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Concept of GST (Goods and Services Tax)

The concept of Goods and Services Tax (GST) is one indirect tax for the whole nation, which will make India one unified common market.

GST is a single tax on the supply of goods and services, right from the manufacturer to the consumer. Credits of input taxes paid at each stage will be available in the subsequent stage of value addition, which makes GST essentially a tax only on value addition at each stage. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages.

 

GST applicable to the following persons or who does it apply to?

 

a. To every person who supplies goods and/or services of value exceeding Rs 20 lac in a financial year. (Limit is Rs 10 lac for some special category states). Compulsory registration for these. And GST must be paid when turnover exceeds Rs 20 lac (Rs 10 lac for some special category states).

b. To any person making inter-state taxable supply of goods and/or services

c. Every e-commerce operator

d. Every person who supplies goods and/or services, other than branded services, through e-commerce operator

e. Aggregators who supply services under their own brand name

f. Casual Taxable Person

g. Non-Resident Taxable Person

h. Person required to deduct/collect tax (TDS/TCS)

i. Input Service Distributor

j. Person supplying online information and database access or retrieval services from a place outside India to a person in india, other than a registered taxable person.

k. Person required to pay tax under Reverse Charge

l. Person supplying the goods on behalf of other taxable person (eg. Agent)

m. GST does NOT apply to Agriculturists

n. GST does not apply to any person engaged exclusively in the business of supplying goods and/or services that are not liable to tax or are wholly exempt from tax under this Act

 

What is the GST framework as per the new law?

 

GST is expected to replace a myriad of indirect taxes such as VAT, customs duty, Excise, CST, Service Tax, Entertainment Tax with a single tax called the Goods and Services Tax.

a. Broadly there will be 2 forms of GST in India.

b. At the intra-state level (when goods travel within a state) and at the inter-state level (when goods travel between states).

c. At the intra-state level two types of GST shall be levied CGST (Central Goods and Services Tax) and SGST (State Goods and Services Tax).

d. At the inter-state level IGST (Or Integrated Goods and Services Tax) shall be levied.

e. Imports shall be considered as inter-state supply.

f. Exports shall be zero rated.

h. Supplies to SEZ will be Zero-rated

 

Taxes/Duties subsumed in GST

 

Central Taxes/Levies

State Taxes/Levies

Central excise duty under Central Excise Act, 1944    

Sales Tax/Value Added Tax (VAT)

Additional excise duties – Under Additional Duties of Excise (Goods of Special Importance Act, 1957

Entertainment tax

Excise Duty under Medicinal & Toiletries Preparation Act, 1955    

State excise duty

Service Tax under Finance Act, 1994    

Luxury tax

Additional Customs Duty (Countervailing Duty – CVD)    

Taxes on lottery, betting & gambling

Special Additional Duty of Customs (SAD)    

Entry tax (not in lieu of Octroi)

Surcharges (e.g. national calamity contingent duty)    

Purchase tax

Cesses (e.g., Cess on rubber, Cess on tea etc)    

State Cesses

Central Sales tax (to be phased out)    

State Surcharges

 

 

Taxes/Duties not subsumed in GST

 

Central Taxes/Levies

State Taxes/Levies

Basic Customs Duty    

Toll Tax or Road taxes

Excise Duty on Tobacco products    

Taxes on Liquors

Export Duty        

Environment Tax

Taxes on petroleum products    

Purchase tax on food grains

Stamp Duties

Property Tax

Specific Central Cess like oil cess etc.

Taxes on motor spirit & high speed diesel

 

Tax on Consumption or Sale of Electricity – Not certain

 

Stamp Duty – Not certain

 

Source: Central Board of Excise and Custom, Government of India (Click here).

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