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First Discussion PaperOn

Goods and Services TaxIn India

The Empowered CommitteeOf

State Finance Ministers

New Delhi

November 10 , 2009



Contents

Pages

Foreword i-iv

Introduction 1-11

Preparation for GST 11-13

Goods & Services Tax Model for India 13-27

Annexure on Frequently Asked 29-53

Questions and Answers on GST



i

Foreword

If the Value Added Tax (VAT) is considered to be

a major improvement over the pre-exis t ing Centra l

excise duty a t t he na tiona l level a nd t he sales ta x system

at the Sta te leve l , then the Goods and Services Tax(GST) will be a further significant breakthrough - the

next logica l step - tow a rds a comprehensive indirect ta x

reform in the country.

K e e p i n g t h i s o v e r a l l o b j e c t i v e i n v i e w , a n

a nnouncement wa s made by Shri P . Chidamba ra m, the

then Union Finance Minis ter in the Centra l Budget

(2007-2008) to the effect that GST would be introduced

from April 1, 2010 an d t ha t t he Em pow ered C omm itt ee

o f S t a t e F i n a n c e M i n i s t e r s , o n h i s r e q u e s t , w o u l d

work wi th the Central Government to prepare a road

m a p f o r i n t r o d u c t i o n o f G S T i n I n d i a . A f t e r t h i s

announcement , the Empowered Commi t tee o f S t a te

Fina nce Ministers decided t o set up a J oint Working

Group (May 10, 2007), with the then Adviser to the

Union Finance Minister and the Member-Secretary of

E m p o w e r e d C o m m i t t e e a s C o - c o n v e n o r s a n d t h econ c er n e d J oi n t S e cr e t a r i e s of t h e D e p a r t m e n t o f

Revenue of Union Finance Minis try and al l Finance

S ecreta r ies of the St a tes a s i ts members . This J oint

Working Group, after intensive internal discussions as



i i

w ell a s intera ction w ith experts a nd r epresenta tives of

Chambers o f Commerce and Indus try , submi t ted i t s

report to the Empowered Committee (November 19,

2007).

This repor t was then d iscussed in de ta i l in the

meetin g of E mpowered Comm itt ee (November 28, 2007).

On th e ba sis of this discussion a nd w ritt en observa tionsof the States , cer tain modif icat ions were made and a

f inal version of the views of Empowered Committee

a t t h a t s t a g e w a s p r e p a r e d a n d w a s s e n t t o t h e

Government of India (April 30, 2008). The comments

of t he G overnment of In dia w ere received on D ecember

12, 2008 and were duly considered by the Empowered

Committee (December 16, 2008). I t was decided that

a C o m m i t t e e of P r i n c ip a l S e cr e t a r i e s /S e cr e t a r i e s

o f F in a nce /Ta xa t ion a nd C ommiss ioners of Tra de

Taxes of the States would be set up to consider these

c o m m e n t s , a n d s u b m i t t h e i r v i e w s . T h e s e v i e w s

were submi t ted and were accep ted in p r inc ip le by

t h e E m p ow e r e d C o m m i t t e e (J a n u a r y 2 1, 20 09 ).

C o n s e q u e n t u p o n t h i s i n - p r i n c i p l e a c c e p t a n c e , a

Working Group, consisting of the concerned officials of

the State Governments was formed who, in close association

w ith senior represent a t ives of the G overnment of Ind ia ,

s u b m i t t e d t h e i r r e c o m m e n d a t i o n s i n d e t a i l o n t h e

structure of GST. An important interact ion has also

recently taken place between Shri Pranab Mukherjee,

t h e U n i o n F i n a n c e M i n i s t e r a n d t h e E m p o w e r e d



iii

Committee (October 19, 2009) on the related issue of

c o m p e n s a t i o n f o r l o s s o f t h e S t a t e s o n a c c o u n t o f

phasing out of CST. The Empowered Committee has

now taken a detailed view on the recommendations of

th e Working G roup of officia ls a nd oth er rela ted m a tt ers.

This detai led view of the Empowered Committee on

the structure of GST is now presented in terms of the

Firs t Discuss ion Paper , a long wi th an Annexure onFrequently Asked Questions and Answers on GST, for

discussions w ith indust ry, tr a de, a gricultur e a nd people

a t l a rge.

The Discussion Paper is divided into four sections.

S ince GS T w ould be furth er improvement over t he VAT,

Section 1 begins with a brief reference to the process of

introduction of VAT at the Centre and the States and

also indicates the precise points where there is a need

for fu r the r improvement . Thi s sec t ion a l so shows

h o w t h e G S T c a n b r i n g a b o u t t h i s i m p r o v e m e n t .

With this as the background for justi f ication of GST,

Section 2 then describes the process of preparation for

G S T . T h e r e a f t e r , S e c t i o n 3 p r e s e n t s i n d e t a i l t h e

c o m p r e h e n s i v e s t r u c t u r e o f t h e G S T m o d e l . F o r

illustrating this GST model further, there is in the end

a n A n n e x u r e o n F r e q u e n t l y A s k e d Q u e s t i o n s a n d

Answers .

This Discussion Paper has been the result of truly

col lect ive ef for ts on the basis of hardwork of al l the



iv

c o n c e r n e d o f f i c i a l s o f t h e S t a t e s , t h e o f f i c i a l s o f

E mpow ered Committee Secreta riat a nd t he Adviser an d

officia ls of th e Un ion F ina nce Ministry , th e counsel a nd

a ctive par ticipat ion of Fina nce Ministers a nd concerned

Senior Minis ters of the States at each s tage , and the

e n c o u r a g e m e n t a n d a d v i c e o f t h e U n i o n F i n a n c e

Minister .

With t he release of this First Discussion P a per a nd

the Annexure on Frequent l y Asked Ques t ions and

Answers, we now sincerely invite interaction with the

r e p r e s e n t a t i v e s o f i n d u s t r y , t r a d e , a g r i c u l t u r e a n d

common people . This interact ion and campaign wi l l

immedia te ly s ta r t a t t he na t iona l level and a t th e St a te

levels. As a part of this interaction, we look forward to

receiving the views of industry, trade, agriculture as

well as consumers in a time-bound manner.

Asim Kumar D a sgupta

Chairman,

Empowered Committee of

St a te Fina nce Ministers

&

Minist er of Fin a nce & E xcise,G overnment of West B enga l

New D elhi,

November 10, 2009



1

1. Introduction

1.1 Int roduction of th e Va lue Added Ta x (VAT) a t

th e Cent ra l an d th e S ta te level ha s been considered to be

a ma jor step – an import a nt brea kthr ough – in th e sphere

of indirect ta x reform s in In dia . If th e VAT is a ma jor

improvement over t he pre-exist ing C ent ra l excise dut y a t

the na t iona l level and t he sa les ta x system a t t he Sta televel, th en t he G oods a nd S ervices Ta x (G S T) w ill indeed

be a further significant improvement – the next logical

step – towa rds a comprehensive indirect ta x reforms in

th e count ry.

1.2 Keeping this object ive in view, a n a nnouncement

was made by the then Union Finance Minister in the

Cent ra l B udget (2007-08) t o t he effect t ha t G S T w ould be

introduced with effect from April 1, 2010 and that the

E mpow ered C ommitt ee of S ta te F ina nce Ministers, on his

request , would work wi th the Central Government to

prepar e a roa d ma p for int roduction of G S T in India . After

this a nnouncement , the E mpow ered Committ ee of St a te

Fina nce Ministers decided t o set up a J oint Working

G roup (Ma y 10, 2007), w ith th e th en Adviser t o the U nion

F i n a n c e M i n i s t e r a n d M e m b e r - S e c r e t a r y o f t h e

E mpowered Committ ee a s its C o-convenors a nd concerned

four J oint S ecreta ries of th e Depa rt ment of Revenue of

Union Finance Ministry and all Finance Secretaries of

th e St a tes a s its m embers. This J oint Working G roup got

i tself divided into three Sub-Groups and had several



2

rounds of interna l discussions a s w ell a s intera ction wit h

experts and representatives of Chambers of Commerce

& Indus t ry . On the bas i s o f these d i scuss ions and

intera ction, the S ub-G roups submitt ed th eir r eport s w hich

w ere th en integra ted a nd consolida ted into th e report of

J oint Working G roup (November 19, 2007).

1.3 This report w a s discussed in deta i l in the meetingof t he E mpowered C ommitt ee on November 28, 2007, a nd

the States were also requested to communicate their

observations on the report in writing. On the basis of

th ese discussions in t he Em pow ered Committ ee a nd t he

w r i t t e n o b s e r v a t i o n s , c e r t a i n m o d i f i c a t i o n s w e r e

cons ide red necessary and were d i scussed w i th the

Co-convenors a nd t he representa tives of th e Depar tm ent

o f R e v e n u e o f U n i o n F i n a n c e M i n i s t r y . W i t h t h e

modifica tions duly ma de, a fina l version of the views of

Empowered Committee on the model and road map for

t he G S T w a s prepared (April 30, 2008). These view s of

E mpow ered Committ ee w ere th en sent to the G overnment

of India , an d th e comm ents of G overnment of In dia w ere

received on D ecember 12, 2008. These comment s w ere duly

considered by th e Em pow ered Comm itt ee (D ecember 16,

2008), a nd it w a s decided th a t a Commit tee of P rincipal

S e cr e t a r i e s /S e cr e t a r i e s o f F i n a n c e /Ta x a t i on a n d

Comm issioners of Tra de Ta xes of th e St a t es w ould be set

up to consider th ese comment s, a nd subm it t heir views.

