As GST IN INDIA - A BRIEF INTRODUCTION iil fas end TS dAns: Concept of tax: A tax is a financial charge or other levy imposed upon a taxpayer (an individual or legal entity) by astate or the functional equivalent of a state. The failure to pay tax is punishable by law. ‘According to Black's Law Dictionary, a tax is a "pecuniary burden laid upon individuals or property owners to support the Government, a payment exacted by legislative authority’. It "is not a voluntary payment or donation, but an enforced contribution, exacted by legislative authority", Insimple words, tax is nothing but money that people have to pay to the Government, services, mliDifferentiate between Direct Taxand Indirect Tax, hi taxes are classified are as follows ~ (i) Direct Taxes : Direct Taxes are taxes which are levied on persons for the income earned or activities conducted, the incidence of which is to be borne by the person himself on whom it is levied. (i) Indirect Taxes : Indirect Taxes are the taxes which are levied on a product or a service, the incidence of which is borne by the consumers who ultimately consume the product or the service, while the immediate liability to pay the tax may fall upon another person such as a manufacturer or seller of goods, Difference between Direct Taxes and Indirect Taxes : Which is used to provide public ‘They are levied on goods and services, (| They are levied on persons. ‘The amount of tax is determined indirectly. (ii) | Amount of tax is ‘determined directly on the basis of taxable income/wealth of assessce. (iii) i incidence is borne by the same person who “Tax incidence passes on to the ultimate consumers. pays it, (iv) | Higher collection costs as tax Collection is difficult, | Less collection costs as tax collection is easier. "They are progressive in nature ic. tax rates are high fare regressive in nature i. All the consumers equally for people having higher ability to pay. bear the burden, irrespective of their ability to pay. | Examples: Goods and Services Tax, Customs Duty ete. (v) | Examples: Income tax, Interest Tax, Expenditure Tax often used to generate tax revenue. Indirect taxes are a major iwide, In India, indirect taxes contribute more than half of the totalfaxes: GST IN INDIA A BKIEE Ly nu eN ON Indirect T TD CA. Yogendra Bangar & CA. Vandana Bangor 2 2) Levied on goods and services on goods at the time of supply oF import/exPort thereof. Hence, it ig cea ip also levied on supply of services. aN PeE ES Tanai eae tax burden shifts on tothe person who ultimately consume, Ce ec ote ga clear shifting of tax burclen in resPecy of indirect ss eS an Sanaa ara supplier ofthe goods is Tecovered fom the buyer by including — rex j thecommodlty es feel direct pinch of 5 Consumer do not (8) Consume or of the time the tax payer Pays (he 6 Government. Thus, ely bears suc taxes (6) Leads to nla eh taxes Indirect taxes are generally inbuilt inthe price of the goods or ne without actually knowing that he is paying tax to the consumer who ultimat Ta tax does not perceive a direct pinch while paying indirect ynsumer who ultim: 1 in prices of commodity and services, In joods and services causes increas : fet th .d leads to inflationary trend. services an ide tax base. Majority of the goods or services tion : Tax imposed on 6 vat words, indirect taxation directly affects the Prices of goods and = Unlike direct taxes, the indirect taxes have a wi Widens the tax base : Unlike direct taxes, Oar ubjct to indirect taxes with ow thresholds. Helps in promoting social welfare : High taxes are impose Poe aay suchas alcoholic products, tobacco prodiucts etc, enables the State to collect substantial revenue. (@)_ Regressive in nature : Generally the indirect axes are regressive in nature. The rich and the poor have to pay the ae arele of indirect taxes on certain. commodities of mass consumption ‘This may further increase the income disparities between the rich and the poor. eR don the consumption of harmful products (also known This not only checks their consumption but also [[DGSENESIS OF GSTININDINAND CONCEPT OF GST _ wari 097 Whatafe the developments taken place under it? OR ‘Write anote on Genesis of GST in India, ‘Ans: The relevant aspects are discussed as under — (1) Goods and Services Tax : GST is levied on Territory of J and services. Itis levied at all st previous stages available as set-off In a nutshell, o the final consumer. ‘supply’ of goods or services or both, in India including the Union service and Kashmir with own legislature. GST is a destination based tax on consumption of goods tages right from manufacture up to final consumption with credit of taxes paid at nly value addition is taxed and burden of tax is to be borne by (2) Genesis of GST In India: > Setting up of Empowered Committee in 2000 : In 2000, the Vajpayee Government started discussion on CST by setting up an empowered committee, The committee was headed by Asim Dasgupta, (Finance Ministe, Government of West Bengal). It was given the task of designing the GST model and overseeing the IT back- ‘end preparedness for its rollout. > Kelkar task force in 2004 : The GST was recommended by the Kelkar Task Force on implementation of the Fiscal Responsibility and Budget Management (RBM) Act, 2003. The Task Force strongly recommended fully integrated ‘GST’ on national basis. > GST proposed in 2007-08 : A proposal to introduce a National level Goods and Services Tax (GST) by April ay 2010 was first mooted in the Budget Speech by the then Union Finance Minister, Shri P. Chidambaram, while presenting the Central Budget of 2007-08. Since the proposal involved reform/ restructuring, of not oy sane mi taxes levied by the Centre but also the States, the responsibility of preparing a Design and Road Mp implementation of GST was assigned to the Empowered Committee of State Finance Ministers eee eet iin Sn eee in GST, however, gained momentum when the mimes Constitut (22™ Amendment) Bill, 2014 on GST in the Parliament on 1 Eee mee ras Wescutcs Cons ien G2 Amado : il more States, Constitution (122™ Amendment) Bill, 2014 received the assent of the President on 8" September, 2016 and became Se (1o1* fete Pa eat ee nd Legislations : The Central GST legislations ~ Goods and Services Tax Bill, 2017, ey eecahorne Sones pe Tone PD fax and Goods and Services spensal ) Bill, 2017 were introduced in Lok Sabha on 27" March, 2017 and