CGST – Central Goods and Service Tax
1. CGST Full Form and CGST Meaning
The full form of CGST under GST law is Central Goods and Service Tax. It is called as CGST Act 2017. The CGST act has been enacted to make a provision for levy and collection of tax on intra-state supply of goods or services or both by the Central Government and the matters connected therewith or incidental thereto.
2. Origin and Commencement of CGST Act
- CGST Act extends to whole of India excluding the states of Jammu and Kashmir.
- Jammu and Kashmir will need to approve levy of GST in its State assembly, on account of its special powers on taxation under the Constitution. Once this is done, GST shall be introduced in the State.
- The CGST Act shall come into force from a date which will be notified by the Central Government in Official Gazette, i.e. from the appointed date.
- Different provisions may be made applicable from different dates as may be notified.
3. Objective of CGST Act 2017
Under erstwhile taxation laws, Central Government levied taxes on, manufacture of certain goods in the form of Central Excise duty, provision of certain services in the form of service tax, inter-State sale of goods in the form of Central Sales tax.
Similarly, the State Governments levied taxes on retail sales in the form of value added tax, entry of goods in the State in the form of entry tax, luxury tax and purchase tax, etc. Accordingly, there is multiplicity of taxes which are being levied on the same supply chain.
Difficulties faced under erstwhile taxation laws shall be listed as below :
- cascading of taxes as taxes levied by the Central Government are not available as set off against the taxes being levied by the State Governments;
- certain taxes levied by State Governments are not allowed as set off for payment of other taxes being levied by them ;
- the variety of Value Added Tax Laws in the country with disparate tax rates and dissimilar tax practices divides the country into separate economic spheres; and
- the creation of tariff and non-tariff barriers such as octroi, entry tax, check posts, etc., hinder the free flow of trade throughout the country. Besides that, the large number of taxes results in high cost of compliance for the taxpayers in the form of number of returns, payments, etc.
In view of the aforesaid difficulties, all the above mentioned taxes are subsumed in a single tax called the goods and services tax which will be levied on supplies which includes goods and services at each stage of supply chain starting from manufacture or import and till the last retail level.
So any tax which were levied by the Central Government or the State Governments on the supply of goods or services has now been converged in goods and services tax, which is a dual levy where the Central Government will levy and collect tax in the form of central goods and services tax (CGST Act 2017) and the State Government will levy and collect tax in the form of state goods and services tax (SGST Act 2017) on intra-State supply of goods or services or both.
4. Salient Features of CGST Act 2017
The features of Central Goods and Services Tax Act, 2017, are as follows :
- to levy tax on all intra-State supplies of goods or services or both
- to broaden the base of the input tax credit by making it available in respect of taxes paid on supply of goods or services or both used or intended to be used in the course or furtherance of business;
- to impose obligation on electronic commerce operators to collect tax at source, at such rate not exceeding one per cent of the value of taxable supplies(net), out of payments to suppliers supplying goods or services through their portals;
- to provide for self assessment of the taxes payable by the registered person;
- to provide for conduct of audit of registered persons in order to verify compliance with the provisions of the Act;
- to provide for recovery of arrears of tax using various modes including detaining and sale of goods, movable and immovable property of defaulting taxable person;
- to provide for powers of inspection, search, seizure and arrest to the officers;
- to establish the Goods and Services Tax Appellate Tribunal by the Central Government for hearing appeals against the orders passed by the Appellate Authority or the Revisional Authority;
- to make provision for penalties for contravention of the provisions of the proposed Legislation;
- to provide for an anti-profiteering clause in order to ensure that business passes on the benefit of reduced tax incidence on goods or services or both to the consumers; and
- to provide for elaborate transitional provisions for smooth transition of existing taxpayers to goods and services tax regime.
5. Taxonomy of CGST Law
- The CGST Act, 2017 comprises of 174 Sections in 21 Chapters and three Schedules on supplies without consideration, treatment of activities as to goods or services and activities which shall be considered as neither goods or services.
- These Schedules are as under :
- Schedule I. Activities to be treated as supply even if made without consideration
- Schedule II. Activities to be treated as supply of goods or supply of services
- Schedule III. Activities or transactions which shall be treated neither as a supply of goods nor a supply of services.