GST: B.Com Fourth Semester, Odisha Unit 1

The provided text is identical to the existing notes, so there are no updates to add. But I will reproduce the information.

Introduction to GST

• A review of the Goods and Services Tax (GST) for B.Com Fourth Semester students at Odisha, with a focus on Unit 1.
• GST represents an indirect tax that is imposed on goods and services.
• Before July 1, 2017, various taxes like service tax, VAT, CST, and excise duty were in effect.
• GST was implemented across India on July 1, 2017, to replace the previous multiple tax system.

Constitutional Provisions Regarding Taxation in India

• The Constitution of India underpins all tax laws, granting the government authority to impose direct and indirect taxes.
• Direct taxes apply to income, while indirect taxes relate to goods and services, including GST.
• The Constitution enables central, state, and local governments to levy taxes and allocate revenue for public expenditure.
• Taxation policy is designed to fund public services and minimize distortions in local industry, trade, and commerce.
• Taxes must be paid, and failure to comply may lead to legal consequences.

Taxation Structure Under the Constitution Post-GST

• The Central Government has the authority to impose income tax, Central Goods and Services Tax (CGST), Integrated Goods and Services Tax (IGST), and customs duty.
• State Governments have the power to impose State Goods and Services Tax (SGST) and excise duty on liquor and petroleum products not covered by GST.
• Union Territories can impose UTGST (Union Territory Goods and Services Tax).
• The previous excise duty system is still used for some products like alcoholic liquor, diesel, and crude oil, which are not subject to GST.

Power of Taxation Under the Constitution

• Section 246A, List 1 of the Seventh Schedule gives parliament the power to make laws, known as the Union List, for central governance.
• Section 246(3), List 2 of the 7th Schedule empowers state governments to enact state-level laws.
• A Concurrent List exists, granting both State and Central governments the power to legislate on certain matters.

Pre-GST Taxation Structure in India

• Before GST, multiple taxes existed, including Value Added Tax (VAT), service tax, Central Sales Tax (CST), excise duty, and octroi.
• The Central Government levied customs duties, Central Sales Tax (CST), and service tax.
• State Governments imposed VAT and excise duty.
• Local bodies charged octroi and entry tax.
• This system created complexities, difficulties in compliance, and double taxation.

Tax Structure in India Before GST

• Direct Taxes included income tax, wealth tax, corporate tax, estate duty, and others.
• Indirect Taxes:
  • Central Government collected customs, Central Sales Tax (CST), and service tax.
  • State Governments collected VAT and excise duty.
  • Local Bodies collected octroi and entry tax.
• The multiple indirect taxes led to various compliance issues and complexities for businesses.

What is GST?

• GST is a value-added tax applied to the supply of goods and services.
• GST offers a comprehensive chain of tax credits from the producer's level to the final consumer.
• Suppliers can claim credit for GST paid on their purchases.
• An example of A selling to B and then to C is provided to show how the credit system works.
• Output tax liability - Input tax credit = tax paid to the government.
• The final consumer ultimately bears the tax burden.
• The GST system eliminates the cascading effect (tax on tax).

Need for GST in India

• Before GST's adoption, some transactions faced double taxation.
• Input tax credit was not available after production.
• Setting off service tax with central sales tax was not possible.
• States had special taxes like entertainment and luxury tax.
• VAT on goods was not integrated with tax on services.
• Cascading nature of tax existed because CST was not Vatable.

Genesis of GST in India

• 2000: The concept of GST was introduced, and a committee was formed to design a GST model.
• 2006-07: The Union Finance Minister announced that GST would be introduced from April 1, 2010.
• 2014: The Constitution 122nd Amendment Bill was introduced in the Lok Sabha.
• 2016: The Constitution 101st Amendment Act was enacted.
• September 2016: The first GST Council meeting took place.
• March 2017: Recommendations were made on CGST, SGST, UTGST, & compensation cess.
• April 2017: All GST-related acts were passed in Parliament.
• May 2017: The GST Council recommended all the rules and regulations.
• June 30, 2017: All States except Jammu & Kashmir passed their SGST Act.
• July 1, 2017: GST was launched.
• July 8, 2017: Jammu & Kashmir passed the SGST Act.

