Introduction To GST

In this topic we will cover the following points: 

  • Difference between direct and indirect tax
  • Need and history of GST
  • Meaning of GST
  • Feature of GST 
  • Benefits of GST
  • Goods and Service Tax Council (GSTC) 
  • Goods and Service Tax Network 

(1) Difference between Direct Tax and Indirect Tax Direct tax:

Direct tax:

  • (1) Imposed on Income
  • (2) Tax burden cannot be Shifted
  • (3) Progressive Nature
  • (4)Collection difficult
  • (5)For e.;g Income tax, wealth tax, etc

Indirect tax:

  • (1)Imposed on, goods and services
  • (2)Tax burden can be shifted and Tax recovered from the customer
  • (3)Regressive Nature
  • (4)Collection relatively easy GST, Custom duty, excise duty, etc 

(2)Need and History of GST

(A)Need for GST:

~Merging of various central and state taxes into a Single tax. Taxes to be subsumed Central Taxes:

  • (1) Central Excise duty and additional excise duty
  • (2)ED Under medicinal toilet Preparation Act
  • (3)Counter veiling duty (CVD) and special CVD
  • (4)CST (central sales tax)
  • (5)Central surcharges and cesses
  • (6)Service Tax 

State Taxes:

  1. Entertainment taxes(except those levied by local bodies)
  2. Entry tax and purchase tax
  3. Tax on lottery, betting, and gambling
  4. Luxury tax
  5. VAT/sales tax
  6. Taxes on advertisements
  7. State surcharges and cesses 
  • ~Mitigates cascading effect
  • ~One nation one tax
  • ~Makes way for National market 

History / Genesis of GST in India: 

  • The idea for GST introduction was moved by the union finance minister in this budget for 20062007 propose to introduce GST from 1.04.2010 but deadline missing on many occasions
  • In 2014 constitution was amended (122nd amendment) on GST presented in parliament on 19.12.2014 
  • Lok Sabha passed the bill on 06.05.2015
  • Rajaya Sabha passed the bill on 03.08.2016 
  • Received the approval of the president on 08.09.2016 
  • Constitution (101st Amendment) Act, 2016 Leads to the introduction of GST in India from 1st July 2017.

Four bills introduced in 2017

  • 1)CGST bill
  • 2)IGST bill ( Integrated)
  • 3)UTGST bill (Union territories)
  • 4)Goods and service tax (Compensation to the stated bill

(3)Meaning:

GST is destination/consumption-based tax Export » Exempted consumption outside India Import » Included consumption inside India 

(4)Features of GST:

  1. Based on the supply of goods and services
  2. Destination based consumption tax
  3. Scope applicable to whole India including Jammu and Kashmir (J&K)
  4. Types of GST/dual GST
  • ~CGST Central GST levied by the central government
  • ~SGST State GST levied by state government
  • ~UTGST Union Territory GST levied by UT
  • ~IGST Integrated GST levied by CG 

(A)Legislation: 

  • ☆CGST CGST Act, 2017
  • ☆SGST Each state has its own SGST Act
  • ☆UTGST Each UT has its own UTGST Act, 2017
  • IGST IGST Act, 2017 

Note: Union territories (UT) 

With own state legislatures: 

  • 1)Delhi
  • 2)Pondicherry

SGST applicable 

Without own state legislature: 

  • 1)Andaman and Nicobar Island
  • 2)Chandigarh
  • 3)Dadra and Nagar haveli
  • 4)Daman and Diu
  • 5)Laksh

UTGST applicable 

(B)Tax system and tax rates:

BOX Tax Rates- 0.25% , 3% ,5%, 12% , 18% and 28% as recommended by GST council

(C)Levy of Tax (GST):

Applicable to:

  • non-supply of all goods or services or both
  • on tobacco and tobacco products, in addition, the center has the power to levy central excise duty

Not applicable to: 

  • alcoholic liquor for human consumption
  • five petroleum products petroleum crude
  • motor spirit (petrol)
  • high-speed diesel
  • natural gas
  • aviation turbine fuel
  • electricity

(D)(a)common thresh hold an exemption

(Basic)

  • Taxpayers with an annual turnover of 20 lakh would be exempt from GST
  • 10 lakh for special category states as per article 279 A (Except Jammu and Kashmir)

