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B.COM:–III PROJECT
STRUCTURE OF GST IN INDIA
NAME:- GOURAV PAREEK

2017

[TYPE THE COMPANY ADDRESS]

1
 INDEX

Name of the Sl. Topics Pg.

chapter No. No.
Introduction 1.1 Background

1.2 Outline of GST introduced in

India
1.3 Previous tax structure of
India
Indirect taxation 2.1 Evolution of indirect taxation

2.2 India’s tax regime

2.3 Rational for GST

Introduction to GST 3.1 Emergence of GST in India

3.2 Overview of GST

3.3 Benefits of GST

Registration 4.1 Person liable for registration

4.2 Compulsory registration in

certain cases
4.3 Procedure for registration

Input tax credit 5.1 Meaning of Input tax credit

5.2 Apportionment of credit &

block credit
5.3 Availability of credit in
special circumstances
Payment 6.1 Payment of tax, interest,
penalty and other

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 INTRODUTION
1.1 Background

Taxation is one of the vital components of development of any country. The revenue from taxation is used to
finance public goods and services such as infrastructure, sanitation, transportation and all other amenities
which are provided by the Government. From the view of economists, a tax is non penal, yet compulsory.
Transfer of resources from the private to public sector levied on the basis of predetermined criteria and
without reference to specific benefit received. Each rupee of tax contributed helps government to provide
better infrastructure, rural revival and social well being. Taxation is also considered as a major tool available
to government for removing poverty and inequality of the society. On the other hand tax reforms are the
essential component of any comprehensive strategy for structural adjustment & resumption of growth.

There are two types of taxes levied in India :-

1. Direct taxes: - this tax is directly levied on the income, profession, etc., and the tax burden cannot be
passed or shifted to other person.

2. Indirect taxes: - this tax is paid indirectly to the government by the ultimate consumer of the goods and
services. In indirect tax immediate burden is on the one person and the ultimate burden is on the other
person.

Goods and Services Taxes (GST) was rolled outs in India with effect from 1st July, 2017. GST is the greatest
tax reforms in India.

It transforms the system of taxation and tax administration into a digital world by adopting the latest
information technology. With the introduction of GST India has joined the club of development and

progressing nations which are already behaving a common tax on goods and services.

1.2 OUTLINES OF GST INTRODUCED IN INDIA

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1. GST model adopted from – CANADA.

2 The first country to implement GST is France.

3 India has the highest tax slab in the world i.e. 28%, next is Argentina at 27%.
4 Around 160+ countries have adopted GST.
5 Indian GST has four rate structure, viz. 5%, 12%, 18%, and 28%, with CESS on sin goods and
luxury items, and 3% special rate on precious metal like gold.
6 GST has five taxes under 5 legislations, central GST, State GST, Integrated GST, Union
Territory GST and compensation CESS.
7 IGST, compensation CESS and CGST charged by the central government.
8 All taxation policies and there implementations will be based on the recommendation on the
GST councils.
9 Supply of taxable items under GST.
10 GST bill was introduced under 122nd constitutional amendment bill, but passed under
constitutional act, 2016
11 Assam was the first state to ratify the GST but Telengana was the first state to pass state GST
bill.
12 GST was constituted with its headquarter in Delhi. The union finance minister will be the chair
person.
13 State finance minister will be the members, one among them will the chair person of the state.
14 1st July will be observed as the GST day as announced by the CBEC.
15 The threshold limit of the GST is 20 lakhs, for some special category states is 10 lakhs
16 There is a compensation scheme available to suppliers. The limit is ₹1 crore. For some special
category state it is ₹ 75 lakhs. The scheme is not available to service suppliers with the exception
of restaurants.
17 There is special purpose vehicle called GSTN to the carter to the IT needs of GST. GSTN comes
under the companies act 2013 with combined stake of central and state governments is 49%. The
rest will be financed by the LIC with 11% and ICICI bank, HDFC bank, and NSE strategic
investment corporation with 10% each.

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 17.1 Previous tax structure

Previous tax structures were somewhat outdated and have some challenges which need to be addressed.
Some of the challenges under the precious indirect tax structures could be attributed to central excise where
in there are variable rate in Excise duty such as 2% without CENVAT 6%, 10%, 18%, 24%, 27%, coupled
with multiple valuation system and various system and various exemption, Further under VAT many states
are charging VAT at different rates, which are resulting in imbalance of trade between the states. At the
same time under VAT, there was lack of uniformity in terms of registration, due dates of payments, return
filling assessment procedures, refund mechanism, appellate process etc.,

Few such challenges were listed below:

1. In taxation of goods, CENVAT was confined to the manufacturing stage and did not intend to the
distribution chain beyond the factory gate. As such, CENVAT paid on goods could not be adjusted
against the state vat payable on subsequent sale of goods. This was true for both for CENVAT collected
domestically produced goods as well as the collected as the additional duty of customers on imported
goods.

2. CENVAT was itself made up of several components in the nature of CESSESS and SURCHARGES
such as the National calamity contingency duty (NCCD), education and higher education cess,
additional duty of excise on tobacco and tobacco products etc. This multiplicity of duty complex the tax
structures and often used to obstruct the smooth flow of tax credit.

3. While input tax credit of CENVAT or additional duty of customer paid on goods was available to
service providers paying service tax, they were unable to neutralize the state VAT or other state taxes
paid on the purchase of goods.

4. State VAT was payable on the value of goods inclusive of CENVAT paid at the manufacturing stage
and thus the VAT liability of a dealer used to get inflated by this components without compensatory set-
off.

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5. Inter-state sale of goods was liable to the Central Sales Tax (CST) levied by the centre and collected by
the states. This was an origin based tax and could not be sate-off against VAT in many situations.

6. State VAT and CST were not directly applicable to the import of goods on which special additional
duties (SAD) of customers were levied on a uniform rate of 4% by the centre. Input tax credit of these
duties was only applicable to only manufacturing excisable goods. Other importers had to claim refunds
of this duty as when they pay VAT on subsequent sales.

7. VAT dealers were unable to set-off any service tax that they may have paid on their procurement of
taxable input services.

8. State governments also levied and collected a variety of indirect taxes such as luxury tax, entry tax, etc.,
for which no set-off was available.

The above issues have been successfully addressed to large extent.

INDIRECT TAXATION
2.1 Evolution of indirect Taxation system in India

Goods were subjected to tax by both centre and states. Up to the manufactures stage central government
was collecting excise duty except alcohol for human consumption, narcotics drugs, etc., on which state
excise was being imposed. Even after GST roll out, states will continue to enjoy state excise duty and sales
tax on liquors.

States have exclusive powers to collect tax on both intra-state and inter-state sales.

service tax was levied and collected by the union government exclusively. There were plenty of taxes
collected by the state governments on various subjects like luxury tax, purchase tax, entry tax and so on.

The following tables illustrates the previous arrangements of taxation :

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TAX TAX LAW TAXABLE TAX
EVENT COLLECTION
Customs duty Customs act, 1962 Import/exports Central govt.
Central excise duty Central excise act Manufacture Central govt.
1944
Central sales tax Central sales tax Inter-state sale State govt.
act, 1956
Service tax Finance act, 1994 Taxable service Central govt.
VAT State VAT act Intra-state sale State govt.

2.2 INDIA’S TAX REGIME

In India the power for taxation has been divided between centre and state under article 246 of the
constitution. As per the said article the centre has power to tax under list I of the Schedule VII of
the constitution, the state can tax under list II of the schedule and both can make law under list III
of the schedule. Therefore, there is a clearly defined and multiple tax regime in India.

