After receiving comments on the report from Government of India and concerned officials of the State
Governments and taking into account their recommendations, the EC released the First Discussion
paper on Goods and Services Tax in India on November 10, 2009 to obtain the inputs of industry,
trade bodies, and people at large. On 22nd March 2011, the Constitution (115th Amendment) Bill
was introduced in the Lok Sabha to operationalize the GST and enable Centre and States to make
laws for levying of GST. However, the Bill lapsed with the dissolution of the 15th Lok Sabha. Thereafter, on 19th December, 2014 the Constitution (122nd Amendment) Bill, 2014 was introduced in the
Lok Sabha to address various issues related to GST. It is noteworthy that the introduction of GST
required a Constitutional amendment as the Constitution did not vest express power either in the
Central Government or State Government to levy tax on the ‘supply of goods and services’. While
the Centre was empowered to tax services and goods up to the production stage, the States had the
power to tax sale of goods. Since the GST regime requires goods and services to be simultaneously
taxed by both the Central and State Governments, a Constitutional amendment was needed.
The Constitution (122nd Amendment) Bill, 2014 was passed by the Lok Sabha on 6th May, 2015 after
which the Rajya Sabha passed the Bill with 9 amendments on 3rd August, 2016. The Lok Sabha
then passed the modified Bill on 8th August, 2016. After getting approval of half of the States, it
was sent to the President for his assent which was given on 8th September, 2016. Thus the road to
GST rollout was cleared and the process of enactment was completed.
Salient Features of GST in India
The salient features of GST in India have been highlighted below:
Supply as the base :
GST would be applicable on “supply” of goods or services as against the
erstwhile concept of tax on the manufacture of goods or on sale of goods or on provision
of services.
Destination-based tax :
As opposed to the previous principle of origin-based taxation, GST
would be based on the principle of destination-based consumption taxation.
Dual GST :
The Centre and the States would simultaneously levy tax on a common base.
The GST to be levied by the Centre would be called Central GST (CGST) and the GST to be
levied by the States (including Union territories with legislature) would be called State GST
(SGST). Union territories without legislature would levy Union territory GST (UTGST).
Inter-State supply :
An integrated GST (IGST) would be levied on inter-State supply of goods
or services. This would be collected by the Centre so that the credit chain is not disrupted.
Imports of goods and services would be treated as inter-State supplies and would be subject
to IGST. (This would be in addition to applicable customs duties).
Proposed benefits of GST
The implementation of GST is expected to bring in various benefits as discussed below:
Dynamic common market:
GST would make India a dynamic common market and result
in generation of positive externalities. By ensuring uniformity of indirect tax rates across
the country, it will substantially improve the ease of doing business.
Elimination of cascading effect:
Under GST, provision of seamless input tax credit across
transactions will avoid tax cascading, eliminate double taxation and improve resource allocation.
Efficiency :
Subsuming of all major indirect taxes will result in the removal of inefficient
taxes. With as single tax to be paid, manufacturers will become more competitive and this
could lead to growth in exports.
Reduced compliance costs :
Harmonisation of tax rates and laws along with seamless input
tax credits and a sound IT infrastructure is expected to lead to reduced compliance costs.
As all the taxpayer services like registrations, payments, returns etc. will be available online,
the compliance process would become simpler.
Concerns regarding GST
The implementation of GST is expected to bring in various benefits as discussed below:
Lack of preparedness :
The understanding of the provisions of GST is still at a nascent stage
for many people engaged in business. They are still trying to assess the mandated GST
compliance provisions that their relevant functional departments (such as IT Department,
Legal department) need to adhere to.
Compliance related issues :
Businesses need to file multiple returns which may increase
manifold in accordance with business models. Clients will need to ensure timely compliance
by registered suppliers to ensure there is no loss of input credit. This will necessitate correct
data and reports to fill accurate GST returns.
Increased costs due to software purchase :
Businesses have to either update their existing
accounting or ERP software to a GST-compliant software or buy a GST software so that they
can keep their business going. Both the options lead to increased cost of software purchase
and training of employees for an efficient utilization of the new billing software.
Structure of GST
There are four categories of indirect taxes under GST
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Central Goods and Services Tax (CGST).
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State Goods and Services Tax (SGST).
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Union Territory Goods and Services Tax (UTGST).
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Integrated Goods and Services Tax (IGST).
CGST
Central Goods and Services Tax (CGST)
GST levied by the Centre on intra-State supply of goods or services or both is called CGST. It is
levied under Central Goods and Services Tax (CGST) Act, 2017 which makes provisions for the levy
and collection of tax on intra-State supply of goods or services or both by the Central Government.
The Act is divided into 21 chapters which deal with matters connected with the levy, collection and
administration of GST.
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Subject to the provisions of sub-section (2), there shall be levied a tax called the central goods and
services tax on all intra-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under section 15 and at such rates,
not exceeding twenty per cent, as may be notified by the Government on the recommendations of
the Council and collected in such manner as may be prescribed and shall be paid by the taxable
person.
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The central tax on the supply of petroleum crude, high speed diesel, motor spirit (commonly known
as petrol), natural gas and aviation turbine fuel shall be levied with effect from such date as may
be notified by the Government on the recommendations of the Council.
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The Government may, on the recommendations of the Council, by notification, specify categories
of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by
the recipient of such goods or services or both and all the provisions of this Act shall apply to such
recipient as if he is the person liable for paying the tax in relation to the supply of such goods or
services or both.
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The central tax in respect of the supply of taxable goods or services or both by a supplier, who is
not registered, to a registered person shall be paid by such person on reverse charge basis as the
recipient and all the provisions of this Act shall apply to such recipient as if he is the person liable
for paying the tax in relation to the supply of such goods or services or both.
SGST
State Goods and Services Tax (SGST)
GST levied by the States on intra-State supply of goods or services or both under their respective
SGST Acts is called SGST.
