UNIT-1 GST (1)

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3rd B.COM – VI SEMESTER BCMCMC
381:GST and CUSTOMS DUTY
Unit I: Introduction
Evolution, Meaning and salient Features of GST; Objectives and basic schemes of GST;
Benefits and Apprehensions of GST – Constitutional Amendments; GST Council – Structure,
Powers, Functions and Provisions; Structure of GST (Dual Model), Types of GST - (CGST,
SGST/UTGST and IGST) its meaning.
Unit II: GST Act 2017

Definitions and Salient features: CGST, SGST/UTGST and IGST. Definition of Goods, Place of
Supply, Principal place of business, agent, principal, Associated Enterprises, Related Persons,
Aggregate Turnover, Services, Taxable Turnover under CGST, SGST and IGST, Capital Goods,
Casual Taxable Person, E-Commerce, Input, Input Tax credit, Job work, Works Contract,
Location of the Supplier, Reverse Charge, Nature of supply – Composite, Mixed, Exempt,
Outward, Inward. Recipient of Goods and Services, Supplier of Goods and Services, E-way
Bill – Rates of GST.
Unit III: Procedure and Incidence of Tax

Procedure relating to levy – CGST and SGST, Scope of Supply, Tax liability on mixed and
composite supply, Tax Invoice, HSN/SAC codes – meaning, source and identification, Time
and Place of Supply of Goods and Services, Valuation and Valuation rules, Transaction Value
– Inclusions and Exclusions, Reverse Charge Mechanism, Time of supply under Reverse
Charge; Procedure relating to levy – IGST, Interstate supply, Intra-state supply, Zero rated
supply, value of taxable supply; - Supply of Goods and Services to Foreign Diplomatic
Missions. Computation of taxable value and tax liability including Reverse Charge.
Unit IV: GST Registration

Procedure, Persons liable for Registration, Persons not liable for Registration, Compulsory
Registration, Deemed Registration, Advantages of Registration, Amendment of Registration,
Cancellation of Registration, Revocation of Cancellation of Registration; Special provisions
for casual taxable persons and non-resident taxable persons; Exempted Goods and Services.
Composition Levy, Conditions and restrictions for Composition Levy; Problems on
computation of Turnover for the purpose of Registration and applicability of Composition
Levy; Role of Information Technology in GST – GST Network – powers and functions of GST
Network, Goods and Service Tax Suvidha Providers (GSP), Types of Returns and due dates
for filing returns.
GST & Customs Duty Unit 1: Introduction

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Unit V: Input Tax Credit

Meaning, eligibility and conditions for claiming Input Tax Credit, Apportionment of credit
and blocked credits, Availability of credits under special circumstances under section 18,
Inputs and Capital Goods, Distribution of credit by Input Service Distributor (ISD), Transfer of
Input Tax Credit; Problems on utilisation of Input Tax Credit (including Blocked credits).
Unit VI: Customs Duty (Customs Act, Customs Tariff Act)

Definitions, types of customs duties – Prohibition of importation and exportation of goods,
Treatment of imports and exports under GST, Methods of valuation for customs – Problems
on computation of Assessable Value and Customs Duty.
BACKGROUND
Government needs funds for various purposes like maintenance of law and order, defence,
social and health services etc. Government obtains funds from various sources in which Tax
revenue is the major source to the Government. Citizen of the nation who generates or
raises income through the activity conducting by utilizing the natural resources of the nation
in one or the other way, has responsibility to provide his share of profit or income for the
public expenditure. In this background State has made set of legal rules and provisions to
raise funds to administer the nation through the enactment of various tax laws.
The Constitution of India and Taxes

The Constitution of India provides that ‘no tax shall be levied or collected except by
authority of law’. The Constitution includes three lists in the Seventh Schedule providing
authority to the Central Government, State Governments and Local bodies to levy and
collect taxes on subjects
Justice Holmes of US Court defines Taxation Systems in India Tax as "It is the price at which
we pay for a civilized society"
Structure of Indian Tax System before GST

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India offers a well-structured tax system for its population. Taxes are the largest source of revenue for the
Government. This money is deployed for various purposes and projects for the development of the nation.
The tax system in India mainly, is a three tier system which is based between the Central,
State Government and the local Government like Municipality corporation. India has a well-
developed structure with clearly separated authority between Central and State
Governments and local bodies.
The Government cannot impose any tax unless it is passed as a law. Here are the salient
features of the taxation system in India:
1. Role of the Central and State Government:

The entire system is clearly demarcated with specific roles for the Central and State
Government. The Central Government of India levies taxes such as customs duty income
tax, service tax, and central excise duty.
The taxation system in India empowers the State Governments to levy income tax on
agricultural income, professional taxes, value added tax (VAT), state excise duty, land
revenue and stamp duty. The local bodies are allowed to collect octroi, property tax, and
other taxes on various services like drainage and water supply.
2. Types of Taxes:
Taxes are classified under two categories namely Direct and Indirect Taxes. The largest
difference between these taxes is their implementation. Direct taxes are paid by the
assessee while indirect taxes are levied on goods and services.
a) Direct taxes:
Direct taxes are levied on individuals and corporate entities and cannot be transferred to
others. These include income tax, wealth tax, and gift tax Presently, wealth tax and gift tax
have been abolished.
Income tax: As per the Income Tax (IT) Act, 1961 every assessee whose total income
exceeds the maximum exempt limit liable to pay this tax. The tax structure and rates are
annually prescribed by the Union Budget. This tax is imposed during each assessment year,
which commences on 1st April and ends on 31st March. The total income is calculated from
various heads such as salaries, house property, business and profession, capital gains, and
other sources. The assesses are classified as Individuals, Hindu Undivided Family (HUF),
Association of Persons (AOP), Body of Individuals (B01), Firm, Company, local authority, and
artificial judiciary not falling in any other category.
b) Indirect taxes:
Indirect taxes are not directly paid by the assessee to the government authorities. These are
levied on goods and services and collected by intermediaries (those who sell goods or offer
services). ere are the most common indirect taxes in India:
1. Value Added Tax (VAT):

This is levied by the State Government and was not imposed by all states when first
implemented Gradually all states implemented to levy such tax. It is imposed on goods sold

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in the state and the rate is decided by the State Governments. Presently it is levied only on
petroleum products and alcoholic liquor for human consumption.
2. Customs duty:
Imported goods brought into the country are charged with customs duty which is levied by
the Central Government.
3. Octroi:
Goods that move from one state to another are liable to octroi duty. This tax is levied by the
respective state governments.
4. Excise duty:
All goods produced domestically are charged with excise duty. Also known as Central Value
Added Tax (CENVAT), this is paid by the manufacturers. Presently it is levied only on
petroleum products, tobacco products and alcoholic liquor for human consumption.
5. Service Tax:
All services provided domestically are charged with service tax. The tax is paid by all service
providers unless specifically exempted. Presently it has been subsumed with GST.
6. Goods and Service Tax (GST):

As a significant step towards the reform of indirect taxation in India, the Central
Government has introduced the Goods and Service Tax (GST) with effect from July 1, 2017.
Distinction between Direct and Indirect Taxes:

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3. Revenue Authorities:
a) CBDT:
The Central Board of Direct Taxes (CBDT) is a part of the Department of Revenue under the
Ministry of Finance. This body provides inputs for policy and planning of direct taxes in India
and is also responsible for administration of direct tax laws through the Income Tax
Department.
b) CBEC:
The Central Board of Excise and Customs (CBEC) is also a part of the Department of Revenue
under the Ministry of Finance. It is the nodal national agency responsible for administering
customs, central excise duty and service tax in India.
c) CBIC:
Under the GST regime, the CBEC has been renamed as the Central Board of Indirect Taxes &
Customs (CBIC) post legislative approval. The CBIC would supervise the work of all its field
formations and directorates and assist the Government in policy making in relation to GST,
continuing central excise levy and customs functions.
The Indian taxation system in India has witnessed several modifications over the years.
There has been standardization of income tax rates with simpler governing laws enabling
common people to understand the same. This has resulted in case of paying faxes, improved
compliance, and enhanced enforcement of the laws.
FEATURES OF INDIRECT-TAXES
A major source of revenue:
Indirect taxes are an important source of tax revenues for Governments all over the world
and continue to grow as more and more countries are moving to consumption oriented tax
regimes. In India, indirect taxes contribute more than 50% of the total tax rev enues of
Central and State Governments.
Tax on commodities and services:

It is levied on commodities at the time of manufacture or purchase or sale or import/export
thereof. Hence, it is also known as commodity taxation. It is also levied on provision of
services.
Shifting of burden:
In the indirect taxes the tax burden is shifted by the tax payer to his customer. The tax is
collected through the selling price of goods and services and remitted to the tax department
of the government. Price of goods and services serves as vehicle for indirect taxes. For
example, GST paid by the supplier of the goods is recovered from the buyer by including the
tax in the cost of the commodity.
No direct pinch to tax payers:
Since, value of indirect taxes is generally inbuilt in the price of the commodity or service,
most of the time the tax payer pays the tax without actually knowing that he is paying tax to
the Government. Thus, tax payer does not perceive a direct pinch while paying indirect

