The Goods and Service Tax Act was passed in the Parliament on 29th March 2017 and came into effect on 1st July 2017. In other words, Good and Service Tax (GST) is levied on the supply of goods and services.
By Abigail Antony, Lovely Professional University.
Introduction of GST Act
“Great Step by Team India, Great Step towards Transformation, Great Steps towards Transparency, this is GST.” – PM Modi. “GST an example of cooperative federalism.” – PM Modi. “GST is a tribute to the maturity and wisdom of India’s democracy.” – Pranab Mukherjee.
The GST is a single, tax that aims or applicable when things are being bought, sold and even used . The GST subsumes most indirect taxes previously at the federal and state level.
It is a consolidated tax based on a uniform tax rate fixed for both goods and services across India, and is payable at the final point of a customers consumption. At each step of sale or purchase in the supply chain, the tax is collected on value-added goods and services, through a tax credit mechanism when profit is earned.
GST is levied on the supply of all goods and services except the use of alchol and other drinking substance. Which is said to have been taxed separately.
GST is not being levied on petroleum crude, high-speed diesel, motor spirit (commonly known as petrol), natural gas and others these have central excise duty and VAT.
What are the types of GST
We have two types of GST transactions, intra-state and inter-state,
Intra state GST transaction ,is the transaction that happens when goods and services are sold within the state.
Inter state GST transaction, is the Transaction that happens when goods and services are sold outsude the boarder of the state.
There are 4 types of GST in India, they
SGST (State Goods and Services
IGST (Integrated Goods and Services Tax)
UTGST (Union Territory Goods and Services Tax)
CGST (Central Goods and Services Tax)
Features and Objectives of GST
“GST to make India’s exports more competitive and provide a level-playing field to domestic industry to compete with imports.” – Pranab Mukerjee.
“The old India was economically fragmented, the new India will create one tax, one market and for one nation.” – Arun Jaitley.
“GST will act as a major boost to economic efficiency, tax compliance and domestic and foreign investment.” – Pranab Mukherjee.
The comprehensive indirect tax comes with many features benefiting businesses. The GST features are subject to change with the evolving economic landscape and Government decisions.
Let us discuss the salient features of GST.
One Nation, One Tax:
Replacing multiple taxes and needed payments imposed by the Central and State governments, with a single tax system stoping a continuos repitation of Taxation.
Dual Structure:
Operating as Central GST under the Central Government and State GST (SGST) under the State Governments, the Inter-State Transactions Integrated GST (IGST) is collected by the Central Government and apportioned with the states.
Destination-based Tax:
GST is applied at every step from production to sale, ensuring tax is charged only on the final product, reducing the burden on consumers and make it easy for buisnesses and companies.
Input Tax Credit (ITC):
By claiming credit on the tax paid for inputs used in the production and provision of goods and services, preventing hiering of taxes and double tax.
Threshold Exemption:
Businesses that have a low turnover , income and sales, don’t have to pay GST making it more easier for them.
Composition Scheme:
Small businesses in certain states can pay GST at a fixed, lower rate instead of regular GST, making tax filing simpler and much affordable.
Online Compliance:
The GST system is managed online through the Goods and Services Tax Network (GSTN), helping businesses file taxes easily.
Anti-Profiteering Measures:
This ensures businesses do not practice unfair sales but beneficial to consumers, National Anti-Profiteering Authority (NAA) monitors the activities.
Increased Compliance and Transparency:
Bringing businesses into a formal economy, GST supervises the said activity by records and evasion reduction.
Sector-specific Exemptions:
Certain sectors like Health, Education and Food grain are either exempted or have reduced GST for affordability.
The main objective of the Goods and Services Tax (GST) in India is to create a unified and simplified tax system. The introduction of GST aims to achieve the following objectives:
Taxes Subsumed Under GST
GST replaced the following taxes and brought them under a tax regime. There is a list of Taxes Subsumed Under GST.
Central Excise Duty
Service Tax
Additional Excise Duty
Additional Customs Duty (Countervailing Duty)
Special Additional Duty of Customs
Value Added Tax (VAT)
Central Sales Tax
Entry Tax
Entertainment Tax (other than the tax levied by local bodies)
Luxury Tax
Taxes on Lottery, Betting, and Gambling
GST Council Structure
The GST Council is a constitutional body in India responsible for ensuring the administration of the country’s Goods and Services Tax (GST). The Council is headed by the Union Finance Minister and consists of state Finance Ministers as members.
GST Council Functions
The functions of the GST Council are as follows:
Recommend Tax Rates: The Council decides tax rates for goods and services, taking into consideration revenue interests of various stakeholders and their impacts.
Decide on Exemptions and Thresholds: The Council decides on exemptions, thresholds, and other matters related to GST and other exemptions.
Resolve Disputes: Settles disagreements between the central and state governments or between states regarding GST rules or revenue sharing so as to ensure a well ensured accounts.
Review Tax Revenue: Checks how much tax is being collected and suggests ways to improve collections by making it easy for both small and large business.
Monitor Implementation: The Council monitors the implementation of GST and suggests measures to improve its functioning.
Examples of case laws;
Ms. Vidya Drolia vs. The Union of India
This particular case was based on the theory of ‘vested right’ in ITC. The appellant, M/s Vidya Drolia, is eligible for an input tax credit in respect of GST paid on purchases from a registered dealer under the CGST Act. However, the supplier in this case had earlier registered the name, and the registration was later nullified. The tax authorities refused the ITC based on the registration, which was cancelled earlier.