development of GST is to

subsume all sorts of indirect

taxes in India like Central
Excise Tax, VAT/Sales Tax,
Service tax, etc. and
implement one taxation system
in India.
development of GST is to
subsume all sorts of indirect
taxes in India like Central
Excise Tax, VAT/Sales Tax,
Service tax, etc. and
implement one taxation system
in India.
development of GST is to
subsume all sorts of indirect
taxes in India like Central
Excise Tax, VAT/Sales Tax,
Service tax, etc. and
implement one taxation system
in India.

Math
Introduction to GST
GST stands for goods and services tax, which was first
introduced in the Budget Speech presented on 28th February
2006. It laid the foundation for a complete reform of India’s
indirect tax system. Finally implemented on 1st July 2017 as
the Goods and Services Tax Act, the indirect taxation system
thus went through a chain of amendments since its inception.
With this tax reform, GST replaced multiple indirect taxes that
were levied on different goods and services. The Central
Board of Indirect Taxes and Customs (CBIC) is the regulatory
body governing all changes and amendments regarding this
tax. This is a GST article that explains all the information on
GST.
Goods and Services Tax is a destination-based, multi-stage,
comprehensive tax levied at each stage of value addition.
Having replaced multiple indirect taxes in the country, it has
successfully helped the Indian Government achieve its ‘One
Nation One Tax’ agenda.
The tax is levied on goods and services sold within India’s
domestic boundary for consumption. Implemented by a
majority of nations worldwide with respective
customisations, the tax has been successful in simplifying the
indirect taxation structure of India.
GST is levied on the final market price of goods and services
manufactured internally, thereby reflecting the maximum
retail price. Customers are required to pay this tax on a
purchase of goods or services as an inclusion in their final
price. Collected by the seller, it is then required to be paid to
the government, thus implying the indirect incidence.
The GST rates on different goods and services are uniformly
applied across the country. Goods and services have,
however, been categorised under different slab rates for tax
payment. While luxury and comfort goods are categorised
under higher slabs, necessities have been included in lower
and nil slab rates. The main aim of this classification is to
ensure the uniform distribution of wealth among residents of
India.

Why do you need a taxing system?

The implementation of GST is expected to bring in various benefits as
discussed below:
1. Dynamic common market: GST would make India a dynamic
common market and result in generation of positive externalities. By
ensuring uniformity of indirect tax rates across the country, it will
substantially improve the ease of doing business.
2. Elimination of cascading effect: Under GST, provision of seamless
input tax credit across transactions will avoid tax cascading, eliminate
double taxation and improve resource allocation.
3. Efficiency: Subsuming of all major indirect taxes will result in the
removal of inefficient taxes. With as single tax to be paid,
manufacturers will become more competitive and this could lead to
growth in exports.
4. Reduced compliance costs: Harmonisation of tax rates and laws
along with seamless input tax credits and a sound IT infrastructure is
expected to lead to reduced compliance costs. As all the taxpayer
services like registrations, payments, returns etc. will be available
online, the compliance process would become simpler.
5. Reduction in tax evasion: Uniform rates of taxation would reduce
the incentive for tax evasion by eliminating rate arbitrage
opportunities between neighbouring states and that between intra-
State and inter-State sales.
6. Improved collection efficiency: GST is also desirable from the point
of view of tax policy and collection. Even if the taxes are lowered, the
revenue of the Union and the states is expected to be buoyant due to
less evasion. A single rate across all goods and services will eliminate
classification disputes and make tax assessment more predictable.
Harmonisation of tax assessment, levy and collection procedures
across states will reduce compliance costs, limit evasion, enhance
transparency and improve collection efficiency.
7. Revenue generation: By controlling tax leakage from the system
and having a wider base, GST would generate more tax revenues for
both the Central and State Governments.
8. Encourages savings and investment: As GST is a tax on
consumption and not on income, so the tax system inherently
encourages savings and investments instead of consumption. Further,
input tax credit would lead to a decrease in the cost of capital goods
and provide boost to investments.
9. Improved efficiency of logistics : Due to GST implementation, the
restriction on inter-State movement of goods is likely to be lessened
and the logistics sector is anticipated to start consolidating
warehouses across the country. In the erstwhile indirect tax
structure, decisions related to logistics and distribution centres were
based on tax considerations as opposed to operational efficiency.
With GST in place, these decisions will now be based on operational
efficiency and warehouses would be set up at locations that would
help in reaching customers faster and reduce costs.
10. Regulation of the unorganized sector : For a large unorganized
sector that exists in business, GST has provisions for online
compliances and payments, and availing of input credit only when
the supplier has accepted the amount, thereby bringing
accountability and regulation to these businesses.
11. Export competitiveness : With GST in place, the export industry
in India would be able to have internationally competitive prices due
to the smooth process of claiming input tax credit and the availability
of input tax credit on services. The exports of goods or services
would be a zero rated supply under GST implying that GST would not
be levied on export of goods or services. All this, in turn, would
provide a push to government’s ‘Make in India’ campaign. Para 2.3
Introduction to GST 12 taxmann®
12. Higher threshold for registration: As per the current VAT
structure, any business with a turnover of more than ` 5 lakh (in most
states) is liable to pay VAT (different rates in different states).
Similarly, for service tax, service providers with turnover less than `
10 lakhs are exempted. Under GST this threshold has been increased
to ` 20 lakhs thus exempting many small traders and service
providers.
13. Composition scheme for small businesses: The composition
scheme under the GST regime is a method of levy of tax designed for
small taxpayers whose turnover is up to ` 1 crore (` 75 lakhs in case of
9 Special Category States). Those who opt for this scheme can file
returns on a quarterly basis unlike the others who have to file returns
on a monthly basis. Under the scheme, small businesses,
manufacturers and restaurants will be subject to a GST rate of 0.5%,
1% and 2.5% respectively on turnover. The Composition scheme has
been designed to simplify and reduce the burden of compliance for
smaller taxpayers.
14. Benefits to consumers: The final price of goods is expected to be
lower due to seamless flow of input tax credit between the
manufacturer, retailer and supplier of services. Average tax burden
on companies is likely to come down which is expected to reduce
prices and hence benefit the consumer.