These view s were submit ted and w ere a ccepted in principle

by t he E mpow ered C omm itt ee (J a nua ry 21, 2009). As



3

a follow-up of this in-principle acceptance, a Working

Group consisting of the concerned officials of the State

G overnments w a s formed w ho, in a ssociat ion w ith senior

represen ta t i ves o f Government o f Ind i a , submi t ted

th eir recomm enda tions in deta il on t he str uctur e of G ST.

A n i m p o r t a n t i n t e r a c t i o n h a s a l s o r e c e n t l y t a k e n

p l a c e b e t w e e n S h r i P r a n a b M u k h e r j e e , t h e U n i o n

F i n a n c e M i n i s t e r a n d t h e E m p o w e r e d C o m m i t t e e(October 19, 2009) on the related issue of compensation

for loss of the States on account of phasing out of CST.

The Em pow ered Committ ee ha s now t a ken a deta iled view

on t he recomm enda t ions of th e Working G roup of officia ls

and other related matters. This detai led view is now

presented in terms of the First Discussion P a per, a long

with an Annexure on Frequently Asked Questions and

Answers on GST, for discussion with industry, trade,

agriculture and people at large. Since the GST at the

Centre a nd S ta tes w ould be a further improvement over

t he VAT, a brief reca lling of th e process of int roduct ion of

VAT in In dia is w ort hw hile.

Value Added Tax at the Central and the State level

1.4 P rior to the introduction of VAT in the Centre

a nd in th e St a tes, th ere w a s a burden of multiple ta xat ion

in th e pre-existing Centr a l excise duty a nd t he St a te sa les

ta x systems. B efore an y commodity w a s produced, inputs

w ere first t a xed, a nd t hen a fter the commodity got produced

with input tax load, output was taxed again. This was

causing a burden of multiple taxation (i.e. “tax on tax”)



4

wi th a cascad ing e f f ec t . Moreover , in the s a le s t ax

structure, when there was also a system of multi-point

sa les ta xa tion at subsequent levels of distr ibutive tr a de,

then a long w ith input ta x loa d, burden of sales ta x pa id

on purcha se at ea ch level wa s a lso added, thus a ggrava ting

th e ca sca ding effect furth er.

1.5 When VAT is introduced in pla ce of Centra l excisedut y, a set-off is given, i.e., a deduction is ma de from t he

overa ll t a x burd en for input t a x. In t he ca se of VAT in

pla ce of sa les t a x syst em, a set-off is given from t a x burden

not only for input t a x paid but a lso for t a x paid on previous

purcha ses. With VAT, the problem of “t a x on t a x” a nd

re la ted burden of cascad ing e f fec t i s thus removed .

Fu rt herm ore, since t he benefit of set -off ca n be obta ined

only if ta x is duly pa id on inputs (in th e ca se of Centr a l

VAT), a nd on both input s a nd on previous pur cha ses (in

the case of State VAT), there is a built-in check in the

VAT str uctur e on t a x complia nce in t he Cent re a s w ell a s

i n t h e S t a t e s , w i t h e x p e c t e d r e s u l t s i n t e r m s o f

improvement in t r ansparency and reduc t ion in t ax

eva sion. For these beneficia l effect s, VAT ha s now been

int roduced in more th a n 150 count ries, including severa l

federa l countr ies. In Asia , it ha s now been int roduced in

a lmost a ll th e count ries.

1.6 In India , VAT wa s introduced at the Centra l level

fo r a se lec ted number o f commodi t i e s in te rms o f

MODVAT with effect from March 1, 1986, and in a



5

step-by-step manner for al l commodities in terms of

CE NVAT in 2002-03. S ubsequent ly, a fter C onstit ut iona l

Amendment empowering the Centre to levy taxes on

services, t hese service t a xes w ere a lso a dded to CENVAT

in 2004-05. Alth ough th e grow t h of t a x revenue from th e

Central excise has not always been specially high, the

revenue growt h of combined CE NVAT a nd service ta xes

ha s been significa nt .

1.7 Introduction of VAT in the Sta tes ha s been a more

cha llenging exercise in a federa l count ry like In dia , w here

each S ta te , in te rms o f Cons t i tu t iona l p rov i s ion , i s

sovereign in levying an d collecting S ta te ta xes. B efore

int roduction of VAT, in th e sa les t a x regime, a pa rt from

th e problem of multiple ta xa tion a nd burd en of a dverse

ca sca ding effect of ta xes a s a lready m entioned, th ere w a s

also no harmony in the rates of sales tax on dif ferent

comm odities a mong th e St a tes. Not only were th e ra tes

of sales tax numerous (often more than ten in several

States) , and di f ferent f rom one another for the same

commodity in di f ferent States , but there was also an

unhea lthy competit ion a mong the St a tes in terms of sales

tax rates – so-cal led “rate war” – of ten resul t ing in,

revenue-w ise, a count er-product ive situa t ion.

1.8 I t is in th is background tha t a t t empts were made

by the States to introduce a harmonious VAT in the

States, keeping at the same time in mind the issue of

sovereignty of the St a tes rega rding the Sta te ta x ma tt ers.



6

The first prelimina ry discussion on S t a t e-level VAT t ook

place in a meet ing o f Chie f Minis ters convened by

Dr. Ma nmohan Singh, the th en Un ion Fina nce Minister

in 1995. In t his meeting, t he ba sic issues on VAT w ere

discussed in general terms and this was fol lowed up

by per iod ic in terac t ions o f S ta te Finance Minis ters .

T h e r e a f t e r , i n a s i g n i f i c a n t m e e t i n g o f a l l t h e

Chief Ministers, convened on November 16, 1999 bySh ri Yashw a nt S inha , th e then U nion Fina nce Minister ,

tw o import a nt decisions, am ong oth ers, w ere ta ken. First ,

before t he int roduction of S t a t e-level VAT, t he un hea lth y

sales ta x “rate w a r” a mong the St a tes would ha ve to end,

and sales tax rates would need to be harmonised by

implement ing uniform floor ra t es of sa les t a x for different

ca tegories of commodities w ith effect from J a nua ry 1, 2000.

S econdly, on th e ba sis of a chievement of the first object ive,s teps would be taken by the Sta tes for in t roduct ion

of S ta te- leve l VAT af ter adequate prepara t ion . For

implementing these decisions, a Standing Committee

of State Finance Ministers was formed which was then

m a d e a n E m p o w e r e d C o m m i t t e e o f S t a t e F i n a n c e

Ministers.

1.9 Therea fter, the Empowered Commit tee has metregula rly. All t he decisions w ere t a ken on t he ba sis of

consensu s. On th e st rengt h of t hese repea t ed discussions

and collective efforts, involving the Ministers and the

concerned officia ls, it w a s possible w ith in a period of about



7

a yea r a nd a ha lf to a chieve nea rly 98 per cent success in

the first objective, namely, harmonisation of sales tax

str uctu re th rough implement a tion of uniform floor r a tes

of sales ta x.

1.10 After rea ching this sta ge, steps were initia ted

for sy stema tic prepar a tion for int roduction of St a te-level

VAT. In order aga in to avoid an y unhea lthy competitionamong the S t a te s which may l e ad to d i s to r t ions in

ma nufacturing and t ra de, at tempts ha ve been made from

the very beginning to harmonise the VAT design in the

S ta tes, keeping also in view th e distinct ive feat ures of ea ch

S ta te a nd t he need for federa l flexibility. This ha s been

d o n e b y t h e S t a t e s c o l l e c t i v e l y a g r e e i n g , t h r o u g h

discussions in the Empowered Committee, to certain

common points of convergence regarding VAT, anda l l o w i n g a t t h e s a m e t i m e c e r t a i n f l e x i b i l i t y t o

accommodate the local characteristics of the States. In

the course of these discussions, references to the Tenth

Five Year Plan Report of the Advisory Group on Tax

Policies & Tax Administration (2001) and the report of

Kelka r (Ch a irma n) Ta sk Force w ere helpful.

1.11 Along w ith th ese mea sures, steps were ta ken for

necessary t ra ining, computeriza tion a nd intera ction with

tr a de a nd indust ry. While th ese prepar a tory steps w ere

taken , the Empowered Commi t tee go t a s i gn i f i c an t

suppor t f rom Shr i P . Chidambaram, the then Union



8

Finance Minis ter , when he responded pos i t ive ly in

provid ing Centra l f inancia l suppor t to the Sta tes in

the event of loss of revenue in transi t ional years of

implementa t ion of VAT.

1.12 As a consequence of a l l these steps, the St a tes

st a rt ed implement ing VAT beginning April 1, 2005. After

overcoming the ini t ial d i f f icul t ies , a l l the States andUnion Territories have now implemented VAT. The

E mpow ered C omm itt ee ha s been m onitoring closely t he

process o f implementa t ion of S ta te- leve l VAT, and

devia t ions from th e a greed VAT ra t es ha s been cont a ined

to less than 3 per cent of the total list of commodities.

Responses of industr y a nd a lso of tr a de ha ve been indeed

encoura ging. The ra te of grow th of ta x revenue ha s near ly

doubled from the average annual rate of growth in the

pre-VAT five yea r period a ft er t he in t roduct ion of VAT.

