Central University of Rajasthan

Assignment of
Corporate Tax Planning

Structure of GST:
tax rates and types of gst

Submitted to Submitted by
Asst. Prof. Sanjay Kumar Patel Anil Kumar
(Dept. Of Management) (2018MBA004)
 The GST Tax Structure

The GST tax structure will bring about a drastic change in the current indirect tax system.
Currently, tax barriers have created a fragmented Indian market.

This has resulted in a cascading effect of taxes on cost making indigenous manufacture less
profitable. Also, the complex multiple taxes have raised the cost of compliance considerably.

The GST tax structure will comprise of the Central Goods and Services Tax (CGST), State
Goods and Services Tax (SGST) and Integrated Goods and Service Tax (IGST).

The four slab tiers of the GST tax structure will be 5 per cent, 12 per cent, 18 per cent and 28
per cent. The lowest rates will be applicable for essential items and the highest for luxury
and demerit goods. Moreover, these include SUVs, luxury cars and tobacco products. GST
may go up to 40 per cent after the GST Council proposed raising the peak rate.
The four slab tiers of the GST tax structure will be 5 per cent, 12 per cent, 18 per cent and 28
per cent. The lowest rates will be applicable for essential items and the highest for luxury
and demerit goods. Moreover, these include SUVs, luxury cars and tobacco products. GST
may go up to 40 per cent after the GST Council proposed raising the peak rate.
Central taxes to be absorbed under GST are:
 Central Excise Duty
 Additional Excise Duties
 Service Tax
 Additional Customs Duty (Countervailing Duty)
 Special Additional Duty of Customs – 4% (SAD)
 Central Surcharges and Cesses in the nature of taxes on goods/services like cess on rubber,
tea, coffee and national calamity contingent duty
State taxes to be absorbed under GST are:
 State VAT/Sales tax
 Entertainment tax
 Luxury tax
 Taxes on lottery
 Betting and gambling
 Tax on advertisements
 State cesses
 Surcharges in the nature of taxes on goods/ services, Octroi and entry tax and purchase tax

Excise and service taxes will be replaced with CGST, Local VAT and other state taxes will
be replaced with SGST. CST will be replaced with IGST. Therefore, IGST is the total of
CGST and SGST.

Alcohol and tobacco will have a separate excise duty in addition to GST. Petroleum and
petroleum products will continue to be taxed under existing laws and will be incorporated
into GST at a future date.

GST has the potential to boost India’s GDP by as much as 2 per cent and has been considered
an unprecedented reform in the history of modern global tax.

Taxpayers will not have the burden of multiple compliances under various states. With the
GST tax structure, there will be a single registration and single return.

This will help build and expand upon the Make in India initiative by the Government of India
by attracting FDI and reducing costs. Hence, these costs are manufacturing costs in the form
of reduced compliance cost and taxes.

Similar to the GST law, the CGST, SGST and UTGST laws will be addressed and
strengthened at the levels of the Centre, States and Union Territories. Hence, the centre will
introduce the CGST Bill and SGST bill shortly in the Legislative Assemblies.

Central and State officials will determine which goods and services will fall in which tax
brackets and will be carried forward to the GST Council for approval. Also, they will decide
which goods and services would attract a cess on top of the peak rate.

This will compensate states for any revenue lost due to the implementation of GST in the first
five years. Moreover, the government intends to roll out GST from 1 July, 2017. Therefore,
GST will help with removing trade barriers and facilitating the ease of doing business.
Journey of GST in India
The GST journey began in the year 2000 when a committee was set up to draft law. It took 17
years from then for the Law to evolve. In 2017 the GST Bill was passed in the Lok Sabha and
Rajya Sabha. On 1st July 2017 the GST Law came into force.
Components of GST: -

There are 3 taxes applicable under this system: CGST, SGST & IGST.

 CGST: Collected by the Central Government on an intra-state sale (Eg: transaction

happening within Maharashtra)
 SGST: Collected by the State Government on an intra-state sale (Eg: transaction
happening within Maharashtra)
  IGST: Collected by the Central Government for inter-state sale (Eg: Maharashtra to
Tamil Nadu)

In most cases, the tax structure under the new regime will be as follows:

How SGST, CGST and IGST will be collected?

Any IGST credit will first be applied to set off in this order:

 First set off against IGST liability.

