Breaking Down the Basics
GST stands for Goods and Services Tax – an indirect consumption tax levied domestically in India on consumption of most goods and services.
GST came into effect through implementation of the 101st Amendment of the Constitution of India, at midnight on 1st July 2017.
Services tax, central excise duty, value added tax, tax levied on inter-state transportation of goods etc. are all subsumed under GST.
GST brings the whole nation under a unified indirect taxation system.
Basic Features of GST
Comprehensive – Almost all indirect taxes have come under its umbrella, except certain state taxes, STT (tax on sale and purchase of securities), etc.
Multistage – Levied on all stages of production process, however it is paid only by the final consumer (is returned to all other parties in different stages of the production process).
Destination–based – The Goods and Services tax is levied at the point of consumption, i.e. on the final consumer of the good/service, unlike previous origin-based taxes.
Multi – layered – GST has three distinct components with both Centre and State levying taxes on a join base (revenue is shared equally by both).
CGST: Tax collected by the Central government on intra-state sales.
SGST: Tax collected by the State government on intra-state sales.
IGST: Tax collected by the Centre on inter-state sales, the revenue is shared by the Centre depending on the destination.
The tax rates are divided into five tax slabs of 0%, 5%, 12%, 18%, and 28%.
GSTs levied on rates agreed upon by Centre and States.
GST council decides/recommends tax rate for different commodities. Most goods fall under 18%.
One Nation, One Tax – GST has simplified exchanges, as it has provided a uniform taxation policy for all States and Union Territories including Jammu and Kashmir.
Timeline and Implementation
Constitutional Amendments and Legislative Provisions
The GST Bill was reintroduced in 2014 by the Finance Minister P. Chidambaram to Parliament as the Constitution (122nd Amendment) Bill.
In 2016 the Bill was passed in both Houses of Parliament and given a green light by President – and renumbered as the Constitution (101st Amendment) Act, 2016.
- CGST covers Service Tax, Excise Duty.
- SGST covers VAT, Luxury tax.
- IGST is a system meant to coordinate inter-state trade.
The Lok Sabha, followed by Rajya Sabha passed four GST bills in July 2017 paving the way for GST to finally be implemented, namely – Central GST Bill, 2017; Integrated GST Bill, 2017; GST (Compensation to States) Bill, 2017; Union Territory GST Bill, 2017.
States have since passed State GST.
GST finally launched at midnight, 1st July 2017.
After being passed by J&K legislature on 7 July 2017, GST has brought the country under a Unified Indirect Taxation System – One Nation, One Tax.
Exemptions Under GST
Alcohol for human consumption, not commercial.
Petrol and Petroleum products.
Services related to agriculture, excluding horse rearing, are exempted from GST.
Distribution of electricity.
Grains, salt, jaggery, etc. have 0% GST rate.
The complete list of all exceptions to GST can be found here.
The Good and Bad of GST
The GST Council is the governing body, the apex institution, for implementation of GST rules in India.
The structure of the Council is as follows –
- Chairperson: Union Finance Minister, while the Vice Chairperson: chosen among Minsters of State Government.
- Members include Ministers of State (finance) and all Ministers of Finance/Taxation of each State.
- Quorum is by 50% while decisions are made by 75% majority.
- States have 2/3rd weightage in GST Council, while Centre has 1/3rd weightage.
The hierarchy of GST Council Secretariat can be found here.
The office of the council is located in New Delhi. It has the authority over –
Tax rates applicable under GST;
Tax exemption rules, special exemptions in certain states, related deadlines and rules; and
Due dates on GST forms etc.
It is the duty of the GST Council to make recommendations about GST to the Union Government as well as the State Governments. They act as conflict resolving body to settle disputes relating to GST between –
the Central Government and a State Government;
the Central Government and one or more States on one side and one or more States on the other side;
two or more States, which occurred due to any recommendation of the GST Council or due to the implementation of the recommendation of the Council.
Current Affairs POI:
The Council has met 36 times.
As on 14.05.2019, 1006 decisions have been implemented - 94.5% of the decisions of the GST Council had already been implemented, which is a big achievement considering that no occasion called for voting due to near unanimity in the Council.
For the first time since February the GST revenue has crossed the 1 lakh crore mark; GST revenues for October were 10 per cent higher than that of the same time last year showing a revival of consumption across the economy.