Mr. Sajid Rahman B.Com, LL.M.

(Corporate & Commercial Law)

Ph.D. Research Scholar (NLUJAA)

*** The notes are a brief overview. Add more case studies, examples etc. subject to availability.
Unit II- Goods and Services Tax- I
Introduction
Goods and Services Tax (GST) is a single tax levied on goods and services from
manufacturing to consumption, eliminating all indirect taxes previously levied. The
implementation of GST was one of the biggest indirect tax reforms of recent times in India.
The implementation of the Goods and Services Tax (GST) in India was a historical
move, as it marked a significant indirect tax reform in the country. The amalgamation of a large
number of taxes (levied at a central and state level) into a single tax is expected to have big
advantages. One of the most important benefit of the move is the mitigation of double taxation
or the elimination of the cascading effect of taxation.
What are the Central and State level taxes absorbed/summed in GST?
In the earlier indirect tax regime, there were many indirect taxes levied by both the state
and the centre. States mainly collected taxes in the form of Value Added Tax (VAT). Every
state had a different set of rules and regulations.
Inter-state sale of goods was taxed by the centre. CST (Central State Tax) was
applicable in case of inter-state sale of goods. The indirect taxes such as the entertainment tax,
octroi and local tax were levied together by state and centre. These led to a lot of overlapping
of taxes levied by both the state and the centre.
For example, when goods were manufactured and sold, excise duty was charged by the
centre. Over and above the excise duty, VAT was also charged by the state. It led to a tax on
tax effect, also known as the cascading effect of taxes.
In India, The Goods and Services Tax (GST) is an indirect tax that has supplanted many
taxes and levies. The GST regime has significantly changed the taxation system, simplifying
the taxation process and reducing the burden of multiple taxes. The details of the taxes
subsumed under GST are as under.
A. Central Level Taxes subsumed in GST

▪ Central Excise Duty and additional Excise Duty

Central Excise Duty is basically imposed on manufacturing of goods in India and the
collection for this duty is done by Central Board of Excise and Customs. The tax rate 12.5%
with input tax credit is being imposed on Jewelers (except Silver ornaments).

▪ Service Tax

Service Tax is a tax that is levy by the government on the services provided and it
actually bear by the customers. It is an indirect tax, wherein the service provider collects the
tax from service receiver and pays to the Government. Currently, Service Tax rate is 15% of
value of services provided, Education cess and Secondary Education cess is 2% of Swachh
Bharat cess (i.e. 0.50%)

▪ Additional Customs Duty commonly known as Countervailing Duty

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 Mr. Sajid Rahman B.Com, LL.M. (Corporate & Commercial Law)
Ph.D. Research Scholar (NLUJAA)

Commonly referred to Countervailing Duty, equivalent to Central Excise Duty which

is imposed on Manufacturing. It is calculated on value base of goods including landing charges
and basic customs duty (excluding anti-dumping duty, safeguarding duty, etc.

▪ Special Additional Duty of Customs

It is payable 4% on good imported and this is in instead of VAT/ Sales Tax.

▪ Central Surcharges and Cess

Surcharge is a charge on tax and as a name suggest, it is an additional charge and it is

basically on personal income tax (on high income slabs) and on corporate income tax. Cess is
imposed by central government and is levied for specific purpose.

B. State Level Taxes subsumed in GST

▪ Value Added Tax (VAT)

VAT is an indirect tax on the goods and services that are provided at state level or
domestic. It is imposed at each stage in the chain of distribution and production from the raw
materials till the valuation of the product and it is borne by the end users (customers) in
Distribution channel.

▪ Entertainment Tax (other than the tax levied by the local bodies), Central Sales
Tax (levied by the Centre and collected by the States)

Entertainment Tax is a tax levied by the government on things related to entertainment

like movie tickets, commercial shows, etc.

▪ Octroi and Entry tax

Octroi is a tax which is charged by local authority say, Municipality and Entry Tax is
charged by State

▪ Purchase Tax

Purchase tax is a tax that is imposed on the purchase of goods by the state government,
and it is applied to wide range of goods.

▪ Central Sales Tax

CST, is levy on sales, which is affected by inter-state trade. CST is an indirect tax on
consumers. As it is centrally levy, so it is administered by the concerned state where the sales
originated.

