TLDR;
This video provides an introduction to the Goods and Services Tax (GST) in India, covering its meaning, definitions, and key features. It explains how GST replaced a complex web of indirect taxes, aiming to create a unified national market. The lecture also touches upon the dual GST structure, destination-based tax, value-added tax, and the technology-driven system for GST administration.
- GST is a comprehensive, destination-based, indirect tax implemented in India on July 1, 2017.
- It aims to unify taxes into a single economic market, promoting ease of doing business with the motto "One Nation, One Tax, One Market."
- The dual GST structure involves both central (CGST, IGST) and state (SGST) governments levying taxes.
Introduction to GST in India [0:31]
GST, or Goods and Services Tax, is a comprehensive, destination-based, indirect tax applied to the supply of goods and services across India. Implemented on July 1, 2017, it replaced a complex system of indirect taxes imposed by both central and state governments. GST is considered India's most significant tax reform since independence, aiming to unify taxes into a single economic market and promote ease of doing business. The motto of GST is "One Nation, One Tax, One Market," ensuring uniform tax rules across all states. Before GST, India had a multi-tax structure with numerous taxes imposed by the center and states, leading to overlapping taxes, lack of uniformity, and barriers to interstate trade. GST aims to consolidate these taxes into a single, unified tax system.
Meaning of GST [4:56]
GST is a single tax on the supply of goods and services from the manufacturer to the consumer. It allows for credits of input taxes paid at each stage of value addition, eliminating the cascading effects of taxes and creating a uniform national market. GST simplifies taxation and ensures easy tax compliance by removing the tax-on-tax effect.
Definitions of GST [6:03]
The Constitution of India defines GST as any tax on the supply of goods and services, excluding taxes on the supply of alcoholic liquor for human consumption. Key elements of this definition include that GST is levied on the supply, not the manufacture or sale, and it covers both goods and services. Alcohol for human consumption and petroleum products are excluded temporarily. The Central Board of Indirect Taxes and Customs (CBIC) defines GST as a destination-based tax levied at all stages from manufacturing to final consumption, with credit for taxes paid at previous stages available as a set-off. The academic and economic definition describes GST as a comprehensive, multistage, destination-based indirect tax levied on every value addition. The World Bank describes Indian GST as the most complex indirect tax system in the world with the multiple rates and numerous exceptions.
Features of GST [11:43]
GST is a comprehensive tax that consolidates a wide range of central and state indirect taxes into a single system, simplifying tax processes, compliance, and administration. India follows a dual GST structure where both central and state governments have the authority to levy and collect tax, ensuring federal balance and revenue sharing. CGST (Central Goods and Services Tax) is imposed by the Central Government on intrastate supply, while SGST (State Goods and Services Tax) and UTGST (Union Territory Goods and Services Tax) are levied by the State and UT Governments on intrastate supply. IGST (Integrated Goods and Services Tax) is levied by the Central Government on interstate supply. GST is a destination-based consumption tax, meaning the tax revenue goes to the state where goods and services are consumed, not where they are produced. It is applicable at every stage of the supply chain, with input tax credit available at each stage, making it a value-added tax system.
Elimination of Cascading Effect and Multiple Tax Slabs [14:41]
GST eliminates the cascading effect of taxes by providing full Input Tax Credit (ITC), leading to lower tax rates and reduced product costs. India has multiple tax slabs based on the nature and essentiality of goods and services, including 0% (basic food items, healthcare, education), 5% (essentials like edible oils, footwear), 12-18% (standard goods and services), and 28% (luxury and demerit goods like tobacco, automobiles).
Input Tax Credit (ITC) Mechanism [16:28]
Registered taxpayers can claim credit for taxes paid on inputs, reducing the final tax burden. Conditions for ITC include being a registered taxpayer with a valid invoice, receiving goods or services, and the supplier uploading the invoice in GSTR-1. The utilization of input tax credit involves making purchases in inward supply and selling things outward, with credit available in import and export, as well as intrastate and interstate transactions.
Technology-Driven System and Pan India Unity [17:46]
GST is administered through a fully digital portal called GSTN (Goods and Services Tax Network), offering online services for registration, return filing, and tax payment. This ensures transparency, reduces corruption, and improves compliance tracking. GST introduces a uniform tax structure across all states and union territories, reducing interstate trade barriers and boosting the concept of One Nation, One Tax, and One Market.
Threshold Exemptions and Composition Scheme [18:55]
Small businesses with turnover below a certain limit are exempted from GST registration and payment. The threshold limit for goods is up to Rs 40 lakh, and for services, it is up to Rs 20 lakh. For North East and Hill States, the limit is Rs 10 lakh. Small taxpayers with turnover up to Rs 1.5 crore can opt for the composition scheme, which offers a lower tax rate (1-6%), quarterly return filing, and simplified compliance, but ITC is not available.
Anti-Profiteering Measures, Self-Assessment, and Return Filing [20:27]
Anti-profiteering measures ensure that businesses pass on the benefit of reduced GST rates and input tax credit to consumers. The National Anti-Profiteering Authority (NAA) monitors violations and ensures fair pricing. GST is based on self-assessment by the taxpayer, who must assess and pay their own tax liability, subject to later audit and scrutiny by the tax authority. Regular return filing includes GSTR-1 (details of outward supply), GSTR-3B (summary return), and GSTR-9 (annual return).