Types of taxes in India

GST can be divided into four sections, based on the kind of transaction it involves.
Before a business can determine its GST liability, assessing the following table is
essential.

GST Types What does it mean?

State Goods and SGST refers to the tax payable on the sale of services and
Services Tax products within a state.
(SGST) It replaces previous taxes, including, Value Added Tax, Entry
Tax, State Sales Tax, Entertainment Tax, surcharges and cesses.

Central Goods and The tax levied on the supply of intra-state products is CGST.
Services Tax The Central Government charges this tax.
(CGST) CGST replaced many taxes levied by the Centre, including
Service Tax, Central Excise Duty, CST, SAD, Customs Duty,
etc.

Union Territory Taxes applicable to the sale of products and services in Union
Goods and Services Territories, such as Andaman and Nicobar, Daman and Diu,
Tax (UTGST) Chandigarh, Dadra, etc.

Integrated Goods The sale of inter-state products and services leads to taxation.
and Services Tax This is IGST. Basically, when businesses transfer services and
(IGST) products from one state to another, they need to pay this form of
GST.

1.7: TYPES OF
GST
• Central Goods and Services
Tax (CGST)
• State Goods and Services
Tax (SGST)
• Integrated Goods and
Services Tax (IGST)
• Union Territory Goods and
Services Tax (UTGST)
Types of
Differences
CGST
SGST
IGST
UGST/UTGST
Applicable
transactions
(Goods &
Services)
Intrastate
(Within
one state)
Intrastate
(Within
one state)
Inter-state
(between two
states or one
state and one
UT) and
imports
Within one
Union
Territory (UT)
Collected by
Central
Govt.
State Govt.
Central Govt.
UT Govt.
Benefitting
Authority
Central
Govt.
State Govt.
Central Govt.
& State Govt.
UT Govt.
Explain and differentiate between Sales
Tax, Value Added Tax & GST.
The introduction of GST, short for Goods and Services Tax, has overshadowed
the indirect taxation system such as VAT, excise duty and service tax in India.
The primary reason behind this is the elimination of the cascading effect of
taxes on the economy. VAT, short for value Added tax, is a state-level tax
charged on the sale of goods immediately upon preparation of Sale Invoice or
when the goods are moved for sale.
Sales Tax is a form of tax paid to a governing body for the sale
of goods and services. Sales tax is an indirect tax and is
generally charged at the point of buy or exchange of certain
taxable goods, charged as a percentage of the value of the
product. The sales tax depends on the government in power
and the individual policies enforced by it, generally being
simple to calculate and collect. In simple terms, the sales tax
is an extra amount of money paid while purchasing goods or
services.
The concept of sales tax depends on the governing principles
followed by governments, but there are some universal sales
taxes applicable in most countries. The different types of
sales taxes are mentioned below.
All about Sales Tax
Retail Sales Tax -This is a tax charged on sale of retail goods
and is directly paid by the final consumer.
Manufacturers’ Sales Tax -This tax is levied on the
manufacturers of certain goods.
Wholesale Sales Tax -This tax is levied on individuals who deal
with wholesale distribution/sale of manufactured goods.
Use Tax- This is a tax levied on the consumer for goods which
are purchased without sales tax (generally from vendors who
are not under the tax jurisdiction).
Value Added Tax- VAT is an additional tax levied on all sales by
certain governments.

