GST is the single indirect tax on supply of goods and services. It is a destination based tax which will be levied at all stages, from manufacturer to consumer with credit of taxes paid at previous stages available as set off. The final consumer will have to bear the GST which is charged by the last dealer before the final consumer.
Integrated Goods and service tax (IGST) shall be levied and collected by the central government on all inter-state transactions, Import or export of goods or services or both.
GST has two components - CGST and SGST. The Central Goods & Service Tax (CGST) shall be levied and collected by the central government whereas the State Goods & Service Tax (SGST) It shall be levied on the intrastate supply of Goods & Services.
The GST would replace the following taxes:
At the Central Level
- Central Excise duty
- Duties of Excise (Medicinal and Toilet Preparations)
- Additional Duties of Excise (Goods of Special Importance)
- Additional Duties of Excise (Textiles and Textile Products)
- Additional Duties of Customs (commonly known as CVD)
- Special Additional Duty of Customs (SAD)
- Service Tax
- Central Surcharges and Cesses which relate to supply of goods and services
At the State Level
- State VAT
- Central Sales Tax
- Luxury Tax
- Entry Tax (all forms)
- Entertainment and Amusement Tax (except when levied by the local bodies)
- Taxes on advertisements
- Purchase Tax
- Taxes on lotteries, betting and gambling
- State Surcharges and Cesses which relate to supply of goods and services
Five petroleum products namely petroleum crude, motor spirit (petrol), high speed diesel, natural gas and aviation turbine fuel have been temporarily kept outside the purview of GST.
As per the definition of GST in constitution, supply of alcoholic liquor for human consumption will continue with existing taxation system. Furthermore, GST will not be applicable for Electricity. The existing taxation system (VAT & Central Excise) will continue in respect of the above commodities.
The threshold limit of aggregate turnover of Rs. 20 lakhs has been prescribed for State & UT while Rs. 10 lakhs has been prescribed for NE and special category of states. However, in certain specified cases the taxable person is liable to pay GST even though he has not crossed the threshold limit.
How a particular transaction of goods and services would be taxed simultaneously under Central GST (CGST) and State GST (SGST)?
Except the exempted goods and services, goods which are outside the purview of GST and the transactions which are below the prescribed threshold limits, the CGST and the SGST would be levied simultaneously on every transaction of supply of goods and services. CGST and SGST would be levied on the same price or value unlike State VAT which is levied on the value of the goods inclusive of CENVAT.
GST is a destination based tax. The SGST on the final product will accrue to the consuming state.
HSN (Harmonised System of Nomenclature) code shall be used for classifying the goods under the GST regime. Taxpayers having turnover below Rs. 1.5 crores are not required to mention HSN Code in their invoices. Taxpayers having turnover above Rs. 1.5 crores but below Rs. 5 crores shall use 2-digit code and the taxpayers having turnover above Rs. 5 crores shall use 4-digit code. The services will be classified as per the Services Accounting Code (SAC)
Imports of Goods and Services will be treated as inter-state supplies and IGST will be levied on import of goods and services into the country. It will follow the destination principle and the tax revenue in case of SGST will accrue to the State where the imported goods and services are consumed. Complete set-off will be available on the GST paid on import on goods and services.
Exports will be treated as zero rated supplies. No tax will be payable on exports of goods or services. Input tax credit will be available as a refund to the exporters. The Exporter will have an option to either pay tax on the output and claim refund of IGST or export under Bond without payment of IGST and claim refund of Input Tax Credit (ITC).