▪ Luxury tax

A Luxury Tax is levy on articles that are either expensive or optional

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 Mr. Sajid Rahman B.Com, LL.M. (Corporate & Commercial Law)
Ph.D. Research Scholar (NLUJAA)

▪ Taxes on lottery, betting and gambling.

Tax which is imposed on Lottery winnings, Gambling and Betting calculated as Tax
Deduction at Source and it is deducted from Income.

Deficiencies of the Indirect Tax Regime’s which led to the introduction of GST
Before the implementation of the Goods and Services Tax (GST) regime in India, the
indirect tax structure was fragmented, complicated, and riddled with numerous defects. The
indirect tax system in India is comprised of multiple taxes levied at different stages of the
supply chain, including central excise duty, service tax, value-added tax (VAT), central sales
tax, and other levies. These taxes were levied by different authorities, resulting in a complicated
and confusing tax structure. Here are some of the major defects in the structure of Indirect taxes
before GST:
▪ Cascading Effect: One of the significant problems with the pre-GST indirect tax
system was the cascading effect of taxes, also known as the tax on tax. In the pre-GST
regime, taxes were levied at each stage of production and distribution, leading to a
compounding effect of taxes. This resulted in an increase in the cost of goods and
services, making them expensive for the end consumer.
Illustration: Let’s take an example of a biscuit manufacturer with some hypothetical figures
to see what happens to the cost of goods and the taxes, by comparing the earlier and current
tax regimes.
Tax calculations in earlier regime:

The tax liability was passed on at every stage of the transaction, and the final liability
comes to a rest with the customer. This condition is known as the cascading effect of taxes,
and the value of the item keeps increasing every time this happens.

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 Mr. Sajid Rahman B.Com, LL.M. (Corporate & Commercial Law)
Ph.D. Research Scholar (NLUJAA)

Tax calculations in current regime(GST):

In the case of Goods and Services Tax, there is a way to claim the credit for tax paid in
acquiring input. The individual who has already paid a tax can claim credit for this tax when
he submits his GST returns.
In the end, every time an individual is able to claims the input tax credit, the sale price
is reduced and the cost price for the buyer is reduced because of lower tax liability. The final
value of the biscuits is therefore reduced from Rs.2,244 to Rs.1,980, thus reducing the tax
burden on the final customer.
▪ Multiple Taxes and Rates: The pre-GST indirect tax structure had multiple taxes
levied at different stages of the supply chain. The central government levied taxes such
as excise duty, service tax, and customs duty, while the state government levied taxes
such as VAT, entry tax, and entertainment tax. Each tax had its own rate, making it
complicated for businesses to calculate and comply with the tax laws.
▪ Compliance Burden: Compliance with the pre-GST indirect tax system was
complicated and time-consuming. Businesses had to comply with multiple tax laws,
file separate tax returns, maintain separate records, and undergo multiple audits. This
resulted in a high compliance burden for businesses, particularly small and medium-
sized enterprises.
▪ Tax Evasion: The pre-GST indirect tax system was plagued with rampant tax evasion
due to the complex tax laws and multiple tax rates. Many businesses found ways to
evade taxes, such as underreporting sales, claiming false exemptions, and claiming
input tax credits fraudulently. This resulted in a loss of revenue for the government and
an uneven playing field for compliant businesses.
▪ Lack of Uniformity: The pre-GST indirect tax system lacked uniformity across states
and industries. Different states had different tax rates, and industries were subject to
different tax laws and exemptions. This resulted in a lack of transparency and
predictability in the tax regime, making it difficult for businesses to plan and invest in
the long term.
All these issues and challenges were not addressed by the old indirect tax regime and
had to be addressed at the earliest. In order to reduce such loopholes and issues, the government
decided to reform the regime and introduce a whole new tax regime which further introduced

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 Mr. Sajid Rahman B.Com, LL.M. (Corporate & Commercial Law)
Ph.D. Research Scholar (NLUJAA)

a single indirect tax known as GST, which subsumed all kinds of indirect taxes under its ambit,
making the procedure easy to understand and comply with.

