Levy and Collection of GST

Levy and Collection of Goods and Services Tax (GST) are central aspects of the GST regime in India, aimed at simplifying and harmonizing the indirect tax landscape across the country. Introduced on July 1, 2017, GST replaced a myriad of previous taxes with a single, unified system of taxation. Understanding the framework for the levy and collection of GST is crucial for businesses and professionals to ensure compliance and efficient tax management.

Constitutional Foundation

GST framework is rooted in the 101st Amendment of the Indian Constitution, which granted the Central and State governments the power to levy GST on the supply of goods and services. The amendment led to the introduction of various GST laws, including the Central GST (CGST) Act, State GST (SGST) Act, Union Territory GST (UTGST) Act, and the Integrated GST (IGST) Act.

Levy of GST

GST is levied on the “supply” of goods and services. Under GST law, supply includes sale, transfer, barter, exchange, license, rental, lease, or disposal made or agreed to be made for a consideration. It also includes import of services. The GST model is a destination-based tax, where the tax is collected by the State where the goods or services are consumed as opposed to where they are produced.

Types of GST

• CGST and SGST/UTGST:

For intra-state supplies (within the same state), both Central GST (CGST) and State GST (SGST) or Union Territory GST (UTGST) are levied. CGST goes to the Central Government, and SGST/UTGST goes to the State/Union Territory government.

• IGST:

For inter-state supplies (between two states or a state and a union territory) and imports, Integrated GST (IGST) is levied. IGST is shared between the Central and State governments as per the IGST Act.

Collection of GST

The collection mechanism of GST is designed to facilitate seamless credit throughout the value chain and across state boundaries. Businesses registered under GST charge the applicable tax (CGST, SGST/UTGST, or IGST) on their sales, and the tax is collected from the buyer. The seller then remits this amount to the government.

Input Tax Credit (ITC)

One of the fundamental features of GST is the Input Tax Credit (ITC) mechanism, which allows businesses to deduct the GST paid on their purchases (inputs) from the GST payable on their sales (output), effectively taxing only the value addition at each stage. This mechanism prevents the cascading effect of taxes, making the system more efficient and reducing the overall tax burden on the end consumer.

Exemptions, Thresholds, and Composition Scheme

• Exemptions:

Certain goods and services are exempt from GST to ensure that essential items remain affordable for the general public.

• Thresholds for Registration:

Businesses with annual turnover exceeding a specific threshold (Rs. 40 lakhs for goods and Rs. 20 lakhs for services, with variations for special category states) are required to register for GST.

• Composition Scheme:

Small taxpayers with a turnover below a certain threshold (Rs. 1.5 crores, subject to certain conditions) can opt for the Composition Scheme, under which they pay GST at a fixed rate on their turnover, without the benefit of ITC.

Compliance and Administration

GST compliance involves regular filing of returns, payment of taxes, and adherence to various procedural requirements under the law. The GST Network (GSTN), a digital platform, facilitates registration, return filing, payment, and other GST-related services.

The levy and collection of GST have significantly transformed India’s indirect tax system, making it more transparent, technology-driven, and aligned with international standards. While challenges remain, particularly in terms of compliance and administration, the system has been evolving to address these issues and to foster a more conducive environment for business and growth.