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Jv-I/14/7066
1
CERTIFICATE
(…………………………) (……………………..)
(…………………………)
Coordinator
(……………………………..)
Dean
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Acknowledgment
I express my gratitude to all those who helped me to prepare and complete my dis-
sertation/training/project work entitled “Goods AND SERVICES TAX IN INDIA”.
First of all, I convey my deep gratitude and heart full thanks to Prof. (Dr.) R.K.
PATNI, Jayoti Vidyapeeth Women’s University for her inspiration, cooperation
and encouragement for pursuing my dissertation. Her valuable suggestion and guid-
ance helped me a lot to complete my work in this institution within a very short pe-
riod.
I render my sincere respect and heart full gratitude to Prof. (Dr.) R.K. PATNI
, Law and Governance, Jayoti Vidyapeeth Women’s University, and Jaipur. I am also
thankful to all the faculty members, for their valuable suggestion towards complet-
ing the dissertation work. I am also grateful to all my classmates, who helped me di-
rectly or indirectly in completing my dissertation/training/project work successful-
ly.
Last but not least, I am really ever grateful to my parents, who remained a constant
source of encouragement and inspiration during the completion of this work suc-
cessfully in Jayoti Vidyapeeth women’s University, Jaipur.
Ravina
(JV-I/14/7066)
3
DECLARATION
"I hereby declare that this submission is my own work and that, to
the best of my knowledge and belief, it contains no material previ-
ously published or written by another person nor materials which
have been accepted for the award of any other degree or diploma of
any university or institution of higher learning, except where due ac-
knowledgment has been made in the text.”
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CONTENTS
1 Introduction to Tax 6
2 History of Tax 8
3 Taxation in India 10
4 History of GST 14
5 What is GST 22
6 GST Bill 24
7 Benefits of GST 31
8 GST Return 35
9 SAC Codes 43
10 Conclusion 67
5
INTRODUCTION TO TAX
Arthasastra mentioned that each tax was specific and there was
no scope for arbitrariness. Tax collectors determined the schedule of
each payment, and its time, manner and quantity being all pre-
determined. The land revenue was fixed at 1/6 share of the produce
and import and export duties were determined on ad-valorem basis.
The import duties on foreign goods were roughly 20% of their value.
Similarly, tolls, road cess, ferry charges and other levies were all
fixed.
Kautilya also laid down that during war or emergencies like famine
or floods, etc. the taxation system should be made more stringent
and the king could also raise war loans. The land revenue could be
raised from 1/6th to 1/4th during the emergencies. The people en-
gaged in commerce were to pay big donations to war efforts.
Kautilya's concept of taxation emphasised equity and justice
in taxation. The affluent had to pay higher taxes as compared to
the poor.
7
HISTORY OF TAX
In India, this tax was introduced for the first time in 1860, by Sir
James Wilson in order to meet the losses sustained by the Govern-
ment on account of the Military Mutiny of 1857. In 1918, a new in-
come tax was passed and again it was replaced by another new act
which was passed in 1922.This Act remained in force up to the as-
sessment year 1961-62 with numerous amendments.
In consultation with the Ministry of Law finally the Income Tax Act,
1961 was passed. The Income Tax Act 1961 has been brought into
force with 1 April 1962. It applies to the whole of India and Sikkim
(including Jammu and Kashmir).Since 1962 several amendments of
far-reaching nature have been made in the Income Tax Act by the
Union Budget every year. Since 1962 several amendments of far-
reaching nature have been made in the Income Tax Act by the Union
Budget every year.
Central Board of Revenue bifurcated and a separate Board for Direct
Taxes known as Central Board of Direct Taxes (CBDT) constituted
under the Central Board of Revenue Act, 1963. The major tax en-
actment in India is the Income Tax Act, 1961 passed by the Parlia-
ment, which imposes a tax on the income of persons.
This Act imposes a tax on income under the following five
heads:
8
Income from other sources.
In Terms of the Income Tax Act, 1961, a person includes:
Individual
Company
Firm
Association of Persons (AOP)
Hindu Undivided Family (HUF)
Body of Individuals (BOI)
Local authority
Artificial Judicial person not falling in any of the preceding cate-
gories.
Taxation in India
Tax System in India
India has a well-developed tax structure with clearly demarcated au-
thority between Central and State Governments and local bodies.
Central Government levies some direct and indirect taxes on indi-
vidual and commodities respectively. Direct taxes are, Personal In-
come Tax, Wealth Tax, and Corporation Tax while indirect tax in-
cludes; Sales Tax, Excise Duty, Custom Duty and Service Tax. Value
Added Tax (VAT), stamp duty, state excise, land revenue and profes-
sion tax are levied by the State Governments. Local bodies are em-
powered to levy tax on properties, octroi and for utilities like water
10
supply, drainage etc. Indian taxation system has undergone tremen-
dous reforms during the last decade. The tax rates have been ra-
tionalized and tax laws have been simplified resulting in better com-
pliance, ease of tax payment and better enforcement. The process
of rationalization of tax administration is ongoing in India.
Direct Taxes
In case of direct taxes (Income Tax, Wealth Tax, Corporation tax
etc.), the burden directly falls on the taxpayer. These are those taxes
which can’t be transferred on the others by the tax payers.
