CGST Act. 2017, Features

The Central Goods and Services Tax Act, 2017 (CGST Act) is a key legislation that forms the backbone of the Goods and Services Tax (GST) regime in India. Enacted to streamline the taxation of goods and services, the CGST Act outlines the provisions related to the levy and collection of central tax on intra-state supplies.

The Central Goods and Services Tax Act, 2017, is a landmark piece of legislation that underpins the implementation of the Goods and Services Tax in India. Its features, ranging from the levy and collection of taxes to provisions related to registration, valuation, input tax credit, and compliance, reflect the government’s commitment to creating a transparent, efficient, and uniform indirect tax system. As the GST regime evolves, the CGST Act continues to play a central role in shaping the taxation landscape, and its provisions are subject to periodic reviews and amendments to address the needs of businesses and ensure the success of GST in India.

Levy and Collection of Tax:

• Objective:

The primary objective of the CGST Act is to levy and collect tax on the supply of goods and services within a state or union territory.

• Uniformity:

The Act ensures uniformity in the application of central tax across all states and union territories, replacing the complex and fragmented indirect tax system that existed before GST.

Scope of Supply:

The CGST Act defines the scope of supply broadly to include all forms of supply of goods or services or both, such as sale, transfer, barter, exchange, license, rental, lease, or disposal made or agreed to be made for a consideration.

• Inclusions and Exclusions:

The Act specifies various inclusions and exclusions to comprehensively cover different types of transactions.

Threshold Limit:

• Exemption:

The CGST Act provides an exemption threshold, below which businesses are not required to register for GST. This threshold is determined to ensure that small businesses are not burdened by the compliance requirements of GST.

Registration:

• Mandatory Registration:

Businesses meeting the specified criteria are required to register under the CGST Act. The registration process is streamlined and facilitated through an online portal.

• Voluntary Registration:

Businesses that do not meet the mandatory criteria can opt for voluntary registration, allowing them to avail of the benefits of input tax credit.

Composition Scheme:

• Option for Small Businesses:

The CGST Act introduces a composition scheme for eligible small businesses, allowing them to pay tax at a lower rate on their turnover. This scheme simplifies compliance for small taxpayers.

Taxable Event:

• Supply as Taxable Event:

The CGST Act identifies the supply of goods or services or both as the taxable event, marking a departure from the earlier tax regime where manufacturing or sale of goods or provision of services triggered tax liability.

Time and Place of Supply:

• Determinants:

The Act outlines specific rules for determining the time and place of supply, which are crucial for the calculation of tax liabilities. These rules provide clarity on when and where the supply is deemed to have occurred.

Valuation of Supply:

• Transaction Value:

The Act follows the transaction value as the basis for the valuation of supply. It includes all expenses incurred in the course of supply, ensuring a comprehensive approach to valuation.

Input Tax Credit (ITC):

• Availability:

The CGST Act allows businesses to avail Input Tax Credit on taxes paid on inputs and input services, ensuring that the tax paid at each stage of the supply chain is credited to the subsequent stage.

• Conditions for Availing ITC:

Certain conditions, such as proper documentation and compliance with the provisions of the Act, must be met for businesses to avail ITC.

Reverse Charge Mechanism:

• Applicability:

The Act introduces the reverse charge mechanism, where the liability to pay tax is shifted from the supplier to the recipient in specific cases.

• Notification:

The government can notify certain categories of supply where the reverse charge mechanism is applicable.

Refund Mechanism:

• Provisions for Refund:

The CGST Act includes provisions for the refund of taxes in cases where excess tax has been paid or where the input tax credit is more than the output tax. –

• Time Limits and Conditions:

The Act specifies time limits and conditions for claiming refunds, ensuring that the refund process is transparent and accountable.

Audit and Assessment:

• Audit by Authorities:

The CGST Act empowers tax authorities to conduct audits to ensure compliance with the provisions of the Act.

• Assessment Procedures:

It outlines the procedures for the self-assessment of taxes by taxpayers and assessment by tax authorities.

Adjudication and Appeals:

• Adjudication Authority:

The Act establishes an adjudication authority to resolve disputes related to the classification of goods and services, determination of the place of supply, and other matters.

• Appellate Tribunal:

It provides for the creation of an Appellate Tribunal for hearing appeals against orders of the adjudicating authority.

Offenses and Penalties:

• Provisions for Offenses:

The CGST Act lists various offenses, such as evasion of tax, issuance of false invoices, and failure to maintain proper records.

• Penalties:

It prescribes penalties for offenses, including monetary fines and imprisonment, depending on the nature and severity of the violation.

Anti-profiteering Measures:

• Objective:

The CGST Act includes provisions to prevent profiteering by businesses after the implementation of GST. Businesses are expected to pass on the benefits of reduced tax rates to consumers.

• Anti-Profiteering Authority:

An Anti-Profiteering Authority is established to examine complaints regarding profiteering and take necessary action.

E-commerce Provisions:

• Liability of E-commerce Operators:

The Act places liability on e-commerce operators to collect and remit tax on behalf of the sellers using their platform.

• Facilitation of Compliance:

E-commerce provisions aim to facilitate compliance and ensure that tax obligations are met in the rapidly growing e-commerce sector.

Seamless Interstate Transactions:

• IGST Mechanism:

The CGST Act is designed to seamlessly integrate with the Integrated Goods and Services Tax (IGST) mechanism for the taxation of interstate supplies. This ensures a unified approach to the taxation of goods and services across states.

Technology Integration:

• GSTN:

The Act envisions the integration of technology through the Goods and Services Tax Network (GSTN), a robust IT infrastructure that facilitates online registration, filing of returns, and other compliance activities.

• E-invoicing:

The Act incorporates provisions for the generation of electronic invoices (e-invoicing) to enhance transparency and reduce tax evasion.

Regular Updates and Amendments:

• Dynamic Nature:

The CGST Act acknowledges the dynamic nature of the economy and business environment, allowing for regular updates and amendments to address emerging challenges and improve the effectiveness of the GST regime.

Coordinated Decision-Making:

• GST Council Interface:

The CGST Act establishes a framework for coordinated decision-making between the central and state governments through the GST Council. The Council serves as a forum for consensus-building on critical GST-related issues.