Concept of Goods and Services Tax
(GST)
F Introduction
The Goods and Services Tax (GST) is one of the most significant tax reforms
introduced in India to simplify and unify the indirect tax system. It replaced
multiple central and state indirect taxes with a single, comprehensive tax on
the supply of goods and services. Backed by constitutional amendments and
detailed legislation, GST aims to create a common national market, reduce the
tax burden on businesses, and ensure transparency in taxation. By introducing a
dual tax structure, cooperative decision-making through the GST Council, and a
technology-driven compliance system, GST has transformed the way indirect taxes
are levied and administered in India.
F Constitutional and Statutory
Framework of GST
Ø
The Constitution (122nd) Amendment Act, 2017
The
Constitution (122nd) Amendment Act laid the constitutional foundation for GST
in India. It amended the Constitution to empower both the Central and State
Governments to levy GST on the supply of goods and services. The Amendment:
1. Article 246A: Gives both Centre and States
the power to make laws and collect GST on the supply of goods and services.
2. Article 279A: Provides for the creation of
the GST Council, which decides GST rates, exemptions, and rules.
It also
helped merge many old indirect taxes (like VAT, excise duty, service
tax) into a single tax called GST.
This
amendment ensured constitutional validity and uniformity in GST implementation across the country.
Ø
Central Goods and Services Tax Act, 2017
The Central Goods and Services Tax Act,
2017 lays down the rules for charging and collecting GST by the
Central Government on intra-State supplies
of goods and services (supplies made within the same State).
It clearly explains:
1.
Taxable event
– GST is charged on the supply of
goods or services,
2.
Levy and collection
of tax – how and when GST is collected by the Centre,
3.
Input Tax Credit
(ITC) – allowing taxpayers to reduce tax by claiming credit of GST
already paid on purchases,
4.
Registration,
returns, assessment, and penalties – procedures for registering under
GST, filing returns, assessment of tax, and penalties for non-compliance.
The CGST Act tells taxpayers how the Central Government applies GST and how compliance is to be followed.
India follows a Dual GST Model,
which means both the Central Government and
State Governments have the power to collect GST on the same
transaction.
Ø
Central GST
(CGST): Collected by the Central
Government on supply of goods or services within a State.
Ø
State GST
(SGST): Collected by the State
Government on the same intra-State supply.
Ø
Integrated
GST (IGST): Collected by the Central
Government on inter-State supplies
(between two States) and on imports.
The IGST amount is later shared between the Centre and the States.
In simple terms:
Ø If a sale happens within a State → CGST + SGST apply.
Ø
If a sale happens between States or goods are
imported → IGST applies.
This model helps maintain federal balance by giving revenue to both Centre and States, while ensuring uniform taxation across India.
F GST Council
The GST Council is a
constitutional body created under Article
279A of the Constitution of India. It acts as the main decision-making authority for GST in
the country.
Its key functions include:
Ø
Recommending
GST tax rates, exemptions, and threshold limits,
Ø
Framing GST
laws, rules, and procedures,
Ø
Resolving
disputes between the Central Government and State Governments or among
States.
The GST Council ensures that all GST-related decisions are taken jointly by the Centre and the States, promoting cooperation, uniformity, and smooth administration of GST across India.
F Central GST and Application of
GST
Central GST (CGST) is applicable on intra-State supplies of goods and services, that is, when
the supply takes place within the same
State.
Under GST law, tax is charged on “supply”, which has a very wide meaning. It includes:
Ø
Sale
of goods or services,
Ø
Transfer
of ownership or rights,
Ø
Purchase,
Ø
Barter or
exchange of goods or services,
Ø
Grant of
license,
Ø
Lease or
rental of property or services,
Ø
Import of
goods and services.
GST is not limited to sales alone. Any form of transaction where goods or services are supplied for consideration is covered under GST. This wide scope ensures that almost all commercial activities involving goods and services are brought under the GST system, making taxation more comprehensive and uniform.
F GST on Imports and Exports
Ø Imports:
Under GST, imports are
treated as inter-State supplies. Therefore, IGST is charged on imported goods and services, along
with applicable customs duties.
This ensures that imported goods are taxed
in the same way as goods produced within India, creating a level
playing field for domestic industries.