were passed ina oc nmIndirect Taxes : GST IN INDIA - A BRIEF INTRODUCTION 13 OCA. Yorendtra Bangar & CA, Vandana Bangar on 29 March, 2017 and with the rocelpt of the President's assent on 12% April, 2017, the Bis wer — The enactment of the Central Acts was followed by the enactment of the State CST laws by various State Legislatures, Telangana, Rajsthan, Chhatlsgath, Purjab, Gon and Bihar were among the first ones 12 pass their respective State GST laws, > Roll out of GST : Government rolled out GST wae, 1" July, 2017. GST in the Union Territory of Jammu and Kashmir with own legislature came into force with effect from 8" July, 2017, ‘The introduction of Goods and Services Tax (GST) i avery significant step inthe field of ire ax reforms in India, By arralgamating u large number of Central and State taxes info a single tax, it will mitigate cascading or double taxation in a major way and pave the way for a common national market } France was the first country to Implement GST in the year 1954, Within 62 years ofits advent, about 160 rramisles mavos Ue world have adopted GST because this tax has the capacity to ralse revenue in the most transparent and neutral manner it pt of GST. Lia ‘Ans: Concept of GST : The basic concept of GST is discussed as under— (1) Value Added Tax : It is a single tax on the supply of goods and services, right from the manufacturer to the aanntrmer with credit of taxes paid at previous stages available as set-off In a nutshell, only value addition is taxed. @) Continuous flow of Tax Credits : GST provides comprehensive and continuous chain of tax credits from the manufacturer's point/service providers point upto the retailer's level/consumer’s level thereby taxing only the value addition at each stage of supply chain. (@)Taxincidence isto be ultimately borne by Final Consumer: GST paid on the procuremint of goods and services can be set off against that payable on the supply of goods or services. Thus, only the fina) consumer ‘bears the GST harged by the last supplier in the supply chain, with set-off benefits at all the previous stages Mitigation of Cascading/ Double Taxation : GST is levied only on value addition ‘Thus, it prevents cascading, ihe of tax 1. tax on tax. GST does not differentiate between goods and services and thus, the two are taxed at a single rate. of GSTin Indias OR et existing indirect taxes which led to the need for ushering into GST regime, ” Ans: Need for GST in Indi: (1) Deficiencies in the existing value added taxation: (@) Excise duty and VAT : In the earlier indirect tax regime, manufacturer of excisable goods charged excise duty on manufacture and value added tax (VAT) on intra-State sale of goods. However, the VAT dealer on fis cubsequent intra-State sale of goods charged VAT (as pet VAT rate a8 was applicable in the respective tate) on value comprising of (basic value + excise duty charged by ‘manufacturer + profit by dealer). (b) Service Tax : Further, service tax was payable om provision of all services other than those covered in the Negative list of services as provided under Section 66D) of the Finance Act, 1994 or otherwise exempted vide the Mega Exemption Notification No. 5/2012-ST lated 20-062012. (0 Shortcomings in earlier Indirect Tax System : There were various shortcomings in earlier indirect system of taxation in India, Under the earlier indirect tax structure, the various indirect taxes which were levied were aarre tually exclusive. Some ofthe shortcomings under earlier indirect taxation system were: > Non-availability of credit of excise duty and service fax for VAT : VAT dealers were not able to take wrodlt of excise duty charged by manufacturers. Duties paid under excise law is subsumed into cost Tia monufacturing level. Like excise duty, VAT dealers were not able to take credit of service tax charged by the service providers on various input services, > No credit of CST 21n the ebeence of credit, CST which was levied on Inter-Stale sales collected by the origin state added to the cost of product. > No credit of VAT to Service Providers : The service providers were not allowed to claim any credit for VAT paid on their inputs. > No credit of Swachh Bharat Cess (SBC) to ‘Manufacturers and Service Providers ; SBC @ 0.5% on value of all taxable services was applicable from "15-11-2015, However, no CENVAT credit was allowed of SBC to the manufacturers as well as service providers.; LAA DRIES ane Indirect Taxes: GST my Ee nat &e CA. Vandana Bangar a eer eee 9s (KKC) to Manufacturers 1% ¥ 7 tof Krishi Kalyan Te ates er wel ie was levied on the ee Ahh -06-3 a il he T 3) ae oe Provider, it WAS CF oe ces. elie an ene territory by the Centre and the State ending ¢P ta Double Taxation m eater as at Paice of India, where there are two taxing authorities . ie entra vet : to federa’ Trment, the country witnessed svrlapping of powers of the Sits Bover FeTe jan and the State Govt Even though past indirect ta system treated goods an servis dite ently, in Ae es ace Sr vtes and other types of supplies were being packaged as compos sq offered for sale to consumers Me iota variety of supply-chain arranBemer ere wa varie, tation ‘Adopting conservative ‘approach to avoid unnecessary litigation, ade and industry charged both VAT and service tax on such disputed items chs of existing indirect tax regime: a: Cena neces een goods and services vie. Goods and Servic Tax (GST) G@)_A comprehensive tx structure COVeTSE tion of GST at both Centre and Ste levels has integrated addresses these problems. ‘Simultaneous introduct 0, sures that both the cascading effects of s for the purpose of set-off relief and enst > and services fora rae a continuous chain of set-off from the original producer's ithe retailer's level/consumer's level is established. hhave been subsumed in the ambit of GST. The erstwhile concepts seeviees are no longer applicable since the tax is now levied taxes on goods CENVAT and service tax are point/service provider's point upto (b)_ Inthe GST Regime, the major indirect aXe ‘of manufacture or sale of goods or rendering 0 ‘on “Supply of Goods and/or services”. ‘Ans: Dual GST Model introduce (1) Dual GST Model : India has adop' ‘and States simultaneously levy GST on taxable supply of goo aaa oe Union Territory. Thus, tax is imposed concurrently by the Centte and States, ie, Centre and States Simultaneously tax goods and services. GST