UNIT – III (F1-505)

INDIRECT TAX
Introduction of Indirect Tax
Indirect Tax: If the actual burden of a tax is borne by the person on whom it is imposed, but its burden is
shifted by the tax payer to someone else and its actual burden is borne by the ultimate consumer, then such
tax is called indirect tax. This tax is levied on Goods and Services. Currently the main indirect taxes are
Goods and Services Tax (GST) and Custom Duty. Before Ist July, 2017 several indirect taxes were in vogue
which included Central Sales Tax (CST), State Value Added Tax (State VAT), Excise Duty, Service Tax as
main indirect tax. Indirect tax is generally regressive in nature.

Definition and Nature of Indirect Taxes

According to Hartley, "Taxes which are shifted quickly through commercial competition between
consumers are indirect taxes".
According to Dr. Dalton, "An indirect tax is imposed on one person but paid partly or wholly by another,
owing to a consequential change in the terms of some contract of bargain between them".
Following are the nature of indirect taxes:
(1) It is psychologically very difficult for a person to pay some amount after it is received in his hands. Thus,
it shifts the burden of the tax-payer.
(2) These taxes are charged not on the income earned but charged on the commodities and/or services
consumed by the tax-payer.
(3) In indirect taxes, the ability of tax-payer is indirectly determined.
(4) The tax-payer does not perceive a direct pinch while paying indirect taxes.
5) Indirect taxes are easier to collect and greater amount of generation of revenue is assured as tax evasion is
comparatively less in the case of organized sector.
(6) Tax imposed on goods directly affects the price of goods. Tax on goods increases its selling prices.
Types of Indirect Taxes
Following are the types of indirect taxes:
(1) Excise Duty: Excise duty is a duty on production or manufacture of goods. It is a tax levied on
manufacture of goods and the liability to pay excise duty arises immediately on manufacture or production of
goods. In India, excise duty is levied in accordance with the provisions of The Central Excise Act, 1944. In
other words, the tax imposed by the government on the manufacturer or producer on the production of some
items is called excise duty.
(2) Custom Duty: Customs duty is a duty or tax, which is levied by Central Govt. on import of goods into,
and export of goods from, India. It is collected from the importer or exporter of goods, but its incidence is
actually borne by the consumer of the goods and not by the importer or the exporter who pay it.
(3) Sales Tax: A sales tax is an indirect tax charged at the point of purchase for certain goods and services.
The tax amount is usually calculated by applying a percentage rate to the taxable price of a sale. A portion of
the sale may be exempt from the calculation of tax, because sales tax laws usually contain a list of
exemptions.
(4) Value Added Tax: The value-added tax (VAT), as name the clearly denotes, is a tax on the value added to
goods in the process of production and distribution. The VAT is a tax to be paid by sellers of goods and
services (other than those exempted) on the basis of the value-added by their respective firms, value added
being computed as the difference between the actual or presumed value of sale or output in the given period
and the value of goods and services purchased from outside and used in the production of that output.
(5) Goods and Services Tax: GST may be defined as 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 may claim the input credit of tax which he has paid while purchasing the goods or
procuring the service.
 Advantages of Indirect Taxes
Following are advantages of indirect taxes:
(1) Psychological Advantage to Tax Payer: It is psychologically very difficult for a person to pay some
amount after it is received in his hands. On the other hands, since the price of commodity or service is
already inclusive of indirect taxes, the customer i.e. the ultimate tax payer does not feel a direct pinch while
paying indirect taxes and hence, resistance to indirect taxes is much less compared to resistance to direct
taxes.
(2) Manufacturers'/Dealers' Psychology Favour Indirect Taxes: The manufacturer/trader who collects the
taxes in his invoice and pays it to Government, has a psychological feeling that he is only collecting the taxes
and is not paying out of his own pocket (though this feeling may not be always correct). It has been observed
that top management takes very keen interest in direct tax matters, while matters relating to indirect taxes are
usually handled by lower management- in some cases only by clerks, though revenue implications are much
higher in indirect taxes.
(3) Easier to Collect: Indirect Taxes are easier to collect as Indirect Taxes are mainly on goods/commodities,
for which record keeping, verification and control is relatively easy (at least in organized sector).
Manufacturing activities are carried out mainly in organized sector, where records and controls are better. On
the other hand, direct taxes are mainly on income/wealth of individuals, firms or corporate bodies, where
millions of transactions are carried out in lakhs of places and keeping an eye over all such transactions is
virtually impossible.
(4) Slightly Less Tax Evasion: Tax evasion is comparatively less in indirect taxes in organized sector due to
convenience of control. Tax planning bordering tax avoidance in not uncommon in organized sector.
Admittedly, tax evasion of indirect taxes is common in unorganized sector.
(5) Supporting Local Industry: Government can and does shield indigenous industry from international
competition (or dumping) by levying high customs duty.
(6) High Revenue from Indirect Taxes: It is interesting to note that during budget discussions and news in
TV, newspaper etc., discussion is more on direct taxes than indirect taxes, though indirect taxes constitute
over 70% of the tax revenue. Litigation in Courts is also much higher in Direct Tax matters than Indirect Tax
matters. Naturally, government is relying more and more on indirect taxes.
Disadvantages of Indirect Taxes
Following are the disadvantages of indirect taxes:
(1) Regressive in Nature: Since the indirect tax is uniform, the tax payable on commodity is same, whether
it is purchased by a poor man or a rich person. This hits the people in lower income group, while people in
higher income groups can afford to pay the taxes.
(2) Reduces Demand of Goods: Tax on goods increases its selling prices, which reduces demand of goods.
Lesser demand means lower growth of industrialization. This is quite true in India, where tax rates are high.
(3) Increases Project Cost: Heavy customs duty levied on machinery increases its costs, which, in the long
run, lowers the pace of industrialization.
(4) Increases Smuggling/Tax Evasion: High customs/excise duty increases smuggling, havala trade and
mafia gangs, which is harmful in many ways. Similarly, high excise duty leads to evasion, due to which
honest tax-payers suffer, while dishonest persons can prosper as they can afford to sell their goods at lower
price.
(5) Indirect Taxes are Perceived as Inflationary: Indirect taxes increase the prices of products and hence
are often perceived as inflationary.
Basis for Changing Indirect Tax
Over the period of almost six decades the prevailing indirect tax regime created complexities and showed
several shortcomings forcing Government to overhaul the existing system. These shortcomings are
summarised below:
(1) Cascading Effect: Both central and state Government levy tax on the same goods. Former levy tax on
manufacture of goods and the later levy VAT on sale of very same goods. State Government does not permit
credit of excise duty paid by the manufacture to the dealer on sale of goods. Thus, VAT is also payable on
excise duty component of the price resulting in cascading effect. Similarly, service tax is payable on
rendering of service. No credit of service tax paid on input service used in selling of goods is provided by the
state government. So tax is levied on tax. It boosted inflation.
