Chapter - 1

GST - Introduction

Meaning of Tax

Tax is a compulsory contribution made by citizen of a nation to meet various

expenditure of the state. Taxes are of two types, viz. Direct Tax and Indirect Tax.

Direct Tax: It is s kind of tax where in incidence and impact is on the same person.

Incidence means liability to pay tax to the government and impact means burden of
paying the tax.

Indirect tax: It is a kind of tax where in incidence and impact is on two different
persons.

Indirect Tax before introduction of GST

Central Govt. State Govt. Local Bodies

Service Tax VAT Taxes on properties
Custom duties Entertainment tax Octroi
Central Excise Luxury tax Taxes on Markets
Surcharge & Cess Entry tax/ Octroi User charges for utilities
CST like water supply,
Property tax electricity, drainage etc.
Stamp duty
Taxes on lottery
Taxes on Betting &
Gambling
Taxes on Advertisement

Evolution of GST in India

The journey of GST started in a modest way back in 1986-87, when the then finance
minister VP Singh introduced Modified Value Added Tax (MODVAT) in 1986 in
Parliament. Since then, various governments at the centre under the leadership of
different finance ministers worked towards the final shape of the present GST.

GST is a uniform tax system throughout India, which will replace various taxes levied
by the Central and State Governments. It is coined to achieve ‘One Nation One Tax’

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motive and promoting ‘ Ease of doing business’ by having simple tax system which
may gradually re-shape India’s business landscape, making India the world’s fastest
growing Major economy.

The following is the list of major chronological events that have led to the launch of
the GST in India on 1st July 2017.

2000 Sri Atal Bihari Vajpayee, then Prime Minister of India, set up an
empowered committee, headed by Sri Asim Dasgupta, Finance
Minister, Govt. of West Bengal. The committee was given the task of
designing the GST model and overseeing the IT back-end preparedness
for its rollout.
2003 The GST was discussed in the report of the Kelkar Task Force on
indirect taxes. The Kelkar Task Force on indirect tax had suggested a
comprehensive GST based on VAT principle.
2006 A proposal to introduce a National level Goods and Service Tax (GST) by
April 1st, 2010, was first mooted in the Budget Speech for the financial
year 2006-07.
2008 EC finalises dual GST structure to have separate levy, legislation
2009 Based on inputs from Government of India and States, the EC released
its First Discussion Paper on Goods and Services Tax in India in
November, 2009.
2010 Project to computerise commercial taxes launched but GST
implementation was postponed.
2011 In order to amend the Constitution to enable introduction of GST, the
Constitution (115th Amendment) Bill was introduced in the Lok Sabha
in March 2011. As per the prescribed procedure, the Bill was referred
to the Standing Committee on Finance of the Parliament for
examination and report.
2012 ‘Committee on GST Design’, consisting of the officials of the
Government of India, State Governments and the Empowered
Committee was constituted.
2013 Committee on GST Design did a detailed discussion on GST design
including Constitution (115th) Amendment Bill and submitted its report
in January 2013. Based on this report, the EC recommended certain
changes in the Constitution Amendment Bill.
2013, The Standing Committee submits its report to Parliament with some
August amendments on the provisions of tax structure and resolution
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 mechanism.
2014 The 115th Constitutional (Amendment) Bill, 2011, for the introduction
of GST introduced in the Lok Sabha in March 2011 lapsed with the
dissolution of the 15th Lok Sabha.
2014-15 The Constitution (122nd) Amendment Bill was introduced in the Lok
Sabha on December 19, 2014, and was passed by the Lok Sabha on
May 06,2015. It was then referred to the Select Committee of Rajya
Sabha, which submitted its report on July 22, 2015
2016 On 3rd August 2016, the Amendment Bill was passed in Rajya Sabha.
Over the next 15 to 20 days, 18 states ratified the Constitution (122 nd
Amendment) Bill, 2014 on GST received the assent of the President on
8th December 2016, and became Constitution (101 st Amendment) Act,
2016.
2016 GST Council was set up on 12th September 2016 to monitor the entire
GST regime.
2017 Four GST supplementary bills: CGST Bill, IGST Bill, UTGST Bill,
GST(Compensation to States) Bill were passed in Parliament and got
the assent of the President on 12th April, 2017, became Act.
2017 On 1st July 2017, GST was rolled out in India.