Taxation structure existing in country:-

Taxes levied by Centre Taxes Levied by State
Central Excise and Custom Value Added Tax( state sales tax)
Service Tax Local taxes
Direct Taxes

Prior to the introduction of VAT in the Centre and in the States, there was a burden of multiple
taxation in the pre-existing Central excise duty and the State sales tax systems. Before any
commodity was produced, inputs were first taxed, and then after the commodity got produced with
input tax load, output was taxed again. This was causing a burden of multiple taxation (i.e. “tax on
tax”) with a cascading effect. Moreover, in the sales tax structure, when there was also a system of
multi-point sales taxation at subsequent levels of distributive trade, then along with input tax load,
burden of sales tax paid on purchase at each level was also added, thus aggravating the
cascading effect further.

In India, VAT was introduced at the Central level for a selected number of commodities in terms of
MODVAT with effect from March 1, 1986, and in a
step-by-step manner for all commodities in terms of CENVAT in 2002-03. Subsequently, after

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Constitutional Amendment empowering the Centre to levy taxes on services, these service taxes
were also added to CENVAT in 2004-05.

When VAT is introduced in place of Central excise duty, a set-off is given, i.e., a deduction is made
from the overall tax burden for input tax. In the case of VAT in place of sales tax system, a set-off
is given from tax burden not only for input tax paid but also for tax paid on previous purchases.
With VAT, the problem of “tax on tax” and related burden of cascading effect is thus removed. .

Before introduction of VAT, in the sales tax regime, apart from the problem of multiple taxation
and burden of adverse cascading effect of taxes as already mentioned, there was also no harmony in
the rates of sales tax on different commodities among the States. Not only were the rates of sales
tax numerous (often more than ten in several States), and different from one another for the same
commodity in different States, but there was also an unhealthy competition among the States in
terms of sales tax rates – so-called “rate war” – often resulting in, revenue-wise, a counter-
productive situation.

It is in this background that attempts were made by the States to introduce a harmonious VAT in
the States, keeping at the same time in mind the issue of sovereignty of the States regarding the
State tax matters.

The States started implementing VAT beginning April 1, 2005. After overcoming the initial
difficulties, all the States and Union Territories have now implemented VAT.

2.3 Rationale for GST

Despite this success with VAT, there are still certain shortcomings in the structure of VAT both at the
Central and at the State level.

The shortcoming in CENVAT of the Government of India are as follows:-

 non-inclusion of several Central taxes in the overall framework of CENVAT, such as

additional customs duty, surcharges, etc., and thus keeping the benefits of comprehensive
input tax and service tax set-off out of reach for manufacturers/dealers.

 no step has yet been taken to capture the value-added chain in the distribution trade below the
manufacturing level in the existing scheme of CENVAT.

The introduction of GST at the Central level will not only include comprehensively more indirect
Central taxes and integrate goods and service taxes for the purpose of set-off relief, but may also lead
to revenue gain for the Centre through widening of the dealer base by capturing value addition in the
distributive trade and increased compliance.

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In the existing State-level VAT structure there are also certain shortcomings as follows:-

 several taxes which are in the nature of indirect tax on goods and services, such as luxury tax,
entertainment tax, etc., have yet not been subsumed in the VAT.

 CENVAT load on the goods remains included in the value of goods to be taxed under State
VAT, and contributing to that extent a cascading effect on account of CENVAT element.

 non integration of VAT on goods with tax on services at the State level and cascading effect
of service tax.

In the GST, both the cascading effects of CENVAT and service tax are removed with set-off, and a
continuous chain of set-off from the original producer’s point and service provider’s point upto the
retailer’s level is established which reduces the burden of all cascading effects.

GST is not simply VAT plus service tax but an improvement over the previous
system of VAT and disjointed service tax.

Implementation of GST will also remove several roadblocks in the existing taxation system in India.
Some of these are:
a)Tax cascading – The Goods and Services Tax Act will overcome the problem of tax- cascading
through input tax credit mechanisms. Under this system, sellers or vendors of goods and services are
eligible to avail tax credits on the amount of GST paid to eligible procurements. Manufacturers can
avail credits for the GST paid to procure inputs, capital goods and services used in the manufacturing
process. In the same way, wholesalers and retailers can avail credits for the GST paid on procurement
of stock. But the final customer who purchases the product for consumption will not be able to avail
and utilize any tax credit. Tax cascading can be understood by the following example:-
A tax is applied on a particular product at each stage and and no credit is available, then tax will be
charged at each stage whenever a good or service changes hands. In other words, tax is applied
several times and is charged even on the tax which forms part of the inputs.
The following taxes will be applied to the product:
 While purchasing inputs i.e. raw materials for the product, the manufacturer pays sales tax.
 When a wholesaler purchases the product from the manufacturer, then he pays tax on
procurement of the product.
 When the retailer purchases the product from the wholesaler, the wholesale again charges tax.
 Lastly, the customer purchases the product from the retailer; the retailer again charges a tax.
This layering of sales tax will significantly increase the final sales price as each party in the
supply chain increases the price of the product to recover the tax they paid. The cascading
effect will increase then tax is paid on tax.

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There are a large number of products and range of services that are outside the ambit of CENVAT and
service tax. The exempts sectors are not allowed to claim any credit of the input tax. In the same way,
under the state VAT, no credits are allowed for the inputs procured and used towards exempted
sectors. Non-eligibility for availment of credits leads to
tax cascading. Due to large number of exemptions, the effect of tax cascading in India is significantly
high.
b) Complexity – Presently in India, for taxing sale of goods, there is Central Sales tax and
respective VAT Acts for each state and Union territory. The Goods and Services Tax will remove this
complication by having a unified code for implementation of State GST in different states. The GST
will not only subsume a large number of indirect taxes but also solve the classification issues by
introducing only one or two rates of tax. Other than this there would be categories that are exempted
or zero rated.
Presently the activities in a supply chain are subject to several taxes. For example – the manufacture
of goods is subject to excise duty and sale of these manufactured goods is subject to state VAT or
CST. The GST will ensure uniform single tax across the entire supply chain.
c) Double taxation – The GST will not make any difference between goods and services as GST will
be levied at each stage in the supply chain. This will help in solving the problem of double taxation.
The issue is not only between the taxes of customs duties, excise duties and service tax but also
between service tax and VAT. The issue of double taxation was addressed by the Honorable Supreme
Court in the case of BSNL vs. UOI (2006(3)SCC-1), wherein the Court held that the same activity
cannot be regarded as both goods and services and hence both service tax and VAT should not be
applicable on the same set of transactions.
The implementation of GST will resolve the dilemma of a large number of assessee who are not sure
of application of the type of tax on certain specified transactions like software development, sale of
sim cards by telecom operators, online subscription of newspapers, value added services provided by
telecom operators, right to distribute movies etc.
d) Composite contracts – There are a large number of works contracts which involve the supply of
goods and services which are available to customers under different supply chain arrangements. Such
situations arise in a gap or overlapping in taxation of goods and services as the States do not have the
power to impose tax on services and the Centre does not have the power to impose tax on sale of
goods within the state. In such cases, a comprehensive solution can be provided only by
implementation of GST.
e)Revenue growth- The introduction of GST along with prudent accounting policies, transparency
and supported by a robust electronic controls will bring down the peak rates of taxation and enhance
revenue growth. This can be understood by the following table by comparing the present rates of tax
and the proposed GST.

