Basics of GST

Understand the basics of the ‘Goods and Service Tax’.

GST is an Indirect Tax that has replaced all Indirect Taxes in India.  The GST Act came into effect on 1st July 2017; Goods & Services Tax is levied on every value addition.

In simple word, GST is an indirect tax levied on the supply of goods and services. 

GST is one indirect tax for the entire Nation. (i.e. One tax One Nation)

GST is levied at every point of sale.

In the case of intra-state sales, Central GST and State GST are levied.

In the case of Inter-state sales Integrated GST is levied.

Definition of Goods and Service Tax – “GST is a comprehensive, multi-stage destination-based Tax that is levied on every value addition.”

Now What is Multi-stage?

Its supply chain of the Goods from manufacture to the consumer.

Understand with the following case:

1      Purchase of raw materials by manufacturer

o   Production or manufacture of the Goods

2     Manufacturer to wholesaler

3     Wholesaler to the retailer

4     Retailer to end consumer

GST is levied on each of these stages which makes it a multi-stage tax.

GST is levied on these value additions i.e. the value-added at each stage to achieve the final sale to the end customer.

levy of GST 

Destination based Tax

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

GST Comprises of

CGST – Central Goods and Service Tax (levied by Central Gov.)

SGST – State Goods and Service Tax (levied by State Gov.)

UTGST – Union Territory Goods and Service Tax (levied by Union territory)

IGST – Integrated Goods and Service Tax (levied by Central Gov.)

Benefits of GST

GST RATES 

Different GST rates are as under 

0% (necessity items like milk, wheat flour) 

0.25% (rough diamonds) 

3%  (gold, silver, etc.) 

5% 

12% 

18% 

28% 

Compensation Cess

A GST Compensation Cess is Specified Rate and it has been imposed on 
the Specified luxury item or demerit goods (like pan masala, tobacco, motor car etc.)

Computed on the value of supply. 

Exception of GST

GST levied on all goods and services, Except following.

1             Alcoholic liquor for human consumption (Subject to State excise duty on manufacture or production and VAT/CST on sale)

2            Petrol, diesel, petroleum crude, ATF, natural gas (Subject to central excise duty on manufacture or production and VAT/CST on sale)

3            GST is not levied on sale or purchase of the immovable property.

4          Opium, Indian hemp, and other narcotic drugs and narcotics :

It is within the purview of GST ( i.e. GST leviable on them)
However the State Government has retained the power to levy excise 

duties on such products manufactured in India.

Therefore it is subject to State excise duties as well as GST both.

5          Tobacco: GST is leviable on tobacco. However, the Union Government has retained the power to levy excise duty on tobacco and tobacco products manufactured in India

Therefore tobacco is subject to GST as well as Central excise duty.

6          GST not Applicable on the Following Service 

Salary and wages 

Electricity 

Interest 

Government Fees (such as MCA fees, land registration fees, etc.) 

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