is levied by the Centre on intra-State supply of goods and/or ‘services called the Central GST (CGST) and that levied by the States/ Union territory is called the State GST (sGST/ UTGST. Similarly, Integrated GST (IGST) is levied and administered by Centre on every inter-state supply of goods and services. IGST is approximately a sum total of CGST and SGST/UTGST and is be levied by Centre on all inter- State supplies. GST extends to whole of India including the Union. Territory of Jammu & Kashmir with own legislature. (2) Need of dual GST model : India is a federal country where both the Centre and the States have bee: nn assigned the powers to ier and collect taxes through appropriate legislation. Both the levels of Government are astinet congte to pee oaD the ave of powers prescribed in the Constitution for which they need cores "therefore, has been introduced keeping with the Constitutional requirement of (3) Administration : Centre levies and. ini i 4 easier administer CGST & IGST while respective States/UTs levies and administer (4) Legislative Framework : There is single legislation - CGST ‘Territories without State legislatures one ud Nicobar rarer 1. Ge ES ae Daman and Diu and Chandigarh] is governed by UTGST A Lakshadweep, Dadra and Nagar Haveli, tenis with thet own leglatutes [Delh, EB \ct, 2017 for levying UTGST. States and Union legislation for levying SGST. Jammu & Kashmir and Puducherry] have enacted their own GST ‘Though there are multiple SGST legislations, legislations, the basic feat sa event and taxable person, classification and valuation of eae eae arene ey apigeition of twats than the hear orm ale SEST elation, cepades eros for collection and levy of é er: feasible. This is necessary to preserve the essence ‘Manner of levy of Dual GST: The Central GST Z and the’ fete of supply of goods and services except— State GST are levied simultaneously on every transaction din Indi oe Dual GST model in view of the federal structure of the country. Centre tds or services or both which, takes place within aIndirect Taxes : GST IN INDIA - A BRIEF (OCA. Youendra Bangar & CA. Vandana Bangar /NTRODUCTION 5 > the exempted goods and services, > Ge geod which are outside the Purview of GST; and transactions wl peor, actions which are below the prescribed threshold limits. Farther, both are levied on . ied on the same inclusive of CENVAT. ‘i Price or value unlike State VAT which was levied on the v (0) Classification of Goods and Services: (@) Goods: The goods are lass to senes e Hode areclasifed onthe basis of HSN (Harmonised Sytem of Nomenclatse) der csr. descriptors fave Scheme of Claseification of Services hasbeen devised wherein the servic of various esos Jive een ste unde various sto heading and ups, Ea OUP Snot it various ). Chapters referred are the Chapters ofthe First Schedule to the Customs Tariff Registration : Ev. . o wea: jee ee of goods and/or services is required to obtain registration in the State/UT from able supply if his aggregate tumover exceeds the threshold limit during a FY. alue of the goods = = with thuesho States with threshold limit of €20 lakh for services and ® 40 lakh for goods (ie. persons et exch ‘in: of = Jammu and Kashmir Naj ae = saa ikki Final Pach cs Uttarakhand All other States Puducherry "Telangana ar] /UTGST for intra-State supplies and IGST (@) Taxis paid by Taxable Person : In GST regime, tax (i.e, CGST and SGST/ provisions have been prescribed in the Renee supplies) is paid by every taxable person and in this regard Composition Scheme and Exemption: For providing relief to small businesses, a simpler method of paying "0! and accounting thereof is also prescribed, known as Composition Scheme. Along with providing relief to small- scale business, the law also contains provisions for granting exemption from payment of ta OF ‘specified goods pee Further, for small service providers also, a scheme prescribing concessional rate of tax has been (©) Compensation Cess : A GST Compensation Cess at specified rate has been imposed under the Somis and Services, Tax (Compensation to States) Cess Act, 2017 on the specified luxury items or demerit goods, Hke Pin masala, tutadco, abvated waters, motor cars etc, computed on value of taxable supply. Compensation cess is leviable om sae State supplies and inter State supplies with a view to provide for compensation tothe States for he loss of revenue arising on account of implementation of the GST. (00) GST -A tax on Goods and Services : GST is evied on supply of all goods and services, except alcoholic liquor for franan consumption and petroleum crude, diese} petrol, ATH and natural gas, The same is discussed as under = {@) Alcoholic liquor for human consumption not leviable to GST: ‘Alcoholic liquor for human consumption is attside the realm of GST. The manufacture/ production of alcoholic liquor continues bbe subjected to State excise duty and inter-State/intra-State sale ofthe same is subject to CST/VAT respectively. (b) Petroleum crude, diesel, petrol, ATF and natural gas not liable to GST till Notified : As regards petroleum crude, diesel, petrol, ATF and natural gas are concerned, they are not ‘presently leviable to GST. GST will be Jevied on these products from a date to be notified on the recommendations of the GST Council. Till such date, central excise duty continues to be levied on manufacture/production of petroleum crude, diesel, petrol, ATF and natural gas and in er-State/intra-State sale of the same is subject to CST/VAT respectively. i ‘Tobacco : Tobacco is within the purview of GST, i.e. GST is leviable on tobacco. However, Union Government () Tol : n (@) Opium, Indian hSolution: In case of local supply of DIA - A BRIEF INTRODUCTION CA eros GST will not be levied on GST islevied. (@) Real Estate Sesieovable property: Howey truction servi es Real Feteageofiamovable PeOP cat lisatic + Input Tax Credit (ITC) of CGST an pee (21) Manner of wilisation of ITC | ISP Ty of CGST and SGST/UTCSE is posse ie COST credit cannot x supply chain but cross utile Sor and SGST/UTGST credit sroeat be utilized for payment of CCST, valle ee Deal ta allowed between CGST/SGST/UTCST and IGST, i. eredit of IGST can be utilized However, cross utilization is allows for the payment of CGST/ SCST/ UTGST and vice versa. ‘Summary Chart of How of TC under GST: “Transaction within the states/ UT's (Intra‘State Transactions) Inter