(2) Multiplicity of Tax/Cess: Multiple taxes were levied in pre GST regime like excise duty, vat, entry tax,
luxury tax, entertainment service tax, octroi, etc. These taxes were in additions to various cesses imposed by
State and Central Government like Krishi Kalyan Cess, clean energy cess, etc. All this made the tax structure
very cumbersome.
(3) Overlapping of Jurisdiction: Over the years, distinction between goods and services has become hazy,
due to which there is overlapping of state VAT and Central Service tax on transactions like works contract,
food related services of restaurants, caterers, computer software, SIM cards, renting of movable property, etc.
In these cases it was difficult to judge whether the transaction was sale of goods or rendering of service.
Therefore both the central and state Government would impose tax.
(4) Rivalry Amongst States: Pre-GST regime of indirect tax was not destination based tax but origin based
tax. In that regime, taxes are collected and utilised by the state administration where goods/services are
transacted/manufactured or supplied. This would encourage state to provide sales tax/VAT relief to attract
industries and at the same time discourage supply of goods from other state by imposing entry tax, octroi,
luxury tax, etc., on goods coming from other states.
(5) Hindrance to Integrated Market System: India despite being one nation could not develop into a
national market due to invisible barriers of Central State tax, VAT, entry tax, etc., as mentioned in last point.
These invisible barriers were visible in the form of check posts on the boundaries of states.
(6) Loss of Man and Truck Hours: Due to check posts mounted by states on entry point millions of man
hours and Truck hours were lost Besides that huge corruption was involved which made logistics
management a costly affairs.
(7) Difficulty in Compliance for Taxpayers: As mentioned already pre GST regime had multiplicity of Tax
and consequently tax laws. Moreover each tax had a different taxable event like manufacture for Excise, VAT
for sales, etc. Also there were multiple of Tax authorities. Compliance required voluminous efforts on the
part taxpayers. It also promoted Inspector raj.
(8) Difficulty in Cross Verification of Credit Availed by Assessee: Earlier it was difficult for the tax
department to get the verification report from supplier of goods to know whether the supplier has issued
particular invoice on the basis of which input tax credit has been taken by the purchaser.
Due to lack of online data the verification was done offline. Often the report of supplier was not received or
received after considerable lapse of time. Many scrupulous dealer exploited this and availed fraudulent
credit.
(9) Tax Evasion: Burden of compliance, multiplicity of tax laws increased the propensity to evade taxes.
Fudging of records, concealment of transaction, bribing the tax officials were the tools adopted to remain out
of tax net.
(10) Huge Amount of Litigation: With multiple tax laws each having different taxable events result was lot
of disputes regarding availment of credit, determining manufacture of goods, value of goods, classification of
goods, etc. Dispute settlement mechanism is almost choked with such disputes resulting in pendency of tax
demands.
Structure of Indian Indirect Taxation Before GST
Pre-GST indirect taxation in India can be divided into central levies and state levies. Central levies mainly
comprise of Excise Duty, Custom Duty Service Tax. State Levies mainly comprise of VAT, CST, State Excise
on alcohol and other levies like Entry Tax, Entertainment Tax. etc. The type of tax along with the taxable
event is tabulated as under:
Types of Tax Taxable Event/Levy

Excise Duty Excise Duty levied on excisable goods produced

or manufactured in India.
Service Duty Service tax is levied on provision of services and
is collected and paid by the provider of service
other than services specified in the negative list.
Value Added Tax Value Added Tax was levied at the time of sale
of goods within the state.
Central Sales Tax Central Sales Tax was levied at the time of sale
of goods outside the state.
Countervailing Duty CVD is at the rate equivalent to rate of excise on
such product levied at the time of importation of
goods.
 Special Additional Duty SAD was levied at the time of importation of
goods to cover VAT/CST element as if those
goods are bought domestically.
Entertainment Tax Entertainment Tax levied on all "payments for
admission" to any entertainment and paid by the
organizers of that event.
Luxury Tax Luxury Tax levied for enjoyment of comfort or
pleasure which is extraordinary to the necessary
of life by any customer.

Goods and Service Tax

Introduction :
Goods and Service Tax (GST) is a comprehensive indirect tax levy on manufacture, sale and consumption of
goods as well as services at the national level. GST covers most of the indirect tax levies into a single tax. It
is not a new type of additional tax but a inclusion of multiple tax levies. It replaced multiple taxes imposed
by Central and State Governments such as Value Added Tax or VAT, Central Sales Tax or CST, Excise Duty
and Service Tax etc.
Meaning of Goods and Service Tax
According to Article 366(12A) of Indian constitution, Goods and Service Tax (GST) is a tax on
supply of goods or services or both except supply of alcoholic liquor for human consumption. The definition
of GST as given by constitution is concise and does not highlight its characteristics. Hence, its meaning
should be understood keeping in view the opinion of the experts.
"Goods and Service Tax" is a destination based consumption tax which is levied on the consumption
of goods and services. GST is based on the principle of value addition wherein tax is charged at each state,
i.e.. from manufacturing till its ultimate consumption and the tax paid at previous stages is allowed as credit
by way of compensation. Thus, it can be said that GST is charged only on the value addition at each stage
and burden of this tax is borne by the ultimate consumer.
GST may be defined as a tax on supply of goods and services, which is charged at each point of sale
of goods or provision of services, where seller of the goods or provider of services may claim the credit of
input tax which he has paid while purchasing the goods or procuring the services. Thus GST is levied at
every stage of the production-distribution chain with applicable set-offs in respect of tax remitted at previous
stages. In a nutshell, only value addition will be taxed and burden of tax is to be borne by the final consumer.
GST is multipoint tax and it is levied on taxable value in every stage but due to input tax credit its
net burden is equal to tax on value addition by the supplier. In input credit method the total GST payable on
supply Less Input credit shall be net GST payable.
Salient Features of GST
Main Features of GST are as follows:
1. GST is a Federal Tax: GST is a federal tax in which both Central Government and Sate Governments
gets the same share.
2. GST is an Indirect Tax: Goods and service tax is an indirect tax, the burden of which is borne by the
ultimate consumer. Although the intermediary traders and distributors do pay GST but they charge it from
the purchasers by transferring the burden to them.