Illustration: Before the Goods and Services Tax could be introduced, the
structure of indirect tax levy in India was as follows:

What is GST?
▪ Goods and services tax means a tax on supply of goods or services, or both, except
taxes on supply of alcoholic liquor for human consumption.
▪ GST is a value added tax levy on sale or service or both.
▪ GST is a destination based consumption tax.
▪ GST offers comprehensive and continuous chain of tax credit.
▪ GST where burden borne by final consumer.
▪ GST eliminate cascading effect of tax.
▪ GST brings uniform tax structure all over India.
When did GST start?
The history of GST goes back as early as the year 1954, when it was first adopted by
France, followed by over 160 countries worldwide. Malaysia was one of the most recent
countries to adopt a valued-based tax system, GST, back in 2015. GST was first introduced in
India in 2017 when they decided to introduce a dual tax structure system.

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 Mr. Sajid Rahman B.Com, LL.M. (Corporate & Commercial Law)
Ph.D. Research Scholar (NLUJAA)

Who introduced GST in India?

The history of GST in India dates back to the year 2000 when the then Prime Minister
Atal Bihari Vajpayee first proposed the idea of GST. The recommendation for the introduction
of Goods and Services Tax (GST) in India was made by the Kelkar Task Force on indirect
taxes in 2003.

The task force, headed by Vijay Kelkar, recommended the implementation of GST to
simplify the complex indirect tax system and improve tax compliance. The task force’s report
became the basis for the subsequent discussions and negotiations.

However, in 2014, the then Finance Minister, Mr Arun Jaitley, introduced the
Constitution Amendment Bill in the parliament. In May 2015, the Constitution (122nd
Amendment) Bill 2014 was passed in the Lok Sabha. The Integrated GST Bill, 2017, the Union
Territory GST Bill, 2017, the Central GST Bill, 2017, and the GST (Compensation to States)
Bill, 2017 were passed by the Lok Sabha and the Rajya Sabha by the 20th of April 2017
Accordingly, Goods and Services Tax (GST) has been implemented in India w.e.f. 1st July,
2017.

Features of The Constitution (One Hundred and One Amendment) Act, 2016

The Constitution of India granted the union and state government the power to levy tax
on both by its union and state lists. The 101st constitution amendment Act introduced the ‘one
nation, one tax’ system.
The 101st Amendment Act, 2016 is a significant amendment to the Constitution of
India that introduced the Goods and Services Tax (GST). This amendment marked a crucial
step towards achieving a unified and simplified indirect tax system in India. The features of
this amendment are as follows:-
▪ Concurrent powers on Parliament and State Legislatures to make laws governing
goods and services. It means there will be dual control of State and Central
authorities for all assesses.
▪ Unified Tax System: The amendment aimed to establish a unified tax regime by
subsuming various indirect taxes such as excise duty, service tax, VAT, and others into
a single GST.
▪ Dual GST Structure: The GST system introduced a dual structure, with the central
and state governments levying and collecting GST simultaneously on the supply of
goods and services.

▪ Constitutional Amendment: The 101st Amendment Act introduced amendments to

several articles of the Indian Constitution, empowering the central and state
governments to levy and collect GST.
▪ GST Council: The GST Council, established under Article 279A, is responsible for
making recommendations on various aspects of GST, including tax rates, exemptions,
and procedural issues.
▪ Article 246A: As per Article 246A, the power to levy GST has been given to the
Parliament as well as to Legislature of every State.

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 Mr. Sajid Rahman B.Com, LL.M. (Corporate & Commercial Law)
Ph.D. Research Scholar (NLUJAA)

a. CGST – enacted by Central Government of India.

b. IGST – enacted by Central Government of India.
c. SGST – enacted by respective State Governments
d. UTGST – enacted by Central Government of India.

▪ Article 286: Restrictions on Tax Imposition

This was an existing article which restricted states from passing any law that allowed
them to collect tax on sale or purchase of goods either outside the state or in the case of import
transactions. It was further amended to restrict the passing of any laws in case of services too.
Further, the term ‘supply’ replaces ‘sale or purchase’.
• Article 366: Addition of Important definitions

Article 366 was an existing article amended to include the following definitions:

➢ Goods and Services Tax means the tax on supply of goods, services or
both. It is important to note that the supply of alcoholic liquor for human
consumption is excluded from the purview of GST.
➢ Services refer to anything other than goods.
➢ State includes Union Territory with legislature.

