GST IN A NUTSHELL

1. GOODS AND SERVICETAX
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MANUEL M MATHEW
CIVIL SERVICE INSTITUTE PALA
TRIVANDRUM

2. •The Goods and Services Tax, or GST is a major indirect
tax reform introduced in India by integrating more than
dozen indirect taxes of the centre and states. It is a
comprehensive tax levied on the manufacture, sale,
and consumption of goods and services. The GST is a
destination based consumption tax made on value
addition. It is “collected on value-added goods and
services” at each transactional stage of the supply chain
or process. Already several countries have adopted GST
basedVAT systems.
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3. The previous system of multiple taxes
•Indirect taxes in the country are imposed by both centre
and states. For a commodity, on the production stage,
there is the Central Excise Duties (imposed as Central
VAT). This is a tax given by manufactures on production
stage. When that commodity reaches the sales stage,
states imposes Sales Tax which is otherwise known as
‘State VAT’. So, in the life cycle of a commodity which is
fully manufactured in India, there are two major types of
taxes – the union excise duties (to be given by
manufacturers) and the state VAT (to be given by
wholesalers and retailers).
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4. Why GST was needed?
Actually, when a person is consuming a commodity,
two types of indirect taxes have to be given (if it is
not using any imported components) – the UED and
the State VAT. Here, there is no coordination
between the centre and the states and among the
states about the rates to be charged for each type of
commodities. Such a situation produces two types of
problems:
•(a) there is no unified tax system in the country
(goods are taxed differently in different states).
•(b) cost cascading effect or tax on tax problem
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5. • No unified tax system
Both the centre and the states fix their own tax rates and
commodity groups while imposing the respective taxes. The
sales tax for a commodity in Punjab may be different from
Karnataka; the same may be different in Maharashtra. This
means there is no unified rates for a particular commodity pan
India.
• Cost-cascading effect
Cost cascading effect refers to the burden of tax on tax. The cost
cascading effect happens when one tax is imposed on a
commodity without giving input tax credit on the previous tax
paid.
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6. GST as a value added tax
•GST belongs to the VAT family as tax revenues are
collected on the basis of value added. Unlike in the case
of a pure commodity based VAT system, GST includes
services also. Similarly, input credit is given while
calculating the tax burden. This means that basic inputs
will not be taxed.
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7. What isVAT?
InVAT, tax is imposed not on the final output, but tax is on the
value addition. That means whatever value addition you make for
a product, on that value addition you have to pay tax to
government.
What isValue addition?
In simple words, value addition means value of output minus
value of input.
What is input tax credit?
Input tax credit means that when a manufacturer pays the tax on
his output, he can deduct the tax he previously paid on the input
he purchased. Here, while paying the tax on his output, he can
deduct or take credit for the tax he paid while purchasing inputs.6

8. Central taxes merged under GST
 Union Excise duties
Service tax
Duties of Excise (Medicinal andToilet Preparations)
Additional Duties of Excise (Textiles andTextile Products)
Additional Duties of Excise (Goods of Special Importance)
Additional Duties of Customs (commonly known as CVD)
Special Additional Duty of Customs (SAD)
Cess and surcharges
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9. State taxes that are subsumed under the GST are:
StateVAT
Central SalesTax
EntertainmentTax (not levied by the local bodies)
EntryTax (other than those in lieu of octroi)
LuxuryTax
Taxes on advertisements
Taxes on lotteries, betting and gambling
State cesses and surcharges insofar as they relate to supply
of goods or services.
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10. Taxes NOT to be subsumed under GST
•CentralTaxes
•Customs Duty
•Excise on tobacco products and petroleum products
•StateTaxes
•Excise duty on liquor
•Octroi
•SalesTax on petroleum products (Natural Gas is undecided)
•Stamp duty
•Taxes and duties on Electricity
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11. Central and State GST
•There is sharing of GST by the centre and the tax accruing
state at 50:50 ratio. For example, if a good is taxed at 18%,
out of this, 9% will go to the centre and the remaining 9%
will go to the state where the good is consumed. The GST
going to the Centre is called as Central GST (CGST) and
that toes to the States is known as State GST (SGST).
Here, the centre and the concerned state will equally share
GST on goods and services.
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12. Integrated GST (IGST)
•The IGST comes to play when the commodity is produced
in one state and is traded to another state (interstate
trade). In this case, the share of SGST should go to the
consuming state (as the GST is a destination based tax).
•As a consumption based tax i.e the tax SGST share should
be received by the state in which the goods or service are
consumed and not by the state in which such goods are
manufactured.
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13. GST Rates
0% - on essential items, rice/wheat
5% -on items of mass consumption
12%/18% -standard rates covering most manufactured items and
Services
28% - on Consumer Durable Goods, Pan masala, tobacco and aerated
drinks etc
Almost 60% of the GST revenues comes from the two middle
rates of 18% and 12%; with the 18% rate functioning the key role
(43% commodities have the 18% tax rate)
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14. Benefits of GST
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16. GST-Three Pillars
•(a) Legal – the Constitutional Amendment Act 101
•(b) Institutional – the GST Council
•(c) InformationTechnology – GSTN
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17. GST Law from a Constitutional Perspective
Notified as Constitution (101st Amendment ) Act, 2016 on
08.09.2016
Concurrent jurisdiction for levy & collection of GST by the
Centre & the States – Article 246A
Centre to levy & collect IGST on supplies in the course of inter-
State trade or commerce including imports – Article 269A
Compensation for loss of revenue to States for five years on
recommendation of GSTC – Clause 19
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18. GST Council – (Article 279A )
§ Chairperson – Union FM
§ViceChairperson - to be chosen amongst the Ministers of State
Government
§ Members - MOS (Finance) and all Ministers of Finance /Taxation
of each State
§ Quorum is 50% of total members
§ Decision by 75% majority
§ Council to make recommendations on everything related to GST
including laws, rules and rates etc.
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19. GST Network (GSTN)
 GSTN is a fully government owned entity
 To function as a Common Pass-through portal for taxpayers-
 submit registration application
 file returns
 make tax payments
 To develop back end modules for 25 States
 Infosys appointed as Managed Service Provider (MSP)
 34 GST Suvidha Providers (GSPs) appointed
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20. E-Way Bill System
•The introduction of e-way (electronic way) bill is a
monumental shift from the earlier “Departmental Policing
Model” to a “Self Declaration Model”. It envisages one e-
way bill for movement of the goods throughout the
country, thereby ensuring a hassle free movement for
transporters throughout the country. The e-way bill
system has been introduced nation-wide for all inter-State
movement of goods with effect from 1st April, 2018.
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