Goods and Services Tax (GST)
Class 12 Indian Economic Development — Overview, Types, ITC, Benefits, and GST Council
Overview of GST
One Nation, One Tax
Key Takeaways
- GST has replaced 17 indirect taxes (VAT, Service Tax, Excise Duty, Sales Tax, etc.) and 23 cesses of Centre and States.
- GST charged at each stage of value addition; supplier off-sets levy on inputs in previous stages through tax credit mechanism.
- Provision of availing input credit at each stage avoids cascading effect (tax on tax) — expected to reduce prices and benefit consumers.
- GST expected to improve ease of doing business, reduce tax burden, improve tax administration, mitigate tax evasion.
Types of Taxes Under GST
CGST
Central GST
Intra-State supply
SGST
State GST
Intra-State supply
IGST
Integrated GST
Inter-State supply (IGST = CGST + SGST)
Key Facts About GST
Single Tax Structure
Aims to subsume multiple taxes into one; make goods uniformly priced across India.
Effect on Prices
Luxury goods → costlier. Items of mass consumption → cheaper.
Consumption Based Tax
Tax received by the state where goods/services are consumed, not where manufactured.
Invoice Matching
Input Tax Credit available only when inward supply details match outward supply.
Anti-Profiteering
NAA (National Anti-Profiteering Authority) prevents excessive profits.
Registration Threshold
Turnover > ₹20 lakhs compulsory. ₹10 lakhs for special category states.
Total GST Collection for 2023-24: ₹20.18 lakh crore
Input Tax Credit (ITC)
Input Tax Credit = reducing taxes paid on inputs from taxes to be paid on output. When any supply is made to a taxable person, the GST charged = Input Tax.
Net Tax Burden: ₹450 − ₹300 = ₹150
Tax paid by manufacturer on output (450) minus tax paid on inputs (300)
Benefits and Key Features of GST
Benefits (7)
✓Reduction in overall tax burden
✓No hidden taxes
✓Development of a harmonized national market for goods and services
✓Higher disposable income in hand, education, and essential needs
✓Customers to have wider choice
✓Increased economic activity
✓More employment opportunities
Key Features (6)
Applicability
Territorial spread = the whole country
Applicable on Supply
GST on supply of goods or services (vs tax on manufacture/sale earlier)
Consumption Based Tax
Destination-based consumption tax (vs origin-based earlier)
GST on Imports
Imports treated as inter-State supplies → subject to IGST + customs duties
GST Rates
Four tax slabs: 5%, 12%, 18%, 28%. Exports and supplies to SEZ = zero-rated.
Payment of GST
Modes include Internet banking, debit/credit card, NEFT/RTGS
GST Council
GST Council
Constitutional Body (Article 279A)A constitutional body making recommendations to Union and State Governments on GST issues. Joint forum of the Centre and the States.
Composition
- Chairperson: Finance Minister
- Vice Chairperson: Chosen amongst State Ministers
- Members: MoS (Finance) + all Ministers of Finance/Taxation of each State
Quorum
of total members
Voting Weightage
Decision requires 75% majority of weighted votes