101st Constitution Amendment Act 2016
The 101st Constitution Amendment Act 2016 has paved the way for the introduction of Goods and Services Tax (GST) in the country.
The Amendment has made a special provision with respect to goods and services tax under Article 246A. Accordingly, the Parliament and the state legislature have power to make laws with respect to goods and services tax imposed by the Union or by the State.
Further, the parliament has exclusive power to make laws with respect to goods and services tax where the supply of goods or services or both takes place in the course of inter-state trade or commerce.
The GST replaced a number of indirect taxes levied by the Union and the State Governments and is intended to remove cascading effect of taxes and provide for a common national market for goods and services.
The Amendment also provided for subsuming of various central indirect taxes and levies.
Further, the Amendment deleted Article 268-A as well as Entry 92-C in the Union List, both were dealing with service tax. They were added earlier by the 88th Amendment Act of 2003. The service tax was levied by the Centre but collected and appropriated by both the Centre and the States.
Goods and Services Tax
GST came into effect from 1 July 2017 through the implementation of the One Hundred and First Amendment of the Constitution of India by the Indian government.
The GST replaced existing multiple taxes levied by the central and state governments.
Goods and Services Tax is a comprehensive, indirect, multistage, destination-based tax.
Comprehensive because it has subsumed almost all the indirect taxes except a few state taxes.
Multi-staged as it is, the GST is imposed at every step in the production process, but is meant to be refunded to all parties in the various stages of production other than the final consumer.
And as a destination-based tax, it is collected from point of consumption and not point of origin like previous taxes.
Goods and services are divided into five different tax slabs for collection of tax: 0%, 5%, 12%, 18% and 28%.
However, petroleum products, alcoholic drinks, and electricity are not taxed under GST and instead are taxed separately by the individual state governments, as per the previous tax system.
There is a special rate of 0.25% on rough precious and semi-precious stones and 3% on gold.
In addition a cess of 22% or other rates on top of 28% GST applies on several items like aerated drinks, luxury cars and tobacco products.
The tax rates, rules and regulations are governed by the GST Council which consists of the finance ministers of the central government and all the states.
Types of GST in India
Central Goods and Services Tax: CGST is charged on the intra state supply of products and services.
State Goods and Services Tax: SGST, like CGST, is charged on the sale of products or services within a state.
Integrated Goods and Services Tax: IGST is charged on inter-state transactions of products and services.
Union Territory Goods and Services Tax: UTGST is levied on the supply of products and services in any of the Union Territories in the country, viz. Andaman and Nicobar Islands, Daman and Diu, Dadra and Nagar Haveli, Lakshadweep, and Chandigarh. UTGST is levied along with CGST.
Revenue distribution
Revenue earned from GST (intra state transaction – seller and buyer both are located in same state) is shared equally on 50-50 basis between central and respective state governments.
Example: if state of Goa has collected a total GST revenue (intra state transaction – seller and buyer both are located in same state) of 100 crores in month of January then share of central government (CGST) will be 50 crores and remaining 50 crores will be share of Goa state government (SGST) for month of January.
For distribution of IGST (interstate transaction – seller and buyer both are located in different states), revenue is collected by central government and shared with state where good is imported.
Example: ‘A’ is a seller located in state of Goa selling a product to ‘B’ a buyer of that product located in state of Punjab, then IGST collected from this transaction will be shared equally on 50-50 basis between central and Punjab state governments only.
GST Identification Number
A 15-digit distinctive code that is provided to every taxpayer is the GSTIN. The GSTIN will be provided based on the state you live at and the PAN.
GSTN – Goods and Service Tax Network
The GSTN is the Goods and Services Tax Network which is responsible for managing the IT system concerning the GST Portal. It is a non-profit, non-government organization and is the database for the official GST Portal.
The GSTN software is developed by Infosys Technologies and the Information Technology network that provides the computing resources is maintained by the NIC.
GST E-Way Bill
An electronic document that is generated to show proof of goods movement is the E-Way bill. You can generate the bill from the GST portal.
It was made compulsory for inter-state transport of goods from 1 June 2018.
It is required to be generated for every inter-state movement of goods beyond 10 kilometres and the threshold limit of ₹50,000.