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taxes. Through the purchase and consumption of various goods and services in our day to
day life we are regularly paying several indirect taxes to the government treasury.
Inflationary:
As indirect taxation directly affects the prices of commodities and services a rise in indirect
taxes leads to inflationary trend.
Wider tax base:
Unlike direct taxes, the indirect taxes have a wide tax base. Majority of the products or
services are subject to indirect taxes with low thresholds. Hence every person in a nation is
indirect tax-payee. Therefore, it is rightly said that there are two things certain in human life
namely, death and taxes.
Promotes social welfare:

High taxes are imposed on the consumption of harmful products (also known as ‘sin goods’)
such as alcoholic products, tobacco products etc. This not only curtails their consumption
but also enables the State to collect substantial revenue. Thus indirect taxes indirectly
promote social welfare.
Regressive in nature:
Generally, the indirect taxes are regressive in nature. The rich and the poor have to pay the
same rate of indirect taxes on certain commodities of mass consumption. This may lead to
further increase the income disparities between the rich and the poor.
DEFICIENCIES IN THE VALUE ADDED TAX SYSTEM IN INDIA

1. Tax evasion is possible through bogus (fake) invoices.
2. Cost of compliance increased as records of all purchases and sales are required to be
maintained.
3. VAT system is distorted due to various exemptions or concessions.
4. VAT is consumption based tax it is collected more by the state which consumes more
goods and not by State which produces more.
5. Since it is tax on expense, it is regressive in nature it affects poor more as they spend
more proportion of their income than rich.
HISTORY OF GST:
France was the first country to implement GST in the year 1954. Within 62 years of its advent, about
160 countries across the world have adopted GST because this tax has the capacity to raise revenue
in most transparent and natural manner.

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EVOLUTION OF GST IN INDIA:
Kelkar Task Force 2004:

The Finance Ministry of Government of India set up a Task Force under the chairmanship
Mr.Vijay Kelkar in 2004 on the implementation of Fiscal Responsibility and Budget
Management. It made recommendations to bring about a radical transformation of the
Indian Tax System. It disagreed with the existing approach of the government to reduce
government expenditure to achieve the fiscal consolidation. It has advised to go for a
Revenue-led Approach which focuses on enhancing the revenues instead of compressing
the expenditure. It went further to suggest that the Government should enhance capital
expenditure in order to counterbalance the contraction effects of fiscal consolidation. The
Goods and Service Tax is an outcome of the recommendations of the Task Force under the
chairmanship of Mr. Vijay Kelkar. In India the draft of Goods and Service Tax (GST) was
presented in the parliament in August, 2009.
Initiative of NDA Government:

Subsequently, the then Union Finance Minister, Shri P. Chidambaram announced that GST
would be introduced from April 1, 2010. Since then, GST missed several deadlines and
continued to be shrouded by the clouds of uncertainty. The talks of ushering in GST,
however, gained momentum in the year 2014 when the NDA Government tabled the
Constitution. (122nd Amendment) Bill, 2014 on GST in the Parliament on 19 th December,
2014. The Lok Sabha passed the Bill on 6th May, 2015 and Rajya Sabha on 3rd August, 2016.
Subsequent to ratification of the Bill by more than 50% of the States, Constitution. (122nd
Amendment) Bill, 2014 received the assent of the President on 8th September, 2016 and
became Constitution (101st Amendment) Act, 2016, which paved the way for introduction
of GST in India. In the following year, on 27th March, 2017, the Central GST legislations -
Central Goods and Services Tax Bill, 2017 integrates Goods and Service Tax Bill, 2017, Union
Territory Goods and Services Tax Bill, 2017 and Goods and Services Tax (Compensation to
States) Bill, 2017 were introduced in Lok Sabha. Lok Sabha passed these bills on 29th March,
2017 and with the receipt of the President’s assent on 12th April, 2017, the Bills were
enacted.
State GST Laws:
The enactment of the Central Acts was followed by the enactment of the State GST laws by
various State Legislatures. Telangana, Rajasthan, Chhattisgarh, Punjab, Goa and Bihar were
among the first ones to pass their respective State GST laws GST is a path breaking indirect
tax reform which will create a common national market. GST has subsumed multiple
indirect taxes like excise duty, service tax, VAT, CST, luxury tax, entertainment tax, entry tax,
etc.

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The Goods and Services Tax (GST) was launched in the midnight of 10th June 2017 by the
Prime Minister of India Sri Narendra Modi. GST is an indirect Tax applicable throughout India
replacing multiple tax system levied by the Central and State Governments. By
amalgamating a large number of Central and State taxes into a single tax and allowing set-
off of prior-stage taxes it would mitigate the all effects of cascading and pave the way for a
common national market. For the consumers the biggest gain would be in terms of a
reduction in the overall tax burden on goods. Introduction of GST would also make our
products more competitive in the domestic and international markets. GST because of its
transparent character would be easier to administer.

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GST – CONCEPT AND STATUS

GST is the biggest reform for indirect taxes in India in the post-independence period. It
simplified indirect taxation, reduced tax complexities, removed the cascading effect and led
to one nation and one tax regime in India. Experts believe that GST will have a huge positive
impact on business and change the way the economy functions.
GST is a single value added tax on the supply of goods and services, right from the
manufacturer to the consumer. Credits of input taxes paid at each stage will be available in
the subsequent stage of value addition, which makes GST essentially a tax only on value
addition at each stage. The final consumer will thus bear only the GST charged by the last
dealer in the supply chain, with set-off benefits at all the previous stages.
MEANING OF GST:
GST stands for "Goods and Services Tax”.
It is a comprehensive Indirect Tax levied on manufacture, sale and consumption of goods as

well as services at the national level.
Its main objective is to consolidates all indirect tax levies into a single tax, except Customs
(excluding SAD) replacing multiple tax levies, overcoming the limitations of existing Indirect
Tax structure, and creating efficiencies in tax administration.
Goods and service Tax means any tax on supply of goods or services or both except taxes on
the supply of the alcoholic liquor for human consumption.
As per GST Act 2017 "GST is a tax on Goods and Services with value addition at each stage
having comprehensive and continuous chain of set of benefits from the producer's / service
provider's point up to the retailer's level where only the final consumer should bear the
tax.”
A major change in administering GST will be that the tax incidence is at the point of sale as
against the present system of point of origin.
GST can be termed as "One Tax One Nation and One Market” because before that we have
many taxes like Service Tax service charge, food charge, and other types of taxes and people
didn't know how all these taxes are applicable but now when GST is introduced it is easy for
the people to understand what amount and why they are paying this tax and it is also very
easy to understand because there are 4 types according to the different types of products.
From Ganganagar to Itanagar from Leh to Lakshwadweep the nation will see “ONE NATION,
ONE TAX”.
GST a cure for ills of existing indirect tax regime

One of the reasons to go the GST way is to facilitate seamless credit across the entire supply
chain and across all States under a common tax base. It is a tax on goods and services, which
will be levied at each point of sale or provision of service, in which at the time of sale of

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goods or providing the services the seller or service provider can claim the input credit of tax
which he has paid while purchasing the goods or procuring the service. This is because they
include GST in the price of the goods and services they sell and can claim credits for the
most GST included in the price of goods and services they buy. The cost of GST is borne by
the final consumer, who can’t claim GST credits i.e input credit of the tax paid.
Example: A product whose base price is ₹ 100 and after levying Excise Duty @ 12% value of
the product is ₹ 112. On sale of such goods VAT is levied @ 12.5% and value to the ultimate
consumer ₹ 126. In the GST system on base price of ₹ 100 CGST and SGST both will be
charged, say @ 10% each and then the value to the ultimate consumer is ₹ 110. So in such a
case the industry can better compete in global environment.
GST has replaced almost 17 of the existing State and Central Indirect Taxes (more to come in
the future) such as Central Excise Duty, Additional Customs Duty VAT Entertainment Tax,
Service Tax etc.
HOW GST WORKS

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NEED OF GST IN INDIA:

There are various taxes that have to pay at every stage and differently collected by Central
and State Governments and rates differ from one state to another. If we talk about GST, it
will have unified whole nation and taxes will be divided among Central and State
Governments, which will make easier to provide services and goods across country, as no
more additional State Taxes will be imposed.
Imposing several taxes on goods and services can lead to high cost and inefficient tax
structure which can subject to shirking and revenue disclosures. The need for GST in Indian
Taxation System will add value at each stage and will set off the rates both at State and at
Centre level. Introducing GST, will increase the efficiency of taxation, improves the
economic growth and it will bring whole nation to one national market.
Following are some of the points that can easily explain the need for GST:
1. Tax Structure will be Simple:
At present, there are huge number of taxes that has to be paid by consumers, with GST
consumers will pay single tax, which is much easier to understand. For businesses,

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accounting complexities will reduce and results in to less paperwork, which will save both
time and money.
2. Tax revenue will increase:

