KG College of Arts and Science

Affiliated to Bharathiar University and Accredited by

NAAC
ISO 9001:2015 Certified Institution
KGiSL Campus, Saravanampatti, Coimbatore, Tamilnadu,
India.
Department of Commerce with Professional Accounting
Subject Name :Indirect taxes
Subject Code : 63C
Class : III B.Com.PA “A & B”
Semester : VI
Prepared by : V.Suganya
Assistant Professor
Department of Commerce with professional
Accounting
KG College of Arts and Science
 Unit – II
GOODS AND SERVICE TAX
INTRODUCTION
Good and Service Tax Introduction – Meaning-
Need for GST-Advantages of GST-Structure of
GST in India – Dual concepts - SGST-CGST-IGST-
UTGST- Types of Rates under GST – Taxes
subsumed under State Goods and Services Tax
Act 2017- Taxes subsumed under Central Goods
and Services Tax Act 2017.
Enhancement : GST in India vs other countries.
INTRODUCTION
• The reform of India's indirect tax regime was started in 1985 by
Vishwanath Pratep Singh, Finance Minister in Rajiv Gandhi’s government,
with the introduction of the Modified Value Added Tax (MODVAT).
Subsequently, Prime Minister P V Narasimha Rao and his Finance Minister
Mannmohan Singh, initiated early discussions on a Value Added Tax (VAT)
at the state level. A single common "Goods and Services Tax (GST)" was
proposed and given a go-ahead in 1999 during a meeting between the
Prime Minister Atal Bihari Vajpayee and his economic advisory panel,
which included three former RBI governors IG Patel, Bimal Jalan and C
Rangarajan. Vajpayee set up a committee headed by the Finance Minister
of West Bengal, Asim Dasgupta to design a GST model.
• The Ravi Dasgupta committee which was also tasked with putting in place
the back-end technology and logistics (later came to be known as the GST
Network, or GSTN, in 2017). it later came out for rolling out a uniform
taxation regime in the country. In 2002, the Vajpayee government formed
a task force under Vijay kelkar to recommend tax reforms. In 2005, the
Kelkar committee recommended rolling out GST as suggested by the 12th
finance Commission.
Meaning
• The Goods and Services Tax (GST) is a value-
added tax levied on most goods and services
sold for domestic consumption. The GST is
paid by consumers, but it is remitted to the
government by the businesses selling the
goods and services. In effect, GST provides
revenue for the government.
Section 2. Definitions
In this Act, unless the context otherwise requires,-
(1) “actionable claim” shall have the meaning assigned to it in section 3 of the Transfer
of Property Act, 1882 (4 of 1882);
(2) “address of delivery” means the address of the recipient of goods and/or services
indicated on the tax invoice issued by a taxable person for delivery of such goods and/or
services;
(3) “address on record” means the address of the recipient as available in the records of
the supplier;
(4) “adjudicating authority” means any authority competent to pass any order or
decision under this Act, but does not include the Board, the Revisional Authority,
Authority for Advance Ruling, Appellate Authority for Advance Ruling, the First
Appellate Authority and the Appellate Tribunal;
(5) “agent” means a person, including a factor, broker, commission agent, arhatia, del
credere agent, an auctioneer or any other mercantile agent, by whatever name called,
who carries on the business of supply or receipt of goods or services on behalf of
another, whether disclosed or not;
(6) “aggregate turnover” means the aggregate value of all taxable supplies, exempt
supplies, exports of goods and/or services and inter-State supplies of a person having
the same PAN, to be computed on all India basis and excludes taxes, if any, charged
under the CGST Act, SGST Act and the IGST Act, as the case may be;
This part of the section therefore explains that aggregate turnover does not include
the value of inward supplies on which tax is payable by a person on reverse charge
basis under sub-section (3) of Section 8 and the value of inward supplies.
• Need of GST in India
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.
• Why in India, there is a need for GST?
• 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.
• What happen in present scenario? Our present taxation system is
very complex and very confusing, corruption chance is there,
which leads to distrust of government, there are hidden tax for
exports, whereas no charge applicable on Importing of Goods/
Services from one state to another.
• Just to overcome these issues, Rajya Sabha introduced GST bill,
