ICAI Notes: GST in India - An Introduction | Taxation for CA Intermediate PDF Download

 Page 1


 
 
    
 
 
CHAPTER 
1
 
 
LEARNING OUTCOMES 
GST IN INDIA –  
AN INTRODUCTION 
Examples/illustrations/Questions and Answers given in the Chapter are based on 
the position of GST law existing as on 30.04.2023. 
 
After studying this Chapter, you will be able to: 
? explain the concept of GST and the need for GST in India. 
? discuss the framework of GST as introduced in India and 
comprehend the various benefits to be accrued from 
implementation of GST. 
? explain the constitutional provisions pertaining to levy of 
various taxes 
? appreciate the need for constitutional amendment paving 
way for GST. 
? discuss the significant amendments made by the 
Constitution (101
st
 Amendment) Act, 2016. 
© The Institute of Chartered Accountants of India
Page 2


 
 
    
 
 
CHAPTER 
1
 
 
LEARNING OUTCOMES 
GST IN INDIA –  
AN INTRODUCTION 
Examples/illustrations/Questions and Answers given in the Chapter are based on 
the position of GST law existing as on 30.04.2023. 
 
After studying this Chapter, you will be able to: 
? explain the concept of GST and the need for GST in India. 
? discuss the framework of GST as introduced in India and 
comprehend the various benefits to be accrued from 
implementation of GST. 
? explain the constitutional provisions pertaining to levy of 
various taxes 
? appreciate the need for constitutional amendment paving 
way for GST. 
? discuss the significant amendments made by the 
Constitution (101
st
 Amendment) Act, 2016. 
© The Institute of Chartered Accountants of India
 
 
 1.2 
GOODS AND SERVICES TAX 
Collect taxes from the citizens as 
honeybees collect nectar from the 
flowers, gently and without inflicting 
pain. 
-Chanakya 
Taxes, after all, are dues that 
we pay for the privileges of 
membership in an organized 
society. 
-Franklin D. Roosevelt 
 
1. OVERVIEW OF TAXATION SYSTEM IN INDIA 
In any Welfare State, it is the 
prime responsibility of the 
Government to fulfill the 
increasing developmental needs of 
the country and its people by way 
of public expenditure.  India, being 
a developing economy, has been 
striving to fulfill the obligations of a Welfare State with its limited resources; the 
primary source of revenue being the levy of taxes.  Though the collection of tax is 
to augment as much revenue as possible 
to the Government to provide public 
services, over the years it has been used 
as an instrument of fiscal policy to 
stimulate economic growth.  Thus, taxes 
are collected to fulfill the socio-economic 
objectives of the Government.  
Now, the question arises, what is tax? A tax is defined as a "pecuniary burden laid 
upon individuals or property owners to support the Government, a payment 
exacted by legislative authority. A tax "is not a voluntary payment or donation, 
but an enforced contribution, exacted pursuant to legislative authority".   
GST in India
Genesis of GST in india
Concept of GST
Need for GST in India
Framework of GST as introduced in India
Benefits of GST
Constitutional provisions
CHAPTER OVERVIEW 
 
© The Institute of Chartered Accountants of India
Page 3


 
 
    
 
 
CHAPTER 
1
 
 
LEARNING OUTCOMES 
GST IN INDIA –  
AN INTRODUCTION 
Examples/illustrations/Questions and Answers given in the Chapter are based on 
the position of GST law existing as on 30.04.2023. 
 
After studying this Chapter, you will be able to: 
? explain the concept of GST and the need for GST in India. 
? discuss the framework of GST as introduced in India and 
comprehend the various benefits to be accrued from 
implementation of GST. 
? explain the constitutional provisions pertaining to levy of 
various taxes 
? appreciate the need for constitutional amendment paving 
way for GST. 
? discuss the significant amendments made by the 
Constitution (101
st
 Amendment) Act, 2016. 
© The Institute of Chartered Accountants of India
 
 
 1.2 
GOODS AND SERVICES TAX 
Collect taxes from the citizens as 
honeybees collect nectar from the 
flowers, gently and without inflicting 
pain. 
-Chanakya 
Taxes, after all, are dues that 
we pay for the privileges of 
membership in an organized 
society. 
-Franklin D. Roosevelt 
 