Simple tax structure will bring more tax payers and in return it will be revenue for the
Governments.
3. Competitive pricing:
It will eliminate all other taxes of indirect taxes and this will effectively mean that tax
amount paid by end users (consumers) will reduce. As in Economics, lower the prices, more
will be demand for that product, results in more consumption of goods, which will be
benefited to companies.
4. Boost to exports:
If Indian market will be competitive in pricing, then more and more foreign players will try
to enter the market, which results in more number of exporters and is benefited to Indian
Market as far no tax rate is finalized, but GST is much needed in the countries where it lacks
transparency and involves complex taxation system.
5. Technology driven system:
GST compliance is going to be transaction based and with cross matching concept, where,
outward supply and inward supply will be matched to determine the net tax liability for a
given dealer. Millions of dealers and billions of transactions to be processed and there
'Technology' will play a pivotal role in the successful implementation and administration of
compliance.
SUBSUMING OF TAXES:
The various taxes levied by the State and Center on supply of goods and services would be
subsumed in the new tax regime as depicted below:

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Following taxes have been subsumed in Central GST:

1. Service Tax-
Service tax is the tax payable on services that are taxable. While in most cases, the
service provider is liable to pay this tax, in certain cases the recipient of the service is
liable to pay tax. This is known as the reverse charge mechanism.
2. Central Excise Duty-

This form of Indirect Tax is levied on goods and commodities manufactured within the
country.
3. Duties of Excise (Medicinal and Toilet Preparations)
4. Additional Excise Duty (Goods of Special Importance)-

This is the duty charged on certain goods which are produced, manufactured or stored in
the country.
5. Additional Excise Duty (Textiles and Textile Products).
6. Excise Duty levied under the MTP Act.

7. Additional Customs Duty (CVD)-
This is a type of duty applicable on certain goods in order to prevent dumping or to
counter export subsidies.
8. Special Additional Duty of Customs (SAD)-
SAD or Special Additional Duty is the duty paid on the imported goods. The importer
could claim for the refund of the special additional duty after the subsequent sale of the
imported items.
9. Central Surcharges and Cesses related to supply of Goods or services
Following taxes have been subsumed in State GST:

1. VAT / Sales Tax-
Value added tax or VAT is the tax applicable on addition of value and is collected at
different stages of sale. VAT is a consumption tax that is placed on a product whenever
value is added at different stages of production.
2. Central Sales Tax-
Central Sales Tax or CST is the tax levied on sale of items in inter-state trade. An origin-
based tax, CST is charged where the item is sold.
3. Luxury Tax
4. Entry Tax (All forms)-

The local tax paid on consumables brought to a state at the time of entry.
5. Purchase Tax-

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Unlike Sales Tax, which is paid by the seller, this tax is paid by the consumer on purchase
of a good. In practice, the seller usually passes on the Sales Tax to the purchaser in the
form of higher price for an item.
6. Entertainment Tax (other than levied by local body)-

This tax includes exhibition, performance, amusement, game, sport or race (including
horse race) and exhibitions of films. Proprietors or organizers of entertainment are liable
to collect Entertainment Tax from the customers and pass on the same to the
Government.
7. Taxes on advertisements
8. Tax on lottery, betting & gambling
9. State Cesses & Surcharges related to supply of goods or services
The principles adopted for subsuming the above taxes under GST:
The various Central, State and Local levies were examined to identify their possibility of
being subsumed under GST.
While identifying, the following principles were kept in mind:
(i) Taxes or levies to be subsumed should be primarily in the nature of Indirect Taxes, either
on the supply of goods or on the supply of services. The taxes, levies and fees that are not
specifically related to supply of goods & services should not be subsumed under GST.
(ii) Taxes or levies to be subsumed should be part of the transaction chain which
commences with import/manufacture/ production of goods or provision of services at one
end and the consumption of goods and services at the other.

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(iii) The subsumation should result in free flow of tax credit in intra and inter-State levels.
(iv) Revenue fairness for both the Union and the States individually would need to be
attempted.
TREATMENT OF SPECIFIC GOODS

i) Tax on supply of the Alcoholic Liquor for human consumption:
As per the proposed amendment to Constitution by the Constitution (122nd Amendment)
Bill, 2014, supply of the alcoholic liquor for human consumption has been excluded from the
definition of Goods and Service Tax. New clause 12A has been inserted in Article 366 which
defines Goods and Service Tax as follows:
‘Goods and Services Tax’ means any tax on supply of goods or services or both except taxes
on the supply of the alcoholic liquor for human consumption. Hence, the supply of the
alcoholic liquor for human consumption will be out of the GST. Alcohol products for human
consumption would continue to be exclusively taxed by the States. Since the Bill specifically
excludes alcohol products from the ambit of GST, bringing it within GST at a future date
would require another Constitutional Amendment. CST on inter-state sales of alcohol would
also continue. It therefore appears that the empowerment of States to tax alcohol products
is intended to remain unaltered in the near future.
ii) Tax on Tobacco products:

Tobacco and tobacco products would be subjected to GST. However, it can be subjected to a
separate Excise Duty by the Centre.
iii) Tax on Petroleum crude oil/ High Speed diesel/Motor Spirit/ Motor Spirit/ Natural
Gas/Aviation Turbine Fuel:
The States would continue as per the current laws to impose Value Added Tax (VAT) on
Petroleum Crude/ High Speed Diesel/ Motor Spirit/ Natural Gas/ Aviation Turbine Fuel on
intra-state sales while inter-state sales would continue to attract Central Sales Tax (CST).
These products would be transitioned into the GST regime from a future date to be notified
by the GST Council. It is currently unclear from the schematics of the Bill whether States
would fully discontinue collecting VAT/ CST on these products from this notified date, or
whether the transition would be gradual. The Bill however also states that these products
can be subjected to an Excise Duty imposed by the Centre; this levy would be imposed now
and even after GST comes into force. Such duty can be in addition to the applicable VAT or
GST imposed.
iv) Tax on Newspapers and Advertisement Therein:
GST would be capable of being levied on the sale of newspapers and advertisements
therein. This would give the governments the access to substantial incremental revenues
since this industry has historically been tax free in its entirety.
v) Opium, Indian hemp and other narcotic drugs and narcotics:

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Opium, Indian hemp and other narcotic drugs and narcotics are within the purview of GST,
i.e. GST is leviable on them. However, State Governments have also retained the power to
levy excise duties on such products manufactured in India. Resultantly, Opium, Indian hemp
and other narcotic drugs and narcotics are subject to GST as well as State excise duties.
vi) Real estate sector:

Further, has been kept out of ambit of GST, i.e. GST will not be levied on sale/purchase of
immovable property.
TAXES WHICH ARE NOT TO BE SUBSUMED:

GST may not subsume the following taxes within its ambit:
• Basic Customs Duty: These are protective duties levied at the time of Import of
goods into India.
• Excise duty /VAT on petroleum products for initial years (In addition to GST at Nil
rate)
• Excise duty on tobacco products (In addition to GST) • Entertainment tax levied by
local bodies
• State excise on Alcoholic beverages (No GST)
• Road & Passenger Tax: These are in the nature of fees and not in the nature of taxes
on goods and services.
• Toll Tax: These are in the nature of user fees and not in the nature of taxes on goods
and services.
• Property Tax
• Stamp Duty
• Electricity Duty
• Royalty on minerals, Environmental /regulatory taxes. Ex: Vehicles tax
SALIENT FEATURES OF GST