▪ The power to levy Central Excise duty on goods manufactured or produced in India is
available in respect of the following products:

a. Petroleum crude;
b. High speed diesel;
c. Motor spirit (commonly known as petrol);
d. Natural gas;
e. Aviation turbine fuel; and
f. Tobacco and tobacco products.

However, once GST is imposed there will be no duty on manufacture of these goods.

▪ The power to impose tax on sale of the following products is still provided to the State
Governments:

a. Petroleum crude;
b. High speed diesel;
c. Motor spirit (commonly known as petrol);
d. Natural gas;
e. Aviation turbine fuel; and
f. Alcoholic liquor for human consumption.
However, once GST Council is recommend the date from which GST is imposed on
these products (except alcoholic liquor for human consumption), and no sales tax will be
imposed on these products.

The notes provided here is for educational purpose only and fair use is permitted by copyright statute.
 Mr. Sajid Rahman B.Com, LL.M. (Corporate & Commercial Law)
Ph.D. Research Scholar (NLUJAA)

Objectives of Goods and Services Tax

As per Statement of Objects and Reasons appended to the Constitutional Amendment
the object of GST is :
a) to have common national market, and
b) avoid cascading effect of taxes.
Listed are the major objectives aspired to be accomplished by implementing GST:-
▪ The fundamental objective of GST was to build a common market with a constant tax
rate in India.
▪ The goods and services tax eradicates the initial taxes for the same transaction as input
tax credits.
▪ There is no export tax as GST boosts exports by refunding the amount collected on the
inputs.
▪ It seeks to increase revenue as it brings more taxpayers by growing the tax base.
▪ The procedure of application and return of tax has been simplified with the use of
common forms.
▪ The tax payment and form submission became convenient with the introduction of
online payment gateways.
▪ A unified information technology system called Goods and Services Network (GSTN)
got operated for simple GST operation.
Salient Features of GST

Goods and Services Tax (GST) is a comprehensive indirect tax levied on the supply of
goods and services in India. Here are some of the salient features of GST:

▪ One Nation, One Tax: GST replaced multiple indirect taxes levied by the Central and
State Governments, such as excise duty, service tax, value-added tax (VAT), and others.
It brought uniformity in the tax structure across India, eliminating the cascading effect
of taxes.
▪ Dual Structure: GST operates under a dual structure, comprising the Central GST
(CGST) levied by the Central Government and the State GST (SGST) levied by the
State Governments. In the case of Inter-state transactions, Integrated GST (IGST) is
applicable, which is collected by the Central Government and apportioned to the
respective State. Import of goods or services would be treated as inter-state supplies
and would be subject to IGST in addition to the applicable customs duties.
▪ Destination-based Tax: GST is a destination-based tax, levied at each stage of the
supply chain, from the manufacturer to the consumer. It is applied to the value addition
at each stage, allowing for the seamless flow of credits and reducing the tax burden on
the end consumer.
▪ Input Tax Credit (ITC): GST allows for the utilization of input tax credit, wherein
businesses can claim credit for the tax paid on inputs used in the production or provision
of goods and services. This helps avoid double taxation and reduces the overall tax
liability.
▪ GST would apply on all goods and services except Alcohol for human consumption.
GST on five specified petroleum products (Crude, Petrol, Diesel, ATF & Natural Gas)
would by applicable from a date to be recommended by the GSTC. Tobacco and
tobacco products would be subject to GST. In addition, the Centre would have the

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 Mr. Sajid Rahman B.Com, LL.M. (Corporate & Commercial Law)
Ph.D. Research Scholar (NLUJAA)