3. It is Levied on Supply of all Goods and Services: Generally goods and service tax is levied on the
supply of all goods and services unless it is exempt under the provisions of the Act. For example, alcoholic
liquor for human consumption has been kept outside the scope of GST. Hence the provisions of this Act shall
not apply on supply of such liquor. Similarly, petrol, diesel, natural gas, crude oil and aviation fuel has also
been kept outside the scope of GST in its preliminary stage. The GST council shall decide upon the date by
which these goods shall also fall within the purview of GST. Similarly, provisions of GST shall also not
apply on supply of such commodities which does not fall in the category of 'goods' as defined under GST
Act, e.g. shares and securities.
4. It is Levied only on Value Addition: This tax is levied only on the value added to a product by each
trader. For example, a trader purchased goods of 10,000 and paid GST at tax rate of 18%. The trader shall not
include tax of 1,800 in its cost of purchase. The trader incurred expenditure of 2,000 on the goods and after
adding a profit of 500 sold the product to the customer at, 12,500. The trader charged GST at the rate of 18%
from the customer and realised 2,250 (12,500 × 18%) as GST. Out of 2,250 realised as GST from the
customer, the trader shall deduct 1,800 which he paid as GST on the goods purchased initially and deposit
the balance amount of 450 in the government treasury which is actually the tax on the value addition made
by the trader. Under GST, there is no tax on tax ie, the tax has not been charged on tax of 1,800 paid by the
trader.
5. It is a Destination Based Tax on Consumption: If the place of manufacturing of goods and its
consumption is in the same state, then the state government of that particular state has the right to collect tax.
But if the place of manufacturing of goods and its consumption are in different states, then naturally the
question arises as to government of which state shall have the right to collect tax. In this situation, since GST
is a destination based tax, therefore the right to collect the tax shall be with that state where the goods have
been consumed or where the goods have been supplied, For example, if some goods are manufactured in the
state of Maharastra and the goods are send to Uttar Pradesh and are consumed here or supplied here. The
place of destination of these goods or the place of supply of these goods shall be the state of Uttar Pradesh
and so the right to collect GST on these goods shall be with the government of Uttar Pradesh.
6. Dual GST Model has been Implemented in our Country: Out of the two models of GST, one model is
wherein the GST is levied by the Central Government at National level and the second model is the dual
GST model, wherein the tax is levied both by the Central and the different State Governments. India has
adopted the Dual GST model as adopted by Canada and Brazil.
If goods and services are supplied in the same state (Intra-State supply) then the tax levied by Central
Government will be called Central GST and the tax collected by State and Union Territories will be called
state GST (SGST)/Union Territory GST (UTGST) respectively.
7. Single Tax in Place of several Indirect Taxes: Before the implementation of GST, there were several
indirect taxes levied in India like Central Sales Tax, State Value Added Tax, Excise duty, Service tax etc.
Now majority of these taxes have been merged in GST and a single goods and service tax is applicable.
8. Amount of GST should be Shown Separately in Invoice: According to GST Law the amount of tax
should be shown separately in the invoice from Input Tax credit point of view. If the GST is not separately
shown in the bill the purchaser dealer can not avail input tax credit.
9. Composition Scheme Under GST: Small taxpayers with an aggregate turnover upto 1.5 crore (75 lakh in
8 special category states) shall be eligible for composition levy. Under the scheme, a taxpayer shall pay tax
on certain percentage of his turnover in a state during the year without the benefit of ITC. The floor rate of
tax for CGST and SGST/UTGST in case of Goods supplied by composition dealer is 1% and 5% in case of
restaurant services. A tax payer opting for composition levy shall not collect any tax from his customers.
10. Self Assessment System: If the dealer pays tax regularly and furnished returns by due dates shall get
advantages of self assessment in the GST system. He need not to present himself before the authorities.
11. Multi Point Tax: GST is a multi point tax. It is recovered on each stage of supply on Value Addition.
12. Provision of Input Tax Credit: Input tax credit means the registered person shall deduct the tax paid by
him from the tax collected by him and shall pay the balance amount in the government treasury. The Act also
contains provisions regarding adjustment of input tax credit of one tax against the output tax liability of other
tax.
Following are the provisions regarding adjustment of input tax credit of one tax against the other tax:
A. CGST can be adjusted against CGST and IGST.
B. SGST can be adjusted against SGST and IGST.
C. IGST can be adjusted against IGST, CGST and SGST.
Note: CGST cannot be adjusted against SGST. Similarly SGST cannot be adjusted against CGST.
13. Decentralisation in Administration: Central Goods and Service Tax (CGST)and Integrated Goods and
Service Tax (IGST) shall be levied and administered by Central Government whereas State Goods and
Service Tax (SGST) and Union Territory Goods and Service Tax (UTGST) shall be levied and administered
by State Governments and Union Territories respectively.
14. Import to be Treated as Inter-State Supply: Imports shall be treated as inter-state supply. As supply of
goods from one state to another state is called Inter State Supply and Integrated Goods and Service Tax
(IGST) is applicable on it. Similarly import of services shall also be considered as Inter-State Supply and
Integrated Goods and Service Tax (IGST) shall be payable on it. On import of Goods. Basic Customs Duty
as well as Integrated Goods and Service Tax (IGST) shall be payable.
15. Exports to be Treated as Zero Rated Supply: Export should be treated as zero rated supply. In other
words, it can be said that there will be no tax on export of goods and services. But exporter will get the
benefit of Input Tax Credit. They will get Input tax credit in the form of refund.
16. Exemption from Registration to Persons doing Business on Small Scale: Generally every person
engaged in supply of taxable goods is liable to get himself registered under this Act. But the provisions of the
Act also specify that if the gross turnover of a person during a financial year does not exceed 40 lakhs / 20
lakhs / 10 lakhs (whichever is applicable in relevant State), he shall not be liable for registration..
Background of GST in India
The idea of national GST was first mooted in India by Kelkar Committee in year 2004 who realised
the need of GST in India for its growth and Development. Vijay Kelkar Task Force 2004 strongly
recommended the integration of indirect taxes into the form of GST in India.
The first announcement for introduction of GST was made in budget speech on 28-2-2006 by the
then Finance Minister, P. Chidambaram. It was proposed to introduce nationwide GST w.e.f. 1-4-2010. This
target date could not be achieved, mainly due to political differences.
The earlier provisions of Constitution did not provide for imposition of GST. Hence, Constitutional
Amendment was required. Constitution (One Hundred and First Amendment) Bill 2014 relating to GST was
passed by Parliament and was ratified by 17 States out of 29 States, as required under Constitution.
The final step to the Constitution (122nd Amendment) Bill, 2014 becoming an Act was taken when
the Hon'ble President of India gave his final assent on September 8, 2016. The constitutional (101st
Amendment) Act came into force which empowers both the state and centre to levy this tax. A
comprehensive dual Goods and Service Tax (GST) h replaced the complex multiple indirect tax structure
from 1 July, 2017.
