GST - Preliminary (Compilation) Part-1

• Part I of the Constitution of India states: “India, that is Bharat, shall be a Union of States”. 
• It provides that territory of India shall comprise the States and the Union Territories specified in the First Schedule of the Constitution of India. 
• The First Schedule provides for twenty-nine (29) States and seven (7) Union Territories. 
• Part VI of the Constitution of India provides that for every State, there shall be a Legislature, while Part VIII provides that every Union Territory shall be administered by the President through an ‘Administrator’ appointed by him. 
• However, the Union Territories of Delhi and Puducherry have been Provided with Legislatures with powers and functions as required for their administration. 
• India is a summation of three categories of territories namely – (i) States (29); (ii) Union Territories with Legislature (2); and (iii) Union Territories without Legislature (5). 
• The State of Jammu and Kashmir enjoys a special status in the Indian Constitution in terms of Article 370 of the Indian Constitution. 
• The Parliament has power to make laws only on Defence, External Affairs and Communication related matters of Jammu and Kashmir. 
• As regards the laws related on any other matter, subsequent ratification by the Government of Jammu and Kashmir is necessary to make it applicable to that State. 
• Therefore, the State of Jammu & Kashmir will have to pass special laws to be able to implement the Goods and Services Tax Acts as its current Constitutional status does not mandate the applicability of the Goods and Services Tax Acts in the State. 
• Once the laws are passed by the State of Jammu & Kashmir, the Union Government will have to amend the Central Goods and Services Act, 2017 to delete the phrase that such provisions do not apply to the State of Jammu & Kashmir. 

1. What is GST?

GST is Goods and Service Tax. Common tax on supply of all Goods and/or Services.

2. Why GST?

To make India as One nation – One Tax – One market.

To reduce cascading effects (tax on taxes), tax evasion by using more technology for governance, Reduce Cost and complications of Compliance, etc

3. Will there be no other taxes, after introducing GST?

Yes, to some extent.

All the major indirect taxes of State and Central Governments shall be subsumed by GST. Following are the taxes subsumed:

Central Taxes: Domestic: Excise Duty, Service tax, Central Sales tax; Imports: CVD and SAD

State Taxes: VAT, Entry tax, Entertainment tax, Luxury tax and Octroi/LBT

4. Will GST be the one tax in lieu of all the above taxes?

Yes, Only one tax, GST. But levied and collected as three different components which are

CGST: Central Goods and Services tax     – Central govt. portion of the revenue

SGST: State Goods and Services tax         – State govt. portion of the revenue

IGST: Integrated Goods and Services tax– Common revenue, total of CGST and SGST, levied and Collected by Central Govt. State’s portion shall be re distributed among states, at a later point of time.

5. When to charge and collect tax under GST?

Under GST, tax should be charged on Supply of Goods or Service or Both.

No concept of Manufacture under GST. Sale of goods, Provision of Service and all other transactions shall be subsumed by treated as Supply.

6. GST is applicable for all the Supplies?

Yes, except for Liquor and Electricity.

Currently Petroleum Crude, Diesel, Petrol natural gas and ATF are also out of GST. But soon provision made to bring these into GST.

7. How to determine on which component of tax to be charged?

Though these are three components, there would be only one bifurcation Inter-state Vs Intra state.

For all the Intra-state (within the state) supplies CGST and SGST of respective state should be charged.

For all the Inter -state (Outside the state) supplies IGST should be charged

Eg. If the dealer of X product located in Hyderabad supplies to a retailer in Telangana, He should charge CGST and SGST of Telangana.

If the same dealer supplies x product to another dealer / retailers in Andhra Pradesh, He should charge IGST (Total of CGST and SGST of Andhra Pradesh).

Note: CGST & SGST shall always be charged together for Intra state supplies and IGST alone for all inter-state supplies.

8. How to determine a transaction as Interstate or Intra state supply?

There are two concepts, Location of Supplier and Place of Supply, to be compared for determining this.

Location of Supplier (LOS): Place/State from where the supply is made

Place of Supply (POS): Place/State to where the supply is made

If LOS and POS are in same state: Intra-state supply – CGST and SGST of that state should be charged.

If LOS and POS are in different states: Inter-state supply – IGST should be charged.

9. Is every supplier liable to be registered under GST?

No, a person/organization shall be registered under GST, only if his aggregate turnover in a financial year exceeds Rs20 Lakhs.

Aggregate turnover: Means total value of all the businesses of a person with same PAN.

Eg 1: If a person is having 5 different businesses, operating with his name (PAN), with 5 Lakhs annual t/o in each business, he is liable to be registered in GST.

Eg 2: For the same person, of 3 businesses are operating with his name (PAN) and two businesses are operating with his wife’s name (PAN), he and she shall not be liable for registration under GST.

10. Only one registration is sufficient?

Yes, one registration for each state in which the person has the business.

In the above example, if the person is having 5 branches in same state, he has to obtain only one registration. If the branches are in 5 different states, 5 registrations should be obtained.

Note: No concept of Centralized registrations under GST