CGST - Central Goods and Services Tax in India

The Goods and Services Tax (GST) was implemented in India by the central government from July 1, 2017, onwards. Drafted with the aim of “One Nation One Tax,” the GST subsumed several different taxes levied by governments under the three broad sections mentioned below.

• Central Goods and Services Tax (CGST): It subsumed within it all the different taxes levied by the central government, including central excise duty and central surcharges and cess.

• State Goods and Services Tax (SGST): This subsumed all the indirect taxes levied by state governments, including sales tax, VAT, state surcharges and cesses, etc.

• Integrated Goods and Services Tax (IGST): This category was brought in for taxing interstate movement of goods and services.

Brought into form under the Central Goods and Services Tax Act 2016, the CGST Act replaced a host of indirect taxes, including central sales tax, central excise duty, service tax, additional customs duties, and further excise duties.

The CGST charges levied on the movement of standard goods and products can be enhanced by a separate body. While the revenue of CGST is collected by the central government, the input tax credit for CGST is for states. The input tax credit can, however, only be appropriated against the CGST payment.

There were several objectives of the CGST Act when it was implemented in 2017. Read on below to learn the objectives of the central GST taxation system.

• The central and state governments were both levying different amounts and forms of taxation on the same products and services, resulting in double taxation for the manufacturers and others involved in the supply chain.

• Owing to double taxation, the country saw high rates of tax evasion and cascading effects.

• The free flow of trade throughout the country was also hampered by octroi, entry tax, check posts, etc., which saw an additional level of taxation for the transport of goods and services across states.

• Taxpayers were also faced with a higher burden of compliance owing to a large number of taxes levied.

To overcome these obstacles to free trade and to do away with double taxation, which increased the taxation burden on taxpayers, the GST was implemented on July 1, 2017, which saw the central government levy taxes in the form of CGST while states began levying SGST. The detailed difference between the three sections of the GST (CGST, IGST and SGST) can be read in our article Key Difference Between CGST, IGST and SGST

The Central Goods and Services Tax (CGST) has several salient features. Read below to learn more about these.

• CGST is levied on all the intra-state goods and services supply.

• It expands the input tax credit base by ensuring their availability as taxes paid on supply of goods and services.

• CGST enables self-assessment by taxpayers on taxes payable by them.

• CGST conducts audits so taxpayers can ensure compliance with the Act’s provisions.

• The CGST can recover tax arrears through provisions for detaining and restricting sale of goods and property by defaulting taxpayers.

• The CGST has provisions for levying GST penalties or fines in case of contravention by taxpayers.

• For consumers, the Central Goods and Services Tax enables a reduction of the tax burden on various goods and services.

The CGST Act includes 174 sections stated across 21 chapters and three schedules pertaining to supplies without consideration, and the treatment of activities as goods or services. The 21 chapters and three schedules are listed below.

• 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 Taxes

• 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 Offenses and Penalties

• Chapter XX Transitional Provisions

• Chapter XXI Miscellaneous

The Schedules include:

• Schedule I: Activities to be carried even if they are made without consideration

• Schedule II: Activities to be considered as supply of goods or services

• Schedule III: Activities or transactions mentioned as neither the supply of goods or services.

Read on below to learn the common rules levied under the CGST Act.

• A tax invoice must be issued to all taxable goods and services if you are already registered for GST.

• A bill of supply must be issued if registration is under the GST composition scheme.

• Ensure that all these invoices have a unique serial number and are noted in sequential order.

• Ensure that the GST invoice includes your name, address, supply place, and GSTIN.

• CGST and SGST are equally filed. So in case, the GST rate is 18%, the CGST is 9% and SGST is also 9%.

• For sales pertaining to out of state businesses, IGST must be levied.

• It is preferable to not buy goods or services from unregistered dealers.

• Ensure that you are filing GST correctly for the same and different states.

• All sales of chargeable goods and services must be issued with a tax invoice.

• Ensure to collect the tax invoice for all the purchases you make.

• Ensure that your documents include your and the client’s GSTIN.

• Furthermore, ensure that all documentation is submitted well within time in order to avoid penalties.

Different documents are required for different categories of taxpayers. Read below to understand better.

For Individuals & Sole Proprietors

• Owner’s PAN Card

• Owner’s Aadhaar Card

• Owner’s photograph

• Residential Proof

• Details of Bank Account

For Partnerships & LLPs

• Deed of Partnership

• PAN Cards of Partners

• Photographs of Partners

• Partners’ Residential Proofs

• Aadhaar Card of Any Authorised Signatory

• Proof of Signatory’s Appointment

• Proof of LLP Registration

• Bank Details

• Business’ Principal Address Proof

For Hindu Undivided Families (HUFs)

• HUF’s PAN Card

• Karta’s (family patriarch’s) PAN Card

• Owner’s photograph

• Bank Details

• Business’ Principal Address Proof

For Companies

• Company PAN Card

• Incorporation Certificate from MCA

• Memorandum or Articles of Association

• Appointment Proof of Signatory

• Signatory’s PAN Card

• Signatory’s Aadhaar Card

• PAN Cards of all Directors

• Directors’ Residential Proofs

• Bank Details

• Business’ Principal Address Proof

For Societies & Clubs

• Registration Certificate Copy

• PAN Card Copies of Club or Society and of Associated Partners or Promoters

• Copy of Bank Account Statement or Crossed Cheque or First Page of Passbook

• Proof of Registered Office Address

• Authorisation Letter Signed by Authorised Signatory

There are several benefits of the Central Goods and Services Tax, some of which are listed below.

• Elimination of Multiple Taxes: Before the GST was implemented, both the Centre and states charged different rates of taxes on the same goods and services. As a result, multiple taxes were levied on goods and services, which resulted in a high burden of taxation on taxpayers.

• Reduces Costs: The CGST has resulted in reducing the prices of goods and services and is helping the common man save more money.

• Ease of Business: CGST has the same concept across all states, which makes it easier to conduct interstate business without worrying about different taxes being levied.

• Seamless Tax Filing and Documentation: CGST has made tax filing and maintaining documentation significantly easier for businessmen and made compliance processes hassle-free.

• Reduces Taxes’ Cascading Effects: Since CGST ensures tax benefits at every stage from manufacturing to consumption and tax is handled on margin price only, it has stopped the cascading effect of taxation in India.