Goods & Service Tax

Goods and Services Tax (GST) is among the big tax reforms introduced in the history of the
Indian fiscal evolution. In addition to the exceptional impact GST has on the economic
growth of the country and the way business is done in India, it has achieved the following:

 Converted India into one common market by seamless flow of tax credits – in the
earlier regime some taxes were not creditable when goods moved from one state to
another, excise/service tax credit was not available to a trader and a services unit
could not claim credit of Value Added Tax (VAT) paid on goods

 Multiple indirect tax laws replaced by a singular uniform tax regime making

compliance easier across the country

 Number of slab rates reduced substantially making life easier and disputes reduced

 Compliance process became uniform across the country due to one common IT

portal where businesses and government agencies interact – this has reduced human
interaction and brought transparency in the administration

 Business decisions may not be driven by tax considerations any more, as most of

the taxes are creditable, bringing in overall efficiency in business operations spurring
economic growth

 Electronic filing and online credit matching has substantially reduced non-

compliance and tax frauds – this is providing significant boost to honest businesses.

Dual GST structure

Under the new regime, the central and state governments are levying GST on every supply of
goods and services at the same time, on a common taxable value. State GST and Central GST
rates are the same.

IGST - an Indian innovation

However, in the case of imports and interstate supplies, one single Integrated GST (GST) is
levied only by the central government, proceeds of which are equally shared by the central
and the recipient state governments. IGST is an Indian innovation which is helping tax credits
move along with goods/services, across states and therefore, has reduced refund situations at
state borders

Objectives of Study
The general objective of study is to get practical insights of Goods & Service Tax.

GST Registration Process

 Return Filing

Specific Operational issues

Objectives

Issues related to Transition Phase

Influence on prices

Scope of the Study

The Goods and Services Tax (GST) was implemented on 1 July 2017. Over the period, the
industry faced many obstacles and hurdles, in terms of getting ready for GST, pricing,
transition of credits, IT systems, operational issues on obtaining refunds and filing of returns.
The study focuses on conceptual framework of GST as well as various hurdles that the
industry has faced over the period of time.

The scope of study includes registration process, filing of various returns under GST Act
2017, and stimulating automation to ease the processes.

Limitation of the Study

To be added
 Unit: II

GST

About GST:
The Good and services tax (GST) is the biggest and substantial indirect tax reform
since 1947. The main idea of GST is to replace existing taxes like value-added tax,
excise duty, service tax and sales tax. GST as it is known is all set to be a game
changer for the Indian economy. India as world’s one of the biggest democratic
country follow the federal tax system for levy and collection of various taxes.
Different types of indirect taxes are levied and collected at different point in the
supply chain. The center and the states are empowered to levy respective taxes as
per the Constitution of India. The Value Added Tax (VAT) when introduced was
considered to be a major improvement over the pre-existing Central excise duty at
the national level and the sales tax system at the State level. Now the Goods and
Services Tax (GST) will be a further significant breakthrough - the next logical
step - towards a comprehensive indirect tax reform in the country.
Several countries have already established the Goods and Services Tax. In
Australia, the system was introduced in 2000 to replace the Federal Wholesale Tax.
GST was implemented in New Zealand in 1986. A hidden Manufacturer’s Sales
Tax was replaced by GST in Canada, in the year 1991. In Singapore, GST was
implement
The Good and services tax (GST) is the biggest and substantial indirect tax reform
since 1947. The main idea of GST is to replace existing taxes like value-added tax,
excise duty, service tax and sales tax. GST as it is known is all set to be a game
changer for the Indian economy. India as world’s one of the biggest democratic
country follow the federal tax system for levy and collection of various taxes.
Different types of indirect taxes are levied and collected at different point in the
supply chain. The center and the states are empowered to levy respective taxes as
per the Constitution of India. The Value Added Tax (VAT) when introduced was
considered to be a major improvement over the pre-existing Central excise duty at
the national level and the sales tax system at the State level. Now the Goods and
Services Tax (GST) will be a further significant breakthrough - the next logical
step - towards a comprehensive indirect tax reform in the country.
Several countries have already established the Goods and Services Tax. In
Australia, the system was introduced in 2000 to replace the Federal Wholesale Tax.
GST was implemented in New Zealand in 1986. A hidden Manufacturer’s Sales
Tax was replaced by GST in Canada, in the year 1991. In Singapore, GST was
implemented in 1994. GST is a value-added tax in Malaysia that came into effect
in 2015
The Good and services tax (GST) is the biggest and substantial indirect tax reform since
1947. The main idea of GST is to replace existing taxes like value-added tax, excise duty,
service tax and sales tax. GST as it is known is all set to be a game changer for the Indian
economy. India as world’s one of the biggest democratic country follow the federal tax
system for levy and collection of various taxes. Different types of indirect taxes are levied
and collected at different point in the supply chain. The center and the states are empowered
to levy respective taxes as per the Constitution of India. The Value Added Tax (VAT) when
introduced was considered to be a major improvement over the pre-existing Central excise
duty at the national level and the sales tax system at the State level. Now the Goods and
Services Tax (GST) will be a further significant breakthrough - the next logical step - towards
a comprehensive indirect tax reform in the country.

