GST is a win-win situation for the entire country.
It brings benefits to all the stakeholders of industry, government and the
consumer. It will lower the cost of goods and services, give a boost to the
economy and make the products and services globally competitive. GST aims to
make India a common market with common tax rates and procedures and remove the
economic barriers thus paving the way for an integrated economy at the national
level. By subsuming most of the Central and State taxes into a single tax and
allowing a set-off of prior-stage taxes for the transactions across the entire
value chain, it would mitigate the ill effects of cascading, improve
competitiveness and improve, liquidity of the businesses. GST is a destination
based tax. It follows a multi-stage collection mechanism. In this, tax is
collected at every stage and the credit of tax paid at the previous stage is
available as a set off at the next stage of transaction. This shifts the tax
incidence closer to the consumer and benefits the industry through better cash
flows and better working capital management.
1. The GST would be applicable on the supply of goods or
services as against the present concept of tax on the
manufacture or sale of goods or provision of services. It would
be destination based consumption tax. This means that tax would
accrue to the State or the Union Territory where the consumption
takes place. It would be a dual GST with the Centre and State
simultaneously levying tax on a common tax base. The GST to be
levied by the Centre on intra-State supply of goods or services
would be called the Central tax (CGST) and that to be levied by
the State including Union territories with legislature/Union
Territories without legislature would be called the State tax (SGST)/Union
Territory tax (UTGST) respectively.
2. The GST would apply to all goods other than alcoholic liquor
for human consumption and five petroleum products, viz.petroleum
crude, motor spirit (petrol), hgi speed diesel, natural gas and
aviation turbine fuel. It would apply to all services barring a
few to be specified. The GST replace the following taxes.
(a) Central Excise (b) Duties of Excise (Medicinal and Toilet
Preparations) (c) Additional Duties of Excise (Goods of Special
Importance) (d) Additional Duties of Excise (Textiles and
Textile Products ) (e) Additional Duties of Customs (commonly
known as CVD) (f) Special Additional Duty of Customs (SAD) (g)
Service Tax and (h) Central Surcharges and Cesses so far as they
relate to supply of foods and services.
3. State taxes that would be subsumed under the GST are (a)
State VAT (b) Central Sales Tax(c) Luxury Tax (d) Entry Tax (e)
Entertainment and Amusement tax ( except when levied by the
local bodies) (f) Taxes on advertisements (g) Purchase Tax (h)
Taxes on lotteries, betting and gambling (i) State Surcharges
and Cesses so far as they relate to supply of goods and
4. The list of exempted goods and services would be common for
the Centre and State.
5. Threshold Exemption;- Taxpayers with an aggregate turnover in
a financial year upto Rs.20 lakhs would be exempt from tax.
Aggregate turnover shall be computed on all India basis. For
eleven Special Category State, like those in the North-East and
the hilly states, the exemption threshold shall be Rs.10 lakhs.
All taxpayers eligible for threshold exemption will have the
option of paying tax with input tax credit (ITC) benefits.
Taxpayers making inter-State supplies or paying tax on reverse
charge basis shall not be eligible for threshold exemption.
6. Composition levy :- small taxpayers with an aggregate
turnover in a financial year upto Rs.50 lakhs shall be eligible
for composition levy. Under the scheme, a taxpayer shall pay tax
as a percentage of his turnover during the year without the
benefit of ITC. The rate of tax of CGST / UTGST each shall not
exceed – 2.5% in case of restaurants etc, 1% of the turnover in
a State/UT in case of a manufacturer, 0.50% of the turnover in
State/UT in case of other suppliers.
7. An Integrated tax (IGST) would be levied and collected by the
Centre on inter-State supply of goods and services. Accounts
would be settled periodically between the Centre and State to
ensure that the SGST/UTGST portion of IGST is transferred to the
destination State where the goods or services are eventually
8. Use of Input Tax Credit:- Taxpayers shall be allowed to take
credit of taxes paid on inputs (input tax credit) and utlize the
same for payment of output tax. However, no input tax credit on
account of CGST shall be utilized towards payment of SGST/UTGST
and vic versa. The credit of IGST would be permitted to be
utilized for payment of IGST, CGST and SGST/UTGST in that order.
9. Exports and supply to SEZ shall be treated as zero-rated
supplies. The exporter shall have an option to either pay output
tax and claim its refund or export under bond without tax and
claim refund of Input Tax Credit.
10. Import of goods and services would be treated as inter-State
supplies and would be subject to IGST in addition to the
applicable customs duties. The IGST paid shall be available as
ITC for further transactions.