Explain Central GST, State GST and IGST

Goods and Services Tax comprises three components applicable, basis the
centre, the state and the integrated levy.
They are –
 CGST – Central Goods and Services Tax is collected by the central
government on sales conducted intra-state.
 SGST – State Goods and Services Tax is collected by the state government
on the sale of goods and services within a particular state as well.
 IGST – The central government collects Integrated Goods and Services
Tax on sales affected inter-state.
Collection of tax is thus undertaken in the following way for intra-state and
inter-state transactions.

GST Levy and Intra-State Sale Inter-State Sale

Revenue
Share

Goods and SGST+CGST IGST

Services Tax

Share of Revenue collected to be Revenue collected by the central

Revenue shared between state and government. It will then be shared
central government equally. as per the goods’ destination.

Here’s an example to help you understand the levy, collection and share of
revenue between the state and the central government.
A seller in Maharashtra sells goods worth Rs. 1 lakh to a buyer in the same
state. The tax rate applicable to the goods is 12%, comprising 6% of CGST and
6% of SGST. The total GST of Rs. 12,000 collected will be shared between the
centre and the state at Rs. 6,000 each as the sale is made intra-state.
The same seller sold goods worth Rs. 50,000 from Maharashtra to Karnataka.
The tax rate applicable to these goods was 18%. The seller will thus charge IGST
of Rs. 9,000 from the buyer due to it being an inter-state sale. The tax collected
will be submitted to the central government.
Once submitted, the tax will be shared by the central government and state
government based on the supply of goods made. For ease of tax collection, the
government has made the entire system for the payment of GST online.

Rate of GST for different items.

The GST tax structure in India is divided into six rate slabs applicable for various
goods and services divided accordingly. Following is the Goods and Services Tax
structure in the country.

 Exempted goods (No tax applicable)

  0.25% rate slab

 5% rate slab

 12% rate slab

 18% rate slab

 28% rate slab

Goods and services tax at the highest rate slab is further divided into items with
cess and items without cess.

An important point to be kept in mind is that all entrepreneurs need to state the
HSN code (Harmonised System of Nomenclature), which is a six-digit unique
number assigned to respective goods and is accepted worldwide.

According to the CGST rules framed by the Government of India, any company
with a turnover within Rs. 15 Million is not required to mention the HSN code on
invoices during goods supply mandatorily. For companies with a turnover between
Rs. 15 Million and Rs. 50 Million, the first two digits of the HSN code must be
mentioned. In the case of companies with a turnover above Rs. 50 Million, the first
four digits of the HSN code need to be indicated on the invoices when supplying
goods.

Using the HSN and GSTIN (unique GST identification number), individuals can
file for GST online by visiting the official GST portal.

Below given is a broad classification of goods and services with tax levies at
various rate slabs. Exempted goods are not included in this list.

GST Product & Services Classification

Rates
(In %)
0.25 Jewellery stones cut and semi-polished

5% Products listed as items of household necessity like spices, sugar, edible

oil, coffee, tea, etc. Sweets, life-saving drugs and coals are also included
under this rate slab.
Services under this rate are newspaper printing, vessel transport from
overseas, fuel-less motor cab renting, AC contract transport services, air
transport for pilgrimage, tour operation services, aircraft leasing, ad space
in print media, etc.

12% The rate slab mostly comprises processed food along with computers and
accessories.
Services include rail transportation of goods in containers via a third
party, air travel (exclusive of the economy class), restaurant services
(exclusive of liquor licence, AC/heating services, etc.), per day
accommodation renting between Rs. 1,000 and Rs. 2,500, building
construction for sale, temporary IP rights, hotel accommodation with
transaction value between Rs. 1,001 and Rs. 7,500, etc.