power to levy Central Excise duty on these products. Exports are zero-rated supplies.
Thus, goods or services that are exported would not suffer input taxes or taxes on
finished products.
▪ Threshold Exemption: Small businesses with a turnover below a specified threshold
(currently, the threshold is ₹ 20 lakhs for supplier of services/both goods & services
and ₹ 40 lakhs for supplier of goods (Intra–Sate) in India) are exempt from GST. For
some special category states, the threshold varies between ₹ 10-20 lakhs for suppliers
of goods and/or services except for Jammu & Kashmir, Himachal Pradesh and Assam
where the threshold is ₹ 20 lakhs for supplier of services/both goods & services and ₹
40 lakhs for supplier of goods (Intra–Sate). This threshold helps in reducing the
compliance burden on small-scale businesses.
▪ Composition Scheme: The composition scheme is available for small taxpayers with
a turnover below a prescribed limit (currently ₹ 1.5 crores and ₹ 75 lakhs for special
category state). Under this scheme, businesses are required to pay a fixed percentage of
their turnover as GST and have simplified compliance requirements.
▪ Online Compliance: GST introduced an online portal, the Goods and Services Tax
Network (GSTN), for registration, filing of returns, payment of taxes, and other
compliance-related activities. It streamlined the process and made it easier for taxpayers
to fulfill their obligations.
▪ Anti-Profiteering Measures: To ensure that the benefits of GST are passed on to the
consumers, the government established the National Anti-Profiteering Authority
(NAA). The NAA monitored and ensured that businesses do not engage in unfair
pricing practices and profiteering due to the implementation of GST. All GST anti-
profiteering complaints are now dealt by the Competition Commission of India (CCI)
from 1st December, 2022.
▪ Increased Compliance and Transparency: GST aims to enhance tax compliance by
bringing more businesses into the formal economy. The transparent nature of the tax
system, with the digitization of processes and electronic records, helps in curbing tax
evasion and increasing transparency.
▪ Sector-specific Exemptions: Certain sectors, such as healthcare, education, and basic
necessities like food grains, are given either exempted from GST or have reduced tax
rates to ensure affordability and accessibility.
▪ Accounts would be settled periodically between the Centre and the States to ensure that
the credit of SGST used for payment of IGST is transferred by the Exporting State to
the Centre. Similarly, IGST used for payment of SGST would be transferred by the
Centre to the Importing State. Further, the SGST portion of IGST collected on B2C
supplies would also be transferred by the Centre to the destination State. The transfer
of funds would be carried out on the basis of information contained in the returns filed
by the taxpayers.

It's important to note that the GST framework is subject to changes and amendments are
passed based on the evolving needs of the economy and the Government's policy decisions.

Advantages of GST

The GST comes with a few advantages, such as one tax system and boosting the
different aspects of the Indian economy, such as:-

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 Mr. Sajid Rahman B.Com, LL.M. (Corporate & Commercial Law)
Ph.D. Research Scholar (NLUJAA)

▪ One Tax System: One of the main intentions of bringing GST was to remove different
types in the Indian tax system. Before the implementation of GST, there were different
taxes such as VAT, service tax, etc. All such taxes have been removed with GST
coming into play. Now, only one tax is charged. Although there are different slabs, GST
charges are different for different items which often creates confusion.
▪ Common National Market Creation: GST brings up a tax structure that is integrated
into nature. This helps remove all kinds of economic barriers, allowing the GST to
create common national markets. Again, using input tax credit can sometimes become
difficult.
▪ The Make In India Initiative: One of the main reasons for bringing Goods and
Services Tax was to help in boosting the ‘Make in India’ products. The GST helps in
manufacturing the products at competitive rates. Although the rest is yet to be explained
by the Government as to how GST helps in this campaign.
▪ Cascading Effect Removal : A big advantage of GST is the removal of the cascading
effect of GST. Cascading effect means the tax levied on tax. So, if a product has 10%
tax on Rs 1000, another 10% of tax will be charged on 1100. So double tax is charged.
In GST, if 28% tax is charged on Rs 1000, then Rs 1280 is charged, and on the next
level, again 28% will be charged on Rs 1000. So, the Tax on Tax system is removed.
▪ Litigation Reduction: GST helps in reducing litigation cost, which was increased due
to multiple taxation systems. As GST is meant to provide clarity in the tax assessment
ability. One can use the revised structure of GST to show the different credit flow in
different businesses. But the credit following is not very smooth and sometimes leads
to errors, so one must be careful.
▪ Composition Scheme: Through the GST, many small businesses with an annual
turnover of less than and equal to INR 1.5 Crore can opt for the composition scheme.
They can reduce their compliance easily using this scheme. The GST is charged at
lower rates of 1%, 5% and 6% by businesses that come under this scheme.
▪ Simple Access: The GST portal can be accessed by anyone sitting anywhere at any
time. This makes filing of returns easy. This is very good for all kinds of businesses.
▪ Efficiency in Logistics: GST has removed different other tax systems such as VAT.
So, since the business already pays to the center and state before the transportation of
goods, there is no need to pay state-level taxes during interstate movement, which
makes the logistics movement better.
▪ Unregulated Sectors get Regulation: Previously various businesses were not
regulated, and there had been tax evasion from the construction and textile sectors. The
implementation of GST has addressed these loopholes. The tax burden has been
reduced for such sectors too. This will prevent tax evasion.
▪ Automated procedures: These processes are automated and simplified for various
processes such as return, tax payment, registration, etc.; all interaction is done through
a common GSTN portal.