Various Central and Provincial Taxes Replaced by GST
Before the implementation of GST, there were several indirect taxes levied in India like central sales
tax, state value added tax, Excise Duty, Service Tax etc., Now majority of these taxes have been merged in
GST and a single goods and service tax is applicable.
About 40 types of indirect taxes, cesses and surcharge are subsumed under GST- The GST would
replace the following taxes:
1. Central Taxes that would be subsumed under the GST are:
(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.
II. State taxes that would be subsumed under the GST are:
(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.
Although majority of the Indirect taxes have been merged in GST, yet there are some indirect taxes which
have not been merged in GST. These taxes are:
(A) Central Taxes which have not been subsumed into GST:
(i) Basic Customs Duty
(ii) Research and Development Cess
(iii) Export Duty
(iv) Anti Dumping Duty
(v) Safeguard Duty
(vi) Terminal Tax on Goods and Passengers
(vii) Central Sales Tax on alcoholic liquor for human consumption and specified petroleum Goods
(B) State taxes which have not been subsumed into GST:
(i) State Excise Duty
(ii) Stamp Duty
(iii) Profession Tax
 (iv) Road and Passenger Tax
(v) Toll Tax
(vi) Electricity Tax
Advantages of Goods and Service Tax
The major benefits of GST are as follows:
1. Mitigation of ill Effects of Cascading: Before implementation of GST, there were several indirect taxes
levied by Central and State Governments. Benefit of tax credit was also not available in respect of many of
these taxes and hence such taxes were included in the cost of commodities. When tax was realized on the
sale of such commodities, tax was also calculated on the tax previously paid, Thus consumer had to bear the
burden of excess tax. But under GST, the benefit of Input tax credit is available at each stage and hence tax
on tax is not charged.
2. Elimination of Multiple Taxes and Double Taxation: Several indirect taxes were imposed in our country
at Central and State level like Excise duty on manufacturing, Central sales tax on dispatching those goods to
other States and State VAT on selling goods within the states. In addition to it, service tax on transportation
cost, toll tax on entry of goods to urban area, octroi etc. were levied on the goods. Almost all these taxes have
been subsumed in Goods and Service tax and now only one tax i.e. Goods and Service tax is applicable. It is
quite natural that the rate of GST is less than the sum total of all these indirect taxes in majority of the cases.
Also GST has been imposed equally on both goods and services. In the previous tax structure there were
several incidences where there was no clarity as to whether a particular transaction relates to goods or
services. Since GST has been imposed equally on both goods and services, hence the problem of double
taxation automatically gets eliminated and thus facilitating trade and commerce.
3. Improved Competitiveness: Reduction in transaction costs of doing business would eventually lead to an
improved competitiveness for the trade and industry.
4. Easy Compliance: A robust and comprehensive IT system would be the foundation of the GST regime in
India. Therefore, all tax payer services such as registrations, returns, payments, etc. would be available to the
taxpayers online, which would make compliance easy and transparent.
5. Gain to Manufacturers and Exporters: The subsuming of major Central and State taxes in GST,
complete and comprehensive set-off of input goods and services and phasing out of Central States Tax (CST)
would reduce the cost of locally manufactured goods and services. This will increase the competitiveness of
Indian goods and services in the international market and give boost to Indian exports. The uniformity in tax
rates and procedures across the country will also go a long way in reducing the compliance cost.
6. Creation of Unified or Common National Market: Unified tax rate and uniform system of tax
collection in the entire country has lead to elimination of several problems which will lead to creation of
unified national market. Different rates of taxes by state. governments and complicated tax collection
procedure lead to several problems for trade and business.
7. Increase in Government Revenue: Implementation of GST will increase revenue of both Central and
State Governments. This is possible because of Several reasons. Firstly, the scope of tax shall widen. Goods,
services and persons who were outside the purview of taxes shall be brought in its ambit which shall increase
government revenue. Secondly, the demand for goods and services shall increase in national and
international market which shall lead to increased production which in turn will generate revenue for the
government. Thirdly, strict administration and implementation of GST shall result in less tax evasion which
in turn shall increase government revenue.
8. Reduction in Overall Tax Burden of Consumers: The burden of all indirect taxes is ultimately borne by
the consumers. In the previous tax structure, the consumer was aware only of the sales tax paid on the
product. He was completely unaware of the various taxes added to the cost of raw material at other stages of
production. Therefore prima facie, it may appear to the consumer that under GST, the rate of tax is high, but
actually the burden of tax on consumer has reduced because of the merging of various taxes into GST, and
thereby making the products cheaper.
9. Eradication of Check Post: E-Way Bill system has eradicated the need of check-posts at States
boundaries. Now, the flow of raw materials and final product has become free and fast in whole of the
country.
10. No GST on Essential and Daily used Goods: Essentials and daily used goods (specially agriculture
based) have been kept exempt category.
11. Boost to 'Make in India' Initiative: GST will give a major boost to the 'Make in India' initiative of the
Government of India by making goods and services produced in India competitive in the national as well as
international market.
12. Exports from India are Zero Rated: More efficient neutralisation of under GST especially for exports,
thereby making products more competitive in global market and thus boosting exports from India.
13. Eradicate Corruption: Under GST all interactions to be through common GSTN portal. It will ensure
least manual interface between the taxpayer and the tax administration. It will definitely effect the
corruption.
14. No Manual Interface: GST is based on IT, which will improve the compliances as all returns to be filed
online, input credit to be verified online encouraging more paper trial of transactions.
15. Reduced and Uniform Tax Rates: The main purpose of introduction of GST is to remove complexities
by reducing the multiplicity of taxes and bringing the uniformity in rate all over India. Thus resulting in
simplicity and uniformity.
16. Boost to Economic Growth: GST will boost exports and manufacturing activities generation of more
employment and thus increased GDP with gainful employment will lead subtantive economic growth and
poverty eradication.
17. Electronic Presentation: Under GST everything in online. Electronic matching of input tax credits all
across India, thus making the process more transparent and accountable.
18. Seamless Flow of Input Tax Credit: Final price of goods is expected to be lover due to such seamless
input tax credit available all over the claim to retailer and to the supplice of services or manufacturer of
products. Thus reducing their tax burden and resulting to bring down the prices.
19. Input Tax Credit to each Middle Man: Under whole of the supply chain, input tax credit is available to
each supplier. Consequently at each stage only value addition is taxed and whole of tax burden falls on final
consumer only.