 Then either set off with CGST or SGST liability, at your preference.
 1. CGST: -

CGST is a part of Goods and Service Tax (GST).

CGST means Central Goods and Service Tax, one of the three categories under Goods and
Service Tax (CGST, IGST and SGST) with a concept of one tax one nation. CGST falls
under Central Goods and Service Tax Act 2016.
For easy understanding, when CGST is being introduced, the present central taxes of Central
Excise Duty, Central Sales Tax CST, Service Tax, Additional excise duties, excise duty
levied under the medical and toiletries preparation Act, CVD (Additional Customs duty –
Countervailing Duty), SAD (Special Additional Duty of customs) surcharges and cesses are
subsumed.

CGST is charged on the movement of goods and services of standard commodities and
services which can be amended time to time by a separate body. The revenue collected under
CGST is for Centre. However, input tax credit on CGST is given to states and such input tax
could be utilized only against the payment of Central GST.

2. SGST: -
SGST is a part of Goods and Service Tax (GST).
SGST means State Goods and Service Tax, one of the three categories under Goods and
Service Tax (CGST, IGST and SGST) with a concept of one tax one nation. SGST falls under
State Goods and Service Tax Act 2016.

For easy understanding, when SGST is being introduced, the present state taxes of State Sales
Tax, VAT, Luxury Tax, Entertainment tax (unless it is levied by the local bodies), Taxes on
lottery, betting and gambling, Entry tax not in lieu of Octroi, State Cesses and Surcharges in
so far as they relate to supply of goods and services etc. are subsumed.

The revenue collected under SGST is for State Government.

3. IGST: -
The IGST full form under GST law is Integrated Goods and Service Tax. It is called as IGST
Act 2017.

The scope of IGST Model gives meaning to the GST Act of which IGST is one of the
components. The IGST Act clarifies that Centre would levy IGST which would
be CGST plus SGST on all inter-State transactions of taxable goods and services with
appropriate provision for consignment or stock transfer of goods and services.
The seller making supply outside the state will pay IGST on value addition after adjusting
available credit of IGST, CGST, and SGST on his purchases. And the exporting State will
transfer to the Centre the credit of SGST used in payment of IGST.

On the other hand, the Importing dealer will claim credit of IGST while discharging his
output tax liability in his own State. The Centre will then transfer to the importing State the
credit of IGST used in payment of SGST.

The relevant information will also be submitted to the Central Agency which will act as a
clearinghouse mechanism, verify the claims and inform the respective governments to
transfer the funds.

Integrated Goods and Services Tax” (IGST) means the tax levied under this Act on the
supply of any goods and/or services in the course of inter-State trade or commerce and for
this purpose,

Integrated goods and services tax (IGST) would mean the tax levied under IGST Act on the
supply of any goods and / or services in the course of inter-state trade or commerce.

Integrated GST shall also apply to import of goods and services into India. The basic
ideology stipulates that any supply of goods or services in the course of import of goods or
services into Indian territory shall be deemed to supply involving inter-state trade or
commerce and hence liable to IGST.

For transactions that are look-alike of import transactions and export of goods and services,
shall be deemed to be supplied in course of inter-state trade or commerce.

Interstate trade or commence will, therefore include :

  Supplies made in the course of – Inter-state trade or commence
 Import into Indian territory (deemed to be inter-state)
 Export (deemed to be inter-state)

Thus, Integrated GST shall apply to inter-state transactions and import as well as export
transactions (deemed to be inter-state transactions) relating to supply of goods and / or
services.

Conclusion: -

GST will bring in transparent and corruption-free tax administration, removing the current
shortcomings in indirect tax structure. GST is business-friendly as well as consumer-friendly.
GST in India is poised to drastically improve the positions of each of these stakeholders. We
need a change in the taxation system which is better than earlier taxation. This need for
change leads us to ‘need for GST’.

GST will allow India to better negotiate its terms in the international trade forums.GST aimed
at increasing the taxpayer base by bringing SMEs and the unorganized sector under its
compliance. This will make the Indian market more stable than before and Indian companies
can compete with foreign companies.

References: -

1. https://cleartax.in/s/gst-law-goods-and-services-tax
2. https://en.wikipedia.org/wiki/Goods_and_Services_Tax_(India)
3. http://www.gstcouncil.gov.in/