Levy and Collection, Composition Levy, Exemptions of GST

Goods and Services Tax (GST) in India is a comprehensive, multi-stage, destination-based tax that is levied on every value addition in the supply chain. The implementation of GST represented a significant overhaul of the indirect tax system, replacing numerous state and central taxes with a unified framework.

Levy and Collection of GST

The constitutional validity of GST is anchored in the 101st Amendment of the Indian Constitution, which led to the introduction of Article 246A. This grants both the Union and the States simultaneous powers to legislate on GST. Consequently, GST is levied and collected on all intra-state supplies of goods and services by the Central GST (CGST) and State GST (SGST) and on all inter-state supplies by the Integrated GST (IGST).

Key Points:

• CGST and SGST:

For intra-state transactions, both the central and the state government levy GST simultaneously. CGST is deposited with the Central Government, and SGST is deposited with the State Government.

• IGST:

For inter-state transactions and imports, IGST is levied. The revenue from IGST is shared between the Central and State Governments as per the regulations.

The GST Council, a constitutional body, recommends the rates, exemptions, and the threshold for the levy of GST. GST is levied on the supply of goods and services except for alcohol for human consumption, petroleum products (which are expected to be included in GST in the future), and electricity.

Composition Levy

The Composition Scheme is a simple and straightforward scheme under GST for small taxpayers to reduce compliance costs. It is an optional scheme available to businesses with an annual turnover below a specified threshold (currently ₹1.5 crore for most states but ₹75 lakhs for special category states, subject to change as per Council recommendations).

Key Features:

• Taxpayers need to pay tax at a nominal rate (1% for manufacturers and traders, 5% for restaurants, and 6% for other service providers as of the latest guidelines).
• Simplified tax return filing procedures.
• No Input Tax Credit (ITC) can be availed by composition dealers.
• Not applicable to interstate suppliers, e-commerce operators, or suppliers of non-GST goods and services.

Exemptions under GST

Certain goods and services are exempt from GST to make essential goods and services more affordable for the general population. The GST Council decides these exemptions.

Key Exemptions:

• Basic food items and grains like rice and wheat.
• Services like education, healthcare, and religious pilgrimages.
• Certain agricultural and handicraft products.

Special Categories:

• Zero-rated supplies:

Exports and supplies to Special Economic Zones (SEZs) are taxed at 0% under GST, allowing exporters to claim a refund for the tax paid on inputs.

• Reverse Charge Mechanism:

In certain cases, the recipient of goods or services is liable to pay GST directly to the government instead of the supplier.