What is GST?

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”.

What does “destination based tax on consumption” actually mean?

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).

Which all taxes would be replaced by GST?

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

Which items (commodities) are not covered under the GST? How will they be taxed now?

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.

Who is liable to pay tax under GST?

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.