Basics of Taxation system in India:

Tax – Meaning and Types, Concept and Features of

Indirect tax, Differences between Direct and Indirect
Taxation, Brief History of Indirect Taxation in India,
Constitutional validity of GST
Tax
Tax is the money that people and businesses must pay to the government to help run the country.
A tax is a compulsory contribution to the state's revenue, levied by the government on income,
business profits, or added to the cost of some goods, services, and transactions.

Types of Taxes in India:

1. Direct Tax (paid directly to the government by the person on whom it's imposed)
 Income Tax (on salary, business income, etc.)
 Corporate Tax
 Capital Gains Tax
2. Indirect Tax (collected by intermediaries like sellers, then paid to the government)
 Goods and Services Tax (GST) – on goods/services bought
 Customs Duty – on imports/exports
 Excise Duty (on manufacturing, now mostly merged into GST)

Direct Taxes Indirect Taxes Other Taxes

Income Tax Sales Tax Property Tax

Corporate Tax Service Tax Registration Fees

Securities Transaction Tax Octroi Duty Toll Tax

Capital Gains Tax Custom Duty Education Cess

Gift Tax Value Added Tax (VAT) Entertainment Tax

Wealth Tax Goods & Services Tax (GST) Professional Tax

Indirect Tax
The tax imposed by the government on goods and services purchased by anyone in the country is
called Indirect Tax. Indirect Tax can be defined as a type of tax in which the incidence and
impact of the tax are passed on to another individual or entity i.e. the end consumer of the
product.
Unlike direct taxes, it is not levied on the income of the person but on the value of goods or
services purchased. Generally, Indirect Tax is levied on sellers (Manufacturers, retailers, etc.) on
the purchase of raw materials or goods purchased for resale and then they pass it onto the end
consumer of the product who has purchased it for final consumption.
Indirect taxation in India is imposed and regulated by the Central Board of Indirect Taxes and
Customs (CBIC). CBIC has all the authority to frame rules for the purpose of levying indirect
tax in the country. CBIC was constituted under the Central Board of Revenue Act, 1963 for
matters relating to the levy and collection of Customs and Central Excise duties and other
Indirect Taxes.

Features of Indirect Tax

The features of Indirect Tax are as follows:
1. Tax Liability: In Indirect Tax, the tax liability is borne by the consumer of the product or
service. The tax is collected by the manufacturer and seller from the consumer.
2. Payment of Tax: The responsibility of payment of tax to the government under indirect tax is
on the seller of the product who collects tax on the behalf of the consumer.
3. Nature: Before the implementation of GST, the nature of indirect taxes was regressive. After
the introduction of GST, it became progressive.
4. Saving & Investment: Indirect Tax encourages saving and investment as it is not charged
directly on income but on consumer’s expenditure.
5. Tax Evasion: It is very difficult to evade tax in this because it is directly charged on the
purchase of goods and services and not on income.

Indirect Tax in India

In India, before July 2017, there were many different Indirect Taxes that were applicable on the
sale and purchase of goods and services in the country. For Example, Service Tax was levied on
any type of service, Excise Duty was levied on the manufacturing of goods, Customs Duty was
levied on the import of goods, etc. On 29th March 2017, the GST Act was passed in the
Parliament of India, which came into effect on 1st July 2017. This was done to merge all the
indirect taxes into a single tax, i.e., Goods and Services Tax (GST) that can replace multiple
layers of taxation in India. It has replaced 17 indirect taxes (9 State-level taxes and 8 Central
level taxes) and 23 cesses of the States and Centres that existed earlier, including Central excise
duty, Service tax, Value Added Tax (VAT), Luxury Tax, etc.

Types of Indirect Tax

Before GST there were many taxes prevailing in the market. Here is the list of major taxes that
were merged into the Goods and Services Tax:
1. Service Tax: This tax was levied by any entity specifically on any service provided by them.
All the services offered by any company if taxable in nature were considered under this.
2. Excise Duty: It was a form of Indirect Tax levied on the production, sale, or license of certain
products. It was replaced by GST in July 2017. Currently, only specific items like petrol &
diesel, etc., are charged with excise duty.
3. Value-Added Tax: All the movable products that are directly sold to customers was taken into
consideration under Value-added Tax. VAT was collected by the respective state government in
the scenario of intra-state sales. Currently, only specific items, like petrol & diesel, etc., are
charged with VAT.
4. Custom Duty: Any goods imported to India from foreign countries was charged with Custom
Duty by the Government of India. It depends on the value and type of goods imported.
5. Stamp Duty: Stamp Duty was levied on the transfer of any immovable property in a state of
India. It included all the legal documents also.
6. Entertainment Tax: Any product or transaction related to entertainment, i.e., purchase of any
video games, movie shows, sports activities, arcades, amusement parks, etc., were subjected to
be charged with Entertainment Tax by the State government of any state of India.