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Securities Transaction Tax (STT)
1. Wealth Tax
Wealth tax, in India, is levied under Wealth-tax Act, 1957. Wealth
tax is a tax on the benefits derived from property ownership. The tax
is to be paid year after year on the same property on its market val-
ue, whether or not such property yields any income. Under the Act,
the tax is charged in respect of the wealth held during the assess-
ment year by the following persons: -
• Individual
• Company
Indirect Taxation
Indirect taxes are those taxes which can be transferred on the oth-
ers by the tax payers. As if the central government increases the rate
of service tax on different services then sellers pass on this incre-
ment on the final consumers of the services.
1. Sales tax (imposed on the sale of goods. It can be of two types;
central sales tax and states sales tax)
2. Central Sales Tax (CST): It is generally payable on the sale of all
goods by a dealer in the course of inter-state trade or commerce or,
outside a state or, in the course of import into or, export from India.
• Value Added Tax (VAT) VAT is a multi-stage tax on goods that is
levied across various stages of production and supply with credit
12
given for tax paid at each stage of Value addition. Introduction of
state level VAT is the most significant tax reform measure at state
level. The state level VAT has replaced the existing State Sales Tax. It
was introduced from April 1, 2005 in the country.
3. Excise Duty: Central Excise duty is an indirect tax levied on goods
manufactured in India. Excisable goods have been defined as those,
which have been specified in the Central Excise Tariff Act as being
subjected to the duty of excise. There are three types of Central Ex-
cise duties collected in India namely
Additional Duty of Excise
Section 3 of the Additional duties of Excise (goods of special im-
portance) Act, 1957 authorizes the levy and collection in respect of
the goods described in the Schedule to this Act. This is levied in lieu
of sales Tax and shared between Central and State Governments.
These are levied under different enactments like medicinal and toi-
let preparations, sugar etc. and other industries development etc.
4. Customs Duty
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Custom or import duties are levied by the Central Government of
India on the goods imported into India. The rate at which customs
duty is livable on the goods depends on the classification of the
goods determined under the Customs Tariff. The Customs Tariff is
generally aligned with the Harmonized System of Nomenclature
(HSL).In line with aligning the customs duty and bringing it at par
with the ASEAN level, government has reduced the peak customs
duty from 12.5 per cent to 10 per cent for all goods other than agri-
culture products. However, the Central Government has the power
to generally exempt goods of any specified description from the
whole or any part of duties of customs livable thereon. In addition,
preferential/concessional rates of duty are also available under the
various Trade Agreements.
5. Service Tax
Service tax was introduced in India way back in 1994 and started
with mere 3 basic services viz. general insurance, stock broking and
telephone. Today the counter services subject to tax have reached
over 120. There has been a steady increase in the rate of service tax.
HISTORY OF GST
The implementation of the Goods and Services Tax (GST) in India
was a historical move, as it marked a significant indirect tax reform
in the country. The amalgamation of a large number of taxes (levied
at a central and state level) into a single tax is expected to have big
advantages. One of the most important benefits of the move is the
mitigation of double taxation or the elimination of the cascading ef-
14
fect of taxation. The initiative is now paving the way for a common
national market. Indian goods are also expected to be more compet-
itive in international and domestic markets post GST implementa-
tion. From the viewpoint of the consumer, there would be a marked
reduction in the overall tax burden that is currently in the range of
25% to 30%. The GST, due to its self-policing and transparent nature,
is also easier to administer on an overall scale.
When did GST start?
Several countries have already established the Goods and Services
Tax. In Australia, the system was introduced in 2000 to replace the
Federal Wholesale Tax. GST was implemented in New Zealand in
1986. A hidden Manufacturer’s Sales Tax was replaced by GST in
Canada, in the year 1991. In Singapore, GST was implemented in
1994. GST is a value-added tax in Malaysia that came into effect in
2015.
History of GST in India
15
by Asim Dasgupta, the finance minister of West Bengal. Das-
gupta chaired the committee till 2011.
2004: A task force that was headed by Vijay L. Kelkar the advi-
sor to the finance ministry indicated that the existing tax struc-
ture had many issues that would be mitigated by the GST sys-
tem.
February 2005: The finance minister, P. Chidambaram, said that
the medium-to-long term goal of the government was to im-
plement a uniform GST structure across the country, covering
the whole production-distribution chain. This was discussed in
the budget session for the financial year 2005-06.
February 2006: The finance minister set 1 April 2010 as the GST
introduction date.
November 2006: Parthasarthy Shome, the advisor to P. Chid-
ambaram, mentioned that states will have to prepare and make
reforms for the upcoming GST regime.
February 2007: The 1 April 2010 deadline for GST implementa-
tion was retained in the union budget for 2007-08.
February 2008: At the union budget session for 2008-09, the fi-
nance minister confirmed that considerable progress was being
made in the preparation of the roadmap for GST. The targeted
timeline for the implementation was confirmed to be 1 April
2010.
July 2009: Pranab Mukherjee, the new finance minister of In-
dia, announced the basic skeleton of the GST system. The 1
April 2010 deadline was being followed then as well.
November 2009: The EC that was headed by Asim Dasgupta put
forth the First Discussion Paper (FDP), describing the proposed
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GST regime. The paper was expected to start a debate that
would generate further inputs from stakeholders.
February 2010: The government introduced the mission-mode
project that laid the foundation for GST. This project, with a
budgetary outlay of Rs.1, 133 crore, computerised commercial
taxes in states. Following this, the implementation of GST was
pushed by one year.