Disadvantages of GST

▪ Very High Tax Burden on SMEs: As per the structure of the previous tax system,
only those businesses whose yearly sales were more than Rs.1.5 crore were required to
pay excise duty. But as per the new tax structure, it is mandatory for all businesses
whose annual sales are more than Rs.40 lakh to pay GST.

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 Mr. Sajid Rahman B.Com, LL.M. (Corporate & Commercial Law)
Ph.D. Research Scholar (NLUJAA)

▪ Compliance Burden: GST compliance is quite high due to the filing of 3 tax returns
every single month. Besides, now it is mandatory for the companies to register for the
GST in all states wherever they perform business.
▪ The whole procedure of registering with the regulatory body, producing GST-
compliant invoices, maintaining digital records, and filing returns have put a huge stress
burden on Small and Medium Enterprises (SMEs) and others.
▪ Increased Costs: It is seen that GST compels businesses to convert their present
accounting software to ERP or GST-compliant software with a view to keeping their
operations running. But one also has to remember that the businesses may incur
substantial expenses for buying, installing, and then training employees to use GST-
compliant software.
▪ In addition to this, the costs of doing business have increased considerably not only for
big businesses but also for small ones since they have to hire tax professionals in order
to become GST-compliant.
▪ IT Software Expenditure: Keeping in view the GST regime, all businesses either have
to update their current accounting software or ERP software to make it GST compliant
or purchase new GST software to prop up their businesses. This results in an increase
in IT expenses of the businesses in terms of purchasing the GST software and training
the staff to use the software efficiently. However, Masters India, a firm that is one of
the leading GST Suvidha Providers(GSP) has successfully developed customized GST
software and APIs in order to ease the compliance procedures for different business
users.

GST Council

According to Article 279A, it is on the part of the President to give the order to
constitute the council of GST within 60 days from the 12th of September 2016 which is already
notified by the Government.

GST council is a governing body which was introduced by the government of India to
regulate, modify and direct the goods and services tax system in the nation. The GST council
takes decisions over tax rates in India and furthermore it takes care of the GST implementation
measures. GST council takes suggestions, improves the changes through notifications and
circulates with the GST departments and ministry of finance.

In order to ease the taxation process for the taxpayer the GST council replaced and
introduced taxation methods as per requirements. The GST Council monitors all the taxation
processes, providing support to departments and avoiding fraud.

The GST Council started in India with the Constitutional amendment bill 2016 under
the approval of the cabinet ministry. The GST Council establishment notification was issued
on the 10th day of September 2016, and it came into force on 12th day of September 2016. On
22nd and 23rd September 2016 first GST council meeting was held in New Delhi. The head of
the GST Council is The Union Finance Minister.

GST Council Structure

Following are the designated personnel, who will form the GST Council together:-

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 Mr. Sajid Rahman B.Com, LL.M. (Corporate & Commercial Law)
Ph.D. Research Scholar (NLUJAA)

▪ The Union Finance Minister who will be the CHAIRMAN of the council.
▪ Vice chairperson- to be chosen from amongst the members of Ministers of State
government.
▪ Members- (a) The Union Minister of State, in-charge of Revenue/Finance

(b) The Minister In-charge of finance or taxation or any other Minister

nominated by each State Government

Note

▪ The Secretary of Revenue Department will work as EX-Officio Secretary to the GST
Council,
▪ The Chairperson of the Central Board of Excise and Customs will be the permanent
invitee in all the proceedings of the GST Council who will not have voting rights.
Features of GST Council
GST Council has the following features –

• The office of the council is located in New Delhi.