Subsuming of Taxes:

GST has replaced few of the erstwhile taxes being levied at various stages of supply
chain. i.e. manufacture, provision of service, sale of goods etc.,

The objective is to remove the multiplicity of taxes levies and thereby reducing the
complexity and remove the effect of cascading taxes.

Below table details the various Central and State taxes that have been subsumed into
GST.

Central Taxes States Taxes

 Central Excise Duty  VAT/Sales Tax
 Additional Excise Duty  Entertainment Tax
 Excise Duty levied under  Luxury Tax
Medicinal & Toilet preparations  Purchase Tax
Act, 1955  Taxes on Advertisements
 Service Tax  Taxes on Lottery, Betting &
 Additional Customs Duty (CVD) Gambling
 Special Additional Duty of  State Cesses & Surcharges
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 Customs- 4% (SAD)  Entry Tax
 Surcharges  CST
 Cess

Taxes which are not to be subsumed:

1. Basic Customs Duty

2. Exports Duty
3. Road & Passenger Tax
4. Toll Tax

Meaning of GST

Goods and Services Tax (GST) is a comprehensive, destination based indirect tax levy
on supply of goods and/or services. It extends of whole of India including Jammu
and Kashmir.

GST is levied on value addition on each stage of supply, credit of tax paid o earlier
stage will be available to the subsequent stages of supply subject to certain
conditions. The input tax credit can be adjusted against output tax by a Registered
Taxable Person.

Definition:

As per amended article 366(12A) of the constitution of India, “Goods and Service Tax
means any tax on supply of goods or services or both except taxes on the supply of
the alcoholic liquor for human consumption”.

Goods:

According to Central Goods and Services Tax Act 2017, “Goods” means every kind of
movable property other than money and securities but include actionable claim,
growing crops, grass and things attached to or forming per of the land which are
agreed to be severed before supply or under a contract of supply.

Services:

According to Central Goods and Services Tax Act 2017, “Services” means anything
other than goods, money and securities but includes activities relating to the use of
money or its conversion by cash or by any other mode, from one form, currency or

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denomination, to another form, currency or denomination for which a separate
consideration is charged.

Objectives of GST

1) To ensure One Country – One Tax.

2) To ensure consumption based tax.
3) To ensure Uniform GST registration, payment and Input tax Credit.
4) To eliminate the cascading effect of Indirect taxes.
5) To ensures the subsumation of all indirect taxes under the centre and state
level.
6) To reduce tax evasion and corruption.
7) To increase productivity.
8) To increase Tax to GDP ratio and revenue surplus.
9) To increase compliance.
10) To reduce economic distortions.
11) To decrease unhealthy competition among states due taxes and revenue.

Salient features of GST

1. Applicability of GST:

GST applicable on supply of goods or services or both in India. Further, it is

applicable with the effect from 1.7.17. Area upto 200 nautical miles inside the
sea is India for the purpose of levy of GST.

2. Destination based consumption taxation:

GST is based on the principle of destination based consumption taxation. The

supplier at each stage is permitted to avail credit of GST paid on the purchase
of goods and/or services and can set off this credit against the GST payable on
the supply of goods and services to be made by him. Thus, only the final
consumer bears the GST charges by the last supplier in the supply chain, with
set off benefits at all the previous stages.

3. Dual structure of GST:

It would be a dual GST with the Centre and States simultaneously levying it on
a common base. The 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

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 (SGST). Union territories without legislature would levy Union territory GST
(UTGST).
4. Tax on Inter-State supply of goods or services:
An Integrated GST (IGST) would be levied on Inter-State supply (including stock
transfers) of goods or services. This would be collected by the Centre so that
the credit chain is not disrupted.
5. Tax on Import of goods or services:

Import of goods or services would be treated as Inter-State supplies and would

be subject to IGST in addition to the basic customs duty. GST compensation
cess will also be applicable.

