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Goods and Services Tax (GST)

GST RATES FOR SERVICES AS APPROVED BY GST COUNCIL

The fitment of rates of services were discussed on 19 May 2017 during the 14th GST Council meeting held at Srinagar, Jammu & Kashmir. The Council has broadly approved the GST rates for services at Nil, 5%, 12%, 18% and 28% as listed below. The information is being uploaded immediately after the GST Council’s decision and it will be subject to further vetting during which the list may undergo some changes. The decisions of the GST Council are being communicated for general information and will be given effect to through gazette notifications which shall have force of law.

GST FAQ: Answers to all your questions about India’s biggest tax reform

1) What is Goods and Services Tax (GST)?

It is a destination based tax on consumption of goods and services. It is proposed to be levied at all stages right from manufacture up to final consumption with credit of taxes paid at previous stages available as set off. In a nutshell, only value addition will be taxed and burden of tax is to be borne by the final consumer.

2) What exactly is the concept of destination based tax on consumption?

The tax would accrue to the taxing authority which has jurisdiction over the place of consumption which is also termed as place of supply.

3) 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:

  • Central Excise duty
  • Duties of Excise (Medicinal and Toilet Preparations)
  • Additional Duties of Excise (Goods of Special Importance)
  • Additional Duties of Excise (Textiles and Textile Products)
  •  The Additional Duties of Customs (commonly known as CVD)
  • Special Additional Duty of Customs (SAD)
  • Service Tax.

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:

  • State VAT
  • Central Sales Tax
  • Luxury Taxd. Entry Tax (all forms)
  • Entertainment and Amusement Tax (except when levied by the local bodies)
  • Taxes on advertisements
  • Purchase Tax. Taxes on lotteries, betting and gambling.

State Surcharges and Cesses so far as they are late to supply of goods and services.

The GST Council shall make recommendations to the Union and States on the taxes, cesses and surcharges levied by the Centre, the States and the local bodies which may be subsumed in the GST.

4) What principles were adopted for subsuming the above taxes under GST?

The various Central, State and Local levies were examined to identify their possibility of being subsumed under GST. While identifying, the following principles were kept in mind:

(i) Taxes or levies to be subsumed should be primarily in the nature of indirect taxes, either on the supply of goods or on the supply of services.

(ii) Taxes or levies to be subsumed should be part of the transaction chain which commences with import/manufacture/ production of goods or provision of services at one end and the consumption of goods and services at the other.

(iii) The subsumation should result in free flow of tax credit in intra and inter-State levels. The taxes, levies and fees that are not specifically related to supply of goods and services should not be subsumed under GST.

(v) Revenue fairness for both the Union and the States individually would need to be attempted.

5) Which are the commodities proposed to be kept outside the purview of GST?

Article 366(12A) of the Constitution as amended by 101st Constitutional Amendment Act, 2016 defines the Goods and Services tax (GST) as a tax on supply of goods or services or both, except supply of alcoholic liquor for human consumption. So alcohol for human consumption is kept out of GST by way of definition of GST in constitution. Five petroleum products viz. petroleum crude, motor spirit (petrol), high speed diesel, natural gas and aviation turbine fuel have temporarily been kept out and GST Council shall decide the date from which they shall be included in GST. Furthermore, electricity has been kept out of GST.

6) What will be the status in respect of taxation of above commodities after introduction of GST?

The existing taxation system (VAT and Central Excise) will continue in respect of the above commodities.

7) What will be status of Tobacco and Tobacco products under the GST regime?

Tobacco and tobacco products would be subject to GST. In addition, the Centre would have the power to levy Central Excise duty on these products.

8) What type of GST is proposed to be implemented?

It would be a dual GST with the Centre and States simultaneously levying it on a common tax base. The GST to be levied by the Centre on intra-State supply of goods and / or services would be called the Central GST (CGST) and that to be levied by the States/ Union territory would be called the State GST (SGST)/ UTGST. Similarly, Integrated GST (IGST) will be levied and administered by Centre on every inter-state supply of goods and services.

9) Why is Dual GST required?

India is a federal country where both the Centre and the States have been assigned the powersto levy and collect taxes through appropriate legislation. Both the levels of Government have distinct responsibilities to perform according to the division of powers prescribed in the Constitution for which they need to raise resources. A dual GST will, therefore, be in keeping with the Constitutional requirement of fiscal federalism.

10) Which authority will levy and administer GST?

Centre will levy and administer CGST and IGST while respective states/UTs will levy and administer SGST/UTGST.

11) Why was the Constitution of India amended recently in the context of GST?

Currently, the fiscal powers between the Centre and the States are clearly demarcated in the Constitution with almost no overlap between the respective domains. The Centre has the powers to levy tax on the manufacture of goods (except alcoholic liquor for human consumption, opium, narcotics etc.) while the States have the powers to levy tax on the sale of goods. In the case of inter-State sales, the Centre has the power to levy a tax (the Central Sales Tax) but, the tax is collected and retained entirely by the States. As for services, it is the Centre alone that is empowered to levy service tax.

Introduction of the GST required amendments in the Constitution so as to simultaneously empower the Centre and the States to levy and collect this tax. Article 246A of the Constitution empowers the Centre and the States to levy and collect the GST.

12. How a particular transaction of goods and services would be taxed simultaneously under Central GST (CGST) and State GST (SGST)

The Central GST and the State GST would be levied simultaneously on every transaction of supply of goods and services except the exempted goods and services, goods which are outside the purview of GST and the transactions which are below the prescribed threshold limits. Further, both would be levied on the same price or value unlike State VAT which is levied on the value of the goods inclusive of CENVAT. While the location of the supplier and the recipient within the country is immaterial for the purpose of CGST, SGST would be chargeable only when the supplier and the recipient are both located within the State.

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