Several countries have already established the Goods and Services Tax. In Australia, the
system was introduced in 2000 to replace the Federal Wholesale Tax. GST was implemented
in New Zealand in 1986. A hidden Manufacturer’s Sales Tax was replaced by GST in
Canada, in the year 1991. In Singapore, GST was implemented in 1994. GST is a value-
added tax in Malaysia that came into effect in 2015.

History of GST in India

 2000: In India, the idea of adopting GST was first suggested by the Atal Bihari Vajpayee
Government in 2000. The state finance ministers formed an Empowered Committee (EC) to
create a structure for GST, based on their experience in designing State VAT.
Representatives from the Centre and states were requested to examine various aspects of the
GST proposal and create reports on the thresholds, exemptions, taxation of inter-state
supplies, and taxation of services. The committee was headed by Asim Dasgupta, the finance
minister of West Bengal. Dasgupta chaired the committee till 2011.

 2004: A task force that was headed by Vijay L. Kelkar the advisor to the finance ministry,
indicated that the existing tax structure had many issues that would be mitigated by the GST
system.

 February 2005: The finance minister, P. Chidambaram, said that the medium-to-long term
goal of the government was to implement a uniform GST structure across the country,
covering the whole production-distribution chain. This was discussed in the budget session
for the financial year 2005-06.

 February 2006: The finance minister set 1 April 2010 as the GST introduction date.

 November 2006: Parthasarthy Shome, the advisor to P. Chidambaram, mentioned that states
will have to prepare and make reforms for the upcoming GST regime.

 February 2007: The 1 April 2010 deadline for GST implementation was retained in the
union budget for 2007-08.

 February 2008: At the union budget session for 2008-09, the finance minister confirmed
that considerable progress was being made in the preparation of the roadmap for GST. The
targeted timeline for the implementation was confirmed to be 1 April 2010.

 July 2009: Pranab Mukherjee, the new finance minister of India, announced the basic skeleton of
the GST system. The 1 April 2010 deadline was being followed then as well.

 November 2009: The EC that was headed by Asim Dasgupta put forth the First Discussion Paper
(FDP), describing the proposed GST regime. The paper was expected to start a debate that would
generate further inputs from stakeholders.
 February 2010: The government introduced the mission-mode project that laid the foundation for
GST. This project, with a budgetary outlay of Rs.1,133 crore, computerized commercial taxes in
states. Following this, the implementation of GST was pushed by one year.

 March 2011: The government led by the Congress party puts forth the Constitution (115th
Amendment) Bill for the introduction of GST. Following protest by the opposition party, the Bill was
sent to a standing committee for a detailed examination.

 June 2012: The standing committee starts discussion on the Bill. Opposition parties raise concerns
over the 279B clause that offers additional powers to the Centre over the GST dispute authority.

 November 2012: P. Chidambaram and the finance ministers of states hold meetings and set the
deadline for resolution of issues as 31 December 2012.

 February 2013: The finance minister, during the budget session, announces that the government
will provide Rs.9,000 crore as compensation to states. He also appeals to the state finance ministers
to work in association with the government for the implementation of the indirect tax reform.

 August 2013: The report created by the standing committee is submitted to the parliament. The
panel approves the regulation with few amendments to the provisions for the tax structure and the
mechanism of resolution.

 October 2013: The state of Gujarat opposes the Bill, as it would have to bear a loss of Rs.14,000
crore per annum, owing to the destination-based taxation rule.

