Meaning and Features of GST [GST Law & Practice B.Com 6th Sem CBCS Pattern Notes]

Meaning and Features of GST

Meaning of GST

According to Article 366 (12A) of Constitution of India, as amended by 101st Constitutional Amendment Act, 2016 defines the Goods and Services Tax (GST) “as a tax of supply of goods or services or both, except supply of alcoholic, liquor for human consumption”.

GST is a destination based tax on consumption of goods and services, right from the manufacturer to the consumer, to be levied on the same taxable event by both the states and the union government. It is levied at all stages right from manufacture up to final consumption with credit of taxes paid at previous stages available as set off. In a nutshell, only value addition is taxed. The burden of tax is to be borne by the final consumer. Concept of destination based tax is that the GST will accrue to the GST authority which has jurisdiction over the place of consumption. On each ‘supply’ of goods or services or both, there will be a State GST (SGST) as well as a Central GST (CGST).

Features of GST

Salient features of GST are as follows:

1. Dual GST: India has adopted a dual GST system, which was imposed concurrently by the Centre and States as CGST & SGST. Center has the power of tax intra-state sales and states are empowered to tax services. Now GST has extended to all over the India.

2. One Nation One Tax: GST is considered to be the biggest indirect tax reform of Independent India. After introduction of GST, one type of tax is chargeable although with multiple tax rate of different items of goods and services.

3. Exemptions: Apart from providing relief to small-scale business, the law also contains provisions for granting exemption from payment of tax on essential goods and/or services.

4. Inter-State Transactions and the IGST Mechanism: The Centre would levy and collect the Integrated Goods and Services Tax (IGST) on all inter-state supply of goods and services. The IGST mechanism has been designed to ensure seamless flow of input tax credit from one State to another. The inter-state seller would pay IGST on the sale of his goods to the Central Government after adjusting credit of IGST, CGST and SGST on his purchases (in that order). The exporting State will transfer to the Centre the credit of SGST used in payment of IGST. The importing dealer will claim credit of IGST while discharging his output tax liability (both CGST and SGST) in his own State. The Centre will transfer to the importing State the credit of IGST used in payment of SGST.

5. Credit of GST paid on Purchases: The supplier at each stage is permitted to avail credit of GST paid on purchase of goods and or services and can set-off this credit against the GST payable on supply of goods and services to be made by him. Thus only the final consumer bears the GST charged by the last supplier in the supply chain, with set-off benefits at all previous stages.

6. Rates of GST: Currently there are four slabs of GST on the various categories of goods and services. They are 5%, 12%, 18% and 28%.

7. Creating of Unified National Market: Introduction of GST would create unified national market which would facilitate free movement of goods and services across the Country.

8. No cascading effect: Since only the value added at each stage is taxed under GST, there is no tax or cascading of taxes under GST system. GST does not differentiate between goods and services and thus the two are taxed at a single rate.

9. No distinction between goods and services: GST would be applicable on “supply” of goods or services as against the present concept of tax on the manufacture of goods or on sale of goods or on provision of services.

10. Destination based Tax: GST would be based on the principle of destination based consumption taxation as against the present principle of origin based taxation. This implies that all SGST collected will ordinarily accrue to the State where the consumer of the goods or services sold resides.

11. Seamless Flow of Credit: GST will facilitate seamless credit across the entire supply chain and across all States under a common tax base. In other words, the eligible entities may claim input tax credit without any hassle under the common tax base.

12. Technology driven: GST is technology driven. The interface of the taxpayer with the tax authorities will be through the common portal (GSTN). There will be simplified and automated Procedures for various processes. All processes, beginning with applying for registration, filing of returns, payment of taxes, claiming of input tax credit, filing of refund claims etc. would be done online through GSTN.

Indirect Taxes which are subsumed by GST

Taxes have been subsumed by GST includes both Central and State Taxes. Following is the list of taxes, both Central and State, subsumed by the GST:

Central Taxes:

1. Central Excise Duty.
2. Duties of Excise (Medicinal & Toilet Preparation).
3. Additional Duties and Excise (Goods of Special Importance).
4. Additional Duties of excise (Textile & Textile Products).
5. Additional Duties of Customs (CVD).
6. Special Additional Duty of Customs (SAD).
7. Central Surcharges and Cesses so far as they relate to supply of goods and service.
8. Service Tax.

State Taxes:

1. State Value Added Tax (VAT)/Sales tax.
2. Central Sales Tax.
3. Luxury tax.
4. Entry tax (All forms)
5. Entertainment Tax (other than the tax levied by the local bodies).
6. Taxes of Advertisement.
7. Purchase Tax.
8. Taxes on lotteries, betting and gambling.
9. State Surcharges and Cesses so far as they relate to supply of goods and services.