States se Sn 7 cGsT SGST/UTGST I (lecst Sesturest Gssr_ cGst SGST/ 5 1GsT UnGsT, [cost | 1GsT_}\7 SGST/ urcst| / ili i ly utilised. icdivof COST/SGST can be wlilised only when credit of COT Thas been completely a Celt SOST/UTGST should be uilized for payment of ICSE, only after ITC of CGST has been utilized fully, cGsT SS SGST/UTGST No Cross utilisation permissible. (Q2) Seamless Flow of Credit : Since GST is a destination ‘based consumption tax, revenue of SGST ordinarily accrues seaes® suming States, The inter State supplier in the exporting State s allowed to set off the available credit of TGST, CST and SGST/UTGST against the IGST payable on inter State supply made by him. “The buyer in the importing State is allowed to avail the credit of 1297 paid on inter State purchase made by him. Trae wicike the earlier scenario where the credit chain used to break in case of {inter State sales on account of non- Taeible CST, under GST regime there isa seamless credit flow in case of inter State supplies too. The revenue of inter State sale does not accrue to the exporting State and the ‘exporting State transfers to the Centre the credit of SGST/UTGST used in payment of IGST. ‘The Contre transfers to the importing State the credit of IGST used in payment of SGST/UTCST- ‘Thus, the inter- State trade of goods and services (IGST) needed a robust settlement mechanism amongst the States and the Centr. ‘A Central Agency is needed which can act as a clearing house and verify the claims and inform the respective Governments to transfer the funds. This is possible only with the help of a strong IT Infrastructure ‘Rajasthan has Supplied goods valued © 1,00,000 to Mr. Ba i 1 goods to Mr. C:in Rajasthan after making value addition of 20%. ‘You are J ‘and Mr. B in respect of the said transactions assuming the rate of GST is ‘Central and State Government, Al : n goods, the supplier would charge dual GST ie, CGST and SGST at specified rates on the supply. Thus, the tax to be levied by Mr. A on supply of goods to Mr. B will be as under: (i Supply of goods by Mr. A to Mr, B: . (ii) ind Value charged for supply of goods (amount in Macsrex 700,000 Add: SCST @ 9% 9,000 Total price charged by Mr. A from Mr. B for local supply of goods 1 ae ‘The CGST & SGST charged from Mr. B for 5 5 the Central and State Government's eek Of goods willbe remitted by Mr. A.to the appropriate account o Ais the first stage supplier of goods and hence, does not have credit of CGST, SGST or IGST. eee voter ins eae ee ge being set off against the CGST and SGST payable on Value charged for supply of goods (€1,00,000 « 120%) (amount in ® ‘Add: CGST @ 9% Tao ‘Add: SCST@ 9% ‘1030 ‘Total price charged by Mr. B from Mr. C for local supply of goods a, 141,600Indirect Taxes | GST IN INDIA - A BRI © CA. Yogendra Bangar & CA. Vandana Bangar (EF INTRODUCTION RH Computation of CGST, SGST payable by Mr. B to Government : emer CGST payable 70,800 Less: Credit of CCST 000 CGST payable to Central Government 1,800 ‘SGST payable |__ 10800 Less: Credit of SGST 9,000 SGST payable to State Government 1.800 Statement of revenue earned by Central and State Government : (amount in ® ee Revenue to Central Revenue to State Government Government ‘Supply of goods by Mr. Ato Mr. B 9,000 9,000 Supply of goods by Mr. B to Mr. C 1,800 1,800 ‘Total 10,800 10,800 Mlustration 2= Tiiter-State Supply ? Mr. X a manufacturer in Rajasthan has Supplied goods Valtied % 1,00,000 to Mr. A a dealer in Rajasthan. Mr. A supplied the said goods to Mr. B in Madhya Pradesh after making value addition of 20%. Mr. B further supplied the goods to Mr. C of Madhya Pradesh after making value addition of 20%. You are required to determine the tax payable by Mr. X, Mr, A and Mr. B in respect of the said transaction assuming the rate of GST is 18%, Also determine revenue earned by Central and State Government, Solution: In case of inter-State supply of goods, the supplier would charge IGST at specified rates on the supply. (Supply of goods by Mr. X of Rajasthan to Mr. A of Rajasthan : (amount in ®) Value charged for supply of goods 11,00,000 Add: CGST @9% 9,000 Add: SGST @ 9% 9,000 Total price charged by Mr. X from Mr. A for intra-State supply of goods 118,000 | Mr. Xis the first stage supplier of goods and hence, does not have any credit of CGST, SGST or IGST. (i) Supply of goods by Mr. A of Rajasthan to Mr. B of Madhya Pradesh - Value addition @ 209 (amt, in Value charged for supply of goods 1,00,000 x 120%) 1,20,000 Add: IGST @ 18% 21,600 Total price charged by Mr. A from Mr. B for inter-State supply of goods 7/41,600 | ‘Computation of IGST payable to Government: (amount in ® IGST payable 721,600 Less: Credit of CGST 9,000 Less: Credit of SGST 9,000 IGST payable to Central Government 3,600 ‘The IGST charged on Mr. B of Madhya Pradesh for supply of goods will be remitted by Mr. A of Rajasthan to the appropriate account of the Central Government. Rajasthan Government will transfer SGST credit of % 9,000 utilised in the payment of IGST to the Central Government. (iii) Supply of goods by Mr. B of Madhya Pradesh to Mr. C of Madhya Pradesh ~ Value addition @ 20% : Mr. B will avail credit of IGST paid by him on the purchase of goods and will utilise such credit for being set off against the CGST and SGST payable on the local supply of goods made by him to Mr. C. Kamounein ® ‘Value charged for supply of goods/ services (® 1,20,000 = 120%) 745000 Add: CGST @9% 13.960 ‘Add: SGST @ 9% ies Total price charged by Mr. B from Mr. Cfor local supply of goods Teo Computation of CGST, SGST payable to Government: (amount in 3 on 12,960 Less: edit of IGST to the extent of CGST payable ena sep CGST payable to Central Government ai SGST payable as Less: Credit of IGST 21,600 - 12,960) 8,640 SGST payable to State Government <i es: INDIA = Rerens 1.8 nave STII ig ek aig % 8,640 utilised in the payment of SGST f° Madhya Pradesh, vent will transfer IGST credit of Central Governm mount in 9: (importing State). Caran ed by onde Goverment net) i Revenue to fevenie fevenuie fo ta Beare (Py cecasent te [ue Comma Government Rajasthan, Madhya Pradesh Supply of goods by Mir, Xto Mr. & a 9,000 Supply of goods by Mr. A to Mr. B ; Sapa Transfer by Rajasthan State to Centre 9,000 re Supply of goods by Mr Bto Me a an iis aa “Transfer by Centre to Madhya Pradesh State : a soe 12,960 Nil 12,960 al ‘Ans: CSTN stands for Goods and Services