which will bring transparency to taxation and consumer will get to
know how much tax amount they are paying to government for
sale/ purchase/ manufacturing.
• The Four-Tier Tax Structure
• Nil rate Rate
• Lower Rate
• Standard Rate
• Higher Rate
• NIL Rate (0%)
• Under this category, the GST council has decided to exempt or not charge any taxes on a
few of the basic commodities. Most of the items in the Consumer Price Index (CPI) comes
under the zero rate. Basically, in simple words, no GST will be charged on these goods.
• The following items stated below are some of the GST-Exempted Goods:
• Raw vegetables including potatoes, onions, and various leguminous vegetables, etc
• Live animals such as sheep, goats, live poultry, birds, bird’s eggs in the shell, fresh fish
• Wheat, corn, maize, cereal grains, soybeans that have yet to put into containers
• Human blood and various components of the same
• Fresh ginger, melon, roasted coffee beans, unprocessed green tea leaves, etc.
• Raw materials such as raw silk, silk waste, khadi fabric, khadi yarn, charcoal, firewood,
handloom fabrics and wool (not processed).
• Tools and instruments such as hearing aids, spades, shovels, tools used in agricultural
purposes, handmade musical instruments, etc.
• *There are many more products that are exempted from GST and the products mentioned
above are just an indication of some of the products that qualify for zero GST.
• Lower Rate (5%)
• Under this slab, a 5% rate will apply to most
of the common commodities and services.
This mainly includes the rest of the items
under the Consumer Price Index and the
mass consumption products. Some of these
items are-frozen vegetables, coffee, tea, rail
tickets, economy air tickets, takeaway food,
fertilizers, etc.
• Standard Rate (12% and 18%)
• Most of the goods and services come under
this slab. To keep inflation in check, the
government has decided to keep two
standard rates for the products and services.
The 12% slab consists of -butter, cheese,
handbags, jewelry boxes, cellphones, frozen
meat, business class air tickets, movie tickets
priced under ₹100, etc. Some of the items
under the 18% slab are-pasta, pastries, cakes,
vacuum cleaners, hairdryers, panels, wires, IT
services, telecom services, etc.
• Higher Rate (28%)
• More than 200 products will come under the
28% tax slab. This mostly consists of luxury
products. Some of these items include-pan
masala, paint, cement, automobile, washing
machine, shampoo, sunscreen, motorcycles,
aerated water, etc. For some of the products
under the 28% slab category, an additional
cess has been fixed by the government.
Dual GST:-
Many countries in the world have a single unified
GST system i.e. a single tax applicable throughout
the country. However, in federal countries like Brazil
and Canada, a dual GST system is prevalent whereby
GST is levied by both the federal and state or
provincial governments. In India, a dual GST is
proposed whereby a Central Goods and Services Tax
(CGST) and a State Goods and Services Tax (SGST)
will be levied on the taxable value of every
transaction of supply of goods and services.
• Benefits of Dual GST: – The Dual GST is expected to be a
simple and transparent tax with one or two CGST and SGST
rates. The dual GST is expected to result in:-
• reduction in the number of taxes at the Central and State
level
• decrease in effective tax rate for many goods
• removal of the current cascading effect of taxes
• reduction of transaction costs of the taxpayers through
simplified tax compliance
• increased tax collections due to wider tax base and better
compliance
STATE TAXES TO BE SUBSUMED IN GST
Following State taxes and levies would be, to begin
with, subsumed under GST:
1. VAT / Sales tax

2. Entertainment tax (unless it is levied by the local

bodies)
3. Luxury tax

4. Taxes on lottery, betting and gambling

5. State Cesses and Surcharges in so far as they relate

to supply of goods and services
6. Octroi and Entry Tax

7. Purchase Tax
CENTRAL TAXES TO BE SUBSUMED IN GST
• Central Excise Duty (CENVAT)
• Additional Excise Duties
• The Excise Duty levied under the Medicinal and Toiletries
Preparations (Excise Duties) Act 1955
• Service Tax
• Additional Customs Duty, commonly known as
Countervailing Duty (CVD)
• Special Additional Duty of Customs – 4% (SAD)
• Surcharges and Cesses levied by Centre are also likely to
be subsumed wherever they are in the nature of taxes on
goods or services. This may include cess on rubber, tea,
coffee, national calamity contingent duty etc.
• Central Sales Tax to be phased out.