6. Subsumation of taxes:
GST would replace the following taxes levied and collected by the Centre-
a) Central Excise duty
b) Duties of Excise (Medicinal and Toilet preparations)
c) Additional duties of Excise (Goods of Special Importance)
d) Additional duties of Excise (Textile and Textile products)
e) Additional duties of Customs (CVD)
f) Special Additional Duty of Customs (SAD)
g) Service Tax
h) Cesses and Surcharge

State taxes that would be subsumed within the GST are:

a) State VAT
b) Central Sales Tax
c) Purchase tax
d) Luxury tax
e) Entry tax ( all forms)
f) Entertainment tax (except those levied by the local bodies)
g) Taxes on advertisements
h) Taxes on lotteries, betting and gambling
i) State cesses and surcharges.
7. Coverage of goods and services in GST:
GST would apply to all goods and services except Alcohol for human
consumption. GST will be payable on petroleum and petroleum products only
from a future date to be notified on the recommendation of the GST Council.
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 8. A common threshold exemption:
A common threshold exemption would apply to both CGST and SGST.
Taxpayers with an annual turnover of 40 lakh (20 lakh for special category
states) would be exempt from GST (Kerala and Chhattisgarh given option to
remain in any limit either 20 lakh or 40 lakh). A compounding option (i.e., to
pay tax at a flat rate without credits) would be available to small taxpayers
having an annual turnover of upto 1.5 crore (upto 75 lakh for special category
states).
9. Input tax credit:

Input tax credit (ITC) to be broad based by making it available in respect of

taxes paid on any supply of goods or services or both used or intended to be
used in the course or furtherance of business subject to certain conditions.

10. Settlement of Accounts:

Accounts would be settled periodically between the Centre and the State to
ensure that the credit of SGST used for payment of IGST is transferred by the
originating state to the centre. Similarly, the GST used for payment of SGST
would be transferred by Centre to the destination state.
11. Exports would be zero-rated.

12. E-filing of returns:

Electronic filing of returns shall be adopted by different class of persons at
different cut-off dates.
13. Modes of payment of tax:
Various modes of payment of tax are available to the taxpayer – internet
banking, debit/credit card and National Electronic Fund Transfer (NEFT) /
Real Time Gross Settlement (RTGS).
14. Refund of tax:
Refund of tax can be sought by taxpayer, who has borne the incidence of tax
within two years from the relevant date.
15. Obligation of E-Commerce operators to collect Tax at Source:
There is obligation on electronic commerce operators to collect ‘tax at source’,
at such rate not exceeding 2%. 2% of net value of taxable supplies, out of
payments to suppliers supplying goods or services though their portals.
16. Limitation period for raising demand:

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 In normal cases, limitation period for raising demand is 3 years from the due
date of filing annual return. In case of fraud suppression or wilfulness
statement, limitation period for raising demand is 5 years from the due date of
filing annual return.
17. Recovery of arrears of tax:
Arrears of tax can be recovered using various modes like detaining and sale of
goods, movable and immovable property of defaulting taxable person.
18. GST Appellate Tribunal:
Goods and Services Tax Appellate Tribunal would be constituted by the Central
Government for hearing appeals against the orders passed by the Appellate
Authority or the Revisional Authority. States would adopt the provisions
relating to Tribunal in respective SGST Act.
19. GST payable:
Normally, GST is payable, when supply is made or when payment is received,
whichever is earlier. GST of current month is payable by 20 th of the following
month. However, a few persons can pay tax on quarterly basis.

20. System of self-assessment is applicable to the taxes payable by the

registered person.

21. Audit of registered persons can be conducted in order to verify

compliance with the provisions of Act.

22. GST is applicable, if goods/services are supplied for consideration. If the

consideration is nil, GST is not applicable.

23. Supply by way gift between unrelated persons is not subject to GST. But
input tax credit will have to be reversed. On the other hand, gift between
related persons is subject to GST. For instance, employer and employee have
been treated as related persons for the purpose of GST.

Benefits of GST

For business and Industry

a) Creation of unified national market:

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 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.
b) Easy compliance:
A robust and comprehensive IT system would be the foundation of the GST
regime in India. Therefore, all tax payer services such as registrations, returns,
payments etc. would be available to the taxpayers online, which would make
compliance easy and transparent.
c) Uniformity of tax rates and structures:
GST will ensure that indirect taxes rates and structures are common across
the country, thereby increasing certainty and ease of doing business.
d) Removal of cascading effect:
A system of seamless tax credits throughout the value chain and across
boundaries of states, would ensure that there is minimal cascading of taxes.
This would reduce hidden costs of doing business.
e) Gain to manufacturers and exporters:
The subsuming of major Central and State taxes in GST, complete and
comprehensive set-off of input goods and services and phasing out of Central
Sales Tax (CST) would reduce the cost of locally manufactured goods and
services. This will increase the competitiveness of Indian goods and services in
the international market and give boost to Indian exports. The uniformity in tax
rates and procedures across the country will also go a long way in reducing the
compliance cost.
f) Improved competitiveness:
Reduction in transaction costs of doing business would eventually lead to an
improved competitiveness for the trade and industry.
g) Boost to Make in India initiative:
GST will give a major boost to the ‘Make in India’ initiative of the Government
of India by making goods and services produced in India competitive in the
national as well as international market.

