The announcement of the Goods and Services Tax (GST) was a milestone in the history of indirect tax reforms in the country. Through the amalgamation of a large number of state and central taxes into a single tax, GST is expected to remove double taxation or the cascading effect of taxation in a significant way. This is in line with the government’s vision of creating a common national market as well. The Central Government rolled out the GST system on 1 July 2017 in a historic midnight session of both houses of parliament. The GST Council has fixed the rate of taxation on 1,211 items, most of which are in the 18% tax slab.
From the perspective of the consumer, the greatest advantage of the GST implementation would be a decrease in the overall tax burden, which is currently, at an average of 25%-30%. The GST regime is also expected to make products manufactured in India more competitive in the international markets, boosting economic growth of the nation.Apart from the above mentioned benefits, the Goods and Services Tax will also be easier to manage owing to the transparency that it offers.
What is new in GST?
Before the implementation of GST, the fiscal powers between states and the Centre were clearly demarcated with no overlaps. The Centre levied tax on goods manufacture (except for alcohol for human consumption, narcotics, etc.) and the states levied tax on the sale of goods.
After the implementation of GST, the Centre and states are concurrently empowered to levy and collect tax. The most important tax rules under the GST regime are as follows:
- GST is applicable on the “supply” of services and goods, as opposed to the sale or manufacture of goods and provision of services that existed previously.
- The new tax system is based on destination-based taxation unlike the origin-based taxation system earlier.
- The GST that is levied by the Centre is called Central GST (CGST) and that levied by the states is called State GST (SGST). Union territories will levy Union Territory GST (UTGST).
- Integrated GST (IGST) is levied on the inter-state supply of services and goods. This is collected by the Centre.
- Import of goods and services will be taxed under IGST.
- GST has subsumed the following taxes levied by the Centre previously:
- Duties of Excise - Medicinal and Toilet
- Central Excise Duty
- Additional Duties of Excise - Goods of Special Importance
- Additional Duties of Customs (CVD)
- Additional Duties of Excise - Textiles
- Special Additional Duty of Customs (SAD)
- Cesses and surcharges
- Service Tax
- GST has replaced the following taxes levied by the states previously:
- State VAT
- Purchase Tax
- Central Sales Tax
- Luxury Tax
- Entertainment Tax, except that levied by certain local entities
- Entry Tax
- Tax on advertisements
- Tax on gambling and lotteries
- State cesses and surcharges
- GST is applicable to all services and goods, apart from alcohol that is consumed by humans.
- There are 4 tax rates under GST, i.e., 5%, 12%, 18%, and 28%. Also, some services and goods fall under the list of tax-exempt items.
- Tobacco products will attract GST and Central Excise Duty.
- Input credit corresponding to CGST will be used for paying CGST on output. Similarly, input credit corresponding to SGST/UTGST will be used for paying SGST/UTGST on output. This implies that the two channels of input tax credit cannot cross over, except in the case of IGST payments.
- Electronic filing of tax returns will be available for different classes of taxpayers at varying cut-off dates.
- An anti-profiteering clause is provided which ensures that businesses pass on the tax benefits to consumers.
- Goods and Services Tax Network (GSTN) has been established as a private company by the Government. GSTN will offer mainly three front-end services to the taxpayer, i.e., registration, payment, and return.
- GSTN will also develop IT modules for the smooth transition from the old tax structure to GST. This service will be available to 25 states that have decided to opt for it.
- GSTN has identified 34 financial technology and IT companies that will act as GST Suvidha Providers (GSPs). These companies will develop applications that taxpayers will use.
Latest GST Notifications
GST Notifications are the latest amendments to the existing provisions under:
- Central Goods and Services Tax Act, 2017
- Integrated Goods and Services Tax Act, 2017
- Union Territory Goods and Services Tax Act, 2017
- Goods and Services Tax (Compensation to States) Act, 2017
Some of the latest GST notifications are listed below:
Central Tax Notifications:
|Notification number and issue date||Provision|
|16/2017-Central Tax, dt. 07-07-2017||Conditions for providing a Letter of Undertaking instead of a bond for export, when the integrated tax is not paid|
|15/2017-Central Tax, dt. 01-07-2017||Amendment to CGST Rules notification 10/2017-CT dated 28.06.2017|
|14/2017-Central Tax, dt. 01-07-2017||Assigning power and jurisdiction to officers from several directorates|
|13/2017-Central Tax, dt. 28-06-2017||Prescribes rates of interest under CGST Act, 2017|
|12/2017-Central Tax, dt. 28-06-2017||Notifies the number of HSN digits that should be present on the tax invoice|
Integrated Tax Notifications:
|Notification number and issue date||Provision|
|06/2017-Integrated Tax, dt. 28-06-2017||Prescribes the interest rate under CGST Act, 2017|
|05/2017-Integrated Tax, dt. 28-06-2017||Notifies the number of HSN digits that should be present on the tax invoice|
|04/2017-Integrated Tax, dt. 28-06-2017||Notifies the IGST Rules, 2017|
|03/2017-Integrated Tax, dt. 28-06-2017||Brings into force several sections of the IGST Act, 2017 from 1 July 2017|
|02/2017-Integrated Tax, dt. 19-06-2017||Empowers the Principal Commissioner of Central Tax, Bengaluru West to allow registration for access to online information or retrieval services|
News on GST Act and changes in GST Rules
The GST structure is based on the GST Act that was composed by the GST Council, a committee comprising of the Union Finance Minister as the chairperson and ministers appointed by the state governments. Any changes in the law will affect the rules in the GST Act, such as the ones for penalty, invoicing, point of taxation, etc.
What becomes cheaper under GST?
Listed below are the items that have become cheaper from 1 July 2017, after GST was implemented.
- Dairy spreads
- Unbranded natural honey
- Milk powder
- Fruits and vegetables
- Groundnut oil
- Palm oil
- Sunflower oil
- Coconut oil
- Mustard oil
- Sugar confectionery
- Cashew nuts
- Baking powder
- Toppings and spreads
- Raisins and gum
- Instant food mixes
- Mineral water
Commodities for daily use:
- Plastic tarpaulin
- Bathing soap
- LPG stove
- Hair oil
- Detergent powder
- Tooth powder
- Tissue papers
- Fish knives
- Cake servers
- LPG domestic
- Carbon paper
- Parchment paper
- All types of paper
- Picture, drawing, and colouring books
- Graph paper
- Exercise books
- School bag
- Medicines for cancer and diabetes
- Glasses for corrective spectacles
- X-ray films for use in medicine
- Diagnostic kits
- Apparel up to Rs.1,000
- Footwear below Rs.500
- Woollen fabrics
- Gandhi topi
- Khadi yarn
- Fly ash bricks and blocks
- Diesel engines of power below 15HP
- Tractor rear tyres and tubes
- Hotels with tariff below Rs.7,500
- Weighing machinery
- Economy-class air tickets
- Static converters (UPS)
- Electric transformers
- Winding wires
- Luxury cars
- Crackers and explosives
- Movie tickets less than Rs.100
- Agriculture in Union Budget
- Union Budget for Rural Sector
- Budget for Youth Employment
- Budget for Health Care Sector
- Railway Budget
- Union Budget for Energy Sector
- Union Budget for Financial Sector
- Fiscal Situation
- Funding of Political Parties in Budget
- Union Budget for Defence Sector
- Union Budget Expenditure
- Union Budget Receipts
- Budget Appropriation Bill
- Finance Bill
- Union Budget Analysis
- Union Budget for Senior Citizen
- Union Budget for Logistics Sector
- Maternity Benefits from Union Budget