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Goods from producer to wholesaler Present taxes (Rs.) GST (Rs.)

Cost of production 80,000 80,000

Producers margin of profit 20,000 20,000
Producer’s price 1,00,000 1,00,000
 Central Excise duty at 14% 14,000 Nil
 VAT at 12.5% 14250 Nil
 Central GST at (expected rate )12% Nill 12,000
 State GST at (expected rate) 8% Nill 8,000
Total Price 1,28,250 1,20,000
Goods from wholesaler to retailer Present taxes (Rs.) GST (Rs.)

Cost of goods to wholesaler 1,14,000 1,00,000

 Profit margin at 5% 5,700 5,000
Total 1,19,700 1,05,000
 VAT at 12.5% 712.5 Nill
 Central GST (expected rate )12% Nil 600
 State GST at (expected rate) 8% Nill 400
Total 1,20,412.5 1,06,000
Goods from retailer to final consumer Present taxes (Rs.) GST (Rs.)

Cost of goods to wholesaler 1,20,412.5 1,06,000

 Profit margin at 10% 12,041.25 10,500
Total 1,32,453.75 1,16,500
 VAT at 12.5% 1,505.15 Nill
 Central GST (expected rate )12% Nill 1,050
 State GST at (expected rate) 8% Nill 840
Total price to the final consumer 1,33,958.9 1,18,390

Tax component in the price to the final 30,467.65 22,890

consumer
Final price exclusive of taxes 1,03,491.25 95,500

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 2.2 EMERGENCE OF GST IN INDIA

The gst is in nearly in 160+ countries and in 19584, France was the first country to introduce GST. As the
tax ensure various benefits, its introduction has been in the agenda of the country of every ruling party. The
journey to introduce GST in India has been long and its a result of larger section in society, particularly,
trade and industry and the foreign establishments who have business interests in India.

when the government of India set up the empowered committee of state finance ministers with Hon’ble
state finance ministers of west Bengal, Karnataka , Madhya Pradesh, Maharashtra, Punjab, Uttar Pradesh,
Gujarat, Delhi, and Meghalaya, as members, it had the following objectives :
 To monitor the implementation of uniform floor rates of sales tax by states and union territories.
 To monitor the phasing out of the sales tax based incentive schemes; to decide milestone and methods of
states to switch over to VAT; and
 To monitor reforms in the central sales tax system existing in the country.
Subsequently honourable state finance ministers of Assam, Tamil Naidu, Jammu & Kashmir, Jharkhand and
Rajasthan were also notified as the members of the empowered committee.

On august 12, 2004, the government of India decided to reconstruct the Empowered committee with all the
honourable finance/taxation ministers of states as its members. Later on, it was decided to register the body as a
society under the society registration act, 1860. GST has been in the pipe line for a long time, for its passage
and implementation.

Here is the brief flash back mirroring the key milestones of the journey in India:
 2003: The kelkar task force of indirect taxes had suggested a comprehensive goods and service tax
(GST) based on VAT principle.
 February 2007: an announcement was made by the union finance minister in the central budget (2007-
08) to the effect that GST would be introduced with the effect from April 07, 2010.

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 September, 2009: the empowered committee (EC) decided to constitute a working group consisting of
principle secretaries/(finance/taxation) and commissioner of trade taxes of all states/UTs to give their
recommendation on :

I. The commodities and services that should be kept in the exempted list.
II. The rules and principles and taxing the transaction of services including the transaction of inter-
state services, and
III. Finalization of the model suggested for inter-state transaction/movement of goods including
stock transfers in consultation with the state bank of India and some other nationalised banks.
 November, 2009: based on ther inputs of Government(s) of centre and states, Empowred committee
realised its First discussion paper on GST.
 March, 2011: The constitution(One hundred and fifteen amendment) bill, 2011to give concurrent
taxcing powers to the union and states was introduced in lok shabha. The bill suggested the creation of
goods and service tax councils and a Goods and Service tax dispute settlement authority. The bill was
lapsed in 2014 and was replaced in the the constitution (122nd amendment) Bill, 2014.
 November 2012: A “committee on GST design”, consisting of the official of the government of India,
State government and empowred committee was constituted.
 January 2013: The Empowered committee deliberated on the proposed design including the
constitution (115th) Amendment bill and submitted the report. Based on the report. the EC
recommended the certain changes in the amendment constitution bill and decided to constitute three
below mentioned committees of officer to discuss and report on various aspect of GST:
i. Committee on place of supply Rules and Revenue Neutral Rates ;
ii. Committee on dual control, threshold and exemptions;
iii. Committee on IGST and GST on imports.
 March 2013: a not for profit, non government, private limited company was incorporated in the name
of Goods and service Tax Network (GSTN) and special purpose vehicle setup by the Government
primarily to provide IT infrastructure and serviced to the central and state governments, Tax payers
and other stakeholders for implementation of the Goods and Service Tax (GST).
 August, 2013: The parliamentary standing committee submitted its report to the Lok Sabha. The
recommendation of the Empowered committee and the recommendation of the parliamentary standing
committee were examined by the ministry in the consultation with the legislative department. Most of
the recommendation made by the Empowered committee and the parliamentary standing committee
were accepted and the draft Amendment bill was suitably revised.
 September, 2013: the final draft constitutional amendment bill incorporating the above stated changes
was sent to the Empowered committee (EC) for consideration.
 November, 2013: the EC once again made certain recommendation on the bill after its meeting in the
shilling. Certain recommendation on which were incorporated in the draft constitution (115th
amendment) bill and the revised draft was again sent to the empowered committee for its
consideration.
 June, 2014: the draft constitution amendment bill in March 2014 was sent to the Empowered
committee after approval of the new government.
 December, 2014: the constitution (122nd amendment) bill 2014 seeking to amend the constitution to
introduce the Goods and Service Tax (GST) and subsume the state value added Tax, octroi and entry
tax , luxury tax etc, was introduced in the Lok Sabha on December 19, 2014by the honourable finance
minister of India Mr. Arun Jaitley.

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 May, 2015: constitutional amendment bill (122nd) was passed by lok sabha on July 22, 2015.
 May, 2015: In rajya sabha the bill was referred to a 21-members select committee of rajya sabha on
June 22, 2015.
 July, 2015: select committee submitted its report to rajya sabha on 22nd July, 2015.
 June, 2016: on June 2016 the ministry of finance released draft model on GST in public domain with
certain amendments.
 August, 2016: on august, 03 2016 the constitution (122nd amendment) bill, 2014 was passed by Rajya
sabha with certain amendments.
 August 2016: The changes made by the Rajaya sabha were unanimously passed by lok sabha , on
August, 08 2016.
 September, 2016: The bill was adopted by majority of state legislature where approval of atleast 50%
of the state assembly was required.
 September, 2016: Final assent of the Hon’ble president of India was given on 8th September 2016.
 April, 2017: Parliament passes the following four bills:
(i) Central goods and service tax (CGST) bill
(ii) Integrated goods and service tax(IGST) bill
(iii)Union territory goods and services(UTGST) bill
(iv) Goods and service tax (compensation to states) bill
 April, 2017: President assent was given to four key lesistation on goods and service tax.
 July, 2017: on 1st July 2017 GST becomes a reality

Overview of GST

WHAT IS GOODS AND SERVICE TAX ?

5.1 Goods and Service Tax is a tax on goods and services, which is leviable at each point of sale or
provision of service, in which at the time of sale of goods or providing the services the seller or
service provider can claim the input credit of tax which he has paid while purchasing the goods or
procuring the service.

