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GST

 

GST is an Indirect Tax which has replaced many Indirect Taxes in India. The Goods and Service Tax Act was passed in the Parliament on 29th March 2017. The Act came into effect on 1st July 2017; Goods & Services Tax Law in India is a comprehensive, multi-stage, destination-based tax that is levied on every value addition.

In simple words, Goods and Service Tax (GST) is an indirect tax levied on the supply of goods and services. This law has replaced many indirect tax laws that previously existed in India.

GST is one indirect tax for the entire country. The GST journey began in the year 2000 when a committee was set up to draft law. It took 17 years from then for the Law to evolve. In 2017 the GST Bill was passed in the Lok Sabha and Rajya Sabha. On 1st July 2017 the GST Law came into force.

Advantages of GST

GST will mainly remove the Cascading effect on the sale of goods and services. Removal of cascading effect will directly impact the cost of goods. Since tax on tax is eliminated in this regime, the cost of goods decreases.

GST is also mainly technologically driven. All activities like registration return filing, application for refund and response to notice needs to be done online on the GST Portal. This will speed up the processes. Under the GST regime, the tax ISlevied at every point of sale. In case of intra-state sales, Central GST and State GST will be charged. Inter-state sales are chargeable to Integrated GST.

Components of GST

There are 3 taxes applicable under this system: CGST, SGST and IGST.

Tax Laws before GST

In the earlier indirect tax regime, there were many indirect taxes levied by both state and centre. States mainly collected taxes in the form of Value Added Tax (VAT). Every state had a different set of rules and regulations.

Interstate sale of goods was taxed by the Centre. CST (Central State Tax) was applicable in case of interstate sale of goods.  Other than above there were many indirect taxes like entertainment tax, octroi and local tax that was levied by state and centre.

This lead to a lot of overlapping of taxes levied by both state and centre.

For example, when goods were manufactured and sold Excise Duty charged by the centre was charged by the centre. Over and above Excise Duty, VAT was also charged by the State. This lead to a tax on tax also known as cascading effect of taxes.

The following is the list of indirect taxes in the pre-GST regime:

 

CGST, SGST, and IGST have replaced all the above taxes.

However, the chargeability of CST for Inter-state purchase at a concessional rate of 2%, by issue and utilisation of c-Form is still prevalent for certain Non-GST goods such as:

(i) Petroleum crude;

(ii) High-speed diesel;

(iii) Motor spirit (commonly known as petrol);

(iv) Natural gas;

(v) Aviation turbine fuel; and

(vi) Alcoholic liquor for human consumption.

in respect of following transactions :

 

Acts

Rules

Notification

Circulars/Orders

Classification of Services

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