Goods and Services Tax (GST)
Introduction to Goods and Services Tax
Objective After going through this lesson, you shall be able to understand the following concepts: ➣ Introduction to Goods and Services Tax ➣ Meaning of Goods and Services Tax ➣ Characteristics of Goods and Services Tax ➣ Objectives of Goods and Services Tax ➣ Classification of Goods and Services Tax Introduction • A Tax is a legally compulsory payment imposed by the government on income and profit of persons and companies without reference to any benefit. • Taxes are of 2 kinds – Direct Taxes & Indirect Taxes Direct taxes Indirect taxes 1. Liability to pay and the burden of direct tax falls on the same person. 1. Liability to pay this tax is on one person and the burden of the tax falls on some other person. 2. Burden of this tax cannot be shifted to others. 2. Its burden can be shifted to others. 3. Direct taxes are considered progressive because they are based on personal ability to pay. 3. They are considered regressive because their burden is more on the poor than on the rich. 4. Direct taxes are levied on the incomes and property of persons. 4. Indirect taxes are levied on goods and services on their sale, production, imports and exports. 5. Direct taxes are compulsory and cannot be escaped. 5. This can be avoided by refraining from purchase of the goods whose price contains taxes. 6. Examples are – income tax, corporation tax, wealth tax, gift tax, etc. 6. Example :GOODS & SERVICES TAX Meaning of Goods and Services Tax According to Article 366(12A) of Constitution of India, “Goods and services tax means any tax on supply of goods, or services or both except taxes on the supply of the alcoholic liquor for human consumption.” Alcohol and Petrol has been kept out of the jurisdiction of GST because they are a major source of revenue for the States. Also, loss of revenue to the states due to GST was uncertain so they were not ready to give up their autonomy on the same. However, Tobacco and its related products will be taxed at the discretion of the Central Government. • It is an indirect tax which has integrated various taxes like Sales tax, excise tax, VAT, etc., into one single tax for the entire nation. By replacing the various archaic tax structures, GST is levied at every stage of the supply chain of the goods or services from production to the last retail level. Taxes on intra-state supply of goods and services are shared equally by the Central and State Government thereby harmonising the taxes at different levels of governance. GST on petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas & aviation turbine fuel is to be levied from a later date on recommendations of GST Council. List of Indirect Taxes Integrated under the head of GST Central Taxes State Taxes 1 Central Excise duty State VAT / Sales Tax 2 Additional duties of excise Central Sales Tax 3 Excise duty levied under Medicinal& Toilet Preparation Act Purchase Tax 4 Additional duties of customs (Counter Vailing Duty & Special Additional Duty) Entertainment Tax (other than those levied by local bodies) 5 Service Tax Luxury Tax 6 Surcharges &Cesses Entry Tax (All forms) 7 --------------------------- Taxes on lottery, betting & gambling 8 --------------------------- Surcharges & Cesses --------------------------- + 13 Cesses The GST Council –Constitution (Article 297A of the Constitution of India) Chairperson : Union Finance Minister Vice Chairperson: Selected from the Ministers of State Government Members: MOS (Finance) and all Ministers of Finance / Taxation of each State Quorum: 50% of total members Decision by: 75% majority Weightage: Centre- 1/3 State- 2/3 Recommendations by the council: on everything related to GST including laws, rules and rates etc.
Background of GST in India
GST is one of the most significant indirect tax reforms in our country inspired from by the success of 160 countries of the world. GST came a little late in India although the idea was mooted almost two decades back by the then Prime Minister Shri Atal Bihari Vajpayee. However, GST in India is quite unique because it is the only country except Canada to have a dual GST model. The timeline of its implementation is as follows:
Year
Event
2006-07
The then Union Finance Minister proposed the idea of GST in his budget speech. Also, 1st April, 2010 was decided to be its implementation date.
2009
The Empowered Committee (EC) comprising of Finance ministers from different states presented its First Discussion Paper (FDP) on the proposed GST regime. Hence, comments were invited from various stakeholders on the same.
2011
Introduction of the 115th amendment bill which eventually lapsed due to differences of opinion.
2014
Introduction of the 122nd amendment bill in the Lok Sabha.
2016
The GST council had its very first meeting
March, 2017
GST council proposed CGST, SGST, IGST, UGST and Compensation Cess Act for the very first time.
April, 2017
CGST, SGST, IGST, UGST and Compensation Cess Act were passed.
1st July, 2017
GST law was introduced all over India except for Jammu and Kashmir.
7th July, 2017
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