March 2011: The government led by the Congress party puts
forth the Constitution (115th Amendment) Bill for the introduc-
tion of GST. Following protest by the opposition party, the Bill
was sent to a standing committee for a detailed examination.
November 2012: P. Chidambaram and the finance ministers of
states hold meetings and set the deadline for resolution of is-
sues as 31 December 2012.
February 2013: The finance minister, during the budget session,
announces that the government will provide Rs.9, 000 crore as
compensation to states. He also appeals to the state finance
ministers to work in association with the government for the
implementation of the indirect tax reform.
August 2013: The report created by the standing committee is
submitted to the parliament. The panel approves the regulation
with few amendments to the provisions for the tax structure
and the mechanism of resolution.
May 2014: The Constitution Amendment Bill lapses. This is the
same year that Narendra Modi was voted into power at the
Centre.
February 2015: Jaitley, in his budget speech, indicated that the
government is looking to implement the GST system by 1 April
2016.
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March 2016: Jaitley says that he is in agreement with the Con-
gress’s demand for the GST rate not to be set above 18%. But
he is not inclined to fix the rate at 18%. In the future if the Gov-
ernment, in an unforeseen emergency, is required to raise the
tax rate, it would have to take the permission of the parlia-
ment. So, a fixed rate of tax is ruled out.
June 2016: The Ministry of Finance releases the draft model law
on GST to the public, expecting suggestions and views.
August 2016: The Congress-led opposition finally agrees to the
Government’s proposal on the four broad amendments to the
Bill. The Bill was passed in the Rajya Sabha.
September 2016: The Honourable President of India gives his
consent for the Constitution Amendment Bill to become an Act.
2017: Four Bills related to GST become Act, following approval
in the parliament and the President’s assent:
o Central GST Bill
The GST Council also finalized on the GST rates and GST rules. The
Government declares that the GST Bill will be applicable from 1 July
2017, following a short delay that is attributed to legal issues.
Tax Structure before GST
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would levy tax on goods manufacture, except alcohol for con-
sumption, narcotics, opium, etc.
The states had the power to charge tax on the sale of goods.
The Centre would levy the Central Sales Tax that was collected
by the originating states.
The Centre was also levying service tax on all types of services.
Additionally, the Centre was charging and collecting additional
duties of customs on goods that were imported into or export-
ed from India. This tax was levied in addition to the Basic Cus-
toms Duty. This additional duty of customs is referred to as
Countervailing Duty (CVD) and Special Additional Duty (SAD)
and it counter balances excise duties, state VAT, sales tax, and
other such taxes.
Constitution (One Hundred and First) Amendment Act, 2016
The Bill suggests levy of GST on all goods and services, except
alcohol that humans consume.
The tax is levied as Dual GST by the Centre and states/union
territories. The component levied by the Centre is Central Tax -
CGST, while that levied by the state is State Tax - SGST. The tax
levied by union territories is Union Territory Tax - UTGST.
The Centre would levy the GST on inter-state trade or imports
of services and goods. This tax is referred to as Integrated Tax -
IGST.
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The Central Government will also levy excise duty on tobacco
products, in addition to GST.
The tax on five petroleum products, i.e., high speed diesel,
crude, petrol, natural gas, and Aviation Turbine Fuel (ATF) will
be outlined later after a decision is made by the GST Council.
September 2016: A Goods and Services Tax Council (GSTC) was cre-
ated by the union finance minister, revenue minister, and ministers
of state to take decisions on GST rates, thresholds, taxes to be sub-
sumed, exemptions, and other features of the taxation system. The
state finance ministers mentioned that the EC would be a platform
for states where there would be discussions of their regional issues.
The GST Council is a separate entity that would oversee the imple-
mentation of the GST system.
Goods and Services Tax Network
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Benefits of GST Implementation
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What is GST?
GST (Goods and Services Tax) is a single indirect tax aimed at making
the country a unified common market. It is imposed on the supply of
goods and/or services within India. Multiple indirect taxes that the
Central Government or State Governments impose on suppliers and
consumers are subsumed by GST. The taxes levied and collected by
the Centre until 1 July, 2017, that are subsumed by GST include Cen-
tral Excise duty, Duties of Excise (medicinal and toilet preparations),
Additional Duties of Excise (goods of special importance), Additional
Duties of Excise (textile and textile products), Additional Duties of
Customs, Special Additional Duties of Customs, Service Tax, and Cen-
tral surcharges and cesses. The State taxes subsumed under GST in-
clude State VAT, Entry Tax, Central Sales Tax, Entertainment and
Amusement Tax, Luxury Tax, Purchase Tax, Taxes on advertise-
ments, Taxes on gambling, betting and lotteries, and State surcharg-
es and cesses relating to the supply of commodities and services.
The implementation of GST by Prime Minister Narendra Modi is con-
sidered a historical move, considering the fact that it significantly re-
formed indirect tax in India. The consolidation of several different
taxes into one is forecast to help the country move forward by elim-
inating the cascading of taxes. The reform is also set to pave the way
for a common national market, thereby making Indian commodities
and services increasingly competitive in both local as well as global
markets a number of countries around the globe have already im-
plemented GST. For instance, Australia saw the introduction of the
tax in 2000, replacing the Federal Wholesale Tax. Canada witnessed
the replacement of the Manufacturer’s Sales Tax with GST in 1991.
