Gst introduction

The Institute of Cost Accountants of India 1
Introduction
This Study Note includes
1.1 Fundamentals of GST
1.2 Constitution [101st Amendment] Act, 2016
1.3 What is GST
1.4 Advantages of GST
1.5 One Nation - One Tax
1.6 Dual GST Model
1.7 Goods and Services Tax Network [GSTN]
1.8 GST Council
1.9 Important Definitions under CGST Law
Study Note - 1
INTRODUCTION
1.1 FUNDAMENTALS OF GST
Difference between Direct Taxes and Indirect Taxes – illustrative list:
Direct Taxes Indirect Taxes
1. Payer of tax and sufferer of tax one and same
(i.e. impact and incidence on the same person)
1. Payer of tax not sufferer of tax whereas sufferer of tax
is not paying directly to the Government (i.e. impact
on one head and incidence on other head)
2. Income based taxes 2. Supply based taxes
3. Rate of taxes are different from person to person 3. Rate of duties are not differ from person to person
4. Entire revenue goes to Central Government of
India
4. Revenue source to Central Government of India as
well as State Governments (i.e. CGST and SGST)
5. Previous year income assessed in the
assessment year
5. There is no previous year and assessment year
concept
6. Central Board of Direct Taxes (CBDT) is an
important part of Department of Revenue.
6. Central Board of Excise and Customs (CBEC) is an
important part of Department of Revenue.
w.e.f. 1-2-2019, The Central Board of Excise & Customs
is being renamed as the Central Board of Indirect
Taxes & Customs (CBIC). (i.e. CBEC renamed as
CBIC).
7. Progressive nature. 7. Regressive nature.
1.2 CONSTITUTION [101ST
AMENDMENT] ACT, 2016
Constitution (122nd Amendment) Bill, 2014 received the assent of the President of India on 8th September, 2016
and became Constitution (101st Amendment) Act, 2016, which paved the way for introduction of GST in India.
Constitution (101st Amendment) Act, 2016 was enacted on 8th September, 2016, with following significant
amendments:
(a) Concurrent powers on Parliament and State Legislatures to make laws governing goods and services. It means
there will be dual control of State and Central authorities for all assessees.

Indirect Taxation
2 The Institute of Cost Accountants of India
(b) As per Article 246A, the power to levy GST has been given to the Parliament as well as to Legislature of every
State.
a. CGST – enacted by Central Government of India.
b. IGST – enacted by Central Government of India.
c. SGST – enacted by respective State Governments
d. UTGST – enacted by Central Government of India
(c) IGST will be apportioned between Centre and the States in the manner provided by Parliament by Law as per
the recommendation of the GST Council.
(d) GST will be levied on all supply of goods and services except alcoholic liquor for human consumption.
(e) The explanation to Article 269A of Constitution of India provides that the import of goods or services will be
deemed as supply of goods or services or both in the course of inter-State trade or commerce. In case of
import of goods IGST will be levied along with the Basic Customs duty. It means IGST is levied in replacement
of CVD + Spl. CVD. In case of import of services only IGST will be levied.
(f) Principles for determining the place of supply and when a supply takes place in the course of inter-state trade
or commerce shall be decided by the Parliament.
(g) The power to levy Central Excise duty on goods manufactured or produced in India is available in respect of
the following products:
a. Petroleum crude;
b. High speed diesel;
c. Motor spirit (commonly known as petrol);
d. Natural gas;
e. Aviation turbine fuel; and
f. Tobacco and tobacco products.
However, once GST is imposed there will be no duty on manufacture of these goods.
(h) The power to impose tax on sale of the following products is still provided to the State Governments:
a. Petroleum crude;
b. High speed diesel;
c. Motor spirit (commonly known as petrol);
d. Natural gas;
e. Aviation turbine fuel; and
f. Alcoholic liquor for human consumption.
However, once GST Council is recommend the date from which GST is imposed on these products (except
alcoholic liquor for human consumption), and no sales tax will be imposed on these products.
As per definition given in article 366(12A), GST covers all the goods except alcoholic liquor for human consumption.
It means no GST can be levied on Alcoholic liquor for human consumption. Present system of State Excise duty and
sales tax on Alcoholic liquor for human consumption will continue.
As a result, the following bills became an Act on 12th April 2017:
● Central Goods and Services Tax Bill, 2017
● Integrated Goods and Services Tax Bill, 2017
● Union Territory Goods and Services Tax Bill, 2017
● Goods and Services Tax (Compensation to States) Bill, 2017
The Central Government notified 1st July, 2017 as the date from which the much awaited indirect tax reform in