Advantages of Indirect Tax

 Collectibility: Compared to direct taxes, indirect taxes are simpler to collect. The
government should not worry about the collection of indirect taxes because they are only
collected at the time of making purchases.
 Convenience: Since indirect taxes are only paid when a purchase is made, they are easy
on the taxpayer and handy. Furthermore, because indirect taxes are collected directly at
the stores or factories, state authorities find it convenient to levy them. This helps to save
a great deal of time and work.
 Fair contributions: Costs of goods and services and indirect taxes are closely related.
This basically means that luxury things are taxed at higher rates while fundamental
requirements are taxed at lower rates, ensuring that contributions are fair.
  Reduce Negative Consumption: Products like alcohol, cigarettes, and other comparable
ones that are harmful to human health are subject to the greatest indirect taxation.

Disadvantages of Indirect Tax

 Regressive: The nature of indirect tax can be regressive. For instance, the salt tax is the
same for rich and poor people, but if a rich person doesn’t pay, there will be bigger fines
as well.
 Financial Burden: There may be cumulative indirect taxes charged at times. As a result,
middlemen in a point-based transaction system are likely to add their own service tax,
which could raise the final price of the goods.
 Hindrance: Industry-unfriendly indirect taxes exist. Taxes on commodities and raw
materials raise the cost of production, preventing industries from growing because their
ability to compete is constrained.

Period Key Developments

Pre-Independence - Taxes like Salt Tax, Customs, and Excise under British rule

- No unified tax system; taxes varied by region

1947 – 1980s - Introduction of Central Excise Duty and Customs Duty

- Sales Tax levied by state governments

1990s – Early
- Economic liberalization led to tax modernization
2000s

- Service Tax introduced in 1994

- VAT (Value Added Tax) introduced in most states by 2005

Challenges Pre- - Complex system with multiple taxes (VAT, Excise, Service Tax,
GST Entry Tax, etc.)

- Tax cascading (tax on tax) and compliance difficulties

2017 – Present - GST launched on 1st July 2017

- Unified indirect tax for goods and services

Difference Between Direct and Indirect Tax

 The fundamental categorization of taxes is premised upon who collects the taxes from taxpayers.
An overview of direct tax and indirect tax difference is given below –

Context of Differentiation Direct Tax Indirect Tax

Between Direct Tax vs Indirect
Tax

Imposition of tax It is levied on the income or An indirect tax is levied on goods and
profit of a taxpayer. services rather than on income or
profits.

Course of payment Taxpayers pay it directly to the Taxpayers pay it to the government
government. through an intermediary.

Paying entity Individuals and businesses End-consumers

Rate of tax payment Based on income and profits Same for all taxpayers

Transferability of payment Cannot be transferred. Transferable

Nature of tax Progressive tax, i.e., its rate Regressive tax, i.e., its rate decreases
increases with taxpayer’s with increase in income.
income.
Constitutional Validity of GST in India
The Goods and Services Tax (GST) became constitutionally valid through the 101st
Constitutional Amendment Act, 2016.
Key Constitutional Changes for GST:

Aspect Details

Amendment 101st Constitutional Amendment Act, 2016

Date Passed August 2016

Implemented On 1st July 2017

New Article Article 246A – Gives power to make laws on GST to both Parliament
Introduced and State Legislatures

Article 269A Deals with IGST (Integrated GST) on inter-state trade; revenue
shared between Centre and States

Article 279A Established the GST Council – a constitutional body to make GST
decisions

Concurrent Both Centre and States can levy GST on intra-state supplies
Jurisdiction

Why GST is Constitutionally Valid:

 Before GST, Union and State governments had separate powers to levy indirect taxes
under List I and List II of the Seventh Schedule of the Constitution.
 Since GST required a common tax on goods and services across the country, it was
necessary to amend the Constitution.
 The 101st Amendment gave legal authority to:
o Merge central and state taxes into a single GST.

o Create a uniform tax structure.