New Zealand saw the implementation of the reform in 1986, while
22
Singapore did so in 1994. GST in Malaysia was introduced in 2015,
and India has jumped on the bandwagon to provide benefits to the
consumers, the industry, and the government. Atal Bihari Vajpayee,
the 10th Prime Minister of India, was the first to recommend the
idea of adopting GST during his time in office, in the year 2000. An
Empowered Committee was formed by the state finance ministers
at the time, and their aim was to formulate a structure for GST as
they already had experience in creating State VAT. The Centre as
well as the State had representatives who were urged to examine
several different aspects of the proposal so as to come up with re-
ports on the taxation of services, taxation of inter-state supplies,
thresholds, and exemptions. The Finance Minister of West Bengal at
the time, Asim Dasgupta, headed the committee and chaired it till
2011. The advisory to the Finance Ministry between 2002 and 2004,
Vijay Kelkar, led a task force and sent a report to the Ministry in
2004, highlighting the issues with the then tax structure, adding that
these issues could be mitigated by adopting GST. During his third
term as the Finance Minister of India, P. Chidambaram said in 2005
that the government’s medium-to-long term objective was to intro-
duce a uniform taxation structure across India and cover the entire
production-distribution chain. As a result, a discussion regarding the
same took place in the Budget Session in FY 2005-06, and 1 April,
2010, was set as the date on which GST would be implemented in
India. The advisor to Chidambaram, Parthasarathy Shome, said that
preparations by the state to make reforms may take time, but the
deadline to implement the regime was retained at 1 April, 2010, in
the Union Budget 2007-08. Chidambaram confirmed that significant
progress was being made by the states to prepare for the implemen-
23
tation of GST in the Union Budget 2008-09, and the deadline re-
mained intact.
In 2009, following the appointment of Pranab Mukherjee as the new
Finance Minister of India, an announcement was made regarding
the basic framework of GST, and there was still no change in the
deadline. In late 2009, the Empowered Committee, led by Asim Das-
gupta, presented the First Discussion Paper (FDP), explaining in de-
tail the proposed GST reform. The foundation for GST, however, was
laid by the Mission-Mode Project introduced by the government.
The budgetary outlay of the project was Rs.1, 133 crore, and it led to
the computerization of commercial taxes in the various states of In-
dia. Following this move, GST implementation was delayed by a
year.
The 115th Amendment to the Constitution saw the Government,
headed by Congress, put forth the bill for the implementation of
GST. The bill drew protests from the opposition party and was then
sent for detailed scrutiny to a standing committee. The bill was dis-
cussed by the committee in June 2012, and concerns were raised by
the opposition party over clause 279B as it provided extra powers to
the Centre. As a result, Finance Ministers of various states along
with the Finance Minister of India held meetings before setting a
deadline to resolve the issues by 31 December, 2012.
24
GST council, over time, finalized GST rules and rates, and the Gov-
ernment announced that GST will come into effect on 1 July, 2017
GST Bill
The GST Bill has become one of the main points of discussion around
the country thanks to its ability to completely reform the whole tax-
ation system in India. The objective of the bill is to simplify the sys-
tem for taxpayers by unifying the taxes applicable to consumers and
suppliers alike. GST was implemented after the approval of four bills
passed by the government, viz., Goods and Services Tax Bill, Inte-
grated GST Bill, Compensation GST Bill, and Union Territory GST Bill.
One of the reasons for the implementation of the GST Bill, as re-
vealed by the Finance Minister of India, Mr. Arun Jaitley, is the im-
pact it will have in keeping inflation in check. Moreover, the differ-
ent kinds of taxes applicable to different commodities and services
in different states will be uniform across the country depending on
the category under which they fall, therefore removing ambiguity.
Even individuals who are heavily taxed can find some respite under
GST.
Prior to 1 July, 2017, the Centre and the State calculated and
charged taxes depending upon the tax layers that were already be-
ing charged on a commodity or service, and not the original price of
the commodity or service. A move like this could adversely affect the
country’s GDP. Through the GST Bill, not only will business opera-
tions become smoother, but it will also keep a check on tax evasion.
Through the GST Bill, the introduction of a multi-tier tax slab will see
four tax slabs applicable to commodities and services in India – 5%,
25
12%, 18% and 28%. Although GST aimed at levying a uniform tax
rate on all products and services, four different tax slabs were intro-
duced because daily necessities could not be subject to the same
rate as luxury items. As a result, the GST Bill is expected to have a
good impact on the general public as products of mass consumption,
such as food grains, will not be taxed. Other commodities and ser-
vices that are commonly used, like soaps and toothpaste will attract
12%-18% tax, which is lower than the current rate of more than
20%. Even household products such as refrigerators and washing
machines will be cheaper as the rate of tax now applicable to them
is 28% as opposed to the previous rate of 30%-31%.
Most of the commodities and services that are subject to GST have
been categorized under four tax slabs, viz. 5%, 12%, 18%, and 28%.
However, GST Rates is not applicable to some goods and services,
such as jute, fish, eggs, fresh meat, milk, chicken, curd, fresh fruits,
butter milk, vegetables, natural honey, bread, salt, besan, prasad,
sindoor, printed books, bindi, judicial papers, newspapers, hand-
loom, bangles, horn cores, bone meal, bone grist, horn meal, hoof
meal, palmyra jaggery, cereal grains hulled, colouring and drawing
books, etc.
