The new GST system has simplified taxation, enhancing taxpayer convenience and ensuring compliance.
Definition and Features of GST
The Union Government introduced the Goods and Services Tax to replace older indirect taxes, such as VAT, service taxes, and excise duty. Moreover, these reforms helped reduce the cascading effect of taxation and promote economic integration.
As per the Constitution (One Hundred and First Amendment) Act of 2016 and subsequent legislations, here is the vital GST information you need to know:
The current indirect tax regime came into effect on July 1, 2017
This taxation applies to the supply of goods and services by categorising them into different slabs: 5%, 12%, 18%, and 28%
Goods, like certain petroleum products, alcohol for human consumption, and tobacco, remain outside the purview of this system
To oversee and guide implementation, the Act notified the creation of a GST Council
The Council consists of the Union Finance Minister and members from state and union territories
There are three components of GST under the taxation laws: CGST, SGST/UTGST, and IGST
History of GST
In 2000, the then Prime Minister deployed the Kelkar Task Force on Indirect Taxes to design a model for the GST regime. While it was supposed to be implemented much earlier, various administrative and political roadblocks delayed its implementation.
Check out the following timeline to get historical information about GST implementation:
Year
Event
2006
The then Union Finance Minister scheduled the introduction of the Goods and Services Tax on April 01, 2010
2009
An Empowered Committee finalised its First Discussion Paper (FDP) on GST
2010
The Union Government postponed its introduction, citing structural and implementing hurdles
2011
The Central Government introduced the bill to the Constitution (115th Amendment) for its implementation, which subsequently lapsed after the dissolution of the 15th Lok Sabha
2014
The Central Government reintroduced GST legislation as the Constitution (122nd
Amendment) Bill in the Lok Sabha
2015
The Lok Sabha approved the Bill, but it was referred to a Select Committee of the Rajya Sabha and Lok Sabha; the select committee submitted its report in July 2015
2016
Rajya Sabha and Lok Sabha passed the amended bill, and it was notified as a Constitution (101st Amendment) Act after the President’s assent
2017
Lok Sabha and Rajya Sabha passed the CGST, UTGST, IGST, and GST (Compensation to States) Bills of 2017
After states passed the respective SGST Bills of 2017, the new regime came into effect on July 1, 2017
Objectives of GST
The Union Government introduced the reformed indirect taxation system to achieve the following goals:
Implementation of the Concept of ‘One Nation, One Tax’
With GST implementation, the government has tried to create a common market in India with a uniform taxation system. The government believes that this uniformity of taxes will eventually reduce the tax burdens.
Input Tax Credit (ITC)
This allows businesses to claim credit on the tax paid on inputs used in the provision or production of goods and services.
Introduction of Simpler Compliance Process
By introducing this system, the government sought to reduce the paperwork required for compliance and ease its tax administration process. Furthermore, it also aims to widen the tax base in India and increase revenue from indirect taxes.
Components of GST
The new indirect taxation broke down the system into three elements, which include the following:
Central GST: The Central Government levies and collects the CGST on the intra-state supply of goods
State/UT GST: While the SGST/UTGST also apply to the intra-state supply of goods, state governments levy and collect them
Integrated GST: The centre levies this type of GST in business, and you will have to pay it on inter-state supply or imports/exports of goods
New Compliances Under GST
The introduction of this reformed tax regime has brought several new systems, such as:
1. E-Way Bill
Suppliers generally issue these bills when they wish to send their goods to another state or union territory. These e-way bills are necessary for the commercial movement of goods valued over ₹50,000 across state borders.
2. E-Invoicing
e-invoicing means submitting a standard invoice, which has already been generated, on an e-invoice portal that is commonly used. It eliminates the requirement for manual data entry while filing the GSTR-1 and for the generation of Part A of e-way bills.
Tax Laws Before GST
Before GST, both state and central governments levied various taxes. The states mainly collected taxes in the form of Value Added Tax (VAT). Previously, every state had a different set of rules and regulations.
On the other hand, the centre taxed inter-state sale of goods in the form of Central State Tax (CST). Local bodies also levied taxes in the form of entertainment tax. The following is alist of some of the indirect taxes that were applicable in the pre-GST regime:
Central Excise Duty
Duties of Excise
Additional Duties of Excise
Additional Duties of Customs
Cess
State VAT
Central Sales Tax
Purchase Tax
Luxury Tax
Entertainment Tax
Entry Tax
Taxes on lotteries, betting, and gambling
Differences Between GST and the Indirect Tax Regime
Check the following table to learn about the distinctions between this new and older tax regime:
Parameters
GST Tax Structure
Old Indirect Tax Structure
Regulatory Law(s)
There is only one law to regulate GST, which is the GST Act of 2017.
Separate laws existed to regulate the various indirect taxes. VAT, meanwhile, was at the discretion of the states.
Tax Structure
The payable tax is made of two components, namely CGST and SGST
Half of the collected GST revenue goes to the state, while the other half goes to the Centre
Indirect taxes were a summation of multiple taxes, including VAT, CST, and Excise Duty, among others
Cascading Effect (Tax on Tax)
Reduces the cascading effect, making the regime very simple
High cascading effect of taxes
Tax Burden
The tax burden is usually lower
The tax burden used to be higher due to the cascading effect of taxes
It is an indirect tax applicable to a supply of goods and services in India. The government collects it from the ultimate point of consumption.
The full form of GST is Goods and Services Tax.
There are four types of GST, namely CGST, SGST, IGST, and UGST.
Both central and state governments collect IGST based on the prefixed revenues.
Yes, you can pay the GST bill through the GST portal.
You can compute your taxes based on the slab in which the relevant good or service falls. These slabs include the rate of 5%, 12%, 18%, and 28%.
