Overview of GST

Introduction

Overview of GST The Goods and Services Tax (GST) is an important change in India’s tax system. It started on July 1, 2017, and replaced many different taxes like Value Added Tax (VAT) and Service Tax with one simple tax. This new system aims to reduce tax cheating, expand the number of taxpayers, and make taxes easier to understand for businesses and the government. By combining several taxes into one, GST has changed how taxes are collected, making it clearer and better for businesses. Overall, GST is a key part of India’s economy that affects businesses, consumers, and the whole country

 

History of GST

The idea of a Goods and Services Tax (GST) in India started sixteen years ago when Atal Bihari Vajpayee was Prime Minister. On February 28, 2006, the Finance Minister suggested that GST would begin on April 1, 2010. A group of State Finance Ministers was asked to create a plan for GST. Teams of officials from both the States and the Central Government were formed to look at different parts of GST and report on things like exemptions, thresholds, services tax, and cross-State sales tax. After discussions, the group released its first paper on GST in November 2009, outlining the main features of the proposed GST, which became the basis for the current GST laws and rules.
In March 2011, a bill to add the Goods and Services Tax (GST) to the Constitution was introduced in the Lok Sabha. But because the political parties could not agree, the bill ended when the 15th Lok Sabha was dissolved in August 2013.
On December 19, 2014, the Constitution (122nd Amendment) Bill 2014 was introduced in the Lok Sabha and passed in May 2015. It was then taken to the Rajya Sabha and sent to a Joint Committee on May 14, 2015. The committee gave its report on July 22, 2015. The Constitutional Amendment Bill was brought up again on August 1, 2016, with support from different political groups. The Rajya Sabha passed the Bill on August 3, 2016, and the Lok Sabha passed it on August 8, 2016. After approval from enough State legislatures and the President, the amendment became the Constitution (101st Amendment) Act 2016 on September 8, 2016. This amendment allowed for the introduction of the Goods and Services Tax in India.
After the GST Council approved several tax bills, including the Central Goods and Services Tax Bill and the Integrated Goods and Services Tax Bill, the Lok Sabha passed them on March 29, 2017. The Rajya Sabha approved them on April 6, 2017, and they became laws on April 12, 2017.
After that, the State Legislatures in different states passed their own State Goods and Services Tax Bills. Various GST laws were put in place, and GST started on July 1, 2017.

The GST would replace the following taxes:

When it was put into use, the GST took the place of these central taxes:
• Service tax
• Duties of excise
• Central excise duties
• Cess and surcharge
• Additional duties of excise
• Additional duties of customs
• Additional duty of customs

GST services also included these state taxes:
• Entry tax
• Purchase tax
• Luxury tax
• State VAT
• Central sales tax
• Entertainment tax
• Taxes on advertisements
• State cess and surcharges
• Taxes on gambling and lottery

Taxpayers with yearly sales of up to Rs. 20 lakh can avoid paying the Goods and Services Tax. For special category states, this limit is Rs. 10 lakh. The GST law also allows the choice of a simpler tax option and an exemption limit.

Types of GST in India
There are Four Types of GST in India
1. Integrated Goods and Services Tax (IGST)
2. State Goods and Services Tax (SGST)
3.Central Goods and Services Tax (CGST)
4. Union Territory Goods and Services Tax (UTGST).
The government has set different tax rates for each type, which will apply to the taxes on goods and services.

1.Integrated Goods and Services Tax or IGST
   1. The Integrated Goods and Services Tax (IGST) is a tax that applies to the sale of goods and services between different states and on imports and exports.
2. The IGST is controlled by the IGST Act. The Central Government collects the IGST, and then shares it with the states.
For example, if a seller from West Bengal sells goods worth Rs.5,000 to a buyer in Karnataka, IGST will apply because this is an interstate sale.
If the GST on the goods is 18%, the seller will charge Rs. 5,900 for them. The IGST collected is Rs. 900, which will go to the Central Government.

2. State Goods and Services Tax or SGST
SGST, or State Goods and Services Tax, is a tax that applies to sales and services within the same state. When goods or services are sold inside a state, both State GST and Central GST are charged. The state collects SGST on these sales, and it follows the SGST Act. The money collected from SGST goes only to the state government.
For example,If a seller from West Bengal sells items to a customer in West Bengal for Rs.5,000, the GST on this sale will be split into two parts: CGST and SGST. If the GST rate is 18%, it will be 9% for CGST and 9% for SGST. So, the total amount the seller will charge is Rs.5,900. From the SGST amount of Rs.450, that money will go to the West Bengal state government.

