Answer:

Structure of GST in India:

India follows a dual GST model where both Centre and States have concurrent power to levy GST.

1. CGST (Central GST):

• Levied by Central Government on intra-state supplies
• Collected alongside SGST
• Example: Mumbai to Pune transaction - CGST + SGST @ 9% + 9% = 18%

2. SGST (State GST):

• Levied by State Government on intra-state supplies
• Collected alongside CGST
• Revenue goes to respective state

3. IGST (Integrated GST):

• Levied by Central Government on inter-state supplies
• Example: Delhi to Haryana transaction - IGST @ 18%
• Later apportioned between Centre and destination state

Illustration:

Scenario 1: Intra-state (Within Maharashtra) - Sale of ₹10,000
CGST @ 9% = ₹900 + SGST @ 9% = ₹900 = Total ₹1,800

Scenario 2: Inter-state (Gujarat to Rajasthan) - Sale of ₹10,000
IGST @ 18% = ₹1,800

Answer:

Benefits of GST:

A. For Businesses:

1. Elimination of Cascading Effect: Full ITC available, reducing tax burden
2. Ease of Compliance: Single registration and online portal
3. Improved Cash Flow: Quick ITC refunds improve working capital
4. Lower Logistics Cost: No check posts, faster goods movement
5. Example: A manufacturer earlier paid excise + VAT with limited ITC. Now pays single GST with full ITC.

B. For Government:

1. Increased Revenue: Broader tax base and better compliance
2. Reduced Tax Evasion: Technology-driven system with invoice matching
3. Simplified Administration: Single online system
4. Better Data: Rich analytics for policy making

C. For Consumers:

1. Lower Prices: Cascading effect elimination reduces prices
2. Transparency: Clear visibility of tax in invoice
3. Better Quality: Organized sector growth ensures quality
4. Example: Pre-GST a product cost ₹146. With GST, same product costs ₹142 due to ITC benefit.

Answer:

Input Tax Credit (ITC):

ITC is the credit of GST paid on purchases (inputs) which can be utilized to pay GST on sales (outputs). It ensures that tax is paid only on value addition at each stage.

How ITC Works:

1. Registered taxpayer pays GST on purchases
2. This GST paid is recorded as Input Tax Credit
3. When making sales, GST is charged (Output Tax)
4. ITC can be used to set off Output Tax liability
5. Net GST = Output Tax - Input Tax Credit

Numerical Example:

Stage 1 - Manufacturer:

• Purchases raw material: ₹50,000
• GST paid @ 18%: ₹9,000 (ITC available)
• Sells finished goods: ₹80,000
• GST collected @ 18%: ₹14,400
• Net GST payable: ₹14,400 - ₹9,000 = ₹5,400

Stage 2 - Dealer:

• Purchases from manufacturer: ₹80,000
• GST paid @ 18%: ₹14,400 (ITC available)
• Sells to retailer: ₹1,00,000
• GST collected @ 18%: ₹18,000
• Net GST payable: ₹18,000 - ₹14,400 = ₹3,600

Benefits of ITC:

• Eliminates cascading effect
• Tax paid only on value addition
• Reduces final price to consumer
• Improves cash flow for businesses

Answer:

GST Council:

GST Council is a constitutional body under Article 279A of Indian Constitution, established to make recommendations on GST-related matters.

Composition:

• Chairperson: Union Finance Minister
• Members: Union Minister of State for Finance and State Finance Ministers of all states
• Voting Rights: Centre has 1/3rd weightage, States collectively have 2/3rd weightage

Functions/Roles:

1. Tax Rates: Recommends GST rates on goods and services
2. Exemptions: Decides goods/services to be exempted from GST
3. Threshold Limits: Recommends threshold limit for GST registration
4. Model GST Laws: Recommends provisions in CGST, SGST, and IGST Acts
5. Special Provisions: Recommends special provisions for Northeastern states
6. Dispute Resolution: Addresses disputes between Centre and States
7. Compensation: Decides on compensation to states for revenue loss

Importance:

• Federal Cooperation: Ensures both Centre and States work together
• Uniform Tax Structure: Creates consistency across India
• Dispute Resolution: Provides forum to resolve Centre-State conflicts
• Flexibility: Can modify rates and rules as per economic conditions
• Consensus Building: Decisions taken with majority support

Example of GST Council Decision: Reducing GST on COVID-19 essentials like masks, sanitizers, and medical equipment from 12% to 5% during pandemic.

