CA Intermediate · Taxation

GST in India - An Introduction: formula sheet

Full chapter guide

Key formulas

Tax payable with input credit: Output tax − Input tax credit = Net tax payable; Tax is effectively on value added at each stage, so there is no tax on tax.
Cascading (no credit) tax at a stage: Tax = Rate × (Cost of inputs including earlier tax + Value added); Earlier tax is inside the base, so the base is inflated.
Value added: Value added = Selling price (excl. tax) − Purchase cost of inputs (excl. tax); GST with full credit equals Rate × Value added.
Direct vs indirect tax: Direct: burden on the person taxed. Indirect: burden shifted to the consumer.; Income-tax is direct. GST, customs duty and the pre-GST excise and VAT are indirect.
Main pre-GST levies subsumed in GST: Central excise duty, service tax, additional customs duty (CVD) and special additional duty (SAD), VAT/sales tax, entry tax, octroi, luxury tax, entertainment tax levied by States (not that levied by local bodies), purchase tax, cesses and surcharges on supply; Basic customs duty, stamp duty, electricity duty and the sale of electricity are outside GST. Alcohol for human consumption is outside GST. Five petroleum products (crude petroleum, high speed diesel, petrol, natural gas and aviation turbine fuel) are outside GST until the Council recommends a date.
101st Constitutional Amendment: Constitution (101st Amendment) Act, 2016; Introduced GST. Received Presidential assent on 8 September 2016.
Article 246A: Article 246A(1): Parliament and the State Legislatures have power to make laws on GST, notwithstanding Articles 246 and 254. Article 246A(2): Parliament has exclusive power to make laws on GST where the supply of goods or services takes place in the course of inter-State trade or commerce.; Special provision for GST. Clause (1) overrides the normal division of powers under Articles 246 and 254. Clause (2) is the exception: for inter-State supply, only Parliament can make the law.
Article 269A: Inter-State supply, including import: GST levied and collected by the Centre, then apportioned between the Centre and the States; Apportionment is on the Council's recommendations. It also covers import of goods or services in the course of trade or commerce. Amounts apportioned to a State do not form part of the Consolidated Fund of India (Article 269A(2)).
Article 279A: Under Article 279A(1), as brought into force by notification of 12 September 2016, the President constitutes the GST Council.; Joint forum of the Centre and the States.
Council composition: Chairperson: Union Finance Minister. Members: Union MoS (Revenue/Finance) and State Ministers in charge of Finance or Taxation; The members of the Council choose one of the State Ministers as Vice-Chairperson, as per Article 279A(3).
Voting in the Council: Decision needs at least three-fourths of the weighted votes of members present and voting. Centre's weight = one-third. All States together = two-thirds.; Quorum is one-half of the total number of members, as per Article 279A(7). The Centre's vote has a weightage of one-third of the total votes cast, and the votes of all the States combined have two-thirds. The three-fourths majority of weighted votes of members present and voting also comes from Article 279A(9).
Article 366(12A): GST = any tax on supply of goods or services or both, except alcoholic liquor for human consumption; Defines GST in the Constitution.
Article 366(26A): Services means anything other than goods; Defines services very widely.
Article 269A(5): Parliament, by law on the Council's recommendation, formulates the principles for determining the place of supply and when a supply is in the course of inter-State trade or commerce; Place of supply principles and the test for inter-State trade are set by Parliament.
Intra-state supply: Total GST = CGST + SGST (or CGST + UTGST in a Union territory without legislature); CGST and SGST (or UTGST) are charged at equal rates, each half of the GST rate.
Inter-state supply: Total GST = IGST = CGST rate + SGST rate; Only IGST is charged. Never charge CGST or SGST on the same inter-state supply.
Intra-state test: Location of supplier and place of supply in the same State or Union territory; If they differ, the supply is inter-state. Imports are inter-state.
Tax computation: GST amount = Value of supply × GST rate ÷ 100; Split into two equal halves for CGST and SGST/UTGST on intra-state supply.
Governing laws: CGST Act, 2017; SGST Acts of States; UTGST Act, 2017; IGST Act, 2017; Intra-state levy is under CGST plus SGST or UTGST. Inter-state levy is under the IGST Act.
Constitutional basis of the Council: Article 279A: GST Council; Constituted by the President. It is a joint forum of the Centre and States.
Composition of the Council: Union Finance Minister (Chairperson) + Union Minister of State in charge of Revenue or Finance + Minister in charge of Finance or Taxation (or any other Minister) nominated by each State Government; The Council elects one of the State Ministers as Vice-Chairperson.
Quorum: Quorum = 50% of the total number of Council members; Meeting cannot validly proceed without it.
Voting weightage: Centre's vote = 1/3 of total votes cast; all State Governments together = 2/3 of total votes cast; Votes are weighted in the meeting, not counted per head.
Decision rule: Decision needs a majority of not less than 3/4 of the weighted votes of members present and voting; The Centre's weightage is 1/3 of the total votes cast, and the 3/4 is measured on the weighted votes of members present and voting. A proposal is therefore blocked if the votes against it exceed 1/4 of the weighted votes cast. Every proposal needs the Centre's affirmative vote: without it the most a proposal can get is 66.67, which is below 75. So the Centre has a veto, because its 33.33 is more than 25. The States together hold 66.67, so a bloc of States holding more than 25 weighted votes against can also block a proposal. Always state the blocking rule against the weighted votes cast, not a fixed total.
Destination principle: Tax accrues to the State or Union where supply is consumed; Applies to goods and services; place of supply rules fix the destination.
Dual GST structure: Intra-State supply: CGST + SGST (or UTGST); Inter-State supply and imports: IGST; Taxable event is supply, not manufacture, sale or provision of service separately.

