2017620 AnoverviewofGST

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PressInformationBureau
GovernmentofIndia
MinistryofFinance
25April201715:19IST
AnoverviewofGST

GOODSANDSERVICESTAXANOVERVIEW

CENTRALBOARDOFEXCISE&CUSTOMS

GOODSANDSERVICESTAX(GST)

1.Benefits:
1.GSTisawinwinsituationfortheentirecountry.Itbringsbenefitstoallthestakeholdersofindustry,governmentand
theconsumer.Itwilllowerthecostofgoodsandservices,giveaboosttotheeconomyandmaketheproductsand
servicesgloballycompetitive.GSTaimstomakeIndiaacommonmarketwithcommontaxratesandproceduresand
remove the economic barriers thus paving the way for an integrated economy at the national level. By subsuming
mostoftheCentralandStatetaxesintoasingletaxandbyallowingasetoffofpriorstagetaxesforthetransactions
across the entire value chain, it would mitigate the ill effects of cascading, improve competitiveness and improve
liquidityofthebusinesses.GSTisadestinationbasedtax.Itfollowsamultistagecollectionmechanism.Inthis,tax
iscollectedateverystageandthecreditoftaxpaidatthepreviousstageisavailableasasetoffatthenextstageof
transaction.Thisshiftsthetaxincidenceneartotheconsumerandbenefitstheindustrythroughbettercashflowsand
betterworkingcapitalmanagement.

2.GSTislargelytechnologydriven.Itwillreducethehumaninterfacetoagreatextentandthiswouldleadtospeedy
decisions.

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3.GST will give a major boost to the Make in India initiative of the Government of India by making goods and
servicesproducedinIndiacompetitiveintheNationalaswellasInternationalmarket.Alsoallimportedgoodswillbe
chargedintegratedtax(IGST)whichisequivalenttoCentralGST+StateGST.Thiswillbringequalitywithtaxation
onlocalproducts.

4.UndertheGSTregime,exportswillbezeroratedinentiretyunlikethepresentsystemwhererefundofsometaxes
may not take place due to fragmented nature of indirect taxes between the Centre and the States. This will boost
Indianexportsintheinternationalmarketthusimprovingthebalanceofpaymentsposition.Exporterswithcleantrack
record will be rewarded by getting immediate refund of 90% of their claims arising on account of exports, within
sevendays.

5.GSTisexpectedtobringbuoyancytotheGovernmentRevenuebywideningthetaxbaseandimprovingthetaxpayer
compliance.GSTislikelyimproveIndiasrankingintheEaseofDoingBusinessIndexandisestimatedtoincrease
theGDPgrowthby1.5to2%.

6.GSTwillbringmoretransparencytoindirecttaxlaws.Sincethewholesupplychainwillbetaxedateverystagewith
creditoftaxespaidatthepreviousstagebeingavailableforsetoffatthenextstageofsupply,theeconomicsandtax
valueofsupplieswillbeeasilydistinguishable.Thiswillhelptheindustrytotakecreditandthegovernmenttoverify
thecorrectnessoftaxespaidandtheconsumertoknowtheexactamountoftaxespaid.

7.Thetaxpayerswouldnotberequiredtomaintainrecordsandshowcompliancewithamyriadofindirecttaxlawsof
theCentralGovernmentandtheStateGovernmentslikeCentralExcise,ServiceTax,VAT,CentralSalesTax,Octroi,
EntryTax,LuxuryTax,EntertainmentTax,etc.Theywouldonlyneedtomaintainrecordsandshowcompliancein
respect of Central Goods and Services Tax Act and State (or Union Territory) Goods and Services Tax Act for all
intraStatesupplies(whicharealmostidenticallaws)andwithIntegratedGoodsandServicesTaxforallinterState
supplies(whichalsohasmostofitsbasicfeaturesderivedfromtheCGSTandtheSGSTAct).

2.SalientFeaturesofGST
ThesalientfeaturesofGSTareasunder:

(i) TheGSTwouldbeapplicable on the supply of goods or servicesasagainstthepresentconceptoftaxonthe

manufacture or sale of goods or provision of services. It would be a destination based consumption tax. This
meansthattaxwouldaccruetotheStateortheUnionTerritorywheretheconsumptiontakesplace.Itwouldbea
dualGSTwiththeCentreandStatessimultaneouslylevyingtaxonacommontaxbase.TheGSTtobeleviedbythe
CentreonintraStatesupplyofgoodsorserviceswouldbecalledtheCentraltax(CGST)andthattobeleviedbythe
StatesincludingUnionterritorieswithlegislature/UnionTerritorieswithoutlegislaturewouldbecalledtheStatetax
(SGST)/Unionterritorytax(UTGST)respectively.