For Central and State Governments

a) Simple and easy administer:

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 Multiple indirect taxes at the Central and State levels are being replaced by
GST. Backed with a robust end to end IT system, GST would be simpler and
easier to administer than all other indirect taxes of the Centre and State levied
so far.
b) Better controls on leakage:
GST will result in better tax compliance due to a robust IT infrastructure. Due
to the seamless transfer of input tax credit from one stage to another in the
chain of value addition, there is an inbuilt mechanism in the design of GST
that would incentivise tax compliance by traders.
c) Higher revenue efficiency:
GST is expected to decrease the cost of collection of tax revenues of the
Government, and will therefore, lead to higher revenue efficiency.
d) Expansion of tax base:
Expansion of the tax base as they will be able to tax the entire supply chain
from manufacturing to retailing.
e) Benefit to consuming states:
GST being destination based consumption tax which will favour consuming
states.
f) Increase in GDP:
As demand will grow naturally production will grow and hence it will increase
gross domestic product. It is estimated that GDP will grow by 1-2% due to GST.

For the Consumer & Common man

a) Single and transparent tax regime:

Due to multiple indirect taxes being levied by the centre and state, with partial
or no input tax credits available at progressive stages of value addition, the cost
of most goods and services in the country, today loaded with many hidden
taxes, would be eliminated. Under GST, there would be only one tax from the
manufacturer to the consumer, leading to transparency of taxes ultimately
borne by the final consumer.
b) Relief in overall tax burden:
Because of efficiency in tax collections due to the design of GST and
transparency, elimination of leakage, over a period of time chances of reduction
of tax rates are bright. This would mean more saving in the hands of the
consumers.

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 c) Reduction in prices:
Final price of goods is expected to be lower due to seamless flow of input tax
credit between the manufacturers, retailers and suppliers of goods and
services.
d) More consumption:
Average tax burden on companies is likely to come down which is expected to
reduce prices and lower prices means more consumption.
e) More Employment:
As GST will reduce cost of product it is expected that demand of product will
increase and to meet the demand, supply has to go up. The requirement of
more supply will be addressed by only increasing employment.
f) More savings:
For a common man, GST applicability means the elimination of double
charging in the system. This will reduce the price of goods and services and
help common man for saving more money.
g) Poverty eradication:
Poverty eradication by generating more employment and more financial
resources.

Basic Schemes of GST

There are two basic schemes of GST:

1) Regular Scheme
2) Composition Scheme

Regular Scheme:

Under this scheme registration is required once threshold limit of 20 lakh (10
lakh in case of special category states except Jammu & Kashmir) crosses as per
section 22 of CGST Act, 2017.

The assessee liable to follow all rules and regulations as per GST Act. The
maintenance of books of accounts, filing of returns, issue of Invoices should be as per
the act.

This is applicable to the suppliers who are all not covered under composition scheme
of GST.

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Composition Scheme:

Composition scheme is optional. It is available to the assessee, whose aggregate

turnover in the FY does not exceed ₹ 1.5 Crore w.e.f. 1st April 2019.

In case of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland,

Sikkim, Tripura and Himachal Pradesh, this limit is ₹ 75 lakh.

The person opting for composition scheme is allowed to file returns annually and pay
tax on a quarterly basis. Such persons will have to pay tax on his total turnover out
of his pocket at the following rates:

Manufacturing: 2%
Restaurant & catering services: 5%
Others: 1%
Services: 6% (turnover up to ₹ 50 lakh per annum)

This scheme is not available to the manufacture of Ice creams, pan masala, Tobacco
products.

Following are the important points to be kept in mind in respect of composition

scheme:
a) Composition scheme dealer cannot make Inter-State supply, supply of services
& Exports.
b) Person opting for composition scheme cannot collect tax.
c) Input tax credit is not available to composition dealers.
d) Composition dealer is not eligible to supply goods through an e-commerce
portal.
e) Composition dealers are required to display the words “Composition Taxable
Person”
f) Person having business in different places and separately registered all of them
should opt for composition scheme (if he choose composition scheme for one
business).
g) If composition taxable person deals in both taxable as well as exempted goods,
tax at fixed rate is payable even on supply of exempted goods (like milk, food
grains etc.).

