GST
Historical background
GST in India has a long history with different governments making
attempts to introduce GST. The NDA government in 2000, for the first
time propounded the idea of GST.
In 2006, Finance minister of the UPA government in his budget speech
called for the implementation of GST and proposed that GST be
introduced in 2010.In December the NDA government introduced
theConstitutional (122nd 2014, Amendment) Bill in the parliament. n
August 2016, the bill was passed with some changes in the 2014 Bill.
Consequently, the President gave his assent to the Bill in September
2016, enacting the 101st Constitutional Amendment Act (2016).
Some features
 GST has replaced a host of indirect taxes that existed earlier.
 GST is one tax that is applicable on both goods and services.
 Under GST the tax rates are uniform across the country and do not
vary from State to State.
 Simplify the indirect tax system
 Mitigate the problem of cascading of taxes.
Taxes subsumed under GST
Central Taxes
1. Central Excise Duty
2. Additional Excise Duties
3. Excise Duty levied under the Medicinal and Toiletries Preparation Act
4. Service Tax
5. Central Sales Tax (CST)
6. Additional Customs Duty, commonly known as Countervailing Duty
(CVD)
7. Special Additional Duty of Customs (SAD)

8. Surcharges and cesses
State Taxes
1. State VAT/ Sales tax
2. Entertainment tax (other than those levied by local bodies, such as
municipalities)
3. Purchase Tax
4. Luxury Tax
5. Taxes on lottery, betting and gambling
6. Taxes on Advertisements
7. Entry Tax (All forms)
8. State Cess and Surcharges

GST is a Value Added Tax meaning that the tax is to be levied on the value
added (VAT) at different stages of the production/supply chain until it
reaches its final destination – the consumer.

Components of GST
Although GST is a single tax, it has two components when transactions
occur within a State or Union Territory, with the Centre and States
simultaneously levying tax on transaction of supply of goods and services.
 The GST to be levied by the Centre on within-State supply of goods
or services is called Central GST (CGST)
 Tax to be levied by the States and Union Territories without
legislature, is called State GST (SGST) and Union Territory GST
(UTGST) respectively.
 Integrated GST (IGST) is GST charged when transactions of supply of
goods and services take place from one state to another. It is to be
levied by the Centre and the tax collected is to be shared with the
State where the final consumption take place.

Division of GST between CGST and SGST/UTGST
12% GST
 6% CGST
 6% SGST / UTGST
GST rates slab
 0%
 5%
 12%
 18%
 28%

Commodities exempt (i.e. zero rated) from GST:
1. A number of basic consumption goods such as unbranded food
products (food grains, pulses, fruits, vegetable, etc.) along with education
and health care and some other services. These are strictly not out of GST
but taxed at zero rate.
Commodities excluded from GST:
2. Alcoholic liquor for human consumption, real estate, electricity;
3. Petroleum and petroleum products–these are outside the purview of
GST temporarily, but shall be subject to the levy of GST at a later date
decided by the Goods and Services Tax Council (GSTC).

COMPENSATION TO STATES
 States will get compensation if, after the implementation of GST,
their tax revenue grows at less than 14 per cent compared to the
revenue earned in the year 2015-16.
 Compensation will be available for the first 5 years.
Why opposition to GST

GST is a destination-based tax which means that tax revenue earned on
inter-State transactions is collected by the Centre and shared with the
State where the final consumption take place.
So, many States such as Maharashtra, Tamil Nadu, Gujarat, Karnataka,
had the producing apprehension that they would lose out on tax revenue
under GST when goods and services produced in their State are
consumed in another State.
Constitutional amendment
As mentioned earlier, before the introduction of GST, the Constitution of
India provided for division of powers of taxation between the Centre and
States. Because of this division, the States On the other did not have the
power to levy tax on supply of services or on imports. On the other hand,
that neither the Centre nor States had the power to tax supply of both
goods and services. Since GST is a tax levied on supply of goods and/or
services, it was essential to amend the Constitution to empower the
Centre to levy tax on sale of goods and States to levy tax on services.
For this purpose, the Constitution of India was amended by the
Constitution Act, 2016 (One Hundred and First Amendment). The 122nd
Constitutional Amendment Bill was passed by the parliament in August
2016.

KEY ORGANISATIONS RESPONSIBLEFOR IMPLEMENTING GST
The two key organisations that form the mainstay for implementing GST
are - The GST Council (GSTC) and the GST Network (GSTN). The former
frames all the rules and regulations associated with GST and the latter is
the Information Technology backbone necessary for the implementation
of GST.
The Goods and Services Tax Council (GSTC) is a constitutional body, which
represents the State and the Central executive. The members of the GSTC
include the Union Finance Minister (chairperson), Union Minister of State
in charge of revenue and the State Finance/Taxation Ministers in
respective states.

Voting strength in the GSTC
1. Central government has a weightage of ⅓of the total votes cast.
2. All States taken together have a weightage of ⅔of the total votes cast,
with each State having equal voting strength.
3. For the proceedings of a meeting to be a valid, at least 50 per cent of
the total number of the members of the GSTC should be present.

GST Network (GSTN)
is a private, not-for-profit
companyregisteredundertheCompaniesAct2013. Private financial
institutions own 51 per cent of the GSTN, with the rest (49 per cent)
being owned by the government – the Centre, all States and the
Empowered Committee of State Finance Ministers (EC).
The role of technology is crucial in implementing GST. All processes
related to GST, such as registration for GST, depositing taxes, uploading
invoices and receipts for receiving ITC, return filing, etc. are to be done
online. Therefore, it is important to have an Information and Technology
(IT) platform which can perform the necessary functions for smooth
implementation and functioning of GST. The GST Network (GSTN) is
expected to facilitate taxpayers in various processes related to GST.
ISSUES RELATED TO DESIGN OF GST
 Having multiple rates does make GST complex.
 At the same time multi-rate structure is needed to keep a check on
prices of goods and services, especially those consumed by the
poor.
 The goods that remain outside the ambit of GST are major sources
of revenue. But keeping them outside GST can have several
negative ramifications.

Other terminologies
 E-way bill is an electronic permit required under GST for inter-state
and intra-state transport of goods in motorised vehicles. It can be
generated from the GSTN by any of the registered parties to a
transaction - the supplier, the recipient or the transporter- before
the movement of goods begins. Alternatively, e-way bill can also be
generated through SMS, Android Application, etc.