GST is a single indirect tax system for the entire nation that aims to create a unified and common market in India.

GST provides relief to Indian industry, trade, and agriculture by allowing a more comprehensive and wider coverage of input and service tax set-off. This is achieved through the involvement of several Central and State taxes in the GST and the phasing out of CST.

Exporters can benefit from GST implementation as major Central and State taxes will be involved, allowing for complete and comprehensive setoff of input goods and services. Additionally, phasing out of Central Sales Tax would reduce the cost of locally manufactured goods and services.

India has a federal system where both the Center and the States have the powers to impose and collect taxes through appropriate legislation. Therefore, Dual GST is required in India.

Under the prevailing State VAT system, there is an edge prescribed in different State VAT Acts below which VAT is not applicable, varying from State to State. GST will simplify this by providing a uniform edge of goods, making it easier for small entrepreneurs and traders to comply with tax laws.

GST implementation will result in the removal of cascading effects of CENVAT and service tax with a continuous chain of set-off from the producer’s end to the retailer’s end. This will reduce the overall tax burden on consumers.

For the introduction of GST, suitable legislation for the levy of GST (Central GST Bill, Integrated GST Bill, and State GST Bills) drawing powers from the Constitution must be passed by the Parliament and the State Legislatures. The GST Bills require a simple majority to pass, unlike the Constitutional Amendment, which requires a 2/3rd majority. The levy of the tax can commence only after the GST law has been enacted by the Parliament and respective Legislatures.

The Goods and Services Tax Council will establish a mechanism to adjudicate disputes between the Government of India and one or more states, or between two or more states, arising from the recommendations or implementation of the GST Council ( as per the 101 amendment act 2016)

GSTN, or Goods and Service Tax Network, is a Special Purpose Vehicle that provides a shared IT infrastructure and services to central and state governments, taxpayers, and other stakeholders for the implementation of GST.

GSTN facilitates registration, forwarding returns, computation and settlement of IGST, matching of tax payment details with banking network, providing various MIS reports to the governments based on taxpayer return information, providing analysis of taxpayer profiles, running the matching engine for matching, reversal, and reclaim of input tax credit, developing a common GST portal and applications, and integrating GST front-end systems with back-end systems for a smooth transition.

Small taxpayers with an aggregate turnover of up to Rs. 50 lakhs in a financial year will be eligible for the composition scheme. Under this scheme, taxpayers will pay tax as a percentage of their turnover during the year, without the benefit of Input Tax Credit (ITC). The floor rate of tax for CGST and SGST will not be less than 1%, and taxpayers who opt for this scheme will not collect any tax from their customers. Taxpayers making inter-state supplies or paying tax on reverse charge basis will not be eligible for this scheme.

Under GST, exports will be considered as zero-rated supplies. Exporters will not have to pay any tax on the goods or services they export, and they will be eligible to claim input tax credit. The credit of input tax will be available as a refund to the exporters.

In the GST regime, imports of goods and services will be treated as inter-state supplies, and IGST will be levied on imported goods and services. The tax revenue in case of SGST will accrue to the State where the imported goods and services are consumed. The GST paid on import of goods and services will be eligible for a full and complete set-off.

The classification of goods under the GST regime is based on the HSN code. Taxpayers with different turnovers will use a different number of digits in the code:

• Taxpayers with turnover between Rs. 1.5 crores and Rs. 5 crores should use a 2-digit HSN code,
• Taxpayers with turnover of Rs. 5 crores and above must use a 4-digit HSN code.
• Taxpayers with turnover below Rs. 1.5 crores do not need to mention the HSN code on their invoices.
• Services will be classified based on the SAC

Small taxpayers with an aggregate turnover up to Rs. 10 lakhs (Rs. 5 lakhs for NE States and Sikkim) are exempt from tax. Taxpayers eligible for threshold exemption have the option to pay tax with input tax credit benefits. Taxpayers making inter-State supplies or paying tax on reverse charge basis are not eligible for threshold exemption.

The taxable person is responsible for paying tax on the supply of goods and/or services. The liability to pay tax arises when the taxable person crosses the threshold exemption of Rs. 10 lakhs (Rs. 5 lakhs for NE States and Sikkim). CGST/SGST is payable on intra-state supplies and IGST is payable on inter-state supplies at the rates specified in the respective Acts. However, there are some specified cases where the taxable person is liable to pay GST even though they have not crossed the threshold limit.

As per the Constitution (one hundred and first amendment) Act, 2016, decisions of the GST Council will be made—

1. by a majority of not less than 3/4th of the weighted votes of the members present and voting at a meeting.
2. The Central Government’s vote will be weighted 1/3rd, and the votes of all State Governments combined will be weighted 2/3rd.
3. A quorum of half the total number of members of the GST Council is required to conduct a meeting.

The GST Council’s mechanism ensures harmonization of different aspects of GST among the Centre and States, as well as between States. The Constitution (one hundred and first amendment) Act, 2016 mandates that the GST Council be guided by the need for a harmonized structure of GST and the development of a harmonized national market for goods and services while discharging its various functions.

The GST Council will be established with the Union Finance Minister as the Chairperson and the State Finance/Taxation Ministers and the Minister of State (Revenue) as members. The council will recommend:

1. The taxes, cesses, and surcharges imposed by the Centre, States, and local bodies that may be subsumed under GST;
2. The goods and services that may be subject to or exempted from GST;
3. The date on which GST will be levied on specific petroleum products and natural gas;
4. Model GST laws, principles of levy, IGST apportionment, and the principles that govern the place of supply;
5. The turnover threshold below which goods and services may be exempted from GST;
6. GST rates, including floor rates with bands;
7. Any special rate or rates for a specific period to raise additional resources during any natural calamity or disaster;
8. Special provisions for North-East States, J&K, Himachal Pradesh, and Uttarakhand; and
9. Any other matters related to GST that the council may decide.