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Constitutional provisions

Constitution (122nd) Amendment Bill, 2014

The Finance Minister Mr. Arun Jaitley Presented the 122 nd Constitution Amendment
Bill, 2014 on the introduction of GST before the Lok Sabha on 19 December 2014.
The Lok Sabha passed the Bill on May 2015 and referred the same to Select
Committee of Rajya Sabha for examination.

In line with the proposed dual model of GST, the Bill proposes amendments like,
giving concurrent powers to both Union and States to legislate on GST, subsuming of
various Central and State levies in GST, empowering Centre to levy and collect CGST
and States to levy and collect SGST on supplies within a state, empowering Centre to
levy and collect IGST on Inter-State supply of goods and services.

The other significant proposals of the bill are:

a. GST Council: A joint forum of the Centre and States namely, Goods and
Services Tax Council is proposed to be created by inserting a new Article 279A
in the Constitution. The function of the Council is to make recommendations to
the Union and the States on important issues like various taxes, rates,
exemptions, threshold limits, dispute resolution etc.
b. Integrated GST: Centre would levy and collect IGST on inter-state supplies of
goods and services and there will be uninterrupted flow of credit across the
States. The tax collected would be collected apportioned between the Centre
and the States in a manner to be provided by Parliament by law, on the
recommendations of the GST Council. Import of goods and services will also be
liable to IGST.
c. Compensation to States: States will be compensated by the Centre for
revenue loss on account of implementation of GST. Such compensation will be
given for a period up to 5 years on a tapering basis, i.e., 100% for first 3 years,
75% in the 4th year and 50% in 5th year.
d. Coverage of goods and services in GST: All goods and services will be
brought under the purview of GST with the exception of alcoholic liquor for

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 human consumption. However, GST will be payable on petroleum products
from a future date to be notified on the recommendation of the GST Council.
e. Rates of GST: There will be uniform GST rates across the country. However,
Centre and States will be given flexibility to fix CGST and SGST rates within a
narrow tax-band over and above the floor rates of CGST and SGST.
f. 1% additional levy: An origin based additional levy of 1% chargeable on inter-
state supply of goods to be levied & collected by manufacturing state for a
period as recommended by the GST council has been proposed in the Bill. This
levy would be non-taxable and would apply only on goods and not on services.

Constitutional (101st) Amendment Act, 2016

The constitution was amended on 8th September 2016 vide constitution (101)
Amendment Act.

The features of the Act are as under:

1. The GST shall be levied on all goods and services except alcoholic liquor for
human consumption.

2. The tax shall be levied as dual GST are applied separately by the Union and the
States.

3. As per Article 246A, the power to make laws & levy GST has been given to the
Parliament as well as to Legislative of every state.

 CGST – enacted by Central Government of India

 IGST – enacted by Central Government of India
 SGST – enacted by respective State governments
 UTGST – enacted by Central Government of India

4. Parliament will have power to make laws with respect to GST where the supply
of goods and/services takes place in the course of interstate trade or commerce
(IGST).

5. The Government of India will have exclusive power to levy and collect GST on
inter–state trade or commerce. This tax shall have apportioned between the

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 Union and States on the recommendations of the GST Council by Parliament
by laws.

6. Taxes on entertainment and amusements to the extent levied and collected by

local authorities shall not be subsumed under GST. The local bodies of states
could continue to levy such taxes.

7. Parliament shall, by law, provide for compensation to States for revenue loss
arising out of the implementation of the GST, based on the recommendations of
the GST Council for a maximum period of 5 years.
8. A GST Council would be constituted comprising the Union Finance Minister
(Chairman), the Minister of State (Revenue) and State Finance
Minister/Minister nominated by each state to recommend on:

a) The taxes, Cesses and Surcharge to be subsumed under GST.

b) The Goods and Services that may be subjected to or exempted from GST.
c) The date from which the specified petroleum products would be subject to
GST.
d) Model GST laws, principles of levy, appointment of IGST officers and the
principles that govern the place of supply.
e) The threshold limit of turnover below which the goods and services may be
exempted from GST.
f) The rates including floor rates with bands of GST.
g) Any special law or rates for a specified period to raise additional resources
during natural calamity or disaster and
h) Special provision with respect to the North-East states, J&K, Himachal
Pradesh and Uttarakand.

