ASSIGNMENT

TOPIC – GST: Meaning, Scope and its Types

SUBJECT– Law of Taxation

ASSIGNMENT SUBMITTED TO

FACULTY OF LAW, UNIVERSITY OF LUCKNOW

For the partial fulfillment of the requirement in

B.A.LL.B ( Hons.) -VIII SEM (SECTION A)

Under guidance of:. Submitted by :

DR. MOHD. UMAR RIA GUPTA

FACULTY OF LAW ROLL NO.- 200013015009

UNIVERSITY OF LUCKNOW

FACULTY OF LAW

UNIVERSITY OF LUCKNOW

LUCKNOW ,UP

2023-24
 ACKNOWLEDGEMENT

I would like to express my special thanks of gratitude to my Taxation teacher Dr. Mohd.
Umar who gave me the golden opportunity to do this wonderful assignment on the topic
GST: Meaning, Scope and its Types which helped me in learning new things through a lot
of research.

I would also like to thank Dean of Law Faculty, Professor B.D Singh for providing all the
help that was required in completing the assignment.

Lastly, I would also like to thank my parents and friends who helped me a lot in finalizing
this assignment within the limited time frame.

The success and final outcome of this assignment required a lot of guidance and assistance
from many people and I am fortunate to get all the support for completing this assignment.

Their guidance and assistance was really helpful in bringing this work to a conclusion.
What is GST? (Goods and Services Tax)

The full form of GST is Goods and Services Tax. It was first introduced in the
Budget Speech presented on 28th February 2006. It laid the foundation for a
complete reform of India’s indirect tax system. Finally implemented on 1st July
2017 as the Goods and Services Tax Act, the indirect taxation system thus went
through a chain of amendments since its inception.

With this tax reform, GST replaced multiple indirect taxes that were levied on
different goods and services. The Central Board of Indirect Taxes and Customs
(CBIC) is the regulatory body governing all changes and amendments regarding
this tax.

GST Meaning and Scope

GST definition is easy to decode. It is a destination-based, multi-stage,

comprehensive tax levied at each stage of value addition. Having replaced multiple
indirect taxes in the country, it has successfully helped the Indian Government
achieve its ‘One Nation One Tax’ agenda.

The tax is levied on goods and services sold within India’s domestic boundary for
consumption. Implemented by a majority of nations worldwide with respective
customisations, the tax has been successful in simplifying the indirect taxation
structure of India.

GST is levied on the final market price of goods and services manufactured
internally, thereby reflecting the maximum retail price. Customers are required to
pay this tax on a purchase of goods or services as an inclusion in their final price.
Collected by the seller, it is then required to be paid to the government, thus
implying the indirect incidence.
The GST rates on different goods and services are uniformly applied across the
country. Goods and services have, however, been categorised under different slab
rates for tax payment. While luxury and comfort goods are categorised under
higher slabs, necessities have been included in lower and nil slab rates. The main
aim of this classification is to ensure the uniform distribution of wealth among
residents of India.

History of GST and GST Information

Back in 2000, the then Prime Minister of India introduced the concept of Goods
and Services Tax. He also formed a committee to draft new indirect tax law.

It, however, took 17 more years for its implementation. Meanwhile, the bill went
through multiple introductions, amendments and rescheduling.

 2000 – Committee set up by the PM for drafting Goods and Service Tax law
for India.

 2004 – A task force reported a need to implement this law and improve the
indirect tax system in India.

 2006 – Goods and Services Tax introduction scheduled on 1st April 2010 by
the Finance Minister of India.

 2007 – Decision to phase out Central Sales Tax (CST).

 Consequently, CST rates were reduced to 3% from 4%.

 2008 – GST’s dual structure was finalised by the EC for separate legislation
and levy.

 2010 – Postponement of GST introduction due to structural and

implementation hurdles. A project launched for the computerisation of
commercial taxes.