1. OVERVIEW OF TAXATION SYSTEM IN INDIA 
In any Welfare State, it is the 
prime responsibility of the 
Government to fulfill the 
increasing developmental needs of 
the country and its people by way 
of public expenditure.  India, being 
a developing economy, has been 
striving to fulfill the obligations of a Welfare State with its limited resources; the 
primary source of revenue being the levy of taxes.  Though the collection of tax is 
to augment as much revenue as possible 
to the Government to provide public 
services, over the years it has been used 
as an instrument of fiscal policy to 
stimulate economic growth.  Thus, taxes 
are collected to fulfill the socio-economic 
objectives of the Government.  
Now, the question arises, what is tax? A tax is defined as a "pecuniary burden laid 
upon individuals or property owners to support the Government, a payment 
exacted by legislative authority. A tax "is not a voluntary payment or donation, 
but an enforced contribution, exacted pursuant to legislative authority".   
GST in India
Genesis of GST in india
Concept of GST
Need for GST in India
Framework of GST as introduced in India
Benefits of GST
Constitutional provisions
CHAPTER OVERVIEW 
 
© The Institute of Chartered Accountants of India
 
 
GST IN INDIA – AN INTRODUCTION                
 
 
 
 1.3 
In simple words, tax is nothing but money that people pay to the Government, 
which is used to provide public services. 
A direct tax is a kind of charge, which is imposed directly on the taxpayer and 
paid directly to the Government by the persons (juristic or natural) on whom it is 
imposed.  A direct tax cannot be shifted by the taxpayer to someone else.  A 
significant direct tax imposed in India is income tax. 
If the taxpayer is just a conduit and at every stage the tax-incidence is passed on 
till it finally reaches the consumer, who really bears the brunt of it, such tax is 
indirect tax.  An indirect tax can be shifted by the taxpayer to someone else.   
Its incidence is borne by the consumers who ultimately consume the product or 
the service, while the immediate liability to pay the tax may fall upon another 
person such as a manufacturer or provider of service or seller of goods.   
Also called consumption taxes, they are regressive in nature because they are not 
based on the principle of ability to pay.  All the consumers, including the 
economically challenged bear the brunt of the indirect taxes equally.   
Indirect taxes are levied on consumption, expenditure, privilege, or right but not 
on income or property.  Earlier, a number of indirect taxes were levied in India, 
namely, excise duty, customs duty, service tax, central sales tax (CST), value added 
tax (VAT), entry tax, purchase tax, entertainment tax, tax on lottery, betting and 
gambling, luxury tax, tax on advertisements, etc.   
However, indirect taxation in India witnessed a paradigm shift on July 01, 2017 
with usherance into a unified indirect tax regime wherein a large number of 
Central and State indirect taxes were amalgamated into a single tax – Goods and 
Services Tax (GST).  The introduction of GST has been a very significant step in the 
field of indirect tax reforms in India.  Customs duty continues in post-GST regime. 
Economists world over agree that direct and indirect taxes are complementary 
and therefore, a rational tax structure should incorporate in itself both types of 
taxes.   
According to the renowned physicist Albert Einstein, “The hardest thing in the world is 
to understand income tax.”  Nevertheless, we are committed to ensure that your 
journey to India's historic indirect tax system is effortless, engaging, and enjoyable! 
  
© The Institute of Chartered Accountants of India
Page 4


 
 
    
 
 
CHAPTER 
1
 
 
LEARNING OUTCOMES 
GST IN INDIA –  
AN INTRODUCTION 
Examples/illustrations/Questions and Answers given in the Chapter are based on 
the position of GST law existing as on 30.04.2023. 
 
After studying this Chapter, you will be able to: 
? explain the concept of GST and the need for GST in India. 
? discuss the framework of GST as introduced in India and 
comprehend the various benefits to be accrued from 
implementation of GST. 
? explain the constitutional provisions pertaining to levy of 
various taxes 
? appreciate the need for constitutional amendment paving 
way for GST. 
? discuss the significant amendments made by the 
Constitution (101
st
 Amendment) Act, 2016. 
© The Institute of Chartered Accountants of India
 
 
 1.2 
GOODS AND SERVICES TAX 
Collect taxes from the citizens as 
honeybees collect nectar from the 
flowers, gently and without inflicting 
pain. 
-Chanakya 
Taxes, after all, are dues that 
we pay for the privileges of 
membership in an organized 
society. 
-Franklin D. Roosevelt 
 