HOW WILL IT WORK?

5.2 GST will be paid at each step till final distribution stage. It will be charged by
dealers(manufacturer, trader and service provider) on the price of goods and services. While GST is
paid at each step in the supply chain of goods and services, the paying dealers don’t actually bear the
burden of the tax because GST is an indirect tax and ultimate burden of the GST has to be taken by
the last Customer. This is because they include GST in the price of the goods and services they sell
and can claim credits for the most GST included in the price of goods and services they buy. The cost
of GST is borne by the final consumer, who can’t claim GST credits, i.e. input credit of the tax paid.

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The working of GST with respect to manufacturer, trader and consumer can be seen in the
illustrations given below. The manufacturers will get the input credit of all the taxes paid by them on
the raw material and also on the services.

Let us assume the rate of GST is 16 percent and a toy manufacturer used following inputs for
manufacturing toys and sells the goods at Rs 120 lakh to trader:-
Manufacturer
Item Particulars Amount (Rs Rate of tax ( Input tax paid
no in lakhs) in percent) (Rs in lakhs)
1 Raw material 50 16 8
2 Stores and spares 25 16 4
3 Services 25 16 4
Total value of inputs 100 16

The output tax to be paid

Sale Value Rate of tax ( in percent) output tax to be paid
(Rs in lakhs)
Rs 120 lakh 16 19.2

Net Tax payable by manufacturer

Total output tax to be paid Rs 19.2 lakh

Total Input tax Paid Rs 16 lakh
Net Tax to be Paid Rs 3.2 lakh

Suppose trader use services amounting to Rs 5 lakh paying service tax at rate of 16 percent amounting
to Rs 0.8 lakh. Therefore total input tax paid by trader is:-
Trader
Item Particulars Amount (Rs Rate of tax ( Input tax paid
no in lakhs) in percent) (Rs in lakhs)
1 Goods purchased from 120 16 19.2
manufacturer
2 Services 5 16 0.8
Total value of inputs 125 20

If trader sell goods to consumer by adding Rs 5 lakh profit margin .The output tax payable by trader is
:-
Sale Value Rate of tax ( in percent) output tax to be paid
(Rs in lakhs)
Rs 130 lakh 16 20.8

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Net Tax payable by Trader

Total output tax to be paid Rs 20.8 lakh

Total Input tax Paid Rs 20 lakh
Net Tax to be Paid Rs 0.8 lakh

Net Tax payable by consumer

Sale Value Rate of tax ( in percent) output tax to be paid

(Rs in lakhs)
Rs 130 lakh 16 20.8

From the above illustration it can be seen that the manufacturer and the trader gets credit of the tax
paid on good and services and had to pay tax on value added only. Further, the government will get
tax of Rs 20.8 lakh which is tax on final sale value of the product though from different sources as
detailed below:-

Description Output tax Input tax credit Net tax payable to

(Rs in lakh) (Rs in lakh) government
(Rs in lakh)
Raw material 8 0 8
supplier
Stores and spares 4 0 4
supplier
Service provider I 4 0 4
Manufacturer 19.2 16 3.2
Service Provider II 0.8 0 0.8
Trader 20.8 20 0.8
Total Tax payable to 20.8
Government

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composition of manufacturer and dealer

25
20.8 20
19.2
20
16
15 Output Tax
Input Tax Credit
10 Net Tax Payable

5 3.2
0.8
0
Manufacturer Trader

Composition of tax paid by the consumer

0.8
0.8

3.2 raw material

8
stores& spares
service providerI
manufacturer
service providerII
4 trader

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Benefits of GST

Benefits for centre

As per the existing taxation system the centre does not has power to tax on production of goods. The
power to levy tax on sales rests with state except in case of inter state sales. Therefore, introduction of
GST would empower centre to tax sales also.

Benefits of GST for Centre:

Increase in GDP

Increase in exports

Power to tax after production down to distribution point

Ensures better compliance and prevent tax evasion

Benefits to state

There is no uniformity in rate of taxes among the states. Even after introduction of VAT there are
different rates of tax in different states. Therefore, there was rate war among states. GST will lead to
uniformity in tax rates. Other benefits for state are:-

Benefits for states

Will get power to tax services

Will reduce rate wars, therefore, outflow of investment to other states due to rate war will be
prevented

Introduction of comprehensive system of reliefs including set off of CENVAT and service taxes

Increase in revenue due to broadening of tax base

Removal of burden of CST

Benefits to industry

Benefits to industry

Will provide comprehensive input tax credit, the service tax can be set off with sales tax
No need to pay CST
Many central and state indirect taxes will be subsumed in GST, therefore, a single tax is to be
paid.
Uniformity in tax procedure throughout the country
Reduced tax burden will increase competitiveness of Indian products in foreign markets

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Benefits to consumer

Benefits to consumer

Reduced tax burden will be passed on to consumers in form of reduced prices.

Better compliance and increased tax revenue will enable the government to spend more on
welfare

The GST at the Central and at the State level will thus give more relief to industry, trade, agriculture
and consumers through a more comprehensive and wider coverage of input tax set-off and service tax
set-off, subsuming of several taxes in the GST and phasing
out of CST. With the GST being properly formulated by appropriate calibration of rates and adequate
compensation where necessary, there may also be revenue/ resource gain for both the Centre and the
States, primarily through widening of tax base and possibility of a significant improvement in tax
compliance. In other words, the GST may usher in the possibility of a collective gain for industry,
trade, agriculture and common consumers as well as for the Central Government and the State
Governments. The GST may, indeed, lead to the possibility of collectively positive-sum game.

19
 REGISTRATION
3.1 Persons liable for registration:

(1) Every supplier shall be liable to be registered under this Act in the State or Union territory, other than
special category States, from where he makes a taxable supply of goods or services or both, if his aggregate
turnover in a financial year exceeds twenty lakhs rupees: Provided that where such person makes taxable
supplies of goods or services or both from any of the special category States, he shall be liable to be registered
if his aggregate turnover in a financial year exceeds ten lakh rupees.

(2) Every person who, on the day immediately preceding the appointed day, is registered or holds a licence
under an erstwhile law, shall be liable to be registered under this Act with effect from the appointed day.

(3) Where a business carried on by a taxable person registered under this Act is transferred, whether on
account of succession or otherwise, to another person as a going concern, the transferee or the successor, as
the case may be, shall be liable to be registered with effect from the date of such transfer or succession.

(4) Notwithstanding anything contained in sub-sections (1) and (3), in a case of transfer pursuant to sanction
of a scheme or an arrangement for amalgamation or, as the case may be, demerger of two or more companies
pursuant to an order of a High Court, Tribunal or otherwise, the transferee shall be liable to be registered, with
effect from the date on which the Registrar of Companies issues a certificate of incorporation giving effect to
such order of the High Court or Tribunal.

Persons not liable for registration :

(1) The following persons shall not be liable to registration, namely: –

(a) any person engaged exclusively in the business of supplying goods or services or both that are not liable
to tax or wholly exempt from tax under this Act or under the Integrated Goods and Services Tax Act;

(b) an agriculturist, to the extent of supply of produce out of cultivation of land.

(2) The Government may, on the recommendations of the Council, by notification, specify the category of
persons who may be exempted from obtaining registration under this Act. Central Government vide
20
Notification No. 05/2017-Central Tax, dt. 19-06-2017 has w.e.f 22nd June 2017 amended section 23 of CGST
Act, 2017 to include the persons who are only engaged in making supplies of taxable goods or services or
both, the total tax on which is liable to be paid on reverse charge basis by the recipient of such goods or
services or both under section 9(3) of the CGST Act, 2017 in the category of persons exempted from
obtaining registration under the aforesaid Act.