Introduction
India, i.e., Goods and Services Tax (GST) will be implemented.
Accordingly, Goods and Services Tax (GST) has been implemented in India w.e.f. 1st July, 2017.
1.3 WHAT IS GST
● Goods and services tax means a tax on supply of goods or services, or both, except taxes on supply of alcoholic
liquor for human consumption (Article 366 (12A) of Constitution of India).
● GST is a value added tax levy on sale or service or both.
● GST is a destination based consumption tax.
● GST offers comprehensive and continuous chain of tax credit.
● GST where burden borne by final consumer.
● GST eliminate cascading effect of tax.
● GST brings uniform tax structure all over India.
1.4 ADVANTAGES OF GST
(a) One Nation One Tax.
(b) Removal of bundled indirect taxes such as VAT, CST, Service tax, CAD, SAD, and Excise.
(c) Removal of cascading effect of taxes i.e. removes tax on tax.
(d) Increased ease of doing business;
(e) Lower cost of production, increases demand will lead to increase supply. Hence, this will ultimately lead to rise
in the production of goods. Resultantly boost to make in India initiative.
(f) It will boost export and manufacturing activity, generate more employment and thus increase GDP with
gainful employment leading to substantive economic growth;
1.5 ONE NATION - ONE TAX
GST will extend to whole of India including the State of Jammu and Kashmir.
On 7th July, 2017, the Jammu and Kashmir Goods and Services Tax Bill, 2017 was passed by the State Legislature,
empowering the State to levy State GST on intra-state supplies with effect from 8th July, 2017.
Concomitantly, the President of India has promulgated two ordinances, namely, the Central Goods and Services
Tax (Extension to Jammu and Kashmir) Ordinance, 2017 and the Integrated Goods and Services Tax (Extension to
Jammu and Kashmir) Ordinance, 2017 extending the domain of Central GST Act and the Integrated GST Act to
the State of Jammu and Kashmir, with effect from 8th July, 2017.
With this, the State of Jammu and Kashmir has become part of the GST regime, making GST truly a “ one nation,
one tax” regime.

Indirect Taxation
1.6 DUAL GST MODEL
India adopted a dual GST where tax imposed concurrently by the Central and States.
Dual GST model
SGST ● State GST
● Collected by the State Government
CGST ● Central GST
● Collected by the Central Government
IGST ● Integrated GST
● Collected by the Central Government on inter-state supply of Goods and Services
Central Goods and Services Tax Act, 2017 (CGST):
CGST levied and collected by Central Government. It is a revenue source to the Central Government of India, on
intra-state supplies of taxable goods or services or both.
State Goods and Services Tax Act, 2017 (SGST):
SGST levied and collected by State Governments/Union Territories with State Legislatures (namely Delhi and
Pondicherry) on intra-state supplies of taxable goods or services or both.
It is a revenue source of the respective State Government.
Union Territory Goods and Services Tax (UTGST):
UTGST levied and collected by Union Territories without State Legislatures, on intra-state supplies of taxable goods
or services or both.
Note: India is a Union of States. The territory of India comprises of the territories of the States and the Union
Territories. Currently, there are 29 States and 7 Union Territories; of which, two (Delhi and Pondicherry) are having
Legislature.
GST – in Union Territories without Legislature:
Supplies within such Union territory, Central GST will apply to whole of India and hence, it would be applicable to
all Union Territories, with or without Legislature.
To replicate the law similar to State GST to Union Territories without Legislature, the Parliament has the powers under
Article 246(4) to make such laws. Alternatively, the President of India may use his general powers to formulate
such laws.
Hence, law same as similar to State GST can be formulated for Union Territory without Legislature, by the Parliament.
The following are Union Territories without Legislature:
1. Chandigarh
2. Lakshadweep