J ustification of GST

1.13 Despite t his success w ith VAT, th ere a re sti ll

certa in shortcomings in th e str uctur e of VAT both a t th e

Cent r a l and a t the S t a te l eve l . The shor tcoming in

CE NVAT of t he G overn ment of India lies in n on-inclusion

of several Central taxes in the overal l f ramework of

CE NVAT, such a s a dditiona l customs dut y, surcha rges,

etc., an d thus keeping t he benefit s of comprehensive input

ta x a nd service ta x set-off out of reach for ma nufa cturers/

dealers. Moreover, no step ha s yet been t a ken t o ca pture

th e va lue-a dded cha in in the distribution t ra de below th e



10

is not s imply VAT plus service ta x but a n im provement

over the previous system of VAT and disjointed service

ta x. H ow ever, for th is GS T to be intr oduced at th e St a te-

level, it is essential that the States should be given the

power of levy of taxation of all services. This power of levy

of service taxes has so long been only with the Centre.

A Const itut iona l Amendment w ill be made for giving th is

power also to the States. Moreover, with the introductionof GST, burden of Central Sales Tax (CST) will also be

rem oved. The G ST a t the Sta te-level is, therefore, just ified

for (a) additional power of levy of taxation of services for

the States, (b) system of comprehensive set-off relief,

including set-off for cascading burden of CENVAT and

service taxes, (c) subsuming of several taxes in the GST

and (d) removal of burden of CST. Because of the removal

of ca scad ing effect , th e burden of ta x under G S T on goodswill , in general, fall .

1. 15 Th e G S T a t t h e C en t ra l a nd a t t he S t a t e level

w ill thu s give more relief to industr y, tr a de, a griculture

and consumers through a more comprehens ive and

wider coverage of input tax set-off and service tax set-

off, subsuming of several taxes in the GST and phasing

out of CST. With the GST being properly formulatedb y a p p r o p r i a t e c a l i b r a t i o n o f r a t e s a n d a d e q u a t e

c o m p e n s a t i o n w h e r e n e c e s s a r y , t h e r e m a y a l s o b e

revenue/resource ga in for both th e Centre a nd t he St a tes,

prima rily t hrough w idening of ta x base a nd possibilit y of



11

a significant improvement in tax-compliance. In other

w ords, t he G S T ma y ush er in t he possibility of a collective

g a i n f o r i n d u s t r y , t r a d e , a g r i c u l t u r e a n d c o m m o n

consumers as well as for the Central Government and

the State Governments. The GST may, indeed, lead to

the possibility of collectively positive-sum game.

2. Preparation for GST

2.1 Keeping th i s sign if ica nce of GS T in v iew , a n

announcement was made by the then Union Finance

Minister in the Union Budget, as mentioned before, to

the effect tha t G ST w ould be int roduced from April 1, 2010,

and that the Empowered Committee of State Finance

Ministers would work with the Central Government to

prepare a road map for introduction of the GST. Afterth is an nouncement, t he Em pow ered Committ ee, as st a ted

earlier, ha d set up a J oint Working G roup wh ich submitt ed

a r e p o r t o n a m o d e l a n d r o a d m a p f o r G S T . A f t e r

a ccommoda ting t he views of the St a tes a ppropria tely on

this report, the views of the Empowered Committee on

th e model a nd road m a p were sent t o th e Governm ent of

I n d i a o n 3 0 t h A p r i l , 2 0 0 8 . T h e c o m m e n t s o f t h e

Government of India were received on 12t h December,2008. These comments were duly considered by the

Empowered Commi t tee in i t s mee t ing he ld on 16 t h

December, 2008 and i t was decided that a Committee

of P rincipa l Secreta ries/Secreta ries (Fina nce/Taxation) a nd



12

Commissioners of Trade Taxes should consider the

comments received from the Government of India and

submit i t s v iews and a l so work out the Centra l GST

and S ta te GST ra te s . The Commi t tee he ld de ta i l ed

d e l i b e r a t i o n s o n 5 t h a n d 6 t h J a n u a r y , 2009, a n d

s u b m i t t e d i t s r e c o m m e n d a t i o n s t o t h e E m p o w e r e d

Commit tee . The Empowered Commit tee cons idered

these recommendat ions in i t s meet ing he ld on 21s t

J a nua ry , 2009 a nd a ccepted t hem in pr inciple. The

Empowered Commit tee a l so dec ided to cons t i tu te a

Working Group cons is t ing o f Pr inc ipal Secre tar ies/

S ecret a ries (Fin a nce/Ta xa t ion) an d C ommissioners of

Tr a d e Ta x e s o f a l l S t a t e s /U Ts t o g i v e t h e i r

recommendations on (a) the commodities and services

t ha t should be kept in th e exempt ed list, (b) t he rules

and principles of taxing the transact ions of services

including the transactions in inter-State services, and(c) f inalization of the model suggested for inter-state

t ra nsa ct ion/movement of goods including st ock tra nsfers

in consultation with the State Bank of India and some

other nationalized banks. I t was also decided that the

senior representatives from the Government of India

may also be associated. The Working Group deliberated

on the issues on 10 t h February , 2009 and decided to

form three Sub Working Groups to deliberate each item

in dept h. The Reports of t he Working G roup on t he

t h r e e i s s u e s h a v e a l r e a d y b e e n r e c e i v e d , a n d t h e

E m p o w e r e d C o m m i t t e e h a s t a k e n a v i e w o n t h e s e

recommendat ions for concluding the de ta i l s o f GST

structure.



13

2.2 While ma king th is prepa ra t ion of GST, it w a s

a lso necessa ry, a s ment ioned ear lier, to pha se out th e CS T,

because i t d id not carry any set-of f re l ie f and there

was a distortion in the VAT regime due to export of tax

from one Sta te to oth er Sta te. The Empow ered Committ ee

accordingly took a decision to phase out CST on the

understa nding with the Centre tha t , since pha sing out of

CS T w ould result in a loss of revenue to th e St a tes on ap e r m a n e n t b a s i s , a n a p p r o p r i a t e m e c h a n i s m t o

compensa te t he S ta tes for such loss w ould be worked out.

The ra t e of CS T ha s a lrea dy been reduced t o 2% a nd w ill

be pha sed out w ith effect from th e da te of int roduction of

GST on the basis of such GST structure which, with

n e c e s s a r y f i n a n c i a l s u p p o r t t o t h e S t a t e s , s h o u l d

adequately compensate for the loss of the States on a

perma nent ba sis. With t hese steps at prepar a tion in mind,it is import a nt now to t urn to t he proposed model of G S T.

3. Goods & Services Tax Model For India

3.1 I t i s impor t an t to t ake note of the s ign if ican t

a dministra tive issues involved in designing a n effective

GST model in a federal system with the objective of

ha ving a n overa ll ha rmonious str ucture of ra tes. Together

with this, there is a need for upholding the powers ofCentra l and St a te Governments in their ta xat ion ma tt ers.

Further, there is also the need to propose a model that

would be easily implementable, while being generally

acceptable to stakeholders.



14

Salient features of the GST model

3.2 Keeping in view t he report of the J oint Working

Group on Goods and Services Tax, the views received

from the States and Government of India , a dual GST

structure with defined functions and responsibilities of

th e Centre a nd t he St a tes is recommended. An a ppropria te

mecha nism tha t w ill be binding on both the Centre a nd

th e S ta tes would be w orked out w hereby th e ha rmoniousra te str uctur e along w ith t he need for furt her modifica tion

could be upheld, if necessary with a collectively agreed

Cons t i tu t iona l Amendment . S a l i e n t f e a t u r e s o f t h e

proposed m odel a re a s follow s:

(i) The G ST shal l ha ve tw o components : one levied

by th e Cent re (hereina fter referred to a s Cent ra l G ST),

a nd t he oth er levied by t he St a tes (hereina fter referred toas State GST). Rates for Central GST and State GST

would be prescribed appropriately, reflecting revenue

considera t ions an d a ccept a bility . This dua l G S T model

w ould be implement ed thr ough m ultiple st a t ut es (one for

CG ST a nd S G ST sta tut e for every S ta te). However, the

ba sic fea tur es of law such a s cha rgeability, definition of

t axab le even t and t axab le person , measure o f l evy

including va lua t ion provisions, bas is of cla ssifica t ion etc.

w o u l d b e u n i f o r m a c r o s s t h e s e s t a t u t e s a s f a r a s

practicable.

(ii) The Cent r a l GST and the S t a te GST wou ld be

a pplica ble to a ll tra nsa ctions of goods a nd services ma de



15

for a cons idera t ion except the exempted goods and

services, goods which are outside the purview of GST

and the transact ions which are below the prescr ibed

threshold limits.

(iii) The Central G ST a nd Sta te GS T a re to be pa id to

the accounts of the Centre an d the Sta tes sepa ra tely. I t

would have to be ensured that account-heads for al l

services and goods would have indicat ion whether i trela tes to Centra l GS T or S ta te G ST (w ith identifica tion

of the S ta te to w hom th e ta x is to be credited).

(iv) Since the Centra l G ST a nd Sta te G ST a re to be

treat ed separa te ly , ta xes pa id aga inst t he Centra l GS T

sha ll be allowed to be t a ken a s input t a x credit (ITC) for

the Central GST and could be utilized only against the

payment of Central GST. The same principle wil l be

a pplica ble for th e S ta te G ST. A ta xpayer or export er would

ha ve to ma inta in separ a te deta ils in books of a ccount for

ut iliza t ion or refund of credit. Fur ther, the rules for ta king

a nd utiliza tion of credit for th e Centr a l GS T a nd th e St a te

G S T w ould be a ligned.

(v) C r os s ut i liz a t i on of I TC b et w e en t h e C en t r a l

GST and the State GST would not be allowed except in

t he ca se of int er-S t a t e supply of goods a nd services und er

th e IG ST model w hich is explained la ter.

