Classification and structure of

GST
Presented By
Samarjit Saha
23-12-2024
The ICFAI University, Tripura
• The Goods and Services Tax (GST) in India is a multi-layered tax
structure that aims to simplify the indirect tax system by
consolidating various taxes into a single system. GST is classified
based on the type of transaction, the nature of supply, and the
taxation level.
 Classification of GST in India

• In India, Goods and Services Tax (GST) is classified into different

categories based on the type of supply, the type of goods or services,
and the tax jurisdiction. Here's a detailed breakdown of the
classification of GST:
 Types of GST Based on Jurisdiction
GST in India is classified based on the jurisdiction of the transaction. It can be divided
into the following types:

1.1. Central Goods and Services Tax (CGST)

• Levy: Levied by the Central Government.
• Applicable: On intra-state supplies (supply within the same state).
• Revenue: The revenue collected from CGST is retained by the Central Government.

1.2. State Goods and Services Tax (SGST)

• Levy: Levied by the State Government.
• Applicable: On intra-state supplies (supply within the same state).
• Revenue: The revenue collected from SGST is retained by the State Government.
1.3. Integrated Goods and Services Tax (IGST)
• Levy: Levied by the Central Government but applicable on inter-state supplies (supply
between two different states or from one state to a Union Territory).
• Applicable: For transactions involving cross-border supplies (i.e., between states or
imports).
• Revenue: The revenue from IGST is shared between the Central Government and the
State Government as per the distribution formula.

1.4. Union Territory Goods and Services Tax (UTGST)

• Levy: Levied by the Union Territories (where there is no state legislature, like Jammu &
Kashmir, Andaman & Nicobar, etc.).
• Applicable: On intra-Union Territory supplies (supply within the same Union Territory).
• Revenue: The revenue collected from UTGST is retained by the Union Territory
Government.
 Classification of Goods and Services
GST is also classified based on the nature of goods and services. Goods and services are
classified under different tax slabs and codes to determine the applicable GST rate.

Goods Classification under GST: Goods are classified under the Harmonized System
of Nomenclature (HSN), which is a standardized coding system used globally for the
classification of goods. Goods are taxed under various

GST slabs:
• 0%: Exempt goods (e.g., fresh fruits, vegetables).
• 5%: Essential goods (e.g., tea, coffee, edible oils).
• 12%: Processed foods (e.g., processed vegetables, certain food items).
• 18%: Common goods (e.g., household products, consumer electronics).
• 28%: Luxury and non-essential goods (e.g., automobiles, certain high-end products).
Services Classification under GST:
Services are classified under the Service Accounting Code (SAC) system. Similar to
goods, services are taxed under different GST slabs based on their nature.

The slabs for services are:

• 0%: Exempt services (e.g., healthcare, education, charitable activities).
• 5%: Transport services, restaurant services, etc.
• 12%, 18%, 28%: Depending on the nature of the service (e.g., business support
services, financial services, luxury services like air travel).
 GST Tax Slabs
GST is structured into multiple tax slabs, which determine the tax rate applicable to
goods and services. These slabs are designed to ensure that essential items are taxed at
a lower rate, while luxury and non-essential items are taxed at a higher rate.

• 0%: Exempted goods and services (e.g., fresh fruits, vegetables, healthcare).
• 5%: Essential consumer items (e.g., tea, coffee, edible oils).
• 12%: Processed foods, non-luxury goods (e.g., certain food items, packaged foods).
• 18%: Common goods and services (e.g., household appliances, electronics).
• 28%: Luxury goods and services (e.g., high-end cars, air travel, luxury hotels).
 GST Exemptions and Special Provisions

Certain goods and services are exempted from GST or are subject to special
tax provisions:

• Exempted Goods and Services: Some items are exempt from GST and not subject
to any tax. These include basic food items, healthcare services, educational services, etc.
• Zero-Rated Supply: Exports of goods and services are considered zero-rated
supplies under GST, meaning they are not taxed but are eligible for Input Tax Credit
(ITC).
• Composition Scheme: Small businesses with a turnover below a specified limit can
opt for the composition scheme, where they pay a lower tax rate (based on turnover)
and have simplified compliance procedures.
 GST Returns and Compliance Structure
Under the classification of GST, businesses must comply with regular filing of GST
returns based on the type of taxpayer and the nature of their business.