3.2 Compulsory registration in certain cases:

Following categories of persons shall be required to be registered under this Act, ––

i. persons making any inter-State taxable supply;

ii. casual taxable persons making taxable supply;
iii. persons who are required to pay tax under reverse charge;
iv. person who are required to pay tax under sub-section (5) of sec 9
v. non-resident taxable persons making taxable supply;
vi. persons who are required to deduct tax under section 51, whether or not separately registered under
this Act;
vii. persons who make taxable supply of goods or services or both on behalf of other taxable persons
whether as an agent or otherwise;
viii. Input Service Distributor, whether or not separately registered under this Act;
ix. persons who supply goods or services or both, other than supplies specified under sub-section (5) of
section 9, through such electronic commerce operator who is required to collect tax at source under
section 52;
x. every electronic commerce operator;
xi. every person supplying online information and database access or retrieval services from a place
outside India to a person in India, other than a registered person; and
xii. such other person or class of persons as may be notified by the Government on the recommendations
of the Council.

3.3 Procedure for registration

(1) Every person who is liable to be registered under section 22 or section 24 shall apply for registration in
every such State or Union territory in which he is so liable within thirty days from the date on which
he becomes liable to registration, in such manner and subject to such conditions as may be prescribed:
Provided that a casual taxable person or a non-resident taxable person shall apply for registration at
least five days prior to the commencement of business. Explanation. —Every person who makes a
supply from the territorial waters of India shall obtain registration in the coastal State or Union
territory where the nearest point of the appropriate baseline is located.
(2) A person seeking registration under this Act shall be granted a single registration in a State or Union
territory: Provided that a person having multiple business verticals in a State or Union territory may
be granted a separate registration for each business vertical, subject to such conditions as may be
prescribed.
(3) A person, though not liable to be registered under section 22 or section 24 may get himself registered
voluntarily, and all provisions of this Act, as are applicable to a registered person, shall apply to such
person.

21
(4) A person who has obtained or is required to obtain more than one registration, whether in one State or
Union territory or more than one State or Union territory shall, in respect of each such registration, be
treated as distinct persons for the purposes of this Act.
(5) Where a person who has obtained, or is required to obtain registration in a State or Union territory in
respect of an establishment, has an establishment in another State or Union territory, then such
establishments shall be treated as establishments of distinct persons for the purposes of this Act.
(6) Every person shall have a Permanent Account Number issued under the Income Tax Act, 1961 in
order to be eligible for grant of registration: Provided that a person required to deduct tax under
section 51 may have, in lieu of a Permanent Account Number, a Tax Deduction and Collection
Account Number issued under the said Act in order to be eligible for grant of registration.
(7) Notwithstanding anything contained in sub-section (6), a non-resident taxable person may be granted
registration under sub-section (1) on the basis of such other documents as may be prescribed.
(8) Where a person who is liable to be registered under this Act fails to obtain registration, the proper
officer may, without prejudice to any action which may be taken under this Act or under any other law
for the time being in force, proceed to register such person in such manner as may be prescribed.
(9) Notwithstanding anything contained in sub-section (1), :–
(a) any specialised agency of the United Nations Organisation or any Multilateral Financial
Institution and Organisation notified under the United Nations (Privileges and Immunities) Act, 1947,
Consulate or Embassy of foreign countries; and

(b) any other person or class of persons, as may be notified by the Commissioner, shall be granted a
Unique Identity Number in such manner and for such purposes, including refund of taxes on the
notified supplies of goods or services or both received by them, as may be prescribed.

(10) The registration or the Unique Identity Number shall be granted or rejected after due verification in
such manner and within such period as may be prescribed.
(11) A certificate of registration shall be issued in such form and with effect from such date as may be
prescribed.
(12) A registration or a Unique Identity Number shall be deemed to have been granted after the expiry of
the period prescribed under sub-section (10), if no deficiency has been communicated to the applicant
within that period.
TAX CREDIT

4.1 INPUT TAX CREDIT

Eligibility and conditions for taking input tax credit :

1. Every registere d person shall, subject to such conditions and restrictions as may be prescribed and in
the manner specified in section 49, be entitled to take credit of input tax charged on any supply of
goods or services or both to him which are used or intended to be used in the course or furtherance of
his business and the said amount shall be credited to the electronic credit ledger of such person.
2. Notwithstanding anything contained in this section, no registered person shall be entitled to the credit
of any input tax in respect of any supply of goods or services or both to him unless, -
a. he is in possession of a tax invoice or debit note issued by a supplier registered under this Act,
or such other tax paying documents as may be prescribed;

22
 b. he has received the goods or services or both Explanation- For the purposes of this clause, it
shall be deemed that the registered person has received the goods where the goods are delivered
by the supplier to a recipient or any other person on the direction of such registered person,
whether acting as an agent or otherwise, before or during movement of goods, either by way of
transfer of documents of title to goods or otherwise;
c. subject to the provisions of section 41, the tax charged in respect of such supply has been
actually paid to the Government, either in cash or through utilization of input tax credit
admissible in respect of the said supply;
d. he has furnished the return under section 39: PROVIDED that where the goods against an
invoice are received in lots or instalments, the registered person shall be entitled to take credit
upon receipt of the last lot or instalment:
e. Provided further that where a recipient fails to pay to the supplier of goods or services or both,
other than the supplies on which tax is payable on reverse charge basis, the amount towards the
value of supply along with tax payable thereon within a period of one hundred and eighty days
from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed
by the recipient shall be added to his output tax liability, along with interest thereon, in such
manner as may be prescribed: Provided also that the recipient shall be entitled to avail of the
credit of input tax on payment made by him of the amount towards the value of supply of goods
or services or both along with tax payable thereon.
3. Where the registered person has claimed depreciation on the tax component of the cost of capital
goods and plant and machinery under the provisions of the Income Tax Act, 1961, the input tax credit
on the said tax component shall not be allowed.
4. A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note
for supply of goods or services or both after the due date of furnishing of the return under section 39 for
the month of September following the end of financial year to which such invoice or invoice relating to
such debit note pertains or furnishing of the relevant annual return, whichever is earlier.

4.2 Apportionment of credit and blocked credit :

(1) Where the goods or services or both are used by the registered person partly for the purpose of any
business and partly for other purposes, the amount of credit shall be restricted to so much of the input
tax as is attributable to the purposes of his business.
(2) Where the goods or services or both are used by the registered person partly for effecting taxable
supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax
Act, and partly for effecting exempt supplies under the said Acts, the amount of credit shall be
restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated
supplies.
(3) The value of exempt supply under sub-section (2) shall be such as may be prescribed, and shall include
supplies on which the recipient is liable to pay tax on reverse charge basis, transactions in securities,
sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building.
(4) A banking company or a financial institution including a non-banking financial company, engaged in
supplying services by way of accepting deposits, extending loans or advances shall have the option to
either comply with the provisions of sub-section (2), or avail of, every month, an amount equal to fifty
per cent of the eligible input tax credit on inputs, capital goods and input services in that month and the
rest shall lapse. Provided that the option once exercised shall not be withdrawn during the remaining
part of the financial year. Provided further that the restriction of fifty per cent. shall not apply to the

