GOODS AND SERVICES TAX (GST)

GST
One Nation , One Tax
 GOODS AND SERVICE TAX

Goods and Services Tax (GST) is a

single tax rate levied on the manufacture,
sale and consumpti on of goods and services
at a nati onal level.In this system, GST is
levied only on the value-added at every
stage of producti on. This will ensure that
there is no cascading eff ect of taxes
(tax on tax paid) on inputs that are used
in manufacturing of goods.
 WHY INDIA NEED GST?

1. Currently, there are multiple indirect taxes Central taxes such as excise duty,
service tax and countervailing duty, and State taxes, such as VAT, entertainment tax and
luxury tax. This results in high tax rates. Accordingly, GST seeks to eliminate multiplicity
of taxes, rates, exemptions and such exceptions to achieve uniformity of taxes across the
country. Further, it would provide greater certainty and transparency of taxes.
2.Because of above transparency, Taxation would increase and lead to reduced tax
evasion.

3.It would also reduce cascading effect(tax on tax) up to much extent.

COMPONENTS OF GST
 HOW IS GST DIFFERENT FROM
CURRENT SYSTEM?
Previous GST
Nature of ACombinationofvalueaddedtax(VAT) Taxincidenceatthepointofsale
Regime whichisadestination-basedtaxandorigin-
basedtaxessuchasexcisedutiesetc.

Tax Base Goods&Servicesaretaxedseparately, Comprehensivebaseofgoods&

subjecttosomeexemptions servicesincluded

Multiplicity Multipletaxrates Singletaxrate

of tax rates

Tax Incompletesetoffmechanismfortaxpaidin Completeset-offshouldbe

Cascading thesupplychain(e.g.nosetoffavailablefor availableintheentirechainof
VATagainstservicetaxorexciseduty) productionanddistributionto
eliminatetaxcascadingeffect
 Most countries have a
unifi ed GST system.
However, India has opted
for a dual GST system
What is the GST
prevalent in Brazil and

model India Canada. Under this model,

both the Centre and states
plans to adopt? have the right to levy and
collect tax on the sale of
goods and services.
 Central GST
FRAMEWORK(MODEL) OF GST (CGST)
No Excise
India will have Concurrent Dual G ST comprising of Centra l
No
G ST and Sta te G ST levied on the same base. Service
G ST rate= CG ST rate + SG ST rate Tax
No Cess,
Total tax collected in G ST will be distributed to centre and
s tate as per CG ST , SG ST r ate
Surcharg
Central G ST( or C GST) would be administered by Central es, etc.
G ovt.
State G ST(or SG ST ) would be administered by State G ovt.
State GST
Integrated G ST (or IG ST) administered by centr al Govt. on
(SGST)
inter s tate transfer of goods and services.
In this model, all the goods and services w ould be subject No VAT
to concur rent taxation by the sta te and the centre. No Cess,
For exa mple, if a product have levy at base price of R s. Surcharg
100 00 and rate of G ST are 8% , CG ST is 3% and SGST is es, entry
5% ,then tax collected durin g transaction is 8 00 , 300 taxes,
goes to centr al govt as CG ST tax , 50 0 goes to the state etc.
govt. as SG ST tax.
W H I C H C E N T R A L T A X ES W I L L B E S U B S U M E D ? ? ONLY CGST

1) Custom Duty

2) Tobacco Products

3) Petroleum Products- so far no butmaybe yes

4) Central Excise Duty

5) Central Sales Tax

6) Service Tax

7) Counter-Veiling Duty on Imported goods

8) Cess, Surcharges
 WHICH STATE TAXES WILL BE ONLY SGST

SUBSUMED??
1) Excise On Liquor For Human Consumption

2) Stamp Duty On Immovable Properties

3) Electricity Duty

4) Petroleum Products
5) State VAT

6) Luxury Tax, Entertainment Tax,Purchase tax

7) Entry Tax

8) Lottery , Betting , Gambling

 IGST just a
INTEGRATED GST (IGST) mechanism
not a Tax

IGST model would be adopted for inter-state

transaction of goods and services.
Centre would levy IGST where IGST = CGST +
SGST
The revenue collected from IGST will be
distributed among the state and the centre as
per SGST and CGST rate.
Input Tax Credit system would be followed.
SGST is credited to the importing state as
against the exporting state (in present
system).
 GST IMPLEMENTATION
CHALLENGES
Robust IT (Information technology) Network:
Success of GST depends on robust IT network connecting
central govt., every state govt. , all Banks, public/private
companies, manufacturers, dealers etc.
Centre has already Incorporated an SPV- GSTN. But real
challenge is in some of the states which lack IT
infrastructure.
A very large database needed for registrations, tax return
filing, IGST, CGST, SGST settlements all over the country.

Extensive Training to tax administration staff for better GST

implementation.

Dispute Settlement Authority: Decision making problems in GST

council due to the democratic structure of the council. So, an
independent authority must be set up to settle disputes between
Centre and States.