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 1. Liability to pay this tax is on one person and the
tax falls on the same person. burden of the tax falls on some other person.
2. Burden of this tax cannot be shifted to 2. Its burden can be shifted to others.
others.
3. Direct taxes are considered progressive 3. They are considered regressive because their
because they are based on personal burden is more on the poor than on the rich.
ability to pay.
4. Direct taxes are levied on the incomes and 4. Indirect taxes are levied on goods and services
property of persons. on their sale, production, imports and exports.
,5. Direct taxes are compulsory and cannot 5. This can be avoided by refraining from purchase
be escaped. of the goods whose price contains taxes.
6. Examples are – income tax, corporation 6. Example :GOODS & SERVICES TAX
tax, wealth tax, gift tax, etc.
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& Purchase Tax
Toilet Preparation Act
4 Additional duties of customs (Counter Entertainment Tax (other than those levied by
Vailing Duty & Special Additional Duty) 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 on everything related to GST
council: 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- The then Union Finance Minister proposed the idea of GST in his budget speech. Also,
07 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, GST council proposed CGST, SGST, IGST, UGST and Compensation Cess Act for the very
2017 first time.
April, CGST, SGST, IGST, UGST and Compensation Cess Act were passed.
2017
1st GST law was introduced all over India except for Jammu and Kashmir.
July,
2017
7th GST law passed and adopted by Jammu & Kashmir.
July,
2017
Why GST was implemented?
To replace the archaic tax structure that comprised of multiple taxes being levied at the
state and the central level.
Being implemented after 17 years of its conceptualisation, it aims to unify the market and
the economy of the country into a one whole unit. This is similar to the case of the
European Union where different countries take advantage of a common market.
In the age of technological advancement, GST is almost fully supported by IT and this thus
ensures movement towards a paper free and efficient tax structure. The Goods and Services
tax Network (GSTN) offers various services to the taxpayers like registration, payment of
tax, filing of returns, etc.
The problem of tax invasion has plagued our society since time immemorial so GST aims to
ensure better compliance through increased transparency.
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 1. Liability to pay this tax is on one person and the
tax falls on the same person. burden of the tax falls on some other person.
2. Burden of this tax cannot be shifted to 2. Its burden can be shifted to others.
others.
3. Direct taxes are considered progressive 3. They are considered regressive because their
because they are based on personal burden is more on the poor than on the rich.
ability to pay.
4. Direct taxes are levied on the incomes and 4. Indirect taxes are levied on goods and services
property of persons. on their sale, production, imports and exports.
,5. Direct taxes are compulsory and cannot 5. This can be avoided by refraining from purchase
be escaped. of the goods whose price contains taxes.
6. Examples are – income tax, corporation 6. Example :GOODS & SERVICES TAX
tax, wealth tax, gift tax, etc.
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& Purchase Tax
Toilet Preparation Act
4 Additional duties of customs (Counter Entertainment Tax (other than those levied by
Vailing Duty & Special Additional Duty) 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 on everything related to GST
council: 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- The then Union Finance Minister proposed the idea of GST in his budget speech. Also,
07 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, GST council proposed CGST, SGST, IGST, UGST and Compensation Cess Act for the very
2017 first time.
April, CGST, SGST, IGST, UGST and Compensation Cess Act were passed.
2017
1st GST law was introduced all over India except for Jammu and Kashmir.
July,
2017
7th GST law passed and adopted by Jammu & Kashmir.
July,
2017
Why GST was implemented?
To replace the archaic tax structure that comprised of multiple taxes being levied at the
state and the central level.
Being implemented after 17 years of its conceptualisation, it aims to unify the market and
the economy of the country into a one whole unit. This is similar to the case of the
European Union where different countries take advantage of a common market.
In the age of technological advancement, GST is almost fully supported by IT and this thus
ensures movement towards a paper free and efficient tax structure. The Goods and Services
tax Network (GSTN) offers various services to the taxpayers like registration, payment of
tax, filing of returns, etc.
The problem of tax invasion has plagued our society since time immemorial so GST aims to
ensure better compliance through increased transparency.
