Government of India recently unveiled  First Discussion Paper on Goods and Services Tax.

GST has been the preferred mode of taxation of goods and services and has been introduced in more than 140 countries. Most countries have single GST rate, however some countries like Canada & Brazil has dual GST structure. White paper proposes dual structure for GST in India. Standard GST rate in most countries vary between 15-25%.

The proposed GST structure in India proposes dual structure.  GST shall have two components- Central GST and State GST. The model shall be implemented by multiple statute- one for Central GST and SGST statute for every state. However, it is proposed that basic feature of laws related to chargeability of tax, definition of taxable event, taxable person, basis of classification, basis of value for chargeability of tax shall remain uniform. Further, to an extent uniform procedure for collection of both Central GST and State GST shall be prescribed.

Central GST shall be payable to the account of Central Government whereas State GST shall be payable to the account of State Government. Separate account for these taxes are to me maintained. Input tax credit of Central GST shall be allowed to be utilized for payment of Central GST only and ITC of state GST can be used for payment of State GST only. Cross utilization will not be allowed except in cases of inter state supply of goods and services.

For taxation of inter state transaction, IGST model has been proposed. In the model Centre shall levy IGST, which would be CGST plus SGST. The seller shall pay IGST after adjusting available IGST, CGST and SGST. The importing dealer shall claim credit of IGST paid. The credit from one state shall be transferred to other state using a clearing house mechanism.

Under CGST, these taxes shall be subsumed:

Central Excise Duty

Additional Excise Duties

Excise duty levied on medicinal and toiletries preparation.

Service Tax

Additional Custom Duty (CVD)

Special Additional duty (SAD)



Following state taxes shall be subsumed in state GST:

VAT/Sales Tax

Entertainment Tax

Luxury Tax

Taxes on lottery, betting and gambling

State cesses and surcharges

Entry tax not in lieu of octroi.

Items not covered under GST:

The proposed GST Structure keeps liquor and petroleum products out of the purview of GST. Regarding applicability of GST on natural gas, decision will be taken in course of time. Excise duty, presently levied by the states shall not be affected. Tobacco products shall be subject to GST with input tax credit. Centre shall be allowed to levy state excise duty over GST on tobacco products. GST shall be levied on imported goods and services by centre. Input tax credit shall be available and tax revenue shall go to the state based on following destination principle.

Existing central excise/sales tax concession scheme in the special area is likely to continue. Various schemes if needed shall be converted into  cash refund scheme so that chain on input tax credit is not disturbed.

Rate of GST shall be prescribed in due course of time. It is expected to be revenue neutral. It is expected that target date may be met for implementation of GST. Threshold limit proposed for Central GST is 1.5 crores and State GST is 10 lakhs. Further a compounding scheme for state GST is being proposed for turnover till 50 lakhs.

To implement the model various legislative changes and constitutional amendment shall be required. It is expected that draft Central GST Act may be released in course of a few weeks for discussion.


The proposed structure is certainly far better than the existing structure. However, a single GST structure, with tax revenue distributed between Centre & states would have been better for trade. Even in the proposed dual structure, it will be advisable for parliament to make basic law even for State GST, which is possible under the present Constitutional scheme. Nevertheless, politics is not something what ought to be done but it is more about what could be done. Keeping in mind the federal structure of the country, and maintaining the financial autonomy probably this structure was required. On the whole a welcome step.

Written by:- Advocate Rajesh Kumar. The author can be contacted on The author can be contacted on [email protected] , Web:

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September 2021