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Many other countries are having single unified system of GST, but due to non consensus between the Central and State Government in India, India shall adopt a dual GST Model. The proposed GST shall be dual GST, i.e., CGST and SGST, where Centre and States will simultaneously levy GST across the value chain. On the one end, Centre would levy and collect Central Goods and Services Tax (CGST) and States would levy and collect the State Goods and Services Tax (SGST) on the transactions within the State. The input tax credit of CGST would be available for discharging the CGST output liability at each stage. Similarly, the credit of SGST paid on inputs would be available for discharging the output liability. Though, at present, no cross utilization of credit would be permitted.

Inter-State Transactions and the IGST Mechanism

The Central Government would levy and collect the Integrated Goods and Service Tax (IGST) on every inter-State transaction means every supply of goods or service from one State to the other shall be the scope of the IGST, where in the input tax credit would be available from one State to another. In this case, the Seller would pay the IGST to Central Government on the sale of his goods or services. The importing dealer will claim credit of IGST while discharging his output tax liability in his own State.

When a dealer sale of his goods or services to another state, he shall pay the tax after adjusting IGST, CGST and SGST on his purchases in that order. The State shall transfer to the Centre the whole of tax implemented on all inter-State transactions, which includes credit adjustment, if any, of SGST. The Centre will transfer to the importing State the credit adjustment used in payment of SGST. Hence, the tax shall be collected by both Centre and the States.

GST shall subsumed the following Taxes

Central Taxes State Taxes
  • Central Excise Duty [including additional excise duties, excise duty under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955]
  • Service tax
  • Additional Customs Duty (CVD)
  • Special Additional Duty of Customs (SAD)
  • Central Sales Tax
  • Surcharges and cesses (relating to supply of goods and services)
·         Value Added Tax/Sales Tax

·         Central Sales Tax

·         Octroi and Entry Tax

·         Purchase Tax

·         Luxury Tax

·         Taxes on lottery, betting & gambling

·         Entertainment tax (other than the tax levied by the local bodies)

·         State cesses and surcharges (relating to supply of goods and services),



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