18% The 18% slab rate consists of items like industrial and capital goods along
with hair oil, toothpaste, soaps, etc.
Services include restaurant services with liquor licence/AC/heating,
decoration and catering services outdoors, per day accommodation
renting between Rs. 2,500 and Rs. 5,000, hotel accommodation with
transaction value over Rs.7,500, entertainments like a circus, folk dance,
etc., works contract supply, etc.

28% The highest rate slab comprises items of luxury like cars, high-end bikes,
consumer durables, etc. along with items like aerated drinks and
cigarettes.
It covers services like amusement facilities, entertainment events,
services of AC 5-star hotels, sporting events, gambling, services of race
 clubs, etc.

With these GST details, you must also know that a few goods and commodities
have been re-classified under the slab rates listed below:

 Nil rates – Making of plates and cups using leaves, bark and flowers, and
dried tamarind.

 1.50% rate – Diamond job work.

 5% rate – Catering services outdoors excluding ITC, marine fuel, wet

grinders (along with stone grinders), and specified commodities for
petroleum operations falling under Hydrocarbon Exploration Licensing
Policy.

 12% rate – Railway wagon coach supplies without ITC refund, other job
work, polyethene packaging bags (woven/non-woven), and slide fasteners.

 18% rate – Almond milk.

 28% rate – Caffeinated beverages.

Additionally, the new cess has also been introduced on a few items.

 1% - Petrol-operated motor vehicles with a capacity of 10 to 13 passengers.

 3% - Diesel-operated motor vehicles with a capacity of 10 to 13 passengers.

 12% - Caffeinated beverages.

Also, sellers can enjoy an exemption for the following –

 FAO supplies for specified projects in the country.

 FIFA-specified supplies for the Under-17 Football World Cup in India for
women.

 Import of specified goods for defence not made indigenously up to the year
2024.
  Platinum/silver supply made by Diamond India Ltd. for export.

 Platinum/silver import by Diamond India Ltd

Advantage and Disadvantage of GST from

VAT and ST.
Advantages of GST
As mentioned above, the GST comes with a few advantages, such as
one tax system and boosting the different aspects of the Indian
economy, such as:-
1. One Tax System
One of the main intentions of bringing GST was to remove different
types in the Indian tax system. Before the implementation of GST,
there were different taxes such as VAT, service tax, etc. All such taxes
have been removed with GST coming into play. Now, only one tax is
charged. Although there are different slabs, GST charges are different
for different items which often creates confusion.
2. Common National Market Creation
GST brings up a tax structure that is integrated into nature. This helps
remove all kinds of economic barriers, allowing the GST to create
common national markets. Again, using input tax credit can
sometimes become difficult.
3. The Make In India Initiative
One of the main reasons for bringing Goods and Services Tax was to
help in boosting the ‘Make in India’ products. The GST helps in
manufacturing the products at competitive rates. Although the rest is
yet to be explained by the Government as to how GST helps in this
campaign.
4. Cascading Effect Removal
A big advantage of GST is the removal of the cascading effect of GST.
Cascading effect means the tax levied on tax. So, if a product has 10%
tax on Rs 1000, another 10% of tax will be charged on 1100. So
double tax is charged. In GST, if 28% tax is charged on Rs 1000, then
Rs 1280 is charged, and on the next level, again 28% will be charged
on Rs 1000. So, the Tax on Tax system is removed.
5. Litigation Reduction
GST helps in reducing litigation cost, which was increased due to
multiple taxation systems. As GST is meant to provide clarity in the
tax assessment ability. One can use the revised structure of GST to
show the different credit flow in different businesses. But the credit
following is not very smooth and sometimes leads to errors, so one
must be careful.
6. Composition Scheme
Through the GST, many small businesses with an annual turnover of
less than and equal to INR 1.5 Crore can opt for the composition
scheme. They can reduce their compliance easily using this scheme.
The GST is charged at lower rates of 1%, 5% and 6% by businesses
that come under this scheme.
7. Simple Access
The GST portal can be accessed by anyone sitting anywhere at any
time. This makes filing of returns easy. This is very good for all kinds
of businesses.
8. Efficiency in Logistics
GST has removed different other tax systems such as VAT. So, since
the business already pays to the center and state before the
transportation of goods, there is no need to pay state-level taxes
during interstate movement, which makes the logistics movement
better.
9. Unregulated Sectors get Regulation
Previously various businesses were not regulated, and there had
been tax evasion from the construction and textile sectors. The
implementation of GST has addressed these loopholes. The tax
burden has been reduced for such sectors too. This will prevent tax
evasion.
10. Automated procedures
These processes are automated and simplified for various processes
such as return, tax payment, registration, etc.; all interaction is done
through a common GSTN portal.
Disadvantages of GST
1. Very High Tax Burden on SMEs
 As per the structure of the previous tax system, only those
businesses whose yearly sales were more than Rs.1.5 crore was
required to pay excise duty. But as per the new tax structure, it
is mandatory for all businesses whose annual sales are more
than Rs.40 lakh to pay GST.
2. Compliance Burden
 GST compliance is quite high due to the filing of 3 tax returns
every single month. Besides, now it is mandatory for the
companies to register for the GST in all states wherever they
perform business.
 The whole procedure of registering with the regulatory body,
producing GST-compliant invoices, maintaining digital records,
and filing returns have put a huge stress burden on SMEs and
others.
3. Increased Costs
  It is seen that GST compels businesses to convert their present
accounting software to ERP or GST-compliant software with a
view to keeping their operations running. But one also has to
remember that the businesses may incur substantial expenses
for buying, installing, and then training employees to use GST-
compliant software.
 In addition to this, the costs of doing business have increased
considerably not only for big businesses but also for small ones
since they have to hire tax professionals in order to become
GST-compliant.
4. IT Software Expenditure
Keeping in view the GST regime, all businesses either have to update
their current accounting software or ERP software to make it GST
compliant or purchase new GST software to prop up their businesses.
This results in an increase in IT expenses of the businesses in terms of
purchasing the GST software and training the staff to use the
software efficiently. However, Masters India, a firm that is one of the
leading GST Suvidha Providers (GSP) has successfully developed
customized GST software and APIs in order to ease the compliance
procedures for different business users.