Ø Exports:
Exports are treated as zero-rated supplies,
which means no GST is charged on exported
goods or services. Exporters are allowed to claim a refund of the Input Tax Credit (ITC) paid on
inputs used in making exports.
Imports are taxed to protect domestic producers, while exports are relieved
from GST to make Indian goods and services more competitive in the global
market. This system encourages
exports and supports India’s economic growth.
F Impact of GST on GDP and
Inflation
GST has
contributed to:
Ø Improved GDP growth:
GST has made a positive contribution to the Indian
economy in several ways. By creating one common national market, GST has
removed barriers between States, improved logistics efficiency, and
reduced transportation and transaction costs. This has helped businesses
operate more smoothly and has supported overall GDP growth.
Ø Moderation of inflation:
In terms of prices, GST has helped control
inflation in the long run by eliminating the problem of tax on tax
(cascading effect) that existed under the earlier indirect tax system.
Although there were some short-term price changes when GST was first
introduced, the system has gradually brought stability.
The GST has helped control inflation in the long run by eliminating the problem of tax on tax (cascading effect) that existed under the earlier indirect tax system. Although there were some short-term price changes when GST was first introduced, the system has gradually brought stability.
F Benefits of GST
GST has created a simpler, transparent, and business-friendly tax system
across trade, e-commerce, and services sectors.
Ø
Benefits to Trade and Industry
GST has
replaced many indirect taxes with a single tax system, reducing complexity. The
availability of seamless input tax credit lowers the tax burden by
avoiding double taxation. As a result, the cost of production and
distribution decreases, making Indian businesses more competitive.
Ø
Benefits to E-commerce
GST
provides uniform tax rates across all States, removing confusion caused
by different State taxes. Centralized registration and return filing
have simplified compliance. It has also increased transparency in online
transactions, helping regulate the digital market effectively.
Ø
Benefits to Services Sector
GST has
removed the overlap between Service Tax and VAT, creating a single,
clear tax structure. Service providers can now claim input tax credit on
both goods and services, reducing overall tax costs and making compliance
simpler.
F Goods and Services Tax Network
(GSTN) Portal
The Goods
and Services Tax Network is the technological backbone of GST. It provides a single online platform for all GST-related
activities.
Ø Registration of taxpayers,
Ø Filing GST returns,
Ø Payment of taxes,
Ø Claiming refunds.
The GSTN
connects taxpayers, tax authorities, and banks on one digital system. This
online platform improves transparency,
efficiency, and ease of doing business, while reducing
paperwork and manual procedures.
F Tax Invoice under GST
A tax invoice is an important document under the GST system. It is issued by a registered GST supplier whenever goods or services are supplied.
Ø Description of goods or services,
Ø Value and rate of GST,
Ø Amount of tax charged,
Ø GSTIN of supplier and recipient.
A
tax invoice acts as proof of supply and tax
payment. It is also essential for
claiming Input Tax Credit (ITC), as buyers can claim credit only when
a valid tax invoice is available.
F Dispute Settlement Mechanism
under GST
The GST system provides a clear dispute resolution mechanism to handle disagreements between taxpayers and tax authorities, as well as between the Centre and the States.
Ø Adjudication by tax authorities, where disputes are first
examined and decided,
Ø Appeals to Appellate Authorities
and the Appellate Tribunal, allowing taxpayers to challenge incorrect or unfair orders,
Ø Resolution of Centre–State and
inter-State disputes through the GST Council, ensuring cooperative federal decision-making.
In simple
words, this mechanism ensures fairness, legal certainty, and protection of
taxpayer rights, while maintaining uniformity and transparency in GST administration.
F Conclusion
The Goods and Services Tax (GST) is a landmark reform in India’s indirect
tax system, supported by a strong constitutional and legal framework. The
Constitution (122nd) Amendment Act, 2017 enabled both the Centre and States to
levy GST and established the GST Council for cooperative decision-making. The
Central Goods and Services Tax Act, 2017 provides clear rules for levy,
compliance, and administration.
The
Dual GST Model ensures uniform taxation while preserving federal balance. GST’s
wide scope, fair treatment of imports and exports, digital support through the
GSTN portal, and effective dispute resolution mechanism have improved
transparency and ease of doing business. Overall, GST has simplified taxation, reduced costs, and supported sustainable economic growth in
India.