Overview of GST:What is GST (Goods and Service Tax), Where & How it is applied?



Goods and service tax: The freedom of all indirect taxes

Indirect tax play a pivotal role in the national economy as the central and state indirect taxes cumulatively contribute to more than 50% of the total tax revenue. Indirect taxes are lived on consumption, expenditure, privileges, or right but not on income or property. The existing tax structure in India are central taxes (central excise duty, service tax, additional duty of excise, CVD) and state taxes (state VAT, central sales tax, purchase tax, entertainment tax). Both central taxes and state taxes are replaced (amalgamated) to form goods and service tax. Through the application of GST all the indirect taxes will come under one head.

The government of India has decided to implement GST from 1st July 2017. The constitution has amended to provide concurrent powers to both Centre and states to levy GST i.e. Centre to tax sale of goods, states to tax provision of service and integrated tax on inter-state trade or commerce ( including imports ) in goods and services. Goods and Service Tax will be applied either on supply of goods or on the supply of services. Taxes included should be part of the transaction chain which commences with import/ manufacture/ production of goods or provision of services at one end and the consumption of goods and services at the other.

While on the other hand supply of alcoholic liquor for human consumption and electricity are kept outside the preview of goods and service tax. Five petroleum products viz. petroleum crude, motor spirit (petrol), high speed diesel, natural gas and aviation turbine fuel have temporarily been kept out and GST Council shall decide the date from which they shall be included in GST. Tobacco and tobacco products would be subject to GST.

The central government will have the authority to levy excise duty in addition to GST on tobacco products. Slabs for goods and services decided by GST council are 0%, 5%, 12%, 18%, and 28%. Government has assured states for the compensation of the loss of revenue from the date of GST for the period of 5 years. Cess is charged over high rate i.e. 28% on specified luxury items and on goods like tobacco.

Also Read: Latest news and analysis on GST

The threshold exemption limit for GST is Rs. 20 lac i.e. those business houses whose annual turnover is more than Rs. 20 lac are eligible to pay goods and service tax. For some special category, the threshold limit is fixed at Rs.10 lac. GST act also has the features such as PAN based registration, all transaction through electronic mode, option of voluntary registration, credit available only if invoice is matched, automatic generation of returns, refund to be granted within 60 days, and most important anti-profiteering provision i.e. if the company does not transfer the benefit of tax to the customer then the company has to pay huge sum as penalty or the government can also cancel the registration. Some of the benefits of GST are overall reduction in prices in consumer goods, reduction in cascading effect of tax and double taxation, uniform rate of tax, free flow of goods and services, ease of doing business.


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