Unit-1: Introduction and Overview of GST

Chapter 1: Introduction

1.1 Introduction
Goods and services tax (GST) has been identified as one of the most important tax reforms
post independence. GST is a path breaking indirect tax reform which will create a common
national market by removing inter-state trade barriers.GST has subsumed (absorbed or
include) multiple indirect taxes imposed by central and state.
GST subsumed the following
Central taxes State taxes

Central excise duty Sate VAT

Additional excise duty Entertainment tax

Service tax Entry tax

Surcharge and cess Luxury Tax

Central sales tax Purchase Tax

GST was first introduced in France in the year 1954. Within 62 years of its introduction about
160 countries across the world have adopted GST. Generally GST is popular for single model
but Canada and Brazil also have dual model of GST. India has adopted a dual GST which will
be imposed concurrently by centre and states.

1.2 GENESIS OF GST IN INDIA

2004 The idea of GST was emerged in India from the recommendation of Kelkar
Task Force.

2007 Union Finance Minister, Shri P. Chidambaram, while presenting the central
Budget (2007-08) announced the GST would be introduced in India.

2014 NDA government tabled the Constitution (122nd Amendment) Bill

2016 It got assent of the president on 8th September, 2016 and became
Constitution (101st amendment) Act, 2016, which paved the way for the
 introduction of GST in India.

2017 (March) Central Goods and Services Tax Bill, 2017, Integrated Goods and Services
Tax Bill, 2017, Union Territory Goods and Services Tax Bill, 2017 and Goods
and Services Tax (Compensation to States) Bill, 2017 were introduced and
passed these bills in Lok Sabha and receipt of President Assent on 12 th
April, 2007 became enacted. Subsequently State GST laws have been
enacted by respective state Government.

2017 (July) w.e.f 1st July 2017 GST has implemented across India

1.3 CONSTITUTIONAL AMENDMENT FOR GST

Constitution (101st amendment) Act, 2016 was enacted on 8.09.2016 for the following
significant amendments.
(a) Concurrent (simultaneously) power on Parliament and State legislatures to make
laws for imposing taxes on goods and services.
(b) GST will be levied on all supply of goods and services except alcoholic liquor for
human consumption.
(c) Parliament has exclusive power to make laws with respect to goods and services tax
of inter-state (from one state to another state) supply.
(d) Parliament shall decide principles for determining the place of supply and when
supply takes place in course of inter-State trade and commerce.
(e) The explanation to Articles 269A of Constitution of India provides that the import of
goods and services will be deemed as a supply takes place in course of inter-State
trade and commerce.
(f) For the following items Central Excise duty will be imposed on their production and
respective States will impose Sales tax the on their sales.
i) Petroleum crude
ii) High speed diesel
iii) Motor spirit (commonly known as petrol)
iv) Natural gas
v) Aviation turbine fuel
vi) Tobacco and tobacco products
(g) Article 279A of the Constitution of India empowers the president of India to
Constitute Goods and Service tax Council (GST Council) under the chairmanship of
the Union Finance Minister to recommend about (Article 279A):
i) the GST rate
ii) Valuation and other fundamental rules
 iii) Exemption
iv) Future changes
v) Return
vi) Registration

1.4 Legislative Framework

There are total 35 GST Acts in India
 1- The Central Goods and service Tax Act, 2017 for imposing CGST on intra-State
supply of goods and services.
 31- State Goods and service Tax Act, 2017 for imposing SGST by respective state on
intra-State supply of goods and services.
 1 – The Union Territory Goods and Services Tax Act, 2017 for levying UTGST in 5
union Territories without State Legislatures on intra-Territory supply of goods and
services. (Andaman and Nicobar Islands, Lakshadweep, Dadra and Nagar Haveli,
Daman and Diu and Chandigarh)
 1 – The Integrated Goods and Service Tax Act, 017 for levying IGST and
 1 – The Goods and services Tax (Compensation to states) Act, 2017 for levying GST
Compensation Cess.

