Introduction to GST

Goods and Services Tax (GST) is a comprehensive, destination-based indirect tax levied on the supply of goods and services in India. It came into effect on July 1, 2017, was replace multiple indirect taxes such as Excise Duty, VAT, and Service Tax, bringing uniformity in taxation across the country.

Key Features of GST:

Multi-Stage Tax: GST is levied at every stage of the supply chain, from manufacturer to consumer.
Destination-Based Tax: Tax is collected by the state where goods or services are consumed.
Dual Structure: GST has two components:

CGST (Central GST) – Levied by the Central Government.
SGST (State GST)/UTGST (Union Territory GST) – Levied by the State/UT Government.
IGST (Integrated GST) – Levied on inter-state transactions and imports, collected by the Centre.

Input Tax Credit (ITC): Businesses can claim credit for the GST paid on purchases, reducing the cascading effect.
Tax Slabs: Common GST rates are 5%, 12%, 18%, and 28%, with special rates for essential goods and services.

Applicability of GST:

Applies to all businesses, traders, manufacturers, and service providers with a turnover exceeding the threshold limit.
GST is mandatory for businesses with an annual turnover above ₹40 lakh (₹20 lakh for services).
Composition Scheme is available for small businesses with a turnover of up to ₹1.5 crore.

Types of Supplies Under GST:

Intra-State Supply: Supply within the same state (CGST + SGST).
Inter-State Supply: Supply between different states (IGST).

Advantages of GST:

o Eliminates cascading effect of taxes (tax on tax).

o Simplifies compliance through a unified tax system.

o Boosts ease of doing business.

o Reduces tax evasion with online compliance & e-way bills.

o Increases government revenue with improved tax collection.

o Dispute Resolution through GST Council

Taxes Subsumed in GST (Before GST vs After GST)

GST replaced multiple indirect taxes at the Central and State levels to create "One Nation, One Tax".

A. Central Taxes Subsumed in GST

Sl. No.	Tax Name	Explanation
1	Central Excise Duty	On manufacture of goods (except petroleum & alcohol).
2	Service Tax	On provision of services.
3	Additional Excise Duties	On special goods like textiles, sugar, tobacco.
4	Countervailing Duty (CVD)	Equivalent to excise on imports (under Customs Act).
5	Special Additional Duty (SAD)	Levied on imports to counterbalance VAT/CST.
6	Central Sales Tax (CST)	On inter-state sale of goods (now replaced by IGST).
7	Excise Duty on Medicinal & Toilet Preparations	Moved to GST.
8	Cesses and Surcharges	Like Krishi Kalyan Cess, Swachh Bharat Cess (if related to supply of goods/services).

B. State Taxes Subsumed in GST

Sl. No.	Tax Name	Explanation
1	State VAT / Sales Tax	On intra-state sale of goods.
2	Central Sales Tax (collected by States)	On inter-state trade (now IGST).
3	Entry Tax / Octroi	On goods entering a local area.
4	Luxury Tax	On hotels, resorts, etc.
5	Entertainment Tax	On movies, events (except those levied by local bodies).
6	Purchase Tax	On purchase of specified goods.
7	Lottery, Betting & Gambling Tax	Subsumed to the extent related to supply.
8	Cesses & Surcharges (State Level)	If related to supply of goods/services.

Taxes Not Subsumed in GST

Not Included in GST
o Excise on petroleum crude, diesel, petrol, natural gas, ATF (Aviation Tribune Fuel)
o Alcohol for human consumption
o Stamp Duty, Vehicle Tax, Property Tax
o Electricity Duty

GSTN (Goods and Services Tax Network)

What is GSTN?

GSTN is a Section 8 (non-profit) company that provides the IT backbone for the entire GST system.

Functions of GSTN:

Maintains the GST Portal (www.gst.gov.in).
Facilitates registration, return filing, payment, refund, etc.
Ensures secure exchange of data between taxpayers, tax authorities, and other stakeholders.
Acts as a pass-through between the taxpayer and the government via GSPs.

Ownership Structure:

100% owned by the Government (earlier it was a private-public partnership).

GSP (GST Suvidha Provider)

GSPs are authorized intermediaries that provide online platforms/tools to taxpayers for GST compliance.

Help businesses interact with GSTN via APIs.
Assist in bulk return filing, invoice uploading, and reconciliation.

3. ASP (Application Service Provider)

ASPs are software service providers that develop applications to help businesses prepare GST returns and manage compliance.

Relation with GSP:

ASPs process data, while GSPs connect to GSTN.
Many companies act as both ASP and GSP.

4. GST Council [Article 279A]

Constitutional Body:

Formed under Article 279A of the Constitution by the 101st Amendment Act, 2016.

Composition of GST Council:

Member	Representation
Chairperson	Union Finance Minister
Member	Union Minister of State for Finance
Members	Finance/Taxation Ministers of all States/UTs

States and Union Territories under GST

India under GST follows the "Dual GST Model":

CGST (Central Goods & Services Tax)
SGST (State GST) / UTGST (Union Territory GST)

States under GST

There are 28 States that levy SGST along with CGST on intra-state supplies.

