Goods and Services Tax (GST), Objectives, Features, Subsumed Taxes

Table of Contents

The 55th GST Council meeting, held on December 21, 2024, in Jaisalmer, Rajasthan, under the chairpersonship of Union Finance Minister Nirmala Sitharaman, introduced significant changes to India’s Goods and Services Tax (GST) framework. These changes aim to simplify compliance, reduce the tax burden on essential items, and ensure a fairer tax regime. Following the recommendations, here’s a comprehensive look at what’s getting cheaper and costlier.

55th GST Council Meeting Highlights

Reduction in GST rates on essential items.
Introduction of GST exemptions for specific categories.
Changes in tax rates on goods and services.
Streamlining compliance measures for taxpayers.

Category	Cheaper / Costlier	GST Rate Change / Clarification
Fortified Rice Kernel (FRK)	Cheaper	Reduced to 5%
Gene Therapy	Cheaper	Full exemption
Motor Vehicle Accident Fund	Cheaper	GST-exempt
Food Inputs for Government Programs	Cheaper	5% concessional rate extended
Appeals in Penalty Cases	Cheaper	Reduced pre-deposit required
Sponsorship Services	Cheaper	Taxed under Forward Charge
Old and Used Vehicles	Costlier	Increased to 18%
Autoclaved Aerated Concrete Blocks	Costlier	Increased to 12%
Ready-to-Eat Popcorn	Costlier	12% for pre-packaged
LRSAM System Equipment	Exempt	IGST exemption extended
IAEA Equipment	Exempt	IGST exemption extended
Pepper and Raisins	Clarified	Not liable to GST
Penal Charges by Banks and NBFCs	Clarified	Not liable to GST
Pre-Packaged Goods Definition	Clarified	Includes up to 25 kg or 25 litres
Regularisation of Past Issues	Clarified	Resolved on “as is where is” basis

Goods and Services Tax (GST)

Goods and Services Tax (GST) is an indirect tax system introduced in India on July 1, 2017, which subsumed multiple indirect taxes levied by the central and state governments, such as VAT, excise duty, and service tax. GST is a value-added tax that is levied on the supply of goods and services, from the manufacturer to the consumer and is designed to create a common national market by eliminating barriers to interstate trade.

Goods and Services Tax History

Initiation (2000): Proposed by Kelkar Task Force on Indirect Taxes to replace complex tax structure.
Roadmap (2009): The Empowered Committee of State Finance Ministers released the First Discussion Paper.
Challenges (2011): The Constitution Amendment Bill faced issues, including compensation to States.
Introduction (2014): Constitution (122nd Amendment) Bill, 2014, introduced, aimed at amending the Constitution for GST implementation.
Legislative Journey (2015-2016): The Lok Sabha passed the Bill in May 2015; the Rajya Sabha and Lok Sabha passed it in August 2016. President’s assent was received on 8th September 2016, enacted as the 101st Constitution Amendment Act.
GST Council (2016): Established with the Union Finance Minister and representatives from all States and Union Territories. Notified on 15th September 2016, with the GST Council Secretariat.
Implementation (July 1, 2017): GST laws implemented, replacing complex Central and State taxes.
Tax Slabs: Goods and services are categorized into tax slabs – 5%, 12%, 18%, and 28%.
Exemptions: Some essential commodities are exempted; Gold and job work for diamonds attract lower tax rates.
Compensation Cess: Levied on demerit goods and certain luxury items.
Technological Infrastructure: Extensive efforts were made to build GSTN (GST Network), a not-for-profit company, provides an IT backbone for taxpayer registration, return filing, and tax payments.
Amendments and Refinements: Post-implementation, GST underwent amendments and refinements based on feedback from businesses and economic changes.

Goods and Services Tax Objectives

The main objective of the Goods and Services Tax (GST) in India is to create a unified and simplified tax system, by replacing multiple indirect taxes levied by the central and state governments with a single, comprehensive tax. The introduction of GST aims to achieve the following objectives:

Simplify the Tax Structure: GST aims to simplify the complex indirect tax structure by replacing multiple taxes with a single tax, reducing compliance costs, and making tax administration more efficient.
Create a Common Market: GST creates a common national market by eliminating barriers to inter-state trade, enabling a seamless flow of goods and services across state borders.
Promote Economic Growth: GST is expected to reduce the tax burden on businesses, encourage entrepreneurship, and increase investment in the country, thereby promoting economic growth.
Improve Tax Compliance: GST is expected to reduce tax evasion by creating a comprehensive and transparent tax system and promoting greater tax compliance among businesses and individuals.
Ensure Social Justice: GST provides for a uniform tax rate across the country, ensuring social justice and reducing the tax burden on the common man.

Features of GST

Feature	Description
Destination-based consumption tax	GST is levied at the point of consumption of goods and services, rather than at the point of origin or production.
Dual GST model	GST is levied by both the central and state governments, under a dual GST model.
Multiple tax rates	GST is levied at four tax rates: 5%, 12%, 18%, and 28% when it was introduced. However, these slabs keep changing with changing needs of the economy.
Input tax credit	Businesses can claim input tax credits for taxes paid on purchases of goods and services, which can be set off against their GST liability.
Online tax filing and payment	GST returns can be filed online, and taxes can be paid through the GST portal.
GST Council	The GST Council is a constitutional body responsible for making recommendations on GST-related issues and making key decisions on GST rates and other matters.
Exemptions and thresholds	Small businesses with a turnover of up to Rs. 20 lahks are exempt from GST, while businesses with a turnover of up to Rs. 1.5 crore can opt for a simplified tax regime.
Anti-profiteering measures	The government has put in place anti-profiteering measures to ensure that businesses pass on the benefits of reduced tax rates and input tax credits to consumers.
GSTN	The GST Network (GSTN) is a non-profit, public-private partnership responsible for providing IT infrastructure and services for the implementation of GST.
GST compliance rating	Businesses are given a GST compliance rating based on their timely filing of returns and payment of taxes, which can impact their ability to do business with other GST-registered entities.

Taxes Subsumed Under GST

GST replaced the following taxes and brought them under a unified tax regime. There is a list of Taxes Subsumed Under GST.

Central Excise Duty
Service Tax
Additional Excise Duty
Additional Customs Duty (Countervailing Duty)
Special Additional Duty of Customs
Value Added Tax (VAT)
Central Sales Tax
Entry Tax
Entertainment Tax (other than the tax levied by local bodies)
Luxury Tax
Taxes on Lottery, Betting, and Gambling

GST Council Structure

The GST Council is a constitutional body in India responsible for overseeing the implementation and administration of the country’s Goods and Services Tax (GST). The Council is chaired by the Union Finance Minister and consists of state Finance Ministers as members.

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.

Other Important Articles
GDP of Indian States	Macroeconomics and Microeconomics
Capitalist Economy	Mixed Economy
India’s GDP Growth Rate	GST Council

Goods and Services Tax UPSC

The Goods and Services Tax (GST) is a consumption-based value-added tax applicable to the majority of goods and services. While consumers bear the cost of GST, it is collected and forwarded to the government by the businesses that sell these goods and services. The Goods and Services Tax (GST) is an important topic for the UPSC Syllabus as it is a significant tax reform implemented in India.

Goods and Services Tax FAQs

What is goods & Service Tax in India?

Goods and Services Tax (GST) is an indirect tax system implemented in India in 2017, which replaced multiple taxes levied by the central and state governments.