Goods and Services Tax (GST) is a comprehensive, destination-based indirect tax levied on the supply of goods and services in India. Introduced on 1st July 2017, GST replaced multiple indirect taxes like VAT, service tax, excise duty, and others, thereby simplifying the tax structure. It is a dual system where both the Central Government and State Governments levy tax simultaneously, i.e., Central GST (CGST) and State GST (SGST) for intra-state transactions, while Integrated GST (IGST) is levied on inter-state transactions. GST follows a value-added model where tax is collected at each stage of the supply chain, with credit available for tax paid on inputs.
Under the Central Goods and Services Tax Act, 2017, various sections define and regulate GST provisions. For instance, Section 7 of the CGST Act defines the scope of “supply,” which is the taxable event under GST. Section 9 lays down the levy and collection of CGST, stating that CGST shall be levied on all intra-State supplies of goods or services except on the supply of alcoholic liquor for human consumption. Section 16 provides for eligibility and conditions for taking Input Tax Credit (ITC), which is crucial for avoiding cascading taxes. Additionally, Section 22 defines the threshold limit for registration under GST, which is ₹20 lakh for most states and ₹10 lakh for special category states.
GST offers multiple benefits such as eliminating the cascading effect of taxes, ensuring transparency, and improving compliance. It also fosters a unified national market by removing state barriers. However, it requires robust digital infrastructure as returns must be filed online via the GST portal. Businesses must maintain accurate documentation and adhere to return timelines to avoid penalties.
Mnemonic to Remember GST Provisions:
“SALT RICE”
- S – Section 7: Supply defined
- A – Act: CGST Act, 2017
- L – Levy under Section 9
- T – Threshold limit – Section 22
- R – Returns filing mandatory
- I – Input Tax Credit – Section 16
- C – Cascading effect removed
- E – E-commerce and digital compliance
