Goods and Services Tax

Business Regulatory Frame work

Mod 5, S2 BBA
 Meaning
• GST is a comprehensive indirect tax on manufacture, sale
and consumption of goods and services throughout India.
• It will substitute many indirect taxes levied on goods and
services throughout India.
• GST is a destination based tax, an end user consuming any
goods or services is liable to pay the Goods and Services Tax
• The main objective of GST is to eliminate the multiplicity of
taxation and eliminate the cascading effects of taxes on
production and distribution of goods and services.
• It extent to whole of India except Jammu & Kashmir.
• Burden of tax to be borne by the final consumer.
• There are 3 taxes in GST- Central GST(CGST), State
GST(CGST), and Integrated Goods and Service Tax(IGST)
 Objective of GST
• Making a unified law (involving all the tax bases, laws
and administration procedures) across the country.
• Ensuring that the cascading effect of tax on tax will be
eliminated.(A cascade tax is a type of turnover tax with
each successive transfer being taxed inclusive of any
previous cascade taxes being levied)
• Reducing the complications in tax administration.
• Decreasing the unhealthy competition among the
states due to taxes and revenues.
• Ensuring the availability of input tax credit across the
value chain.(Input tax credit means reducing the taxes
paid on inputs from taxes to be paid on outputs)
 Facts regarding GST
• 1st country to introduce GST – France
• In GST in India,goods and services are divided
into five tax slabs for collection of tax - 0%, 5%,
12%,18% and 28%.
• Average monthly GST Collections upto March
2018 is about 90,000 Cr Rs.
• GST Council is the governing body of GST having
33 members. It is chaired by the Union Finance
Minister.
• The first state to approve the GST Bill - Assam
 Existing Indirect Taxes included under
GST
Central Tax State Tax
Central Excise Duty State VAT(Value added tax)
Service Tax Luxury Tax
Central Surcharges and Cesses

Special additional duty of customs Entertainment and amusement

Tax(Except when levied by the local
bodies)
Additional duty of Excise Taxes on advertisement
Purchase Tax
Taxes on lotteries
State Surcharges and Cesses (supply of
goods)
Commodities kept outside the purview
of GST
• 1. Alcohol for human consumption.
• 2. Petroleum products
3 Taxes in GST- CGST, SGST, IGST
 Example-CGST, SGST, IGST
• Suppose goods worth Rs. 10,000 are sold by Manufacturer
A in Delhi to Dealer B in Delhi. Further, B resells them to
Trader C in Punjab for Rs. 17,500. Trader C finally sells to
End User D in Punjab for Rs. 30,000.
• Let the GST be 18%(SGST-9%, CGST-9%)
• Since A is selling this to B in Delhi itself, it is an intra-state
sale and both CGST @9%(=0.09*10000=Rs 900) and
SGST@9%(Rs 900) will apply.
• B (Delhi) is selling to C (Punjab). Since it is an inter-state
sale, IGST@18% (=0.18*17500=3150 Rs)will apply.
• C (Punjab) is selling to D (Punjab). Again it is an intra-state
sale and both CGST @9%(0.09*30000=Rs 2700) and
SGST@9%(2700Rs) will apply.
Example-CGST, SGST, IGST
 Difference between CGST, SGST and
IGST
CGST
CGST means Central goods
and service tax to replace
the existing tax like service
tax, excise, etc
Collected by Central
Government
It is applicable to Intra-
state supply.
SGST
SGST means State goods
and service tax, replace the
existing tax like sales tax,
luxury tax, entry tax, etc
Collected by State
Government
It is applicable to Intra-
state supply.
IGST
IGST refers to the
integrated goods and
services tax and it is a
combined form of CGST
and SGST
Collected by Central
Government
It is applicable to Inter-
state supply.
 Dual-Model of GST
• Under the dual GST system, central
government and state governments are
simultaneously levying the Taxes on supply of
goods and services.
• These two components of GST are Central GST
(CGST) and State GST(SGST).
• CGST will replace CENVAT and Service Tax and
SGST will replace State VAT.
 Model of CGST and SGST

Invoice (A to B) Invoice (B to C) Invoice(C to D) Invoice (D to E)