The Special Category States are:

  • MMNT 
  • Manipur
  • Mizoram
  • Nagaland
  • Tripura

(D)(b) Threshold limit for composition tax

(Flat rate of tax without Input Tax Credit ITC)

  • ₹150 lakh for normal states and UT‘s
  • 100 lakh for special category states (except MMNT)

Input Tax Credit (ITC)

Input tax:  (Credit of which will be availed)

Output tax: (The ITC will be made available only in the following order)

Most important note:

  1. Credit of CGST cannot be available for SGST/ UTGST
  2. Credit of SGST cannot be availed for CGST/ UTGST

(E)Other Miscellaneous Features:

  • Online modes of payment of GST
  • Electronic Filing of returns by a different class of persons at different cutoff dates
  • System of selfassessment and audit of the taxes payable by the registered person 

(5)Benefits of GST:

  • ~Eliminates cascading effect
  • ~Elimination of double/multiple taxations 
  • ~Boost to make in India
  • ~Widens tax base due to transparency and accountability
  • ~One nation one tax ~Makes products nationally marketable
  • ~Improve overall investment eliminate and reduce tax evasion
  • ~Simplified and automated procedures reduce compliance cost
  • ~Simple tax regime and reduction in multiplicity of taxes
  • ~Time limit for obtaining registration, refund, etc 

(6)Goods And Service Tax Council (GSTC):

(a)Constitution:

President of India constituted the GST council with effect from 12.09.2016 

(b)members of GSTC:

Chairperson:Union finance minister Vicechairperson:One of the state finance minister Union minister of the state in charge of revenue and finance State minister in charge of finance OR taxation 

(c)Quoram and procedure:

Quorum:-1/2 of the total members Procedure:council shall determine the procedure for performance of its function Every decision to be taken by GST council by a majority of not less than 3/4 of weighted votes of the members present and votingCentral government weightage one-third of total votes cast state government two-third 

(d)Functions/Role of GST council:-

1)Shall make recommendations to the union and states on

  • Taxes, cess, surcharges, to be subsumed
  • Exemption of goods and services from GST
  • Threshold limit for exemption
  • GST rates and special rates
  • Special provisions for special states
  • Recommend the date for including petroleum products under GST 

2)Settlement of disputes between

  • (a)Government of India v/s one or more states
  • (b)Government of India and one more states v/s one or more states
  • (c)Between two or more states 

(e)Major decisions are already taken by GSTC:

  • (i)Exemption limit of $20,00,000/for normal states (including j&k) and 310,00,000/for special category states only 4 states MMNT i.e Manipur, Mizoram, Nagaland, Tripura
  • (ii)Exemption limit for composition levy i.e *150 lakh for normal states (including j&k and Uttarakhand) and 100 lakh for special category states MMNT
  • (iii)Four Tax Rates i.e 5%, 12%, 18% and 28% for majority Products and 3% for precious metals
  • (iv)Five Laws CGST, UTGST, IGST, SGST, and GST Compensation Law have been made.
  • (v)Power to collect GST in territorial waters shall be delegated by CG to the States
  • (vi)Eighteen rules on composition, Registrations Valuation, ITC, invoice, Accounts, and Records are recommended and notified
  • (vii) Formulas and mechanism Fox GST Compensation cess has been finalized.
  • (viii)Rates of Interest on delayed payments and delayed Refund has been recommended and notified.
  • (ix)www.gst.gov.in Electrotric portal managed by GSTN 

(7)GOODS AND SERVICES TAX NETWORK:

(GSTN)

(a)Meaning

  • Private Company Setup u/s 25 of the companies Act, 2013
  • GSIN has selected 311T, ITes, and Financial technology companies known as GST Suvidha Providers (GSPs)
  • Develop applications to be used by taxpayers For interacting with the GSTN

(b)Functions of GSTN

(1)Main functions:-

Registration (R) Payment (P) Filling of Returns (R)

(2)Other functions:-

  • 1) Providing MIS reports to CG/SGS
  • 2)Accounting of funds transfer between CG &SGS
  • 3)Matching of tax payment details with authorized banks
  • 4)Reversal and reclaim of ITC 

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