GST (Goods and Services Tax) is a single indirect tax applied on the supply of goods and services
in India. It is paid by consumers when they purchase any product or use a service. Before GST,
there were many different taxes like VAT, service tax, and excise duty, which made the system
complicated. GST replaced all these taxes with one unified tax system, making it simpler and more
transparent. It is a destination-based tax, which means it is collected where the goods or services
are consumed. GST is divided into three types: CGST (collected by the central government), SGST
(collected by the state government), and IGST (applied on interstate transactions). Overall, GST
helps in creating a uniform tax structure across the country and reduces confusion in taxation.
Features of GST:
Single Tax System – GST combines many taxes like VAT, service tax, and excise into one tax.
Destination-Based Tax – Tax is collected where goods or services are consumed, not where they
are produced.
Dual Structure – CGST (Central Government) and SGST (State Government).
Applies to Goods and Services – Charged on both products and services.
Input Tax Credit (ITC) – Businesses can reduce tax by claiming credit for the tax already paid.
Uniform Tax Rates – Same tax rates are followed across all states in India.
Online Process – GST registration, payment, and returns are done online.
Advantages of GST:
Simplifies Tax System – Replaces multiple taxes.
Uniform Tax Across India – Same tax rates everywhere.
Reduces Tax Burden – Avoids double taxation.
Input Tax Credit Benefit – Reduces costs.
Boosts Business Growth – Easier compliance.
Online and Transparent – Reduces corruption.
Increases Government Revenue – Better compliance.
Unit 1: Preliminary of GST – Foundation
Constitutional Framework:
Money Bill (Article 110): Related to taxation and government money matters.
Finance Bill: Presented during the Budget with tax proposals.
101st Constitutional Amendment Act, 2016: Enabled GST.
Article 246A: Gives power to Centre and State to make GST laws.
Direct Tax vs Indirect Tax:
Direct Tax – Paid directly (Income Tax).
Indirect Tax – Paid by consumer but collected by seller (GST).
Taxable Event – GST is charged on supply.
Problems in Pre-GST Era:
Cascading Effect – Tax on tax.
Fragmented System – Different taxes in different states.
Lack of ITC – No credit for taxes paid.
Evolution, Objectives and Features of GST:
Objectives:
Common National Market
Reduction of Cascading Effect
Ease of Doing Business
GST Council:
Article 279A
Central Govt: 1/3rd voting power
States: 2/3rd voting power
75% majority needed
Functions: Decide rates, exemptions, dispute resolution
Key Definitions:
Aggregate Turnover – Total value of supplies excluding GST
Capital Goods – Long-term business assets
Casual Taxable Person – Occasional supplier
Input Tax Credit – Credit of tax paid
Reverse Charge – Buyer pays tax
Concept of Supply:
Supply includes sale, barter, exchange, lease, rental
Conditions: Consideration + Business purpose
Dual GST Structure:
CGST – Central
SGST – State
UTGST – Union Territories
IGST – Inter-state
Intra-State vs Inter-State:
Intra-State – CGST + SGST
Inter-State – IGST
GST Rates:
0%, 5%, 12%, 18%, 28%
Compensation Cess on luxury goods
Non-GST Items:
Alcohol
Petroleum products
Tobacco (partly)
Administration:
Centre + State control
Cross-empowerment
GSTN for online system
Special Mechanisms:
Reverse Charge Mechanism – Buyer pays tax
Composition Scheme – Small businesses, lower tax, no ITC
Time, Value, Place of Supply:
Time – When tax arises
Value – Price paid
Place – Location of taxation
Registration:
Turnover limits apply
Online registration with PAN, Aadhaar
Compulsory for certain persons
Amendment, Cancellation, Revocation:
Amendment – Update details
Cancellation – Voluntary or by officer
Revocation – Restore registration