Here is a list of goods and services under the different tax slabs:
Commodities subject to 5% GST:
Agarbatti
Apparels up to Rs.1,000
26
Braille paper
Braille typewriters
Braille watches
Cashew nuts
Medicines
Milk food for babies
Packaged food items
Packed paneer
Pizza bread
Postage stamps
Revenue stamps
Roasted coffee beans
Rusk
Sabudana
Skimmed milk
Spices
Stamp-post marks
Stent
Sugar
Tea
Services Subject to 5% GST:
27
Commodities Subject to 12% GST:
Almonds
Animal fat sausage
Apparel above Rs.1000
books
Fish knives
Forks
Frozen meat products
Fruits
Ghee
Glasses for corrective spectacles and flint buttons
Jelly
Jam
Ludo
Mobile
Namkeen
Non-AC restaurants
Notebooks
Nuts
Packaged dry fruits
Packed coconut water
Preparations of vegetables
Sewing machine
Skimmers
Spoons
State-run lotteries
Tongs
Tooth powder
28
Umbrella
Work contracts
Services Subject to 12% GST:
29
Instant food mixes
Kajal pencil sticks
Preserved vegetables
printed
Printers
Salad dressings
Soap
Soups
Speakers
Steel products
Tampons
Tissues
Services Subject to 18% GST:
Aerated water
After shave
Aircraft for personal use
Automobiles Motorcycles
Bidis
Ceramic tiles
Chewing gum Molasses
30
Chocolates devoid of cocoa
Deodorants
Dishwasher
Dye
Hair clippers
Hair shampoo Sunscreen
Paint
Pan masala
Shavers
Shaving creams
Vacuum cleaner
Vending machines
Waffles and wafers coated with chocolate
Services Subject to 28% GST:
Benefits of GST
The Goods and Services Tax (GST) is imposed on the supply of prod-
ucts and/or services within the country. It subsumes multiple indi-
rect taxes that are imposed by the State Governments or the Central
Government, such as Service Tax, Purchase Tax, Central Excise Duty,
Value Added Tax, Entry Tax, Luxury Tax, Local Body Taxes, etc.
31
GST offers benefits to the government, the industry, as well as the
citizens of India. The price of goods and services is expected to re-
duce under the new reform, while the economy will receive a
healthy boost. It is also expected to make Indian products and ser-
vices internationally competitive. Following are some of the main
benefits of GST:
Uniformity in Taxation: The objective of GST is to drive India
towards becoming an integrated economy by charging uniform
tax rates and eliminating economic barriers, thereby making
the country a common national market. The subsuming of the
aforementioned State and Central indirect taxes into just one
tax will also provide a major lift to the Government’s ‘Make in
India’ campaign, as goods that are produced or supplied in the
country will be competitive not only in national markets, but in
the international ones as well. Moreover, IGST (Integrated
Goods and Services Tax) will be levied on all imported goods.
IGST will be equal to State GST + Central GST, more or less, thus
bringing uniformity in taxation on both local as well as import-
ed goods.
Cascading of Taxes: The cascading of taxes will be prevented by
GST as the whole supply chain will get an all-inclusive input tax
credit mechanism. Business operations can be streamlined at
each stage of supply thanks to the seamless accessibility to in-
put tax credit across products or services.
32
funds, returns, etc., will be automated and simplified. Whether
it is the filing of returns, filing of refund claims, payment of tax-
es, or even registration, all processes will be done online via
GSTN. The verification of input tax credit will be done online
too, and input tax credit across the country will be matched
electronically, thereby turning the process into an accountable
and transparent one. As a result, the process will also be much
quicker since the taxpayer will not have to interact with the tax
administration.
33
es. A single rate and a single mechanism will prevail across India,
thereby helping in ensure that there is no overlapping of taxes. For
instance, if the GST rate applicable to a certain product is 20% and a
consumer purchases it for Rs.200, the GST amount would be 20% of
Rs.200 = Rs.40. The overall GST amount paid by all three entities, viz.
the manufacturer, the wholesaler, and the retailer will never be
more than Rs.40. As a result, the tax applicable to the retailer as per
the previous system will be waived off and he can save money on
tax. The same applies to manufacturers and wholesalers as they
would all have paid GST on the same commodity, thereby providing
relief on each other’s tax burden.
GST helps in decreasing transaction costs, which in turn make it easy
to improve business, which eventually increases competition within
the industry. An increase in competition will also help in generate
more jobs as newer businesses are established across industries. Ex-
porters and manufacturers can also reap the benefits of GST as most
of the state and central taxes would no longer be applicable to
products and services, and there will be no more levy of Central
Sales Tax either. Lowered costs in the Indian industry will mean that
Indian exports will receive a major boost, therefore making Indian
goods and services more competitive in international markets.
Since all indirect taxes charged by the state governments and the
central government will be subsumed by GST, it will become simpler
to administer the taxation system, especially because of the pres-
ence of a robust IT system. Evading GST will become almost impos-
34
sible due to the use of an advanced IT platform, thereby promoting
the payment of taxes.
