Costing and Taxation · Ch 7 — Goods and Service Tax (GST)
Salient Features and Benefits of GST
7.iv
Salient Features and Benefits of GST
Salient features of GST
- Destination-based consumption tax — revenue accrues to the State of consumption, not the State of production (Section 7.i).
- Levied on "supply" of goods or services, as a single unified taxable event, rather than separately on "manufacture" (Excise), "sale" (VAT/CST), and "provision of service" (Service Tax) as under the pre-GST structure.
- Dual GST model — the Centre and the States/UTs both levy GST simultaneously (Section 7.iii).
- Seamless Input Tax Credit (ITC) chain — GST paid on inputs/input services is available as credit against GST payable on output supplies, right across the supply chain, which is what removes the cascading effect.
- GST Council (Article 279A) — a constitutional body, chaired by the Union Finance Minister with State Finance Ministers as members, that recommends GST rates, exemptions, thresholds, and administrative rules, giving both levels of government a shared voice in the tax's design.
- Threshold exemption and Composition Scheme for small businesses/taxpayers, keeping compliance proportionate to the size of the business.
- A comprehensive tax base, covering nearly all goods and services, with a small, specifically defined set of exclusions — alcohol for human consumption is entirely outside GST, and (as of this writing) five specified petroleum products remain outside pending a GST Council decision (Section 7.ii).
Benefits of GST
| For | Benefits |
|---|---|
| Business and industry | Easier compliance through a single registration/return system; removal of the cascading tax-on-tax effect, lowering the effective cost of inputs; a genuinely uniform tax structure and rates across India, removing the earlier need to plan business/warehousing decisions around State-to-State tax differences; improved competitiveness for less-developed States, since the destination-based principle no longer favours only producing States |
| Central and State Governments | A simpler, single-window administration in place of many separate tax departments; better tracking of the value chain through invoice-matching, reducing leakage/evasion; a broader, more buoyant tax base over time; a shared constitutional forum (the GST Council) for deciding rates and resolving Centre-State issues jointly |
Definition 1Input Tax Credit (ITC)
The mechanism by which GST paid on inputs/input services is set off against GST payable on output supplies, so tax is effectively paid only on the value added at each stage — the core mechan …
Definition 2GST Council [Article 279A]
The constitutional body, chaired by the Union Finance Minister with State Finance Ministers as members, that recommends GST rates, exemptions, thresholds, and rules — the joint C …