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Jai Narayan Vyas University

Faculty of Law

Law of Taxation And GST


Topic: Basics of Goods And Services
Tax.

Submitted By: Rahul Tanwar


Submitted To:
Acknowledgment

I would like to express my special thanks of


gratitude to my teacher of Law of Taxation
for his/her able guidance
and support in completing my project
Secondly, I would like to thank my friends
who helped me with their valuable
suggestion and guidance that has been
helpful in various phases of the completion
of the project
CERTIFICATE

This is to certify that Rahul Tanwar student


of class B.A LLB 8th semester has
successfully completed his Law of Taxation
and GST project on topic: Basics of Goods
and Services Tax under the guidance of

Rahul Tanwar
B.A LLB 8th Semester
Introduction

The idea of a nationwide GST in India was first proposed by


the Kelkar Task Force on Indirect taxes in 2000. The objective
was to replace the prevailing complex and fragmented tax
structure with a unified system that would simplify
compliance, reduce tax cascading, and promote economic
integration. The Empowered Committee of State Finance
Ministers prepared a design and roadmap, releasing the First
Discussion Paper in 2009. The Constitution Amendment Bill
was introduced in 2011 but faced challenges regarding
compensation to States and other issues.
After years of deliberation and negotiations between the
Central and State Governments, the Constitution (122nd
Amendment) Bill, 2014, was introduced in the Parliament.
The Bill aimed to amend the Constitution to enable the
implementation of GST. The Constitution Amendment Bill
was passed by the Lok Sabha in May, 2015. The Bill with
certain amendments was finally passed in the Rajya Sabha
and thereafter by the Lok Sabha in August, 2016. Further, the
Bill has been ratified by the required number of States and has
since received the assent of the President on 8th September,
2016 and has been enacted as the 101st Constitution
Amendment Act, 2016. The GST Council was notified w.e.f.
15th September, 2016. For assisting the GST Council, the
office of the GST Council Secretariat was also established.

The GST Council, consisting of the Union Finance Minister


and representatives from all States and Union Territories, was
established to make decisions on various aspects of GST,
including tax rates, exemptions, and administrative
procedures. It played a crucial role in shaping the GST
framework in India. On 1st July, 2017, GST laws were
implemented, replacing a complex web of Central and State
taxes. Under the Indian GST, goods and services are
categorized into different tax slabs, including 5%, 12%, 18%,
and 28%. Some essential commodities are exempted from
GST, Gold and job work for diamond attract low rate of
taxation. Compensation cess is being levied on demerit goods
and certain luxury items.

To prepare for the implementation of GST, extensive efforts


were made to build the necessary technological infrastructure
and train tax officials and businesses. GST Network (GSTN),
a not-for-profit company, was created to provide the IT
backbone for the GST system, including taxpayer registration,
return filing, and tax payments.

Since its implementation, the Indian GST has undergone


various amendments and refinements based on feedback from
businesses and the evolving economic scenario. While the
GST implementation initially posed challenges for businesses
in terms of understanding the new compliance requirements
and adapting to the changes, it has gradually settled into the
Indian tax landscape.

It can be said that the history of GST in India showcases a


monumental shift in the country's tax structure, aiming to
create a more unified, efficient, and transparent indirect tax
regime for the benefit of businesses and the economy as a
whole.
Salient Features of GST

Goods and Services Tax (GST) is a comprehensive indirect


tax levied on the supply of goods and services in India. Here
are some of the salient features of GST:

• One Nation, One Tax: GST replaced multiple indirect


taxes levied by the Central and State Governments, such
as excise duty, service tax, value-added tax (VAT), and
others. It brought uniformity in the tax structure across
India, eliminating the cascading effect of taxes.

• Dual Structure: GST operates under a dual structure,


comprising the Central GST (CGST) levied by the
Central Government and the State GST (SGST) levied by
the State Governments. In the case of Inter-state
transactions, Integrated GST (IGST) is applicable, which
is collected by the Central Government and apportioned
to the respective State. Import of goods or services would
be treated as inter-state supplies and would be subject to
IGST in addition to the applicable customs duties.

• Destination-based Tax: GST is a destination-based tax,


levied at each stage of the supply chain, from the
manufacturer to the consumer. It is applied to the value
addition at each stage, allowing for the seamless flow of
credits and reducing the tax burden on the end consumer.