(ii)TheGSTwouldapplytoallgoodsotherthanalcoholicliquorforhumanconsumptionandfivepetroleumproducts,
viz.petroleumcrude,motorspirit(petrol),highspeeddiesel,naturalgasandaviationturbinefuel.Itwouldapplyto
allservicesbarringafewtobespecified.TheGSTwouldreplacethefollowingtaxescurrentlyleviedandcollected
bytheCentre:

a.CentralExciseDuty

b.DutiesofExcise(MedicinalandToiletPreparations)

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c.AdditionalDutiesofExcise(GoodsofSpecialImportance)

d.AdditionalDutiesofExcise(TextilesandTextileProducts)

e.AdditionalDutiesofCustoms(commonlyknownasCVD)

f.SpecialAdditionalDutyofCustoms(SAD)

g.ServiceTax

h.CentralSurchargesandCessessofarastheyrelatetosupplyofgoodsandservices

(iii)StatetaxesthatwouldbesubsumedundertheGSTare:

a.StateVAT

b.CentralSalesTax

c.LuxuryTax

d.EntryTax(allforms)

e.EntertainmentandAmusementTax(exceptwhenleviedbythelocalbodies)

f.Taxesonadvertisements

g.PurchaseTax

h.Taxesonlotteries,bettingandgambling

i.StateSurchargesandCessessofarastheyrelatetosupplyofgoodsandservices

(iv)ThelistofexemptedgoodsandserviceswouldbecommonfortheCentreandtheStates.

(v)ThresholdExemption:TaxpayerswithanaggregateturnoverinafinancialyearuptoRs.20lakhswouldbeexempt
fromtax.AggregateturnovershallbecomputedonallIndiabasis.ForelevenSpecialCategoryStates,likethosein
the NorthEast and the hilly States, the exemption threshold shall be Rest. 10 lakhs. All taxpayers eligible for
thresholdexemptionwillhavetheoptionofpayingtaxwithinputtaxcredit(ITC)benefits.Taxpayersmakinginter
Statesuppliesorpayingtaxonreversechargebasisshallnotbeeligibleforthresholdexemption.

(vi) Compositionlevy:SmalltaxpayerswithanaggregateturnoverinafinancialyearuptoRest.50lakhsshallbe
eligibleforcompositionlevy.Underthescheme,ataxpayershallpaytaxasapercentageofhisturnoverduringthe
yearwithoutthebenefitofITC.TherateoftaxforCGSTandSGST/UTGSTeachshallnotexceed

2.5%incaseofrestaurantsetc

1%oftheturnoverinastate/UTincaseofamanufacturer

0.5%oftheturnoverinstate/UTincaseofothersuppliers.

Ataxpayeroptingforcompositionlevyshallnotcollectanytaxfromhiscustomersnorshallhebeentitledtoclaim
anyinputtaxcredit.Thecompositionschemeisoptional.TaxpayersmakinginterStatesuppliesshallnotbeeligible
forcompositionscheme.Thegovernment,may,ontherecommendationofGSTCouncil,increasethethresholdfor
theschemetouptorupeesonecrore.
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(vii)AnIntegratedtax(IGST)wouldbeleviedandcollectedbytheCentreoninterStatesupplyofgoodsandservices.
AccountswouldbesettledperiodicallybetweentheCentreandtheStatestoensurethattheSGST/UTGSTportionof
IGSTistransferredtothedestinationStatewherethegoodsorservicesareeventuallyconsumed.

(viii) UseofInputTaxCredit:Taxpayersshallbeallowedtotakecreditoftaxespaidoninputs(inputtaxcredit)and
utilize the same for payment of output tax. However, no input tax credit on account of CGST shall be utilized
towardspaymentofSGST/UTGSTandviceversa.ThecreditofIGSTwouldbepermittedtobeutilizedforpayment
ofIGST,CGSTandSGST/UTGSTinthatorder.

(ix)HSN(HarmonisedSystemofNomenclature)codeshallbeusedforclassifyingthegoodsundertheGSTregime.
Taxpayers whose turnover is above Rs. 1.5 crore but below Rs. 5 crore shall use 2digit code and the taxpayers
whoseturnoverisRs.5croreandaboveshalluse4digitcode.TaxpayerswhoseturnoverisbelowRs.1.5croreare
notrequiredtomentionHSNCodeintheirinvoices.