20. Global Taxation Mechanism: With utilisation of modern information and communication techniques,
Indian GST system has taken a global format. Simplicity and certainty in taxation rules have generated a
hope of improvement in investment environment. GST has systematic mechanism to protect honest
businessmen and to identify tax evaders.
Demerits/Disadvantages/Difficulties of GST
Following are the limitations or drawbacks of GST:
1. Lack of Computer Knowledge: The basic concept of GST lies on computer system. The entire work
from issuing of invoice by the dealer upto filing of return and making payment of tax is done through
computer. Most of the dealers do not use computer and those who use computer also face difficulty in doing
GST work on computer.
2. Problem due to Complicated Procedure: The procedure of GST became very complicated due to
payment of tax on reverse charge mechanism and the provisions for granting input tax credit and thereby the
dealers face more difficulty. To avail the benefit of input tax credit the dealer is under obligation to maintain
complete accounts and records. Moreover, the input tax credit shall not be allowed until it tallies with the
statements furnished by the supplier and the tax is paid by the supplier. Similarly maintaining record and
availing benefit of input tax credit is a difficult task under reverse charge mechanism.
3. Not a Single Tax: GST is being referred as a single taxation system but in reality it is a dual tax in which
State and Centre both collects separate tax on a single transaction of sale and service. GST is a confusing
term where double tax is charged in the name of a single taxation system.
4. Multiple Tax Rates: Under GST also there are multiple tax rates. Presently it has 5 Slabs in GST-0, 5, 12,
18 and 28%.
5. Danger of leak out of Secret and Private Matter: All the records of business and information about the
dealer are kept in computer in GST system. It is always dangerous that the data may be hacked or leak out
from the computer at any time. If the date from the computer is really hacked, then all the secret matters of
the business shall become public and it may be misused.
6. Burden of Tax is Higher due to High Rates of Taxes: It is said about the benefit of GST that since
several taxes are subsumed into GST, hence the rate of GST shall be lower and the ultimate consumer would
get the things at cheaper rate. But in fact it is not so. The classification of goods for rate purpose has not been
suitably or rationally. The goods which should be charged at 4% or 5% has been kept in the category of 12%
and similarly the goods to be charged at 14% or 15% has been included in the category of 18% or 28%. The
rate of service tax has also been fixed at 18% as against 15%. As such, the ultimate consumer has to pay
higher amount of tax.
7. Lack of Security of System: All the computers of the country are attached to GST website. If there arises
any virus in computer system, then there is a danger of becoming all business activities standstill.
8. No Reduction in the Evasion and Corruption: It was expected that the application of GST would reduce
tax evasion and corruption. But, in fact it has not happened so. The buying and selling activities without
invoice are still going on as usual and many officers have been caught red-handed accepting the bribe from
the dealers.
9. Problem due to Mandatory Furnishing of Several Returns: Only one return was to be furnished before
the introduction of GST. Now the dealer has to furnished 3 returns every month and one return is to be
furnished at the end of the year. Hence, most of the dealers are required to furnish 37 returns every year. The
dealer is busy throughout the year in furnishing these returns. It has adverse affect on his business. Now, it
has become essential to seek assistance from the practitioners. The practitioners have increased their fees. It
is a direct loss to the dealers.
10. Adverse Effect on the Economy of Goods Manufacturing States: In our country there are certain
States which manufacture or produce goods in heavy quantity. On the other hand there are several States
which manufacture or produce goods in small quantity while the consumption is more in those states. Since
GST is a destination based consumption tax, hence the manufacturing state does not earn any revenue when
it exports the manufactured goods to other States, though in federal system of taxation all the states have
been their consent for the application of GST, yet they express or show disagreement from time to time
against this system. Though the Central Government has assured such states to compensate such loss for 5
years, but the calculation of such loss is a matter of controversy and after 5 years they will have complete
loss of that revenue which they were getting as Central Sales Tax (CST).
11. More Formalities: GST is not a easier system. The traders have to fulfil more legal and accounting
requirements of the law instead of previous commercial law.
Need for GST in India
The old system of indirect taxation had multiplicity of taxes levied by the Centre and State. This had led to
complex and conflicting indirect tax structure, adding to multiple compliance and administrative costs. There
was no uniformity in tax rates and structure across States. There was cascading of taxes due to 'tax on tax'.
There were too many restrictions on seamless credit available, i.e., credit of excise duty and service tax paid
at the stage of manufacture was not available to the traders while paying the State level sales tax or VAT and
vice-versa. Further, no credit of State taxes paid in one State could be availed in other States.
In order to provide benefit to the common public improvement has always been made in indirect
taxes. For this purpose CENVAT system was introduced in 1984 in respect of Excise duty so that benefit of
Input tax credit may be given. Similarly, in place of old sales tax the VAT system was Introduced by different
states after the year 2003. Provision of Input tax credit was also made in this system. Inspite of this, necessity
of Goods and Service Tax was felt in India. The main reason behind it was the several short-comings in old
indirect tax structure. The main short-comings or drawbacks in existing indirect tax structure were as
follows:
Deficiencies in Existing Taxation System
1. Cascading Effects of Tax: All the tax levied before a product reach to the ultimate consumer were
included in the cost of the product. For example, a product is manufactured in Mumbai and after that it is
brought in U.P.. First of all excise duty was levied on such product. After that Central Sales Tax (CST) was
levied. During transportation of goods service tax was charged. All these taxes would be included in the cost
of dealer of U.P..When the dealer of U.P. would sell such goods he would charge VAT on the total cost
including different taxes paid by him. Thus the cost of the product increases and its burden is born by the
ultimate consumer.
2. More Burden of Taxes on Consumer: From the state of manufacture upto the stage of consumption
several taxes are levied and the goods become very dear till it reaches to the ultimate consumer. On the same
goods excise duty, Central Sales Tax, Service Tax and State VAT are charged and thus the rate and volume of
tax become very high. Consequently the consumers get the goods at high prices.
3. Conflict between the Revenue Interest of the Different State Governments: In our country there are
some states which manufacture or produce goods in heavy quantity and there are some state states which are
rich in minerals. On the other hand there are such states also which manufacture or produce goods in very
small quantity. These are called consumption states. When the goods move from the manufacturing state to
the consuming state, the manufacturing state levies Central Sales Tax. This state tries to levy CST at higher
rate so that it could get more revenue. On the other hand the Government of consumption state would levy
VAT at higher rate on sale of goods so that it would get more revenue. The burden of both the tax borne by
the consumer and he would get goods at high rates.