3. Central Goods and Services Tax or CGST
The Central Goods and Services Tax (CGST) is a tax that applies to sales within the same state, similar to State GST. The CGST is managed by the CGST Act, and the money collected from CGST goes to the Central Government.
If a seller in West Bengal sells goods worth Rs.5,000 to a customer in West Bengal, they will charge GST, which is split into CGST and SGST. If the GST rate is 18%, it will be 9% for CGST and 9% for SGST. The total amount the seller will charge is Rs.5,900. The Central Government will receive Rs.450 from the CGST.

4. Union Territory Goods and Services Tax or UTGST
The Union Territory Goods and Services Tax (UTGST) is like the State Goods and Services Tax (SGST) but is used in the Union Territories (UTs) of India. The UTGST applies to goods and services in places like Andaman and Nicobar Islands, Chandigarh, Daman Diu, Dadra and Nagar Haveli, and Lakshadweep. It is based on the UTGST Act. The money collected from UTGST goes to the Union Territory government. The UTGST is used instead of SGST in these areas and is added to the Central Goods and Services Tax (CGST).

Constitutional basis For Gst
The Constitution (101st Amendment) Act, 2016

This Act made changes to the Constitution to help put the GST law into action. Here are the main points that were addressed:

– How power to collect and create laws about GST is shared.
– How the GST law applies and its reach.
– How revenue from GST is divided between the Central and State governments.
– The setup, powers, and responsibilities of the GST Council.
– Ending old taxes to allow for GST.

Article 246A: Special Rules for GST 
This Article was added to allow the Parliament and State/Union Legislatures to create laws about GST. However, only the Parliament can make laws for goods and services that are sold between states. The IGST Act handles these state-to-state sales, so the Parliament has the sole authority to create laws under this Act. Additionally, this article keeps certain products out of GST until a date suggested by the GST Council.

Petroleum Crude
High-Speed Diesel
Motor Spirit
Natural Gas
Aviation Turbine Fuel

Article 269A: Collecting GST for Goods and Services Between States

Article 246A gives the Parliament the power to make laws about trade between states. Article 269A explains how money from these trades is shared between the Central and State governments. It allows the GST Council to create rules for this. When goods or services are brought in from other places, it is also called inter-state supply. This means the Central Government can charge IGST on these imports. Before, imported goods had a different tax called Countervailing Duty (CVD). Now, the IGST tax lets businesses get credit for the tax they paid on imports, which wasn’t possible before.

Article 279A: GST Council 
This Article allows the President to set up a group called the GST Council, which includes both the central and state governments. The GST Council is a top committee that can change or adjust laws related to the Goods and Services Tax in India.

Article 286: Limits on Taxes

This article stopped states from making laws that let them collect taxes on buying or selling goods outside their state or on imports. It was changed to also stop laws about services. The word ‘supply’ is now used instead of ‘sale or purchase’.

Article 366: New Definitions Added
Article 366 was changed to include these definitions:
Goods and Services Tax (GST) is the tax on selling goods, services, or both. It is important to remember that GST does not apply to the sale of alcohol for drinking.
Services are anything that is not goods.
State also means Union Territory with its own laws.
Compensation to States Under GST
This law includes a way to help states make up for the money they lose because of GST. It will last for five years. The Goods and Services Tax (Compensation to States) Act, 2017 was created because of this.

Seventh Schedule
The Seventh Schedule in Article 246 has three lists that show what the Union and State Governments can make laws about.

List – I: Union List
This list includes topics that only the Central Government can make laws about.

List – II: State List
This list includes topics that only State Governments can make laws about.

List – III: Concurrent List
This list includes topics that both the Central and State Governments can make laws about. Changes were made to this list to allow the Central Government to collect excise duty on five petroleum products: petroleum crude, high-speed diesel, motor spirit, natural gas, and aviation turbine fuel. The Central Government also collects excise duty on tobacco and tobacco products, so these items are taxed both by excise duty and GST. States were also given the power to tax the five petroleum products. The entertainment tax was mostly removed, except where local bodies still charge it.

Conclusion
The Goods and Services Tax (GST) in India is a transformative tax reform that has unified the country’s indirect tax structure. From its historical roots to its current implementation, GST has brought about significant changes. The Constitution (101st Amendment) Act, 2016 laid the foundation for GST, enabling the introduction of Central GST (CGST), State GST (SGST), and Integrated GST (IGST). These types of GST work together to create a seamless and efficient tax system. With its implementation, GST has simplified tax compliance, reduced tax cascading, and promoted economic growth. As India continues to refine its GST framework, it is poised to reap the benefits of a more streamlined and business-friendly tax environment.

Reference

1.https://www.bajajfinserv.in/gst#:~:text=GST%20(Goods%20and%20Services%20Tax)%20is%20a%20unified%20tax%20system,and%20simplifies%20the%20tax%20system.

2.https://www.gst.gov.in/about/gst/history

3.https://cleartax.in/s/constitution-amendment-gst

4.https://www.bankbazaar.com/tax/types-of-gst.html