Benefits to consumer
GST RETURN
GST returns must be filed by all persons who register themselves
under GST. There are many different kinds of GST returns that must
be filed every month, according to the CGST Act, 2017. Even an an-
nual return has to be filed by all those who are registered under
GST. Entities registered under the GST Composition Scheme will
have to file their returns on a quarterly basis as well as annually. The
most common returns that must be filed include GSTR 1, GSTR 2,
and GSTR 3.Normal taxpayers will have to submit these three re-
turns on a monthly basis along with one annual return, as per the
CGST law. Taxpayers who are registered as Input Service Distributors
are liable to collect or deduct the tax (TCS/TDS). All registered taxa-
35
ble individuals are required to submit outward supply information in
Form GSTR 1 by the 10th day of the following month.
The Kinds of returns applicable under GST
GST has a number of returns that must be filed electronically via the
GST Network portal. Here is a list of returns applicable under GST:
GSTR 1: Information regarding outward supplies of commodi-
ties or services by registered taxable suppliers. The return due
date will be the 10th day of the following month.
GSTR 1A: Information relating to auto-drafted supplies of
commodities or services. The return due date will be the 15th
day of the following month.
GSTR 2: Information relating to inward supplies of products and
services by registered taxable recipients. The return due date
will be the 15th day of the following month.
GSTR 2A: Information relating to auto-drafted supplies from
GSTR 1 or GSTR 5 to the recipient.
GSTR 3: This is a monthly return based on the finalisation of in-
formation relating to outward supplies as well as inward sup-
plies in addition to the payment of tax amount by registered
taxable persons. The return due date will be the 20th day of the
following month.
GSTR 3A: Notice to return defaulter under Section 46 of the
Central GST Act, 2017.
GSTR 4: Quarterly return for registered individuals who have
selected the composition levy by composition suppliers. The re-
turn due date will be the 18th day of the month next to quar-
ter.
36
GSTR 4A: Auto-drafted information for registered individuals
who have chosen the composition levy.
GSTR 5: Return for NRI taxable individuals by NRI taxable indi-
viduals. The return due date will be the 20th day of the follow-
ing month.
GSTR 5A: Information relating to the supply of database access,
online information, or retrieval service by an individual located
outside the country made to non-taxable individuals in India.
GSTR 6: Return for Input Service Distributor by Input Service
Distributor. The return due date will be the 13th day of the fol-
lowing month.
GSTR 6A: Information relating to auto-drafted supplies from
GSTR 1 or GSTR 5 to Input Service Distributors.
GSTR 7: Return for Tax Deducted at Source by the tax deductor.
The return due date will be the 10th day of the following
month.
GSTR 7A: Tax Deducted at Source Certificate.
GSTR 8: Statement for Tax Collected at Source by the tax collec-
tor or e-commerce operator. The return due date will be the
10th day of the following month.
GSTR 9: GST Annual return by registered taxable persons. The
return due date will be the 31st of December of the following
financial year.
GSTR 9A: Simplified annual return by compounding taxable in-
dividuals registered under Section 8.
GSTR 10: GST final return by taxable individual whose registra-
tion is either cancelled or surrendered. The return due date will
be within three month from the date on which the registration
37
was cancelled or the date on which the cancellation order was
issued, whichever is later.
GSTR 11: GST inward supplies statement for (Universal Identifi-
cation Number) UIN by individuals having UIN and claiming a
refund. The return due date will be the 28th day of the month
after the month for which the statement was filed.
ITC-1A: GST ITC mismatch report.
GST returns can be filed only via the online mode. Offline prepara-
tion of returns can also be done, and individuals who choose the of-
fline route will have to upload their returns onto the portal. A com-
mon e-return will have to be filed for Central GST, State GST, Inte-
grated GST and Additional Tax. Taxpayers who are registered under
38
GST will have to file their returns on the GST portal. The filing can be
done by the individual himself/herself or via an authorised repre-
sentative.
Annual Returns
All registered entities, apart from persons who pay tax under Section
51 or 52, or an Input Service Distributor, as an NRI taxable person
39
and a regular taxable person, should electronically submit their an-
nual returns as mentioned in sub-section (1) of Section 44 in Form
GSTR 9 via the GST portal. The return can be filed by the person di-
rectly or via a Facilitation Centre notified by the Commissioner.
Final Return
The current tax structure that has been replaced by GST and a num-
ber of changes are in order. Here are the most prominent difference
between the VAT structure and GST:
40
tax deducted at source,
and surcharge and cesses.
Validation Under VAT, the system will Under GST, the vali-
partly validate the returns, dation will take place
and full verification will be on the system, and
subject to assessments by consistency checks
state or central authorities. will be carried out on
input credit availed,
tax payments, and
utilisation.
Basic Customs Under VAT, the centre No change.
Duty charges tax on imports un-
der a separate act.
Excise Duty Under VAT, excise duty will Under GST, the ex-
be levied up to the point of cise duty will be re-
manufacturing. placed by Central
GST and tax will be
levied up to retail
level.
Service Tax Under VAT, the centre Under GST, the State
charges service tax on a list GST subsumes ser-
of services under the Fi- vice tax depending
nance Act on provi- upon rules relating
sion/payment basis. to Place of Supply.
State VAT Under VAT, all commodi- Under GST, the State
ties apart from those ex- GST subsumes this
empt are taxed. tax.
Central Sales Under VAT, CST is charged Under GST, the Inte-
Tax at a concessional rate of grated GST sub-
41
2% so far as inter-state sumes CST.
transfers are concerned
against C-Forms. The full
rate applicable otherwise
ranges from 5% to 14.5%.