The important changes made in Constitution (new Articles/Amended Articles) via this

law are as follows:

Article 246A: Power to make laws with respect to Goods and Services Tax: (New)

This article grants power to Centre and State Governments to make laws with
respect to GST imposed by Centre or such State.

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Centre has the exclusive power to make laws with respect to GST in case of inter-
state supply of goods and/or services.

However, in respect to the following goods, aforesaid provisions shall apply from the
date recommended by the GST Council.

 Petroleum crude
 High speed diesel
 Motor spirit
 Natural gas
 Aviation turbine fuel

Amendment of Article 248(1) - Residuary power of legislation:

Under Article 248(1) Parliament as exclusive power to make any law in respect
of any item not covered under State list and Concurrent list.

This article has been amended. Now, this power has been subjected to Article 246A.

Amendment of Article 249(1) – Power of Parliament to legislate with respect to

a matter in the State list in the national interest:

Parliament under article 249(1) can make the law in respect of any item
specified in the state list in the national interest, if the Council of States has declared
by resolution and supported by 2/3 rd member present and vote. Now, this also
includes GST under article 246A.

Amendment of Article 250(1) - Power of Parliament to legislate with respect to

a matter in the State list in case of emergency:

In the event of announcement of emergency, Parliament of India has power to

make the laws in respect of any item covered under State list for the whole India or
part of India under article 250(1). GST under article 246A i.e. Parliament of India can
make the GST law in case of emergency.

Amendment of Article 268(1) – Duties levied by the Union but collected by the
States:

Article 268(1) provides the provision of levy of Stamp duty and excise duty on
medicinal and toilet preparation by union government and collected by state (in case
of state) and by the union (in case of union territory). Now, the duties of excise on
medicinal and toilet preparations has been omitted same was amalgamated in GST.
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Amendment of Article 268A – Empowering Union to levy Service Tax omitted:

Article 268A provides power to Government of India to levy the service tax.
Now, this article has been omitted.

Article 269A (new insertion)– Levy and collection of GST on inter-State supply:

Article 269A stipulates that GST on supplies in the course of inter-State trade
or commerce shall be levied and collected by the Government of India and such tax
shall be apportioned between the Union and the States in the manner as may be
provided by Parliament by law on the recommendations of the GST Council.

Further, Parliament of India will formulate the law in respect of tax on inter-State
trade of goods and services.

In addition to the above import of goods or services or both will also be equally
treated as Supply of goods and services in the course of Inter-State trade or
commerce.

Amendment of Article 270(1) - Distribution of Goods and Services Tax between

the Centre and the States:

Article 270(1) provides the distribution of certain taxes between union and
states as per clause (2) of Article 270.

The inter-State GST has been kept outside from the provision of above article.
Because the provision of distribution of revenue in case of inter-State GST in already
incorporated under 269A. Hence same is excluded from the purview of 270(1).

Article 270 is amended to provide for distribution of the goods and services tax
between the Centre and States (other than IGST).

Amendment of Article 271 – Surcharge on taxes by Union:

Article 271 empowers Parliament to increase any of the duties, or taxes referred
to in articles 269 or 270. It further provides that such surcharge is not shareable and
remains with the Centre. Now this article is amended to exclude GST from its
purview.

Article 279A (New insertion) – Constitution of Goods and Services Tax Council:

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Article 279A of the Constitution empowers the President to constitute a joint forum of
the Centre and States namely, Goods and Services Tax Council (GST Council).

The provisions relating to GST Council came into force on 12 th September, 2016.
President constituted the GST Council on 15th September, 2016.

The GST Council shall consists of the following members, namely:

(a) The Union Finance Minister is the Chairperson.

(b) The Union Minister of State in charge of Revenue or Finance is the member
(c) The Minister in charge of Finance or Taxation or any other Minister nominated
by each State government are the members.

The council shall make recommendations on rate of GST, surcharges, Exemptions,

Model of GST Law, place of supply rules, special rate of GST, Special provision for
North east states or any other matter as decided by the council.

Amendment of Article 286 – Restriction on Imposition of tax:

Article 286 restricts the state laws from imposition of any tax on sale or purchase of
goods outside the state or in the course of the import of the goods into or export of
the goods out of the territory of India.