23
 tax paid on supplies made by one registered person to another registered person having the same
Permanent Account Number
(5) Notwithstanding anything contained in sub-section (1) of section 16 and subsection (1) of section 18,
input tax credit shall not be available in respect of the following namely:
 for making the following taxable supplies, namely: -
(a) motor vehicles and other conveyances except when they are used-
 further supply of such vehicles or conveyances; or
 transportation of passengers; or
 imparting training on driving, flying, navigating such vehicles or conveyances;
 for transportation of goods.
(b) the following supply of goods or services or both, -
(i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery
except where an inward supply of goods or services or both of a particular category is used by a
registered person for making an outward taxable supply of the same category of goods or services or
both or as an element of a taxable composite or mixed supply;
(ii) membership of a club, health and fitness centre,
(iii) rent-a-cab, life insurance, health insurance except where
(A) the Government notifies the services which are obligatory for an employer to provide to
its employees under any law for the time being in force; or
(B) such inward supply of goods or services or both of a particular category is used by a
registered person for making an outward taxable supply of the same category of goods
or services or both or as part of a taxable composite or mixed supply; and
(iv) travel benefits extended to employees on vacation such as leave or home travel concession. works
contract services when supplied for construction of immovable property, (other than plant and
machinery), except where it is an input service for further supply of works contract service; goods or
services or both received by a taxable person for construction of an immovable property (other than plant
and machinery) on his own account, including when such goods or services or both are used in the course
or furtherance of business;

4.3 Availability of credit in special circumstances

1. Subject to such conditions and restrictions as may be prescribed-
a. A person who has applied for registration under the Act within thirty days from the date on which he
becomes liable to registration and has been granted such registration shall, be entitled to take credit of
input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held
in stock on the day immediately preceding the date from which he becomes liable to pay tax under the
provisions of this Act.
b. A person, who takes registration under sub-section (3) of section 25 shall, be entitled to take credit of
input tax in respect of inputs held in stock and inputs contained in semi finished or finished goods held
in stock on the day immediately preceding the date of grant of registration.
c. Where any registered person ceases to pay tax under section 10, he shall be entitled to take credit of
input tax in respect of inputs held in stock, inputs contained in semifinished or finished goods held in

24
 stock and on capital goods on the day immediately preceding the date from which he becomes liable to
pay tax under section 9 PROVIDED that the credit on capital goods shall be reduced by such
percentage points as may be prescribed (d) Where an exempt supply of goods or services or both by a
registered person becomes a taxable supply, such person shall be entitled to take credit of input tax in
respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock
relatable to such exempt supply and on capital goods exclusively used for such exempt supply on the
day immediately preceding the date from which such supply becomes taxable: PROVIDED that the
credit on capital goods shall be reduced by such percentage points as may be prescribed .
2. A registered person shall not be entitled to take input tax credit under sub-section (1), in respect of
any supply of goods or services or both to him after the expiry of one year from the date of issue
of tax invoice relating to such supply.
3. Where there is a change in the constitution of a registered person on account of sale, merger,
demerger, amalgamation, lease or transfer of the business with the specific provision for transfer
of liabilities, the said registered person shall be allowed to transfer the input tax credit which
remains unutilized in his electronic credit ledger to such sold, merged, demerged, amalgamated,
leased or transferred business in such manner as may be prescribed.
4. Where any registered person who has availed of input tax credit opts to pay tax under section 10
or, where the goods or services or both supplied by him become wholly exempt, he shall pay an
amount, by way of debit in the electronic credit ledger or electronic cash ledger, equivalent to the
credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or
finished goods held in stock and on capital goods, reduced by such percentage points as may be
prescribed, on the day \immediately preceding the date of exercising such option or, as the case
may be, the date of such exemption: Provided that after payment of such amount, the balance of
input tax credit, if any, lying in his electronic credit ledger shall lapse.
5. The amount of credit under sub-section (1) and the amount payable under sub-section (4) shall be
calculated in such manner as may be prescribed
6. In case of supply of capital goods or plant and machinery, on which input tax credit has been taken,
the registered person shall pay an amount equal to the input tax credit taken on the said capital
goods or plant and machinery reduced by such percentage points as may be prescribed or the tax on
the transaction value of such capital goods or plant and machinery determined under section 15,
whichever is higher: Provided that where refractory bricks, moulds and dies, jigs and fixtures are
supplied as scrap, the taxable person may pay tax on the transaction value of such goods determined
under section 15.
PAYMENT

5.1 Payment of Tax, Interest, Penalty and other Amounts

1. Every deposit made towards tax, interest, penalty, fee or any other amount by a person by internet
banking or by using credit or debit cards or National Electronic Fund Transfer or Real Time Gross
Settlement or by such other mode and subject to such conditions and restrictions as may be prescribed,
shall be credited to the electronic cash ledger of such person to be maintained in such manner as may
be prescribed.
2. (2) The input tax credit as self-assessed in the return of a registered person shall be credited to his
electronic credit ledger, in accordance with section 41, to be maintained in such manner as may be
prescribed.

25
 3. (3) The amount available in the electronic cash ledger may be used for making any payment towards
tax, interest, penalty, fees or any other amount payable under the provisions of the Act or the rules
made there under in such manner and subject to such conditions and within such time as may be
prescribed.
4. (4) The amount available in the electronic credit ledger may be used for making any payment towards
output tax under this Act or under the Integrated Goods and Services Tax Act in such manner and
subject to such conditions and within such time as may be prescribed.
5. (5) The amount of input tax credit available in the electronic credit ledger of the registered person on
account of-
a. integrated tax shall first be utilised towards payment of integrated tax and the amount remaining, if
any, may be utilised towards the payment of central tax and State tax, or as the case may be, Union
territory tax, in that order;
b. the central tax shall first be utilised towards payment of central tax and the amount remaining, if
any, may be utilised towards the payment of integrated tax;
c. the State tax shall first be utilised towards payment of State tax and the amount remaining, if any,
may be utilised towards payment of integrated tax;
d. the Union territory tax shall first be utilised towards payment of Union territory tax and the amount
remaining, if any, may be utilised towards payment of integrated tax;
e. the central tax shall not be utilised towards payment of State tax or Union territory tax; and
f. the State tax or Union territory tax shall not be utilised towards payment of central tax.
6. The balance in the electronic cash ledger or electronic credit ledger after payment of tax, interest,
penalty, fee or any other amount payable under this Act or the rules made the reunder may be refunded
in accordance with the provisions of section 54.
7. All liabilities of a taxable person under this Act shall be recorded and maintained in an electronic
liability register as may be prescribed.
8. Every taxable person shall discharge his tax and other dues under this Act or the rules made thereunder
in the following order, namely:
a. self –assessed tax, and other dues related to returns of previous tax periods;
b. self-assessed tax, and other dues related to the return of current tax period;
c. any other amount payable under the Act or the rules made thereunder including the demand
determined under Section 73 or 74.
9. Every person who has paid the tax on goods and /or services under this Act shall, unless the contrary is
proved by him, be deemed to have passed on the full incidence of such tax to the recipient of such goods
or services or both. Explanation.1- For the purposes of this section,
a. the date of credit to the account of the Government in the authorised bank shall be deemed to be the
date of deposit in the electronic cash ledger;
b. the expression:
i. “tax dues” means the tax payable under this Act and does not include interest, fee and
penalty; and
ii. “other dues” means interest, penalty, fee or any other amount payable under this Act or
the rules made the reunder.

26
 Questionnaire
Question asked by a chartered accountant

1) What is Goods and Service Tax (GST)?

