(The Gist of Kurukshetra) GOODS AND SERVICES TAX (GST) - September - 2017

(The Gist of Kurukshetra) GOODS AND SERVICES TAX (GST) - September - 2017


Much awaited Goods and Services Tax (GST) is set to be implemented from July L", 2017. It is being lauded as the most important tax reform since 1947. Following is a brief overview of GST:

Salient Features of GST:

(i) The GST would be applicable on the supply of goods or services as against the present concept of tax on the manufacture or sale of goods or provision of services. It would be a destination based consumption tax. This
means that tax would accrue to the State or the Union Territory where the consumption takes place. It would be a dual GST with the Centre and States simultaneously levying tax on a common tax base.

(ii) The GST would apply to all goods other than. alcoholic liquor for human consumption and five petroleum products, viz. petroleum crude, motor spirit (petrol), high speed diesel, natural gas and aviation turbine fuel. It would apply to all services barring a few to be specified. The GST would replace a host of indirect taxes such as - Central Excise Duty, Service Tax, Central Surcharges and Cesses so far as they relate to supply of goods and services, State VAT, Luxury Tax, Purchase Tax etc.

(iii) The list of exempted goods and services would be common for the Centre and the States.

(iv) Threshold Exemption: Taxpayers with an aggregate turnover in a Financial Year up to RS.20 lakhs would be exempted from tax. For eleven Special Category States, like those in the North-East and the hilly States, the exemption threshold shall be Rs. 10 lakhs.

(v) An Integrated tax (IGST) would be levied and collected by the Centre on inter-State supply of goods and services. Accounts would be settled periodically between the Centre and the States to ensure that the SGST/UTGST portion of IGST is transferred to the destination State where the goods or Services are eventually consumed.

(vi) Use of Input Tax Credit (ITC): Taxpayers shall be allowed to take credit of taxes paid on inputs (input tax credit) and utilize the same for payment of output tax.

(vii) Exports and supplies to SEZ shall be treated as zero-rated supplies.

(viii) Import of goods and services would be treated as inter-State supplies and would be subject to IGST in addition to the applicable customs duties. The IGST paid shall be available as ITC for further transactions.


1. GST aims to make India a common market with common tax rates and procedures and remove the economic barriers, thus paving the way for an integrated economy at the national level. GST is a win-win situation for all the stakeholders of industry, government and the consumer. It will lower the cost of goods and services, give a boost to the economy and make the products and services globally competitive.

2. GST is largely technology driven. It will reduce the human interface to a great extent and this would lead to speedy decisions. GST will bring more transparency to indirect tax laws.

3. GST will give a major boost to the 'Make in India' initiative of the Government of India by making goods and services produced in India competitive in the National as well as International market.

4. Under the GST regime, exports will be zerorated in entirety unlike the present system, where refund of some taxes may not take place due to fragmented nature of indirect taxes between the Centre and the States. This will boost Indian exports in the international market.

5. GST is expected to bring buoyancy to the Government Revenue by widening the tax base and improving the taxpayer compliance. GST is likely to improve India's ranking in the Ease of Doing Business Index and is estimated to increase the GDP growth by 1.5 to 2 per cent.

6. The taxpayers would not be required to maintain records and show compliance with a myriad of indirect tax laws of the Central and the State Governments. They would only need to maintain records and show compliance in respect of Central GST, State GST and Integrated GST.

Other provisions of GST:

(i) Valuation of goods shall be done on the basis of transaction value i.e. the invoice price, which is the current practice under the Central Excise and Customs Laws. Taxpayers are allowed to issue supplementary or revised invoice in respect of a supply made earlier.

(ii) New modes of payment of tax are being introduced, viz. through credit and debit cards, National Electronic Fund Transfer (NEFT) and Real Time Gross Settlement (RTGS). (iii) E-Commerce companies are required to collect tax at source in relation to any supplies made through their online platforms, under fulfillment model, at the rate notified by the Government.

(iv) An antiprofiteering measure has been incorporated in the GST law to ensure that any benefits on account of reduction in tax rates results in commensurate reduction in prices of such goods/ services.

IT preparedness:

Putting in place a robust IT network is an absolute must for implementation of GST. A Special Purpose Vehicle called the GSTN has been set up to cater to the needs of GST. The functions of the GSTN would, inter alia, include: (i) facilitating registration; (ii) forwarding the returns to Central and State authorities; (iii) computation and settlement of IGST; (iv) matching of tax payment details with banking network; (v) providing various MIS reports to the Central and the State Governments based on the taxpayer return information; (vi) providing analysis of taxpayers' profile; and (vii) running the matching engine for matching, reversal and reclaim of input tax credit. The target date for introduction of GST is 1st July, 2017. The GSTN will also make available standard software for small traders to keep their accounts in that, so that straight away, it can be uploaded as their monthly returns on GSTN website. This will make compliance easier for small traders.

All States/UTs except the State of Jammu & Kashmir, are ready for roll-out of GST with effect from 1st July, 2017

As of 21st June, 2017, all the States and Union Territories (having assemblies), except the State of Jammu & Kashmir, have approved the State Goods and Services Tax (SGST) Act. The State of Kerala issued an Ordinance approving State GST Act while the State of West Bengal had issued an Ordinance in this regard on 15thJune, 2017. Now the only one State that is yet to pass the State GST Act is the State of J&K. Thus, almost the entire country including all the 30 States/UTs are now on board and ready for the smooth roll-out of GST with effect from 1st July, 2017.

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