Now, supply of goods or services or both will be covered by this clause. This clause
will restrict the states from imposition of Inter-State GST and same will be levied by
union government under article 269A as mentioned earlier.

Amendment of Article 366- Definitions:

The terms Goods and Services Tax, Services and State have been defined under
respective clauses of Article 366:

Goods and Services Tax means any tax on supply of goods or services or both
except taxes on the supply of the alcoholic liquor for human consumption.

Services means anything other than goods.

State, with reference to article 246A, 268, 269, 269A and 279A, includes a union
territory with Legislature.

Goods includes all materials, commodities and articles.

Amendment of Article 368- Power to parliament to amend the constitution:

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Article 368 has been amended to include Article 279A under its purview.
Consequently, at least two-thirds of the majority in each House of the Parliament and
ratification by al least half of the states is specifically required to make any
amendment in Article 279A relating to GST Council.

Amendment in 6th schedule- Power to access and collect land revenue and to
impose tax:

Under para 8 of sixth schedule, the District council of an autonomous district shall
have power to levy and collect taxes on professions, trades, employment, animal,
vehicle, boat, on entry of goods, for maintenance of schools, dispensaries, road etc.
Now, additionally such District may levy taxes on Entertainment and amusement.

Amendment in 7th schedule:

Union List- Entry 84:

As per Entry No.84 Duties of excise shall be levied on tobacco and other goods
manufactured or produces in India except alcoholic liquor for human consumption,
opium, Indian hemp and narcotics. Now, the excise duty has been subsumed by
Article no.246A.

Hence, now new entry no.84 will cover Excise duty on Petroleum products. It means
even after introduction of GST, central excise duty on above products shall remain in
force till the time as GST council thinks fit.

Entry No.92:

Entry no.92 covers tax on sale or purchase of newspaper and has been omitted, thus
they are now under GST.

Entry No.92C:

Entry no 92C covers service tax and has been omitted, they are merged into GST.

State List- Entry No.52:

Entry no.52 gives power to levy the entry tax. Now, the entry has been omitted. It
means now local bodies can’t levy and collect the entry taxes like octroi, LBT etc.

Entry No. 54:

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Under Entry no 54 state government can collect tax on sale or purchase of goods
other than newspaper. Now, the state government can collect the taxes on sale of
petroleum products and alcoholic liquor for human consumption.

Entry No.55:

Entry no 55 powers state government to levy the tax on advertisement. Now, this
entry has been omitted.

Entry No.62:

Entry no 62 covers taxes on luxuries, including taxes on entertainment,

amusements, betting and gambling. Now, this has been replaced by these taxes only
be levied by local governments.

GST Council

A Council set by Government of India named as GST Council. GST Council

constituted w.e.f. 12.09.2016 as per Article 279A to monitor the entire GST regime
and the council is also empowered with statutory powers to make recommendations
from time to time to make GST implementation more effective.

Composition of GST Council:

(a) The Union Finance Minister is the chairman for the Council.
(b) The Union Minister of State in-charge of Revenue will be member.
(c) The Minister In-charge of Finance/taxation or any other minister nominated by
each State Government – Members.

Quorum and Decision Making:

i) For a valid meeting of the members of the GST Council, at least 50% of the
total number of the member should be present at the meeting.

ii) Every decision made during the meeting should be supported by at least
75%

(3/4th) majority of the weighted votes of the members who are present and
voting at the meeting.

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 iii) The voting of Central Government shall have the weighted of one-third of the
total votes.

iv) The votes of the State Governments shall have the weighted of two-third of
the total votes, cast in the meeting.

v) Any act, decision or proceedings shall not be declared as invalid on the basis
of any remaining deficiency at the time of establishment of GST Council i.e.

a) If there is any vacancy remained in the Council

b) if there is any defect in the constitution of Council

c) If there is any defect in the appointment of a person as a member of the

Council

d) If there is any procedural compliance

Powers and Functions of GST Council

The council has legislative, executive and judicial powers. It will recommend GST
legislation, oversee implementation of the GST in the country, and set up a
mechanism to adjudicate between its members. As per Article 279A (4), the council
will make recommendations to the Union and the States on important issues related
to GST,, like

(1) Taxes, cesses and surcharges to be subsumed under the GST.