Answer:

Comparison of Pre-GST and Post-GST Tax Structure:

Aspect	Pre-GST Era	Post-GST Era
Number of Taxes	17+ indirect taxes (Excise, Service Tax, VAT, CST, Entry Tax, etc.)	Single unified GST (CGST/SGST/IGST)
Cascading Effect	Tax on tax existed - major problem	Eliminated through seamless ITC
Compliance	Multiple registrations, returns to different authorities	Single registration, online filing
Interstate Trade	CST with no ITC, check posts, delays	IGST with full ITC, no check posts
Tax Rates	Different rates in different states	Uniform rates across India

Limitations of Pre-GST Regime Overcome by GST:

1. Cascading Effect:

• Problem: Tax was levied on value including previous taxes
• Solution: GST provides full ITC, eliminating cascading

2. Complex Compliance:

• Problem: Multiple registrations with different authorities
• Solution: Single GSTIN, one portal for all compliance

3. Interstate Barriers:

• Problem: CST had no ITC, check posts caused delays
• Solution: IGST with full ITC, e-way bills replaced check posts

4. Tax Evasion:

• Problem: Manual systems, limited tracking
• Solution: Technology-driven GSTN, invoice matching, e-way bills

5. Fragmented Market:

• Problem: Different state taxes created barriers
• Solution: One Nation, One Tax - unified national market

Answer:

Destination-Based Taxation:

Under GST, tax is levied at the place of consumption (destination) and not at the place of production (origin). The tax revenue accrues to the state where goods or services are consumed.

Key Features:

• Tax collected in the state where goods/services are consumed
• Revenue goes to destination state, not origin state
• Promotes equitable distribution of tax revenue

Example:

A manufacturer in Gujarat sells goods worth ₹1,00,000 to a customer in Maharashtra. GST rate is 18%.

• IGST of ₹18,000 is charged
• Tax revenue goes to Maharashtra (destination state) where goods are consumed
• Gujarat (origin state) does not get this revenue

Contrast with Origin-Based Tax: In pre-GST era, CST was origin-based where the origin state got revenue, creating interstate trade barriers.

Answer:

GSTIN (GST Identification Number):

GSTIN is a unique 15-digit identification number assigned to every registered taxpayer under GST.

Structure of GSTIN:

• First 2 digits: State Code (as per Census 2011)
• Next 10 digits: PAN of the taxpayer
• 13th digit: Entity code (number of registrations in a state)
• 14th digit: Default 'Z'
• 15th digit: Check digit for validation

Example: 27AAPFU0939F1Z5

• 27: Maharashtra (State Code)
• AAPFU0939F: PAN of the business
• 1: First registration in Maharashtra
• Z: Default value
• 5: Check digit

Uses: Required for GST registration, filing returns, claiming ITC, and issuing tax invoices.

Answer:

Differences between CGST, SGST, and IGST:

Basis	CGST	SGST	IGST
Full Form	Central GST	State GST	Integrated GST
Levied By	Central Govt	State Govt	Central Govt
Applicable On	Intra-state supply	Intra-state supply	Inter-state supply
Revenue Goes To	Central Govt	Respective State	Central Govt (shared with destination state)
Rate	Half of total GST	Half of total GST	Full GST rate
Example	Delhi to Delhi: 9%	Delhi to Delhi: 9%	Delhi to UP: 18%

Answer:

Main Objectives of GST:

1. Remove Cascading Effect:

• Eliminate tax on tax situation
• Seamless flow of Input Tax Credit across supply chain