• The Ex-officio Secretary to the GST Council is the Revenue Secretary of India.
• The Central Board of Excise and Customs (CBEC) is a chairperson and a permanent,
non-voting invitee for all the meetings of the GST Council.
• A post for Additional Secretary to the GST Council would be created. This post would
be equivalent to the level of the Additional Secretary to the Indian Government.
• At the level of Joint Secretary of the GST Council, four posts of commissioner would
be created in the GST Council Secretariat.
• The GST Council Secretariat would consist of officers on a deputation basis appointed
from the Central as well as the State Governments.

Quorum for GST Council Meetings

▪ The quorum of GST council is 50% of total members

▪ Decision is taken by 3/4th majority (75%), wherein-

(a) the Central Government would have the weightage of 1/3rd of the total vote cast,
and

(b) the State Governments would have a weightage of 2/3rd of the total votes cast.

Power of GST Council

The Power of GST council is only recommendatory in nature.

As per Article 279A (4), the Council will make recommendations to the Union and the
States on important issues related to GST, like

▪ The goods and services that may be subjected or exempted from GST.
▪ Principles that govern Place of Supply.
▪ Threshold limits.

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 Mr. Sajid Rahman B.Com, LL.M. (Corporate & Commercial Law)
Ph.D. Research Scholar (NLUJAA)

▪ GST rates including the floor rates with bands, special rates for raising additional
resources during natural calamities/disasters.
▪ Special provisions for certain States, etc.
▪ Transition Provisions

GST Council Functions

The functions of the GST Council are as follows:
▪ Recommend Tax Rates: The Council recommends tax rates for goods and services,
taking into account revenue implications and the interests of various stakeholders.
▪ Decide on Exemptions and Thresholds: The Council decides on exemptions,
thresholds, and other matters related to GST.
▪ Resolve Disputes: The Council resolves disputes between the central and state
governments or between different states, related to GST implementation or revenue
sharing.
▪ Review Tax Revenue: The Council reviews the tax revenue position and suggests
measures to improve revenue collection.
▪ Monitor Implementation: The Council monitors the implementation of GST and
suggests measures to improve its functioning.
▪ Recommend Changes: The Council recommends changes to the GST Act, rules, and
procedures as required.
▪ Making special provisions for the following states: Arunachal Pradesh, Assam,
Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura,
Himachal Pradesh and Uttarakhand.
Supreme Court’s Decision on GST Council: On 19th May 2022, the Supreme Court
is against the GST council over its multiple decisions and has given some side towards the
central and state government with the verdict that the government are not bound to apply the
decision given by the council and can have their own version of the decisions as per their own
conditions. The bench of justice DY Chandrachud has given the verdict recently to clear the
air over the decisions by the GST council which were taking a toll on the central as well as the
state government.
Definitions
▪ Aggregate Turnover
As per Section 2(6) of the Central Goods and Service Tax Act, 2017 “aggregate
turnover” means the aggregate value of all taxable supplies (excluding the value of inward
supplies on which tax is payable by a person on reverse charge basis), exempt supplies, exports
of goods or services or both and inter-State supplies of persons having the same Permanent
Account Number, to be computed on all India basis but excludes central tax, State tax, Union
territory tax, integrated tax and cess.
▪ Composite Supply
Composite Supply applies for more than 1 service/goods. As per Section 2(30) of the
GST Act, 2017, a supply in which a person who is subject to taxation makes a supply of two
or more goods/services or both which are subject to taxation, and these goods/services or both,
are naturally bundled or rather say are supplied in combination with one another, where one
them is a principle supply, then in the ordinary course of business this supply comes under
‘Composite Supply’.