o Allow both central and state governments to levy and collect GST
simultaneously.
Conclusion:
The Constitutional validity of GST comes from the 101st Amendment Act, which gave legal
powers and structural support to implement GST across India. It ensures a harmonized tax
system and is backed by constitutional authority.
Introduction to GST
Introduction to Goods and Services Tax, Constitutional
Framework, Tax subsumed under GST, Dual model of GST,
Features of GST, GST council- composition- powers and
functions.
Goods and Services Tax (GST)
The Goods and Services Tax or GST is a single, indirect tax that integrates all indirect taxes
within the Indian economy. The GST Act was passed on 29th March 2017 in the Parliament of
India and came into effect on 1st July 2017. The idea behind it was to replace multiple layers of
taxation with one tax (GST). It has replaced 17 indirect taxes (9 State-level taxes and 8 Central
level taxes) and 23 cesses of the States and Centres that existed earlier, including Central excise
duty, Service tax, Value Added Tax (VAT), Luxury Tax, etc. The aim behind implementing the
GST Act was ‘One Nation and One Tax’. When GST was implemented, 1300 goods and 500
services were taken into consideration.
GST is a destination-based consumption tax as it is charged at every stage, wherever some value
is added to the goods or services, and the supplier of the good or service offsets the charge on its
inputs of the previous stages. The charge is offset through the tax credit mechanism. Ultimately,
the last dealer passes on the added GST to the consumer of the goods or services. The reason
behind charging input credit at every stage of the value chain is to avoid the cascading effect.
Cascading effect means charging tax on tax. The Government of India has eliminated the
cascading effect with the expectation of reducing the prices of goods or services and benefiting
the consumers.
The three types of taxes under GST are:
 Central Goods and Services Tax (CGST): GST levied by the Centre on the Intra-State
supply of goods or services.
 State Goods and Services Tax (SGST): GST levied by the State (including Union
Territories with legislatures) on the Intra-State supply of goods or services by the State.
 Integrated Goods and Services Tax (IGST): GST collected by the Centre and levied on
the Intra-State supply of goods or services. In other terms, IGST is the total of CGST and
SGST.
Features of GST
The features of GST are:
1. GST Rates: The States and Centres have mutually decided upon the GST rates levied on
goods or services through CGST, SGST, and IGST under the aegis of the GST Council. The four
tax slabs under GST are 5% (for consumer durables), 12% (general rate), 18% (general rate), and
28%(luxurious goods). However, the rate of GST for exports and supplies to the Special
Economic Zones (SEZs) is 0%.
2. Applicability of GST: The Goods and Services Tax applies to the whole country (India).
3. Consumption-Based Tax: Earlier, the taxes were based on the principle of origin-based
taxation. However, the Goods and Services Tax is a destination-based consumption tax, which
means that the taxes will be received by the states in which the goods or services have been
consumed. As the tax is received by the consumer State, the losses faced by Producer States are
compensated by the Centre.
4. Applicable on Supply of Goods and Services: Earlier, the taxes were charged on the basis of
tax on the manufacture or sale of goods or on the provision of services; however, the Goods and
Services Tax is charged on the basis of Supply of Goods and Services.
5. GST on Imports: The imports of goods and services come under IGST and is treated as Inter-
State Supplies. IGST is charged on the imports of goods and services in addition to the
applicable customs duties.
6. Payment of GST: The taxpayers can make payment of GST through different modes, like
Internet Banking, NEFT (National Electronic Funds Transfer)/RTGS (Real Time Gross
Settlement), and debit/credit cards.

Facts about GST:

1. Single Tax Structure: The basic aim of GST is to replace multiple taxes with a single tax and
make the price of goods or services uniform across the country. However, in doing so, some
goods or services became cheaper, while some became costly.
2. Effect on Prices: Goods and Services Tax has made luxury goods costlier and goods
manufactured for mass consumption cheaper.
3. Consumption-Based tax: The Goods and Services Tax is not received by the state in which
the goods have been manufactured, but by the state in which the goods or services have been
consumed.
4. Invoice Matching: The invoice matching mechanism will be added to the Indian GST. It
means that when details of inward supply filed in by the buyer match the details of outward
supplies filed in by the supplier, then only Input Tax Credit of purchased goods or services will
be available to them. Besides, GST is a self-regulating mechanism, as it keeps a check on tax
evasion and tax fraud and also brings more business to the formal economy.
5. Anti-Profiteering Measure: The recently implemented GST law includes the feature of anti-
profiteering measures. As the name suggests, the anti-profiteering measures prevent the
companies from making excess profits. According to the rules of Anti-Profiteering, the benefit of
increased input tax credit and decreased GST tax rates should reach the customers in the form of
a reduced price of goods or services. These provisions are efficiently managed and administered
by NAA (National Anti-Profiteering Authority).
6. Registration under GST: It is mandatory for an organization with an aggregate turnover
exceeding ₹ 40 Lakhs in a financial year to register under GST. However, this limit is set at ₹ 20
Lakhs for the North Eastern and hilly states (Special category states).

