid on inputs (Rs 100 + Rs 120 + Rs 80)= Rs 150
Input Credit = Rs 300

How user can avail Input Tax Credit
• Use input tax credit from IGST,CGST,SGST paid
on purchases.To pay IGST
• Use input tax credit from CGST & IGST paid on
purchases.To pay CGST
• Use input tax credit from SGST & IGST paid on
purchases.To pay SGST
NOTE:
 User cannot use CGST input tax credit to pay SGST liability.
 User cannot use SGST input tax credit to pay CGST liability.

Advantages
of GST
Removing
Cascading
effects
Regulating
the
Unorganized
Sector
Composition
scheme for
small
businesses
Online
simpler
procedure
under GST
Higher
threshold
for
Registration
Lesser
Compliances
Defined
treatment of
e-commerce
Increased
efficiency in
logistics

Increased Cost
due to software
purchase
Being GST
Compliant
GST will mean
an Increase in
operational costs
GST is an online
taxation system
SMEs will have a
higher tax
burden Disadvantages
of GST

Conclusion
• Change is definitely never easy.
• Government is trying to smoothen the road to GST.
• Will benefit in the long run.
• Paper work has become less than previous tax regime as GST is online
taxation system.
• Unified Tax system and easy input tax credits.

REVISION