 2011 – Introduction of Constitution Amendment Bill for enabling the Goods

and Services Tax Law.
  2012 – Discussion regarding the tax initiated by the Standing Committee;
stalled due to lack of clarity regarding Clause 279B.

 2013 – GST’s report presented by the Standing Committee.

 2014 – The Finance Minister of India reintroduces the Goods and Services
Tax Bill to Parliament.

 2015 – The Lok Sabha clears the bill, but it is stalled in the Rajya Sabha.

 2016 – Goods and Services Tax Network (GSTN) went live. The law’s
amended model passed in both Houses of Parliament and received a nod
from the President of India.

 2017 – The Cabinet approves four supplementary bills on GST cleared by

the Lok Sabha and the Rajya Sabha. The Goods and Services Tax Law was
implemented on 1st July 2017.

List of Taxes Subsumed after GST Implementation

Good service tax was introduced as a comprehensive indirect tax structure. With
this introduction, the government aimed to consolidate all indirect taxes levied
under one umbrella.

Thus, except for customs duty that is levied on the import of goods, Goods and
Services Tax replaced multiple indirect taxes. This introduction helped overcome
the limitations of its previous indirect tax structure regarding implementation and
inefficiency in the collection process.

Following is the list of indirect taxes that were subsumed by Goods and Service
Tax-

 Indirect Taxes Imposed by the Central Government

o Central Sales Tax

o Service Tax
 o Central Excise Duty

o Excise Duty (Additional)

o Countervailing Duty or Additional Customs Duty

o Special Additional Customs Duties

 Indirect Taxes Imposed by the State Government

o State VAT

o Entry Tax and Octroi Duty

o Luxury Tax

o Amusement and Entertainment Tax

o Taxes on Advertisements

o Goods and services related to cess and surcharges

o Purchase Tax

o Tax on betting, lottery and gambling.

Objectives of GST

The key objectives of GST are-

 'One Nation, One Tax’

GST took the place of many indirect taxes that existed before. It was introduced
with a core motive and policy called the 'One Nation, One Tax’. It was introduced
as so to provide set tax rates for a service/product that every state would follow. It
even simplified administering taxes and compliances.

 To Subsume Indirect Taxes in India

 To create a centralised and unified tax system on goods and services, GST was
introduced in India. Under its laws, the majority of indirect taxes were subsumed
into one to simplify administration.

 To Restrain Tax Evasion

Prior to the introduction of GST, the tax evasion rate was very high. In order to
curb evasion and create a centralised tax surveillance system, GST was introduced
in India. It has effectively contributed to reducing the number of tax defaulters.

Components of Goods What does it mean?

and Services Tax
State Goods and Services SGST refers to the tax payable on the sale of services and products within a
Tax (SGST) state.
It replaces previous taxes, including Value Added Tax, Entry Tax, State Sales
Tax, Entertainment Tax, surcharges and cesses.
Central Goods and The tax levied on the supply of intra-state products is CGST. The Central
Services Tax (CGST) Government charges this tax.
CGST replaced many taxes levied by the Centre, including Service Tax,
Central Excise Duty, CST, SAD, Customs Duty, etc.
Union Territory Goods Taxes applicable to the sale of products and services in Union Territories,
and Services Tax such as Andaman and Nicobar, Daman and Diu, Chandigarh, Dadra, etc.
(UTGST)
Integrated Goods and The sale of inter-state products and services leads to taxation. This is IGST.
Services Tax (IGST) Basically, when businesses transfer services and products from one state to
another, they need to pay this form of GST.

Types of GST and GST Rules

GST can be divided into four sections based on the kind of transaction it involves.
Before a business can determine its GST liability, assessing the following table
about the Components of GST is essential.
 GST Levy and Intra-State Sale Inter-State Sale
Revenue Share

Goods and SGST+CGST IGST

Services Tax
Share of Revenue Revenue collected to be Revenue collected by the central government.
shared between state It will then be shared as per the goods’ destination.
and central government
equally.