(vi) Idea lly, the problem rela ted to credit a ccumula tion

on a ccount of refund of G S T should be a voided by bot h t he

Cent re an d th e Sta tes except in t he ca ses such a s export s,



16

purcha se of ca pita l goods, input t a x a t h igher ra te th a n

out put t a x etc. wh ere, a ga in refund/a djustment should be

completed in a time bound m a nner.

(vii) To the extent feasible, uniform procedure for

collection of both Cent ra l G ST a nd S ta te G S T w ould be

prescribed in th e respective legisla tion for Cent ra l G ST

a nd Sta te GST.

(vii i) The adm inistra tion of the Centra l GS T to the

Centre a nd for S ta te G ST to the St a tes would be given.

This would imply tha t t he Centre and t he Sta tes would

ha ve concurrent jurisdiction for t he entire va lue cha in a nd

for a ll ta xpa yers on t he ba sis of th resholds for goods a nd

services prescribed for t he St a tes a nd t he Cent re.

(ix) The present th reshold prescr ibed in di fferent

State VAT Acts below which VAT is not applicable

va ries from S ta te to Sta te. A uniform S ta te G ST th reshold

a cross St a tes is desira ble an d, t herefore, it is considered

that a threshold of gross annual turnover of Rs.10 lakh

both for goods a nd services for a ll th e St a tes a nd U nion

Territories ma y be a dopted w ith a dequa te compensa tion

for t he St a tes (part icularly, the St a tes in North -E a stern

R e g i o n a n d S p e c i a l C a t e g o r y S t a t e s ) w h e r e l o w e r

threshold had prevailed in the VAT regime. Keeping in

v i e w t h e i n t e r e s t o f s m a l l t r a d e r s a n d s m a l l s c a l e

indus tr ies and to avoid dual contro l , the Sta tes a l so

considered t ha t th e thr eshold for C entra l G S T for goods



17

ma y be kept a t Rs.1.5 crore a nd t he thr eshold for Cent ra l

G S T for services ma y a lso be appropriat ely high. It ma y

be mentioned th a t even now t here is a sepa ra te th reshold

of services (Rs. 10 lakh) and goods (Rs. 1.5 crore) in the

S ervice Ta x a nd CE NVAT.

(x) The Sta tes are a l so of the v iew tha t Composit ion/

Compounding Scheme for th e purpose of G S T should ha vea n upper ceiling on gross an nua l turn over an d a floor t a x

ra te w ith respect to gross a nnua l turnover. In pa rticular ,

there would be a compounding cut-off at Rs. 50 lakh of

gross an nua l tur n over a nd a floor r a te of 0.5% a cross the

States . The scheme would also al low option for GST

r e g i s t r a t i o n f o r d e a l e r s w i t h t u r n o v e r b e l o w t h e

compounding cut-off.

(xi) The ta xpa yer w ould need to submit periodica l

return s, in common forma t a s fa r a s possible, to both th e

Central GST authority and to the concerned State GST

authorities.

(xii) Ea ch ta xpa yer would be a l lott ed a P AN-linked

ta xpayer identificat ion number w ith a tota l of 13/15 digits.

This would bring the GST PAN-linked system in line

with the prevailing PAN-based system for Income tax,

facil ita ting da ta excha nge an d t a xpa yer compliance.

(xiii) K e ep i n g i n m i n d t h e n e e d o f t a x p a y e r ’ s

convenience, functions such a s a ssessment , enforcement ,



18

scrutiny a nd a udit w ould be underta ken by t he aut hority

which is col lect ing the tax, wi th information shar ing

betw een the Centr e a nd the Sta tes.

Central and State Taxes to be subsumed under GST

3.3 The var ious Centra l , S ta t e and Loca l levies were

exam ined to ident ify th eir possibility of being subsum ed

under GST. While identifying, the following principlesw ere kept in mind:

(i) Ta x es or l ev ies t o b e s u bs u m ed s h ou ld b e

primarily in the nature of indirect taxes, either on the

supply of goods or on t he su pply of serv ices.

(i i) Ta xes or levies to be subsumed should be part of

the transact ion chain which commences wi th import/ma nufa ctur e/production of goods or provision of services

a t one end a nd the consumption of goods and services a t the

other.

(i ii) The subsuma tion should result in free f low of ta x

credit in intra a nd int er-St a te levels.

(iv) The ta xes, levies a nd fees tha t a re not specifica l ly

related to supply of goods & services should not be

subsumed under G S T.

(v) R ev en u e fa i r n es s f or b ot h t h e U n ion a n d t h e

St a tes individually w ould need t o be at tempted.



19

3. 4 O n a pp li ca t i on of t h e a b ov e pr i n ci pl es , it i s

recommended that the following Central Taxes should be,

to begin with, subsumed under the Goods and Services

Tax:

(i) C en tra l E xcise D ut y

(ii) Addit iona l Excise Du t ies

(i ii) The Excise Dut y levied under the Medicinal a ndToilet ries P repa ra t ion Act

(iv) S er vice Ta x

(v) Addit ional Customs Duty , commonly known a s

Counterva iling Dut y (CVD)

(vi) Special Additiona l Duty of Customs - 4%(SAD)

(v ii) Surcharges , and

(vii i) Cesses.

Follow ing St a te ta xes a nd levies would be, to begin w ith,

subsumed under G ST:

(i) VAT /S a les t a x

(ii) Ent er ta inment ta x (unless it i s levied by the loca l

bodies).

(iii) L uxur y t a x

(iv) Ta xes on lot t ery , bet t ing a nd gambling.

(v) S ta te Cesses and Surcharges in so fa r a s they

rela t e to supply of goods a nd services.

(v i) Entry ta x not in lieu of Octroi.



20

Purchase tax: Some of the States felt that they are

ge t t ing subs tant ia l revenue f rom Purchase Tax and ,

therefore, it should not be subsumed under GST while

majori ty of the States were of the view that no such

exemptions should be given. The di f f icul t ies of the

foodgrains producing States and cer tain other States

w ere a pprecia ted a s substa nt ial revenue is being ea rned

by th em from P urcha se Ta x a nd it w a s, therefore, felt th a tin ca se Purchase Ta x ha s to be subsumed then a dequa te

a nd cont inuing compensa t ion ha s to be provided to such

S ta t es. This issue is being discussed in consu lta t ion w ith

the G overnment of India.

Tax on items containing Alcohol: Alcohol ic

bevera ges would be kept out of t he purview of GS T. S a les

Ta x/VAT ca n be cont in ued t o be levied on a lcoholic

beverages a s per t he existing pra ctice. In ca se it h a s been

ma de Va ta ble by some St a tes, there is no objection to tha t.

E xcise Dut y, w hich is present ly being levied by t he St a tes

ma y not be a lso a ffected.

Tax on Tobacco products: Toba cco products w ould

be subjected t o GS T w ith ITC. C entre ma y be a llow ed to

levy excise dut y on toba cco products over a nd a bove G S T

w ithout ITC.

Tax on Petroleum Products: As far as petroleum

products a re concerned, it w a s decided t ha t th e basket of

petroleum products, i.e. crude, motor spirit (including



21

ATF) and HSD would be kept outside GST as is the

prevailing practice in India. Sales Tax could continue to

be levied by the S ta tes on these products w ith preva iling

floor ra t e. S imilar ly, Cent re could a lso cont inue its levies.

A final view w hether Na tur a l Ga s should be kept outside

th e GS T w ill be ta ken a fter furth er delibera tions.

Taxation of Services :As indica ted ea rlier, both th eCent re an d th e St a tes w ill ha ve concurrent pow er to levy

ta x on a ll goods an d services. In t he ca se of S ta tes, th e

principle for t a xat ion of int ra -St a te a nd inter-St a te ha s

a l ready been fo rmula ted by the Work ing Group o f

P rin cipa l Secreta ries/S ecret a ries of Fina nce/Ta xa t ion

a n d C o m m i s s i o n e r s o f T r a d e T a x e s w i t h s e n i o r

represent a tives of Depa rt ment of Revenue, G overnment

of India. For int er-St a te tra nsa ctions a n innova tive modelof In tegra ted GST wi l l be adopted by appropr ia te ly

a ligning a nd int egra ting C G ST a nd S G ST. The w orking

of th is model is elabora t ed below .

3.5 Inter-State Transactions of Goods and Services

T h e E m p o w e r e d C o m m i t t e e h a s a c c e p t e d t h e

recommendations of the Working Group of concerned

officials of Central and State Governments for adoptionof IGST model for taxation of inter-State transaction

of G oods a nd S ervices. The scope of IG S T Model is t ha t

Centre w ould levy IG ST w hich w ould be CG ST plus S G ST

on a l l in ter-Sta te t ransac t ions o f t axable goods and



22

services with appropriate provision for consignment or

st ock tr a nsfer of goods a nd services. The inter-S ta te seller

w ill pa y IG ST on va lue a ddition a fter adjusting a va ila ble

credit of IGST, CGST, and SGST on his purchases. The

Exporting S ta te w ill tra nsfer t o the Centre the credit of

SGST used in payment of IGST. The Importing dealer

w ill cla im credit of IG ST w hile discha rging his output ta x

lia bil ity in his ow n S ta te. The Cent re will tra nsfer to theimporting State the credit of IGST used in payment of

S G ST. The releva nt informa tion will a lso be submitt ed

to the Cent ra l Agency w hich w ill act a s a clea ring house

mecha nism, verify t he cla ims a nd inform t he respective

governments t o tr a nsfer the funds.