4. Lack of Co-ordination in providing Input Tax Credit: There is no provision of input tax credit in some
of the taxes while in others though there is a provision of input tax credit but such credit can be availed or set
off against that particular tax only. It cannot be set off against any other tax. For example there is no
provision of input tax credit in Central Sales Tax. On the other hand in Excise Duty though there is a
provision of input tax credit, but it can be set off against Excise Duty only. It cannot be set off against State
VAT, Similarly input tax credit of VAT cannot be set off against the Excise Duty. Due to such provisions the
consumer does not get relief.
5. Administrative Expenses to be High: Due to separate arrangement for administration of different taxes
the administrative expenses are very high. For example, the administration of Excise Duty and Customs Duty
is done by a separate Board named as Central board of "Excise Duty and Custom Duty". But the
administration of VAT is done by each state government separately in its own state. It increases the
administrative expenses, the burden of which is borne by the ultimate consumer.
6. Tax Evasion and Black Money: The problem of tax evasion and creation of black money is very old in
our country. Efforts have been made by the government from time to time to remove these problems, but no
solid favourable results have been achieved in this direction. Political leaders runnings the government,
officers and employees of Tax Department, Dealers and Consumers (Public), no one is serious in this regard.
The customer may be heard usually saying that "reduce the price, I do not want invoice". Similarly Tax
department employees may be hear saying that "if you do everything in proper way" then what shall we do -
we do need our share. Similarly, political leaders need fund for the election expenses. Therefore they adopt
liberal view against businessmen. The businessman increases his margin. Since there is no transparency in
tax system, hence most of the persons (with a few exception) become part of tax evasion and black money.
7. Problem in facing Competition in National and International Market: Due to multiple taxes and high
rate of taxes the goods manufactured in our country is often dearer and we face difficulty in selling goods in
international market in competition of other countries. The goods of other countries is often cheaper and
hence get market in foreign countries easily. Similarly, the other countries provide similar goods at cheaper
rate in our country also. Thus the industries of our country sustain loss. Often goods from China, Japan,
Switzerland and other countries is available in our country at a cheaper rate in comparison to price of our
goods. For this reason the Government withdraw tax from exports or increase duty on imports and thus
protect our industries so that they can face competition.
Thus there are so many reasons for adopting GST system in India instead of old indirect system of
multiple taxes. GST is the latest concept in respect of taxation on supply of goods and services in course of
business, Commerce and service activities and transactions. Most of the countries adopted this system, as
well as in India it is adopted.
Structure of Goods and Service Tax in India
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.
Adoption of Dual GST Model: India has adopted dual model of Goods and Service Tax wherein tax
is imposed collectively by Central and State Governments. Share of Central and State Governments have
already been fixed on the basis of general rates of tax. Currently this share is 50-50. Centre and States
impose these taxes under different Acts. Centre and States have been given equal rights for levy, collection
and administration of GST.
Extent of Goods and Service Tax: Goods and service Tax Act is applicable to whole of India
including the State of Jammu and Kashmir. The Act came into force on 1st July, 2017. However, different
dates have been appointed for applicability of different provisions of GST.
Different Laws relating to GST: Following 35 Acts relating to GST have been framed in our
country:
Name of Acts No. Name of Tax
The Central Goods and Services Tax Act, 2017 1 CGST
State Goods and Services Tax Act, 2017 31 SGST
(including union territory having legislature)
The Union Territory Goods and Services Tax Act, 2017 1 UTGST
The Integrated Goods and Services Tax Act, 2017 1 IGST
 The Goods and Services Tax (Compensation to States) 1 GST
Act, 2017 Compensation Cess

Scope and Administration of Various Taxes

Important provisions relating to various taxes imposed under Goods and Service Tax are as under:
1. Central Goods and Services Tax (CGST)
If both the supplier and recipient of Goods or Services or both are in the same state or within the same Union
Territory, then this tax is imposed by the Central Government. The Central Goods and Services Tax has been
divided into 21 Chapters containing 174 sections.
CGST is to be administered by the Central Government. CGST has replaced existing Central Excise,
Service Tax, Additional Excise Duty, Special Additional Duty of customs etc. The rate of CGST is half as the
normal rate of GST. The supplier should show the amount of CGST separately in the invoice/bill. The whole
amount of CGST will be deposited in the account of Central Government. Central Government has the
absolute right to utilise this entire amount.
Main objectives of CGST are as follows:
1. To levy tax on all intra-State supplies of goods or services or both except supply of alcoholic liquor for
human consumption at a rate to be notified, not exceeding twenty percent, as recommended by the GST
Council (the Council);
2. To broad base the input tax credit by making it available in respect of taxes paid on any supply of goods or
services or both;
3. To impose obligation on electronic commerce operators to collect tax at source, at such rate not exceeding
one per cent, of net value of taxable supplies;
4. To provide for self-assessment of the taxes payable by the registered person; 5. To provide for conduct of
audit of registered persons in order to verify compliance with the provisions of the Act;
6. To provide for recovery of arrears of tax using various modes including detaining and sale of goods,
movable and immovable property of defaulting taxable person;
7. To provide for powers of inspection, search, seizure and arrest to the officers;
8. To establish the GST Appellate Tribunal by the Central Government for hearing appeals against the orders
passed by the Appellate Authority or the Revisional Authority;
9. To make provisions for penalties for contravention of the provisions of the proposed Legislation;
10. To provide for an anti-profiteering clause in order to ensure that business passes on the benefit of reduced
tax incidence on goods or services or both to the consumers; and
11. To provide for elaborate transitional provisions.
2. State Goods and Services Tax (SGST)
This tax is levied by the State Government if both the supplier and recipient of goods or services or both are
in the same state. For example both of them are in the state of U.P. or in the state of Madhya Pradesh. In U.P.
this tax will be called U.P. GST and in Madhya Pradesh it will be called M.P.GST. In this way all the state
governments (including those Union territory which have their own legislature) shall levy this tax on the
intra state supply of goods within their States.
SGST would be leviable along with CGST on the supply made by a registered person within a State.
SGST is to be administered by State Governments. SGST has replaced State VAT, CST, Luxury Tax, Octroi
and Entry Tax, Purchase Tax etc. The supplier should show the amount of SGST separately in the
invoice/bill. State Government has the absolute right to use the amount of SGST.
3. Union Territory Goods and Services Tax (UTGST)
If both the supplier and recipient of goods or services or both are in the same Union Territory (Andaman and
Nicobar Island, Lakshadweep, Dadra and Nagar Haveli, Daman and Due and Chandigarh), then this tax is
imposed by the respective Union Territories. SGST and UTGST cannot be imposed together on the same
transaction. Either SGST can be levied or UTGST can be levied. UTGST is to be administered by
Administrator appointed by the Central Government for the Union Territory.