Tax ). A Special Purpose Vehicle [a company incorporated i 2013] called the GSTN has been set up to cater 10 the needs of under the provisi GSI. The GSIN provides a shared IT infrastructure and services 10 Central and State Governments, tax payers and other stakeholders for implementation of GST. Resultantly, Common GST Electronic Portal = www:gst.goviin = 4 website managed by GSIN has been set up by the Government to establish a uniform interface for the tax payer and a common ‘and shared TT infrastructure between the Centre and States. ‘The GST portal is accessible over Internet (by taxpayers and their CAs/Tax Advocates etc) and Intranet by Tax Officials ete. The portal is one single common portal for all GST related services ‘A common GST system provides linkage to all State/ UT Commercial Tax Departments, Central Tax authorities, ‘Taxpayers, Banks and other stakeholders, The eco-system consists of all stakeholders starting from taxpayer to tax professional to tax officials to GST portal to Banks to accounting authorities Primarily, GSTN provides three front end services to the taxpayers namely registration, payment and return through ‘GST Common Portal iene Oia entral and the State Governments based on the tax riot wotevarnh ook ie bss tchin r matchin and reclaimofinputtaxcredit, ph However, itis important to note that the Common GST Electronic Portal for furnishing electronic way bil is wauenatll gstgov.in [managed by the National Informatics Centre, Ministry of Electronics & Information ‘echnology, Government of India]. E-way bill is an electronic document generated on the GST portal evidencing movement of goods. aa i et ta, ci serge near re ye wh movisera of throu; platform. GSPs develop applications to be used by taxpayers for interacting ‘They facilitate the tax payers in uploading invoi ili 2 iploading invoices as well as filing of returns and act as a single stop shop for GST They customize products that address the needs of different segment of users, GSPs Seis) cry win ear Ain neice tanapesan cars ce, payer retumIndirect Taxes : GST IN INDIA - OCA Yopends Hang CA. Vandana Bengt NTROPUCTION ae 0) WHICH OF the existing taxes|are subsumed under GST? OR I istany six state levies, which are subsumed in GST. (3 Marks, May 2018-NS) ear four Central levies, which are subsumed in GST. (2 Marks, Nov. 2018-NS) Ans: Taxes subsumed in GST : The following duties/ taxes are discontinued and subsumed into GST — Central Taxes State Taxes > Central Excise duty > State VAT > Duties of Excise (Medicinal and Toilet Preparations) > Lwcury Tax } Additional Duties of Excise (Goods of Special Importance) | Entry Tax (all forms) }> Additional Duties of Excise (Textiles and Textile Products) |) Entertainment and Amusement Tax (except > Additional Duties of Customs (commonly known as CVD) when levied by the local bodies) > Special Additional Duty of Customs (SAD) > Taxes on advertisements > Service Tax > Purchase Tax > Central Sales Tax > Taxes on lotteries, betting and gambling > — Central Surcharges and Cesses so far as they relate to supply |™ State Surcharges and Cesses so far as they of goods and services. relate to supply of goods and services. he GST Council shalll make recommendations to the Union and States on the taxes, cesses and surcharges levied by the Centre, the States and the local bodies which may be subsumed in the GST. | Gy What are the benefits which the Country will accrue from GST? ‘Ans: GST is a win-win situation for the entire country. It brings benefits to all the stakeholders of industry, Government ry the consumer, It will lower the cost of goods and services, give a boost to the economy and make the products and services globally competitive. ‘The significant benefits of GST are discussed hereunder: (A) Benefits to economy : {Q) Creation of common 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. (@) Boost to ‘Make in India! initiative: GST gives @ major Doost to the ’Make in India‘ initiative of the Covernmentof 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. @) Enhanced investment and employment: The subsuming of major Central and State taxes in GST, complete B and comprehensive set-off of input tax on goods and services and phasing out ‘of Central Sales Tax (CST) é ase the coat of locally manufactured goods and services and increases the competitiveness of Indian ‘goods and services in the intemational market and thus, gives ‘boost to investments and Indian exports. I With a boostin exports and manufacturing activity, more employment is generated and GDP is increased. \(B) Simplified tax structure + (1). 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. Certainty in tax administration: Common system, of classification of goods and services ensures certainty jn tax administration across India. Easy fax compliance: (@) Automated procedures with greater use of FT: ‘There are simplified and automated procedures for various : refunds, tax payments. All interaction is through the common GSTN. such as registration, returns, Preece re eanis interface between the taxpayer and the tax administration. tuction in compliance costs : The compliance cost is lesser under GST as multiple record-keeping for a ‘ety of taxes is not needed, therefore, there is lesser investment of resources and manpower in sl, “The uniformity in laws, procedures and tax rates across the country goes a long way cost.1s: GST IN INDIA“ Indirect Taxes : GST IN Cuvogendes® ingar & CA. Vandana Bangar 1.10 / setiet to industry erade and agriculnise throug rand servicaan eet ote DRT SS a anapacent apd complete cain chee Tpads to lowering of tax burden on an ages for trade and industry + S Ae to agriculture and Industry GST has given more more comprehensive and vider coveragi: of input ta anetnL and siate taxes in the GST and phasing out of CST. cera eoults in widening of tax base andl Peter tax compliance also in industry, trade and agriculture, (@) Mitigation of ill effects of cascading + By subsuming most of the aes and by allowing a set-off of prior-stage tax forthe transactions actos# the pnitigating the il effects of cascading, Improving ‘competitiveness an businesses. and State taxes into a single tax entire value chain, it helps in 1g liquidity of the average dealer i (@) Benefits to small traders and entreprenctrs ¢ GST has increased the threshold for cst area fe small businesses. Further, single