(2) Goods and services which may be subject to, or exempt from GST.
(3) The threshold limit of turnover for application of GST.
(4) Rates of GST including floor rates.
(5) Model GST laws, principles of levy, apportionment of IGST and principles
related to place of supply.
(6) Special provisions with respect to the eight north-eastern states, Himachal
Pradesh, Uttarakhand and Jammu & Kashmir.
(7) The date on which the GST shall be levied on Petroleum products.
(8) Any special rate or rates for a specified period to raise additional resources
during any natural calamity or disaster.
(9) Other related matters.

Resolving Disputes under the GST regime

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 The Constitution (101st Amendment) Act, 2016 provides that the Goods and
Services Tax Council shall establish a mechanism to adjudicate any dispute between

a) Government of India and one or more States or

b) Government of India and any State or States on one side and one or more other
States on the other side or
c) Two or more States, arising out of the recommendations of the Council or
implementation thereof.

GST Council Meetings

GST Council has met Thirty Two times as on January 2019 and some important
decisions taken in the GST Council meetings are:

1. The threshold limit for exemption from levy of GST would be ₹ 20 lakhs for the
States except for the Special Category states, as enumerated in Article 279A of
the Constitution, for which it will be ₹10 lakhs.
2. The threshold for availing the Composition scheme could be ₹ 1.5 crore.
Service providers and some others would be kept out of the Composition
scheme.
3. Approval of the Draft GST Rules on registration, payment, return and refund
and invoice, debit/credit notes with the understanding that major changes may
be permitted with the approval of the Chairperson, if required, based on
suitable suggestions from the stakeholders or from the Law Department.
4. All entities exempted from payment of indirect tax under any existing tax
incentive scheme would pay tax in the GST regime and the decision to continue
with any incentive scheme shall be with the concerned State or Central
government. In case, the State or Central Government decides to continue with
any existing exemption/incentive scheme. It will be administered by way of a
reimbursement mechanism.
5. Adoption of four slabs tax rate structure of 5%, 12%, 18% and 28%. In
addition, there would be a category of exempt goods and further a cess would
be levied on certain goods such as luxury cars, aerated drinks, pan masala and
tobacco products, over and above the rate of 28% for payment of compensation
to the states.
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Structure of GST / Types of GST

GST in India will be levied on the basis of Dual model, India has a federal system
where both the Central Government and the State Governments have been
empowered to levy and collect taxes on supply of Goods and services.

Under the dual GST system the Central Government and State Governments are
empowered to levy taxes on supply of goods and/or services.

GST

Inter-State transactions Intra-State transactions

(a) Supply of goods and services from (Supply of goods and/or services
one state to another state. Within the State or Union Territory)
(b) Supply of goods and services to
SEZ unit or developer.
(c) Import of goods and/or services
From a place outside India.

IGST CGST/SGST/UTGST
Central Goods and Services Tax:
CGST is levied on Intra-States supplies of both goods and services by the
Central Government and will be governed by the CGST Act. SGST will also be levied
on the same Intra-State supply but will be governed by the State Government.
State Goods and Services Tax:
SGST is a tax levied on Intra State supplies of both goods and services by the
State Government and will be governed by the SGST Act. As explained above, CGST
will also be levied on the same Intra-State supply but will be governed by the Central
Government.
Example: Rajesh, a dealer in Karnataka sold goods to Ravi in Karnataka worth ₹
10,000. The GST rate is 18% comprising of CGST rate of 9% and SGST rate of 9%, in
such case the dealer collects ₹ 1,800 and ₹ 900 will go to the central government and
₹ 900 will go the Karnataka Government.
Union Territory GST (UTGST):

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 UTGST is a tax levied on every Intra UT supply of goods and services in the
Union territories in absence of legislature and has similar properties as that of SGST.
The Union territory GST is applied to Union territories of India namely Chandigarh,
Lakshadweep, Daman & Diu, Dadra & Nagar Haveli, Andaman and Nicobar Islands.
Integrated GST:
IGST is a tax levied on all Inter-State supplies of goods and services and will be
governed by the IGST Act. IGST shall be levied and collected by Government of India
and such tax shall be apportioned between the Union and the States in the manner
as may be provided by the Parliament by law on the recommendations of the GST
Council.
IGST would be applicable on import of goods and/or services from a place outside
India supply of goods and services as well.
Example: Consider that a businessman Ram from Karnataka had sold goods to
Krishna of Maharashtra worth ₹ 10,000. The GST rate is 18% comprised of 18%
IGST. In such case, the dealer has to charge ₹ 1,800 as IGST. This IGST will go to the
Centre.

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