Collection of tax is thus undertaken in the following way for intra-state and inter-
state transactions.

Example

Here’s an example to help you understand the levy, collection and share of revenue
between the state and the central government.

A seller in Maharashtra sells goods worth Rs. 1 lakh to a buyer in the same state.
The tax rate applicable to the goods is 12%, comprising 6% of CGST and 6% of
SGST. The total GST of Rs. 12,000 collected will be shared between the centre
and the state at Rs. 6,000 each as the sale is made intra-state.

The same seller sold goods worth Rs. 50,000 from Maharashtra to Karnataka. The
tax rate applicable to these goods was 18%. The seller will thus charge IGST of Rs.
9,000 from the buyer due to it being an inter-state sale. The tax collected will be
submitted to the central government.

Once submitted, the tax will be shared by the central government and state
government based on the supply of goods made. For ease of tax collection, the
government has made the entire system for the payment of GST online.

Understanding the Dual Structure of Goods and Services

Tax
Unlike a federal structure where the government collects taxes and distributes them
to the states, a dual tax structure allows both the centre and the state to levy and
collect taxes.

Goods and Services Tax in India carries this same dual structure, thus having two
components, state as well as a central levy. The structure is applicable to all
transactions related to goods and services.

Concepts of GST Levy – Multi-Stage, Destination-based

and Value Added

The comprehensive nature of the Goods and Services tax levy takes into account
every stage of manufacture whereby value-added to an item is taxable. Plus, a
change of destination also attracts GST.

The various stages of GST application are discussed below -

 Meaning of Multi-stage Levy

From production/manufacture to consumption, an item is passed from one link of

the supply chain to another until it is finally purchased for consumption. An
indirect tax is hence, levied at every stage, to be borne ultimately by a consumer.

The different steps of production of a finalised good and its corresponding sale in
the market comprise the following in general.

 Raw material purchase

 Manufacture/production of raw materials into finished goods

 Storage of finished goods at the warehouse

 Sale of goods to the wholesaler

 Sale of goods to the retailer

  Sale to an end-user/consumer

GST charged at each link of this chain makes it a multi-stage tax.

 Meaning of Destination-based Levy

A destination-based levy means the item is to be taxed at a place where it is

consumed and not at its origin. This means that the location where an item is
consumed will rightfully collect the tax.

In this context, it is essential to differentiate the concept of ‘supply’ from ‘place of

supply’. The decision regarding whether a sale is intrastate or interstate will be
taken accordingly.

 Meaning of Taxation on Value Addition

The concept of GST on value addition implies every addition made to an item to
make it saleable to the end-user is taxable under this regime. Understand it with the
help of an example.

The manufacturing unit of Britannia Industries Limited in Chennai, Tamil Nadu,

manufactures a variety of biscuits. During the manufacturing process, it goes
through the following stages, with value added at each stage.

 Processing flour, sugar and other materials into a dough and baking into
biscuits increases the value of the material by making it saleable as units.

 The biscuits are then sent to the warehousing agent for storage and further
processing. He then packs the biscuits in sets of 10 for the next stage of the
process. It is another value addition as it increases the monetary value of the
biscuits, making them saleable.

 Each packed unit is labelled as a product with Britannia’s brand logo. The
act of labelling is the next stage of value addition.
  The biscuits are packed in smaller cartons and re-labelled to be transported
and sold to the retailer, crossing another stage of value addition.

Thus, for each monetary value added to these stages, making the product
saleable, GST is levied, thus making it a tax on value addition.

Conclusion
Under the erstwhile indirect tax regime, there was no concept of Supply.
The stage at which indirect taxes were levied varied under different tax
laws. The ‘excise duty’ was charged on goods manufactured when they
were taken out of the factory. ‘Service Tax’ was levied based on certain
rules known as the ‘point of taxation’ rules, for services rendered. A VAT
would arise on the value of the sale of goods or provision of services. The
present system has merged all taxes to maintain a single taxable event.