Input Tax Credit Under GST

Input Tax is the GST charged on the goods or services supplied to a taxable person. Input Tax
Credit means reducing or adjusting the taxes paid by an individual or firm on the inputs from the
taxes to be paid by them on the output, i.e., the final product. In other words, it means to claim
the credit of the GST paid by an individual or a firm on the purchase of goods or services used as
a raw material for manufacturing the finished goods or services. The suppliers at every stage of
the supply chain have the permission to avail of any GST credit paid by them on the purchase of
goods or services. This availed credit can be set off against the GST payable by them on the
supply of goods or services to be made later. In this way, the ultimate consumer has to bear the
GST charged by the last supplier of the supply chain. Therefore, the tax will be charged on the
value added to the good or service only, which avoids the cascading effect, i.e., double taxation.
For example, if a manufacturer has paid taxes on Input A, B and C of ₹ 90, ₹ 130 and ₹ 150,
respectively, and ₹ 600 on the final output, then he can claim the amount paid on input, i.e.,
purchase of raw material. Therefore, the manufacturer can claim (90+130+150) ₹ 370 and will
have to deposit only ₹ 230 (600-370) as tax.
Ways in which GST benefits and empowers citizens
1. Reduction in overall tax burden: It is expected that the tax burden on industries and trades
will be reduced, which will result in an increase in consumption and a decrease in the price of
goods and services. The ultimate result of this change is expected to be an increase in the
production level and development of the industries.
2. No hidden taxes: As GST is replacing all indirect taxes with one tax, there are no chances of a
hidden tax within the invoice of the goods and services. For example, if a commodity costs
₹500, it means that the overall cost of the commodity is ₹500 without any hidden taxes.
3. Development of a harmonised national market for goods and services: Harmony in tax
rates, laws and procedures simplifies its compliance. The common interface of the GST portal
brings synergy and efficiency to the filing of taxes. Earlier, service tax and VAT had their own
returns and compliances, which was time-consuming. However, GST merges both compliances
and lowers the number of returns, ultimately reducing the time spent on these compliances.
4. Higher disposable income in hand: Disposable income is the money at hand left with the
consumer after making all expenses. As GST has reduced the tax burden on the taxpayers, it will
increase their disposable income.
5. Customers have a wider choice: Earlier due to cascading effect, the customer used to have
less disposable income at hand to spend on goods and services. But, the reduction in prices of
goods and services, and tax burden has increased the disposable income of the consumers giving
them a wide choice while purchasing goods and services.
6. Increased economic activity: Reduction in prices of goods and services, increase in
disposable income of consumers, and decrease in the price of goods and services is leading the
consumers in performing economic activities.
7. More employment opportunities: With the implementation of GST, the manufacturing of
goods has become simplified, resulting in an increase in the number of manufacturers and
industries. More industries will bring employment opportunities to the country, benefiting the
citizens of India.

GST Council
The Goods and Service Tax Council is a constitutional body that advises the Indian Parliament. It
provides recommendations to the Union and State governments about issues related to Goods
and Services Tax. To provide these recommendations, it collects extensive data from the market
on changes in demand for goods and services.

The Goods and Services Tax Council (GST Council)

comprises:
 According to the Article 279A of the amended Constitution, the GST Council comprises
the following members:
Chairperson: Finance Minister
Vice Chairperson: He/she is chosen amongst the Ministers of State Government.
Members: The members of the GST Council are MoS (Finance) and all Ministers of
Finance/Taxation of every state.
 Voting takes place when at least half of the members are assembled.
 The Centre has one-third weightage, whereas the States have two-thirds of the total votes
cast at the meeting.
 The decision is taken by a 75% majority.
 The Council shall make recommendations on anything related to the GST, including rules
and rates, etc.
Functions of the GST Council
 Recommendations on GST Laws: The Council makes recommendations to the Union
and the States on various aspects of GST, such as the goods and services that may be
subjected or exempted from GST.
 GST Rate Structure: It decides the rate structure of GST, which includes the rates of
GST, the threshold limit for exemption, and the limits for turnover for availing the
composition scheme.
 Special Provisions for States: The Council recommends special provisions for certain
states, mainly the North-Eastern States, Jammu & Kashmir, Himachal Pradesh,
and Uttarakhand.
 Model GST Laws: The drafting of model GST laws, the principles of levy,
apportionment of IGST (Integrated Goods and Services Tax), and the principles that
govern the place of supply fall under the purview of the Council.
 Dispute Resolution: It also functions as a dispute resolution mechanism, resolving any
disputes arising out of its recommendations.
  Other Recommendations: The Council also makes recommendations on various other
aspects related to GST, such as the date on which GST will be levied on petroleum crude,
high-speed diesel, motor spirit (petrol), natural gas, and aviation turbine fuel.
Periodic Review: The Council periodically reviews the tax regime to make it more efficient and
to meet the changing economic needs.