1. OVERVIEW OF TAXATION SYSTEM IN INDIA 
In any Welfare State, it is the 
prime responsibility of the 
Government to fulfill the 
increasing developmental needs of 
the country and its people by way 
of public expenditure.  India, being 
a developing economy, has been 
striving to fulfill the obligations of a Welfare State with its limited resources; the 
primary source of revenue being the levy of taxes.  Though the collection of tax is 
to augment as much revenue as possible 
to the Government to provide public 
services, over the years it has been used 
as an instrument of fiscal policy to 
stimulate economic growth.  Thus, taxes 
are collected to fulfill the socio-economic 
objectives of the Government.  
Now, the question arises, what is tax? A tax is defined as a "pecuniary burden laid 
upon individuals or property owners to support the Government, a payment 
exacted by legislative authority. A tax "is not a voluntary payment or donation, 
but an enforced contribution, exacted pursuant to legislative authority".   
GST in India
Genesis of GST in india
Concept of GST
Need for GST in India
Framework of GST as introduced in India
Benefits of GST
Constitutional provisions
CHAPTER OVERVIEW 
 
© The Institute of Chartered Accountants of India
 
 
GST IN INDIA – AN INTRODUCTION                
 
 
 
 1.3 
In simple words, tax is nothing but money that people pay to the Government, 
which is used to provide public services. 
A direct tax is a kind of charge, which is imposed directly on the taxpayer and 
paid directly to the Government by the persons (juristic or natural) on whom it is 
imposed.  A direct tax cannot be shifted by the taxpayer to someone else.  A 
significant direct tax imposed in India is income tax. 
If the taxpayer is just a conduit and at every stage the tax-incidence is passed on 
till it finally reaches the consumer, who really bears the brunt of it, such tax is 
indirect tax.  An indirect tax can be shifted by the taxpayer to someone else.   
Its incidence is borne by the consumers who ultimately consume the product or 
the service, while the immediate liability to pay the tax may fall upon another 
person such as a manufacturer or provider of service or seller of goods.   
Also called consumption taxes, they are regressive in nature because they are not 
based on the principle of ability to pay.  All the consumers, including the 
economically challenged bear the brunt of the indirect taxes equally.   
Indirect taxes are levied on consumption, expenditure, privilege, or right but not 
on income or property.  Earlier, a number of indirect taxes were levied in India, 
namely, excise duty, customs duty, service tax, central sales tax (CST), value added 
tax (VAT), entry tax, purchase tax, entertainment tax, tax on lottery, betting and 
gambling, luxury tax, tax on advertisements, etc.   
However, indirect taxation in India witnessed a paradigm shift on July 01, 2017 
with usherance into a unified indirect tax regime wherein a large number of 
Central and State indirect taxes were amalgamated into a single tax – Goods and 
Services Tax (GST).  The introduction of GST has been a very significant step in the 
field of indirect tax reforms in India.  Customs duty continues in post-GST regime. 
Economists world over agree that direct and indirect taxes are complementary 
and therefore, a rational tax structure should incorporate in itself both types of 
taxes.   
According to the renowned physicist Albert Einstein, “The hardest thing in the world is 
to understand income tax.”  Nevertheless, we are committed to ensure that your 
journey to India's historic indirect tax system is effortless, engaging, and enjoyable! 
  
© The Institute of Chartered Accountants of India
 
 
 1.4 
GOODS AND SERVICES TAX 
 
 
At Intermediate level, we will study the select provisions of 
substantive and procedural law of GST - concept of supply, 
charge of GST, exemptions, basic concepts of time, value and 
place of supply, input tax credit, registration, tax invoice, credit and debit 
notes, accounts and records, e-way bill, returns & payment.  Remaining 
provisions of the GST law and entire Customs law will be discussed at Final 
level.  
 
2. GENESIS OF GST IN INDIA 
In the year 2000, the then Prime Minister mooted the concept 
of GST and set up a committee to design a Goods and 
Services Tax (GST) model for the country.  In 2003, the Central 
Government formed a task force on Fiscal Responsibility and 
Budget Management, which in 2004 strongly recommended fully integrated ‘GST’ 
on national basis.   
Subsequently, the then Union Finance Minister, Shri P. Chidambaram, while 
presenting the Union Budget (2006-2007), announced that GST would be 
introduced from April 1, 2010.  Since then, GST missed several deadlines and 
continued to be shrouded by the clouds of uncertainty.   
The talks of ushering in GST, however, gained 
momentum in the year 2014 when the NDA Government 
tabled the Constitution (122
nd
 Amendment) Bill, 2014 on 
GST in the Parliament on 19
th
 December, 2014.  The Lok 
Sabha passed the Bill on 6
th
 May, 2015 and Rajya Sabha 
on 3
rd
 August, 2016.  Subsequent to ratification of the Bill 
by more than 50% of the States, Constitution 
(122
nd
 Amendment) Bill, 2014 received the assent of the President on 8
th
September, 2016 and became the Constitution (101
st
 Amendment) Act, 2016, 
which paved the way for introduction of GST in India.  
In the following year, on 27
th
 March, 2017, the Central GST 
legislations - Central Goods and Services Tax Bill, 2017, 
Integrated Goods and Services Tax Bill, 2017, Union 
` 
© The Institute of Chartered Accountants of India
Page 5


 
 
    
 
 
CHAPTER 
1
 
 
LEARNING OUTCOMES 
GST IN INDIA –  
AN INTRODUCTION 
Examples/illustrations/Questions and Answers given in the Chapter are based on 
the position of GST law existing as on 30.04.2023. 
 
