GST GOODS SERVICE TAX

GST GOODS SERVICE TAX

GST 

WHAT IS GST

Goods and Service Tax

Goods and Services Tax (GST) is an indirect taxation in India merging most of the existing taxes into single system of taxation, Introduction of Goods and Services Tax (GST) is a significant step in the reform of indirect taxation in India.

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Features of GST

1. GST would be applicable on “supply” of goods or services as against the present concept of tax on the manufacture of goods or on sale of goods or on provision of services.

2. GST would be based on the principle of destination based consumption taxation as against the present principle of origin based taxation.

3. It would be a dual GST with the Centre and the States simultaneously levying it on a common base. The GST to be levied by the Centre would be called Central GST (CGST) and that to be levied by the States would be called State GST (SGST).

4. An Integrated GST (IGST) would be levied on inter-State supply (including stock transfers) of goods or services. This would be collected by the Centre so that the credit chain is not disrupted.

5. Import of goods or services would be treated as inter-State supplies and would be subject to IGST in addition to the applicable customs duties.

6. CGST, SGST & IGST would be levied at rates to be mutually agreed upon by the Centre and the States under the aegis of the GST Council (GSTC).

Presently, Central Government is empowered to levy excise duty on manufacturing and service tax on the supply of services. Further, State Governments has the power to levy sales tax or value added tax (VAT) on the sale of goods and various other taxes/duties as been empowered under the constitution.

GST and Centre-State Financial Relations

Currently, fiscal powers between the Centre and the States are clearly demarcated in the Constitution with almost no overlap between the respective For Departmental Officers only Page 4of 8 domains. The Centre has the powers to levy tax on the manufacture of goods (except alcoholic liquor for human consumption, opium, narcotics etc.) while the States have the powers to levy tax on sale of goods. In case of inter-State sales, the Centre has the power to levy a tax (the Central Sales Tax) but, the tax is collected and retained entirely by the originating States. As for services, it is the Centre alone that is empowered to levy service tax. Since the States are not empowered to levy any tax on the sale or purchase of goods in the course of their importation into or exportation from India, the Centre levies and collects this tax as additional duties of customs, which is in addition to the Basic Customs Duty. This additional duty of customs (commonly known as CVD and SAD) counterbalances excise duties, sales tax, State VAT and other taxes levied on the like domestic product. Introduction of the GST would require amendments in the Constitution so as to concurrently empower the Centre and the States to levy and collect the GST.

The assignment of concurrent jurisdiction to the Centre and the States for the levy of GST would require a unique institutional mechanism that would ensure that decisions about the structure, design and operation of GST are taken jointly by the two. For it to be effective, such a mechanism also needs to have Constitutional force.