Objectives of GST

• To create a Simplified Taxation System by consolidating various taxes into a single GST.
• To achieve Economic Integration by removing tax-related trade barriers.
• To achieve Elimination of Cascading Effect, thus removing the burden of tax on tax.
• Goal to broaden Tax Base by increasing the number of taxpayers.
• To promote Competitiveness by enabling fair competition between businesses.
• To promote Transparency and Accountability in the taxation system.
• To provide a Boost to Economic Growth by promoting economic development.
• Goal for a Uniform Tax Rate by applying consistent tax rates across the country.

Silent Features of GST and Scope of GST

• GST operates as a consumption-based tax, with the tax paid in the state where goods or services are consumed, also known as a destination-based tax.
• Concurrent Dual GST: CGST (Central GST) and SGST (State GST) are levied simultaneously on intrastate transactions.
• Components of GST include IGST, CGST, SGST, and UTGST.
• Legislative Framework of GST covers Inter-state and Intra-state Transactions.
• Rate of GST: Multiple rates exist, such as 5%, 12%, 18%, and 28%, and also 0% or 3%.
• Taxes to be Subsumed under GST Structure: Both Central and State Taxes.
• IGST is levied on the supply of goods and services across states for Inter-State Transactions.
• GST provides for a seamless flow of input tax credit as part of the Input Tax Credit Chain.
• Taxable Event in GST: The key taxable event is the supply of goods or services.
• Common Portal: GST is managed through a common electronic portal (www.gst.gov.in).
• Features include a Seamless Flow of Credit, Electronic Returns, and Wide range of payments accepted for tax payments.
• TDS and TCS are applicable for government contracts.
• Self-assessment of taxes is expected by each registered person.
• Anti-Profiteering Authority exists to investigate businesses exploiting consumers.
• GST composition exists for businesses with turnover under 1.5 crore.
• Classification of Goods and Services by Harmonized System Nomenclature (HSN).

Center and State Financial Relation

• Concurrent Power Amendment: Applicable to both Central and State governments.
• Amedment for Exclusive Power of Central Government for IGST
• Amendment for Residuum of Central Government
• Duty Divided by Union and Collected by State
• Apportionment of IGST between Union and State

Center and State Taxes to be Subsumed in GST

• Central Taxes to be Subsumed:
  • Central Excise Duty
  • Additional Excise Duty
  • Central Sales Tax (CST)
  • Service Tax
  • Additional Customs Duty
  • Special Additional Duty of Customs
• State Taxes to be Subsumed:
  • State VAT
  • Sales Tax
  • Entertainment Tax
  • Luxury Tax
  • Taxes on lottery, betting, and gambling
  • State cesses and surcharges
  • Octroi and Entry Tax
  • Purchase Tax

Principles of Subsuming Tax Under GST in India

• The tax should be in the nature of an indirect tax.
• The tax should be a part of the transaction chain.
• There must be a free flow of credit in inter and intra State transactions.
• The collected amounts from taxes need to be fairly distributed between members.

Events That Have Led to Introduction of GST in India

• The Constitution was amended to provide the necessary powers for implementation.
• GST statutes were formed and passed.
• A GST Council was formed to make decisions.
• The role of the Central Board of Excise and Customs (CBEC) was redefined.
• An IT framework was developed.

Dual GST

• The concept is that both Central and State governments levy GST which is key to balancing the tax collection scheme.
• This allows each party to collect what is due.

Benefits of GST

• Boost to the Make in India Initiative through simplification that makes it easier to do business in India.
• Elimination of Multiple Taxes and Double Taxation reduces the tax burden.
• Creation of Unified National Market creates a single market across the country.
• Mitigation of Ill Effects of Cascading, which eliminates tax on tax.
• GST has widened the tax base and improved government revenue.
• Easier to trade throughout the country with a seamless flow of tax credits and easier to follow compliances.
• It Reduces tax fraud and simplifies and automates procedures.
• Benefits for Businesses and Industry: Reduced Compliance + Easier trading due to reduced bottlenecks
• Benefits for Consumers with a Reduction in Prices
• Harmonizes levies
• All of above is supported by a robust technology via the GSTN network