Overview of GST

BY
Ashima Bansal.
Joint Secretary ,GSTCS.
Outline
1. Objectives, Salient Features and Uniqueness of Indian GST
2. GST Revenue Performance
3. Initiatives in GST
4. Challenges and Way forward
 1. Objectives, Salient
Features & Uniqueness
of Indian GST

3
 GST in India – One Nation, One Tax

Centre States
Indirect Tax regime in India was highly Union Excise, VAT/Sales Tax,
Service Tax
fragmented and multiple
Entertainment
tax, betting tax,
•Multiple taxes levied by multiple tiers of cesses and
surcharges
luxury tax,
cesses
Government GST
•Non-uniformity in legal provisions, Taxes on Local Bodies
compliance framework, rates etc. interstate trade Tax on
Central Sales Tax entertainment,
Indian GST is a unique model advertising etc.
•Concurrent laws & powers
•Unification through IGST & GST Council

4
Objectives of GST:

‘Good and Simple Tax’..

Raise Tax Broaden the tax

revenues base

Uniformity in Minimize the

Tax Rates across Cascading effect
the Country of Taxes

Establishment of
Transparency in
a Common
Incidence of tax
National Market

5
 Benefits for Trade, Industry and Exports
• Multiple returns & agencies, around 500 forms
Ease in
• Common compliance framework
Compliance
• One compliance portal for all services
• No tax arbitrage
Smoother
Interstate • No check posts, no statutory forms
Trade & • Seamless flow of credit across State border
Commerce • No cascading of taxes

• Cascading of taxes led to exports not being fully tax- free

Reduced
• Post GST, no cascading allows exports to be zero rated
taxation
• Makes them more competitive

• Higher scrutiny due to difficulties in verifying ITC

Faster
refunds • System verified input tax credit – less hassle in refunds
• Refunds processed though a single source
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7

Benefits for Government, trade & Industry

Clarity in • Different events of taxation pre-GST – manufacturing, sale, purchase, entry,

taxation services, luxury to one event of supply
leading to
lower disputes • Goods and services treated differently; sectors with overlap  goods and services
treated similarly

• Race to the bottom – adverse impact on revenues

Uniformity • No competition among states and steal thy neighbour policies
of taxes
 Formalization of Economy

• More and more businesses moving in the formal economy is evident from the significant increase in
the GST taxpayer base.
1

• Moving to the formal economy will bring in more visibility and hence more opportunities for
MSMEs. For instance, new GST registrations have also increased MSMEs credit uptake.
2

• Common set of data available to both Centre and the States making tax collections more effective. Tax
Revenue on Rise.
3

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Salient features
Unique Federal Body called GST Council –Article 279A
• 31 Independent States and Union Territories come together with the Central
Government to pool their sovereign indirect tax powers. Chaired by Union FM
with States FM or Minister nominated as Members. Power to recommend
principles of levy of tax, exemptions, floor rates, rates, special rates

Cooperative Federalism –Dual concurrent levy

• Dual levy of taxes on the same transaction with the Central Government
handholding the States in the initial years of implementation through
compensation

Non-Intrusive IT based System

• All compliance, return filing and payments
made through one common portal for all
taxpayers
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 Salient Features:Four Pillars Of the GST Council

Law Committee Fitment Committee

01  Proposes changes in the GST laws taking into
account various feedbacks about the problems 02  tasked with evolving a principle and a subsequent
methodology to determine rates for various
being faced by various industries/ trades/ supplies under GST. Recommending any other rate
taxpayers. provided in Act or Rules
 Preparing draft Rules/notifications  Examining all representations of trade on rate,
 Examining all representations of trade on Legal classification and other issue related to rates like
issues inverted duty structure

GIC ITGRC
03 

decision-making body at the top tier
takes decisions to the extent possible and
04  The IT Grievance Redressal Committee was
envisaged to address the difficulties faced by a
where necessary, on issues of urgent and section of taxpayers owing to technical glitches on
procedural nature GST Portal.
 SoP to submit the issues of data fixation to the GST
Council.
Salient features of Indian GST:

Dual GST – Concurrent taxation by the States and Centre

Multiple rate slabs – Allowing for the consumption of goods by

different income groups to be taxed differently

IT based system- GST portal-registration, returns and refunds

Inherited complexity due to pre-GST structure. Separate

registrations in each State as opposed to single nationwide
registration in pre-GST regime in service sector.

