Chapter 1: Introduction to GST

Concept 1 Features of Indirect Taxes

i. Important source of revenue
ii. Tax on good on service
iii. Shifting of burden – Possible
iv. No protection of direct pinch
v. Inflationary
vi. Wider tax base
vii. Promotes Social Welfare
viii. Regressive in Nature

Concept of GST
1. GST is value added tax
2. Continuous Chain of tax Credits
3. Burden born by final Consumer
4. No cascading of Tax

Point of tax Particular Manufacture Distributor

First point Tax Cost - 110
(+) Value Add 100 90
100 200
(+) Sales Tax 10% 10 -
Invoice Price 110 200

Last Point Tax Cost - 100

(+) Value Add 100 90
100 190
(+) Sales Tax 10% - -
Invoice Price 100 190

Multi Point Tax Cost - 110

(+) Value Add 100 90
100 200
(+) Sales Tax 10% 10 20
Invoice Price 110 200

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 Point of tax Particular Manufacture Distributor
GST System Cost - 100
(Multi point) (+) Value Add 100 90
100 190
(+) GST 10% 10 19
Invoice 110 209

Output Tax 10 19
(-)ITC - (10)
GST liability 10 9
(Cash Ledger)

Wholesaler Retailer Consumer Government Merit / Demerit

200 280 350 10 M = Tax Eviation

80 70
280 350 D = Law Revenue
- -
280 350

190 270 374 34 M = Optimum

80 70 Revenue
270 340 D = Tax Eviation
- 34
270 374

220 330 440 100 M = Highest

80 70 (10+20+30+40) Revenue
300 400 D = Inflation
30 40 Tax Eviation
300 440

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 190 270 374 (10 + 9 + 8 + 7) M – Tax Evation
80 70 = 34 ITC Available
270 340 Mitigation
27 34 Cascading
297 374 Effect
Optimum Revenue
27 34 Value Added Tax
(19) (27)
8 7

# Framework of GST
1. Dual GST
EX
Supply Consumer Tax
Mumbai Pune CGST + SGST
Mumbai Gujrat IGST
Maharashtra CLAAD IGST
(LADD Andaman) Other CLADD (Chandigad) IGST
Andaman Andaman CGST + UTGST
India Pak Excise Duty + IGST
Dubai India

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1 Legislative Framework

Constitution (101 amendment) Act 2016

Intra State Inter State

(Within The State ) one State → Another state
one UT → Another UT
one State → UT
29 States+ Delhi CLADD
+ Puducherry (Without Legislative) IGST Act, 2017
(legislative)
1. CGST Act, 2017
1. CGST Act, 2017 And
And 2. UTGST Act, 2017
2. SGST Act, 2017

2 Classification Of Goods and Service

→ HSN – (Harmonised System of Nomenclature)
→ HSN is used for classifying goods under GST.
→ Chapter referred in the Rate Schedules For goods are the chapters of the first schedule
For goods are the chapter of the first schedule to the customs Tariff Act, 1975.

→ Ex:- 21 06 90 20 - Pan masala

Chapter Heading Sub heading Sub Sub Heading

3 Registration :-
Every Supplier of goods and or services is required to obtain registration in the
State / UT from where he makes the taxable supply if his aggregate turnover exceeds the
Threshold limit during a F.Y (u/s 22)

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 Threshold Limit

MA= Manipur A = Arunachal P - Jammu And Kashmir

MI = Mizoram T = Telangana - Assam
NA = Nagaland M = Meghalaya - Himachal Pradesh
TRI = Tripura U = Uttarakhand - All other State
P = Puducherry
S = Sikkim
G S G+S Specified G S G+S Specified
Goods Goods
10L 10L 10L 10L G S G+S Specified 40L 20L 20L 20L
Goods
20L 20L 20L 20L

Illustration
1 Supply of Goods By X of Maharashtra to A of Maharashtra At Rs 10000

Solution Particulars Amount (Rs)

Value Charges To supply of goods 10000
(+) CGST 9% 900
(+) SGST 9% 900
Total price Charge by ‘X’ From ‘A’ for intra State 11500
supply of goods and service

2 Supply of goods / Service By ‘A’ of Maharashtra to ‘X’ of Gujrat. Value addition of 20%

Solution Particulars Amount (Rs)

Value Charges To supply of goods 10000
(+) Value of addition of 20% 2000
Value charge by supplier 12000
(+) IGST @ 18% 2160
Total price Charge by A from B 14160

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 Computation Of liability
Particulars Amount (Rs)
IGST 2160
(-) Credit of CGST 900
(-) Credit of SGST 900
TGST Payable to Central Govt. 360

S -ITC→ I
(MH) –Money→ (CG)
900 900

3 Supply of Goods by ‘B’ of Gujrat ta ‘C’ of Gujrat. Value addition @20%

Solution Particulars Amount (Rs)

Value Charges To supply of goods 12000
(+) Value of addition of 20% 2400
Value charge by supplier 14400
(+) CGST 9% 1296
(+) SGST 9% 1296
Total Price Charge by ‘B’ from ‘C’ 16992

Computation of Liability

Particular Amount (Rs)

CGST Payable 1296
(-) Credit of IGST 1296
CGST Payable to Central GOVT Nil
SGST Payable 1296
(-) Credit of IGST (2160 - 1296) 864
SGST Payable to State Govt 432

CG Will Transfer IGST Credit of Rs 864 Utilised in the payment of SGST to Gujrat.

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 Revenue Statement
Transaction Revenue to CG Revenue to Maharashtra Revenue To Gujrat
X to A 900 900 -
A to B 360 - -
Maharashtra 900 (900) -
To CG
B to c - - 432
CG to Gujrat (864) - 864
Total 1296 Nil 1296

# Utilization of Input Tax Credit :-

Steps ITC Liability
1 IGST IGST
2 IGST CGST Any order or
CG →SG SGST Any Protection
3 ITC of IGST to be company exhausted
4 CGST CGST
5 CGST IGST
6 SGST SGST
7 SGST Money IGST
SG → CG
X
CGST SGST
X

Situation – 1 :-
Intra state Purchase and Intra State Supply

RP Industries
Intra state Value Intra state
CGST + SGST Added CGST + SGST

CGST → CGST
SGST → SGST
X
SGST SGST

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Situation 2:-
Intra State Purchase and Intra state supply.

RP Industries
Intra state Value Intra state
CGST + SGST Added IGST

CGST → IGST
SGST → IGST
CG -X→ SGST

Situation 3
Inter State Purchase and Interstate supply.

RP Industries
Inter state Value Inter state
IGST Added IGST

IGST → IGST

Situation 4
Interstate Purchase and Intra state Supply

RP Industries
Inter Value Intra
IGST Added CGST + SGST

IGST CGST Any order

SGST Any promotion

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 Situation 5
Input Taxable and output Exempt

RP Industries
Input Value Output
CGST / SGST/ IGST Added No GST Liability

NO ITC

Situation 6
Input Taxable and Output Exported

RP Industries
Input Value Output
CGST/ IGST/SGST Added Export

ITC Available

[Refunded]

[Zero Rated Supply]

# GST Common Portal

→ www.gst.gov.in
→ GST common Portal is set up by government to Established a uniform interface for tax
Player and a common and shared IT infrastructure between centre and state
→ It is managed by GSTN (Goods and services tax Network)
→ GST is the portal is one single common portal for all GST Related Service
→ The GST portal is accessible over internet

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