Goods and Service Tax (GST)

‘The consensus we arrived with states for amending the Constitution to implement GST is  a major breakthrough. This alone has the potential to make India competitive and attractive for investment’

-Narendra Modi

Introduction:

The Goods and Service Tax (GST) was executed by the Indian government as part of their “one nation, one tax” agenda. The GST is a tax that applies to both goods and services. It is an indirect tax in India that has mostly replaced other indirect taxes such as excise duty, VAT, and services tax. Parliament passed the Goods and Service Tax Act on March 29, 2017, and it went into force on July 1, 2017. To put it another way, the GST is a tax that is levied on the provision of goods and services. GST is a multi-stage, destination-based tax applied on all value additions. GST is a single indirect tax law that applies to the whole of India.

Working of GST:

The GST is a destination-based tax because it is imposed in the state where goods and services are consumed (rather than where they are produced). GST is imposed at every point of sale and is included in the cost of a product. At the moment, all goods and services are largely divided into four rate categories: 5%, 12%, 18%, and 28%.

Certain goods and services are exempt from GST and are instead subject to existing state taxes, such as value added tax (VAT), which is a tax levied at each stage of the supply chain’s value addition. The tax is paid by the customer at every stage of the manufacturing process. The implementation of GST on petroleum crude, high-speed diesel, motor spirit, natural gas, and aviation turbine fuel has been delayed, and they are presently subject to excise duties and VAT imposed by the government.

There are a number of GST exemptions and relaxations that can be claimed if certain conditions are met. A tax credit is an example of this type of incentive because it is the amount that some taxpayers can deduct from their tax liability.

Benefits of GST:

  1. Easy Compliance
  2. Uniformity of tax rates and structures
  3. Removal of cascading effect
  4. Improved competitiveness
  5. Simple and easy to administer
  6. Higher revenue efficiency
  7. Relief in the overall tax burden
  8. Benefit of Input tax credit (ITC)

Taxable event in GST:

Prior to the advent of GST, taxable events were distinct for each statute under the old tax system. However, in 2017, the definition of a taxable event shifted dramatically, with the “supply” of a specific item or service becoming the primary focus of taxation. Goods and services are covered by supply under GST when they are sold, transferred, bartered, exchanged, licenced, rented, leased, or disposed of.

Classification of Goods and Services under GST:

To classify traded products, a globally recognised system of numbers and names was established. Under the GST regime, the Harmonized System of Nomenclature (HSN) code is extensively used to categorize products, whereas the Services Accounting Code (SAC) is used to categorize services.

GST Model:

India has adopted a Dual GST model in view of federal structure of the country. GST will be levied concurrently by the Centre and the States on taxable supplies of goods and services, or both, that occur inside a State or Union Territory. The GST levied by the Centre is known as the Central GST (CGST).

  • The GST imposed by the state is called State GST (SGST) while the tax levied by Union territory is called Union Territory GST (UTGST).
  • Integrated GST (IGST) is imposed on commodities that are transported between states. Goods imports are classified as interstate supplies. Imports will be subject to IGST as well as any applicable customs charges.

The legislations under which GST is levied:

The Central GST Act, 2017

The Integrated GST Act, 2017

The GST (Compensation to States) Act, 2017 and

The Union Territory GST Act, 2017

Registration:

Every supplier of goods and/or services is required to obtain registration in the State/UT from where he makes the taxable supply if his aggregate turnover is exceeding prescribed limits during the financial year.

GST Common Portal:

The Government has established an unified GST Electronic Portal http://www.gst.gov.in, which is maintained by the Goods and Services Network (GSTN), to provide a uniform interface for tax payers and a shared IT set-up between the Centre and States.

The CST portal is accessible over Internet (by taxpayers and their CAs/Tax Advocates etc.) and Intranet by Tax officials etc. The portal is one single common portal for all GST related services mainly registration, payment and filing GST return.

All State/UT Commercial Tax Departments, Central Tax Authorities, Taxpayers, Banks, and other stakeholders are linked via a common GST system.

Conclusion:

India’s most significant tax reforms is GST. GST has both national and international benefits. On the national level, it simplifies the manufacturer’s job by combining many taxes into one and promoting economic unification. On a global scale, it aligns India with the global market by implementing a globally accepted tax policy.

References:

  1. Dual GST Model in India, Clear tax, https://cleartax.in/s/dual-gst-model#:~:text=The%20dual%20GST%20model%20refers,the%20administration%20is%20run%20separately.&text=It%20is%20also%20different%20from,such%20as%20in%20the%20USA.
  2. Milind Talegaonkar, What is GST? All that you need to know about GST, Blog iPleaders, https://blog.ipleaders.in/gst-all-you-need-to-know-about-it/#:~:text=The%20Centre%20would%20levy%20GST,supply%20of%20goods%20and%20services.&text=The%20GST%20to%20be%20levied,GST%20(%E2%80%9CSGST%E2%80%9D).
  3.  GST- Goods and Service Tax, B markets, https://www.bajajfinservmarkets.in/gst.html
  4. Vikas Vasal, What Is GST? 5 Things You Need To Know, Forbes Advisor, https://www.forbes.com/advisor/in/tax/what-is-gst-5-things-you-need-to-know/
  5. 10 Benefits of Goods and Service Tax (GST), Clear IAS, https://www.clearias.com/10-benefits-goods-and-service-tax-gst/
  6. Goods & Services Tax GST (India) What is GST? Indirect Tax Law Explained, Clear Tax, https://cleartax.in/s/gst-law-goods-and-services-tax

Aishwarya Says:

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