Legal provisions and GST rates kept close to the pre-GST regime.
Tax rates below the revenue neutral rate.
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1
2

Estimated Benefits to the Public

18.0%

16.0% 15.3% The GST rate is about 3.9 % lower than the
14.0%
Revenue Neutral Rate
12.0%
11.4%
10.0%
This has resulted in estimated savings of
Rs. 18 lakh cr to the public
8.0%

6.0%
The average savings are about Rs. 28,000
4.0%
crore per month
2.0%

0.0%
Revenue Neutral Rate Average Effective GST Rate
This translates to a savings of
recommended by CEA Rs. 12,000 per household per year
Committee
Salient Features
Free flow of goods – No Check posts - No physical barriers-E-way bill
• Moving from 31 different fractured markets to establishing one common market with no
physical barriers between States for movement of goods – Reducing travel time
considerably
• Electronic Way-Bills that can be generated online, SMS, Mobile App (~2Mn generated
every day, ~1 Bn till date)

Feedback based taxation policy design

• Responsive to challenges faced by taxpayers and
providing solutions on a real time basis
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Salient Features

The Tax Credit System

• A truly value added tax system where cross utilization of all GST paid taxes is available

Streamlining Imports and Exports

• Easing imports and exports through easy payment systems, refund
processes and tax credits

One Authority – One Administration

• All taxpayers to have a single window tax authority
for all compliance purposes
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salient Features

Restriction on input tax credit

• ITC restricted to 100% of the eligible credit as per the GSTR-2B return.

Leaner Supply Chains

• With same incidence of taxes across the country, supply
chains are leaner and more efficient

Lower Cost of Doing Business

• With fungible credit and reduced incidence of
taxes - Cost of doing business is reduced
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 Salient Features GSTN Portal
Compliance: Return Filing, Tax Payment, filing ITC Taxpayers Education: CBT, User Manuals,
forms Webinars, Twitters, e-mails, Advisories

GST services: Registration, Refund,

Appeal, Revocation App., Advance Ruling, Tracking Status: Refund, LUT, Return,
Clarification and Replies, Registration etc. & view filing Status

Taxpayers’ Needs: Engage/dis-engage GSTP,

Updates: News, Updates, Alerts,
Accounting & Billing software
Notifications, SMS and e-mails

Grievance Redressal: Help Desk, Extensive View and Download: GSTR-2A,

Error list, reasons and solutions, Self-Help GSTR-2B, GSTR-3B, Import BE etc.
Portal
Empowerment: Ledgers’ View, Return Dashboard,
Statutory Conformity: Demand, Recovery, Comparison Report, Risk Rating, Matching tools,
Audit, Assessment, Adjudication, ITC/EWB
blocking, Enforcement Actions, Declarations

Facilities to Opt-in, Opt-out, Nudging: Alerts, Deadlines, Red-flags,

Withdrawal, Cancellations etc.
Dual Concurrent GST Model

When UTGST would

Supply be charged?