 May 2014: The Constitution Amendment Bill lapses. This is the same year that Narendra Modi was
voted into power at the Centre.

 December 2014: India’s new finance minister, Arun Jaitley, submits the Constitution (122nd
Amendment) Bill, 2014 in the parliament. The opposition demanded that the Bill be sent for
discussion to the standing committee.

 February 2015: Jaitley, in his budget speech, indicated that the government is looking to
implement the GST system by 1 April 2016.

 May 2015 : The Lok Sabha passes the Constitution Amendment Bill. Jaitley also announced that
petroleum would be kept out of the ambit of GST for the time being.

 August 2015: The Bill is not passed in the Rajya Sabha. Jaitley mentions that the disruption had no
specific cause.

 March 2016: Jaitley says that he is in agreement with the Congress’s demand for the GST rate not
to be set above 18%. But he is not inclined to fix the rate at 18%.

In the future if the Government, in an unforeseen emergency, is required to raise the tax rate, it
would have to take the permission of the parliament. So, a fixed rate of tax is ruled out.

 June 2016: The Ministry of Finance releases the draft model law on GST to the public, expecting
suggestions and views.
 August 2016: The Congress-led opposition finally agrees to the Government’s proposal on the four
broad amendments to the Bill. The Bill was passed in the Rajya Sabha.

 September 2016: The Honorable President of India gives his consent for the Constitution
Amendment Bill to become an Act.

 2017: Four Bills related to GST become Act, following approval in the parliament and the
President’s assent:

o Central GST Bill

o Integrated GST Bill

o Union Territory GST Bill

o GST (Compensation to States) Bill.

Goods and Services Tax (GST) is an indirect tax which was launched at midnight on 1 July 2017 by the
President of India, Pranab Mukherjee and Prime Minister of India, Narendra Modi. The launch was
marked by a historic midnight (30 June-1 July) session of both houses of the Parliament convened at
the Central Hall of the Parliament. GST is applicable throughout India which will replace multiple
cascading taxes levied by the central and state governments. It was introduced as The Constitution
(One Hundred and First Amendment) Act 2017, following the passage of Constitution 122nd
Amendment Act Bill.

Key features of GST

1. Dual Goods and Service Tax: CGST and SGST
2. Destination-Based Consumption Tax: GST will be a destination-based tax. This implies
that all SGST collected will ordinarily accrue to the State where the consumer of the goods or
services sold resides.
3. Computation of GST on the basis of invoice credit method: The liability under the GST
will be invoice credit method i.e. cenvat credit will be allowed on the basis of invoice issued
by the suppliers.
4. Payment of GST: The CGST and SGST are to be paid to the accounts of the central and
states respectively.
5. Goods and Services Tax Network (GSTN): A not-for-profit, NonGovernment Company
called Goods and Services Tax Network (GSTN), jointly set up by the Central and State
Governments will provide shared IT infrastructure and services to the Central and State
Governments, tax payers and other stakeholders.
6. GST on Imports: Centre will levy IGST on inter-State supply of goods and services.
Import of goods will be subject to basic customs duty and IGST.
7. Maintenance of Records: A taxpayer or exporter would have to maintain separate details in
books of account for availment , utilization or refund of Input Tax Credit of CGST, SGST
and IGST.
8. Administration of GST: Administration of GST will be the responsibility of the GST
Council, which will be the apex policy making body of the GST. Members of GST Council
comprised of the Central and State ministers in charge of the finance portfolio.
9. Goods and Service Tax Council : The GST Council will be a joint forum of the Centre and
the States. The Council will make recommendations to the Union and the States on important
issues like tax rates, exemption list, threshold limits, etc. One-half of the total number of
Members of the Council will constitute the quorum of GST council.

Central Goods and Service Tax.

CGST means Central Goods and Service Tax. CGST is a part of goods and service tax. It is
covered under Central Goods and Service Tax Act 2016. Taxes collected under Central
Goods and Service tax will be the revenue for central Government. Present Central taxes like
Central excise duty, Additional Excise duty, Special Excise Duty, Central Sales Tax, Service
Tax etc. will be subsumed under Central Goods And Service Tax.

State Goods and Service Tax

SGST means State Goods and Service Tax. It is covered under State Goods and Service Tax
Act 2016. A collection of SGST will be the revenue for State Government. After the
introduction of SGST all the state taxes like Value Added Tax, Entertainment Tax, Luxury
Tax, Entry Tax etc. will be merged under SGST. For example, if goods are sold or services
are provided within the State then SGST will be levied on such transaction.