Tax on Inter- Under VAT, this tax is ex- Under GST, this tax is
State Transfer empt against Form F. levied but dealers
of Commodities will have access to
to Agent or full credit.
Branch
Tax on Export of Under VAT, this tax is ex- No change.
Commodities empt.
and Services
Tax on Transfer Under VAT, this tax is gen- Under GST, this tax
of Commodities erally exempt, but its ap- may be levied unless
to Agent or plicability depends upon TIN of the transferor
Branch state procedures. and transferee is the
same.
Cross Set-Off of Under VAT, set-off of ser- Under GST, set-off
Levy vice tax and excise duty is between State GST
permitted. and Central GST is
not allowed.
Cascading Effect Under VAT, credit between Under GST, credit
service tax and excise duty available on the
is available, but there is no whole amount of
set-off against VAT on ex- taxes up to retailer.
cise duty.
Disallowance of Under VAT, this is not per- Under GST, there will
inputs or input mitted. be no such disallow-
42
services utilised ance, unless the GST
in exempted Council finalises a list
commodities or of those items falling
services under the Negative
List.
Disallowance of Under VAT, there are a few Under GST, there will
credit on cer- non-creditable commodi- be no such disallow-
tain items ties and services under VAT ance unless the GST
as well as CENVAT rules. Council specifically
allows it.
SAC Code
SAC stands for Services Accounting Code. This code is used for the
classification of services. Each kind of service offered has a unified
code for measurement, recognition and taxation. SAC Codes in the
present regime have been clearly defined for each kind of service of-
fered. Here are the SAC codes for the sections under which they are
classified:
SECTION 5: CONSTRUCTION SERVICES Group 99541: Construction
Services of Buildings
43
995413 Construction services of industrial buildings such as build-
ings used for production activities (used for assembly line
activities), workshops, storage buildings and other similar
industrial buildings
995414 Construction services of commercial buildings such as office
buildings, exhibition & marriage halls, malls, hotels, restau-
rants, airports, rail or road terminals, parking garages, pet-
rol and service stations, theatres and other similar build-
ings.
995415 Construction services of other non-residential buildings
such as educational institutions, hospitals, clinics including
vertinary clinics, religious establishments, courts, prisons,
museums and other similar buildings
995416 Construction Services of other buildings n.e.c
995419 Services involving Repair, alterations, additions, replace-
ments, renovation, maintenance or remodelling of the
buildings covered above.
Group 99542: General Construction Services of Civil Engineering
Works
45
995473 Painting services.
995474 Wall tiling and floor services.
995475 Wall covering, wall papering, and other floor laying ser-
vices.
995476 Carpentry and joinery services.
995477 Railing and fencing services.
995478 Other building finishing and completion services.
995479 Services that involve repair, replacements, alterations,
maintenance and additions or the finishing or completion
of the aforementioned works.
SECTION 6: DISTRIBUTIVE TRADE SERVICES, ACCOMMODATION,
FOOD AND BEVERAGE SERVICES, GAS AND ELECTRICITY DISTRIBU-
TION SERVICES, AND TRANSPORT SERVICES
Group 99611: Services in Wholesale Trade
996111 Services provided on a contract basis or for a commis-
sion/fee on wholesale trade.
46
cluding door delivery, takeaway services and room services.
996333 Services offered in canteens and other similar establish-
ment functions.
996334 Catering in marriage halls, exhibition halls and other in-
door/outdoor events.
996335 Catering in flights, trains, etc.
996336 Preparation and/or supply services, edible preparations,
non-alcoholic and alcoholic beverages to airlines and other
transport operators.
996337 Other contract food services.
996339 Other food, edible preparations, non-alcoholic and alcohol-
ic beverages serving services.
Group 99641: Passenger Transport Services
47
Road by Bus, Car, non-scheduled long distance bus and
coach services, stage carriage etc
996423 Taxi services including radio taxi & other similar services
996424 Coastal and transoceanic (overseas) water transport ser-
vices of passengers by Ferries, Cruise Ships etc
996425 Domestic/International Scheduled Air transport services of
passengers
996426 Domestic/international non-scheduled air transport ser-
vices of Passengers
Group 99651: Land Transport Services of Goods
996511 Road transport services of goods including parcels, office
and household furniture, letters, live animals, containers,
etc. by trucks, animal or man-drawn vehicles, refrigerator
vehicles, trailers and other vehicles.
996512 Railway transport services of goods including office and
household furniture, parcels, letters, live animals, bulk car-
go, intermodal containers, etc.
996513 Transport services of natural gas and petroleum, sewerage,
water and other goods.
996519 Other land transport services of goods.
Group 99652: Water Transport Services of Goods
996521 Transoceanic and coastal water transport services of goods
by tankers, container ships, bulk cargo vessels, refrigerator
vessels, etc.
996522 Inland water transport services of goods by tankers, refrig-
erator vessels and other vessels.
Group 99653: Air and Space Transport Services of Goods
48
996531 Air transport services of parcels, letters and other goods.
996532 Space transport services of freight.
Group 99660: Rental Services of Transport Vehicles with or without
Operators
996601 Rental services of road vehicles including buses, coaches,
cars, trucks and other motor vehicles, with or without op-
erator
996602 Rental services of water vessels including passenger ves-
sels, freight vessels etc with or without operator
996603 Rental services of aircraft including passenger aircrafts,
freight aircrafts etc with or without operator
996609 Rental services of other transport vehicles. with or without
operator
Group 99671: Cargo Handling Services
52
machinery with or without operator.
