Part 3 – Frequently Asked Questions (FAQs) on Goods and Services Tax (GST)

In the previous two parts, we have covered the fundamentals of the recently passed Goods and Services Tax. As you are aware, both Rajya Sabha and Lok Sabha passed the law in thumping majority. In the meantime, Assam assembly also passed the tax bill very quickly. The central government under the leadership of Narendra Modi is actively working in such a way to implement the GST bill on April 1. In this article, we will cover few more topics related to the new tax bill.

How would GST be administered in India?

Basically, there are two components of GST such as the Central GST (CGST) and State GST (SGST). Both central government and the respective state governments will levy GST across the value chain at the same time. You should note that the tax will be levied on each and every supply of goods and services.

While the centre would levy and collect Central Goods and Services Tax (CGST), the state governments would also levy and collect the State Goods and Services Tax (SGST) on all transactions within a State.

Moreover, the input tax credit of CGST would be available for discharging the CGST liability on the output at each stage. In the same way, the SGST credit paid on inputs would be allowed for paying the SGST on output. In the Goods and Services Tax, no cross utilization of credit would be permitted.

How would a particular transaction of goods and services be taxed simultaneously under CGST and SGST?

The Central GST and the State GST would be levied simultaneously on every transaction of supply of goods and services except on exempted goods and services. You will not be charged any GST if the relevant goods are outside the purview of GST and the transaction which are below the prescribed threshold limits.

Furthermore, both would be levied on the same value, unlike State VAT which is levied on the value of the goods inclusive of Central Excise. The central government has created a diagrammatic representation of the working of the Dual GST model within a State.

Will cross utilization of credits between goods and services be allowed under GST regime?

The Goods and Services Tax will allow cross utilization of CGST and SGST credit between goods and services. However, this will not be allowed in the case of interstate supply of goods and services under the IGST model.

In this next part of the series, we will examine the role of IT in the Goods and Services Tax.