Essential Features of GST

 One Nation, One Tax: Goods and Services Tax (GST) was introduced on July 1,
2017, based on the principles of value-added tax and applies to the supply of goods
and services across the nation.
o It brought uniformity in the tax structure across India, eliminating the cascading
effect of taxes.
 Multiple Tax Levels: India’s GST system consists of multiple tax rates, with four
primary tax rates (5%, 12%, 18%, and 28%).
o Additionally, there is a “zero rate” for certain essential goods and services.

 Dual Structure: GST operates under a dual structure, comprising the Central GST
(CGST) levied by the Central Government and the State GST (SGST) levied by the State
Governments.
o In the case of Inter-state transactions, Integrated GST (IGST) is applicable,
which is collected by the Central Government and apportioned to the respective
State.
 Destination-Based Tax: This means that the revenue generated from GST is collected by
the state where the goods or services are consumed, rather than where they are produced.
 Exports are Zero-rated: Goods or services that are exported would not suffer input
taxes or taxes on finished products.
 Input Tax Credit: Under the Indian GST system, businesses can claim input tax
credit for the GST they paid on their purchases.
o This helps eliminate the cascading effect of taxation and ensures that taxes are
levied only on the value added at each stage of the supply chain.
 Composition Scheme: The composition scheme is available for small taxpayers with a
turnover below a prescribed limit (currently 1.5 crores and 75 lakhs for special category
state).
 o Businesses are required to pay a fixed percentage of their turnover as GST and
have simplified compliance requirements.
 Threshold Exemption: Small businesses with a turnover below a specified threshold
(currently, it is 20 lakhs: supplier of both goods & services and 40 lakhs: for supplier of
goods (Intra–State) in India) are exempt from GST.
o Some special category states, the threshold varies between 10-20 lakhs for
suppliers of goods and/or services except for Jammu & Kashmir, Himachal
Pradesh and Assam where the threshold is 20 lakhs for supplier of services/both
goods & services and 40 lakhs for supplier of goods (Intra–State).
o This threshold helps in reducing the compliance burden on small-scale businesses.

 Compliance and Reporting: Registered businesses in India are required to file regular
GST returns, including details of their sales, purchases, and tax liabilities, through an
online portal provided by the Goods and Services Tax Network (GSTN).
 Goods and Services Categorization: GST in India classifies goods and services into
various tax slabs based on their nature and essentiality.
o This categorization is periodically reviewed and updated by the GST Council, a
body consisting of representatives from both the central and state governments.
 Anti-Profiteering Authority: India also has an Anti-Profiteering Authority in place to
ensure that businesses pass on the benefit of reduced tax rates or input tax credits to
consumers by reducing prices.
 Sector-specific Exemptions: Certain sectors, such as healthcare, education, and basic
necessities like food grains, are either exempted from GST or have reduced tax rates to
ensure affordability and accessibility.

Constitutional and Legislative Framework of GST

The Constitution (One Hundred and First Amendment) Act, 2017, is a significant reform in the
Indian taxation system. This amendment introduced the Goods and Services Tax (GST) in India.
The key highlights of the 101st Constitutional Amendment Act are:
 Introduction of GST: The act brought in a uniform tax system by subsuming various
central and state taxes into a single GST.
 Dual GST Model: It implemented a dual GST model, which means that both the Centre
and the States will simultaneously levy GST on a common tax base.
 GST Council: The amendment led to the formation of the GST Council, a joint forum of
the Centre and the States. This council is tasked with making recommendations on
various issues related to GST, such as the tax rate, exemption list, and threshold limit.
 Integrated GST (IGST): The act also introduced the concept of Integrated GST, which
is levied on inter-state transactions of goods and services and is shared by both the Centre
and the States.
 Compensation to States: It provided for compensation to states for any revenue loss due
to the implementation of GST for a period of five years.
Quorum, Decision-Making Process, Weightage of Votes, and Validity of Acts
 Quorum Requirement: A minimum of 50% of the total members of the GST Council
must be present to constitute a valid meeting.
 Decision-Making Majority: For any decision to be passed during the meeting, it must be
supported by at least a 75% majority of the weighted votes of the members who are
present and voting.
 Weightage of Votes:
o Central Government: Carries a weight of one-third of the total votes.

o State Governments: Carry a weight of two-thirds of the total votes.