List of 28 States:

Andhra Pradesh, Arunachal Pradesh, Assam, Bihar, Chhattisgarh, Goa, Gujarat, Haryana, Himachal Pradesh, Jharkhand, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Manipur, Meghalaya, Mizoram, Nagaland, Odisha, Punjab, Rajasthan, Sikkim, Tamil Nadu, Telangana, Tripura, Uttar Pradesh, Uttarakhand, West Bengal.

What is a Legislature?

A legislature is a law-making body. In India, this usually refers to the State Legislative Assembly, which makes laws for a state or union territory.

Union Territories (UTs) under GST

There are 8 Union Territories, but only 5 levy UTGST, as 3 UTs have their own legislatures and are treated like states for GST.

UTs with Legislature (Treated like States → SGST applies):

These Union Territories have their own elected legislative assembly and a Chief Minister.

Delhi
Jammu & Kashmir (Reorganized as UT with legislature after 2019)
Puducherry

They levy SGST (not UTGST) + CGST.

UTs without Legislature (UTGST applies):

These UTs do not have a legislative assembly. They are directly governed by the President of India through a Lieutenant Governor or Administrator.

Andaman and Nicobar Islands
Chandigarh
Dadra & Nagar Haveli and Daman & Diu
Lakshadweep
Ladakh

They levy UTGST + CGST.

Constitutional Provisions Related to GST

Need for Constitutional Amendment

Before GST, taxation powers were divided between the Centre and States. The Centre could levy excise duty and service tax, while States levied VAT and other taxes. To implement a uniform GST, a constitutional amendment was required to empower both the Centre and States to levy and collect GST.

Thus, the 101st Constitutional Amendment Act, 2016 was passed, introducing key changes to the Constitution.

Key Articles Introduced/Amended in the Constitution

Article	Provision
Article 246A	Special power to make laws on GST. Gives both Parliament and State Legislatures power to make laws on GST. Intra-State supply: Both Centre & State can make laws (CGST + SGST). Inter-State supply: Only Parliament can legislate (IGST).
Article 269A	Levy and collection of IGST on inter-State trade and commerce. IGST is collected by the Central Government and distributed between Centre & States as per GST Council recommendations.
Article 279A	The GST Council is a constitutional body that makes recommendations on GST rates, exemptions, laws, and procedures.
Article 366(12A)	Defines Goods and Services Tax (GST) as a tax on supply of goods or services, except alcohol for human consumption.
Article 368	Process for amending the Constitution (used for the 101st Amendment).
Article 286	Restrictions on State governments from imposing tax on the supply of goods and services outside their jurisdiction.
Article 246	Division of powers between Centre and States – amended to introduce Article 246A. It earlier governed the tax powers before GST

Quorum of GST Council Meetings

For a meeting of the GST Council to be valid, at least 50% of the total members must be present.

Decision-Making in the GST Council

Every decision is made by a 3/4th majority of the weighted votes of members present and voting.
Weightage of votes:

Central Government: 1/3rd
State Governments (All together): 2/3rd

So, both Centre and States must agree for any major decision.

Members of the GST Council

(As per Article 279A of the Constitution)

There is no fixed number of members because all States and UTs with legislature are represented.

Composition:

Position	Who?	Voting Power
1 Chairperson	Union Finance Minister	(Central Govt – 1/3 vote)
2 Member	Union Minister of State (Finance/Revenue)	(No separate vote)
3 Members	Finance/Taxation Ministers of all States and UTs with legislature	(Collectively hold 2/3 vote)

Members are there right now (as of current structure)

28 States
3 UTs with Legislature:

Delhi
Puducherry
Jammu & Kashmir

Total States/UTs represented = 31

Plus:

Union Finance Minister (Chairperson)
Union MoS Finance/Revenue

So, total current members ≈ 33

But remember: the voting is only between:

Central Government (1 vote with 1/3 weight)
All States/UTs with legislature together (31 votes with 2/3 weight)

Important Points to Remember:

The number of members can change if new states are formed or UTs get/lose legislature.
Only Centre and States/UTs with legislature can vote.
Union Minister of State is a non-voting member (assists only).

Article 246 & 7th Schedule of the Constitution

It divides the power to make laws between:

The Parliament (Central Government)
The State Legislatures

And it does this using the Seventh Schedule, which contains three lists.

Constitutional Lists

Under the Indian Constitution, legislative powers between the Centre and States are divided into three lists in the Seventh Schedule:

List	Name	Who Makes Law?
List I	Union List	Central Government
List II	State List	State Governments
List III	Concurrent List	Both Centre and States

Before GST – Multiple Taxes Were Levied Based on These Lists:

Union List (List I) – Centre had power to levy:

Excise Duty
Customs Duty
Service Tax
Central Sales Tax (CST)

State List (List II) – States had power to levy:

VAT (on sale of goods)
Entry Tax
Entertainment Tax
Luxury Tax
Taxes on betting, lotteries, etc.

Concurrent List (List III):

Both Centre & States could legislate on topics like adulteration of food, but taxation was not included here.

After GST – What Changed?

The 101st Constitutional Amendment restructured taxation powers.

Key point:

GST is a concurrent tax under Article 246A.
Centre + States can both legislate on intra-state supply.
Only Parliament can legislate on inter-state supply (IGST).
State List entries were amended to remove powers that now come under GST.

Introduction To GST