Need for introducing GST

- There are various taxes that have to pay at every stage and differently collected by State
and Central Government and rates differ from one state to another.
- If we talk about GST, it will unified whole nation and taxes will be divided among
Central and State Government, which will make easier to provide services and goods
across country, as no more additional state taxes will be imposed.
- Imposing several taxes on goods and services can lead to high cost and inefficient tax
structure which can subject to shirking and revenue disclosures.
- The need for GST in Indian Taxation System will add value at each stage and will set off
the rates both at state and at central level.
- Introducing GST, will increase the efficiency of taxation, improves the economic growth
and it will bring whole nation to one national market.

The duties and taxes merged under GST

At Central Level:-

1. Central Excise Duty : imposed on manufacturing of goods in India

2. Service Tax:
3. Additional Customs Duty
4. Central Surcharges and Cess: – Surcharge is a charge on tax and as a name suggest, it
is an additional charge and it is basically on personal income tax (on high income slabs)
and on corporate income tax. Cess is imposed by central government and is levied for
specific purpose.

At State Level

1. Value Added Tax (VAT):-on the goods and services that are provided at state level or
domestic- imposed at each stage in the chain of distribution and production from the raw
materials till the valuation of the product and it is borne by the end-users (customers) in
the Distribution channel.
2. Central Sales Tax: – CST, is a levy on sales, which is affected by inter-state trade. CST
is an indirect tax on consumers. As it is centrally levy, so it is administered by the
concerned state where the sales originated.

GST and Centre-State Financial Relations

- Fiscal powers between the Centre and the States are clearly demarcated in the
Constitution with almost no overlap between the respective domains.
- The assignment of concurrent jurisdiction to the Centre and the States for the levy of
GST required a unique institutional mechanism that would ensure that decisions about the
structure, design and operation of GST are taken jointly by the two.
- It is a dual GST with the Centre and the States simultaneously levying tax on a common
base. GST to be levied by the Centre would be called Central GST(CGST) and that to be
 levied by the States would be called State GST (SGST)- Federal Structure- single law not
possible but the legislature brought in SGST but the laws in all states are identical.
- Section 23 of GST Act
- Change from tax based on originator state to the destination state

There are four components under this system

● CGST: It is the tax collected by the Central Government on an intra-state sale (e.g., a
transaction happening within Maharashtra)- CGST ACT,2017
● SGST: It is the tax collected by the state government on an intra-state sale (e.g., a
transaction happening within Maharashtra)- SGST ACTS
● IGST: It is a tax collected by the Central Government for an inter-state sale (e.g.,
Maharashtra to Tamil Nadu)- IGST ACT, 2017
● GST Compensation Cess - Goods and Services Tax (Compensation to States) Act
2017. The object of levying this cess is to compensate the states for the loss of revenue
arising due to the implementation of GST on 1st July 2017 for a period of five years or
such period as recommended by the GST Council.

Definition of Supply under GST: Inclusive Definition

- Under GST, Supply is considered a taxable event for charging tax. The liability to pay tax
arises at the ‘time of supply of goods or services. Thus, determining whether or not a
transaction falls under the meaning of supply, is important to decide GST’s applicability.
- Section 7 of CGST- Supply includes sale, transfer, exchange, barter, license, rental, lease
and disposal made or agreed to be made for a consideration by a person in the course or
furtherance of business.
- Activities or transactions treated neither as the sale of goods nor sale of services as per
Schedule III of GST Act
- Supply has three important elements:
1. Two persons
2. Goods or services- Supply should be of goods or services. Supply of anything
other than goods or services like money, securities etc. does not attract GST.
3. done for consideration in course of furtherance of business, made or agreed to be
made.

- (b) import of services for a consideration whether or not in the course or furtherance of
business; and
- (c) the activities specified in Schedule I, made or agreed to be made without a
consideration.
Section 7 (2) – Neither a Supply of Goods nor a Supply of services- (a) activities or transactions
specified in Schedule III- read at https://taxguru.in/goods-and-service-tax/supply-gst-
detailed-analysis.html

Section 7 (1A) - Schedule II for Treatment of Activity as Supply of Goods or Supply of

Services

To avoid any litigation in regard of that a particular activity is a Supply of goods or a Supply of
services the Legislature makes provisions in this respect. Schedule II has been prescribed
wherein (Schedule II) it has been fixed that a particular activity shall be treated either as Supply
of goods or as Supply of services.

GST collection/charge have two types: Section 9- https://taxguru.in/goods-and-service-

tax/supply-gst-detailed-analysis.html

Forward Charge: Supplier supplies goods/services or both to recipient, and Recipient make
payment along with GST amount to Supplier. The Supplier is liable to pay GST amount to
Government, which is collected from Recipient. Section 9(1) and section 9 (2) covers the
Forward charge.

Reverse Charge: Supplier supplies goods/services or both to recipient, and Recipient make
payment without GST amount to Supplier. The Recipient is liable to directly pay the GST
amount to Government. Section 9(3) and section 9 (4) covers the Forward charge.

Sec 9(1)- alcoholic liquor for human consumption is outside the purview of CGST Act.

Section 9(2)- inside the purview CGST Act but not taxable yet- kept in abeyance

- petroleum crude,
- high-speed diesel,
- motor spirit (commonly known as petrol),
- natural gas and
- aviation turbine fuel