The salient features of GST are as under:
1. GST would be applicable on "supply" of goods or services as against the present concept
of tax on the manufacture of goods or on sale of goods or on provision of services.
2. GST would be based on the principle of destination based consumption taxation as
against the present principle of origin-based taxation.
3. It would be a dual GST with the Centre and the States simultaneously levying it on a
common base. The GST to be levied by the Centre would be called Central GST (central
tax- CGST) and that to be levied by the States [including Union territories with legislature]
would be called State GST (state tax- SGST). Union territories without legislature would
levy Union territory GST (union territory tax- UTGST).
4. An Integrated GST (integrated tax- IGST) would be levied on inter-State supply (including
stock transfers) of goods or services. This would be collected by the Centre so that the
credit chain is not disrupted.
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5. Import of goods of Services would be treated as inter-State supplies and would be subject
to IGST in addition to Customs Duties.
6. CGST, SGST /UTGST& IGST would be levied at rates to be mutually agreed upon by the
Centre and the States under the Goods and Services Tax Council.
7. GST would replace the indirect taxes levied by both State and Central Government
8. GST would apply to all goods and services except Alcohol for human consumption.
9. GST on five specified petroleum products (Crude, Petrol, Diesel, ATF & Natural gas) would
be applicable from a date to be recommended by the GSTC.
10. Tobacco and tobacco products would be subject to GST. In addition, the
Centre would continue to levy Central Excise Duty.
11. A common threshold exemption would apply to both CGST and SGST.
12. All Exports and supplies to SEZs and SEZ units would be zero-rated.
13. Input Tax Credit (ITC) to be broad based by making it available in respect of taxes paid
on any supply of goods or services or both used or intended to be used in the course or
furtherance of business.
14. Accounts would be settled periodically between the Centre and the State to ensure that
the credit of SGST used for payment of IGST is transferred by the originating State to
the Centre. Similarly, the IGST used for payment of SGST would be transferred by
Centre to the destination State.
15. Goods and Services Tax Appellate Tribunal would be constituted by the Central
Government for hearing appeals against the orders passed by the Appellate Authority
or the Revisional Authority. States would adopt the provisions relating to Tribunal in
respective SGST Act.
OBJECTIVES OF GST
1. Ensuring that the cascading effect of tax on tax will be eliminated.
2. Improving the competitiveness of the original goods and services, thereby improving the
GDP rate too.
3. Ensuring the availability of input credit across the value chain.
4. Reducing the complications in tax administration and compliance.
5. Making a unified law involving all the tax bases, laws and administration procedures
across the country.
6. Decreasing the unhealthy competition among the states due to taxes and revenues.
7. Reducing the tax slab rates to avoid further clarification issues.
8. To implement One Country - One Tax
9. Consumption based tax instead of Manufacturing
10. Uniform GST Registration, payment and Input Tax Credit
11. To eliminate the cascading effect of Indirect Taxes on single transaction
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12. Subsume all Indirect Taxes at Centre and State Level under
13. Reduce tax evasion and corruption
14. Increase productivity
15. Increase Tax to GDP Ratio and revenue surplus
SCOPE OF GST:
• GST shall cover all goods and services, except alcoholic liquor for human consumption,
for the levy of Goods and Services Tax.
• In case of petroleum and petroleum products, it has been provided that these goods shall
not be subject to the levy of Goods and Services Tax till a date notified on the
recommendation of the Goods and Service Tax Council.
• Promulgation of GST Council proposed Article 279A of the Bill provides for Constitution of
Goods and Services Tax Council to examine issues relating to GST and make
recommendations to the Union and the State on parameters like rates, exemption list
and threshold limits.
• The council shall function under the Chairmanship of the Union Finance Minister and will
have the state Union Ministers as its members.
• Tobacco products subject to levy of GST and Centre may also levy Excise Duty as per
Entry No 83 of Seventh Schedule to the Constitution.
GOODS AND SERVICES TAX NETWORK (GSTN):

• Goods and Services Tax Network (GSTN) has been set up by the Government as a private
company under erstwhile Section 25 of the Companies Act, 1956.
• GSTN would provide three front end services to the tax payers namely Registration,
Payment and Returns.
• Besides providing these services to the taxpayers, GSTN would be developing back-end IT
modules for 27 States who have opted for the same.
• The migration of existing taxpayers has already started from November, 2016.
• The Revenue department of both Centre and States are pursuing the presently registered
taxpayers to complete the necessary formalities on the IT system operated by GSTN for
successful migration.
BASIC SCHEME OF GST:

Every tax system prescribes several actions which need to be taken by businesses to ensure
compliance with statutory provisions. Things like periodic payment of taxes, filing timely
returns and maintaining prescribed records are necessary steps in a tax system for
corporate taxpayers.
There are two basic schemes of GST. They are viz.,

1. Regular Scheme &
2. Composition Scheme.

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1. Regular Scheme:
Under this scheme registration is required once threshold limit crosses as per section 22 of
CGST Act, 2017. The assessee is liable to follow all rules and regulations as per GST Act. The
maintenance of books of accounts, filing of Returns, issue of Invoices should be as per Act.
This is applicable to the suppliers who are all not covered under composition scheme of
GST.
Threshold Limit with effect from 01.04.2019.
 Threshold Limit for Registration in case of goods (allover India) except in the state of
Arunacahal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Puducherry, Sikim,
Telengana, Tripura, Uttrakhanad- ₹ 40 lakhs
 Threshold Limit for Registration in case of Services except persons engaged in making
Supplies in the state of Arunacahal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland,
Puducherry, Sikim, Telengana, Tripura, Uttrakhanad- ₹ 20 lakhs
 Threshold Limit for Registration in case of Goods & Services engaged in making Supplies
in the state of Arunacahal Pradesh, Meghalaya, Puducherry, Sikim, Telengana,
Uttrakhanad - ₹ 20 lakhs
 Threshold Limit for Registration in case of Goods & Services engaged in making Supplies
in the state of Manipur, Mizoram, Nagaland, Tripura - ₹ 10 lakhs
2. Composition scheme:
 To make compliance easier for small businesses, many State Governments have
provisions in their VAT system for payment of a composition levy by small
businesses.
 This ensures greater compliance without the need for maintaining copious records.
 The One Nation One Tax Scheme (GST) which promises to club all the Indirect Taxes
into one also boasts a composition scheme for small businesses.
 The GST Composition Scheme will make compliance with tax laws hassle free for
eligible businesses opting for the scheme.
 A taxpayer whose turnover is below ₹ 1.5 crore w.e.f 1.4.2019 can opt for
Composition Scheme.
 In case of Arunachal Pradesh, Uttara Khand, Manipur, Meghalaya, Mizoram,
Nagaland, Sikkim and Tripura the limit is now Rs 75 lakh.
 Turnover of all businesses registered with the same PAN should be taken into
consideration to calculate turnover.
 In case of service providers other than Restaurants ₹ 50 Lakhs.
BENEFITS OF GST
GST is a win-win situation for the entire country. It brings benefits to all the stakeholders of
industry, Government and the consumer.
The significant benefits of GST are discussed hereunder:
 Benefits to economy

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 Benefits for Business and Industry

 Benefits to the Common Man
Benefits to economy
1. Creation of unified national market: GST aims to make India a common market with
common tax rates and procedures and remove the economic barriers thus paving the way
for an integrated economy at the national level.
2. Boost to 'Make in India' initiative: GST gives 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. This will create India as a Manufacturing hub.
3. Enhanced investment and employment: The subsuming of major Central and State taxes
in GST, complete and comprehensive setoff of input tax on goods and services and phasing
out of Central Sales Tax (CST) reduces the cost of locally manufactured goods and services
and increases the competitiveness of Indian goods and services in the international market
and thus, gives boost to investments and Indian exports. With a boost in exports and
manufacturing activity, more employment is generated and GDP is increased.
4. Certainty in tax administration: Common system of classification of goods and services
ensures certainty in tax administration across India.
5. Automated procedures with greater use of IT: There are simplified and automated
procedures for various processes such as registration, returns, refunds, tax payments. All
interaction is through the common GSTN portal, therefore, less public interface between
the taxpayer and the tax administration.
6. Reduction in compliance costs: The compliance cost is lesser under GST as multiple
record-keeping for a variety of taxes is not needed, therefore, there is lesser investment of
resources and manpower in maintaining records. The uniformity in laws, procedures and tax
rates across the country goes a long way in reducing the compliance cost.
7. Simple and easy to administer: Multiple indirect taxes at the Central and State levels are
being replaced by GST. Backed with a robust end to end IT system, GST would be simpler
and easier to administer than all other Indirect Taxes of the Centre and State levied so far.
8. Better controls on leakage: GST will result in better tax compliance due to a robust IT
infrastructure. Due to the seamless transfer of input tax credit from one stage to another in
the chain of value addition, there is an inbuilt mechanism in the design of GST that would
incentivize tax compliance by traders.
9. Higher revenue efficiency: GST is expected to decrease the cost of collection of tax
revenues of the Government, and will therefore, lead to higher revenue efficiency.
10. Expansion of tax base: Expansion of the tax base as they will be able to tax the entire
supply chain from manufacturing to retailing.

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11. Benefit to consuming States: GST being destination based consumption tax which will
favour consuming States.
12. Unorganized sector is regulated under GST: In the pre-GST era, it was often seen that
certain industries in India like construction and textile were largely unregulated and
unorganized. Under GST, however, there are provisions for online compliances and
payments, and for availing of input credit only when the supplier has accepted the amount.
This has brought in accountability and regulation to these industries.
13. Transparency: The complexity of the present indirect tax structure prevents
transparency. GST being a uniform tax system, it would yield the necessary information to
the end consumers and help create a transparent environment.
Benefits for business and industry