 Validity of Acts:
o The validity of any act, decision, or proceeding of the GST Council is
not affected by any vacancy within the Council.
o Any defects in the Council’s constitution or in the appointment of its
members do not invalidate its decisions.
o Non-compliance with procedural aspects does not render the
Council’s decisions or proceedings invalid.

The Electronic Way Bill (E-Way Bill)

  The Electronic Way Bill (E-Way Bill) is an important component of the Goods and
Services Tax (GST) system in India.
o It’s a digital document generated on the GST portal, evidencing the movement
of goods.
 Here are the key aspects of the E-Way Bill under GST:
o Purpose: To Track the Movement of Goods as it is primarily used to monitor the
movement of goods from one place to another.
o Value Threshold: An E-Way Bill is required when the value of the consignment
of goods transported exceeds ₹50,000 (although this threshold can vary in some
states).
o Interstate and Intrastate Movement: It’s necessary for both interstate and
intrastate movement of goods.
o The validity of an E-Way Bill: Depends on the distance the goods have to travel.
For example, for every 100 km or part thereof, the E-Way Bill is valid for one
day in case of regular cargo, and for 15 km in case of Over Dimensional Cargo
(ODC).
Goods and Services Tax Network (GSTN)
 The Goods and Services Tax Network (GSTN) is a digital and technological
backbone that facilitates the implementation and monitoring of the Goods and Services
Tax (GST) in India.
 GSTN provides a shared IT infrastructure and services to central and state
governments, taxpayers, and other stakeholders, helping in the efficient and transparent
administration of GST.
Assessment and Evaluation of 6 years of GST
 GST completed 6 years on 1st of July 2023.
 The growth of GST has been phenomenal in terms of collection which have grown from
Rs. 7.19 lakh crore in FY 2017-18 (from July 2017) to Rs. 18.10 lakhs crore in FY
2022-23.
 The collection for FY 2022-23 was 22% higher than that of FY 2021-22.

Conclusion
  Goods and Services Tax (GST) in India represents a significant overhaul of the indirect
tax system, aiming to streamline taxation, enhance compliance, and foster a unified
market.
 Implemented in 2017, GST has simplified the tax structure by subsuming various
central and state taxes into a single unified tax, promoting ease of doing business and
reducing tax evasion.
 Despite initial challenges, GST has emerged as a cornerstone of India’s economic
reforms, contributing to increased transparency and efficiency in the tax regime.

