Summary on Goods & Services Tax – India

Practice Areas
  1. What is GST?
    • GST is one indirect tax for the whole nation, which will make India one unified common market.
    • GST is a single tax on the supply of goods and services, right from the manufacturer to the consumer replacing different types of indirect tax levies.
    • This is game changing reform for the Indian economy.
  2. Why is it important?
    • Several indirect tax levies will be replaced / subsumed in GST (For ex: Central excise duty, service tax, state sales tax, octroy, entry tax, purchase tax, luxury tax, etc.
    • This removes the cascading effect of taxes
    • Easy compliance and administration
    • Better control on leakage
  3. When this bill was passed?
    • In 2003, the Kelkar Task Force on indirect tax had suggested a comprehensive Goods and Services Tax (GST) based on VAT principle.
    • Finally bill was passed in Indian parliament in Aug 2016.
  4. How would GST be administered in India?Keeping in mind the federal structure of India, there will be two components of GST – Central GST (CGST) and State GST (SGST). Both Centre and States will simultaneously levy GST across the value chain.
    Intra-state supply of Goods & Services
    • Central GST(CGST)
    • State GST (SGST)
    Inter-state supply of Goods & Services
    • Integrated GST (IGST)
    Imports
    • Basic customs duty
    • Integrated GST (IGST)
    Exports
    • Zero rated
  5. How it works?
    Stage of supply chain Purchase value of input Value addition Value at which supply goods and services made to next stage Rate of CGST Rate of SGST CGST on putput SGST on putput Input tax credit on CGST Input tax credit on SGST Net CGST Net SGST
    Manufacturer 100 30 130 10% 5% 13 6.5 10 0 13-10=3 6.5-0=6.5
    Whole 130 20 150 10% 5% 15 7.5 13 6.5 15-13=2 7.5-6.5=1
    Retailer 150 10 160 10% 5% 16 8 15 7.5 16-15=1 8-7.5=0.5
  6. What are GST rates? Central government and states will decide on CGST and SGST rates within the above total rates.