GST In India | Meaning of GST | History of GST – Know More. 2024

gst in india 2034

GST In India | Meaning of GST | History of GST – Know More. 2024

How to came GST in India ?

In the year 2000, the then Prime Minister mooted the concept of GST and set up a committee to design a Goods and Services Tax (GST) model for the country. In 2003, the Central Government formed a task force on Fiscal Responsibility and Budget Management, which in 2004 strongly recommended fully integrated ‘GST’ on national basis.

The then Union Finance Minister, Shri P. Chidambaram, while presenting the Union Budget (2006-2007), announced that GST would be introduced from April 1, 2010. Since then, GST missed several deadlines and continued to be shrouded by the clouds of uncertainty.

The talks of ushering in GST, however, gained momentum in the year 2014 when the NDA Government tabled the Constitution (122nd Amendment) Bill, 2014 on GST in the Parliament on 19th December 2014. The Lok Sabha passed the Bill on 6th May, 2015 and Rajya Sabha on 3rd August, 2016. Subsequent to ratification of the Bill by more than 50% of the States, Constitution (122nd Amendment) Bill, 2014 received the assent of the President on 8th September 2016 and became Constitution (101st Amendment) Act, 2016,which paved the way for introduction of GST in India.

GST in India is a path breaking indirect tax reform which attempts to create a common national market. GST has subsumed multiple indirect taxes like excise duty, service tax, VAT, CST, luxury tax, entertainment tax, entry tax, etc. VAT and GST in india are often used inter-changeably as the latter denotes comprehensiveness of VAT by coverage of goods and services. France was the first country to implement VAT/GST in 1954.

Presently, more than 160 countries have implemented VAT/GST in some form or the other because this tax has the capacity to raise revenue in the most transparent and neutral manner. Most of the countries follow unified GST i.e., a single tax applicable throughout the country. However, in federal polities like Brazil and Canada, a dual GST system is prevalent. Under dual system, GST is levied by both the federal and the State Governments. India has adopted dual GST model because of its unique federal nature.

What is GST in ?

GST is a value added tax levied on supply i.e., manufacture or sale of goods and provision of services. comprehensive and continuous chain of tax credits from the producer’s point/service provider’s point upto the retailer’s level/consumer’s level thereby taxing only the value added at each stage of supply chain. The supplier at each stage is permitted to avail credit of GST paid on the purchase of goods and/or services and can set off this credit against the GST payable on the supply of goods and services to be made by him.

Why GST is needed for India ?

Certain transactions were subject to double taxation and were taxed as both goods and services, since under the earlier regime, distinction between goods and services was often blurred.

CENVAT did not include chain of value addition in the distributive trade after the stage of production. Similarly, in the State-level VAT, CENVAT load on the goods was not removed. This lead to the cascading of taxes.

CENVAT and State-Level VAT were essentially value added taxes, set off of one against the credit of another was not possible as CENVAT was a central levy and State-Level VAT was a State levy.

There were several taxes in the States, such as, Luxury Tax, Entertainment Tax, etc. which were not subsumed in the VAT. Hence for a single transaction, multiple taxes in multiple forms were required to be paid.

VAT on goods was not integrated with tax on services, at the State level, to remove the cascading effect of service tax.   With service sector being the fastest growing sector in the economy, the exclusion of services from the tax base of the States potentially eroded their tax- buoyancy.

Importance of GST in India ?

  1. Creating one economic India
  2. Fillip  to Make In India initative
  3. Unfettered flow of goods and services
  4. Increasing economic activity to boost employment

GST model in India.

Dual GST model the federal structure of the country. Consequently, Centre and States simultaneously levy GST on taxable supply of goods or services or both, which takes place within a State or Union Territory. Thus, tax is imposed concurrently by the Centre and  States, i.e., Centre and States simultaneously tax goods and services. Now, the Centre also has the power to tax intra-State sales & States are also empowered to tax services.


GST is a destination- based tax applicable on all transactions involving supply of goods and services for a consideration subject to exceptions .

Central Goods and Services Tax (CGST) – levied and collected by Central Government,

State Goods and Services Tax (SGST) – levied and collected by State Governments/Union Territories with Legislatures

Union Territory Goods and Services Tax (UTGST) – levied and collected by Union Territories without Legislatures, on intra-State supplies of taxable goods and/or services.

 Integrated Goods and Services Tax (IGST). IGST is the sum of CGST and SGST/UTGST and is levied by Centre on all inter-State supplies.

Where supplier and the place of supply of goods or services are in the same State/Union territory, it is treated as intra-State supply of goods or services respectively.

Further, where the location of the supplier and the place of supply of goods or services are in two different States or two different Union Territories or a State and a Union territory, it is treated as inter-State supply of goods or services.