2. Broaden Tax Base:

• Bring more businesses and transactions under tax net
• Include both goods and services comprehensively

3. Increase Tax Compliance:

• Technology-driven system ensures transparency
• Invoice matching reduces non-compliance

4. Reduce Tax Evasion:

• Online system with real-time tracking
• E-way bills and invoice matching mechanism

5. Create Common National Market:

• Uniform tax structure across India
• Eliminate interstate trade barriers
• Facilitate ease of doing business

6. Simplify Tax Structure:

• Replace multiple indirect taxes with single GST
• Reduce compliance burden

Answer:

"One Nation, One Tax" Concept:

This concept means a unified indirect tax system across India, replacing multiple Central and State taxes with a single Goods and Services Tax.

Key Features:

1. Unified Tax System:

• Single tax replacing 17+ indirect taxes
• Same tax structure applicable throughout India

2. Common National Market:

• Eliminates state-wise variations in tax rates
• Facilitates seamless movement of goods and services

3. Uniform Compliance:

• Single registration through GSTN portal
• Same procedures for all states

Benefits:

• For Business: Easy expansion across states, reduced compliance costs
• For Consumers: Uniform prices across India
• For Economy: Improved logistics efficiency, GDP growth

Example: A product taxed at 18% GST will have the same rate whether sold in Kerala, Punjab, or any other state, unlike pre-GST era where VAT rates varied from 5% to 15% across states.

Answer:

GST (Goods and Services Tax):

GST is an indirect tax levied on the supply of goods and services in India. It is a comprehensive, multi-stage, destination-based tax that replaced multiple indirect taxes.

Implementation Date:

GST was implemented in India on July 1, 2017 at midnight in Parliament's Central Hall. It was launched by the President, Prime Minister, and Finance Minister.

Key Point: It replaced 17+ indirect taxes including Central Excise, Service Tax, VAT, CST, Entry Tax, etc., with a single unified tax system.

Answer:

GSTN - GST Network

Definition: GSTN is the IT infrastructure and services provider for GST implementation in India.

Main Functions:

• Provides common portal (www.gst.gov.in) for all GST-related activities
• Facilitates online registration, return filing, and tax payment
• Enables invoice matching and e-way bill generation
• Integrates with banks, tax departments, and taxpayers

Ownership: Public-private partnership - 51% government, 49% private financial institutions.

Answer:

GST Tax Slabs in India:

There are five main GST tax slabs:

• 0% (Nil): Essential items - fresh milk, fruits, vegetables, bread
• 5%: Household necessities - edible oil, sugar, tea, coffee, coal
• 12%: Processed foods - butter, cheese, ghee, dry fruits
• 18%: Most goods and services - FMCG, capital goods, IT services
• 28%: Luxury and sin goods - automobiles, tobacco, aerated drinks, AC

Note: Some luxury goods in 28% slab attract additional cess.

Answer:

GST Registration Threshold Limits:

For Goods Suppliers:

• General states: ₹40 lakhs annual turnover
• Special category states: ₹20 lakhs annual turnover

For Service Providers:

• General states: ₹20 lakhs annual turnover
• Special category states: ₹10 lakhs annual turnover

Special Category States: Northeastern states, Himachal Pradesh, Jammu & Kashmir, Uttarakhand

Note: Businesses below threshold are exempt from GST registration unless they opt for voluntary registration.

Answer:

Taxes Replaced by GST:

Central Taxes Replaced:

1. Central Excise Duty: Tax on manufacturing of goods
2. Service Tax: Tax on services provided

State Taxes Replaced:

3. Value Added Tax (VAT): Tax on sale of goods within state
4. Central Sales Tax (CST): Tax on inter-state sale of goods

Other Taxes Replaced:

• Entry Tax
• Luxury Tax
• Entertainment Tax
• Octroi
• Purchase Tax

Total: GST replaced 17+ indirect taxes with a single unified tax system.