List of UT –
1. Andaman and Nicobar,
Intra State Inter State 2. Chandigarh,
3. Dadra and Nagar Haveli
and Daman and Diu,
4. Lakshadweep,
5. Ladakh and
With Legislature
SGST/
CGST IGST 1. Puducherry.
UTGST 2. National Capital
Territory of Delhi,
3. Jammu and Kashmir,
Levy of CGST, SGST, UTGST & IGST

State 1
Foreign
Territory

Union Territory State 2

without Legislature Union territory
with legislature
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 GST - Impact on Cost and ITC
A Ltd B Ltd
Selling Price 1000 Cost ?
GST @ 12% ? Profit 1,000
Total ? Total Taxable Value ?
GST @18% ?
Total Invoice ?
Tax Payable ?
Less: Input tax Credit 80
Net Payment ? Tax Payable ?
Less: Input tax Credit ?
Net Payment (in Cash) ? Type of
Ledger in
GST ?
 GST - Impact on Cost and ITC
A Ltd B Ltd
Selling Price 1000 Cost 1,000
GST @ 12% 120 Profit 1,000
Total 1120 Total Taxable Value 2,000
GST @18% 360
Total Invoice 2,360
Tax Payable 120
Less: Input tax Credit 80 Electronic
Net Payment 40 Tax Payable 360 Credit
Ledger
Less: Input tax Credit 120
Net Payment (in Cash) 240

Electronic
Cash Ledger
GST System statistics as on 31st Jan 2023
 Unique Feature -Compensation Cess
 At the time of introduction of GST, the Constitution amendment provided that the Parliament, by law shall
provide compensation to States for a period of five years for loss of revenue due to introduction of GST.
 Accordingly, the GST Compensation to States , 2017 was legislated which provides for release of
compensation against 14% year-on-year growth over revenues in 2015-16 from taxes subsumed in GST.
Provision for levy of cess on certain luxury items and demerit goods and this cess collected is to credited into
a Public Account known as GST Compensation Fund.
 The States were compensated for loss of revenue due to implementation of GST (w.e.f. 01.07.2017) for 5
years’ period till June,2022
To safeguard that States have adequate and timely resources to combat Covid and related issues, Centre borrowed
₹ 1.1 lakh crore in 2020-21 and ₹ 1.59 lakh crore in 2021-22 and passed it on to States on a back-to-back basis.
All the States agreed on this decision. Pertinently, the Government issued Notification No. 1/2022–Compensation
Cess dated 24.06.2022 extending the Goods and Services Tax (GST) compensation cess until March 31, 2026 in
order to meet the GST revenue shortfall as well as servicing the abovementioned loan borrowed through special
window scheme
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2. GST Rate Structure &
Rationalization

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 Principles Guiding the GST Rate Structure

Rate of incidence should not increase from Pre-GST tax

structure
Need to protect revenues of Centre and States

The rate structure should not be regressive in nature

Items of mass consumption should not be taxed at

higher rates
The prices of goods of basic necessities (CPI basket)
should not increase As decided in the 3rd
meeting of GST Council
Many items could not be taxed at 40%, as they were - October 2016
consumed by the middle class
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GST Rate Structure as Decided in 4th GST Council Meeting

S. Goods with Combined tax rate of Proposed GST rate bands for such
No. Central Excise and VAT goods

1 Between 3% and less than 9% 5%

2 Between 9% and less than 15% 12%

3 Between 15% and less than 21% 18%

4 Equal to or more than 21% 28%

As decided in the 4th GST Council Meeting - November 2016

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Fitment of various Goods and Services into the Rate Structure

Rate Goods / Services

0% Vegetables, fruits, cereals, milk products, hearing aids, agricultural implements
etc.
0.25% Diamonds and precious stones
1% Construction service in relation to affordable housing

3% Gold and Semi precious stones

5% Fertilizers, Footwear Renewable equipment, Man-made yarns, Tractors, Fabrics,
Pharma, RMG and Made-ups, Generators / inverters, Edible oil, Specified Job
work services, Aggarbatti, Construction service other than affordable housing,
Restaurant services etc.

12% Agri machinery, Utensil, Bicycles, LED light, Milling machines, Ink, Ethyl
alcohol, Medical equip, PP_bags, Water pumps, Other Misc items

18% Mobile phones, Metals, Organic chemicals, Services etc.