Legislative Framework of GST in India

There is single legislation – CGST Act, 2017 – for levying CGST. Union Territories without Legislatures i.e., Andaman and Nicobar Islands, Lakshadweep, Ladakh, Dadra and Nagar Haveli & Daman and Diu and Chandigarh] are governed by UTGST Act, 2017 for levying UTGST. States and Union territories with their own legislatures i.e., Delhi, Jammu and Kashmir and Puducherry have their own GST legislation for levying SGST.

Registration in GST ?

Every supplier of goods and/ or services is required to obtain registration in the State/UT from where he makes the taxable supply if his aggregate turnover exceeds the threshold limit during a FY.

Composition Scheme in GST ?

Providing relief to small businesses, manufacturers, service providers, suppliers of food articles, traders, etc., making intra-State. Supplies, a simpler method of paying taxes .

What is Exemption in GST ?

Providing relief to small-scale business, the law also contains provisions for granting exemption from payment of tax on essential goods and/or services.

Seamless flow of credit in GST

The inter-State supplier in the exporting State is allowed to set off the available credit against the IGST  payable on inter-State supply  by him.

The buyer in the importing State is allowed to avail the credit of IGST paid  on inter-State purchases  by him. The revenue of inter-State sale does not accrue to the exporting State and the exporting State transfers to the Centre the credit of SGST/UTGST used in payment of IGST. The Centre transfers to the importing State the credit of IGST used in payment of SGST/UTGST.

ITC should   be   utilized. First, IGST credit should be utilized towards IGST payment, and then towards payment of CGST and SGST/UTGST in any order and in any proportion.

ITC of CGST cannot be utilized for payment of SGST/UTGST and vice versa. ITC of SGST/UTGST should be utilized for payment of IGST, only after ITC of CGST has been fully utilized .

GST Common Portal

Electronic Portal – a website managed by Goods and Services Network (GSTN) is set by the Government to establish a uniform interface for the tax payer and a common and shared IT infrastructure between the Centre and States. The portal is one single common portal for all GST related services.

GST Electronic Portal for furnishing electronic way bill is E-way bill is an electronic document generated on the GST portal evidencing movement of goods. Website for  uploading/reporting of e-invoices  by notified persons.

What is GSPs ?

GST Suvidha Providers. GST System and have the capability to develop applications to be used by taxpayers for interacting with the GSTN.  GSP develops applications having features like return filing, reconciliation of purchase register data with auto populated data for acceptance/rejection/modification, dashboards for taxpayers for quick monitoring of GST compliance activities.

Application Service Providers (ASPs)

 who act as a link between taxpayers and GSPs.

What is Compensation Cess ?

Specified rate imposed under the Goods and Services Tax Cess Act, 2017 on the specified luxury items or demerit goods, like pan masala, tobacco, aerated waters, motor cars etc., computed on value of taxable supply. Compensation cess is leviable on intra-State supplies and inter-State supplies.

GST Charge except the item given below –

GST is levied on all goods and services, except alcoholic liquor for human consumption and petroleum crude, diesel, petrol, ATF and natural gas.

  1. Alcoholic liquor for human consumption
  2. Petroleum crude, diesel, petrol, ATF and natural gas
  3. Tobacco
  4. Opium, Indian hemp and other narcotic drugs and narcotics
  5. Real estate sector

Benefit of GST in India

  1. Creation of unified national market
  2. Boost to ‘Make in India’ initiative
  3. Enhanced investment and employment
  4. Ease of doing business
  5. Certainty in tax administration
  6. Automated procedures with greater use of IT
  7. Reduction in compliance costs

Advantage of GST in India

GST in India is playing vital role in development of Indian economy

  1. Benefits to industry
  2. Mitigation of ill effects of cascading
  3. Benefits to small traders and entrepreneurs

GST Provision –

Article 265 – the Constitution of India prohibits arbitrary collection of tax. It states that “no tax shall be levied or collected except by authority of law”. The term “authority of law” means that tax proposed to be levied must be within the legislative competence of the Legislature imposing the tax.

Article 245 – Part XI of the Constitution deals with relationship between the Union and States. The power for enacting the laws is conferred on the Parliament and on the Legislature of a State by Article 245 of the Constitution. The said Article provides as under:

  1. Subject to the provisions of this Constitution, Parliament may make laws for the whole or any part of the territory of India, and the legislature of a State may make laws for the whole or any part of the State.
  2. No law made by the Parliament shall be deemed to be invalid on the ground that it would have extra-territorial operation.

Article 246 – It gives the respective authority to Union and State Governments for levying tax.

Seventh Schedule to Article 246 – Three lists which enumerate the matters under which the Union and the State Governments have the authority to make laws.

Article 246A – Power to make laws with respect to Goods and Services Tax.

Article 269A –  Levy and collection of GST on inter-State supply

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