registration is aided dfn Siaiet Soallibesipeonee eS ‘been provided the additional benefit of composition ‘scheme. With the creation of a seamless natios matket prross the country, small enterprises have an opportunity t0 expand their national footprint with minimal investment. CONSTITUTIONAL PROVISIONS 12. Give a brief note on Constitutional provisions as regards taxation in India? aaa cir itatinal Provisions: Power to levy and collect taxes emerges from the Const ANT! of India. Article 245 of tae onatitution confers the power on the Parliament and on the legislature of the State for enacting the laws. In case any tax law, be it an act, rule, notification oF order is not ‘n conformity with the Constitution, it is called ultra vires the Constitution and is illegal and void. ‘The significant provisions relating to constitution are as under: (i) Tanes not to be insposel save by authority of law [Aticle 265]: This Artic ofthe Conttuion of india prohibits rane a slcatonof tax. t tals that no tax ahal be levied or collected except by authority of law’, The emt seat of Inv! means that tax proposed fo be levied must be within the legislative competence of he Legislature imposing the tax (2) Extent of laws made by Parliament and by the Legislatures of States [Article 245] : Past XI ofthe Const dels wth lori btn the Union and States, The power for enacting the laws is conferred on the aamen and on the Legit of Sat Arise 245 of he Const. The said Article provides as under- (Subj to the provisions ofthis Constation, Parliament may mule laws for the whele or any part of te territory of India, and the Legislature ofa State may make laws forthe whole or any part ofthe State. (@) No law made by the Parliament shall invali i ab ae yt Bll al be deemed to be invalid on the ground that it would have extra @) Subject matter of laws made by i yy Parliament and by the Legisla Asticl : rempective aor Unigh arate eae pee mnie of States [Article 246] : It gives the re Boy ade cape Seer aes Loa) esi Cagalre cea Beeman emney eh ae " y gislature may make laws for whole or part of the (@) Seventh Schedule to Article 246 : It contains three li 4 lists which the State Governments have the authority to make laws. The ebb nes ti matte] under which the Union md Hy saty Soran The three lists are as follows ~ (List (Union List): The Central Government has exclusive here. powers to make laws in respect of matters listed (ii) List Uf (State List) : The State Gov bu! : ernment has the powers to ma (iii) List 11 (Concurrent List) : The authority to make laws in res laws in respect of matters listed here. Ei Fic, ial ce eee : ect of matters listed in the said list is given "© in List I enumerate the subjects, ze ao aera a ‘where the Central Government “has a further power to make nee cts where the State Governments ree ra anger et: eae a has power to levy taxes. Entries Se the power to levy taxes, Parliament ised in a State even if such matter is included Pia:Indirect Taxes : GST IN INDIA - A BRIEF INTRt (© CA. Yogendra Bangar & CA. Vandana Bangar eee ‘Ans: Constitutional Amendment : The Constitutional provisions hitherto had delineated separate powers for the Genire and the States to impose various taxes, Whereas the Centre levied excise duty on all goods produced or ‘mantufactured in India, the States levied Value Added Tax once the goods entered the stream of trade upon. completion of manufacture. With respect to goods imported from outside the country into India, Centre levied basic customs duty and additional duties of customs together with applicable cesses, if any. In case of inter-State sales, the Centre has the power to levy a tax (the Central Sales Tax) but, the tax is collected and retained entirely by the States. As for services, it is the Centre alone that was empowered to levy service tax. Introduction of the GST required amendments in the Constitution so as to simultaneously empower the Centre and the States to levy and collect this tax. The Constitution of India has been amended by the Constitution (101") Act, 2016 for this purpose. Article 246A of the Constitution empowers the Centre and the States to levy and collect the ' GST. ‘Ans: The Constitution (101 Amendment) Act, 2016 (‘Amendment Act’) received presiciential assent on 8% September 2016. This Act paves the way for introduction of Goods and Services Tax (GST) by making special provisions with respect to goods and services tax. The Amendment Act contains a total of 20 sections. Out of the same, one section, i. Section 12 pertaining to GST Council came into effect from 12" September, 2016. ‘The remaining 19 sections came into effect from 16% September, 2016, The Constitution was amended to introduce the GST for conferring concurrent taxing powers on the Centre as well as the States (includes Union Territory with Legislature) to make laws for levying goods and services tax on every transaction of supply of goods or~ A BRIEF INTRODUCTK . op IN INDIA A BRI ION direct Taxes : GST ININDIA agar CA. Vanda In Och Yogenes ana Banga 4 a CT, 2016 ANALYSIS OF THE CONSTITUTION 101’ NDMENT A‘ z a called the Constitution (One Hunde Sec, ‘This Act 1 1. | shorted and commencement nd First Amendment) Act 2016. | 2) It shall come into force 0° such date as the Cental Be rent may, oy nonfintion i9 the Official Gazette, appoint, and different dates may be appointed for| appoint ars of hs Act an ay reference ny such provision to the ‘commencement of this Act shall be] construed as a reference tO the commencement of that| provision " | ee Tyne artide grants power to Centre| TEGGal piavision with respect [>| Concurrent Powe © This ; i eee ae and State Governments f0 make laws with respect to GST i i i i .d by Centre or su¢ vrotwithstanding anything contained in| imPOSe! Srpuch at % Noni ias and 254, Panlament, and, | Interstate transact scusive power with Cent subject to clause (2), the Legislature of ‘Centre has the exclusive power to make law ‘with respect Sredy Slate, have power to make laws) to GST i case of inier-State supply of goods and/or vith respect to goods and services tax] services. 