4. Integrated Goods and Services Tax (IGST)
If the supplier and recipient of goods or services or both are in different states or out of the two, one is in a
state and other one is in some union territory, then this tax shall be imposed and collected by the Central
Government. Since it is a destination based tax, hence the share of the destination state shall be transferred
by the Central Government to that particular state. The amount of this tax shall be equal to CGST+SGST on
those goods.
IGST is to be levied and collected by the Central Government on Inter-State supply of Goods and
Services. As per 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 State.
Imports to be considered as Inter-state Supply: Imports of goods or service or both shall be
considered as Inter-state supply and IGST shall be payable on it.
Main Features of IGST
(i) The Central Government would administer and levy taxes on IGST
(ii) Seller/Service provider in the origin state is to charge IGST on inter-state supply of goods and/or
services. IGST CGST + SGST/UTGST
(iii) Inter-State Seller/service provider shall use his input CGST and input SGST for payment of IGST, i.e. he
shall pay net IGST.
(iv) Inter-State Buyer/service recipient shall avail input tax credit on the basis of fax invoice for payment of
his own IGST, CGST or SGST.
(v) Both, the seller/service provider and the buyer/service recipient shall report these transactions in the
respective e-returns.
(vi) The exporting state will transfer the SGST portion to Central Government and Central Government will
transfer that SGST to impor.ing State.
(vii) Stock transfer to branch/depot in other State will also attract IGST. Where the stock transfer is from
branch in one city to a branch in another city but within the same State, it does not attract any IGST or CGST
and SGST unless the each branch is separately registered and it has separate verticals.
(viii) IGST will be levied on Import of Goods and/or Services. Therefore, Import will be attract Basic
Custom Duty plus IGST.
SLAB OF GST
GST is levied at the point of supply, that is at the time and place of supply and that's when the liability to
charge GST arises. Under Section 15 of Central Goods & Services Tax Act, 2017, GST would be levied on
the transaction value.
Rates (Goods)
Rates are broadly 0.25%, 3%, 5%, 12%, 18% and 28% and that is split into CGST and SGST equally for
Intrastate sales and fully leviable as IGST for Inter-state sale.
Rates (Services)
Rates are broadly 5%, 12%, 18% and 28% and that is split in to CGST and SGST equally for Intra-state sales
and fully leviable as IGST for Inter-state sale.
Present GST Rate Structure
GST Rates Goods Services
No Tax Essential Commodities such as: Lodge and Hotel services carry a
(1) Sanitary napkins, tariff below INR 1,000, Jan Dhan
(2) Rakhi made without any precious stones, Yojana and Bank charges savings
(3) Deities made of wood, stone, or marble accounts, etc.
(4) Food Items such as:
(i) Fortified milk,
(ii) Vegetables,
(iii) Curd, salt,
(iv) Natural honey, and
(v) Eggs.
(5) Non Food Items such as:
(i) Handloom,
(ii) Bangles,
(iii) Judicial papers,
(iv) Stamps,
(v) Printed books, and
(vi) Newspaper.
5% GST (1) Food Items such as: 1) Restaurants in hotels that carry
(i) Fish fillet, room tariff less than INR 7,500,
(ii) Coffee, 2) Non-AC and Standalone AC
(iii) Skimmed milk powder, restaurants and the ones that serve
(iv) Frozen vegetables, liquor,
(v) Pizza bread. (3) Special flights for pilgrims,
(vi) Spices, (4) Takeaway foods,
(vii) Tea, (5) Newspaper printing and small
(viii) Sliced dry mango, restaurants,
(ix) Cashew nuts, (6) Transportation services like
(x) Unbranded namkeen, railway airways,
(xi) Milk food for babies, (7) Supply of tour operators
(xii) Cinnamon and cinnamon powder services,
and edible mixtures, etc. (8) Transport via radio taxis and
(2) Non Food Item such as: cabs,
(i) Agarbatti, (9) Tailoring services, etc.
(ii) Fertillizers,
(iii) Coal,
(iv) Ayurvedic medicines,
(v) Kerosene,
(vi) Insulin,
(vii) Lifeboats and
(viii) Plastic waste, etc.

12% GST (1) Food Items such as: (1) Building construction for sale,
Ghee, cheese, butter, frozen meat (2) Business-class air tickets,
products, fruit juices, pickles, namkeen, (3) Guesthouses,
sausages, instant food mixes, etc. (4) Inns and hotels with room
2) Non-food Items such as: Umbrella, tooth tariffs less than INR 7,500,
powder, sewing machine, handbags, (5) Mining and drilling for crude
pouches, purses, jewellery box, artificial or natural gas,
yarn, nuts, fruits, medicine, cell phones (6) Metro and monorail
and wooden frames for the mirror, construction,
photographs or painting, Art ware of iron, (7) Pollution control or effluent
etc. treatment plants, etc.
18% GST (1) Food Items such as: (1) Restaurant in hotels that carry
(i) Pastries and cakes, room tariffs of more than INR
(ii) Cornflakes, 7,500,
(iii) Pasta, (2) IT and Telecom services,
(iv) Flavoured refined sugar, (3) Outdoor catering,
(v) Preserved vegetables, (4) Water parks,
(vi) Ice cream, (5) Theme parks, and
(vii) Chocolate, (6) Financial services, etc.
(viii) Mineral water,
(ix) Soups,
(x) Oil powder, and
(xi) Sauces,
(2) Non-food Items such as:
(i) Washing machine,
(ii) Detergents,
(iii) Glassware,
(iv) Safety glass,
(v) Pumps,
(vi) Mirror, and
(vii) Light fittings,
28% GST Item such as: (1) Betting on casinos,
1) Dishwasher, (2) Gambling,
 2) Sunscreen, (3) Hotel stay bill above INR
3) Dye, 7,500,
4) Tobacco, Bidis, Cigarette, Pan masala, etc. (4) Racing,
5) Automobiles, (5) Five-star hotels,
6) Aircraft for personal use, and (6) Cinema and entertainment, etc.
7) Ceramic tiles.

GST COUNCIL
According to Section 2(36) of Central Goods and Service Tax (CGST), 2017, GST Council means the
Goods and Service Tax Council established under Article 279A of the constitution. The Goods and Service
Tax Council (GST Council) is a joint forum of the Centre and State to make recommendations to Union and
States relating to GST. GST Council is the Apex constitutional body (authority) to decide the policies of the
GST.
Constitution of the GST Council: The President of India Constituted a GST Council on 15th
September, 2016 by issuing an ordinance under Article 279A of the Constitution. Following are the
provisions regarding the election and nomination of Chairperson, Vice-chairperson and members of this
council:
(a) Union Finance Minister shall be the Chairperson of this Council.