1. Benefits to agriculture and Industry: GST has given more relief to industry, trade and
through a more comprehensive and wider coverage of input tax set-off and service tax
setoff, subsuming of several Central and State agriculture taxes in the GST and phasing out
of CST. The transparent and complete chain of set-offs which results in widening of tax base
and better tax compliance also leads to lowering of tax burden on an average dealer in
industry, trade and agriculture.
2. Mitigation of ill effects of cascading: By subsuming most of the Central and State taxes
into a single tax and by allowing a set-off of prior-stage taxes for the transactions across the
entire value chain, it helps in mitigating the ill effects of cascading, improving
competitiveness and improving liquidity of the businesses.
3. Benefits to small traders and entrepreneurs: GST has increased the threshold for GST
registration for small businesses. Further, single registration is needed in one State. Small
businesses have also been provided the additional benefit of composition scheme. With the
creation of a seamless national market across the country, small enterprises have an
opportunity to expand their national footprint with minimal investment.
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. Uniformity of tax rates and structures: GST will ensure that Indirect Tax rates and
structures are common across the country, thereby increasing certainty and ease of doing
business. In other words, GST would make doing business in the country tax neutral,
irrespective of the choice of place of doing business.
6. Improved competitiveness: Reduction in transaction costs of doing business would

eventually lead to an improved competitiveness for the trade and industry.
7. Gain to manufacturers and exporters: The subsuming of major Central and State Taxes in
GST, complete and comprehensive setoff of input goods and services and phasing out of
P a g e | 22
Central Sales 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.
8. Ease of doing business: Simpler tax regime with fewer exemptions along with reduction in
multiplicity of taxes under GST has led to simplification and uniformity. The uniformity in
laws, procedures and tax rates across the country makes doing business easier.
9. E-Commerce operators no longer suffer from differential treatment: Earlier to GST

regime, supplying goods through e-commerce sector was not defined. It had variable VAT
laws. Let us look at this example: Online websites (like Flipkart and Amazon) delivering to
Uttar Pradesh had to file a VAT declaration and mention the registration number of the
delivery truck. Tax authorities could sometimes seize goods if the documents were not
produced. Again, these e-commerce brands were treated as facilitators or mediators by
states like Kerala, Rajasthan, and West Bengal which did not require them to register for
VAT. All these differential treatments and confusing compliances have been removed under
GST. For the first time, GST has clearly mapped out the provisions applicable to the e-
commerce sector and since these are applicable all over India, there should be no
complication regarding the inter-state movement of goods anymore.
10. Improved efficiency of logistics: Earlier, the logistics industry in India had to maintain
multiple warehouses across states to avoid the current CST and state entry taxes on
interstate movement. These warehouses were forced to operate below their capacity, giving
room to increased operating costs. Under GST, however, these restrictions on inter-state
movement of goods have been lessened. As an outcome of GST, warehouse operators and
e-commerce aggregators players have shown interest in setting up their warehouses at
strategic locations such as Nagpur (which is the zero-mile city of India), instead of every
other city on their delivery route. Reduction in unnecessary logistics costs is already
increasing profits for businesses involved in the supply of goods through transportation.
Benefits to the Common Man

1. Reduction in the price of goods and services: In GST, cascading effect shall be removed as
the Input Tax Credit (ITC) shall be available for all goods and services at each and every stage
of the supply chain. So, now the final price of goods and services is expected to be lower
due to the seamless flow of ITC between the manufacturer, retailer and service provider.
This shall lead to a reduction of cost thereby reduction in prices which is charged to ultimate
consumers.
2. Uniform prices throughout the country: In the previous tax regime, State Value Added Tax
(VAT) was levied on Sale of goods. As the rate of tax was different from States to States,
there was variation in prices. Also, certain taxes and duties (Eg. entry tax) was levied only in
certain states. As GST is ONE NATION ONE TAX, there is a uniform price for all the products
and services throughout the nation, there does not arise any such complexities.

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3. Trust in Simpler Tax System: The previous indirect tax structure was very complicated to
understand for a layman. GST will increase the level of transparency and trustworthiness of
the Consumer on Tax Administrators as well as Business because everything is
computerized. This shall boost the trust of consumers in a simplified tax system.
4. Better accessibility of goods and services: As all the goods and services are charged one
rate across the nation, the consumer does not travel across the states to make purchases
for the purpose of saving tax. Further, the online shopping companies will plan their
operations to reduce the lead time, while managing the warehousing facilities, which today
are contingent on filling complexities of the present tax structure.
5. Hitting on corruption: The GST, as per government, has significantly helped in curbing
corruption. Whether an SME, MSME or a large enterprise, there is a prescribed regime with
a uniform tax slab that everyone will fall in. There is no scope for evasion or legal wrangling.
This makes it really easy when it comes to doing businesses. Not to mention it routes out
corruption, eliminates the middleman, is anti-profiteering and beneficial to the economy.
6. Increasing productivity: E-way bill ensured easy movement across the state borders,
helping in increasing productivity.
7. GDP growth: This new and advance tax system increase tax payer in a genuine way. It
provides boost to GDP in a positive way. The GDP growth is a very win-win situation for
people and government in long run. The governments have to spend on social reform and
infrastructures that is beneficial for all in long run.
8. Reduces circulation of black money: It will curb circulation of black money as it leads to
issue of "pakka bill" system which is linked with trader's Adhaar and PAN number.
9. Poverty eradication: The increased production will lead to more job opportunities in long
run. It helps to eradicate poverty by generating more employment and more financial
resources.
10. Rise in the production of goods: Low prices further leads to an increase in the demand/
consumption of goods. Increased demand leads to increase supply. Hence, it ultimately
leads to rise in the production of goods. A national tax reform of such high enormity that
touches millions of consumers and producers is definitely a commendable effort and is
expected to be a win-win for all!
Disadvantages of GST
1. Increased costs due to software purchase:
Businesses have to either update their existing accounting or ERP software to GST-
compliant one or buy a GST software so that they can keep their business going. But both
the options lead to increased cost of software purchase and training of employees for an
efficient utilization of the new billing software.

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2. Being GST-compliant:
Small and medium-sized enterprises (SME) who have not yet signed for GST have to
quickly grasp the nuances of the GST tax regime. They will have to issue GST-complaint
invoices, be compliant to digital record-keeping, and of course, file timely returns. This
means that the GST-complaint invoice issued must have mandatory details such as GSTIN,
place of supply, HSN codes, and others.
3. GST will mean an increase in operational costs:
It is already established fact that GST is changing the way how tax is paid; businesses will
now have to employ tax professionals to be GST-complaint. This will gradually increase
costs for small businesses as they will have to bear the additional cost of hiring experts.
Also, businesses will need to train their employees in GST compliance, further increasing
their overhead expenses.
4. GST is an online taxation system:
Unlike earlier, businesses are now switching from pen and paper invoicing and filing to
online return filing and making payments. This might be tough for some smaller
businesses to adapt.
5. SMEs will have a higher tax burden:

Smaller businesses, especially in the manufacturing sector will face difficulties under GST.
Earlier, only businesses whose turnover exceeded ₹ 1.5 crore had to pay excise duty. But
now any business whose turnover exceeds ₹ 40 lakh will have to pay GST. However, SMEs
with a turnover upto ₹ 75 lakh can opt for the composition scheme and pay only 1% tax
on turnover in lieu of GST and enjoy lesser compliances. The catch though is these
businesses will then not be able to claim any input tax credit. The decision to choose
between higher taxes or the composition scheme (and thereby no ITC) will be a tough
one for many SMEs.
6. To Burn a hole in the consumers pocket in the name of cess and costlier Services:
There were many exemptions provided for various Services earlier. But under GST
exemptions have been given only where necessary. Thus, the businessmen will pass the
ultimate economic tax burden to the consumers. Also on certain goods like tobacco
products, aerated water, motor cars; additional cess is being levied which is known as
"compensation cess"; thus making the goods costlier. Moreover, certain services such as
accommodation in hotels, work contracts, movie tickets, etc. to get costlier as previous
service tax charged was around 15% and the current GST rate charged for them is 18% or
28%.
GST: Impact of GST on Indian Economy

An economy of a country can grow only if its people and their businesses grow and there is
an increase in the Government revenue in the long run. The following points covering the
GST impact on economy that shall help to understand it in a better way.

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1. GST or Goods and Services Tax is a destination based indirect tax that will remove the
cascading effect of taxes. GST that will replace a number of indirect taxes like Service tax,
excise duty, Value Added Tax (VAT), Counter Vailing Duty (CAD), Special Additional Duty of
Customs (SAD), Central Sales Tax (CST) etc.
2. GST shall ease the way for doing business by removing a plethora of indirect taxes.
3. GST shall potentially have its impact on both the manufacturing as well as the services
sector. Though the common man may hesitate initially but the after effects of GST shall
sound really beneficial.
4. Businesses may it be small or big shall be engaged in the transition from the earlier
taxation system to the new GST system. However, it may take some time to adjust,but
slowly and gradually as they get used to this new taxation system,things will get simplified.
5. GST shall reduce the overall transaction cost of businesses like the warehousing and
logistics cost shall see a decreasing trend and businesses shall benefit from it.
6. GST shall enforce free flow of goods and services as well as seamless flow of credit. This
shall directly or indirectly lay a positive impact on economy and foster growth through
increased production of goods.
7. If the actual benefit of GST gets passed on to the consumers, we can see a reduction in
the cost of different goods. This will further enhance demand of products and boost their
sales thereby benefiting the overall economy.
8. The perfect example of positive impact of GST on Indian economy shall be seen through a
boost for the "Make in India" programme as manufacturers shall be entitled for input tax
credit for capital goods.
9. The enhanced production means reduction in the unemployment rate. If more
employment is generated in the country, this leads to high demand. This vicious circle of
Demand-Production Employment-Demand implies that the GDP of the country can see an
increasing trend.
10.The Indian products shall become more competitive at the domestic as well as the
international levels.
11.The new GST or Goods and Services Tax shall pave the way for a common national
market wherein a common tax known as GST shall be apply. Although,there are 4 GST slabs
i.e.5%, 12%,18% and 28% that have been finalised for different category of goods and
services.
12.GST shall add to the Government revenue by widening the tax horizon and bringing even
smaller businesses in its ambit. Initially, the production states i.e.the ones where production
takes place may loose revenue which the centre shall compensate. But, as time passes by
the improved tax compliance under the GST system shall add to the revenue of
Government. Small business must now be prepared to take up a significant compliance
burden as there is no scope of escapism of any kind.