1.5 STRUCTURE OF GST

1. GST is levied on supply of goods and services across India (including Jammu and
Kashmir). It is a single tax on the supply of goods and services, right from the
manufacturer to the consumer. Under GST credit of taxes paid at previous stages is
available as set-off from the output tax.
2. GST is destination based consumption tax. Benefit of tax (STCG/ UTGST) will accrue
to the consuming state.
3. Centre and states will impose tax on goods and services simultaneously. Centre
now can impose tax on sale of goods within State and States can impose tax on
services.
(1) Intra-State supply of goods and services-
 CGST- Payable to Central Government
 SGST/ UTGST- Payable to State Government/ Union Territory (as
applicable) where they are consumed
(2) Inter-States Supply of goods and services
 IGST - Payable to Central Government
4. Centre will levy and administer CGST and IGST while respective States/ UTs will levy
and administer SGST/UTGST.
5. Import will be treated as inter-States supply and IGST will be chargeable along with
basic Customs duty.
6. However, in GST Export will be treated as Zero rated supplies and no IGST is
payable.
7. The rates of GST are 0.5%, 3%, 5%, 12%, 18% and 28%. In addition , compensation
cess will be payable on pan masala, coal, aerated water and motor cars (Sin cess).
There is no Education cess or Swach Bharat cess or Krishi Kalyan Cess on GST.
8. GST will be calculated on value of supply of goods and services, which is
transaction value. (subject to some exceptions)
9. Under GST, every suppliers who have made taxable supply shall required to get
himself registered under GST Law.
10. A registered person is entitled to take credit (deduction) of input tax paid from the
output tax (if any) subject to following restriction:
(a) Utilisation of IGST : first utilised for the payment of IGST then the balance
may be utilize towards payment of CGST and SGST/UTGST
(b) Utilisation of CGST: first utilised for the payment of CGST then the
balance may be utilize towards payment of IGST.
(c) Utilisation of SGST/UTGST: first utilised for the payment of SGST/UTGST
then the balance may be utilize towards payment of IGST.
11. Under GST regime there is a seamless (without any obstruction) credit flow in case
of inter-state supplies, which is not possible in pre GST period. No credit is
available for CST paid by the buyer. Under GST regime the seamless credit will flow
as follows:
(a) The inter-state supplier in exporting state is allowed to set off the available
credit in IGST, CGST and SGST/UTGST against the IGST payable. on inter-state
supply made by him.
(b) The buyer of importing state in inter-state supply can avail the credit of IGST
paid on purchase, from the output tax payable. so ne break of taking seamless
credit.
(c) The exporting state transfers to the centre the credit of SGST/ UTGST utilised
for the payment of IGST.
(d) The Centre transfers to the importing state the credit of IGST used in payment
of SGST/UTGST.
12. A common portal or platform is needed which could act as a clearing house and
verify the claims and inform the respective government to transfer the funds. This
is possible with the help of a strong IT infrastructure. Accordingly Government has
 established common GST Electronic Portal (www.gst.gov.in), a website managed by
Goods and Services Network (GSTN) for the tax payer and common IT
infrastructure for Central and States. Primarily, GSTN provides three services to
taxpayers.
(a) Facilitating of Registration.
(b) Forwarding the returns to Central and states authorities
(c) Computation and settlement of IGST
(d) Matching of tax payment details with banking network
(e) Providing analysis of taxpayers’ profile.

1.6 Benefits of GST

GST is a win-win situation for the entire country. It provides benefits to all the stakeholders
of industry, Government and customers. It is expected that it will reduces cost of goods and
services and make them globally competitive. The significant benefits of GST are discussed
hereunder:
(a) Creation of unified national market: GST aims to make India a common market with
common tax rates and compliances (procedures) and remove the economic barriers
to form a integrated economy national level.
(b) Mitigation of ill effects of cascading: GST subsume most of the Central and states
indirect Taxes into a single taxes and allow the credit of tax paid from the output tax
for the transaction across the entire value chain process. Eradication of “tax on tax”
gives the benefit to the industry.
(c) Boost to ‘Make in India ‘ initiative: GST will give major boost to the ‘Make in India ‘
initiative of government of India by making goods and services produced in India
competitive in the national as well as international market.
(d) Increase in government revenue: GST is expected to increase the Government
revenue by widening the tax base and improving the taxpayer compliances.