What is Goods and Services Tax?
Goods and Services Tax means a tax on supply of goods or services, or both, except taxes on supply of alcoholic liquor for human consumption
[Article 366(12A) of Constitution of India inserted w.e.f. 16-9-2016]
Note that the word used is ‘supply’ and not ‘sale’. Thus, stock transfers, branch transfers will also get covered under GST net.
GST will be payable on free supplies made to related persons. GST will not be payable to free gifts and free samples to unrelated person, but input tax credit in respect of such goods will have to be reversed.
IGST will be payable on inter-state stock transfers and branch transfers [Though CGST Act and IGST Act have not been extended to J&K, IGST will be payable].
For stock transfers or branch transfer within the State (except J&K), SGST and CGST will be payable only where the taxable person has more than one GST registrations within the State. If there is single registration within State, ‘Bill of Supply’ (challan) will be sufficient.
Basic scheme of GST is as follows —
What is Goods and Services Tax
♦ Goods and Services Tax (GST) will be on ‘supply’ of goods or services or both, in India except Jammu and Kashmir. Area upto 200 nautical miles inside sea is ‘India’ for purpose of GST.
♦ For supplies within the State or Union Territory – (a) Central GST (CGST) will be payable to Central Government and (b) State GST (SGST) or UTGST (Union Territory GST) will be payable to State Government or Union Territory (as applicable). Area upto 12 nautical miles inside sea part of State or Union Territory which is nearest.
♦ For inter-state supplies (supply from one State or Union Territory to another State or Union Territory), Integrated GST (IGST) will be payable to Central Government. IGST is payable if supply is beyond 12 nautical miles but upto 200 nautical miles.
♦ In addition, GST Compensation Cess of about 12% will be payable on pan masala, tobacco products, coal, aerated waters and motor cars.
♦ Basic customs duty. Education Cess and Secondary and Higher Education Cess of Customs, IGST and GST Compensation Cess (on goods were Compensation Cess is applicable) will be payable on import of goods.
♦ Distinction between goods and services will be mostly eliminated. This will eliminate problem of dual taxation presently faced by construction industry, works contract, food related services like restaurant and outdoor catering, leasing and hire services and software services.
♦ GST is based on Vat concept of allowing input tax credit of tax paid on inputs, input services and capital goods, for payment of output tax. This will avoid cascading effect of taxes.
♦ GST is consumption based tax i.e. tax is payable in the State where goods or services or both are finally consumed.
♦ The expected rates of GST – (CGST + SGST/UTGST) -Nil, 2%, 5%, 12%, 18% and 28%. These rates will apply to IGST also.
♦ Though tax is payable to both Central Government and State Government, control will be exercised either by State Government Authorities or Central Government Authorities. This will avoid dual control.
♦ GST Council (Goods and Services Tax Council) is Apex Constitutional body which will determine policies of GST.