Goods and Service Tax (GST) is a new destination-based tax that is levied on the sale and purchase of goods and services. It is a consumption based tax, meaning the end consumer is responsible for paying the actual tax. Although the tax will be levied at each stage of the supply chain, the consumers will get input tax credit (ITC) for the tax paid by them at earlier stages, which they can reuse for the payment of the final tax. As a result, a consumer will be paying only the tax amount applied to the final transaction. GST will effectively replace all the existing and previous taxes including VAT, Service Tax, Excise Duty and other taxes in India, thus realizing the concept of “One tax, one nation”.

The tax will be received only by the relevant tax authority which has jurisdiction over the place of consumption (or the place of final supply).

A: GST would effectively replace all the following taxes:
Center levied taxes

• Excise duty
• Duties of Excise on Medicinal and Toilet Preparations
• Additional Duties of Excise on Goods of Special Importance and Textiles and Textile Products
• Additional Duties of Customs (CVD)
• Special Additional Duty of Customs (SAD)
• Service Tax
• Central Surcharges and Cesses related to supply of goods and services

State taxes

• VAT
• Luxury Tax
• Entertainment and Amusement Tax (Except those levied by the local bodies)
• Purchase tax
• State Surcharges and Cesses related to supply of goods and services
• Central sales tax
• All forms of Entry tax
• Taxes on advertisement
• Taxes on gambling, lottery, and betting

Alcohol for human consumption, high-speed diesel, Petroleum Products (petroleum crude), motor spirit (petrol), natural gas and aviation turbine fuel & Electricity will not be taxed as per GST rules. These commodities will continue to be taxed according to the previous tax (VAT & Central Excise) system.

The GST system implemented in India is a dual GST with both the Centre and State getting a part of the tax levied on a common base.

The GST charged by the Centre on intrastate (within a state) supply of goods & services is called CGST (Central GST) while the tax levied by the States on the same transaction is called SGST (State GST).

The tax levied by the Centre on all interstate (between two states) supplies of goods and services is called Integrated GST (IGST).

According to the Constitution of India, both the Centre and the States have the right to levy and collect taxes through appropriate procedure. A dual GST system is in place to protect that right.

In the previous system, the fiscal powers were separately assigned between the Centre and the State which were responsible for levying different taxes on different types of services and goods. Under GST, though, the fiscal powers of these two entities may often overlap as they are required to charge the same GST. This is why an amendment (one hundred and first amendment) was made in the Constitution of India under the Constitution Act, 2016 to empower both the Centre and the States to levy and collect the GST.

GST will replace all the indirect taxes being levied on the supply of goods and services in India, thus creating the way for a common national market.

• It removes the cascading tax system (tax on tax) completely.
• It will also reduce the overall tax being paid on many goods.
• It will also improve the value of our products in the international markets.
• The governments are also likely to see growth in their revenue due to the widening of the tax network.
• Also, the unified tax system will be easier to follow and administer.
• It will be easier to receive the input tax credit under GST.
• It increases the efficiency of logistics in India.
• There is the provision of GST composition scheme to ease the process for small businesses.
• Secure and easier online tax filing, credit storage, and management.

GST rates for different products and services are decided jointly by the Centre and the States. The applicable GST rates for various commodities can be found on the official GST portal.
Although GST is a one tax system, the GST Council has finalized five different tax slabs with different tax rates on each slab items.

• GST rate of 5% on good like oil, spices, coffee, tea, etc.
• 12% GST on computers, cycles, foods, and other similar items.
• 18% GST for most products/services
• 28% tax on luxury items and services like tobacco products, SUVs, etc.
• Zero tax (GST-exempted) for basic need products like milk and other food items.

Any taxable person with an aggregate turnover of 20 lakhs or more is liable to pay GST. IGST is to be paid on all inter-state supplies while CGST/ SGST is payable on the intra-state supplies of goods and services.