(x)ExportsandsuppliestoSEZshallbetreatedaszeroratedsupplies.Theexportershallhaveanoptiontoeitherpay
outputtaxandclaimitsrefundorexportunderbondwithouttaxandclaimrefundofInputTaxCredit.

(xi)ImportofgoodsandserviceswouldbetreatedasinterStatesuppliesandwouldbesubjecttoIGSTinadditionto
theapplicablecustomsduties.TheIGSTpaidshallbeavailableasITCforfurthertransactions.

3.GSTCouncil
ThemechanismofGSTCouncilwouldensureharmonizationondifferentaspectsofGSTbetweentheCentreandtheStates
aswellasamongStates.IthasbeenspecificallyprovidedthattheGSTCouncil,initsdischargeofvariousfunctions,shall
be guided by the need for a harmonized structure of GST and for the development of a harmonized national market for
goodsandservices.TheGSTCouncilshallestablishamechanismtoadjudicatedisputesarisingoutofitsrecommendation
orimplementationthereof.

4.MinimalInterface

The physical interface between the taxpayer and the tax authorities would be minimal under GST. Certain important
provisionsinthisregardareillustratedasunder:

a)TherewillbecrossempowermentofofficersbelongingtoCentralandStateGovernments.OfficerofCGSTwillbe
empoweredtoactasproperofficerofSGSTandviceversa.
b)Registrationwillbegrantedonlineandshallbedeemedtohavebeengrantedifnodeficiencyiscommunicatedto
theapplicantwithin3commonworkingdaysbythetaxadministrationwhichhasbeenallottedtheexaminationof
the application. Such allotment is to be done one each alternately between the Central and the State Tax
administration.
c) Taxable person shall himself assess the taxes payable (selfassessment) and credit it to the account of the
Government.Thereturnfiledbythetaxpayerwouldbetreatedasselfassessed.
d) Paymentoftaxshallbemadeelectronicallythroughinternetbanking,oralsothroughcreditcardandthroughthe
modes of Real Time Gross Settlement (RTGS) or National Electronic Funds Transfer (NEFT). Smaller taxpayers
shallbeallowedtopaytaxoverthebankcounter.Allchallansforpaymentoftaxshallbegeneratedonlineonthe
GoodsandServicesTaxNetwork(GSTN).
e)Thetaxpayershallfurnishthedetailsofoutwardsupplieselectronicallywithoutanyphysicalinterfacewiththetax
authorities.Inwardsupplydetailswouldbeautodraftedfromthesupplydetailsfiledbythecorrespondingsuppliers.
f) Taxpayersshallfile,electronically,monthlyreturnsofoutwardandinwardsupplies,ITCavailed,taxpayable,tax
paid and other prescribed particulars. Composition taxpayers shall file, electronically, quarterly returns.
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Omission/incorrectparticularscanbeselfrectifiedbeforethelastdateoffilingofreturnforthemonthofSeptember
ofthefollowingyearortheactualdateoffilingofannualreturn,whicheverisearlier.
g) Formismatchedinvoices,reversalandreclaimofinputtaxcreditshallbedoneelectronicallyontheGSTNportal
withoutanytaxpayercontact.Thiselectronicsystemwouldalsoprevent,interalia,inputtaxcreditbeingtakenon
thebasisoffakeinvoicesortwiceonthesameinvoice.
h)Taxpayersshallbeallowedtokeepandmaintainaccountsandotherrecordsinelectronicform.

5.Inputtaxcredit
Taxpayerisallowedtotakecreditoftaxespaidoninputs(inputtaxcredit),asselfassessed,inhisreturn.Taxpayercantake
creditoftaxespaidonallgoodsandservices,otherthanafewitemsinthenegativelist,andutilizethesameforpaymentof
outputtax.Creditoftaxespaidoninputscanbetakenwheretheinputsareusedforbusinesspurposesorformakingtaxable
supplies.FullinputtaxcreditshallbeallowedoncapitalgoodsonitsreceiptasagainstthecurrentCentralGovernmentand
many State Government practice of staggering the credit in more than one installment. Unutilized input tax credit can be
carriedforward.Thefacilityofdistributionofinputtaxcreditforservicesamongstgroupcompanieshasbeenprovidedfor
throughthemechanismofInputServiceDistributor(ISD).