A B C D E
Supplier Manufacturer wholesaler Retailer Customer
• Invoice from A to B
• Cost of goods = 200
• SGST@9% = 18
• CGST@9% = 18
• Total = 236
Invoice from B to C
• Cost of goods = 200
• Value Addition= 50
• Total Cost = 250
• SGST @ 9% = 22.5
• CGST @ 9% = 22.5
• Total = 295
• Tax payable = Output tax – Input Tax = 45 – 36 = 9
 Invoice from C to D
• Cost of goods = 250
• Value addition= 50
• Total Cost = 300
• SGST@ 9% = 27
• CGST @9% = 27
• Total = 354
• Tax payable = output tax – input tax = 54-45 = 9
Invoice from D to E
• Cost of goods = 300
• Value addition = 50
• Total cost = 350
• SGST@9% = 31.50
• CGST@9% = 31.50
• Total = 413
• Tax payable = output tax – input tax = 63-54 = 9
• Finally, Consumer(E) bear all the tax burden,
i.e., 36+9+9+9 = 63
• B, C, D paid only on value addition.
 Features of Dual GST
• There are two components for GST - CGST and SGST
• CGST to be levied by central government and SGST to
be levied by state government
• CGST replaces CENVAT and Service tax and the SGST
replaces state VAT(Value added tax).
• GST will have a list of exempted goods.
• Tax collected by local bodies won’t be subsumed in
GST.(eg : Professional tax, Entertainment tax etc.)
• GST returns will be required to be filed in an online
portal known as GSTN(Goods and Service Tax
Network).
 Evolution of GST in India
• Before GST, taxation laws between the Centre and states
were clearly demarcated.
• The states had the power to charge tax on the sale of goods.
• The Centre would levy the Central Sales Tax and Service Tax.
• In India, the idea of adopting GST was first suggested by the
Atal Bihari Vajpayee Government in 2000
• A task force that was headed by Vijay L. Kelkar was formed in
2004, indicated that the existing tax structure had many issues
that would be mitigated by the GST system.
• In 2005, the finance minister, P. Chidambaram, said that the
medium-to-long term goal of the government was to
implement a uniform GST structure across the country,
covering the whole production-distribution chain.
 Evolution of GST in India
• In July 2009, Pranab Mukherjee, the then finance
minister of India, announced the basic skeleton of the
GST system.
• In December 2014, India’s current finance minister,
Arun Jaitley, submits the Constitution (122nd
Amendment Bill), 2014 in the parliament that deals
with GST.
• GST Bill was passed by Rajya sabha on 3rd August 2016
• GST Bill was passed by Loksabha on 8th August 2016
• GST Bill was signed by President on 8th September
2016 and GST came into force in India from 1st July
2017.
 Opportunities/Advantages of GST
• 1. Under GST, a centralised registration will make doing
business easier, simpler and the consequent expansion
will be an advantage for SMEs.
• 2. Reduction of the tax burden on new business. Under
GST, firms within turn over limit upto 40 Lakh, are
exempted from paying tax.(Formerly it was upto 5 lakh
for state VAT)
• 3. Under the Goods and Services Tax bill, there will be
no entry tax anymore. Consequently, the movement of
goods at check posts and interstate borders will
become fast and easy..
 Opportunities/Advantages of GST
• 4. Eliminating the vague distinction between
goods and the services.
• 5. With the implementation of GST, it is
expected that the burden of tax will reduce
both for the manufacturer and the end user
which boost the industry and economy to a
great extent
 Challenges of GST
• 1. GST system is totally dependent on the online
submission of taxes which in result overburdens
the small scale businesses.
• 2.GST increases the problem of tax evasion which
results in huge loss in the economic condition of
the country (due to the following provision
existing in the Bill which states that business
entity with an annual turnover less than Rs. 40
lakhs is given exemptions under GST registration).
 Challenges of GST
• 3. Taxes to agricultural inputs(like fertilizers and
tractors) are increased in GST which impacts the
agriculture sector of India(which is the backbone
of Indian economy)
• 4. In GST, three types of taxes are levied
i.e. CGST, SGST, and IGST(Integrated GST). CGST
and SGST are levied on intrastate sale and IGST is
levied on the inter-state sale. This is creating a
dispute related to confusion between types of
category to be mention under which head;
 Applicability of CGST, SGST & IGST
• When the location of the supplier and the place of
supply i.e., location of the buyer are in the same state,
(intra-State transactions), a seller has to collect both
CGST and SGST from the buyer. The CGST gets
deposited with Central Government and SGST gets
deposited with State Government.
• When the location of the supplier and the place of
supply are in different states(interstate transaction),
the transaction is assumed to be Inter-State. In an
Inter-State transaction, a seller has to collect IGST from
the buyer.
 What is IGST ?
• IGST is a tax levied on all Inter-State supplies
of goods and/or services and will be governed
by the IGST Act.
• IGST will be applicable on any supply of goods
and/or services in both cases of import into
India and export from India.
• IGST is collected by central government, and it
will be shared between central and state
government.