The ma jor a dva nt a ges of IG ST Model a re:

a) Maintenance of uninterrupted ITC cha in on inter-

St a te tra nsact ions .

b) No upfront pa yment of ta x or substa nt ial blockage

of funds for th e int er-S t a t e seller or buyer.

c) No refund claim in export ing Sta te , a s ITC is used

up while paying th e ta x.

d ) Self monitor ing model.e) Level of computer izat ion is limited to inter-St a te

d e a l e r s a n d C e n t r a l a n d S t a t e G o v e r n m e n t s

should be able to computerize their processes

expeditiously.



23

f) As al l inter-St a te dea lers wi ll be e-regis tered andcorrespondence with them will be by e-mail, thecomplia nce level will improve subst a nt ia lly.

g) Model ca n ta ke ‘B usiness to B usiness ’ a s wel l a s‘B usiness t o Consumer’ tra nsa ctions into a ccount .

3.6 GST Rate Structure

The E mpowered Comm itt ee ha s decided to ad opt atw o-ra te structure –a low er ra te for necessar y items an d

goods of basic import a nce a nd a sta nda rd ra te for goodsin genera l. There w ill a lso be a specia l ra t e for precious

metals and a list of exempted items. For upholding ofspecial needs of ea ch S ta te a s well a s a ba lan ced approa cht o f e d e r a l f l e x i b i l i t y , a n d a l s o f o r f a c i l i t a t i n g t h eintroduction of GST, it is being discussed whether the

exempt ed list u nd er VAT regime including G oods of Loca l

Im port a nce ma y be reta ined in t he exempted list un derS ta te G ST in the initia l yea rs. It is also being discussedwhether the Government of India may adopt, to begin

w ith, a simila r a pproa ch t ow a rds exempted l ist under t heCGST.

The St a tes a re of the view tha t for CG ST rela ting t o

goods, the G overnment of India ma y a lso ha ve a t w o-ra testr uctu re, with conformit y in t he levels of ra te under t he

SG ST. For ta xa tion of services, th ere ma y be a single ra tefor both CG ST a nd S G ST.

The exac t va lue o f the SGST and CGST ra tes ,

including th e ra te for services, will be ma de know n d uly

in course of a ppropria t e legisla tive a ctions.



24

3. 7 Zero Rating of Exports

E xport s w ould be zero-ra ted. Sim ilar benefits m a y

be given to Specia l Economic Zones (SE Zs). However, such

benefits will only be allowed to the processing zones of

th e SE Zs. No benefit t o th e sales from a n S E Z to Domestic

Ta riff Area (D TA) w ill be a llowed.

3.8 GST on Imports: The GST will be levied on

import s w ith necessa ry C onst itut iona l Amendment s. Both

CGST and SGST will be levied on import of goods and

services in t o th e coun t ry . The incidence of t a x w ill follow

th e destina tion principle a nd t he ta x revenue in ca se of

S G S T w ill a ccrue to the St a te w here the import ed goods

a nd s ervices a re consum ed. Full a nd complete set-off w ill

be available on the GST paid on import on goods and

services.

3.9 Special Industrial Area Scheme

After the introduction of GST, the tax exemptions,

remissions etc. rela ted t o indust ria l incentives should be

convert ed, if a t a ll needed, into ca sh refund schemes aft er

collection of ta x, so th a t th e G S T scheme on t he ba sis of a

continuous chain of set-offs is not disturbed. Regarding

S pecia l Indust ria l Area S chemes, it is cla rified th a t such

exempt ions , r emiss ions e tc . wou ld con t inue up to

legitima te expiry t ime both for the Centr e a nd t he St a tes.

Any new exemption, remission etc. or continuation of

ear lier exemption, remission etc. would not be a llow ed.



25

In such cases , the Centra l and the St a te G overnments

could provide reimbur sement a ft er collect ing G S T.

3.10 IT Infrastructure

After acceptance of IGST Model for Inter-State

t r a n s a c t i o n s , t h e m a j o r r e s p o n s i b i l i t i e s o f I T

infrast ructur a l requirement w ill be sha red by the Centra l

G overnment th rough the use of its own I T infra str ucture

facility. The issues of tying up the State Infrastructure

facil i t ies with the Central facil i t ies as well as further

improvement o f the S t a te s ’ own IT in f r as t ruc ture ,

including TINXS YS, is now t o be ad dressed expeditiously

a nd in a t ime bound ma nner .

3.11 Constitutional Amendments, Legislations

and Rules for administration of CGST and SGST

I t is essent ial t o have Consti tut iona l Amendments

for empow ering th e St a tes for levy of service ta x, G ST on

import s a nd consequentia l issues a s w ell a s corresponding

Centra l a nd St a te legisla tions with a ssociat ed rules an d

procedures. With t hese specific ta sks in view, a J oint

Working G roup ha s r ecently been const itut ed (S eptember

30, 2009) comprising of the officials of the Central and

St a te G overnment s to prepa re, in a t ime bound ma nner

a dra ft legisla tion for C onsti tut iona l Amendment, dra ft

legislation for CGST, a suitable Model Legislation for

SGST and rules and procedures for CGST and SGST.

Simulta neous steps ha ve also been initia ted for dra fting



26

of a legisla t ion for IG ST a nd rules an d procedures. As

a par t of this exercise , the Working Group wi l l a lso

address the issues of dispute resolution and advance

ruling.

3.12 Harmonious structure of GST and the

States’ autonomy in a Federal Framework

As a par t of th e exercise on C onst itut iona l Amendment ,

a specia l at t ention would be given, a s ment ioned ea rlier

in para 3 .2 , to the fo rmula t ion o f a mechan i sm for

upholding the need for a harmonious structure for GST

along with the concern for the States’ autonomy in a

federa l str ucture.

3.13 Dispute Resolution and Advance Ruling

As a pa rt of t he exercise on dr a fting of legisla tion,

rules a nd procedures for t he a dministr a tion of CG ST a nd

S G S T, specific provisions w ould a lso be ma de to the issues

of disput e resolution a nd a dva nce ruling.

3.14 Need for compensation during

implementation of GST

Despite the sincere attempts being made by theE mpow ered Committ ee on t he determina tion of G ST ra te

str uctur e, revenue neutra l ra tes, it is difficult t o estima te

accurate ly as to how much the States wi l l gain from

service ta xes a nd h ow much t hey w ill lose on a ccount of



27

removal of ca sca ding effect, pa yment of input t a x credit

and phasing out of CST. In view of this , i t would be

essential to provide adequately for compensation for

l o s s t h a t m i g h t e m e r g e d u r i n g t h e p r o c e s s o f

implementation of GST for the next f ive years. This

issue may be comprehens ive ly taken care o f in the

r e c o m m e n d a t i o n s o f t h e T h i r t e e n t h F i n a n c e

Commission. The payment of this compensation wil lneed to be ensured in terms of special grants to be

released to the St a tes duly in every month on t he basis

of neutrally monitored mechanism.

3.15 With th e release of this First Discussion P a per

and the Annexure on Frequently Asked Questions and

Answ ers on G ST, int era ction wit h t he represent a t ives of

industry, t ra de a nd a griculture would begin immediat ely

a t t he nat iona l level, an d then a lso simulta neously a t t he

St a te levels. Similar ly a w a reness ca mpa ign for common

consum ers would a lso be initia ted a t t he sam e tim e. As a

part of the discussion and campaign, the views of the

industry, tra de a nd a griculture as w ell as consumers ar e

being sought in a structured an d time bound ma nner.



29

Annexure

Frequently Asked Questions and Answers on GST

Question 1 : What is the justification of GST ?

Answer : There was a burden of “ tax on tax” in

t h e p r e - e x i s t i n g C e n t r a l e x c i s e d u t y o f t h e

G overnment of India a nd sa les ta x system of the Sta te

Governments . The introduction of Central VAT

(CENVAT) has removed the cascading burden of

“ t a x o n t a x ” t o a g o o d e x t e n t b y p r o v i d i n g

a mecha nism of “set off” for t a x paid on inputs a nd

services upto the st a ge of production, a nd ha s been

a n improvement over th e pre-exist ing Cen t ra l excise

dut y. S imilar ly, th e int roduct ion of VAT in th e St a t es

has removed the cascading effect by giving set-off

for t a x paid on inputs a s w ell a s ta x paid on previous

purcha ses a nd ha s a ga in been a n improvement over

th e previous sa les ta x regime.

B ut both t he CE NVAT a nd t he St a te VAT

ha ve cert a in incomplet eness. The incompleteness in

CENVAT is that i t has yet not been extended to

include chain of value addition in the distributive



30

t r ade be low the s tage o f product ion . I t has a l so

not included severa l Centr a l ta xes, such a s Additiona l

E xcise Dut ies, Additiona l Cust oms D uty , S urcha rges

etc. in t he overa ll fra mew ork of CE NVAT, a nd t hus

kept the benefits of comprehensive input tax and

service ta x set-off out of th e reach of ma nufa ctu rers/

dea lers. The int roduction of G S T w ill not only include

comprehensively more indirect Central taxes andintegrate goods and services taxes for set-off relief,

b u t a l s o c a p t u r e c e r t a i n v a l u e a d d i t i o n i n t h e

distributive tra de.