• Input Tax Credit (ITC): GST allows for the utilization of


input tax credit, wherein businesses can claim credit for
the tax paid on inputs used in the production or provision
of goods and services. This helps avoid double taxation
and reduces the overall tax liability.
GST would apply on all goods and services except Alcohol
for human consumption. GST on five specified petroleum
products (Crude, Petrol, Diesel, ATF & Natural Gas) would by
applicable from a date to be recommended by the GSTC.
Tobacco and tobacco products would be subject to GST. In
addition, the Centre would have the power to levy Central
Excise duty on these products. Exports are zero-rated
supplies. Thus, goods or services that are exported would not
suffer input taxes or taxes on finished products.
• Threshold Exemption: Small businesses with a turnover
below a specified threshold (currently, the threshold is ₹
20 lakhs for supplier of services/both goods & services
and ₹ 40 lakhs for supplier of goods (Intra–Sate) in
India) are exempt from GST. For some special category
states, the threshold varies between ₹ 10-20 lakhs for
suppliers of goods and/or services except for Jammu &
Kashmir, Himachal Pradesh and Assam where the
threshold is ₹ 20 lakhs for supplier of services/both
goods & services and ₹ 40 lakhs for supplier of goods
(Intra–Sate). This threshold helps in reducing the
compliance burden on small-scale businesses.

• Composition Scheme: The composition scheme is


available for small taxpayers with a turnover below a
prescribed limit (currently ₹ 1.5 crores and ₹ 75 lakhs for
special category state). Under this scheme, businesses are
required to pay a fixed percentage of their turnover as
GST and have simplified compliance requirements.

• Online Compliance: GST introduced an online portal, the


Goods and Services Tax Network (GSTN), for
registration, filing of returns, payment of taxes, and other
compliance-related activities. It streamlined the process
and made it easier for taxpayers to fulfil their obligations.

• Anti-Profiteering Measures: To ensure that the benefits


of GST are passed on to the consumers, the government
established the National Anti-Profiteering Authority
(NAA). The NAA monitored and ensured that businesses
do not engage in unfair pricing practices and profiteering
due to the implementation of GST. All GST anti-
profiteering complaints are now dealt by the Competition
Commission of India (CCI) from 1st December, 2022.

• Increased Compliance and Transparency: GST aims to


enhance tax compliance by bringing more businesses
into the formal economy. The transparent nature of the
tax system, with the digitization of processes and
electronic records, helps in curbing tax evasion and
increasing transparency.

• Sector-specific Exemptions: Certain sectors, such as


healthcare, education, and basic necessities like food
grains, are given either exempted from GST or have
reduced tax rates to ensure affordability and accessibility.
Accounts would be settled periodically between the Centre
and the States to ensure that the credit of SGST used for
payment of IGST is transferred by the Exporting State to the
Centre. Similarly, IGST used for payment of SGST would be
transferred by the Centre to the Importing State. Further, the
SGST portion of IGST collected on B2C supplies would also
be transferred by the Centre to the destination State. The
transfer of funds would be carried out on the basis of
information contained in the returns filed by the taxpayers.
It's important to note that the GST framework is subject to
changes and amendments are passed based on the evolving
needs of the economy and the Government's policy decisions.
GST and Centre-State
Financial Relations

The implementation of GST has brought about a fundamental


shift in the financial relations between the Central
Government and the State Governments in India. GST is a
unified tax system that replaced multiple indirect taxes levied
by both the Central and State Governments. Under GST, both
the Central and State Governments share the authority to levy
and collect taxes on goods and services. This has led to
greater harmonization and uniformity in the tax structure
across States, promoting economic integration.

The GST system follows a dual structure, comprising Central


GST (CGST) and State GST (SGST), levied concurrently by
the Central and State governments, respectively. Additionally,
an Integrated GST (IGST) is levied on interstate supplies and
imports, which is collected by the Central Government but
apportioned to the destination state.
In terms of revenue distribution, the GST Council plays a
crucial role. It is a joint forum consisting of the Union Finance
Minister and representatives from all States and Union
Territories. The Council makes decisions on various aspects of
GST, including tax rates, exemptions, and revenue sharing
between the Central and State Governments. Except for one
decision, all decisions of the Council were taken by
consensus.
To ensure a smooth transition to the GST regime and address
any revenue losses incurred by the States, a compensation
mechanism was established. The Central Government was
committed to providing compensation to the States for any
revenue shortfall during the initial years of GST
implementation. This compensation was meant to bridge the
gap between the expected revenue growth and the actual
revenue collected by the States.

It has fostered greater coordination, reduced tax barriers, and


streamlined the tax system, leading to improved efficiency
and competitiveness in the Indian economy. The successful
implementation of GST relies on a cooperative and
consensus-based approach between the Central and State
Governments. It has transformed financial relations, ensuring
greater coordination and efficiency in the Indian tax system.
Bibliography

1. Goods and Services Tax Council

2. https://cleartax.in/s/understanding-
the-basics-of-gst

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