(b) Union State minister who is incharge of Revenue of Finance shall be the member of this council.
(c) Every State Government shall nominate a Minister who is incharge for finance or taxation matters or
any other state minister shall be its members.
Selection of Vice-chairperson: The Finance ministers from all the states shall from among
themselves select one as the Vice-chairperson of this Council. The tenure for the vice-chairperson shall also
be decided by them.
Necessary Quorum for Conduction of Meetings: Quorum is that percentage of the total number of
members of an institution presence of which is necessary for conducting a meeting otherwise meeting cannot
be conducted. In this connection, presence of 50 percent of the total number of members of the GST Council
shall complete the quorum for conduction of the meeting. Thus GST Meeting shall not be conducted if the
presence of the members is below 50 percent.
Decision on the basis of Three-Fourth Majority of Members: Every decision made during the
meeting should be supported by at least 75 percent majority of the weighted votes of the members who are
present and voting at the meeting. In Article 279A, there is a principle which divides the total weighted vote
cast between Central Government and State Government:
(a) The vote of Central Government shall have the weightage of one-third of the total votes cast, and
(b) The votes of all the State Governments taken together shall have the weightage of two-third of the
total votes cast in the meeting.
Role and Functions of GST Council
1. The GST Council shall put forward its recommendations to Central and State Governments in the
following matters:
(i) Taxes, Cesses and other surcharges of Central Government, State Government and Local Authorities
which can be subsumed in Goods and Service Tax.
(ii) Determine goods and service on which GST should be imposed and which should be exempt from
GST.
(iii) To recommend the model for Goods and Service Tax laws, principles for determining the supply of
Goods and services in the course of Inter-state Trade or commerce and principles to regulate the place
of supply.
(iv) The threshold limit of Minimum turnover below which the goods and services shall be kept outside
the purview of Goods and Service Tax.
(v) Rates of Goods and Service Tax (including upper and lower limits).
(vi) Specified rate or rates for a specific time period for collection of additional resources during the time
of natural calamity or casualty.
(vii) Specific provisions for the states of Arunachal Pradesh, Assam, Jammu and mir, Manipur,
Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand.

(viii) Any other matter related to Goods and Service Tax which the council may determine.
2. Recommend the date by which this tax shall be applicable on Petroleum products: Currently GST is not
applicable on crude oil, petrol, diesel,natural gas and aviation fuel. GST Council shall suggest the date by
which GST shall be applicable on these goods.
3. While discharging in the functions conferred by this article, the Goods and Services Tax Council shall be
guided by the need for a harmonised structure of goods and services tax and for the development of a
harmonised national market for goods and services.
4. No act or proceedings of the Goods and Services Tax Council shall be invalid merely by reason of-
(a) any vacancy in, or any defect in, the constitution of the Council; or
(b) any defect in the appointment of a person as a Member of the Council; or
(c) any procedural irregularity of the Council not affecting the merits of the case.
5. The goods and Services Tax Council shall establish a mechanism to adjudicate any dispute-
(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 States on
the other side: or
(c) between two or more States,
arising out of the recommendations of the Council or implementation thereof.
Goods and Service Tax Network (GSTN)
The Goods and Service Tax Network (GSTN) is a non-profit, non government organisation, which is
incorporated to supervise the IT system of the GST common portal. It will be used to track every financial
transaction and check evasion by its business intelligence tools.
Formation of GSTN and Common Portal
In order to ensure speedy decision making and allay the fears of red tapism, Goods and Service Tax
Network (GSTN) has been incorporated with private shareholding to the tune of 51% and the remaining
stake is owned by the State and Central Government combined.
In the Government's stake, 49% of the shares are divided equally between the Central (24.5%) and
State governments (24.5%).
The Common GST Electronic Portal is a website as www.gst.gov.in which is managed by Goods and
Service Tax Network (GSTN). It is a company incorporated under the provisions of Section 8 of the Indian
Companies Act, 2013. The object of this portal is to establish a uniform process for all the tax payers and to
establish an Information technology structure to share information between the centre and states.
GST Portal can be approached by any tax payer, or their Chartered Accountants, Tax Consultants or
any tax officials. This is the only common portal for all the services and information related to GST.
A common GST system provides necessary assistance to all State Governments, Union Territories,
Commercial Taxes Department, Central Tax Officials, Tax Payers, Banks and other beneficiaries.
Salient Features of GSTN
1. The Goods and Service Tax Network (or GSTN) is a non-profit, non-government organization which is
incorporated to supervise the IT system of the GST Common Portal.
2. It will be used to track every financial transaction and check evasion by its business intelligence tools.
3. This portal will provide taxpayers with all services, from registration to filing of tax returns and
maintaining all tax details.
4. The portal will work as depository of database of taxpayers and their transactions.
5. The contract for developing the IT system is given to Indian IT Major, Infosys.
6. For backend GSTN has provided two models. Model-I and Model-II. Centre and some State Governments
have opted the Model-I. NIC is developing backend system for such States and Wipro is developing
backend system for Central Government. Infosys will develop backend system for remaining States, who
have opted for Model-II.
Objectives of GST Network
The objectives of GST network are as follows:
(1) Simplification: GST Network simplifies the process for taxpayers by creating a uniform process of filing
returns.
(2) Cost Reduction: The GST Network lower compliance cost and collection cost.
(3) Reduction in Tax Evasion: It helps in minimising the risk of tax evasion and reduction in leakages due
to the smooth flow of information between the Centre and States.
(4) Automation: It digitises and automates processes through e- registration, e-payment, and e-return.
(5) Credit Availability: The GST Network enable a smooth flow of credit by the government on the basis of
returns filed and revenues recounciled against challan data from the bank.
(6) Uniformity: The GST Network helps to create uniformity in policy administration.
Functions of GSTN
The entire process of GST is online starting from registration to the filing of return. GSTN is the backbone of
the Common Portal which is the interface between the taxpayers and the government.
Primarily, this GSTN Company provides assistance to tax payers regarding Registration, payments,
Returns related services through common portal.
Functions of GSTN Company includes the following:
(i) To provide help in Registration
(ii) To send Returns to Central and State Officials
(iii) Computation and settlement of Integrated Goods and Service Tax (IGST).
(iv) Matching of the Tax payment Sheet with the Banking Network.
(v) To Provide the necessary Management Information System (MIS) to Central and State Governments
on the basis of Tax Information Sheet.
(vi) To assist the Tax payers regarding the adjustment of Input Tax Credit and its refund and also to
regulate the same.
To perform these functions smoothly, GSTN Company has also taken the assistance of other IT and
Finance Companies which will facilitate in uploading the invoices of the tax payers, filing of Returns etc.