It is a destination based tax on consumption of goods and services. It is proposed to be levied

at all stages right from manufacture up to final consumption with credit of taxes paid at
previous stages available as setoff. In a nutshell, only value addition will be taxed and burden
of tax is to be borne by the final consumer.

2) What are GST rate slabs?

The Goods and Services Tax (GST) will be levied at multiple rates ranging from 0 per cent to
28 per cent. GST Council finalised a four-tier GST tax structure of 5%, 12%, 18% and 28%,
with lower rates for essential items and the highest for luxury and de-merits goods that would
also attract an additional cess.

Service Tax will go up from 15% to 18%. The services being taxed at lower rates, owing to
the provision of abatement, such as train tickets, will fall in the lower slabs.

In order to control inflation, essential items including food, which presently constitute
roughly half of the consumer inflation basket, will be taxed at zero rate.

The lowest rate of 5% would be for common use items. There would be two standard rates of
12 per cent and 18 per cent, which would fall on the bulk of the goods and services. This
includes fast-moving consumer goods.

Highest tax slab will be applicable to items which are currently taxed at 30-31% (excise duty
plus VAT).

Ultra luxuries, demerit and sin goods (like tobacco and aerated drinks), will attract a cess for
a period of five years on top of the 28 per cent GST.

The collection from this cess as well as that of the clean energy cess would create a revenue
pool which would be used for compensating states for any loss of revenue during the first five
years of implementation of GST.

Finance minister said that the cess would be lapsable after five years.

The structure to agreed is a compromise to accommodate demand for highest tax rate of 40%
by states like Kerala.
While the Centre proposed to levy a 4% GST on gold but the final decision on this was put
off. During a press conference, finance minister Mr. Jaitley said, “GST rate on gold will be

27
finalised after the fitting to the approved rates structure of all items is completed and there is
some idea of revenue projections”.

The principle for determining the rate on each item will be to levy and collect the GST at the
rate slab closest to the current tax incidence on it.

The GST will subsume the multitude of cesses currently in place, including the Swachh
Bharat Cess, the Krishi Kalyan Cessand the Education Cess. Only the Clean Environment
Cess is being retained, revenues from which will also fund the compensations.

3) Which of the existing taxes are proposed to be subsumed under GST?

GST is set to replace various taxes as mentioned below:

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

State taxes that would be subsumed under the GST

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.

28
The GST Council shall make recommendations to the Union and States on the taxes, cesses
and surcharges levied by the Centre, the States and the local bodies which may be subsumed
in the GST.

4) What will be status of Tobacco and Tobacco products under the GST regime?

Tobacco and tobacco products would be subject to GST. In addition, the Centre would have
the power to levy Central Excise duty on these products.

Commodities Proposed to be kept outside GST

Alcohol for human consumption, Petroleum Products viz. petroleum crude, motor spirit
(petrol), high speed diesel, natural gas and aviation turbine fuel & Electricity.

Taxation of such Commodities in GST Regime

The existing taxation system (VAT & Central Excise) will continue in respect of the above
commodities.

5) What type of GST is proposed to be implemented?

It would be a dual GST with the Centre and States simultaneously levying it on a common
tax base. The GST to be levied by the Centre on intra-State supply of goods and / or services
would be called the Central GST (CGST) and that to be levied by the States would be called
the State GST (SGST). Similarly Integrated GST (IGST) will be levied and administered by
Centre on every inter-state supply of goods and services.

6) Why is Dual GST required?

India is a federal country where both the Centre and the States have been assigned the powers
to levy and collect taxes through appropriate legislation. Both the levels of Government have
distinct responsibilities to perform according to the division of powers prescribed in the
Constitution for which they need to raise resources. A dual GST will, therefore, be in keeping
with the Constitutional requirement of fiscal federalism.

7) Which authority will levy and administer GST?

Centre will levy and administer CGST & IGST while respective states will levy and
administer SGST.

8) How a particular transaction of goods and services would be taxed simultaneously under
Central GST (CGST) and State GST (SGST)?

29
The Central GST and the State GST would be levied simultaneously on every transaction of
supply of goods and services except the exempted goods and services, goods which are
outside the purview of GST and the transactions

which are below the prescribed threshold limits. Further, 8 both would be levied on the same
price or value unlike State VAT which is levied on the value of the goods inclusive of
CENVAT. While the location of the supplier and the

recipient within the country is immaterial for the purpose of CGST, SGST would be
chargeable only when the supplier and the recipient are both located within the State.

Illustration I: Suppose hypothetically that the rate of CGST is 10% and that of SGST is 10%.
When a wholesale dealer of steel in Uttar Pradesh supplies steel bars and rods to a
construction company which is also located within the same State for, say Rs. 100, the dealer
would charge CGST of Rs. 10 and SGST of Rs. 10 in addition to the basic price of the goods.

He would be required to deposit the CGST component into a Central Government account
while the SGST portion into the account of the concerned State Government. Of course, he
need not actually pay Rs. 20 (Rs.10 + Rs. 10 ) in cash as he would be entitled to set-off this
liability against the CGST or SGST paid on his purchases (say, inputs). But for paying CGST
he would be allowed to use only the credit of CGST paid on his purchases while for SGST he
can utilize the credit of SGST alone.

In other words, CGST credit cannot, in general, be used for payment of SGST. Nor can SGST
credit be used for payment of CGST.

Illustration II: Suppose, again hypothetically, that the rate of CGST is 10% and that of SGST
is 10%. When an advertising company located in Mumbai supplies advertising services to a
company manufacturing soap also located within the State of Maharashtra for, let us say Rs.
100, the ad company would charge CGST of Rs. 10 as well as SGST of Rs. 10 to the basic
value of the service.

He would be required to deposit the CGST component into a Central Government account
while the SGST portion into the account of the concerned State Government. Of course, he
need not again actually pay Rs. 20 (Rs. 10+Rs. 10) in cash as it would be entitled to set-off
this liability against the CGST or SGST paid on his purchase (say, of inputs such as
stationery, office equipment, services of an artist etc). But for paying CGST he would be
allowed to use only the credit of CGST paid on its purchase while for SGST he can utilise the
credit of SGST alone.

In other words, CGST credit cannot, in general, be used for payment of SGST. Nor can SGST
credit be used for payment of CGST.

9) What are the benefits which the Country will accrue from GST?

30
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. 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 our products competitive in the domestic and
international markets. Studies show that this would instantly spur economic growth. There
may also be revenue gain for the Centre and the States due to widening of the tax base,
increase in trade volumes and improved 10 tax compliance. Last but not the least, this tax,
because of its transparent character, would be easier to administer.

10) What is IGST?

Under the GST regime, an Integrated GST (IGST) would be levied and collected by the
Centre on inter-State supply of goods and services. Under Article 269A of the Constitution,
the GST on supplies in the course of inter-

State trade or commerce shall be levied and collected by the Government of India and such
tax shall be apportioned between the Union and the States in the manner as may be provided
by Parliament by law on the recommendations of

the Goods and Services Tax Council.

11) How GST returns will be filed?

For properly updating the invoices, Indian taxpayers and businesses have to file certain
returns with the Government. These returns have to be mandatorily filed as any non-
compliance towards the same may lead to disallowance of input tax credit, apart from
attracting penalties and interests, etc. Proper filing of information and passing the same in the
returns is a mandatory process for smooth flow of credit to the last recipient.

The returns have been designed so that all transactions are in sync with each other and that no
transaction is left unattended between the buyer and the seller. All the data is stored in GSTN,
which can be accessed by the users/taxpayers anytime online.

