Goods and Services Tax, in short known as GST, is a single tax on the supply of goods and services right from the manufacture to the consumer.
Credits of input taxes paid at each stage will be available in the subsequent stage of value addition, which makes GST essentially a tax only on value addition at each stage. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages.
Benefits to Various Groups
- To simplify the complex indirect tax structure across the country, which is ridden with hidden cost for trade and industry.
- To bring uniformity in indirect tax rates across the nation.
- To minimize cascading of taxes i.e. tax over tax, which leads to artificial inflation in price of goods and services.
- Will broaden the tax base and lead to better tax compliance supported with solid IT infrastructure.
- Will foster common and seamless Indian market
Which taxes are subsumed under GST?
Central Taxes & Duties
- Central Excise Duty
- Additional Excise Duty
- Service Tax
- Additional Customs Duty commonly known as Countervailing Duty
- Special Additional Duty of Customs
- State Value Added Tax/Sales Tax
- Entertainment Tax (other than the tax levied by the local bodies)
- Central Sales Tax (levied by the Centre and collected by the States)
- Octroi and Entry tax
- Purchase Tax
- Luxury tax
- Taxes on lottery, betting and gambling
Administration of GST
On every supply of goods and services within a state, the centre and states will simultaneously levy GST across the value chain. The GST levied by centre is called Central GST (CGST) and the one levied by the state is called State GST (SGST).
In case of Inter-State transactions, the Centre would levy and collect the Integrated Goods and Services Tax (IGST). IGST is nothing but CGST & SGST put together which is levied and collected by the centre.
GST will be a destination-based tax. This implies that all SGST collected will ordinarily accrue to the State where the consumer of the goods or services sold resides.
Input Tax Credit (ITC)
The input tax credit of CGST would be available for discharging the CGST liability on the output at each stage. Similarly, the credit of SGST paid on inputs would be allowed for paying the SGST on output. No cross utilization of credit would be permitted.
Goods & Services Not Covered Under GST
- Alcoholic Beverages for human consumption
- Petroleum & Petroleum products (until notified by GST council)
These products will continue to be taxed as per the current system.
Taxes on Tobacco and Tobacco products by the Central Government will continue to be levied in addition to the GST.
Goods and Services Tax Network (GSTN)
A not-for-profit, Non-Government Company called Goods and Services Tax Network (GSTN), jointly set up by the Central and State Governments will provide shared IT infrastructure and services to the Central and State Governments, tax payers and other stakeholders.
Due to a shift from origin based to destination based indirect tax structure, some States might face drop in revenue in the initial years. To help the States in this transition phase, the Centre has committed to compensate all their losses for a period of 5 years.
Q: Will cross utilization of credits between goods and services be allowed
under GST regime?
Q: Will GST apply on import of goods?
A: IGST will be levied on all imports into the territory of India.
Q: Will GST apply on export of goods?
Q: What is the threshold limit for exemption from GST registration?
A: ₹20 lac (₹10 lac for special category states)
Q: What are the tax rates under GST?
A: GST will have four tax rates: 5%, 12%, 18% & 28%