Integrated Goods and Service Tax

IGST means Integrated Goods and Service Tax. IGST falls under Integrated Goods and
Service Tax Act 2016. Revenue collected from IGST will be divided between Central
Government and State Government as per the rates specified by the government. IGST will
be charged on transfer of goods and services from one state to another state. Import of Goods
and Services will also be deemed to be covered under Inter-state transactions so IGST will be
levied on such transactions. For example, if Goods or services are transferred from Rajasthan
to Maharashtra then the transaction will attract IGST.

GST Council
 It is set up by president under article 279-A. It is chaired by union finance minister.

 It will constitute union minister of state in charge of revenue and minister in charge of finance or
taxation or of any other field nominated by state governments. The 2/3rd representatives in council
are from states and 1/3rd from union.

 It will make recommendations on:

a. Taxes, surcharge, cess of central and states which will be integrated in GST.

b. Goods and services which may be exempted from GST.

c. Interstate commerce – IGST- proportion of distribution between state and center.

d. Registration threshold limit for GST.

e. GST floor rates.

f. Special rates during calamities.

g. Provision with respect to special category states specially north east states

 It may also work as Dispute Settlement Authority for GST.

 The Council would consist of 2/3rd representation of states and 1/3rd representation of the
Centre. The GST Council will take all decisions regarding tax rates, dispute resolution, exemptions
and so on. Recommendations of the GST Council (75% votes) will be binding on the Centre and the
States.

Goods and Services Tax Network (GSTN)

Goods and Services Tax Network has been set up by the Government as a private company
under erstwhile Section 25 of the Companies Act, 1956. GSTN would provide three front end
services, namely Registration, Payment and Return to taxpayers. It will also assist some State
with the development of back end modules.
Goods and Services Tax Network (GSTN) is a Section 8 (under new companies Act, not for
profit companies are governed under section 8), non-Government, private limited company. It
was incorporated on March 28, 2013. The Government of India holds 24.5% equity in GSTN
and all States of the Indian Union, including NCT of Delhi and Pondicherry, and the
Empowered Committee of State Finance Ministers (EC), together hold another 24.5%.
Balance 51% equity is with nonGovernment financial institutions. The Company has been set
up primarily to provide IT infrastructure and services to the Central and State Governments,
tax payers and other stakeholders for implementation of the Goods and Services Tax (GST).
The Authorized Capital of the company is Rs. 10,00,00,000 (Rupees ten crore only).

Structure of GSTN 
The GST System Project is a unique and complex IT initiative. It is unique as it seeks, for the
first time to establish a uniform interface for the tax payer and a common and shared IT
infrastructure between the Centre and States. Currently, the Centre and State indirect tax
administrations work under different laws, regulations, procedures and formats and
consequently the IT systems work as independent sites. Integrating them for GST
implementation would be complex since it would involve integrating the entire indirect tax
ecosystem so as to bring all the tax administrations (Centre, State and Union Territories) to
the same level of IT maturity with uniform formats and interfaces for taxpayers and other
external stakeholders. Besides, GST being a destination based tax, the inter- state trade of
goods and services (IGST) would need a robust settlement mechanism amongst the States
and the Centre. This is possible only when there is a strong IT Infrastructure and Service back
bone which enables capture, processing and exchange of information amongst the
stakeholders (including tax payers, States and Central Governments, Accounting Offices,
Banks and RBI).
 Prior to this, the Union Ministry of Finance had set up the Technical Advisory Group for
Unique Projects (TAGUP) in March 2010 to make recommendations on the roadmap to roll
out five major financial projects including GST. TAGUP recommended setting up of
National Information Utilities as private companies with a public purpose for implementation
of large and complex Government IT projects including GST.

 In compliance of the above decision, GST Network was registered as a non-government,

not-for-profit, private limited company under section 8 (under new companies Act, not for
profit companies are governed under section 8) of the Companies Act 1956 with the
following equity structure:

Particulars Equity%
Central Government 24.5%
State Governments & EC 24.5%
HDFC 10%
ICICI Bank 10%
NSE Strategic Investment Co 10%
LIC Housing Finance Ltd 11%

In brief, the decision to structure GSTN in its current form was taken after approval of the
Empowered Committee of State Finance Ministers and the Union Government after due
deliberations over a long period of time

GSTIN
 Goods and Services Identification Number is a 15 digit alphanumeric number.
 First two digit shows the State code,
 Another ten digit shows the Permanent Account Number (PAN).
 Next number shows the entity number of the same PAN holder in a state. Next is
alphabet Z by default.
 Next is the check sum digit.