Taxes Subsumed Under GST

Central Taxes State Taxes Taxes Not Covered by GST
 Central Excise Duty  State VAT  Property Tax & Stamp
(CENVAT)  Central Sales Tax Duty
 Additional Excise Duties  Luxury Tax  Electricity Duty
 Duties of Excise (Toilet  Entry Tax of all  Excise Duty on Alcohol
and Medicinal Types  Basic Custom Duty
Preparations)  Entertainment and  Petroleum crude, Diesel,
 Additional Duties of Amusement Tax Petrol, ATF & Natural
Excise (Goods of Special  Taxes on Gas
Importance) Advertisements  Entertainment Tax (Levied
 Additional Duties of  State Surcharges by Local Bodies)
Excise (Textiles and Textile and Cesses  Road Tax
Products)
 Additional Duties of
Custom (CVD)
 Service Tax
 Central Surcharge and
Cesses
The dual GST model
the dual GST structure means levying taxes with two different taxation
components. In India, it is a single transaction within the state due to its federal
nature, so both Central Goods and Service Tax, or CGST, and State Goods and
Service Tax, or SGST, are levied on the same transaction. The Dual GST is a tax
system introduced in India to make the tax procedure simple. The term "dual" has
been used here because there are two types of taxes: one is collected by the central
government, and the other is collected by the state government. It makes the tax
system fair and organized. So, before GST, there were numerous types of taxes,
and businesses had to deal with complicated rules, whereas under GST, it
comprehensively combines all types of taxes and makes it easy to understand. Dual
GST results in both the central and state governments' taking tax on the same
goods or services. Overall, Dual GST is an important step in making the Indian tax
system more transparent and efficient.
Meaning of Dual GST Model in India
The Dual GST model in India is the one where there are two types of taxes on
goods and services – one collected by the central government (CGST) and one by
the state government (SGST). This system was introduced to make the tax process
easier and more organized. Both the central and state governments can collect tax
on the same item, but each collects its own share. In Dual GST, the entire central
government collects CGST for an entire country and the state government collects
SGST for that particular state in which goods or services are sold. This Dual GST
model aims to simplify tax collection so as not to confuse people. Earlier, there
were a lot of miscellaneous taxes, making it very difficult for businesses to handle.
The new system supports businesses by unifying taxes between all states;
therefore, a business does not have to maintain different rules of the game for
different states. Overall, it makes paying taxes fairer and clearer for everybody.
Notable Features of Dual GST Model
The dual GST model of India has numerous significant features through which
the tax system becomes better and easier to understand. Such features benefit the
businesses as well as the government in the tax collection process in a fair way.
Now, let's focus on some major features of this model through which it is well
executed.
Two Kinds of Tax (CGST and SGST):
The most notable attribute of the dual GST model is that it covers two kinds of
taxes, of which one comes under CGST (Central Goods and Services Tax) and
another under SGST (State Goods and Services Tax). In essence, the center collects
the money for CGST, whereas a state government collecting the amount, where
goods and services are actually sold, provides the revenue towards SGST, thus both
sides of the state government collect part of the same tax. This gets every state an
appropriate share of the taxes paid. Businesses would pay both these taxes, though
this process streamlines it, so they aren't burdened by too much bureaucracy.
Same Tax Rate All Over India
Under Dual GST, tax rates across the states become the same, where the state
doesn't determine them, similar products and services get the same rate. This
means that if one purchases a product in one state or another, the tax rate will be
the same. It helps businesses because they do not have to bother about different
rates of tax in different states. It's also fair for consumers because, presumably,
everyone would pay the same amount of tax on the same items. This uniform tax
rate makes the system clearer and simpler for everybody to follow.

Reduction in Tax Burden

Before the Dual GST system, there were many taxes on goods and services, which
made things complicated. The new system reduces this burden by combining
various taxes into one. This makes it easier for businesses to understand and
manage their taxes. With fewer taxes to worry about, businesses can focus on
improving their products and services. The tax burden on consumers is also lower
because of this simplification.

Tax Credit System

The Dual GST model would allow businesses to claim tax credits on the taxes
already paid at the time of purchase. So, businesses have not paid the tax again on
the things that have already been taxed. It reduces the total tax cost to businesses.
For instance, when a firm purchases raw material and pays tax, it can use that tax
credit to reduce the taxes it is supposed to pay when it sells the finished product.
This system encourages businesses to grow and helps keep the prices of goods and
services in check.
Prevention of Tax Evasion
One of the key features of Dual GST is that it will deny evasion opportunities by
the businesses, which try to escape taxes. The two kinds of governments-that is, the
central and state governments-will collect taxes from the businesses. There are
checks to ensure proper payment of tax by the business enterprise, and they must
make proof of tax payments and transactions, making it hard to cheat the system.
This will result in more honest businesses and, more importantly, efficient
collection of tax by the government. Ultimately, it ensures everyone pays their due
tax share.

Benefits of Dual GST Model

The Dual GST model brings along several advantages that make the tax system
better for businesses, consumers, and the government. It simplifies the way taxes
are collected and ensures fairness across the country. Let's explore some of the key
benefits that come with this system.
Simplified Tax System
Simple. Simplifies process - previously so many different tax kinds. No. There was
so much paperwork before GST to keep track. Today, dual GST, as per me at least,
eliminates much of those troubles as in now only need to focus upon the two
significant ones, be it CGST (Central Goods and Services Tax) or the SGST. This
is also more straightforward for the consumers, since it makes life easy, in addition
to clarity with the tax system.
Equality Across States
One more advantage of Dual GST is the equality of taxation across states. The rate
is the same in all the states for alike products and services. This is where you have
been in any of the states or the other; you would still pay the same amount for a
similar product or service. This helps businesses that operate in different states
because they don’t have to deal with different tax rules. It also ensures that no state
is at a disadvantage when it comes to collecting taxes.
Boosts Business Growth
The Dual GST model helps businesses grow by making it easier for them to
expand into different states. Since the tax rates are uniform and a tax credit system
is there, complicated rules in each state need not be taken care of by businesses.
Businesses can concentrate on developing their products and services. This system
will encourage new business houses to begin and allows existing ones to expand
without getting hampered by tax-related issues. With businesses expanding, more
jobs are created, and the economy benefits.

