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GST FAQ

What is Goods and Service Tax?

Goods and Services Tax also popularly known as GST is a destination-based indirect tax that is levied on the consumption of goods and services. The proposed tax will be levied at Centre and State levels at all stages right from the manufacturing to its final consumption. The unique aspect of this tax is that credit of taxes will be paid at various stages as setoff. This also inclines that only value added tax will be levied and the burden of the tax is to be borne by the consumer.

What is the entry under constitution that covers Goods and Service Tax (GST)?

Article 246A of Constitution of India governs Goods and Service Tax.

What are the taxes that are subsumed in Goods and Service Tax (GST)?

GST will replace all the existing indirect taxes and all of the below mentioned taxes will be subsumed under GST.

At the Central level, the following taxes are being subsumed

  1. Central Excise Duty
  2. Duties of Excise (Medicinal and Toilet Preparations)
  3. Additional Duties of Customs (CVD)
  4. Additional Duties of Excise  (Goods of Special Importance)
  5. Additional Duties of Excise (Textiles and Textile Products)
  6. Service Tax
  7. Special Additional Duty of Customs (SAD)
  8. Central Surcharges and Cesses

At the State Level:

  1. Central Sales Tax
  2. State VAT
  3. Luxury Tax
  4. Entry Tax (all forms)
  5. Entertainment and Amusement Tax
  6. Taxes on Advertisements
  7. Purchase Tax
  8. Taxes on lotteries, betting and gambling
  9. State Surcharges and Cesses

What is the statute governing levy and collection of Goods and Service Tax (GST)?

Levy & collection of Central Goods & Service Tax is governed by Central Goods and Service Tax Act, 2016 and Levy & Collection of State Goods & Service Tax is governed by respective State Goods and Service Tax Act, 2016.

What are the different GST rates?

The new Goods and Services Tax (GST) will have multiple rates that start from zero per cent to 28 per cent. As per the Act, the GST will be a four-tier tax structure of 5%, 12%, 18% and 28%. The essential items will attract lower rates while the luxury items will attract higher rates and additional cess.

To keep the inflation in check most of the essential food items are exempted and kept under the zero tax rate. Most of the common use items fall under 5% bracket and fast moving consumer goods fall under the 12% and 18% bracket. Luxury items and items like tobacco and aerated drinks are listed in the 28% bracket.

What type of GST is proposed to be implemented?

The government has announced a dual GST where Centre and the State will levy a common tax base simultaneously. The Centre will levy intra-state supply of goods and services and would be called as Central GST (CGST). On the other hand, the State will levy GST as well which will be called State GST (SGST). The Centre will also levy Integrated GST (IGST) on all inter-state supply of goods and services.

Do we really need Dual GST?

In India, Centre and State both have the powers to levy and collect taxes through appropriate channels and legislation. Both, Centre and State have their own distinct responsibilities and division of powers that are prescribed in the Constitution. Dual GST is implemented keeping in mind the Constitutional framework and fiscal federalism.

What are the benefits of GST?

GST is a way to bring together a large number of Central and State taxes under a single tax. This also allows to set-off of prior stages taxes. From the consumer point of view, all the goods and services will be reduced because there is a reduction of tax burden on goods and services. The introduction of GST will also make local products competitive in the local and global markets. GST is technology-based indirect tax which also encourages better transparency and easier to administer.

Is GST also applicable beyond the territorial waters of India?

No, the GST is not applicable beyond the territorial waters of India.

How will exported goods be taxed under GST?

Exported goods will fall under zero tax bracket and therefore no GST is payable on goods and services that are exported. However, credit of input tax credit will be available and can be refunded to the exporters.

Who is liable to pay GST?

Any taxable person who supplies goods and services is liable to pay GST. As per the new turnover limits the GST will apply when turnover of the business exceeds Rs 20 Lakh. The limit for North Eastern states is Rs 10 lakh. This provides a relief to small traders and service providers as many states have VAT threshold of 5 lakhs and 10 lakhs for service tax. Small manufacturers with excise threshold of 1.5 crore is now reduced to 20 lakh under GST regime. Small manufacturers with business threshold of more than 20 lakh will now have to register under GST.

How will imported goods be taxed under the new GST regime?

The import of goods and service will be treated as inter-state supplies and therefore IGST will be levied. The state where the goods are consumed will accrue SGST eventually.

What is the jurisdiction of Goods and Service Tax (GST) provisions?

The Goods and Service Tax (GST) Act is applicable for whole of India including Jammu & Kashmir. It is applicable to territorial waters, seabed and subsoil underlying the territorial waters, air space above its territory and territorial waters including installations, structures and vessels located in the continental shelf of India and the Exclusive economic zone of India.

Whether supply of services or goods received beyond the territorial waters of India are liable?

No, Supply of goods or services beyond the territorial waters of India is not covered under the Goods and Service Tax (GST) Net. But the Supply of goods or services to installations, structures and vessels located in the continental shelf of India and the Exclusive economic zone of India is covered under Goods and Service Tax (GST) Net.

What is the charging Section under CGoods and Service Tax (GST)/SGoods and Service Tax (GST)?

Section 7 is the charging provision of the CGoods and Service Tax (GST) / SGoods and Service Tax (GST) Act. It provides that all intra- State supplies would be liable to CGoods and Service Tax (GST) / SGoods and Service Tax (GST). It also provides for the rate of tax applicable on such supplies, the manner of collection of tax by the Government and the person who will be liable to pay such tax.
The levy of tax on supply of goods and / or services is in two parts ?
(i) in the hands of the supplier and
(ii) in the hands of the recipient of goods / services under reverse charge mechanism

What is Reverse Charge Mechanism?

Normally, the supplier of goods and / or services will be liable to discharge tax on the supplies effected. However, the Central or State Governments upon recommendation of the Goods and Service Tax (GST) Council are empowered to specify by notification the categories of supplies in respect of which the recipient of goods and / or services will be liable to discharge the tax.
All other provisions of this Act will apply to the recipient of such goods and / or services, as if the recipient is the supplier of such goods and / or services ? viz., for the limited purpose of such transactions, the recipient would be deemed to be the “supplier.