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13.The proposed GST rate on services i.e.18% from the present service tax rate of 15% shall
also lead to an increased revenue.
14.Certain exemptions leading to revenue foregone are likely to be removed to further

widen the tax base under GST.
15. Some experts believe that there can be a rise in inflation after the implementation of
GST. However, this impact of inflation is expected to subside slowly and gradually.
So, with the revised changes rightly implemented and the combined impact of all the above
factors, GST can act as a great stimulant for the economic growth of the country in the near
future.
In the years to come, GST can help the Indian economy to grow by widening the tax base
and having greater transparency and participation in the formal economy. Now, whether
the passing of actual benefits really happens is a matter of considerable speculation.
But, if it does happen, the combined effect of the above positive stimulants shall help
businesses grow, maximise sales, increase revenue, reduce unemployment, rise in demand
of goods etc. that shall ultimately lead to increase in Gross Domestic Product or GDP of the
country. Increase in GDP itself means that the economy is moving towards a brighter and
progressive side, this is what we as an Indian citizen want.
So, GST is expected to positively benefit the two important pillars of a growing economy i.e.
India's business climate as well as the financial system of the country. Both of them play a
crucial role in shaping the economy of any country.
GST being a completely new reform for a developing nation like India is bound to have some
teething problems, especially at the initial stage. Later on, as and when people get
accustomed to it and overcome the transition stage i.e. from the multiple indirect taxation
system to the new GST regime, they are more likely to benefit from it.
CONSTITUTIONAL FRAME WORK OF GST
CONSTITUTION (122nd) AMENDMENT BILL, 2014

In line with the dual model of GST, the Bill made amendments like giving concurrent powers
to both Union and States to legislate on GST, subsuming of various Central and State levies
in GST, empowering Centre to levy and collect CGST and States to levy and collect SGST on
supplies within a State empowering Center to levy and collect IGST on inter-state supply of
goods and services. The other significant points of the Bill are:
a. GST council:
A joint forum of the Centre and States namely, Goods and Service Tax Council is to be
created by inserting a new Article 279A in the Constitution. The Union Finance Minister will
be the Chairman of this Council and the Minister will be nominated by each of the States &
UTs with Legislatures will be its members. The function of the Council is to make

P a g e | 27
recommendations to the Union and the States on important issues like various taxes, rates,
exemptions, threshold limits, dispute resolution etc.
b. Integrated GST (IGST):

Centre would levy and collect IGST on inter-state supplies of goods and services and there
will be uninterrupted flow of credit across the States. The tax collected would be
apportioned between the Centre and the States in a manner to be provided by Parliament
by-law, on the recommendations of the GST Council. Import of goods and services will also
be liable to IGST. This seems to be in- lieu of Additional Duties of Customs, CVD and Special
CVD which are proposed to be subsumed in GST through CVD. Special CVD is levied only on
importation of goods and not on services.
c. Compensation to states:
States will be compensated by the Centre for revenue loss on account of implementation of
GST. Such compensation will be given for a period up to five years on a tapering basis, i.e.,
100% for first three years, 75% in the fourth year and 50% in fifth year.
d. Coverage of goods and service in GST:
All goods and services will be brought under the preview of GST with an exception of
alcoholic liquor for human consumption. However, GST will be payable on petroleum and
petroleum products only from a future date to be notified on the recommendation of the
GST Council. Till the time, such date is notified, existing taxes being levied by the States and
the Centre on petroleum and petroleum products i.e., Sales Tax/VAT, CST and Excise Duty
will continue to be levied on them. Electricity and real estate have been kept out of GST.
Thus, Electricity Duty, Stamp and other Property Taxes will continue in GST regime too.
Tobacco products will be liable to both GST and Excise Duty. Thus, even after the
implementation of GST, existing taxes like Excise Duty, VAT and CST will continue to be in
operation though with limited scope and applicability.
e. Rates of GST:
There will be uniform GST rates across the country. However, Centre and States will be
given a flexibility to fix CGST and SGST rates within a narrow tax- band over and above the
floor rates of CGST and SGST. This has been done to give some fiscal autonomy to both
Centre and States.
f. 1% additional levy: Since GST is a destination based tax, the revenue thereof will accrue
to the consumption State which is in stark contrast to the present position where
manufacturing States are entitled to the revenue of origin based CST. Keeping in view the
concerns of revenue loss of manufacturing states, an origin based additional levy of 1%
chargeable on inter-state supply of goods has been proposed in the Bill. Being an origin
based tax, the revenue thereof will be assigned to the States from where such supplies
originated i.e., the manufacturing State. This levy would be non-taxable and would apply
only on goods and not on services. The Bill proposes that such levy would be in force for a
period as recommended by the GST Council. Such an origin based tax is against the
fundamental principle of GST which is a destination based tax. Further, since this levy is non-
taxable, it will lead to effect of tax cascading.

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CONSTITUTIONAL AMENDMENT ACT, 2016 (101 Amendment)

The Constitution was amended on 8th September 2016 vide Constitution (101) Amendment
Act.
The features of the Act are as under:
1. The GST shall be levied on all goods and services except alcoholic liquor for human
consumption.
2. The tax shall be levied as dual GST are applied separately by the Union and the States.
3. Parliament will have power to make laws with respect to GST imposed by the
Union(CGST) and the State legislatures will have power to make laws with respect to GST
imposed by the States(SGST).
4. Parliament will have exclusive power to make laws with respect to GST where the supply
of goods and/services takes place in the course of interstate trade or commerce (IGST).
5. The Government of India will have exclusive power to levy and collect GST on inter-state
trade or commerce. This tax shall have apportioned between the Union and States on
the recommendations of the GST Council by Parliament by- laws.
6. Taxes on entertainments and amusements to the extent levied and collected by a

Panchayat or a Municipality or a Regional Council or a District Council shall not be
subsumed under GST. The local bodies of States could continue to levy such taxes.
7. Parliament shall, by-law, provide for compensation to States for revenue loss arising out
of the implementation of the GST, based on the recommendations of the GST Council.
Such compensation could be for a maximum period of 5 years.
8. A GST Council would be constituted comprising the Union Finance Minister (who will be
the chairman of the council), the Minister of State (Revenue) and the State
Finance/Taxation Minister to recommended on
a. The taxes, Cesses and Surcharge to be subsumed under GST.
b. The Goods and Services that may be subjected to or exempted from GST.
c. The date from which the specified petroleum products would be subject to GST.
d. Model GST laws, principles of levy, appointment of IGST Officers and the principles
that govern the place of supply.
e. The threshold limit of turnover below which the goods and services may be
exempted from GST.
f. The rates including floor rates with bands of GST.

g. Any special law or rates for a specified period to raise additional resources during any
natural calamity or disaster and

P a g e | 29
h. Special provision with respect to the North-East States, J&K, Himachal Pradesh and
Uttarkhand.
As per the provisions of the Amendment Act, every decision of the GST Council shall be
taken by a majority of not less than 3/4th of the weighted votes of the members present
and voting. The vote of the Central Government shall have a weightage of 1/3rd of the votes
cast and the votes of all the State Governments taken together shall have a weightage of
2/3rd of the total votes cast in the meeting. One half of the total number of members of the
GST Council shall constitute the quorum at its meetings.
There are several Articles in the Constitution of India which define the financial relations
between Union and States. Since GST Bill involves a huge interest of the State Governments,
such a historical tax reform cannot take place without making suitable changes into the
Constitution. For this purpose, 101st Amendment of the Constitution was passed. This act
received the assent of the President of India on 8th September, 2016. The important
changes made in Constitution (new Articles / Amended Articles) via this law are as follows:
Article 265 of Constitution of India –
Taxes not to be imposed except by authority of law. No tax shall be levied or collected
except by authority of law. The authority of law allocates the power to levy various taxes
between the Central and the State Governments.
Article 246 of the Indian Constitution, distributes legislative powers including taxation,
between the Parliament of India and the State Legislature. Schedule VII enumerates these
subject matters with the use of three lists:
• List - I entailing the areas on which only the Parliament is competent to make laws,
• List - II entailing the areas on which only the State Legislature can make laws, and
• List - III listing the areas on which both the Parliament and the State Legislature can
make laws upon concurrently.
Union and the States have no concurrent power of taxation.
Changes in the 7th Schedule
This amendment has made following changes in 7th Schedule of the Constitution:
Union List:
• The entry 84 of Union List earlier comprised the duties on tobacco, alcoholic liquors,
opium, Indian hemp, narcotic drugs and narcotics, medical and toilet preparations. After
this amendment, it will comprise of Petroleum crude, high speed diesel, motor spirit
(petrol), natural gas, and aviation turbine fuel, tobacco and tobacco products and are
subject to Union jurisdiction.
• Entry 92 (newspapers and on advertisements published therein) has been deleted thus,
they are now under GST.
• Entry 92-C Service Tax has been now deleted from Union List.
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State List:
 Under State list, entry 52 Entry Tax for sale in state has been deleted.
 In Entry 54, Taxes on the sale or purchase of goods other than newspapers, subject to
the provisions of Entry 92-A of List I, has been now replaced by taxes on the sale of
petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural
gas, aviation turbine fuel and alcoholic liquor for human consumption, but not including
sale in the course of inter-State trade or commerce or sale in the course of international
trade or commerce of such goods.
 Entry 55 Advertisement Taxes have been deleted.
 Entry 62 Taxes on luxuries, including taxes on entertainments, amusements, betting and
gambling has been replaced by these taxes only to be levied by local Governments,
Panchayats, Municipality, Regional Council or District Council.
Article 254 of Constitution of India:

