Meaning of GST:

The goods and services tax (GST) is an indirect federal sales tax that is applied to the cost of certain goods and services. The business adds the GST to the price of the product, and a customer who buys the product pays the sales price inclusive of the GST. The GST portion is collected by the business or seller and forwarded to the government. It is also referred to as Value Added Tax (VAT) in some countries.

Most countries with a GST have a single unified GST system, which means that a single tax rate is applied throughout the country. A country with a unified GST platform merges central taxes (e.g., sales tax, excise duty tax, and service tax) with state-level taxes (e.g., entertainment tax, entry tax,sin tax,transfer tax,sin tax, ( luxury tax) and collects them as one single tax. These countries tax virtually everything at a single rate.

• The Centre will levy and collect the Central GST.

• States will levy and collect the State GST on the supply of goods and services within a state.

Principles of GST

• The Centre will levy the Integrated GST (IGST) on the inter-state supply of goods and services, and apportion the state’s share of tax to the state where the good or service is consumed.

• The 2016 Act requires Parliament to compensate states for any revenue loss owing to the implementation of GST.

The salient features of GST are as under:

(i) Supply would be the Taxable event: GST would be applicable on supply of goods or services as against the present concept of tax on the manufacture of goods or on sale of goods or on provision of services (Refer Section 7 of CGST Act, 2017)

(ii) Destination Based Taxation: Consuming state will gain due to this shift from origin based taxation to destination based taxation; Parliament shall by law, on recommendation of GST council, provide for compensation to states for loss of revenue arising on account of implementation of GST upto 5 years as per clause 18 of the constitutional (One hundred and First) amendment Act, 2016

(iii) Dual Taxing Structure: The new Article 246A intends to grant concurrent powers to the Union and state legislatures to make laws with respect to GST. The power to make laws in respect of supplies in the course of inter-state trade or commerce will be vested only in the Union Government. States will have the right to levy GST on intra-state transactions including services. It would be a dual GST with the Centre and the 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 (SGST).

(iv) Integrated GST (IGST): It 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.

(v) BCD + IGST on Imports of Goods: It would be treated as inter-State supplies and would be subject to IGST in addition to the applicable customs duties (BCD)

(vi) IGST on Import of Services: Import of services would be treated as inter-State supplies and would be subject to IGST.

Objectives of GST

1. One Country – One Tax: Implementation of goods and services tax aims at creating one tax rate one market across the country by removing different rates of taxes applicable. By the implementation of GST only one rate of tax is applicable on a particular product across the country.

2. Consumption based tax instead of Manufacturing: Goods & services tax on consumption. It is a destination based tax i.e., the tax will be paid to the state where the final product is purchased / consumed by the final consumer rather than where the product is produced or manufactured.

3. Uniform GST Registration, payment and Input Tax Credit: To create simple administrative procedure this GST system needs only a Single Uniform GST registration across the states. The manufacturer, wholesaler, trader will be eligible for input tax credit on the inputs used for the final product being sold.

4. To eliminate the cascading effect of Indirect taxes on single transaction: The key objective of implementation of goods and services tax is to remove cascading effect of tax i.e., tax on taxes. In the earlier system where the value added tax / sales tax was levied on excise duty, customs duty included in the purchase price of the inputs which was lead to cascading of taxes and thereby the selling prices will be increased, it was burden to the final consumers. Under GST the tax paid on inputs in earlier stages will be allowed as input tax credit hence the tax will be levied only on value addition in each stage of consumption. Hence, the cascading of taxes will be removed to a maximum extent.

5. Subsume all indirect taxes at Centre and State Level: The pre-GST implementation taxes like central excise duty, special additional duty, value added tax, service tax etc, will be subsumed under dual system i.e., Central Goods and Services Tax and State Goods and Services Tax.

6. Reduce tax evasion and corruption: Implementation of GST aims at reducing the tax evasion by the businessmen, public and entities.

7. Increase Productivity: By allowing taxes paid in the earlier stages as inputs the cost of the products will be reduced and thereby the consumption will be increased which will in turn lead for increase in production.

8. Increase Tax to GDP ratio and revenue surplus: The implementation of GST assists all the sectors to contribute to the higher extent than at present contribution.

9. Increase Compliance: Under GST only single registration, single return is required to be submitted compared to old indirect tax system. It can be expected that the compliance level will be enhanced.

10.Reducing economic distortions: Implementation of GST tries to solve the economic problems by making the necessity products cheaper to all categories of people.

11. Decreasing the unhealthy competition among the states due to taxes and revenues: The intention of introducing GST as one nation – one tax is to avoid any unhealthy competition among the states and the tax structure is made uniform across all the states so that goods can be bought or supplied to any where at the same rate. The centre shares the revenues with the states.

12. Ensuring the availability of input credit across the value chain: GST allows the set- off of input tax to output tax. This input credit is available through out the stages of manufacture of across the value chain. It is only the difference in tax between output tax and input tax that is payable.

Who needs GST Registration?

The criteria for persons who should be registered under GST are provided under Chapter 6 of the CGST Act. As per the CGST Act, the following persons are required to obtain GST registration.

Who is NOT Required to Obtain GST Registration?

Any person who is engaged exclusively in the business of supplying goods or services that are not liable to tax under GST or wholly exempt from tax under GST is exempt from obtaining GST registration.

Also, an agriculturist, to the extent of supply of produce out of cultivation of land is exempt from obtaining GST registration. Under GST, agriculturist means an individual or a Hindu Undivided Family who undertakes cultivation of land:

By own labour, or

By the labour of family, or

By servants on wages payable in cash or kind or by hired labour under personal supervision or the personal supervision of any member of the family.