S imilar ly, in t he present St a te-level VAT

scheme, CE NVAT loa d on t he goods h a s not y et been

removed a nd t he ca sca ding effect of tha t part of ta x

burden ha s rema ined unrelieved. Moreover, there a reseveral taxes in the States, such as, Luxury Tax,

Entertainment Tax, etc. which have still not been

subsumed in the VAT. Further, there has also not

been any integration of VAT on goods with tax on

services at the S ta te level w ith r emova l of ca sca ding

effect of service ta x. In a ddition, a lthough th e burden

of C entr a l S a les Ta x (CS T) on inter-St a t e movement

of goods has been lessened with reduction of CSTra t e from 4% t o 2%, t his bu rden ha s a lso not been

fully pha sed out . With t he int roduction of GS T a t

the State level, the additional burden of CENVAT

a nd services ta x w ould be comprehensively removed,



31

a nd a cont inuous cha in of set-off from th e origina l

producer’s point a nd service provider’s point upt o t he

retailer’s level would be established which would

e l i m i n a t e t h e b u r d e n o f a l l c a s c a d i n g e f f e c t s ,

including the burden of CENVAT and service tax.

This is t he essence of G S T. Also, ma jor Cent ra l a nd

St a te ta xes w ill get subsumed into G ST w hich w ill

reduce the mult iplicity of ta xes, a nd t hus bring downthe compliance cost. With GST, the burden of CST

w ill a lso be pha sed out .

Thu s G S T is n ot s imply VAT plus service

tax, but a major improvement over the previous

syst em of VAT a nd disjoint ed services ta x – a just ified

step forw a rd.

Question 2. What is GST? How does it work ?

Answer : As a l r ea d y m en t ion ed in a ns w er t o

Question 1, G S T is a t a x on goods a nd services w ith

comprehens ive and cont inuous chain o f se t-of f

benef i t s f rom the producer ’s point and service

prov ider ’ s po in t up to the re t a i l e r ’ s l eve l . I t i s

essentia lly a ta x only on va lue a ddition a t ea ch sta ge,a nd a supplier a t ea ch st a ge is perm itt ed to set -off,

through a tax credit mechanism, the GST paid on

the purchase of goods and services as available for

set-off on t he G S T t o be pa id on t he supply of goods



32

a nd services. The fina l consum er w ill thu s bear only

the GST charged by the last dealer in the supply

cha in, w ith set -off benefits a t a ll the previous st a ges.

The illust ra tion show n below indica tes, in

terms of a hypothetica l example w ith a ma nufacturer,

one w holeseller a nd one ret a iler, how G S T w ill w ork.

Let us su ppose tha t G ST ra te i s 10%, w i th t he

ma nufa ctu rer ma king value add ition of Rs.30 on his

purcha ses worth Rs.100 of input of goods a nd services

used in the ma nufa ctu ring process. The ma nufa ctu rer

w ill t hen pa y n et G ST of Rs. 3 a fter sett ing-off Rs. 10

a s G S T pa id on his input s (i.e. In put Ta x Cr edit) from

gross G ST of Rs. 13. The ma nufa cturer sells t he goods

to the wholeseller. When the wholeseller sells thesa me goods a fter ma king va lue a ddition of (sa y), Rs.

20, he pa ys n et G S T of only Rs. 2, a fter s ett ing-off of

Input Tax Credit of Rs. 13 from the gross GST of

Rs. 15 to the ma nufa cturer. Simila rly, when a reta iler

sells the same goods after a value addition of (say)

Rs. 10, he pa ys n et G S T of only Re.1, a fter s ett ing-off

Rs.15 from h is gross G ST of Rs. 16 pa id to w holeseller.

Thus, the manufacturer, wholeseller and retai lerha ve to pay only Rs. 6 (= Rs. 3+ Rs. 2+ Re. 1) a s G ST

on the value addition along the entire value chain

from the producer to th e reta iler, a fter sett ing-off GS T

paid a t t he ea rlier st a ges. The overa ll burden of G S T



33

on t he goods is t hus much less. This is shown in t he

table below. The same illustration will hold in the

cas e of fina l service provider a s w ell.

Table

Stage of Purchase Value Value Rate GST Input Net

supply value of addition at of on Tax GST=

chain Input which GST output credit GST onsupply output

of goods – Input

and tax

services creditmade to

next stage

Ma nufa ct urer 100 30 130 10% 13 10 13–10 = 3

Whole seller 130 20 150 10% 15 13 15–13 = 2

Reta iler 150 10 160 10% 16 15 16–15 = 1

Question 3 : How can the burden of tax, ingeneral, fall under GST ?

Answer : As a l r ea d y m en t ion ed in An s w er t o

Quest ion 1, the present forms of CENVAT and

State VAT have remained incomplete in removing

fully the ca sca ding burden of ta xes a lrea dy pa id at

ear l i e r s t ages . Bes ides , the re a re severa l o the r

ta xes , which both the Centra l G overnment a nd th eSt a te G overnment levy on production, ma nufa cture

a nd distr ibutive t ra de, w here no set-off is a va ilable

in th e form of input ta x credit. These t a xes a dd to

the cost of goods and services through “tax on tax”



34

w hich th e f ina l consumer ha s to bea r. Since, with

th e introduction of G S T, a ll the ca sca ding effects of

CE NVAT a nd service ta x w ould be removed w ith a

cont inuous cha in of set -off from t he producer’s point

to the reta i ler ’s point, oth er ma jor Cent ra l an d St a te

ta xes w ould be subsumed in G S T a nd C ST w ill a lso

be pha sed out , th e fina l net burden of ta x on goods,

under G ST w ould, in genera l, fa ll . S ince there w ouldbe a transparent and complete chain of set-of fs ,

th is will help widening t he covera ge of ta x ba se a nd

improve tax compliance. This may lead to higher

genera tion of revenues w hich ma y in tur n lea d to the

possibility of low ering of a vera ge ta x burden.

Question 4 : How will GST benefit industry, trade

and agriculture ?

Answer : As m en tion ed in An sw er t o Quest ion 3,

th e GS T w ill give more relief to indust ry, t ra de an d

agr icu l ture through a more comprehens ive and

wider coverage of input tax set-off and service tax

se t-of f , subsuming of severa l Centra l and Sta te

taxes in the GST and phas ing out o f CST. The

tr a nspa rent a nd complete cha in of set-offs wh ich w illr e s u l t i n w i d e n i n g o f t a x b a s e a n d b e t t e r t a x

complia nce ma y a lso lea d t o low ering of ta x burden

o n a n a v e r a g e d e a l e r i n i n d u s t r y , t r a d e a n d

agriculture.



35

Question 5 : How will GST benefit the exporters?

Answer : Th e subsum in g of m a jor C en t ra l a n d

S ta te ta xes in G S T, complete an d comprehensive set -

off of input goods a nd services a nd pha sing out of

Central Sales Tax (CST) would reduce the cost of

locally manufactured goods and services. This will

increase the competitiveness of Indian goods andservices in the international market and give boost

to India n exports. The uniformity in ta x ra tes a nd

procedures across t he count ry w ill a lso go a long w a y

in reducing t he complia nce cost.

Question 6 : How will GST benefit the small

entrepreneurs and small traders?

Answer : Th e pr es en t t h res h old pr es cr ibed in

different State VAT Acts below which VAT is not

applicable varies from State to State. The existing

threshold of goods under State VAT is Rs. 5 lakhs

for a ma jority of bigger St a tes a nd a low er threshold

f o r N o r t h E a s t e r n S t a t e s a n d S p e c i a l C a t e g o r y

St a tes. A uniform S ta te G ST thr eshold a cross St a tes

i s d e s i r a b l e a n d , t h e r e f o r e , t h e E m p o w e r e d

Committee has recommended that a threshold of

gross a nnu a l tur nover of Rs. 10 la kh both for goods

a nd services for a ll th e St a tes a nd U nion Territories

ma y be adopted w ith a dequa te compensa tion for t he

States (par t icular ly , the States in North-Eastern



37

Question 8 : What are the salient features of the

proposed GST model?

Answer : Th e sa lien t fea t u res of t h e pr oposed m odel

a re as follow s:

(i) C on sis t en t w it h t h e fed er a l s t ru ct u re of t h e

country, the GST will have two components:

one levied by t he Cent re (hereina fter referred

to a s Centr a l GS T), an d th e oth er levied by t he

St a tes (hereina fter referred t o as St a te G ST).

This dual GST model would be implemented

th rough multiple sta tut es (one for CG ST a nd

SGST statute for every State) . However, the

basic features of law such as chargeabil i ty ,definition of ta xa ble event a nd t a xa ble person,

mea sure of levy including va lua t ion provisions,

basis of classification etc. would be uniform

a cross these sta tut es a s far a s pra ctica ble.

(ii) Th e C en t r a l G S T a n d t h e S t a t e G S T w ou ld

be a pplica ble to a ll tra nsa ctions of goods a ndserv i ces excep t the exempted goods and

services, goods wh ich a re out side th e purv iew

of G ST a nd t he tra nsa ctions w hich a re below

th e prescribed t hreshold limit s.



38

(iii) The Centra l G ST a nd Sta te G ST are to be paid

to the accounts of the Centre and the States

separately.

(iv ) S in ce t h e C en t r a l G S T a n d S t a t e G S T a r e t o

be treated separately, in general , taxes paid

a ga inst th e Cent ra l GS T sha ll be a l low ed to be

ta ken a s input t a x credit (ITC) for t he Centr a lGST and could be uti l ized only against the

pay ment of Cent ra l G ST. The sam e principle

w ill be a pplica ble for t he St a te G S T.

(v) Cross u t ilisa t ion of ITC betw een the Centra l

G ST a nd t he St a te G ST w ould, in general , not

be a llow ed.