Promotes Tax Compliance

Because in dual GST it makes easier the tracking of taxes, businesses should
properly follow the tax rules to avoid any error. With double government
involvement and two governments participating in the act, there's a higher
checking to ensure correct tax payment of the business that avoids tax evasions and
everybody contributes their proper share. When more businesses pay their taxes
honestly, the government has more money to spend on important services like
schools and hospitals. It helps create a more honest and transparent tax system.
Reduces Tax Burden on Consumers
The Dual GST model also reduces the tax burden on consumers. As the tax system
is simplified, and unnecessary taxes are reduced, the cost of goods and services
becomes lower. Businesses can then pass on those savings to the consumers, so
products become affordable. The overall cost of taxes for businesses can be
reduced because of the tax credit system. This can contribute to keeping the prices
down for consumers, which means they get to pay less for the things they buy.
Impact and Implications Due to the Dual GST Model
The Dual GST model has brought a lot of changes in the way taxes are collected
and managed in India. Although it has made the tax system more organized and
transparent, it has also brought new challenges for businesses and the government.
Let's look at the impact and implications of this system in more detail.
Impact on Businesses
The Dual GST model has made it easier for businesses to follow tax rules because
now they only need to deal with two taxes, CGST and SGST. However, businesses
now need to manage these taxes carefully, which can take more time and effort.
This might be difficult for small businesses that do not have many resources to
handle the extra work.
Impact on Consumers
The system is much fairer in that consumers of goods and services pay the same
tax rate in any state in which they might live. As a result of the tax, some products
are going to become a little costlier, but consumers will mostly know what they are
paying. In the long run, this system should assist in keeping the prices stable,
giving shoppers much more choices in the market.
Effect on the Government
The government benefits in the Dual GST model because it can collect taxes more
fairly and efficiently from both central and state levels. It also reduces the chances
of tax evasion, thereby helping the government collect more money. However, the
government has to spend some time helping businesses adjust to the new tax
system.
Implications for Businesses
The Dual GST model requires businesses to manage two types of taxes, CGST and
SGST, which can be a bit complicated. Businesses need to keep proper records and
adhere to new rules to avoid errors. This may be challenging for smaller
businesses, but with time, it should become easier as they adjust to the new system.
Impact on Consumers
For consumers, it will mean equal tax rates throughout all states and is therefore
more equitable. Of course, certain items may cost a little bit more because the
business will be trying to recover their losses through these new taxes. In the long
run, the system should be able to provide more price stability and thus
predictability when it comes to shopping.
Implications for the Government
The government benefits from the Dual GST model because it can collect taxes
more efficiently and reduce tax evasion. This allows the government to raise more
funds to spend on important public services like schools and hospitals. However,
the government must spend time educating businesses and people to ensure
everyone understands the new system.
Conclusion
In a nutshell, the Dual GST system has eased the Indian tax structure by combining
center and state taxes. It has made tax payment easy and simple to understand.
Businesses are no longer confused by many complex tax rules and can concentrate
more on their work. Consumers also benefit because they pay a fair and uniform
tax on goods and services across the country. With GST, tax collection is more
organized and transparent, which reduces tax evasion. The dual tax system ensures
that both the central and state governments get their share of tax revenue. It has
helped improve the economy by making businesses more competitive and allowing
them to expand easily into different states. The system also promotes equity, as
each person pays the same tax for similar items regardless of where he or she is
located. While there are adjustments to be made in this system, it still represents a
positive step toward strengthening the country's economy. On the whole, Dual GST
is making the Indian tax system better for all people.

Module No. 3: Time, Place And

Value of Supply
Supply, Scope of Supply,
Composite and Mixed Supplies,
Levy and Collection, Composition
Levy, Exemptions, Time of Supply
– in case of Goods and in case of
Services - Problems on
ascertaining Time of Supply; Place
of Supply – in case of Goods and
in case of Services (both General
and Specific Services) – Problems
on Identification of Place of
Supply; Value of Supply –
Meaning, Inclusions and
Exclusions. Problems on
calculation of ‘Value of Supply’.