The Centre and States will jointly decide the rates for CGST and SGST. The GST Council will recommend the rates, which will then be notified.

In the GST regime, the Integrated GST (IGST) would be imposed and collected by the Central government on inter-state supplies of goods and services. According to Article 269A of the Constitution, the GST on supplies during inter-state trade or commerce will be levied and collected by the Government of India, and the tax will be divided between the Union and the States as suggested by the Goods and Services Tax Council and provided by Parliament by law.

The implementation of GST will be a major reform in the field of indirect taxation in India.

• It will consolidate numerous Central and State taxes into one tax and allow prior-stage tax credits, which will mitigate the cascading effect and create a uniform national market.
• The most significant gain for consumers will be a decrease in the overall tax burden on goods, which is presently estimated at 25% – 30%.
• The introduction of GST will also make our products competitive in both domestic and international markets, boosting economic growth.
• Furthermore, there may be revenue gains for the Centre and States as the tax base expands, trade volumes increase, and tax compliance improves.
• Finally, because of its transparent nature, this tax will be simpler to administer.

• For every transaction of goods and services, both Central GST and State GST will be levied except for exempted goods and services and those below the threshold limits.
• They will be charged the same price or value. For CGST, the location of the supplier and recipient doesn’t matter, but for SGST, they both have to be in the same state.
• The CGST and SGST components will be deposited into respective government accounts.
• Credits for CGST and SGST cannot be used interchangeably for payment.

The Constitution of India was amended recently to enable both the Centre and States to levy and collect the Goods and Services Tax (GST). Prior to the amendment, the Centre had the power to tax the manufacture of goods while States had the power to tax the sale of goods. The GST required changes to be made in the Constitution to allow for the concurrent powers of both the Centre and States to levy and collect the tax. Article 246A of the Constitution was added by the Constitution (one hundred and first amendment) Act, 2016 for this purpose.

The Centre will administer and collect CGST and IGST, while the respective states will be responsible for administering and collecting SGST.

A dual GST model is proposed, where both the Centre and States will levy it on a common tax base. The Centre will levy the CGST on intra-state supply of goods and/or services, while the States will levy the SGST. The Centre will also administer and collect IGST on every inter-state supply of goods and services.

Tobacco and tobacco products will be subject to GST, and the Centre will also have the power to levy Central Excise duty on these products.

The current taxation system (VAT & Central Excise) will continue for tobacco and tobacco products.

Alcohol for human consumption, petroleum products like petroleum crude, motor spirit (petrol), high-speed diesel, natural gas and aviation turbine fuel, and electricity will not be covered under GST.

In order to identify which taxes could be subsumed under GST, the different Central, State, and Local levies were evaluated based on several principles.

• These principles included that the taxes or levies to be subsumed should mainly be indirect taxes on the supply of goods or services.
• Additionally, they should be part of the transaction chain that begins with the import, manufacture, or production of goods or services and ends with their consumption.
• The subsumption should allow for a free flow of tax credit both within and between states.
• Taxes, levies, and fees that are not specifically related to the supply of goods and services should not be included in the GST.
• Finally, the subsumption should aim to achieve revenue fairness for both the Union and the States.

The GST is proposed to replace various existing taxes, which are currently levied and collected by the Centre and the States.

The taxes to be subsumed under the GST are:

• Central Excise duty, Duties of Excise (Medicinal and Toilet Preparations),
• Additional Duties of Excise (Goods of Special Importance),
• Additional Duties of Excise (Textiles and Textile Products),
• Additional Duties of Customs (commonly known as CVD),
• Special Additional Duty of Customs (SAD),
• Service Tax, and
• Central Surcharges and Cesses related to supply of goods and services.

State taxes that would be subsumed under the GST include:

• State VAT, Central Sales Tax, Luxury Tax, Entry Tax (all forms),
• Entertainment and Amusement Tax (except when levied by the local bodies),
• Taxes on advertisements,
• Purchase Tax, Taxes on lotteries, betting and gambling, and
• State Surcharges and Cesses related to supply of goods and services.
  
  

The GST Council will recommend to the Union and States which taxes, cesses and surcharges levied by the Centre, the States and the local bodies can be subsumed in the GST.

It refers to a tax that is collected by the jurisdiction over the place where the goods or services are consumed.

GST is a tax on consumption of goods and services levied at all stages from manufacture to final consumption with a credit of taxes paid at previous stages available as set off. It aims to tax only value addition and be borne by the final consumer.

The GST common portal will inform the applicant of the grant or rejection of their registration application through an email and SMS, along with jurisdictional details.

A non-resident taxable person is a taxable person who occasionally undertakes transactions involving the supply of goods and/or services, with no fixed place of business in India.

A taxable person residing outside of India, who occasionally conducts business transactions in India, without a fixed place of business in the country is considered a non-resident taxable person according to the MGL.

A Casual Taxable Person refers to a person who occasionally undertakes transactions in a taxable territory where they have no fixed place of business, as per Section 2(21) of MGL.

Government authorities/PSUs not making outward supplies of GST goods but making inter-state purchases will be given a unique identification number (ID) by the respective state tax authorities through the GST portal, even though they are not liable to obtain GST registration.

A taxable supplier who supplies to UN organizations is expected to mention the UIN on the invoices and treat such supplies as supplies to another registered person (B2B). The invoices will be uploaded by the supplier.