An In-depth Exploration of Goods and Services Tax (GST) in India

The Goods and Service Tax (GST) is an essential tax regime that has shaped the Indian economy since its implementation in 2017. Originating from France in the 1950s, this revolutionary taxation system has positioned itself as a cornerstone of economic growth and development. As a reform that involves manufacturers, traders, and service providers, GST has dramatically altered the landscape of indirect taxes in India.

 1. What is GST?

• GST i.e. Goods and Service Tax, is a tax levied on the goods and services. GST came very first in France in 1950. It is an advanced taxation system.
• GST was introduced first in India w. e. f. 01/07/2017. For this constitutional amendment no. 101 was made on 08/09/2016.
• It covers manufacturers of the goods, Traders, and service providers. GST is an indirect tax, meaning that it is not be paid out of own pocket like income Tax.
• It is a biggest and landmark tax reform in the history of India which helped the Indian economy to grow fast.

2. Benefits / Advantages of the GST.

• This has brought uniformity in the taxation throughout the country.
• This has reduced the competition in between the states.
• This has reduced the hurdles in front of the trade and businessman.
• This has avoided double taxation that is tax on tax [cascading effect].
• It helped in creating a single common national market.
• It is a simplified taxation system.
• It reduced the tax compliance of no. of different taxes, because of the amalgamation of the different taxes in the GST act.
• It boosted the Indian economy.
• It is a transparent tax system.
• It helped in increasing the revenue.
• It helped in increasing the employment.
• Manufacturing cost of the goods is reduced.
• Issue whether particular supply is of goods or services is resolved to a great extent.

3. How GST is implemented:

• Though the subject of sales tax is of a State Government, Central government took the initiative to implement this tax by bringing all the states on one platform. Central government has given compensation to all the state governments, if there is a loss to the state government due to the implementation of the GST for the first five years. For this purpose separate act named Goods and Service Tax (State Compensation) Act is made.
• Under the GST law, tax is levied on both i.e. goods and services. GST covers almost all the goods and services with few exceptions. It is a destination based consumption tax system, meaning that the state where the goods/services are consumed/ended will get the tax. In fact it is a tax levied on the value addition only.
• At present nearly 90% registered taxable persons [business entities] are handled by the State Governments and nearly 10% registered Taxable Persons [business entities] are handled by the Central Government.

4. What is mean by duel nature of GST?

• GST introduced in India has a dual mode meaning that, both the central government and the state governments are empowered to levy this tax.
• Both the governments are administrating/implementing this tax and getting the share of the tax.
• This is because the India is a federal government / country.
• Centre is levying the tax on the interstate transactions of goods and service while state government is levying the tax on intra state transactions.

5. How GST is levied ?

GST is levied under following four heads.

• CGST
• SGST
• IGST
• UTGST
• CESS
• CGST stands for= CENTRAL GOODS AND SERVICE TAX- It is levied by the central government.
• SGST stands for= STATE GOODS AND SERVICE TAX- It is levied by the State Government.
• IGST stands for- INTEGRATED GOODS AND SERVICE TAX- It is the sum total of SGST and CGST.- It is levied by the central government but it is shared in between the central government and the state government in which those goods/ service is given.
• UTGST stands for= UNION TERRITORY GOODS AND SERVICE TAX- It is levied by the union Territories. It is implemented only in five UT excluding Delhi and Pondicherry. They are implementing SGST.
• CESS is also levied on certain luxury goods under the GST act.
• CGST and SGST are more or less same with very few exceptions. SGST and UTGST are similar, only with a difference that SGST is applicable to states while UTGST is applicable to UNION TERRITORES.

6. How the GST is levied in the bills?

• Interstate supply means sales / supply of the goods and services within two states and intrastate supply means sales / supply of the goods and services within the state.
• In the sales bill either CGST + SGST is levied if the sales/ supply is within the state.
• If the sales is within the two states, then only IGST is levied which is equal to the sum total of the CGST and SGST.

7. Which taxes are amalgamated in GST?

• While introducing this GST act number of central and state taxes were amalgamated into this GST.
• Important central taxes which are amalgamated in the GST act are, Central service tax act, Central excise duty.
• Important state taxes which are amalgamated in the GST act are Vat act, Central Sales Tax, Luxury Tax, Entry Tax, Purchase Tax, Entertainment Tax, etc.
• These are only few examples. There are many more taxes which are amalgamated. But above listed are important taxes.

8. Which taxes are not amalgamated in GST?

Following Taxes are not amalgamated into GST act.

• Of Central Government, like Custom act, Export Duty etc.
• Of State Government like, Road Tax, Toll Tax, Profession Tax, Electricity Duty, Stamp duty and registration charges, State Excise Duty etc.
• These are only few examples. There are other taxes also which are not amalgamated into GST act.

9. What is mean by ITC?

• GST is a tax levied on the goods and service supplied / sold by a registered taxable person [business having the GSTIN].
• This tax is levied at each stage of the supply.
• While selling or making the supply, the supplier of the goods/ service can take back the tax paid to his supplier while purchasing the goods/ service, in the form of input tax credit, subject to the certain conditions/ limitations.
• Thus the tax is levied only on the value addition.
• Actual burden of the tax is on the final consumer/ end user.

10. Which goods are not covered by GST?

Following goods are yet not covered by GST.

• Crude Oil.
• High speed diesel.[ Diesel]
• Natural gas.
• Aviation turbine fuel.
• Motor spirit (petrol).
• Alcoholic Liquor for human consumption.

11. What is GSTN?

• Goods and Services Tax Network (GSTN) is a government enterprise [company] which is handling all the activities related to the GST.
• It was established in 2013.
• It provides the IT service to the Central Government, State Government, businessman and all other stake holders for the implementation of the GST.

Interesting fact.

[As India entered the GST regime at the stroke of midnight of 01/07/2017, Big Bazaar issued the first invoice under GST in India].

Conclusion: The introduction of GST was a significant milestone in India’s taxation history, promising a unified, simplified, and transparent tax system. While it has indeed facilitated ease of doing business and increased revenue, understanding its intricate dynamics is essential for leveraging its full potential. As GST continues to evolve, it remains a critical catalyst for India’s future economic growth. An exciting fact to note is that Big Bazaar issued the first GST invoice in India at the stroke of midnight on July 1, 2017, marking the start of a new fiscal era.

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About the author: Mr. Bhusari Chandrakant is working presently as a Dy. Commissioner of State Tax, in Maharashtra Goods and Service Tax Department [MGST]. He is working for the last 26 years [ since 1997] in the field of taxation and handled the Bombay Sales Tax, Maharashtra Value Added tax, Central Sales Tax , Profession Tax, Luxury Tax, Works Contract Tax act, Lease Act and Goods and Service Tax. He is presently posted at Pune.

Disclaimer: Information given in this article is only for the information and knowledge purpose and it cannot be used for the legal interpretation or legal purpose.