Quick revision

GST is a destination-based tax on consumption, levied on supply of goods and services, and it came into force on 1 July 2017.
The model is dual GST: both the Centre and the States levy tax on the same supply.
Intra-State supply: CGST (Centre) plus SGST (State) or UTGST (Union territory without legislature). UTGST applies to Andaman and Nicobar Islands, Lakshadweep, Dadra and Nagar Haveli and Daman and Diu, Chandigarh and Ladakh. Union territories with a legislature (Delhi, Puducherry, Jammu and Kashmir) are covered by SGST.
Inter-State supply and imports: IGST, levied and collected by the Centre.
Article 246A gives Parliament and State Legislatures power to make GST laws.
Article 269A deals with IGST on inter-State supplies, which the Centre collects and shares.
Article 279A provides for the GST Council, and Article 366(12A) defines goods and services tax.
The GST Council is chaired by the Union Finance Minister and includes Union and State ministers in charge of finance or taxation.
The quorum of the Council is one-half of the total number of its members (Article 279A(3)).
Council decisions need three-fourths of weighted votes of members present and voting; the Centre has one-third weight and the States two-thirds (Article 279A(9)).
GST subsumed central excise, service tax and several State levies like VAT, and reduces cascading through input tax credit.
Alcohol for human consumption is outside GST. Crude petroleum, HSD, petrol, natural gas and ATF are within the GST framework (Article 366(12A)), but GST is not yet levied on them until the Council recommends a date; the earlier indirect taxes (Central excise or other Central levies, and State VAT) continue to apply to them, depending on the product.

Common mistakes

Saying GST subsumed all indirect taxes. Fix: Remember that basic customs duty, stamp duty, electricity duty and alcohol for human consumption remain outside GST. Five petroleum products (crude petroleum, high speed diesel, petrol, natural gas and aviation turbine fuel) are also outside GST until the Council recommends a date.
Calling cascading effect 'double taxation of income'. Fix: Define it as tax charged on a value that already includes an earlier tax because no credit is allowed.
Saying the Centre alone levies GST on all supplies. Fix: Remember that Article 246A gives concurrent power. The Centre levies CGST and IGST. The State or UT levies SGST or UTGST.
Mixing up Article 269A and Article 279A. Fix: Use the job-based hook: 269A = inter-State tax levy and sharing; 279A = Council.
Charging CGST and SGST on an inter-state supply. Fix: Dual levy applies only to intra-state supply. Inter-state supply attracts only IGST.
Treating Delhi and Puducherry as UTGST territories. Fix: UTGST applies only to Union territories without a legislature. Delhi and Puducherry have legislatures and levy SGST.
Writing that the Council can make GST law or rates on its own. Fix: Write that the Council makes recommendations. Law is made by Parliament and State Legislatures, and rates are notified by the Government.
Saying decisions are taken by simple majority. Fix: Remember the 3/4 weighted majority of members present and voting.

Exam tips

Theory questions on 'need for GST' reward a pairing of problem and remedy. Write 5 to 6 points, each with its fix.
Memorise the subsumed taxes in three groups: Central (excise, service tax, additional customs duties, cesses and surcharges), State (VAT, entry tax, luxury tax, purchase tax, entertainment tax levied by States) and local (octroi). Entertainment tax levied by local bodies stays outside GST.
MCQs often ask what is not subsumed. Remember basic customs duty, stamp duty, alcohol for human consumption, electricity duty and the sale of electricity, and the five petroleum products (crude petroleum, high speed diesel, petrol, natural gas and aviation turbine fuel) until the Council recommends a date.
Always draw the stage-wise table in cascading numericals. Marks are given for the working even if the arithmetic slips.
Write the year and amendment: 101st Constitution Amendment Act, 2016, and GST effective 1 July 2017.
Learn the Article numbers as a short table in your head: 246A, 269A, 279A, 366(12A), 366(26A). MCQs often test a number against its job.
For descriptive answers on the Council, give composition, voting and functions as separate bullets. Each point earns marks.
Always add the exceptions: alcoholic liquor for human consumption, and the five petroleum products on which GST applies from a date the Council recommends.