4 imposed by the Union or by such State. | > Petroleum products - Outside purview of GST till 2). Parliament has exclusive power tomake | Notified ite & However, in respect to the following Panitith reapect to goods and services | goods, the aforesaid provi shall apply from the date | eee tre supply of ponds, oF of ||. reraeamenided by the GSP Council : | sax Joes, or both takes place in the} (a) Petroleum Crude cee era an (b) High Speed Diesel Explanation : The provisions of this ind article, shall, in respect of goods and © pena (commonly known as Petrol) Pee ered ane nice Wg Mae tet DONG), take effect from the date] (©) Aviation ‘Turbine Fuel FU aed bp the < Gopde and |». \Overriding Effect’: hei provisions of Aitide 22°) Services Tax Council. notwithstanding anything contained in Articles 246 and 254, Article 254 deals with the supremacy of the laws made by Parliament. 3 | Article 48: Residuary powers of legislation. | Article 248 grants the residuary powers to Parliament to make laws with respect to any matter not enumerated in the Concur on Site as Such power shall include the power of making any law imposing a tax not mentioned in either of those Lists. | Ne amendment prefixes the words “Subject to article Reise oA existing article thereby making it clear that the | ia ee ue does not have the power to frame laws in a : Article 249: Power of Parliament to legislate ‘with respect to a matter in the State List in the national interest. Ate 249 rans Ue Paliament the power to make avs wi respect amatirin the Sate ist in national interes in ac eceeereclin ae of States has declared by resolution and voting Boeitendin resttiebel oa aaa Articles 249 hi aie ne ore bt fave been amended to grant power to Parliament to make laws with eRe eee moor on Services Tax Article 250: Power of Parliament to legi legislate with respect to any matter in the State List if a Proclamation of Emergency is in operation. Article 250 provi iaes Ae eee for Parliament's absolute power to make SaRMEr Ay a any part of the territory of India with enumerated in the State List during proclamation of emergency. The amendment has insertedIndirect Taxes : GST IN INDIA - A BRIEF INTRODUCTION (© CA. Youendra Bangar & CA. Vandana Bangar 1.13 words goods and services tax in the existing article so that Parliament can also make laws with respect 0 GST during the Article 268: Duties levied by the Union but collected and appropriated by the State. emergency. “Article 268 pertains to the duties levied by the Centre but collected and appropriated by the States, It stipulates that such stamp duties and such duties of excise on medicinal and toilet preparations as are mentioned in the Union List shall be levied by the Government of India but shall be collected in the case where such duties are leviable within any Union territory, by the Government of India, and in other cases, by the States within which such duties are respectively leviable. ‘The Constitution Amendment Act omits “and such duties of excise on medicinal and toilet preparations” from Article 268, Duties of excise on medicinal and toilet preparations have been. subsumed into the goods and services tax to be levied by the entre and States “Article 269: Taxes levied and collected by the Union but assigned to the States. ; Taxes levied and distributed .e Union and the States. 7 | Omission of Article 268A: Service tax levied | Article 268A dealing with service ta Jevy has been omitted as by Union and collected by the Union and | a result of which this shall subsume into GST. the States. 8 “Article 269 earlier provided power to the Central Government to levy taxes on sale or purchase of goods and taxes on consignment of goods with respect to Inter-State trade or commerce. Now, the amendment restricts the applicability of the article only on those taxes which are not mentioned in new the course of inter State trade or commerce | and collected by the Government of India | ‘between the Union and “benprovidednl ‘Article 270 is amended to provide for distribution of the goods J and services tax between the Centre and the States, by order of the President after considering recommendations of the- A BRIEF INTRODU Indirect Taxes : GST ny psa Jeans ee indir Ts apples for those t ipportioned or payable) 2 the Central Government £0F Ievied by it under anita TGA G) and (2) and Clause (1) of 2691. | ce se any of ‘a1 | Article 271: ‘Surcharge on certain duties and | Article 271 eee Te oe 270. rae Ss po: inion. or taxes referred to in her provide, ia Pe cflntienlaachargel sis Teor and remain witht ean ee Now this article is amended ‘© exclude GST from ie} purview, EEE == 42 | Article 279A: GST Council Discussed in Question below. : =a =a | Article 286; Restrictions as to imposition of ‘Antiele 286 which restrains the States eaten laws for| tax on the sale or purchase of goods. imposition of any tax on the sale OF Fy goods Where ich sale or purchase takes place outside the State or in course! sheep is pon fe the territory of India. | ‘This article has been amended to incorporate the changes| Sy Sy eS words “sale | purchase” with “supply” and words “goods” with “goods or| eevices or both’. Consequently, States have no right to impose| GST on inter-State supply of goods or services or both. It wil be levied by Union Government under Article 269A 2s} mentioned earlier. Farther, clause (3) of Article 286 which stipulates that anylaw| of a State shall, in so far as it imposes, oF authorises the imposition, of a tax on the sale or purchase of goods decir by Parliament by law to be of special importance in inter Sate Eades Gelcommerce) bel subjected to! such restrictions aa Conditions in regard to the system of levy, rates and other incidents of the tax, as Parliament may, by law, specify, | been omitted. 