Group 99732: Rental or Leasing Services Related to Other Goods
997321 Rental or leasing services related to radios, projectors, tele-
visions, audio systems, video cassette recorders, and relat-
ed accessories and equipment (Home entertainment sys-
tems).
997322 Rental or leasing services related to disks and video tapes
(Home entertainment systems).
997323 Rental or leasing services related to furniture and other
household appliances.
997324 Rental or leasing services related to leisure and pleasure
equipment.
997325 Rental or leasing services related to household linen.
997326 Rental or leasing services related to footwear, clothing and
textiles.
997327 Rental or leasing services relating to do-it-yourself equip-
ment and machinery.
997329 Rental or leasing services related to other goods.
Group 99733: Licensing Services for the Right to Use Intellectual
Property and Similar Goods
997331 Licensing services for the right to use databases and com-
puter software.
997332 Licensing services for the right to show and broadcast origi-
nal films, television and radio program, sound recordings,
etc.
997333 Licensing services for the right to reproduce original art
works.
53
997334 Licensing services for the right to copy and reprint manu-
scripts, journals, periodicals and books.
997335 Licensing services for the right to use Research and Devel-
opment products.
997336 Licensing services for the right to use franchises and trade-
marks.
997337 Licensing services for the right to use minerals including
their evaluation and exploration.
997338 Licensing services for the right to use other natural re-
sources including telecommunication spectrum.
997339 Licensing services for the right to use other intellectual
products and other resources.
SECTION 8: BUSINESS AND PRODUCTION SERVICES
54
sciences.
998122 Research and experimental development services in hu-
manities
Group 99813: Interdisciplinary Research Services
998130 Interdisciplinary research and experimental development
services.
Group 99814: Research and Development Originals
55
998221 Financial auditing services.
998222 Bookkeeping and accounting services.
998223 Payroll services.
998224 Other similar services.
56
998321 Architectural advisory services.
998322 Architectural services for residential building projects.
998323 Architectural services for non-residential building projects.
998324 Historical restoration architectural services.
998325 Urban planning services.
998326 Rural land planning services.
998327 Project site master planning services.
998328 Landscape architectural services and advisory services.
58
Group 99838: Photography and Videography and their Processing
Services
59
998415 Data transmission services
998419 Other telecommunications services including Fax services,
Telex services
60
998451 Library services
998452 Operation services of public archives including digital ar-
chives
998453 Operation services of historical archives including digital ar-
chives
62
998832 Paper and paper product manufacturing services.
63
Group 99888: Transport Equipment Manufacturing Services
65
Group 99961: Audio-Visual and Related Services
Conclusion
Goods and Service Tax, with end-to-end IT-enabled tax mechanism,
is likely to bring buoyancy to government revenue. It is expected
that the malicious activity of tax theft will go away under Goods and
Service Tax regime in order to benefit both governments as well as
the consumer. In reality, that extra revenue that the government is
expecting to generate won’t come from the consumers’ pocket but
67
from the reduction of tax theft. . Now goods not conducive or harm-
ful to the health of people are taxed extra by means known as 'Sin
Tax' or 'deterrent tax’. Thus tobacco and tobacco related items are
penalized making cost of Cigarettes etc more. Kerala state has start-
ed a 'Fat Tax' on Pizza etc. That was to discourage and even prevent
people from falling victims to such habits. That serves a social –
health responsibility of the government. Now they are all out of ex-
tra taxation and are taxed as any other goods. This will pave way for
higher social health cost which will only help to increase further tax-
ation. The government ha not agreed to put any higher cap for tax
rates. That very clearly shows that there is always chance of higher
rates of taxes. This will tear away the arguments of those who say
that GST is good. GST does not do away with or replace all kinds of
taxation. It has just merged just a handful or less different taxes and
fused them in one name. Service tax is subsumed, but all services
are included in GST as akin to goods. Those sectors now excluded
may first resist a try to avoid but if compelled will simply transfer the
burden on the final service user. So in effect there will be more
items coming under service tax in the guise of GST. The supporters
of GST claim that litigation on tax matters will be reduced. That is
not true. It depends on how clearly terms of implementation are
worded and interpreted. Going from the experience of 'officialise' or
the jargons and clause- in-clause wordings of our laws and rules, I
am not that optimistic. The legal sector itself will be one which may
start litigations as now they also come under service taxes if inter-
68
preted correctly .The service sectors will try to avoid or reduce tax
liability by terming the major part of service costs as reimburse-
ments or revenue expenses etc which could be got back and tax ex-
emptions obtained. That can defeat the expectation of higher tax
revenue from service sector by GST. The possible favourable points I
see are (a) E commerce will get boost and more respectability. How-
ever as online shopping does not deal in day to day items generally,
common man is not going to get much out of it. Moreover, as of
now the scene is controlled by big multinationals .There will be a lit-
tle more ease for tax machinery. That is for the government and not
for common man. Retailers have to continue with same formalities
as earlier though in different names and forms. The inclusion of pe-
troleum products in GST is going to be a boon for the oil companies,
which also mainly goes to the private corporate.
69