Inconsistency between laws made by Parliament and laws made by the Legislatures of
States if any provision of a law made by the Legislature of a State is repugnant to any
provision of a law made by Parliament which Parliament is competent to enact, or to any
provision of an existing law with respect to one of the matters enumerated in the
Concurrent List: The law made by Parliament, whether passed before or after the law made
by the Legislature of such State, or, as the case may be, the existing law, shall prevail and
the law made by the Legislature of the State shall, to the extent of the repugnancy, be void.
Article 246 (A): This is a new article inserted in the Constitution.

It says that
(1) Notwithstanding anything contained in articles 246 and 254 of Parliament, and, subject
to clause (2), the Legislature of every State, have power to make laws with respect to Goods
and Services tax imposed by the Union or by such State.
(2) Parliament has exclusive power to make laws with respect to Goods and Services Tax
where the supply of goods, or of services, or both takes place in the course of inter-State
trade or commerce.
Article 269A
This is a new Article which reads as follows:
(1) Goods and Services Tax 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 States in the manner as may be provided by Parliament by
law on the recommendations of the Goods and Services Tax Council.
(2) The amount apportioned to a State under clause (1) shall not form part of the
Consolidated Fund of India.
(3) Where an amount collected as tax levied under clause (1) has been used for payment of
the tax levied by a State under Article 246A, such amount shall not form part of the
Consolidated Fund of India.

P a g e | 31
(4) Where an amount collected as tax levied by a State under Article 246A has been used for
payment of the tax levied under clause (1), such amount shall not form part of the
Consolidated Fund of the State.
(5) Parliament may, by- law, formulate the principles for determining the place of supply,
and when a supply of goods or of services or both takes place in the course of inter-
State trade or commerce.
Article 279-A:
This article empowers the president to constitute a joint forum of the centre and States
namely, Goods and Service Tax Council (GST Council).
GST COUNCIL- (powers, functions and provisions)

The Constitution (One Hundred and Twenty-second Amendment) Bill, 2016, for introduction
of Goods and Services Tax (GST) in the country was accorded assent by the President on 8th
September, 2016, and the same has been notified as the Constitution (One Hundred and
First Amendment) Act, 2016. As per Article 279A (1) of the amended Constitution, the GST
Council has to be constituted by the President within 60 days of the commencement of
Article 279A. The notification for bringing into force Article 279A with effect from 12th
September, 2016 was issued on 10th September, 2016. As per Article 279A of the amended
Constitution, the GST Council will be a joint forum of the Centre and the States.
GST Council is the main decision-making body that has been formed to finalize the design of
GST. This governing body of GST comprises of Union Finance Minister - Arun Jaitley, who is
the Chairman of the Council, the Minister of State (Revenue) and the State Finance/
Taxation Ministers. The duty of the Council is to make recommendations to the Union and
the States. It has been provided in the Constitution (one hundred and first amendment) Act,
2016 that the GST Council, in its discharge of various functions, shall be guided by the need
for a harmonized structure of GST and for the development of a harmonized national
market for goods and services.
In the GST Council a decision is taken by a three-fourth majority with the Centre having a
one-third vote and the States the remaining two-third.
The GSTC has been notified with effect from 12th September, 2016. GSTC is being assisted
by a Secretariat. Twenty meetings of the GSTC have been held so far.
GST Council Constitution/Structure of GST Council

According to the Article 279A, it is on the part of Prime Minister to give the order to
constitute the Council of GST within the 60 days from the 12th September 2016 which is
already notified by the Government.
GST Council is a federal forum with both Centre and State Governments of India on board.
It is made of:

P a g e | 32
 The Union Finance Minister (as Chairman),

 The Union Minister of State in charge of Revenue or Finance, and
 The Minister in charge of Finance or Taxation or any other Minister, nominated by
each State Government.
The decisions of the GST Council are made by three-fourth majority of the votes cast. The
center has one-third of the votes cast, and the States together have two-third of the votes
cast. Each State has one vote, irrespective of its size or population.
Apart from the above:

 The Secretary (Revenue) will be appointed as the Ex-Officio Secretary to the GST
Council.
 The Chairperson, Central Board of Excise and Customs (CBEC), will be included as a
permanent invitee (non-voting) to all proceedings of the GST Council.
 One post of Additional Secretary to the GST Council in the GST Council Secretariat (at
the level of Additional Secretary to the Government of India) will be created.
 Four posts of Commissioner in the GST Council Secretariat (at the level of Joint
Secretary to the Government of India) will also be created.
Quorum and Decision-Making

• For a valid meeting of the members of GST Council, at least 50 percent of the total
number of the member should be present in the meeting.
• 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 in the
meeting. In 'Article 279A' a principle is there which divides the total weighted vote cast
between Central Government and State Governments:
 The votes of Central Government shall have the weighted of one-third of the
total votes,
 The votes of State Government shall have the weighted of two third of the total
votes, cast in the meeting
 Any act, decision or proceedings shall not be declared as invalid on the basis of any
remaining deficiency at the time of establishment of GST Council i.e.
 if there is any vacancy remained in the Council
 if there is any defect in the Constitution of Council
 if there is any defect in the appointment of a person as a member of the Council
 if there is any procedural non-compliance.
Power and functions of GST Council:

1. The Constitution (one hundred and first amendments) Act, 2016 provides that every
decision of the GST Council shall be taken at a meeting by a majority of not less than
3/4th of the weighted votes of the Members present and voting.
2. The vote of the Central Government shall have a weightage of 1/3rd of the votes casted
3. The votes of all the State Governments taken together shall have a weightage of 2/3rd of
the total votes cast in that meeting.

P a g e | 33
4. At least 50% of the members of the GST Council shall constitute the quorum at its
meetings.
They will make recommendations to the Union and the States on:
1. The taxes, cesses and surcharges levied by the Centre, the States and the local bodies
which may be subsumed under GST;
2. The goods and services that may be subjected to or exempted from the GST;
3. The date on which the GST shall be levied on petroleum crude, high speed diesel, motor
spirit (commonly known as petrol), natural gas and aviation turbine fuel;
4. Model GST laws, principles of levy, apportionment of IGST and the principles that govern
the place of supply;
5. The threshold limit of turnover below which the goods and services may be exempted
from GST;
6. The rates including floor rates with bands of GST;
7. Any special rate or rates for a specified period to raise additional resources during any
natural calamity or disaster;
8. Special provision with respect to the North- East States, J&K, Himachal Pradesh and
Uttarkhand; and
9. Any other matter relating to the GST, as the Council may decide.
Guiding principle of GST Council

The mechanism of GST Council would ensure harmonization on different aspects of GST
between the Centre and the States as well as among States.
It has been provided in the Constitution (one hundred and first amendment) Act, 2016 that
the GST Council, in its discharge of various functions, shall be guided by the need for a
harmonized structure of GST and for the development of a harmonized national market for
goods and services.
Resolving Disputes under the GST regime

The Constitution (one hundred and first amendments) Act, 2016 provides that the Goods
and Services Tax Council shall establish a mechanism to adjudicate any dispute between:
(a) Government of India and one or more States; or
(b) Government of India and any State or States on one side and one or more other Sates
on the other side; or
(c) Two or more States, arising out of the recommendations of the Council or
implementation thereof.
STRUCTURE OF GST (Dual Model)

 Many countries in the world have a single unified GST system i.e. a single tax
applicable throughout the country.
 However, in federal countries like Brazil and Canada, a dual GST system is prevalent
whereby GST is levied by both the federal and state or provincial Governments.

P a g e | 34
 In India, a dual GST is proposed whereby a Central Goods and Services Tax (CGST) and
a State Goods and Services Tax (SGST) will be levied on the taxable value of every
transaction of supply of goods and services.
 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.
 It would be a dual GST with the Centre and States simultaneously levying it on a
common tax base.
a. The GST to be levied by the Centre on intra-State supply of goods and / or services
would be called the Central GST (CGST) and
b. That to be levied by the States would be called the State GST (SGST).
c. Similarly, Integrated GST (IGST) will be levied and administered by
Centre on every interstate supply of goods and services.
Impact of Dual GST Model:

a. The GST is expected to foster increased efficiencies in the economic system thereby
lowering the cost of supply of goods and services.
b. There is an expectation that the aggregate incidence of the dual GST will be lower than
the present incidence of the multiple indirect taxes in force.
c. The implementation of the GST is expected to bring about, if not in the near term but in
the medium to long term, a reduction in the prices of goods and services.