After studying this Chapter, you will be able to: 
? explain the concept of GST and the need for GST in India. 
? discuss the framework of GST as introduced in India and 
comprehend the various benefits to be accrued from 
implementation of GST. 
? explain the constitutional provisions pertaining to levy of 
various taxes 
? appreciate the need for constitutional amendment paving 
way for GST. 
? discuss the significant amendments made by the 
Constitution (101
st
 Amendment) Act, 2016. 
© The Institute of Chartered Accountants of India
 
 
 1.2 
GOODS AND SERVICES TAX 
Collect taxes from the citizens as 
honeybees collect nectar from the 
flowers, gently and without inflicting 
pain. 
-Chanakya 
Taxes, after all, are dues that 
we pay for the privileges of 
membership in an organized 
society. 
-Franklin D. Roosevelt 
 
1. OVERVIEW OF TAXATION SYSTEM IN INDIA 
In any Welfare State, it is the 
prime responsibility of the 
Government to fulfill the 
increasing developmental needs of 
the country and its people by way 
of public expenditure.  India, being 
a developing economy, has been 
striving to fulfill the obligations of a Welfare State with its limited resources; the 
primary source of revenue being the levy of taxes.  Though the collection of tax is 
to augment as much revenue as possible 
to the Government to provide public 
services, over the years it has been used 
as an instrument of fiscal policy to 
stimulate economic growth.  Thus, taxes 
are collected to fulfill the socio-economic 
objectives of the Government.  
Now, the question arises, what is tax? A tax is defined as a "pecuniary burden laid 
upon individuals or property owners to support the Government, a payment 
exacted by legislative authority. A tax "is not a voluntary payment or donation, 
but an enforced contribution, exacted pursuant to legislative authority".   
GST in India
Genesis of GST in india
Concept of GST
Need for GST in India
Framework of GST as introduced in India
Benefits of GST
Constitutional provisions
CHAPTER OVERVIEW 
 
© The Institute of Chartered Accountants of India
 
 
GST IN INDIA – AN INTRODUCTION                
 
 
 
 1.3 
In simple words, tax is nothing but money that people pay to the Government, 
which is used to provide public services. 
A direct tax is a kind of charge, which is imposed directly on the taxpayer and 
paid directly to the Government by the persons (juristic or natural) on whom it is 
imposed.  A direct tax cannot be shifted by the taxpayer to someone else.  A 
significant direct tax imposed in India is income tax. 
If the taxpayer is just a conduit and at every stage the tax-incidence is passed on 
till it finally reaches the consumer, who really bears the brunt of it, such tax is 
indirect tax.  An indirect tax can be shifted by the taxpayer to someone else.   
Its incidence is borne by the consumers who ultimately consume the product or 
the service, while the immediate liability to pay the tax may fall upon another 
person such as a manufacturer or provider of service or seller of goods.   
Also called consumption taxes, they are regressive in nature because they are not 
based on the principle of ability to pay.  All the consumers, including the 
economically challenged bear the brunt of the indirect taxes equally.   
Indirect taxes are levied on consumption, expenditure, privilege, or right but not 
on income or property.  Earlier, a number of indirect taxes were levied in India, 
namely, excise duty, customs duty, service tax, central sales tax (CST), value added 
tax (VAT), entry tax, purchase tax, entertainment tax, tax on lottery, betting and 
gambling, luxury tax, tax on advertisements, etc.   
However, indirect taxation in India witnessed a paradigm shift on July 01, 2017 
with usherance into a unified indirect tax regime wherein a large number of 
Central and State indirect taxes were amalgamated into a single tax – Goods and 
Services Tax (GST).  The introduction of GST has been a very significant step in the 
field of indirect tax reforms in India.  Customs duty continues in post-GST regime. 
Economists world over agree that direct and indirect taxes are complementary 
and therefore, a rational tax structure should incorporate in itself both types of 
taxes.   
According to the renowned physicist Albert Einstein, “The hardest thing in the world is 
to understand income tax.”  Nevertheless, we are committed to ensure that your 
journey to India's historic indirect tax system is effortless, engaging, and enjoyable! 
  