Impact of GST on Indian Economy

Reduce tax burden on producers and foster growth through more production. This
double taxation prevents manufacturers from producing to their optimum capacity and
retards growth. GST would take care of this problem by providing tax credit to the
manufacturer.
 Various tax barriers such as check posts and toll plazas lead to a lot of wastage for
perishable items being transported, a loss that translated into major costs through
higher need of buffer stocks and warehousing costs as well. A single taxation system
could eliminate this roadblock for them.
 A single taxation on producers would also translate into a lower final selling price
for the consumer.
 Also, there will be more transparency in the system as the customers would know
exactly how much taxes they are being charged and on what base.
 GST would add to government revenues by widening the tax base.
 GST provides credits for the taxes paid by producers earlier in the goods/services
chain. This would encourage these producers to buy raw material from different
registered dealers and would bring in more and more vendors and suppliers under the
purview of taxation.
 GST also removes the custom duties applicable on exports. Our competitiveness in
foreign markets would increase on account of lower cost of transaction.
 The proposed GST regime, which will subsume most central and state-level taxes, is
expected to have a single unified list of concessions/exemptions as against the current
mammoth exemptions and concessions available across goods and services.

The introduction of Goods and Services Tax would be a very noteworthy step in the
field of indirect tax reforms in India. By amalgamating a large number of Central and
State taxes into a single tax, it would alleviate cascading or double taxation in a major
way and pave the way for a common national market.

GST RETURNS

Every registered taxable person shall, for every calendar month or part thereof,
furnish, in such form and in such manner as may be prescribed, a return,
electronically, of inward and outward supplies of goods or services, input tax credit
availed, tax payable, tax paid and other particulars as may be prescribed within 20
days after the end of such month:
Provided that a registered taxable person paying tax under the provisions of Section 8
of this Act shall furnish a return for each quarter or part thereof, electronically, in
such form and in such manner as may be prescribed, within 18 days after the end of
such quarter:
Every registered taxable person, who is required to furnish a return under subsection
(1), shall pay to the credit of the appropriate Government the tax due as per such
return not later than the last date on which he is required to furnish such return.
A return furnish under the sub-section (1) by a registered taxable person without
payment of full tax due as per such return shall not be treated as a valid return for
allowing input tax credit in respect of supplies made by such person. Every registered
taxable person shall furnish a return for every tax period under subsection (1),
whether or not any supplies of goods or services have been effected during such tax
period.
Note: Subject to the provisions of Section 25 and 26, if any taxable person after
furnishing a return discovers any omission or incorrect particulars therein, other than
as a result of scrutiny, audit, inspection or enforcement activity by the tax authorities,
he shall rectify such omission in the return to be filed for the month or quarter, as the
case may be, during which such omission are noticed, subject to the payment of
interest, where applicable and as specified in the Act:
Types of GST Returns
GSTR-1 - GSTR-1 is a monthly return that should be filed by every registered dealer
by the 10th of the following month. It is the first or the starting point for passing input
tax credit to the dealers. It contains details of all outward supplies i.e. sales. GSTR-1
has to be filed by "all" taxable registered persons under GST. However, there are
certain dealers who are not required to file GSTR-1, instead are required to file other
different GST returns as the case may be. These dealers are ECommerce operators,
Non-Resident dealers and Tax deductors. It has to be filed even in cases where there
is no business conducted during the reporting month.

GSTR-2- It is mandatory to furnish details of inward supplies of goods/services

received during a tax period for every registered taxable person. These details are
furnished based on FORM GSTR-2A which is auto populated on the basis of GSTR 1
filed by your supplier, electronically through the Common Portal, either directly or
from a Facilitation Centre. However, GSTR 2A does not in itself auto populates a
complete GSTR 2, as there are certain other transactions which are to be mentioned
manually in addition to the data which is generated through GSTR 2A, viz. Details of
Inward Supplies from an Unregistered Persons on which tax is paid on the Reverse
Charge basis and Imports effected during the tax period, etc.