1. HABIBULLAH & CO. CHARTERED ACCOUNTANTS
© Habibullah & Co. Chartered Accountants, India For Private Circulation Only
OVERVIEW OF INDIAN GOODS AND SERVICE
TAX
Introduction of GST would be a very significant
step in the field of indirect tax reforms in India.
By amalgamating a large number of Central and
State taxes into a single tax and allowing set-off
of prior-stage taxes, it would mitigate the ill
effects of cascading and pave the way for a
common national market.
While the process of amending the constitution
to enable the introduction of GST has been slow,
the other processes for introduction of GST have
been proceeding at a reasonable pace. As a
result, a few months back, the Government had
released documents outlining four processes
under GST regime, i.e. registration, payment of
tax, returns and refunds, for giving industry an
insight in the thinking of the Government
towards GST. Taking a further step towards
introduction of GST, the Government has
released the draft model GST law for public
comments.
The model law provides a common draft of
Central GST (CGST) Act and State GST (SGST)
Act. The model law also includes the draft of
Integrated GST (IGST) Act as well as draft GST
Valuation Rules.
For the consumers, the biggest gain would be in
terms of a reduction in the overall tax burden on
goods, which is currently estimated at 25%-
30%. Introduction of GST would also make
Indian products competitive in the domestic and
international markets. Studies show that this
would instantly spur economic growth.
With the 101st Constitution Amendment Act
coming into force on 8th September, 2016 and
notification of the GST Council on 15th
September – the road to GST rollout is clear.
Indian Government is keen on introducing GST
the biggest indirect tax reform, with effect from
01 April 2017.
UNDERSTANDING INDIAN GST
GST is a value-added tax levied at all points in
the supply chain with credit allowed for any tax
paid on input acquired for use in making the
supply. It would apply to both goods and services
in a comprehensive manner, with exemptions
restricted to a minimum.
In keeping with the federal structure of India, it
is proposed that GST will be levied concurrently
by the Centre (CGST) and the states (SGST). It
is expected that the base and other essential
design features would be common between
CGST and SGST across SGSTs for individual
states. Both CGST and SGST would be levied on
the basis of the destination principle. Thus,
exports would be zero-rated, and imports would
attract tax in the same manner as domestic
goods and services. Inter-state supplies within
India would attract an Integrated GST
(aggregate of CGST and the SGST of the
destination State).
In addition to the IGST (Integrated GST), in
respect of supply of goods, an additional tax of
up to 1% has been proposed to be levied by the
Centre. Revenue from this tax is to be assigned
to origin states. This tax is proposed to be levied
for the first two years or a longer period, as
recommended by the GST Council.
GST has been envisaged as an efficient tax
system, neutral in its application and distribution
attractive.
The advantages of Indian GST are:
 Wider tax base, necessary for
lowering tax rates and eliminating
classification disputes
 Elimination of multiplicity of taxes and
their cascading effects
 Rationalization of tax structure and
simplification of compliance procedures
 Harmonization of center and state tax
administrations, which would reduce
duplication and compliance costs

2. HABIBULLAH & CO. CHARTERED ACCOUNTANTS
© Habibullah & Co. Chartered Accountants, India For Private Circulation Only
 Automation of compliance procedures to
reduce errors and increase efficiency
Destination principle
The GST structure would follow the destination
principle. Accordingly, imports would be subject
to GST, while exports would be zero-rated. In the
case of inter-state transactions within India,
State tax would apply in the state of destination
as opposed to that of origin.
Taxes to be subsumed
GST would replace most indirect taxes currently
in place such as:
(i) taxes currently levied and collected by
the Centre:
a. Central Excise duty
b. Duties of Excise (Medicinal and Toilet
Preparations)
c. Additional Duties of Excise (Goods of Special
Importance)
d. Additional Duties of Excise (Textiles and
Textile Products)
e. Additional Duties of Customs (commonly
known as CVD)
f. Special Additional Duty of Customs (SAD)
g. Service Tax
h. Central Surcharges and Cesses so far as they
relate to supply of goods and services
(ii) State taxes that would be subsumed
under the GST are:
a. State VAT
b. Central Sales Tax
c. Luxury Tax
d. Entry Tax (all forms)
e. Entertainment and Amusement Tax (except
when levied by the local bodies)
f. Taxes on advertisements
g. Purchase Tax
h. Taxes on lotteries, betting and gambling
i. State Surcharges and Cesses so far as they
relate to supply of goods and services
Taxation under Central GST (CGST) and
State GST (SGST)
The Central GST and the State GST would be
levied simultaneously on every transaction of
supply of goods and services except on
exempted goods and services, goods which are
outside the purview of GST and the transactions
which are below the prescribed threshold limits.
Further, both would be levied on the same price
or value unlike State VAT which is levied on the
value of the goods inclusive of Central Excise.
How will IT be used for the implementation
of GST?
For the implementation of GST in the country,
the Central and State Governments have jointly
registered Goods and Services Tax Network
(GSTN) as a not-for-profit, non-Government
Company to provide shared IT infrastructure and
services to Central and State Governments, tax
payers and other stakeholders. The key
objectives of GSTN are to provide a standard and
uniform interface to the taxpayers, and shared
infrastructure and services to Central and
State/UT Governments.
GSTN is working on developing a state-of-the-art
comprehensive IT infrastructure including the
common GST portal providing frontend services
of registration, returns and payments to all
taxpayers, as well as the backend IT modules for
certain States that include processing of returns,
registrations, audits, assessments, appeals, etc.
All States, accounting authorities, RBI and banks,
are also preparing their IT infrastructure for the
administration of GST.
There would no manual filing of returns. All taxes
can also be paid online. All mis-matched returns
would be auto-generated, and there would be no
need for manual interventions. Most returns
would be self-assessed.

3. HABIBULLAH & CO. CHARTERED ACCOUNTANTS
© Habibullah & Co. Chartered Accountants, India For Private Circulation Only
About Us
Habibullah & Co. (HCO) is a professional
services firm providing audit, assurance, tax,
financial advisory and consulting services to a
wide range of publicly traded and privately held
companies, guided by core values including
competence, honesty and integrity,
professionalism, dedication, responsibility and
accountability.
At HCO, the interests of our clients are
paramount. Our focus on the mid-market means
we have a real understanding of the environment
in which our clients operate and are ideally
placed to help them grow and prosper.
Who we are and what we stand for
 Established 1962
 9 Partners
 100 + staff
 6 offices across India
 International Representation through
“Antea- Alliance of Independent Firms”
 Member Firm of The Institute of
Chartered Accountants of India since
1962
 Registered with all major Government
Regulators in India
Our Services
 Accounting and Auditing
 Business Setups in India
 Tax Compliance, Planning and
Management
 Transfer Pricing Advisory
 Business Advisory
Let’s talk
For a deeper discussion of how this issue might
affect your business, please contact, Managing
Partner for International Relations:
CA. Vivek Agarwal
E: vivek@hcoca.com
T: +91-98391-19370
Office in India
New Delhi
Lucknow
Gorakhpur
Patna
Ranchi
Varanasi
Mau
Associates at
Kolkata
Mumbai
Allahabad
Agra
Email
info@hcoca.com
Website
www.hcoca.com
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Habibullah & Co. and no part of this can be reproduced
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please obtain professional advice before taking any decision.