Basic knowledge of GST

The Goods and Services Tax (GST) implementation is around the corner in India. It is expected to be applicable from 1st April 2017. In this connection, a series of articles will be posted here. Hope this helps.

Which of the existing taxes are proposed to be subsumed under GST?

The GST would replace the following taxes:

(i) taxes currently levied and collected by the Centre:

  1. Central Excise duty
  2. Additional Duties of Customs (commonly known as CVD)
  3. Special Additional Duty of Customs (SAD)
  4. Service Tax
  5. Central Surcharges and Cesses so far as they relate to supply of goods and services

(ii) State taxes that would be subsumed under the GST are:

  1. State VAT
  2. Central Sales Tax
  3. Luxury Tax
  4. Entry Tax (all forms)
  5. Entertainment and Amusement Tax (except when levied by the local bodies)
  6. Taxes on advertisements
  7. Purchase Tax
  8. Taxes on lotteries, betting and gambling
  9. State Surcharges and Cesses so far as they relate to supply of goods and services

GST Council fixed an annual turnover limit for exemption at Rs 20 lakh and resolved that all cesses will be subsumed in the GST. (means those entities doing a business of less than Rs.20 Lakhs per year are exempt from GST)

The state authorities will have jurisdiction over assessees with annual turnover of less than Rs 1.5 crore (Means the entities who are doing annual sales upto Rs.1.50 crores will be assessed by the present day Sate VAT department)

Those with a turnover of over Rs 1.5 crore would be cross-examination either by officers from the Centre or state to avoid dual control. ( means the companies can be assessed by State VAT or Central Excise department)

However, the power for assessment of 11 lakh service tax assessees who are currently assessed by Centre, would remain with it. (means Service providers will be assessed by the present day service tax department)

New assessees which would be added to the list would be divided between the Centre and states.

How GST will appear in Sales Invoice?

GST consists of three types of taxes, namely Central GST (CGST), State GST (SGST) and Integrated GST (IGST). Suppose hypothetically that the rate of CGST is 10%, and that of SGST is 10%, how it will appear in an Invoice.

Example; ABC Limited raises Invoice of Rs.1000 for sale of goods or services to any buyer within the state of Karnataka; he has to charge CGST of Rs.100 (10%) and SGST of Rs.100 (10%)

Suppose ABC Limited raises Invoice of Rs.1000 to any buyer outside the state of Karnataka, say a buyer in Pune, he has to charge IGST of Rs.200 (20%)

He would be required to deposit the CGST component into a Central Government account while the SGST portion into the account of the concerned State Government. Of course, he need not actually pay Rs. 200 (Rs.100 + Rs. 100 ) in cash as he would be entitled to set-off this liability against the CGST or SGST paid on his purchases (say, inputs).

GST is popularly projected as ‘One Nation One Tax.’ Does this mean, only one rate of tax? Say, 20% or 18% on all sales or services?

No. GST will have multiple tax rates. The possible scenario would be –

  • Exempted goods and services – Nil rate of tax
  • Export of goods and services – ZERO rate tax
  • Precious metals such as Jewels – 2 or 4% tax
  • Essential goods or services – 6 or 8% tax
  • All other goods and services – Standard Rate 18% or 20%
  • Goods like Cigarettes or luxury cars – 40%

There won’t be any Cess like Education Cess or Krishi Kalyan Cess or Swachh Bharat Cess,etc. in addition to GST rates.

Are you selling any goods against C Form or I-Form? If so, please check whether you have collected the Forms and submitted to the department. If it is not done (or partially done), make a special drive to collect the forms from the clients.

The State VAT department is in a tearing hurry to complete the assessments before the GST comes into place. In the case of non-submission of forms, the department is mercilessly levying additional taxes. Those who have large inter-state sales will have a sizable impact.

Kindly take up this matter seriously and save taxes.

What is the scope of composition scheme under GST?

Small taxpayers with an aggregate turnover in a financial year up to Rs. 50 lakhs shall be eligible for composition levy. Under the scheme, a taxpayer shall pay tax as a percentage of his turnover during the year without the benefit of Input Tax Credit. (Composite tax rate yet be announced). A tax payer opting for composition levy shall not collect any tax from his customers. Tax payers making inter- state supplies or paying tax on reverse charge basis shall not be eligible for composition scheme.

Composition scheme is optional. Taxpayers are free to opt for regular scheme.

If a person is operating in different states, with the same PAN number, whether he can operate with a single Registration?

No. Every person who is liable to take a Registration will have to get registered separately for each of the States where he has a business operation and is liable to pay GST.

How will an import bill look like under GST?

Today, on import of goods, one has to pay Customs Duty (CD) + Countervailing Duty (CVD) + Special Additional Duty (SAD)

Under GST regime, the tax structure would be Customs Duty (there will not be any change in Customs Duty provisions) + Integrated Goods and Service Tax (IGST)

Which of the taxes kept outside the purview of GST?

The following taxes will continue in its present form, even after the implementation of GST

  • Professional Tax
  • Stamp Duty
  • Road Tax
  • Customs Duty
  • Excise Tax on alcohol
  • VAT and Excise Duty on Petroleum products
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About B E Kumar Prasad

B E Kumar Prasad
He is a Practicing Chartered Accountant in Bengaluru, India. He has 25+ years of experience in income tax, business setup, and NRI matters. He is also an Insolvency Professional and Registered Valuer (F&SA).Prasad welcomes your comments and questions. Please email him at

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