The abbreviation “CGST” refers to Central Goods and Services Tax. Under Goods and Services Tax (GST), the CGST (Central Goods and Service Tax) Act, 2017 has been authorized to arrange for levy and collection of tax on supply of goods and/or services in case of intra-state supply by the Central Government and the issues associated therewith or incidental thereto.
Objective of CGST Act, 2017
Under the former taxation laws, the Central Government imposed different taxes on production or manufacture of certain goods (Central Excise duty), interstate sale of goods in the form of Central Sales tax (CST), tax on providing services interstate/intrastate in the form of Service Tax, etc.
The State Governments imposed a tax on retail sales in the form of Value Added Tax (VAT), on entry of goods in the State as Entry tax, Luxury tax on Luxury Items/Services, and so on. In the like manner, there were a variety of taxes that the government levied on similar transactions. Excessive tax evasion and cascading effects were the major challenges faced under past taxation systems.
There were several Value Added Tax Laws in the country with different tax rates and dissimilar tax practices which were dividing the country into different zones. The creation of barriers such as entry tax, octroi, checks posts, etc., acted as an obstacle to the free flow of trade throughout the country. Also, the large number of taxes led to a higher compliance burden to the taxpayers.
To overcome the flaws of the previous laws, GST with Dual Levy Approach was introduced in India on 1st July 2017 wherein the Central governments will levy tax in the form of Central Goods and Services Tax (CGST) and State governments in the form of State Goods and Services Tax (SGST).
Highlights of CGST Act 2017
The highlights of the CGST Act, 2017 are:
- To levy a tax on all the intra-State supplies of goods and services;
- To widen the base of the Input Tax Credit (ITC) by making it accessible concerning taxes paid on the purchase or supply of goods or/and services utilized or proposed to be used in the business or further development of business;
- To impose an obligation on the e-commerce operators to collect TCS, at such rate not surpassing 1% on the value of net taxable supplies, out of payments made to suppliers who provide goods or services through their portals;
- To accommodate self-assessment of the taxes that are payable by the registered individual;
- To direct audit of registered people to confirm compliance with the provision of the Act;
- To undertake recovery of arrears used in different modes including sale of goods(or service), movable and immovable property of the defaulting taxable individuals;
- To introduce the power of assessment, detention, search and seizure to the tax officers;
- To set up the Goods and Services Tax Appellate Tribunal by the Central Government for hearing interests against the requests passed by the Appellate Authority or the Revisionary Authority;
- To make arrangements for punishments for the contradiction of the provision of the proposed legislation; and
- To undertake an anti-profiteering clause to guarantee that business passes on the advantage of the reduced tax rate on goods or/and services to the customers.
CGST Law Taxonomy
The Central Goods and Services Tax (CGST) Act, 2017 comprises 174 Sections divided into 21 Chapters and 3 Schedules.
The 21 Chapters covered under the CGST Act, 2017 are as under:
- Chapter I Preliminary
- Chapter II Administration
- Chapter III Levy and Collection of Tax
- Chapter IV Time and Value of Supply
- Chapter V Input Tax Credit
- Chapter VI Registration
- Chapter VII The Tax Invoice, Credit and Debit Notes
- Chapter VIII Accounts and Records
- Chapter IX Returns
- Chapter X Payment of Tax
- Chapter XI Refunds
- Chapter XII Assessment
- Chapter XIII Audit
- Chapter XIV Inspection, Search, Seizure and Arrest
- Chapter XV Demands and Recovery
- Chapter XVI Liability to Pay in Certain Cases
- Chapter XVII Advance Ruling
- Chapter XVIII Appeals and Revision
- Chapter XIX Offences and Penalties
- Chapter XX Transitional Provisions
- Chapter XXI Miscellaneous
- Schedule I
- Schedule II
- Schedule III
- Removal of Difficulty Orders
These Schedules are as under:
● Schedule I: Transactions/Activities that are to be treated as supply regardless of whether such supply of goods or services, made without consideration.
● Schedule II: Transactions or Activities that are treated as a supply of goods or/and services.
● Schedule III: Transactions/Activities that will be treated neither as a supply of goods nor as services.