Unit 1 - GST Concept and Practice |. Concept and Types of Indirect Tax Concept of Indirect Tax: Indirect taxes are those taxes where the burden of payment is shifted from the person who initially pays the tax to another person. These taxes are imposed on goods and services rather than on income or profits. Unlike direct taxes, indirect taxes are collected by intermediaries (such as retailers, wholesalers, or service providers) and ultimately paid by consumers. Characteristics of Indirect Taxes: e Shiftability - The tax burden is transferred from one entity to another. e Levied on Goods and Services - These taxes are imposed at different stages of production and consumption.e No Direct Payment by Individuals — Unlike income tax, consumers do not pay indirect taxes directly to the government. e Regressive in Nature - They affect all consumers equally, regardless of income. e Higher Revenue Collection — Indirect taxes contribute significantly to government revenue. Types of Indirect Taxes (Before GST): Before the introduction of Goods and Services Tax (GST), multiple indirect taxes were levied at different stages: 1.Central Level Taxes: e Excise Duty (levied on the manufacturing of goods) e Service Tax (on services provided)e Customs Duty (on imports and exports) e Central Sales Tax (CST) 2. State Level Taxes: e Value Added Tax (VAT) e Entertainment Tax e Luxury Tax e Entry Tax e Purchase Tax 3. Other Taxes: e Octroi (charged by local municipalities) e Taxes on lotteries, betting, and gamblingTypes of Indirect Taxes (After GST): With the implementation of GST, all major indirect taxes were subsumed into a single tax system. Now, GST is categorized into: e Central Goods and Services Tax (CGST): Levied by the central government on intra- state sales. e State Goods and Services Tax (SGST): Levied by the state government on intra- state sales. e Integrated Goods and Services Tax (IGST): Levied on inter-state sales, collected by the central government. e Union Territory Goods and Services Tax (UTGST): Levied in union territories without a legislature. Il. Right to Impose Indirect Tax by Center, State, and Union Territory Before and After the 101stAmendment Before the 101st Amendment (Pre-GST Era): e The Constitution of India divided taxation powers between the Central and State Governments as per Schedule VII: e Union List (List I): Central Government had the power to levy customs duty, excise duty, service tax, and central sales tax (CST). e State List (List II): State Governments levied VAT, entertainment tax, luxury tax, and entry tax. e Concurrent List (List III): Both governments had control over certain taxes like stamp duty. e This led to a complex tax structure with multiple overlapping taxes.After the 101st Amendment (Post-GST Era): e The 101st Constitutional Amendment Act, 2016, introduced Article 246A, giving both the Central and State Governments the power to levy GST. e It replaced the earlier tax system and introduced a dual GST structure (CGST + SGST/UTGST for intra-state transactions, and IGST for inter-state transactions). Key changes: e Article 246A: Grants states and the center concurrent powers to legislate on GST. e Article 269A: Defines how IGST is collected and apportioned between states and the center. e Article 279A: Establishes the GST Council to regulate GST policies.Impact of the 101st Amendment: e Elimination of cascading tax effect (tax on tax). e Uniform taxation system across India. e Simplification of tax structure. e Boost to economic growth and ease of doing business. Ill. Introduction of GST in India What is GST? Goods and Services Tax (GST) is a comprehensive, destination-based indirect tax that replaced multiple indirect taxes in India. It was introduced to create a single tax system for the entire nation.Historical Background of GST in India: e 2000: Vajpayee Government formed a committee to draft a GST framework. e 2004: Kelkar Task Force recommended GST implementation. e 2006: Union Budget announced GST to be implemented by 2010. e 2011: Constitution Amendment Bill for GST was introduced. e 2014: 122nd Constitutional Amendment Bill was tabled in Parliament. e 2016: 101st Constitutional Amendment Act was passed, paving the way for GST. e 1st July 2017: GST was officially launched in India.Features of GST: e One Nation, One Tax: Unified taxation system across India. e Dual GST Structure: Central GST (CGST) and State GST (SGST/UTGST). e Destination-Based Tax: Tax is collected at the place of consumption. e Elimination of Multiple Taxes: GST subsumes indirect taxes like VAT, excise, and service tax. e Input Tax Credit Mechanism: Reduces tax burden by allowing input tax credit at each stage of production. e Technology-Driven System: GSTN (Goods and Services Tax Network) facilitates online filing and compliance.Advantages of GST: e Simplified tax structure. e Reduction in the price of goods and services. e Boost to trade and commerce. e Transparency in taxation. Challenges in GST Implementation: e Initial compliance issues due to the digital nature of GST. e High rates for some goods and services. © Concerns about revenue loss for states. e Frequent changes in GST rates and policies.