Introduction
3. Daman and Diu
4. Dadra and Nagar Haveli
5. Andaman and Nicobar Islands
Integrated Goods and Services Tax Act, 2017 (IGST):
IGST is a mechanism to monitor the inter-state trade of goods and services and ensure that the SGST component
accrues to the Consumer State. It would maintain the integrity of ITC chain in inter-state supplies. The IGST rate would
broadly be equal to CGST rate plus SGST rate. IGST would be levied and collected by the Central Government on
all inter-State transactions of taxable goods or services.
The revenue of inter-state sales will not accrue to the exporting state and the exporting state will be required to
transfer to the Centre the credit of SGST/UTGST used in payment of IGST.
How to Decide IGST or CGST + SGST while raising invoices:
Location of Supplier and Place of Supply
In different
states
In same
state
Intra State Transaction Inter State Transaction
CGST + SGST IGST
1.7 GOODS AND SERVICES TAX NETWORK (GSTN)
Goods and Services Tax Network (GSTN) is a [Section 8 of the Companies Act, 2013, (i.e. not for profit companies)],
non-Government, private limited company. Technology backbone for GST in India. GST being a destination based
tax, the inter- state trade of goods and services (IGST) would need a robust settlement mechanism amongst the
States and the Centre. This is possible only when there is a strong IT Infrastructure and Service back bone which
enables capture, processing and exchange of information amongst the stakeholders (including tax payers, States
and Central Governments, Accounting Offices, Banks and RBI).
As a result Goods and Services Tax Network (GSTN) has been set up.
GST Network will soon become a 100% govt-owned company:
Cabinet consider converting GSTN to government entity on September 26, 2018.

Indirect Taxation
Goods and Services Tax Network (GSTN):
Intra-state transaction - Tax payment and credit flow
Functions of the GSTN (i.e. Role assigned to GSTN):
Creation of common and shared IT infrastructure for functions facing taxpayers has been assigned to GSTN and
these are:
1. filing of registration application,
2. filing of return,
3. creation of challan for tax payment,
4. settlement of IGST payment (like a clearing house),
5. generation of business intelligence and analytics etc.
All statutory functions to be performed by tax officials under GST like approval of registration, assessment, audit,
appeal, enforcement etc. will remain with the respective tax departments.

Introduction
1.8 GST COUNCIL
As per Article 279A of the Constitution of India, the President of India is empowered to constitute Goods and
Services Tax Council. The President of India constituted the GST Council on 15th September, 2016.
The GST Council shall consist of Union Finance Minster as a Chairperson, Union Minister of State in charge of
Finance as a member, the State Finance Minister or State Revenue Minister or any other Minister nominated by
each State as a member of the Council. The GST Council shall select one of them as Vice Chairperson of Council.
Guiding principle of the GST Council:
The mechanism of GST Council would ensure harmonization on different aspects of GST between the Centre and
the States as well as among States. It has been provided in the Constitution (101st Amendment) Act, 2016 that the
GST Council, in its discharge of various functions, shall be guided by the need for a harmonized structure of GST
and for the development of a harmonized national market for goods and services.
Functions of the GST Council:
GST Council is to make recommendations to the Central Government and the State Governments on
1. tax rates,
2. exemptions,
3. threshold limits,
4. dispute resolution,
5. GST legislations including rules and notifications etc.