A shopkeeper sold a bicycle to a customer for Rs.10304 including

GST. The rate of GST was 12%. Find SGST payable to him.

ANS - Let x→S.P

x+10012×x=10304
100112x=10304
x=9200
GST=10304−9200
GST=1104
SGST=552
2. A shopkeeper sold two bags for Rs. 2500 Each. He gains 25% on
one while on the other he loses 20%. Find whether he made a gain or
a loss in the whole transaction and also find the gain/loss percentage.
ANS = Let the cost price of bag 1 be ‘x’ and the cost price of bag 2 be
‘y’.
Now, we have, x + 25x/100 = 2500
5x/4 = 2500
x = Rs. 2000 y – 20y/100 = 2500
4y/5 = 2500
y = Rs. 3125
Total CP = x + y = 2000 + 3125 = 5125 Total SP = 2500 + 2500 = Rs.
5000
∴ Loss percentage = (5125 – 5000)/5125 × 100 = 2.43%
This project was very helpful in showing how everything works
together in a GST

Conclusion
In conclusion, it can be said that GST has been a major reform in the
indirect tax system in India and has resulted in numerous benefits.
However, there is still a need for further improvement in the GST
regime, especially with regard to simplifying the tax structure,
reducing the compliance burden, and resolving technical issues in the
IT system.
The government has introduced various measures to address these
concerns, such as reducing tax rates, simplifying the return filing
process, and improving the IT system. Vakilsearch can provide
comprehensive support throughout theIn conclusion, it can be said
that GST has been a major reform in the indirect tax system in India
and has resulted in numerous benefits. However, there is still a need
for further improvement in the GST regime, especially with regard to
simplifying the tax structure, reducing the compliance burden, and
resolving technical issues in the IT system.
The government has introduced various measures to address these
concerns, such as reducing tax rates, simplifying the return filing
process, and improving the IT system. search can provide
comprehensive support throughout the GST registration process,
ensuring compliance with legal and regulatory requirements and
helping clients achieve their goals using GST.
process, ensuring compliance with legal and regulatory requirements
and helping clients achieve their goals using GST.

What did I learn from this

Despite its challenges, it can be concluded that GST has
been a positive step towards creating a unified indirect
tax regime in India. GST has provided numerous
economic benefits, including increased revenue
collection, improved transparency, and a unified
market