GST Fundamentals – Study Notes
(CS Executive – Business Law & Taxation)
1. Simple Explanation
GST (Goods and Services Tax) is a value‑added tax that lumps together several indirect taxes (VAT, Service Tax, etc.) into a single, nationwide tax on the supply of goods and services.
- Purpose: Simplify the tax system, eliminate cascading effect, and create a unified market.
- Structure: The tax is levied at every stage of the supply chain – from manufacturer to consumer.
- Key Feature: Input Tax Credit (ITC) – businesses can offset the GST paid on inputs against the GST charged on outputs, preventing tax on tax.
2. Key Points
| Topic | What You Need to Know |
|---|---|
| GST Types | • Central GST (CGST) – levied by the Central Government on intra‑state supplies. • State GST (SGST) – levied by State Governments on intra‑state supplies. • Integrated GST (IGST) – levied by the Central Government on inter‑state supplies. |
| Taxable Event | Supply of goods or services by a registered person to a bona fide recipient in exchange for consideration. |
| GST Registration | • Threshold: ₹20 Lac (₹10 Lac for NE & UTs) for most businesses. • Voluntary: Any business can register regardless of turnover. |
| GST Rates | • 4 %, 5 %, 12 %, 18 %, 28 % (plus a 3 % cess on 28 % slab). • Zero‑rate items (e.g., exports, fresh food). • Exempt items (e.g., government services, fresh fruits). |
| Input Tax Credit | • Creditable if the supplier has paid GST and furnished a valid invoice. • Restrictions: ITC is not allowed on luxury goods, alcohol, etc. • Timing: Claim ITC only when the invoice is received. |
| GST Returns | • GSTR‑1 – details of outward supplies. • GSTR‑2A – auto‑generated inward supplies (updated with GSTR‑3B). • GSTR‑3B – monthly summary of outward supplies and ITC claim. |
| Place of Supply | Determines whether CGST/SGST or IGST is applicable. • Intra‑state: CGST + SGST. • Inter‑state: IGST. |
| Reverse Charge Mechanism (RCM) | GST payable by the recipient (not the supplier) when the supplier is unregistered or the supply is exempt from registration. |
| Penalty & Compliance | • Late filing: ₹5 per day (₹200 capped). • Non‑payment: 10% of unpaid tax plus interest. • Audits: GST audits to check ITC claims and compliance. |
| Key Statutory References | • GST Act, 2017 and its Rules. • Notification‑16/2017 – GST rates. • Notification‑19/2017 – ITC provisions. • Notification‑13/2022 – GST on e‑commerce. |
3. Worked Example
Scenario
A manufacturer, ABC Pvt. Ltd., sells 100 units of a consumer electronic device to a retailer, XYZ Retailers, for ₹200,000 (ex‑GST). The applicable GST rate is 18 %.
-
Determine the GST amount
[ GST = \text{Ex‑GST value} \times \text{Rate} = ₹200,000 \times 18% = ₹36,000 ] -
Total Invoice Value
[ \text{Total} = \text{Ex‑GST} + GST = ₹200,000 + ₹36,000 = ₹236,000 ] -
Tax Components
- CGST: 9 % of ₹200,000 = ₹18,000
- SGST: 9 % of ₹200,000 = ₹18,000
(Total GST = ₹36,000)
-
Input Tax Credit (Assuming ABC had paid GST on inputs)
- ABC purchased components worth ₹80,000 (ex‑GST) and paid 18 % GST = ₹14,400.
- ITC claim = ₹14,400 (subject to restrictions).
-
Tax Liability
- Outward supply GST: ₹36,000
- ITC available: ₹14,400
- Net GST payable: ₹36,000 – ₹14,400 = ₹21,600
-
Filing
- GSTR‑1: Report ₹200,000 (ex‑GST value) and ₹36,000 GST.
- GSTR‑3B: Claim ITC ₹14,400, pay ₹21,600.
4. Quick Revision Summary
| Item | What to Remember |
|---|---|
| GST | Unified indirect tax; CGST+SGST for intra‑state; IGST for inter‑state. |
| Registration Threshold | ₹20 Lac (₹10 Lac for NE & UTs) – or voluntary. |
| Rates | 0 %, 4 %, 5 %, 12 %, 18 %, 28 % + 3 % cess. |
| Input Tax Credit | Available on all inputs (except restricted items); claim upon invoice receipt. |
| Returns | GSTR‑1 (outward), GSTR‑2A (inward auto‑generated), GSTR‑3B (monthly summary). |
| RCM | Recipient pays GST when supplier is unregistered or supply is exempt. |
| Compliance Penalties | ₹5 per day late filing, 10% penalty on |