FAQs

What is the history of GST internationally?

Internationally, Gst was first introduced in France and now more than 150 countries have introduced GST.

What is the justification of GST?

A product or service passes through many stages till it reaches the final consumer. Central and State Government has levied many indirect taxes on various taxable events in the same value chain. Examples of such levies is Excise duty, VAT, CVD, SAD etc.
There is a burden of "tax on tax" in the pre-existing system of indirect laws of India, as both the CENVAT and the State VAT have certain degree of incompleteness.
With, the introduction of GST, a continuous chain of set-off from the original producer's point and service provider's point up to the retailer's level would be established which would eliminate the burden of all cascading effects, including the burden of CENVAT and service tax.

​What would be the rate of GST?

Whether cross utilization of credits between CGST and SGST be allowed?

Input tax credit of CGST would be available for payment of CGST and input tax credit of SGST would be available for payment of SGST. However, cross utilization of tax credit between the CGST and the SGST would be allowed in the case of inter-State supply of goods and services under the IGST model.

What is the basis of applying GST in India?

​​GST would be applicable on all goods and service at the final consumer point. It would contain two components CGST and SGST. GST will follow the destination principle as a result of this; tax base will shift from production to consumption whereby imports will be liable to the both CGST and SGST and exports should be relieved from the burden of GST by zero rating.

How many types of GST will be there​?

We will have 2 basic forms of GST:
1. State GST - Each State will have its own GST. This will be levied by each state government.
2. Centre GST - Central Government will have 1 GST applicable all over India.
However for inter-state transactions IGST would be applicable.

What is the concept of providing threshold exemption for GST? ?

Threshold exemption is built into a tax regime to keep small traders out of tax net. This has three-fold objectives:

a. It is difficult to administer small traders and cost of administering of such traders is very high in comparison to the tax paid by them.
 b. The compliance cost and compliance effort would be saved for such small traders.
 c. Small traders get relative advantage over large enterprises on account of lower tax incidence.

The present thresholds prescribed in different State VAT Acts below which VAT is not applicable varies 48 from State to State. A uniform State GST threshold across States is desirable and, therefore, as already mentioned in Answer to Question 6, it has been considered that a threshold of gross annual turnover of Rs. 10 lakh both for goods and services for all the States and Union Territories might be adopted with adequate compensation for the States (particularly, the States in North-Eastern Region and Special Category States) where lower threshold had prevailed in the VAT regime. Keeping in view the interest of small traders and small scale industries and to avoid dual control, the States also considered that the threshold for Central GST for goods may be kept Rs.1.5 Crore and the threshold for services should also be appropriately high.

How will be Inter-State Transactions of Goods and Services be taxed under GST in terms of IGST method?

The Empowered Committee has accepted the recommendation for adoption of IGST model for taxation of inter-State transaction of Goods and Services. The scope of IGST Model is that Centre would levy IGST which would be CGST plus SGST on all inter-State transactions of taxable goods and services. The inter-State seller will pay IGST on value addition after adjusting available credit of IGST, CGST, and SGST on his purchases. The Exporting State will transfer to the Centre the credit of SGST used in payment of IGST. The Importing dealer will claim credit of IGST while discharging his output tax liability in his own State. The Centre will transfer to the importing State the credit of IGST used in payment of SGST. The relevant information is also submitted to the Central Agency which will act as a clearing house mechanism, verify the claims and inform the respective governments to transfer the funds.
The major advantages of IGST Model are:

a. Maintenance of uninterrupted ITC chain on inter-State transactions.
b. No upfront payment of tax or substantial blockage of funds for the inter-State seller or buyer.
c. No refund claim in exporting State, as ITC is used up while paying the tax.
d. Self monitoring model.
e. Level of computerisation is limited to inter-State dealers and Central and State Governments should be able to computerise their processes     expeditiously.
f. As all inter-State dealers will be e-registered and correspondence with them will be by e-mail, the compliance level will improve substantially.
g. Model can take ‘Business to Business’ as well as ‘Business to Consumer’ transactions into account.

How will imports be taxed under GST?

With Constitutional Amendments, both CGST and SGST will be levied on import of goods and services into the country. The incidence of tax will follow the destination principle and the tax revenue in case of SGST will accrue to the State where the imported goods and services are consumed. Full and complete set-off will be available on the GST paid on import on goods and services.