The notes provided here is for educational purpose only and fair use is permitted by copyright statute.
 Mr. Sajid Rahman B.Com, LL.M. (Corporate & Commercial Law)
Ph.D. Research Scholar (NLUJAA)

The main ingredients for ‘Composite Supply’ are:

1. Supply is made
2. By a Taxable Person
3. Supply of two or more goods/services or both
4. Which are Naturally bundled
5. One of them is the primary supply
6. Supplied in the ordinary course of business
IILUSTRATION: Supply is made for goods which are packed and transported with insurance.
Now this supply is made by a person who is subject to taxation. And this combination of goods
and services are naturally bonded, i.e., they cannot be separated from one another. Here supply
of goods is the primary supply, i.e, the predominant element as per Section 2(90) of the said
Act and the combination of the supply of goods, packing and transportation with insurance, is
the composite supply.
▪ Mixed Supply
As per Section 2(74) of the CGST Act, 2017, a supply in which a person who is subject to
taxation makes an individual supply of two or more goods/services or both which are subject
to taxation, and these goods/services or both, are supplied in combination with one another for
a single, where this supply does not come under ‘Composite Supply’, then such a supply is a
mixed supply. In such supply the good which are supplied in one single package can be sold
separately and is independent of one another.
ILLUSTRATION: Supply is made for a package which consists of Sweets, Aerated Drinks,
Canned Foods, Chocolates, Dry Fruits, Cakes, Candies, Fruit Juices, Chips and Mouth
Fresheners. Now this package when supplied is supplied for a single price. This is what exactly
is a mixed supply. However, in the present scenario if the goods were not supplied in one single
package but was rather supplied separately then, it would not have been called mixed supply.
▪ Composition Levy
The provision related to composition levy is governed by Section 10 of the CGST Act,
2017 (“Act”). The composition levy is an alternative method of levy of tax designed for small
taxpayers whose turnover is up to Rs. 1.5 crore ( Rs 75 lakhs in case of special category States,
except Jammu & Kashmir and Uttarakhand).While the turnover threshold for Jammu &
Kashmir and Uttarakhand will be Rs 1 crore must register under the GST composition scheme.
The objective of composition scheme is to bring simplicity and to reduce the compliance cost
for the small taxpayers. Moreover, it is optional and the eligible person opting to pay tax under
this scheme can pay tax at a prescribed percentage of his turnover every quarter, instead of
paying tax at normal rate.
▪ GST Compliance Rating
GST law provides for Goods and Services Tax Compliance Rating which is a new
concept in India. Presently, there is no system of compliance rating under any tax laws in India.
GST compliance rating is a concept which will be experimented as a legal provision for the
first time in our country. Accordingly, every taxable person shall be assigned a GST
compliance rating score based on his record of compliance with the provisions of the GST Act.

The notes provided here is for educational purpose only and fair use is permitted by copyright statute.
 Mr. Sajid Rahman B.Com, LL.M. (Corporate & Commercial Law)
Ph.D. Research Scholar (NLUJAA)

Every taxable person irrespective of its nature or size or turnover shall be assigned a GST
compliance rating.
Section 149 of the Central Goods and Services Tax Act, 2017 contains provision in
respect of GST compliance rating as under:
"(1) Every registered person may be assigned a goods and services tax compliance
rating score by the Government based on his record of compliance with the provisions of this
Act.
(2) The goods and services tax compliance rating score may be determined on the basis
of such parameters as may be prescribed.
(3) The goods and services tax compliance rating score may be updated at periodic
intervals and intimated to the registered person and also placed in the public domain in such
manner as may be prescribed."

Difference between Direct and Indirect Tax

Basis of
Direct tax Indirect tax
comparison

The impact of tax lies with the person on

These are on the same person on
Incidence and whom the tax is imposed, but the
whom the tax has been
impact incidence lies with another person who
imposed.
pays the tax.

The burden of paying tax is on The burden of paying the tax is on the
Burden to pay the person who earned the person who uses the commodities or
tax income and cannot be shifted to facilities given by a person on whom tax is
anyone else. imposed, so it can be shifted.

The burden of direct tax is less The MRP of a product includes taxes, and
Viability as it is imposed on income so the income or wealth of a person has no
earned and wealth generated. role to play but is only used to pay.

Here, the penalty lies with the supplier of

Penalty in case In the case of any default, the
goods and services and not with the person
of default penalty lies with the assessee.
who is paying the tax.

It is paid to the suppliers of goods and

It is directly paid to the services, and then they further pay it to the
Paid to
government. government. Thus, it is indirectly paid to
the government.

VAT (value-added tax), excise duty,

House tax, wealth tax, income
Examples custom tax, tax on agricultural products,
tax, etc.
entertainment tax, etc.

The notes provided here is for educational purpose only and fair use is permitted by copyright statute.