© The Institute of Chartered Accountants of India
 
 
 1.4 
GOODS AND SERVICES TAX 
 
 
At Intermediate level, we will study the select provisions of 
substantive and procedural law of GST - concept of supply, 
charge of GST, exemptions, basic concepts of time, value and 
place of supply, input tax credit, registration, tax invoice, credit and debit 
notes, accounts and records, e-way bill, returns & payment.  Remaining 
provisions of the GST law and entire Customs law will be discussed at Final 
level.  
 
2. GENESIS OF GST IN INDIA 
In the year 2000, the then Prime Minister mooted the concept 
of GST and set up a committee to design a Goods and 
Services Tax (GST) model for the country.  In 2003, the Central 
Government formed a task force on Fiscal Responsibility and 
Budget Management, which in 2004 strongly recommended fully integrated ‘GST’ 
on national basis.   
Subsequently, the then Union Finance Minister, Shri P. Chidambaram, while 
presenting the Union Budget (2006-2007), announced that GST would be 
introduced from April 1, 2010.  Since then, GST missed several deadlines and 
continued to be shrouded by the clouds of uncertainty.   
The talks of ushering in GST, however, gained 
momentum in the year 2014 when the NDA Government 
tabled the Constitution (122
nd
 Amendment) Bill, 2014 on 
GST in the Parliament on 19
th
 December, 2014.  The Lok 
Sabha passed the Bill on 6
th
 May, 2015 and Rajya Sabha 
on 3
rd
 August, 2016.  Subsequent to ratification of the Bill 
by more than 50% of the States, Constitution 
(122
nd
 Amendment) Bill, 2014 received the assent of the President on 8
th
September, 2016 and became the Constitution (101
st
 Amendment) Act, 2016, 
which paved the way for introduction of GST in India.  
In the following year, on 27
th
 March, 2017, the Central GST 
legislations - Central Goods and Services Tax Bill, 2017, 
Integrated Goods and Services Tax Bill, 2017, Union 
` 
© The Institute of Chartered Accountants of India
GST IN INDIA – AN INTRODUCTION                
 
 
 
 1.5 
It is not the end but start of 
the Journey. 
-Arun Jaitely
It’s a win for democratic 
ethos of India and a victory 
for everyone, GST will 
improve the way of doing 
business. 
-Narendra Modi 
Territory Goods and Services Tax Bill, 2017 and Goods and Services Tax 
(Compensation to States) Bill, 2017 were introduced in Lok Sabha.  Lok Sabha 
passed these bills on 29
th
 March, 2017 and with the receipt of the President’s 
assent on 12
th
 April, 2017, the Bills were enacted.   
The enactment of the Central Acts was 
followed by the enactment of the State GST 
laws by various State Legislatures.  Telangana, 
Rajasthan, Chhattisgarh, Punjab, Goa and Bihar 
were among the first ones to pass their 
respective State GST laws.  By 30
th
 June, 2017, 
all States and Union Territories had passed their 
respective SGST and UTGST Acts except Jammu 
and Kashmir. With effect from 1
st
 July, 2017, the 
historic indirect tax reform - GST was introduced.  
GST law was extended to Jammu and Kashmir on 8
th
 July, 2017. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CGST, IGST, UTGST 
and Compensation 
Cess Acts passed. 
30
th
 June 2017 
2014 
In the year 2000, the then Prime 
Minister introduced the concept of 
GST and set up a committee to design 
a GST model for the country. 
2000
2006 
Announcement by Union 
Finance Minister, during 
budget of 2006-07 that 
GST would introduced 
from 1 April 2010. 
The Constitution 
(122nd Amendment) 
Bill was introduced in 
the Lok Sabha. 
Aug 2016 
The 
Constitution 
(101st 
Amendment) 
Act was enacted 
Sep 2016 
Mar 2017 
Apr 2017 
May 2017 
1
st
 GST 
Council 
Meeting 
GST Council 
Recommends CGST, 
SGST, IGST, UTGST & 
Compensation Cess 
Bill. 
GST Council 
recommends 
all the rules. 
All States 
except J & K 
passed their 
SGST Act 
1
st
 July 2017 
GST launched
8
th
 July 2017 
SGST Act passed by J&K; 
CGST and IGST Ordinances 
promulgated to extend 
GST to J&K. 
 
  Journey 
continues 
© The Institute of Chartered Accountants of India