(vi) To the extent fea sible, uniform procedure for

collection of both Centra l G ST a nd S ta te G ST

w o u l d b e p r e s c r i b e d i n t h e r e s p e c t i v e

legislat ion for Cent ra l GS T a nd S ta te G ST.

(vii) The a dministra t ion of the Centra l G ST would

be w i th the Centre a nd for St a te G ST with t he

S ta te s .

(viii) The ta xpa yer would need t o submit periodica l

returns to both t he Centr a l GS T a uthority a nd

to the concerned St a te G S T a ut horities.



39

(ix) E a ch t a x pa y e r w ou ld be a l lot t e d a P AN -

linked taxpayer identif ication number with

a t ota l of 13/15 digits . This w ould bring t he

GST PAN-l inked sys tem in l ine w i th the

preva iling P AN-ba sed system for In come t a x

f a c i l i t a t i n g d a t a e x c h a n g e a n d t a x p a y e r

complia nce. The exa ct design w ould be w orked

ou t in consu l t a t i on w i th the Income-TaxDepartment .

(x) K eepin g in m in d t h e n eed of t a x pa y e rs

convenience, functions such as assessment,

enforcement , scru t iny and audi t would be

underta ken by t he a uth ority w hich is collecting

the ta x, w ith informa tion sha ring betw een the

Centre a nd the St a tes .

Question 9 : Why is Dual GST required ?

Answer : India is a federa l count ry w here bot h t he

Centr e a nd th e St a tes ha ve been assigned th e pow ers

t o l e v y a n d c o l l e c t t a x e s t h r o u g h a p p r o p r i a t e

leg is la t ion . Both the leve ls o f Government have

dis t inct responsibi l i t ies to perform according tot he division of pow ers prescribed in th e Const itu t ion

for w hich t hey need to ra ise resources. A dua l G S T

w ill, therefore, be in keeping w ith th e Constitut iona l

requirement of fisca l federa lism.



40

Question 10 : How would a particular transaction

of goods and services be taxed

simultaneously under Central GST

(CGST) and State GST (SGST)?

Answer : Th e C en t r a l G S T a nd t h e S t a t e G S T

w ould be levied simulta neously on every t ra nsa ction

of supply of goods a nd services except t he exemptedgoods and services , goods which are outs ide the

purview of G ST a nd t he tra nsa ctions w hich a re below

th e prescribed t hreshold limits. Fur t her, both w ould

be levied on t he sa me price or va lue unlike S ta t e VAT

w hich is levied on t he va lue of th e goods inclusive of

CE NVAT. While th e locat ion of t he supplier a nd t he

recipient within the country is immaterial for the

purpose of CGST, SGST would be chargeable onlyw hen t he supplier a nd t he recipient a re both loca ted

wi thin the Sta te .

Illustration I : Suppose hypoth etica lly tha t th e ra te

of CG S T is 10% a nd t ha t of SG S T is 10%. When a

wholesale dealer of steel in Uttar Pradesh supplies

steel ba rs a nd rods to a const ruction compa ny w hich

is also located within the same State for , say Rs.100, the dealer would charge CGST of Rs. 10 and

S G S T of Rs. 10 in a ddition t o the ba sic price of th e

goods. He would be required to deposit the CGST

component int o a Cent ra l Governm ent a ccount w hile



41

th e SG S T port ion into t he a ccount of t he concerned

St a te G overnment. Of course, he need not a ctua lly

pay Rs. 20 (Rs. 10 + Rs. 10 ) in cash a s he w ould be

entit led t o set-off this liabilit y a ga inst t he CG S T or

SGST paid on his purchases (say, inputs). But for

paying CGST he would be allowed to use only the

credit of CG S T paid on his purcha ses wh ile for S G S T

he can uti l ize the credit of SGST alone. In otherw ords, C G S T credit ca nn ot, in genera l, be used for

pay ment of SG S T. Nor ca n S G S T credit be used for

paym ent of CG ST.

Illustration II: S uppose, a ga in hypothetica lly, th a t

t he ra t e of CG S T is 10% a nd t ha t of SG S T is 10%.

When an advertising company located in Mumbai

s u p p l i e s a d v e r t i s i n g s e r v i c e s t o a c o m p a n yma nufa cturing soa p also loca ted wit hin the St a te of

Ma ha ra shtr a for , let us say Rs. 100, the ad compa ny

would charge CGST of Rs. 10 as well as SGST of

Rs. 10 t o t he ba sic va lue of th e service. H e would be

required to deposi t the CGST component into a

Centr a l G overnment a ccount w hile the S G ST port ion

into the a ccount of the concerned S ta te G overnment .

Of course, he need not a ga in a ctua lly pa y Rs. 20 (Rs.10+ Rs. 10) in cash a s it w ould be ent itled to set-off

th is liabil ity a ga inst t he CG ST or S G ST paid on his

purchase (say, of inputs such as stationery, office

equipment , services of a n a rt ist etc). B ut for pa ying



42

CG S T he would be a llow ed to use only th e credit of

CG ST pa id on its purcha se w hile for SG S T he ca n

utilise the credit of SG ST a lone. In other w ords, CG ST

credit cannot, in general , be used for payment of

S G S T. Nor can S G S T credit be used for pa yment of

CGST.

Question 11 : Which Central and State taxes areproposed to be subsumed under GST ?

Answer : Th e va r ious Cen t ra l, S ta t e a nd Loca l

levies were examined to identify their possibility of

being subsumed under G ST. While ident ifying, the

follow ing principles w ere kept in min d:

(i) Ta x es or lev ies t o b e s ub su m ed sh ou ld beprima rily in t he na tur e of indirect ta xes, eith er

on the supply of goods or on the supply of

services.

(i i) Ta xes or levies to be subsumed should be par t

of the tr a nsa ction cha in wh ich comm ences with

import/manufacture/production of goods or

prov i s ion o f se rv i ces a t one end and theconsum ption of goods a nd services a t th e oth er.

(i ii ) The subsuma tion should result in f ree flow of

ta x credit in int ra a nd inter-St a te levels.



43

(iv) Th e t a x es , l ev ies a n d f ees t h a t a r e n ot

specifica lly relat ed t o supply of goods & services

should n ot be subsumed under G ST.

(v) R ev en ue fa i rn es s for bot h t h e U n ion a n d t h e

St a tes individually w ould need to be at tempted.

O n a p p l i c a t i o n o f t h e a b o v e p r i n c i p l e s , t h eEm pow ered Committ ee ha s recommended tha t t he

following Central Taxes should be, to begin with,

subsumed under t he G oods a nd S ervices Ta x:

(i) Cent ra l E xcise D ut y

(ii) Ad dit ion a l E xcis e D u t ies

(i ii ) The Excise Duty levied under the Medicinal

a nd Toiletr ies P repar a tion Act

(iv) S ervice Ta x

(v) Addit ional Customs Duty , commonly known as

Countervail ing D uty (CVD)

(vi) Special Additiona l Duty of Customs - 4%(SAD)

(vii) S ur ch a r ges, a n d

(viii) Cesses .



44

The fol low ing S ta te t a xes a nd levies w ould be , to

begin w ith, subsum ed under GS T:

(i) VAT /S a les t a x

(ii) Enter t a inment t ax (un less it i s lev ied by the

loca l bodies).

(iii) Luxury t a x

(iv) Taxes on lot tery, bet t ing a nd ga mbling .

(v) S t a t e C es ses a n d S ur ch a r ges in so fa r a s t hey

rela t e to supply of goods a nd s ervices.

(v i) Ent ry t ax not in lieu of Oct roi.

Purchase tax: Some of the Sta tes fel t tha t t hey are

gett ing substa nt ial revenue from P urcha se Ta x a nd,

th erefore, it should not be subsumed under G ST w hile

ma jority of the St a tes w ere of the view th a t n o such

exemptions should be given. The difficulties of the

foodgra in p roduc ing S t a te s was apprec i a ted as

substantial revenue is being earned by them from

P urcha se Ta x an d i t w a s, therefore, fel t th a t in case

P urcha se Ta x ha s to be subsumed th en a dequa te a nd

cont inuing compensa t ion ha s to be provided t o such

S t a t es. This issue is being discussed in consult a t ion

w ith th e G overnment of India .



45

Tax on items containing Alcohol: Alcoholic

bevera ges w ould be kept out of the purview of G S T.

S a les Ta x /VAT could be cont inued t o be levied on

alcoholic beverages as per the existing practice. In

ca se i t ha s been ma de Va ta ble by some St a tes, there

is no object ion t o tha t . Excise Dut y, w hich is presently

levied by t he St a tes ma y n ot a lso be affected.

Tax on Tobacco products: Tobacco products

w ould be subjected t o G S T w ith ITC. C entr e ma y be

a llow ed to levy excise dut y on t obacco product s over

a nd a bove GS T w ith I TC.

Tax on Petroleum Products:As fa r a s pet roleum

products a re concerned, it w a s decided t ha t th e basket

of pe tro leum products , i .e . c rude , motor sp i r i t(including ATF) an d H S D w ould be kept outside G S T

a s is th e preva iling pra ctice in In dia . S a les Ta x could

cont inue to be levied by t he S ta tes on th ese products

w ith preva iling floor ra te. Simila rly, Cent re could a lso

cont inue its levies. A final view w hether Na tur a l G a s

should be kept out side the G S T w ill be ta ken a fter

furt her delibera tions.