The key returns are:

• GSTR-1: Details of outward supplies (sales).
• GSTR-2A: Details of inward supplies (purchases).
• GSTR-3B: Summary return to pay tax.
• GSTR-9: Annual return.
 Summary of GST Classification

1.Jurisdiction-Based Classification: CGST, SGST, IGST, UTGST.

2.Goods Classification: Under HSN code and subject to varying GST slabs (0%,
5%, 12%, 18%, 28%).
3.Services Classification: Under SAC code and taxed under different GST slabs.
4.GST Slabs: 0%, 5%, 12%, 18%, 28%.
5.Exemptions and Special Provisions: Exempt supplies, zero-rated exports, and
composition scheme.

This classification structure ensures that GST is applied efficiently, with clear tax
rates based on the nature of the goods or services and the location of the supply.
 Levy of compensation cess

• The Compensation Cess is an additional tax levied under the Goods

and Services Tax (GST) system to compensate the states for the
potential revenue loss arising from the implementation of GST. The
Compensation Cess is levied on certain goods and is separate from
the regular GST levied on those goods or services. It is specifically
applicable to luxury goods and goods deemed harmful to health or
the environment.
Key Points of the Compensation Cess:

1.Objective of Compensation Cess:

1. The primary objective of the Compensation Cess is to compensate the States
for any potential loss of revenue resulting from the introduction of GST, for a
period of 5 years (from July 1, 2017, to June 30, 2022).
2. The compensation is meant to make up for the revenue that states would have
earned from taxes like VAT, excise duty, and sales tax before GST was
implemented.
1.Levy of Compensation Cess:
1. Compensation Cess is applicable only to certain high-value goods and luxury items.
These are typically goods with a higher GST rate (28%) and have been specifically
identified for the levy of the cess.
Goods subject to Compensation Cess include:
• Luxury Cars
• Motor vehicles
• Cigarettes and tobacco products
• Aerated beverages
• Mouth fresheners
• Pan masalaOther tobacco-based products
The rate of the cess varies based on the nature of the goods.
Collection of GST (Goods and Services Tax) in India

• The collection of GST is a critical part of the implementation of the

GST system in India. It involves the levy and payment of taxes on the
supply of goods and services, both at the central and state levels.

Here's a detailed explanation of how GST is collected:

1. Types of GST Collected

• GST is collected in different forms depending on the nature of the

transaction and jurisdiction involved. The Central Government and State
Governments are responsible for the collection and distribution of GST.

1.1. Central Goods and Services Tax (CGST)

• Levy: The Central Government collects CGST on intra-state (within the
same state) supply of goods and services.
• Rate: The rate of CGST is half of the total GST rate applicable to goods or
services, as the State Government also levies SGST for intra-state transactions.
1.2. State Goods and Services Tax (SGST)

• Levy: The State Governments collect SGST on intra-state (within the same
state) supply of goods and services.
• Rate: The rate of SGST is the other half of the total GST rate applicable, in
conjunction with CGST.

1.3. Integrated Goods and Services Tax (IGST)

• Levy: The Central Government collects IGST on inter-state (between

different states) supply of goods and services, or on the import of goods and
services into India.
• Rate: The IGST rate is the sum of the CGST and SGST rates (for example,
if the GST rate is 18%, the IGST rate would be 18%).
1.4. Union Territory Goods and Services Tax (UTGST)

• Levy: In Union Territories without a legislature (e.g., Jammu &

Kashmir, Andaman & Nicobar), the UTGST is collected on intra-
Union Territory transactions.
• Rate: The UTGST rate is similar to SGST and is applied alongside
IGST for inter-Union Territory supplies.
 Collection Process of GST

2.1. Registration and Issuance of GSTIN

• GST Registration: Businesses must first get registered under GST if their
turnover exceeds the prescribed threshold limit. Registration provides them
with a unique GST Identification Number (GSTIN).