6.Refund
Timelimitforclaimingonlinerefundhasbeenincreasedfromoneyeartotwoyears. Refund shall be granted within 60
days from the date of receipt of complete application. Interest is payable if refund is not sanctioned within the stipulated
periodof60days.IftherefundclaimislessthanRs.2lakhs,thereisnoneedfortheclaimanttofurnishanydocumentary
evidencetoprovethathehasnotpassedontheincidenceoftaxtoanyotherperson.Onlyaselfcertificationtothiseffect
wouldsuffice.Refundofinputtaxcreditshallbeallowedincaseofexportsorwherethecreditaccumulationisonaccount
ofinverteddutystructure(i.e.wherethetaxrateonoutputishigherthanthatoninputs).

7.Demands
A new concept of sunset clause for tax disputes has been introduced. It provides that Adjudication Order shall be issued
within 3 years of filing of annual return in normal cases and the time limit is 5 years (from the date of filing of annual
return)infraud/suppressioncases.SCNwillhavetobeissuedatleast3monthspriortothetimelimitprescribedforissueof
adjudicationorderinnormalcasesandatleast6monthspriortothetimelimitprescribedforissueofadjudicationorderin
cases involving fraud/suppression etc. Penalty is Nil or minimal if the tax short paid / nonpaid is deposited along with
interestatthestageofaudit/investigation.

8.AlternateDisputeResolutionmechanismAdvanceRulings
AdvancerulingmechanismhasbeencontinuedundertheGSTlaw.Thesalientfeaturesareasunder:

a)Advancerulingcanbesoughtinrespectofmoresubjectsthanallowedatpresent.Thesubjectsare:classificationof
goods/orservices,timeandvalueofsupply,rateoftax,admissibilityofinputtaxcredit,liabilitytopaytax,liability
totakeregistrationandwhetheraparticulartransactionamountstoasupplyunderGSTlaw.
b)Advancerulingcanbesoughtnotonlyfornewactivitiesbutalsoforexistingactivities.Thefacilityofappeal,which
isnotthereundertheCentrallaw,hasbeenprovidedintheGSTLaw.
c)TheapplicantsortheDepartment,ifaggrievedbytheadvanceruling,wouldhenceforthgettheopportunitytofilean
appeal before the Appellate Authority for revision of the ruling. Advance Ruling can be obtained more easily as
therewillbeoneAdvanceRulingAuthority(asalsotheAppellateAuthority)ineveryState.

9.OtherprovisionsofGST
Theprovisionsworthmentioninghereare:

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(i) Valuationofgoodsshallbedoneonthebasisoftransactionvaluei.e.theinvoiceprice,whichisthecurrent
practiceundertheCentralExciseandCustomsLaws.Taxpayersareallowedtoissuesupplementaryorrevised
invoiceinrespectofasupplymadeearlier.
(ii)Newmodesofpaymentoftaxarebeingintroduced,viz.throughcreditanddebitcards,NationalElectronicFund
Transfer(NEFT)andRealTimeGrossSettlement(RTGS).
(iii)ECommercecompaniesarerequiredtocollecttaxatsourceinrelationtoanysuppliesmadethroughtheironline
platforms,underfulfilmentmodel,attheratenotifiedbytheGovernment.
(iv) AnantiprofiteeringmeasurehasbeenincorporatedintheGSTlawtoensurethatanybenefitsonaccountof
reductionintaxratesresultsincommensuratereductioninpricesofsuchgoods/services.

10.ITpreparedness
Putting in place a robust IT network is an absolute must for implementation of GST. A Special Purpose Vehicle
called the GSTN has been set up to cater to the needs of GST. The GSTN shall provide a shared IT infrastructure and
servicestoCentralandStateGovernments,taxpayersandotherstakeholdersforimplementationofGST.Thefunctionsof
theGSTNwould,interalia,include:(i)facilitatingregistration(ii)forwardingthereturnstoCentralandStateauthorities
(iii)computationandsettlementofIGST(iv)matchingoftaxpaymentdetailswithbankingnetwork(v)providingvarious
MISreportstotheCentralandtheStateGovernmentsbasedonthetaxpayerreturninformation(vi)providinganalysisof
taxpayersprofileand(vii)runningthematchingengineformatching,reversalandreclaimofinputtaxcredit.Thetarget
dateforintroductionofGSTis1stJuly,2017.

TheGSTNwillalsomakeavailablestandardsoftwareforsmalltraderstokeeptheiraccountsinthat,sothatstraight
awayitcanbeuploadedastheirmonthlyreturnsonGSTNwebsite.Thiswillmakecomplianceeasierforsmalltraders.

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