28% Automobiles, Cement, Cigarettes etc. 26
3. GST Revenue Performance

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2
8

Trends in GST Revenue

Monthly average GST Revenue (₹ crore)

1,60,000
1,48,924
1,50,000

1,40,000

1,30,000
1,23,608
1,20,000

1,10,000
1,01,845
98,114
1,00,000 94,734
89,885
90,000

80,000
2017-18 2018-19 2019-20 2020-21 2021-22 2022-23
3. Initiatives in GST

a. E-invoicing
b. QRMP
c. MSME

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E-Invoicing
GST Council in its 35th meeting held on 21st June 2019 proposed to introduce
an e-invoicing system in India in a phased manner on a voluntary basis

Accelerating business process automation

Reducing compliance burden

Enhancing ease of doing business and

Reducing tax evasion

E-invoicing was mandatorily introduced for all taxpayers with an annual

aggregate turnover of above Rs. 500 crores from October 01, 2020, and those
with an annual aggregate turnover of above Rs. 10 cr at present.
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Exempted Sectors & Businesses from E Invoice

a government department, a local authority,

SEZ Units (However SEZ Developer not exempted from E Invoice)

Insurance, Banking, FI [including NBFCs] Rule 54(2)

Goods Transport Agency – Rule 54(3)

Passenger Transport Services– Rule 54(4)

Multiplex Cinema – Rule 54(4A)

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Auto-population of GST Returns

E-way Bill

GSTR-1

GSTR-3B
E-Invoice GSTR-2A

GSTR-2B

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MSMEs

Quarterly Return and Monthly

Payment (QRMP) Scheme and
Composition Scheme
Invoice Furnishing Facility
(IFF)

Exemption from Annual

Return,
NIL Return Filing Facility <=2 Cr: GSTR-9/9A (Optional)
<= 5 Cr: GSTR-9C (Not
required)

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QRMP Scheme

Registered Person
Turnover up to 5 Cr

Quarterly Return Month 1 & Month 2 Month 1 & month 2

(GSTR 1 and GSTR Monthly Payment of Invoice Furnishing
3B) Tax (PMT-06) by 25th Facility (IFF) for B2B

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QRMP Scheme – NIL Return

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4. Challenges and Way Forward

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 Challenges and Way Forward

Perception of Law,
Compliance burden
Fake invoicing & ITC • GST Suvidha Kendras
Fraud • Document Identification
Numbers mandated for all
• Risk profiling of communication with
taxpayers taxpayer
37 • Database analysis
Rate rationalisation. • Limiting ITC to 100%
GoM on rate rationalization of the reported invoices
GoM on casinos, online • Enhanced KYC norms
gaming and horse racing like using Aadhaar
• Fetching Pan based e-
mail and mobile number
from CBDT database (to
be introduced)
• Freezing of assets, bank
accounts
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Challenges and Way Forward

Reduce Pending
legal cases
Reduce Blockage of • Legacy dispute
working capital resolution scheme
to pre-GST
Tax evasion • Special Refund disputes
weeks • Early
• Red Flag Reports • Complete online
shared daily with establishment of
refund process GSTAT
tax administrators. eliminating
• BIFA physical
• E-way Bill and interaction
FASTag • Single
integration disbursement
authority
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Enforcement Measures taken to Curb Fraud

E-way bill
• Distance covered 200
km / day
Min Cash Payment • No e-way bill if two
• Minimum cash GSTR-3Bs are not filed
payment of 1% of
Registration: liability if the taxable
• Suspension of supply of the
registration Rule 21A registered assessee is
• Verification of new more than 50 lakh in a
registration month- Rule 86B

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 Way forward

Broad basing GST and Revenue optimization

Sealing leakages & Enforcement

Rationalization of GST rates & structure

Pre population of returns

Simplification of Reports

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Uniform backend application

Dynamic Law Review

Capacity Building & awareness – GST practitioners with facilitation centres

Bottom Line : Co-operative Federalism & Consensus based decision making

Thank You