74 | Article 366: Definitions. New Definitions have been introduced. \ ‘tetide 36 sets out definitions. Following | From the definition of Goods and services Tax as per Article| sew clauses have been inserted— 366(12A), it is clear the alcoholic liquor for human) {12A) “Goods and services tax means any | consumption would always remain outside the scope of GST. | fax on supply of goods, or services or both | Besides this Article 366(29A) defining deemed sale has not} except taxes on the supply of the alcoholic | been omitted. | liquor for human consumption; Definition of “goods”: The term goods has already been} (26A) “Services” means anything other than | defined under Article 366(12) in an indlusive manner to| goods; provide that “goods includes all materials, commodities, nd (268) “State” with reference to Articles 246A, articles”. | 268, 269, 269A and Article 279A includes a Union territory with Legislature; 15 | Article 368: Power of Paliament fo amend | Article 968 has been amended to indlude Article 279A als the Constitution and procedure therefor. _| within its purview. Consequently, at least 2/3% of the majority ineach House of the Parliament and ratification by at least hal of the States is specifically required to make any amendment in| Article 279A relating to GST Council. ‘Tt must be noted that even after the introduction of GST : Central excise duty contin ea dlenbrbnt , ? peo Lee Oe jb to be levied on manufacture/ production of tobacco, petroleum crude, dies | fi) State excise duty is leviable i " ( es ty on manufacture/ production of alcoholic liquor, opium, Indian hemp and parc (ii), VATis leviable on inra-State sale of petroleum crude, diesel, petrol, ATF, natural gas and alcoholic liquorIndirect Taxes : GST IN INDIA - A BI dete SopRU RDN momnsrnooucriow a 15. What is Goods an ‘Ans: Goods and Services Petroleum crude, di Petroleum crude, diesel, petrol, ATE, natural gas are presently not taxable under GST and alcoholic liquor is outside Tax Council [Article 279A] : 5 Constitution of GST Council Article 279A of the Constitution empowers the President of India to constitute a joint forum of the Centre and States namely, Goods & Services Tax Council (GST Council). ‘The provisions relating to GST Council came into force on 12-09-2016, The President constituted the GST Council on 15-09-2016, 2 |Members of the GST | The GST Council shall consist ofthe following members, namely:— (a) the Union Finance Minister Chairperson; (b) the Union Minister of State in charge of Revenue or Finance _ Member (the Minister in charge of Finance or Taxation or any other Minister nominated by each State Government Members. 3. | Vice-Chairperson ‘The State Finance Minister's shall choose one amongst themselves as Vice- Chairperson of the Council for such period as they may decide, Role of GST Council _ | The GST Council shall make recommendations to the Union and the States on- @) (b) © (a) the taxes, cesses and surcharges levied by the Union, the States and the local bodies which may be subsumed in the goods and services tax; the goods and services that may be subjected to, or exempted from the goods and services tax; model Goods and Services ‘Tax Laws, principles of levy, apportionment of GST levied on supplies in the course of inter State trade or commerce under Article 269A and the principles that govern the place of supply; the threshold limit of tumover below which goods and services may be exempted from goods and services tax) (©) the rates including floor rates with bands of goods and services tax; © any special rate or rates for a specified period, to raise additional resources during any natural calamity or disaster; (g) special provision with respect to the States of Arunachal Pradesh, Assam, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand; and (h)_ any other matter relating to the GST, as the Council may decide. = ifective date of levy of | The GST Council shall recommend the date on which the goods and servives fax be EST on _ petroleum| Jevied on petroleum crude, high speed diesel, motor spirit (commonly known a8 products petrol), natural gas and aviation turbine fuel ~& lGuiding principles for | While discharging the functions conferred by this arile the ‘Goods and Services Tax GST Council Council shall be guided by the need — {@) fora harmonised structure of goods and services tax, and (b)_ forthe development of a harmonised national market for goods and services, 7. | Quorum ‘Onerhalf of the tolal number of Members of the Goods and Services Tax Council shall constitute the quorum at its meetings. % | Procedure The Goods and Services Tax Council shall determine the procedure in the performance ofits functions. isi i Council shall be taken at a meeting, by 9. ions to be taken by | Every decision of the Goods and Services Ta pes cate me majority of not less than 3/4 of the weighted votes of the members present and woting, in accordance with the following principles, namely'—INDIA - A BRIEF INTRODU indirect Taxes : GST IN IND On pangar eCA.Vi Toy 6 me ca Shalt have a weightage of 1/9% ofthe a (a) _ the vote of the Central Government votes cast, and e | (b) the votes of all the State Governments taken together shall have a weightage 2/3% of the total votes cast nae No act or proceedings of the Goods and Services Tax Council shall invalid meg] | or any defect in, the constitution of the Council; or | (6) any defect in the ‘appointment of 4 ‘person as @ ‘Member of the Council; or | (9__ any procedural irregularity of the ‘Council not affecting the merits of the case_| “The Goods and Services Tax Council shall establish a mechanism to adjudicate ay dispute — () _ between the Government of India (ii) between the Government of India and more other States on the other side; oF (iii) between two or more States, 70, [Vacancy etc. not fo jnvalidate proceedings | by reason of— (a) any vacancy in, 11. | Settlement of disputes ‘and one or more States; OF | any State or States on one side and one of the Council or implementation thereof. = arising out of the recommendations Fain bonis all os ay “Ans: The CST law comprises of the following — + 1. [Acts > _ Central Goods and Services Tax Act, 2017. > Integrated Goods and Services Tax Act, 2017. > Union Territory Goods and Services Tax Act, 2017. > — Goods and Services Tax (Compensation to States) Act, 2017. > State Goods and Services Tax Acts, 2017 [for 28 states and 3 Union Territories deemed beStates). 2. | Rules > Central Goods and Services Tax Rules, 2017. | > Integrated Goods and Services Tax Rules, 2017. > Union Territory Goods and Services Tax Rules, 2017. > State Goods and Services Tax Rules, 2017 {for 28 states and 3 Union Territories deemed i beStates] > Goods and Services Tax (Compensation to States) Rules, 2017. | > _ GST Settlement of Funds Rules, 2017. rm Central Tax Notifications [CT] [Non-tariff] Central Tax (Rate) Notifications [CT (Rate)] [Tariff] Integrated Tax Notifications [IT] [Non-tariff] Integrated Tax (Rate) Notifications {IT (Rate)] [Tariff] ‘Union Territory Tax Notifications [UTT] [Non-tari Union Territory Tax (Rate) Notifications a aan [Tariff] porn a ‘Notifications [GST Compensation Cess] [Non-tariff] eearrit (Rate) Notifications [GST Compensation Cess (Fa 3. | Notifications eeleslecle