Taxation of Services : As indicated earlier, both

th e Cent re an d th e Sta tes w ill ha ve concurrent pow er

to levy t a x on goods a nd services. In th e ca se of St a tes,

the principle for taxation of intra-State and inter-



46

St a te ha s a lrea dy been formula ted by the Working

G r o u p o f P r i n c i p a l S e cr e t a r i e s /S e cr e t a r i e s of

Fina nce /Ta xa t ion a nd C ommiss ioners o f Tra de

Ta xes w ith senior represent a t ives of Depa rt ment of

Revenue , Government o f Ind i a . For in te r -S ta te

tra nsa ctions a n innova tive model of Integra ted GS T

w i l l b e a d o p t e d b y a p p r o p r i a t e l y a l i g n i n g a n d

integrat ing CG ST a nd IG ST.

Question 12 : What is the rate structure proposed

under GST ?

Answer : Th e E mpow ered C om mit t ee ha s decided

to adop t a two-ra te s t ruc ture –a lower r a te fo r

necessa ry i t ems a nd i t ems of basic importa nce a nd a

sta nda rd ra te for goods in genera l. There will also be

a spec i a l r a te fo r p rec ious me ta l s and a l i s t o f

exempted items. For upholding of special needs of

each Sta te as w ell as a ba lan ced a pproa ch to federal

flexibility, it is being discussed wh ether th e exempted

list under VAT regime including Goods of Local

Importance may be retained in the exempted l ist

under St a te G ST in the initia l yea rs. I t is a lso being

discussed whether the Government of India may

adopt , to begin wi th, a s imilar approach towards

exempted list u nder t he CG S T.

For CG ST rela ting to goods, th e St a tes

considered tha t t he Government of India might a lso



47

have a two-rate structure, with conformity in the

l e v e l s o f r a t e w i t h t h e S G S T . F o r t a x a t i o n o f

services, th ere ma y be a single ra te for both CG ST

a nd SG ST.

The exact va lue of the S G ST a nd C G ST

rates, including the rate for services, will be made

known duly in course o f appropr ia te leg is la t iveactions.

Question 13: What is the concept of providing

threshold exemption for GST?

Answer : Th reshold exem pt ion is built int o a t a x

regime to keep sma ll tra ders out of ta x net. This ha s

t hr ee-fold object ives:

a ) I t is difficult t o a d min ist er sm a ll t r a der s a n d

cost of administering of such traders is very

high in compar ison t o the ta x pa id by them.

b) Th e com plia n ce cos t a n d com plia n ce effor t

w ould be sa ved for such sma ll t ra ders.

c) S m a ll t r a der s get rela t ive a d va n t a ge over la r ge

ent erprises on a ccount of low er ta x incidence.

The present th resholds prescribed in different St a t e

VAT Acts below w hich VAT is not a pplica ble va ries



48

from St a te to St a te. A uniform St a te GS T th reshold

a cross St a tes is desirable and, t herefore, a s a lrea dy

mentioned in Answer to Question 6, i t has been

considered th a t a th reshold of gross a nnu a l turnover

of Rs. 10 la kh both for goods a nd serv ices for a ll the

St a tes a nd U nion Territories might be adopted w ith

a dequa te compensa tion for t he St a tes (part icularly,

the Sta tes in Nor th-Eas tern Region and Specia lCa tegory S ta tes) w here low er threshold ha d preva iled

in the VAT regime. Keeping in view the interest of

sma ll tra ders a nd sma ll sca le industries a nd t o a void

dual control , the States also considered that the

threshold for Central GST for goods may be kept

Rs.1.5 Crore and the threshold for services should

a lso be a ppropria tely high.

Question 14 : What is the scope of composition and

compounding scheme under GST?

Answer : As a l r ea dy m en t ion ed in An s w er t o

Quest ion 6, a C omposit ion/Compounding S cheme will

b e a n i m p o r t a n t f e a t u r e o f G S T t o p r o t e c t t h e

interests of sma ll tra ders an d sma ll sca le industries.

The C omposi t ion /C ompound ing schem e for t hepurpose of G S T should ha ve a n upper ceiling on gr oss

a nnua l turn over a nd a f loor ta x rat e w ith respect t o

gross a nnua l turnover. In pa rticular th ere w ill be a

compounding cut-off at Rs. 50 lakhs of the gross



49

a nnua l tur nover a nd t he floor r a te of 0.5% a cross the

States . The scheme would al low option for GST

regis trat ion for dealers wi th turnover below the

compoun ding cut -off.

Question 15 : How will imports be taxed under GST ?

Answer : Wit h C on st it ut ion a l Am endm en ts, bot hCGST and SGST will be levied on import of goods

and services into the country. The incidence of tax

wil l fol low the dest inat ion principle and the tax

revenue in case of SGST will accrue to the State

w here th e import ed goods a nd services a re consum ed.

Full a nd complet e set -off will be a va ilable on t he G S T

pa id on import on goods a nd services.

Question 16 : Will cross utilization of credits

between goods and services be

allowed under GST regime?

Answer : C ros s u t il i z a t ion of cr ed i t o f C G S T

be tween goods and se rv i ces wou ld be a l lowed .

S imilar ly, th e fa cility of cross utilizat ion of credit w ill

be available in case of SGST. However, the crossutilization of CGST and SGST would generally not

be allowed except in t he cas e of int er-S t a t e supply of

goods a nd services under t he IG S T model w hich is

expla ined in a nsw er to th e next question.



50

Question 17 : How will be Inter-State Transactions

of Goods and Services be taxed under

GST in terms of IGST method ?

Answer : The E mpow ered C om mit tee ha s a ccept ed

t he recommend a t ion for a dopt ion of IG S T model for

taxat ion of in ter-Sta te t ransac t ion of Goods and

Services. The scope of IGST Model is that Centrewould levy IGST which would be CGST plus SGST

on a ll inter-St a te tr a nsa ctions of ta xable goods a nd

services. The int er-S t a t e seller w ill pa y IG S T on

value addi t ion af ter adjust ing avai lable credi t of

IGST, CGST, and SGST on his purchases . The

E xport ing St a te will tr a nsfer to the Centre the credit

of SGST used in payment of IGST. The Importing

dealer will claim credit of IGST while discharginghis output t a x liabili ty in his ow n S ta te. The Cent re

w ill tra nsfer t o th e importing S ta te the credit of IGS T

used in pay ment of SG S T. The releva nt informa tion

is also submitted to the Central Agency which will

a ct a s a clea ring house mecha nism, verify t he claims

and inform the respective governments to transfer

th e funds.

The ma jor a dva nt a ges of IG S T Model a re:

a ) M a i n t en a n ce of un in t e rr u pt e d I TC ch a i n on

inter-State transactions.



51

b) N o u pfr on t pa y m en t of t a x or s ub st a n t ia l

blockage of fund s for th e int er-S t a t e seller or

buyer.

c) No refund cla im in expor t ing Sta te , a s ITC is

used up w hile paying the ta x.

d) S elf m on it or in g m od el.

e) Level of computerisa tion is limited to inter-St a te

dea le r s and Cent r a l and S t a te Governments

should be able to computerise their processes

expeditiously.

f) As a ll inter-Sta te dealers wi ll be e-regis tered a nd

c o r r e s p o n d e n c e w i t h t h e m w i l l b e b y

e-mai l , the compl i ance l eve l w i l l improve

substant ial ly .

g) Model ca n ta ke ‘B us iness to B us iness’ a s well as

‘ B u s i n e s s t o C o n s u m e r ’ t r a n s a c t i o n s i n t o

account.

Question 18 : Why does introduction of GST require

a Constitutional Amendment?

Answer : T h e C o n s t i t u t i o n p r o v i d e s f o r

delinea tion of pow er t o ta x betw een t he Centre a nd

St a tes. While the Cent re is empow ered t o ta x services



52

a nd goods upto the production st a ge, th e St a tes ha ve

th e pow er to ta x sa le of goods. The St a tes do not ha ve

th e pow ers to levy a ta x on supply of services wh ile

the Centre does not have power to levy tax on the

sale of goods. Thus, the Constitution does not vest

e x p r e s s p o w e r e i t h e r i n t h e C e n t r a l o r S t a t e

G overnment to levy a ta x on t he ‘supply of goods a nd

services’. Moreover, the Constitution also does notempower the S t a te s to impose t ax on impor t s .

Therefore , i t i s essential to have Const i tut ional

Amendm ents for empow ering the Cent re to levy ta x

on sa le of goods a nd S ta tes for levy of service ta x a nd

ta x on import s a nd other consequent ia l issues.

As pa rt of th e exercise on C onst itut iona l

Amendment, there would be a special attention to

the formulation of a mechanism for upholding the

need for a ha rmonious str ucture for G S T a long w ith

the concern for the powers of the Centre and the

St a tes in a federal structure.

Question 19: How are the legislative steps being

taken for CGST and SGST ?

Answer : A J oint Working G roup ha s recent ly been

constituted (September 30, 2009) comprising of the

officials of the Central and State Governments to

prepa re, in a t ime-bound ma nn er a dra ft legislat ion

for Constit ut iona l Amendm ent.



Question 20: How will the rules for administration

of CGST and SGST be framed?

Answer : The J oint Working G roup, a s m entioned

a bove, ha s a lso been ent rust ed t he ta sk of prepar ing

d r a f t l e g i s l a t i o n f o r C G S T , a s u i t a b l e M o d e l

Legislation for SGST and rules and procedures for

CG ST a nd S G S T. Simulta neous steps ha ve a lso beeninitiat ed for dr a fting of legislat ion for IG ST a nd r ules

and procedures . As a par t o f th is exerc ise , the

Working Group will also address to the issues of

dispute resolution a nd a dva nce ruling.

empowered committee of fm 091109 gst first draft

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