Indirect Taxation
1.9 IMPORTANT DEFINITIONS UNDER CGST LAW
1. Sec 2(6), “aggregate turnover” means:
The aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable
by a person on reverse charge basis), exempt supplies, exports of goods or services or both and inter-State
supplies of persons having the same Permanent Account Number, to be computed on all India basis but
excludes central tax, State tax, Union territory tax, integrated tax and cess;
2. Sec 2(17), “business” includes:
(a) any trade, commerce, manufacture, profession, vocation, adventure, wager (i.e. bet, gamble) or any
other similar activity, whether or not it is for a pecuniary benefit;
(b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a);
(c) any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency,
continuity or regularity of such transaction;
(d) supply or acquisition of goods including capital goods and services in connection with commencement
or closure of business;
(e) provision by a club, association, society, or any such body (for a subscription or any other consideration)
of the facilities or benefits to its members;
(f) admission, for a consideration, of persons to any premises;
(g) services supplied by a person as the holder of an office which has been accepted by him in the course
or furtherance of his trade, profession or vocation;
(h) services provided by a race club by way of totalisator (i.e. computer that registers bets and divides the
total amount bet among those who won) or a licence to book maker in such club;
w.e.f. 1-2-2019, activities of a race club including by way of totalisator or a license to book maker or
activities of a licensed book maker in such club; and”;
and
(i) any activity or transaction undertaken by the Central Government, a State Government or any local
authority in which they are engaged as public authorities;
Note: Book maker means: a person whose job is to take bets (especially on horse races), calculate
odds, and pay out winnings; the manager of a betting shop.
As per CSGT (Amendment) Act, 2018, “business” includes –
3. Sec 2(18), “business vertical” means:
A distinguishable component of an enterprise that is engaged in the supply of individual goods or services or
a group of related goods or services which is subject to risks and returns that are different from those of the
other business verticals.
Explanation. – For the purposes of this clause, factors that should be considered in determining whether
goods or services are related include––
► the nature of the goods or services;
► the nature of the production processes;
► the type or class of customers for the goods or services;

Introduction
► the methods used to distribute the goods or supply of services; and
► the nature of regulatory environment (wherever applicable), including banking, insurance, or public
utilities;
The said definition, however, has been omitted vide the CGST (Amendment) Act, 2018.
4. Sec 2(20), “casual taxable person” means:
A person who occasionally undertakes transactions involving supply of goods or services or both in the course
or furtherance of business, whether as principal, agent or in any other capacity, in a State or a Union territory
where he has no fixed place of business;
5. Sec 2(30), “composite supply” means:
A supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or
services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with
each other in the ordinary course of business, one of which is a principal supply;
Illustration — Where goods are packed and transported with insurance, the supply of goods, packing
materials, transport and insurance is a composite supply and supply of goods is a principal supply;
6. Sec 2(31), “consideration” in relation to the supply of goods or services or both includes––
(a) any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for
the inducement of, the supply of goods or services or both, whether by the recipient or by any other
person but shall not include any subsidy given by the Central Government or a State Government;
(b) the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of,
the supply of goods or services or both, whether by the recipient or by any other person but shall not
include any subsidy given by the Central Government or a State Government:
Provided that a deposit given in respect of the supply of goods or services or both shall not be considered as
payment made for such supply unless the supplier applies such deposit as consideration for the said supply.
7. Sec 2(32), “Continuous supply of goods” means:
A supply of goods which is provided, or agreed to be provided, continuously or on recurrent basis, under
a contract, whether or not by means of a wire, cable, pipeline or other conduit, and for which the supplier
invoices the recipient on a regular or periodic basis and includes supply of such goods as the Government
may, subject to such conditions, as it may, by notification, specify;
8. Sec 2(33), “Continuous supply of services” means:
A supply of services which is provided, or agreed to be provided, continuously or on recurrent basis, under
a contract, for a period exceeding three months with periodic payment obligations and includes supply of
such services as the Government may, subject to such conditions, as it may, by notification, specify;
Sec 2(45), Electronic Commerce Operator means:
Any person, who owns, operates or manages digital or electronic facility or platform for electronic commerce.
9. Sec 2(50), “Fixed establishment” means:
A place (other than the registered place of business) which is characterised by a sufficient degree of
permanence and suitable structure in terms of human and technical resources to supply services, or to
receive and use services for its own needs;