2.2. Collection by Supplier

• Tax on Supply: The supplier of goods or services collects GST from the
buyer at the time of sale or service provision. The tax is added to the sale
price of the goods or services, making the customer the final taxpayer.
2.3. Payment of GST
• Payment Mechanism: The collected GST is paid to the government by the business,
after adjusting for the Input Tax Credit (ITC) on purchases (i.e., tax paid on business
inputs).
• Filing GST Returns: The supplier must file GST returns periodically (monthly or
quarterly depending on the business size), reporting the tax collected (output tax) and tax
paid (input tax). These returns include:
• GSTR-1: Outward supplies (sales).
• GSTR-3B: Monthly summary of returns.
• GSTR-9: Annual return.

2.4. Input Tax Credit (ITC)

• Claiming ITC: Businesses can offset the tax they pay on their purchases (input tax) against
the tax they collect on their sales (output tax).
• This system ensures that only the value-added portion is taxed at each stage of the supply
chain, preventing tax cascading (tax on tax).
3. GST Collection Mechanisms
3.1. Payment by the Taxpayer
• Payment Online: GST payments are made online through the GST portal, with the
taxpayer paying the appropriate CGST, SGST, IGST, and Compensation Cess (if
applicable).
• Payments must be made before filing returns, and the system allows businesses to claim
ITC for taxes already paid.
3.2. Tax on Reverse Charge Mechanism (RCM)
• Under the Reverse Charge Mechanism (RCM), the recipient of the goods or services is
liable to pay GST instead of the supplier. This mechanism is applicable in specific
situations, such as:
• When a registered person receives taxable goods or services from an unregistered supplier.
• Certain notified categories of supplies, like services provided by an advocate, a goods transport agency,
etc.
3.3. E-Way Bill System
• For the movement of goods worth more than Rs. 50,000, an E-Way Bill is required
under GST. The E-Way Bill serves as an electronic permit for the transportation of goods
across states or within the same state and ensures tax compliance.
 Distribution of GST Revenue
• Intra-State Transactions: For supplies within a state, the collected GST is
divided equally between the Central Government and the State Government (50%
each).

• Inter-State Transactions: For inter-state transactions, the entire IGST is

collected by the Central Government, and later, the State’s share is transferred
from the IGST pool.

• Compensation Cess: The compensation cess is collected separately and

credited to the Compensation Fund, which is used to compensate states for any
revenue loss.
 GST Return Filing and Compliance

• Filing Returns: Businesses must file GST returns regularly to report their tax
liability and claim input tax credits.

The common types of returns include:

• GSTR-1: Details of outward supplies.
• GSTR-3B: Summary of outward and inward supplies with tax payment.
• GSTR-9: Annual return.

• Timeliness: Timely filing of returns ensures that the tax payment and input
credit mechanisms work seamlessly, and any penalties for late filing are avoided.
 GST Enforcement and Auditing

• GST Audits: The government can conduct audits to ensure that businesses are
complying with GST laws. The GST Audit process may involve reviewing books
of accounts, tax filings, and claims for ITC.

• Penalties: Non-compliance with GST regulations (such as late payment, non-

filing of returns, or tax evasion) may attract penalties or interest charges.
 Summary of GST Collection Process
• Registration: Businesses must register for GST and obtain a GSTIN.
• Collection by Supplier: GST is collected by the supplier from the buyer.
• Payment: The collected GST is paid to the government after adjusting for ITC.
• Filing Returns: Businesses must file regular returns, detailing the tax collected
and paid.
• Revenue Sharing: Revenue from intra-state transactions is shared equally
between the Central and State governments, while IGST from inter-state
transactions is handled by the Central Government.

The collection of GST ensures that the tax system is efficient, transparent, and helps
avoid tax cascading. It also provides the mechanism for states to receive
compensation for any revenue loss due to the transition to GST.