P a g e | 35
d. The expectation is that the dealers would start passing on the benefit of the reduced tax
incidence to the customers by way of reduced prices.
Benefits of Dual GST Model:

1. reduction in the number of taxes at the Central and State level.
2. decrease in effective tax rate for many goods.
3. removal of the current cascading effect of taxes.
4. reduction of transaction costs of the taxpayers through simplified tax compliance.
5. increased tax collections due to wider tax base and better compliance.
TYPES OF GST
 India is a federal country where both the Centre and the States have been assigned the
powers to levy and collect taxes.
 Both the Governments have distinct responsibilities to perform, as per the Constitution,
for which they need to raise tax revenue.
 The Centre and States are simultaneously levying GST.
 The three types of tax structure are implemented to help taxpayers take the credit
against each other, thus ensuring 'One Nation, One Tax'.
 Unlike earlier when there were multiple taxes such as Central Excise, Service Tax and
State VAT etc., under GST, there is just one tax.
 GST is categorized into CGST, SGST or IGST depending on whether the transaction is Intra-
State or Inter-State.
Central Goods and Services Tax (CGST)

 CGST is a tax levied on Intra State supplies of both goods and services by the Central
Government and will be governed by the CGST Act.
 SGST will also be levied on the same Intra State supply but will be governed by the State
Government.
 This implies that both the Central and the State Governments will agree on combining
their levies with an appropriate proportion for revenue sharing between them.
State Goods and Services Tax (SGST)

 SGST is a tax levied on Intra State supplies of both goods and services by the State
Government and will be governed by the SGST Act.
 As explained above, CGST will also be levied on the same Intra State supply but will be
governed by the Central Government.
 Example: Suppose Karan is a dealer in Karnataka who sold goods to Arjun in Karnataka
worth ₹ 1, 00,000. The GST rate is 18% comprising of CGST rate of 9% and SGST rate of
9%. In such case, the dealer collects ₹ 18,000 of which ₹ 9,000 will go to the Central
Government and ₹ 9,000 will go to the Government of Karnataka.

P a g e | 36
Union Territory GST (UTGST)

 The GST Council has included the UTGST in order to complete the constitutional
obligation which it says the Constitution (One Hundred and First Amendment) Act, 2016,
has added a new clause, namely Clause 26B on 'State' in Article 366.
 As per this clause, "State" with reference to Articles 246A, 268, 269, 269A, and 279A
includes a Union territory with Legislature yet even 'State' for the purposes of GST,
added a Union territory with Legislature.
 The purpose of UTGST Bill is to apply a collection of tax on every Intra UT supply of
goods and service in the union territories in absence of legislature and has similar
properties as that of SGST.
 So all in all, the SGST cannot fulfill the needed provision here and for the same UTGST
has taken its place.
 The Union Territory GST is applied to union territories of India namely Chandigarh,
Lakshadweep, Daman and Diu, Dadra and Nagar Haveli, Andaman and Nicobar Islands.
Integrated Goods and Services Tax (IGST)

 IGST is a tax levied on all Inter-State supplies of goods and/or services and will be
governed by the IGST Act.
 IGST will be applicable on any supply of goods and/or services in both cases of import
into India and export from India.
 Example: Consider that a businessman Tom from Karnataka had sold goods to John of
Gujarat worth ₹ 1,00,000. The GST rate is 18% comprised of 18% IGST. In such case, the
dealer has to charge ₹ 18,000 as IGST. This IGST will go to the Centre.
ROLE OF CENTRAL BOARD OF INDIRECT TAXES AND CUSTOMS (CBIC)

 CBIC is playing an active role in the drafting of GST law and procedures, particularly the
CGST and IGST law, which will be exclusive domain of the Centre.
 This apart, the CBEC has prepared itself for meeting the implementation challenges,
which are quite formidable.
 The number of taxpayers is likely to go up significantly. The existing IT infrastructure of
CBIC has been suitably scaled up to handle such large volumes of data.
 Based on the legal provisions and procedure for GST, the content of work-flow software
such as ACES (Automated Central Excise & Service Tax) would require re-engineering. The
name of IT project of CBIC under GST is 'SAKSHAM’.
 It was also felt that the organizational structure and deployment of human resources
needed a review for smooth and effective implementation of GST.
 A Working Group has after extensive deliberations and studies, submitted its Report
which has been approved by the Government and has since been implemented.
 Augmentation of human resources would be necessary to handle large taxpayers' base
in GST scattered across the length and breadth of the country.
 Capacity building, particularly in the field of Accountancy and Information Technology
for the departmental officers has to be taken up in a big way.

P a g e | 37
 A massive four-tier training program has been conducted under the leadership of
NACEN.
 This training project is aimed at imparting training on GST law and procedures to more
than 60,000 officers of CBEC and Commercial Tax officers of State Governments.
 CBIC would be responsible for administration of the CGST and IGST law.
 In addition, excise duty regime would continue to be administered by the CBIC for levy
and collection of central excise duty on five specified petroleum products as well as on
tobacco products.
 CBIC would also continue to handle the work relating to levy and collection of customs
duties.
 Director General of Safeguards, CBEC has been mandated to conduct detailed enquiry
on anti-profiteering cases and should give his recommendation for consideration of the
National Anti-Profiteering Authority.
 CBIC has been instrumental in handholding the implementation of GST.
 It had set up the Feedback and Action Room which monitored the GST implementation
challenges faced by the taxpayer and act as an active interface between the taxpayer
and the Government.
QUESTIONS
6 Marks Questions
1. Give a brief note on evolution of GST in India.
2. What is GST? How does it work?
3. State the different products which are outside the purview of GST.
4. Write a note on basic scheme of GST in India.
12 Marks Questions
1. What is subsuming of taxes?
2. Explain the salient features of GST.
3. State various objectives of GST.
4. Explain the features of composition scheme of GST.
5. Explain the structure of GST (Dual) Model.
6. Explain the types of GST in India.
24 Marks Questions
1. What is GST? Explain various features and objectives of GST in India.
2. What is GST? Explain the different benefits of GST.
3. Explain the powers and functions of GST council in India.
*************************** THE END**************************

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P age|1

3rd B.COM – VI SEMESTER BCMCMC

381:GST and CUSTOMS DUTY

Unit II: GST Act 2017

Unit III: Procedure and Incidence of Tax

Unit IV: GST Registration

GST & Customs Duty Unit 1: Introduction

Unit V: Input Tax Credit

Unit VI: Customs Duty (Customs Act, Customs Tariff Act)

The Constitution of India and Taxes

GST & Customs Duty Unit 1: Introduction

1. Role of the Central and State Government:

1. Value Added Tax (VAT):

GST & Customs Duty Unit 1: Introduction

6. Goods and Service Tax (GST):

Distinction between Direct and Indirect Taxes:

GST & Customs Duty Unit 1: Introduction

Tax on commodities and services:

GST & Customs Duty Unit 1: Introduction

Promotes social welfare:

DEFICIENCIES IN THE VALUE ADDED TAX SYSTEM IN INDIA

GST & Customs Duty Unit 1: Introduction

EVOLUTION OF GST IN INDIA:

Kelkar Task Force 2004:

Initiative of NDA Government:

GST & Customs Duty Unit 1: Introduction

GST & Customs Duty Unit 1: Introduction

GST – CONCEPT AND STATUS

It is a comprehensive Indirect Tax levied on manufacture, sale and consumption of goods as

GST a cure for ills of existing indirect tax regime

GST & Customs Duty Unit 1: Introduction

HOW GST WORKS

GST & Customs Duty Unit 1: Introduction

NEED OF GST IN INDIA:

GST & Customs Duty Unit 1: Introduction

2. Tax revenue will increase:

GST & Customs Duty Unit 1: Introduction

Following taxes have been subsumed in Central GST:

2. Central Excise Duty-

3. Duties of Excise (Medicinal and Toilet Preparations)

4. Additional Excise Duty (Goods of Special Importance)-

5. Additional Excise Duty (Textiles and Textile Products).

6. Excise Duty levied under the MTP Act.

9. Central Surcharges and Cesses related to supply of Goods or services

Following taxes have been subsumed in State GST:

4. Entry Tax (All forms)-

GST & Customs Duty Unit 1: Introduction

6. Entertainment Tax (other than levied by local body)-

8. Tax on lottery, betting & gambling

9. State Cesses & Surcharges related to supply of goods or services

While identifying, the following principles were kept in mind:

GST & Customs Duty Unit 1: Introduction

TREATMENT OF SPECIFIC GOODS

ii) Tax on Tobacco products:

v) Opium, Indian hemp and other narcotic drugs and narcotics:

GST & Customs Duty Unit 1: Introduction

vi) Real estate sector:

TAXES WHICH ARE NOT TO BE SUBSUMED:

SALIENT FEATURES OF GST

GOODS AND SERVICES TAX NETWORK (GSTN):

* THE END