Depending on the type of GST registration (Regular, Composite, etc) businesses will need to
file upto 37 GST returns every year. These returns can be filed using any GST Return Filing
Software or directly from GSTN portal.

Learn all about GST Returns.

12) What would be the role of GST Council?

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A GST Council would be constituted comprising the Union Finance Minister (who will be
the Chairman of the Council), the Minister of State (Revenue) and the State Finance/Taxation
Ministers to make recommendations to the Union and the States on

(i) the taxes, cesses and surcharges levied by the Centre, the States and the local bodies which
may be subsumed under GST;

(ii) the goods and services that may be subjected to or exempted from the GST;

(iii) the date on which the GST shall be levied on petroleum crude, high speed diesel, motor
sprit (commonly known as petrol), natural gas and aviation turbine fuel;

(iv) model GST laws, principles of levy, apportionment of IGST and the principles that
govern the place of supply;

(v) the threshold limit of turnover below which the goods and services may be exempted
from GST;

(vi) the rates including floor rates with bands of GST;

(vii) any special rate or rates for a specified period to raise additional resources during any
natural calamity or disaster;

(viii) special provision with respect to the North- East States, J&K, Himachal Pradesh and
Uttarakhand; and

(ix) any other matter relating to the GST, as the Council may decide.

13) Who is liable to pay GST under the proposed GST regime?

Under the GST regime, tax is payable by the taxable person on the supply of goods and/or
services. Liability to pay tax arises when the taxable person crosses the threshold exemption,
i.e. Rs.10 lakhs (Rs. 5 lakhs for NE States) except in certain specified cases where the taxable
person is liable to pay GST even though he has not crossed the threshold limit. The CGST /
SGST is payable on all intra-State supply of goods and/or services and IGST is payable on all
inter- State supply of goods and/or services. The CGST /SGST and IGST are payable at the
rates specified in the Schedules to the respective Acts.

14) What are the benefits available to small tax payers under the GST regime?

Tax payers with an aggregate turnover in a financial year up to [Rs.10 lakhs] would be
exempt from tax.

[Aggregate turnover shall include the aggregate value of all taxable and non-taxable supplies,
exempt supplies and exports of goods and/or services and exclude taxes viz.GST.]

Aggregate turnover shall be computed on all India basis. For NE States and Sikkim, the
exemption threshold shall be [Rs. 5 lakhs]. All taxpayers eligible for threshold exemption

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will have the option of paying tax with input tax credit (ITC) benefits. Tax payers making
inter-State supplies or paying tax on reverse charge basis shall not be eligible for threshold
exemption.

15) How will the goods and services be classified under GST regime? What is HSN under
GST?

HSN (Harmonised System of Nomenclature) code shall be used for classifying the goods
under the GST regime. Taxpayers whose turnover is above Rs. 1.5 crores but below Rs. 5
crores shall use 2 digit code and the taxpayers whose turnover is Rs. 5 crores and above shall
use 4 digit code. Taxpayers whose turnover is below Rs. 1.5 crores are not required to
mention HSN Code in their invoices. Services will be classified as per the Services
Accounting Code (SAC).

Read about HSN and SAC.

16) How will imports be taxed under GST?

Imports of Goods and Services will be treated as inter-state supplies and IGST will be levied
on import of goods and services into the country. The incidence of tax will follow the
destination principle and the tax revenue in

case of SGST will accrue to the State where the imported goods and services are consumed.
Full and complete set-off 14 will be available on the GST paid on import on goods and
services.

17) How will Exports be treated under GST?

Exports will be treated as zero rated supplies. No tax will be payable on exports of goods or
services, however credit of input tax credit will be available and same will be available as
refund to the exporters.

18) What is the scope of composition scheme under GST?

Small taxpayers with an aggregate turnover in a financial year up to [Rs. 50 lakhs] shall be
eligible for composition levy. Under the scheme, a taxpayer shall pay tax as a percentage of
his turnover during the year without the benefit of ITC.

The floor rate of tax for CGST and SGST shall not be less than [1%]. A tax payer opting for
composition levy shall not collect any tax from his customers. Tax payers making inter- state
supplies or paying tax on reverse charge basis shall not be eligible for composition scheme.

Please note that the composition scheme is optional.

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19) What is GSTN and its role in the GST regime?

GSTN stands for Goods and Service Tax Network (GSTN). A Special Purpose Vehicle called
the GSTN has been set up to cater to the needs of GST. The GSTN shall provide a shared IT
infrastructure and services to Central and State Governments, tax payers and other
stakeholders for implementation of GST. The functions of the GSTN would, inter alia,
include:

facilitating registration;

forwarding the returns to Central and State authorities;

computation and settlement of IGST;

matching of tax payment details with banking network;

providing various MIS reports to the Central and the State Governments based on the tax
payer return information;

providing analysis of tax payers’ profile; and

running the matching engine for matching, reversal and reclaim of input tax credit.

The GSTN is developing a common GST portal and applications for registration, payment,
return and MIS/ reports. The GSTN would also be integrating the common GST portal with
the existing tax administration IT systems

and would be building interfaces for tax payers. Further, the GSTN is developing back-end
modules like assessment, audit, refund, appeal etc. for 19 States and UTs (Model II States).
The CBEC and Model I States (15 States) are themselves developing their GST back-end
systems. Integration of GST front-end system with back-end systems will have to be
completed and tested well in advance for making the transition smooth.

20) How are the disputes going to be resolved under the GST regime?

The Constitution (one hundred and first amendment) Act, 2016 provides that the Goods and
Services Tax Council shall establish a mechanism to adjudicate any dispute 16 (a) between
the Government of India and one or more States; or (b) between the Government of India and
any State or States on one side and one or more other Sates on the other side; or (c) between
two or more States, arising out of the recommendations of the Council or implementation
thereof.

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 Questionnaire
Q1. Is GST is good for Indian economy ?

Strongly agree Agree Disagree Strongly Agree

14 20 9 7

20

20

18
14
16

14

12
9
10

8
7

0
Strongly Agree Agree Disagree Strongly Disagree

Source:- Primary Data

Analysis :- In this above table we can see that out of 50 peoples 14 peoples are strongly agree that
GST is good for Indian economy and 20 peoples are agree that it is good while other 9 & 7 peoples
are disagree and strongly disagree about the GST.

The table shows that majority of peoples think that the GSt will lead to a better Indian Economy.

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Q2. Is GST is good for Tax evasion ?

Strongly agree Agree Disagree Strongly Disagree

45 3 2 0

45
45

40

35

30

25

20

15

10

3
5
2
0

0
Strongly Agree Agree Disagree Stronly Disagree

Source:- Primary Data

Analysis:- it is seen from the above table that out of 50 peoples 45 peoples
strongly agree that GST will reduce the Tax evasion from India. And 3 people
agree while 2 peoples disagree and 0 peoples disagree.

So we can clearly see that GST will help to reduce the tax evasion.

36
Q3. Will GST help poor people for a better life?

Strongly Agree Agree Disagree Strongly Disagree

15 10 3 2

15
16

14

12
10

10

3
4 2

0
Strongly Agree Agree Disagree Strongly Disagree

Source:- primary Data

Analysis:- It is seen from the above table that out off 30 peoples 15 peoples
strongly Agree that GST will improves the life of poor peoples. 10 peoples
agreed about it and 3 & 2 peoples disagree and strongly Disagree about it

Thus this table shows that majority of peoples think that GST will improves the
life of poor peoples

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