What is GST?

GST is a multi-stage tax system which is comprehensive in nature and applied on the sale of
goods and services. The main aim of this taxation system is to curb the cascading effect of
other Indirect taxes and it is applicable throughout India.

Journey of GST IN INDIA

The GST journey began in the year 2000 when a committee was set up to draft law. It took
17 years from then for the Law to evolve. In 2017, the GST Bill was passed in the Lok Sabha
and Rajya Sabha. On 1st July 2017, the GST Law came into force.

Objectives Of GST
1. To achieve the ideology of ‘One Nation, One Tax’.
2. To subsume a majority of the indirect taxes in India
3. To eliminate the cascading effect of taxes
4. To curb tax evasion
5. To increase the taxpayer base
6. Online procedures for ease of doing business
7. An improved logistics and distribution system
8. To promote competitive pricing and increase consumption
 Given below is how will GST works:
 Manufacturer: The manufacturer will have to pay GST on the raw material that is
purchased and the value that has been added to make the product.
 Service Provider: Here, the service provider will have to pay GST on the amount that is
paid for the product and the value that has been added to it. However, the tax that has
been paid by the manufacturer can be reduced from the overall GST that must be paid.
 Retailer: The retailer will need to pay GST on the product that has been purchased from
the distributor as well as the margin that has been added. However, the tax that has been
paid by the retailer can be reduced from the overall GST that must be paid.
 Consumer: GST must be paid on the product that has been purchased.

What are the components of GST?

1. Central Goods and Services Tax : CGST is charged on the intra state supply of
products and services.
2. State Goods and Services Tax : SGST, like CGST, is charged on the sale of
products or services within a state.
3. Integrated Goods and Services Tax : IGST is charged on inter-state transactions
of products and services.
4. Union Territory Goods and Services Tax : UTGST is levied on the supply of
products and services in any of the Union Territories in the country, viz. Andaman
and Nicobar Islands, Daman and Diu, Dadra and Nagar Haveli, Lakshadweep, and
Chandigarh. UTGST is levied along with CGST.

Illustration:
 Let us assume that a dealer in Gujarat had sold the goods to a dealer in Punjab
worth Rs. 50,000. The tax rate is 18% comprising of only IGST.

In such a case, the dealer has to charge IGST of Rs.9,000. This revenue will go to
Central Government.

 The same dealer sells goods to a consumer in Gujarat worth Rs. 50,000. The GST
rate on goods is 12%. This rate comprises CGST at 6% and SGST at 6%.
 The dealer has to collect Rs.6,000 as Goods and Service Tax, Rs.3,000 will go to
the Central Government and Rs.3,000 will go to the Gujarat government since the
sale is within the state.

Tax Laws Before the Implementation of GST

 The Centre and the State used to collect tax separately. Depending on the state,
the tax regimes were different.
 Even though import tax was levied on one individual, the burden was levied on
another individual. In the cases of direct tax, the taxpayer must pay the tax.
 Prior to the introduction of GST, direct and indirect taxes were present in India.

What are the New Compliances Under GST?

Apart from online filing of the GST returns, the GST regime has introduced several
new systems along with it.
e-Way Bills
GST introduced a centralised system of waybills by the introduction of “E-way bills”.
This system was launched on 1st April 2018 for inter-state movement of goods and
on 15th April 2018 for intra-state movement of goods in a staggered manner.
Under the e-way bill system, manufacturers, traders and transporters can generate
e-way bills for the goods transported from the place of its origin to its destination on a
common portal with ease. Tax authorities are also benefited as this system has
reduced time at check -posts and helps reduce tax evasion.
E-invoicing
The e-invoicing system was made applicable from 1st October 2020 for businesses
with an annual aggregate turnover of more than Rs.500 crore in any preceding
financial years (from 2017-18). Further, from 1st January 2021, this system was
extended to those with an annual aggregate turnover of more than Rs.100 crore.
These businesses must obtain a unique invoice reference number for every
business-to-business invoice by uploading on the GSTN’s invoice registration portal.
The portal verifies the correctness and genuineness of the invoice. Thereafter, it
authorises using the digital signature along with a QR code.
e-Invoicing allows interoperability of invoices and helps reduce data entry errors. It is
designed to pass the invoice information directly from the IRP to the GST portal and
the e-way bill portal. It will, therefore, eliminate the requirement for manual data entry
while filing GSTR-1 and helps in the generation of e-way bills too.

GST Rates
The GST Council has assigned GST rates to different goods and services. While
some products can be purchased without any GST, there are others that come at 5%
GST, 12% GST, 18% GST, and 28% GST. GST rates for goods and services have
been changed a few time since the new tax regime was implemented in July 2017.

How to calculate gst

GST Council
GST Council is the governing body of GST having 33 members, out of which 2 members are of
centre and 31 members are from 28 state and 3 Union territories with legislation. The council
contains the following members (a) Union Finance Minister (as chairperson) (b) Union Minister of
States in charge of revenue or finance (as member) (c) the ministers of states in charge of
finance or taxation or other ministers as nominated by each states government (as member).
GST Council is an apex member committee to modify, reconcile or to procure any law or
regulation based on the context of goods and services tax in India. The council is headed by the
union finance minister Nirmala Sitharaman assisted with the finance minister of all the states of
India. The GST council is responsible for any revision or enactment of rule or any rate changes
of the goods and services in India.

Difference between vat and gst

Name of Item Applicable GST Rate

Mobile Phone 12%

Sanitizer 18%

Gold Jewellery 3%

Two wheeler 28%

Car 28%