Indirect Taxation
10. Sec 2(52), Goods means:
Every kind of movable property other than money and securities but includes actionable claim, growing
crops, grass and things attached to or forming part of the land which are agreed to be served before supply
or under a contract of supply.
11. Section 2(56), “India” means:
The territory of India as referred to in Article 1 of the Constitution, its territorial waters, seabed and sub-soil
underlying such waters, continental shelf, exclusive economic zone or any other maritime zone as referred to
in the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976, and
the air space above its territory and territorial waters;
12. Sec 2(62), “input tax” in relation to:
A registered person, means the central tax, State tax, integrated tax or Union territory tax charged on any
supply of goods or services or both made to him and includes —
(a) the integrated goods and services tax charged on import of goods;
(b) the tax payable under the provisions of sub-sections (3) and (4) of section 9;
(c) the tax payable under the provisions of sub-sections (3) and (4) of section 5 of the Integrated Goods
and Services Tax Act;
(d) the tax payable under the provisions of sub-sections (3) and (4) of section 9 of the respective State
Goods and Services Tax Act; or
(e) the tax payable under the provisions of sub-sections (3) and (4) of section 7 of the Union Territory Goods
and Services Tax Act, but does not include the tax paid under the composition levy;
13. Section 2(78), “non-taxable supply” means:
a supply of goods or services or both which is not leviable to tax under this Act or under the Integrated Goods
and Services Tax Act;
Example 1:
(1) Alcoholic Liquor for human consumption is Non-taxable Supply.
(2) Sale of Land etc.
14. Sec 2(84), “person” includes—
(a) an individual;
(b) a Hindu Undivided Family;
(c) a company;
(d) a firm;
(e) a Limited Liability Partnership;
(f) an association of persons or a body of individuals, whether incorporated or not, in India or outside India;
(g) any corporation established by or under any Central Act, State Act or Provincial Act or a Government
company as defined in clause (45) of section 2 of the Companies Act, 2013;

Introduction
(h) any body corporate incorporated by or under the laws of a country outside India;
(i) a co-operative society registered under any law relating to co-operative societies;
(j) a local authority;
(k) Central Government or a State Government;
(l) society as defined under the Societies Registration Act, 1860;
(m) trust; and
(n) every artificial juridical person, not falling within any of the above;
15. Sec. 2(90), “principal supply” means the supply of goods or services which constitutes the predominant
element of a composite supply and to which any other supply forming part of that composite supply is
ancillary;
16. Sec. 2(93), “recipient” of supply of goods or services or both, means—
(a) where a consideration is payable for the supply of goods or services or both, the person who is liable to
pay that consideration;
(b) where no consideration is payable for the supply of goods, the person to whom the goods are delivered
or made available, or to whom possession or use of the goods is given or made available; and
(c) where no consideration is payable for the supply of a service, the person to whom the service is
rendered,
and any reference to a person to whom a supply is made shall be construed as a reference to the recipient
of the supply and shall include an agent acting as such on behalf of the recipient in relation to the goods or
services or both supplied;
(17) Section 2(98), “reverse charge” means:
The liability to pay tax by the recipient of supply of goods or services or both instead of the supplier of such
goods or services or both under sub-section (3) or sub-section (4) of section 9, or under sub-section (3) or sub-
section (4) of section 5 of the Integrated Goods and Services Tax Act;
(18) Section 2(102), “services” means:
Anything other than goods, money and securities but includes activities relating to the use of money or
its conversion by cash or by any other mode, from one form, currency or denomination, to another form,
currency or denomination for which a separate consideration is charged;
Explanation [W.E.F. 1-2-2019] –
For the removal of doubts, it is hereby clarified that the expression “services” includes facilitating or arranging
transactions in securities
Example - Some service charges or service fees or documentation fees or broking charges or such like fees
or charges are charged in relation to transactions in securities.

Indirect Taxation
(19) Section 2(105), “supplier” in relation to:
Any goods or services or both, shall mean the person supplying the said goods or services or both and
shall include an agent acting as such on behalf of such supplier in relation to the goods or services or both
supplied;
(20) Section 2(107), “taxable person” means:
A person who is registered or liable to be registered under section 22 (i.e. registration required if turnover
exceed threshold limit and so on) or section 24 (i.e. Compulsory registration under GST).
(21) Section 2 (108), “taxable supply” means:
A supply of goods or services or both which is leviable to tax under this Act;

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