GST on Intra-State Supply (CGST and SGST)**

In the case of intra-state supply of goods or services (i.e., within the same state), both the Central Goods and Services Tax (CGST) and the State Goods and Services Tax (SGST) are levied concurrently.

• CGST: Collected by the Central Government.
• SGST: Collected by the State Government where the supply occurs.
• The tax rate is equally split between CGST and SGST.

GST on Inter-State Supply (IGST)**

For inter-state supply of goods or services (i.e., between different states), Integrated Goods and Services Tax (IGST) is levied.

• IGST: Collected by the Central Government.
• It is later apportioned between the Centre and the consuming State as per the recommendations of the GST Council.

GST on Imports

Imports of goods and services are treated as inter-state supplies and attract IGST along with applicable customs duties under the Customs Act.

• IGST is levied on the value of the imported goods/services.
• Basic Customs Duty (BCD) is also applicable.

Composition Levy (Section 10)

Under the Composition Scheme, small taxpayers can pay GST at a fixed rate of turnover without availing input tax credit (ITC).

• Applicable to businesses with aggregate turnover up to ₹1.5 crore (₹75 lakh in special category states).
• Rates:
  • 1% for traders
  • 2% for manufacturers
  • 5% for restaurants (not serving alcohol)
• Not applicable to service providers (except restaurant services) and inter-state suppliers.

Exempted Goods and Services

Certain goods and services are exempt from GST either by way of notification or under Schedule I of the CGST Act.

• Examples of exempted goods: Fresh fruits and vegetables, milk, salt, etc.
• Examples of exempted services: Educational services, healthcare services, certain public transportation.
• Suppliers of exempt goods/services cannot claim input tax credit.

Meaning and Importance of ITC

Mechanism to avoid cascading effect of taxes

Input Tax Credit (ITC) is the credit that a registered person can claim for the tax paid on purchases (inputs), which can be set off against the output tax liability.

• ITC prevents the cascading effect of taxation, i.e., tax on tax.
• Only registered taxpayers can avail ITC.

Eligibility and Conditions for ITC (Section 16)

Possession of tax invoice, receipt of goods/services, tax paid by supplier

A registered person is eligible to claim ITC only if the following conditions are satisfied:

• Possession of a valid tax invoice or debit note.
• Receipt of goods or services.
• Tax charged has been paid to the government by the supplier.
• Return (GSTR-3B) has been furnished.
• ITC must be claimed within the time limit specified (earlier of due date of September return or filing of annual return).

Non-Eligibility for ITC (Section 17)

Blocked credits

ITC is not available for certain items even if all conditions are met. These are called "blocked credits".

• Motor vehicles (except for transport, training, and passenger services).
• Goods/services used for personal consumption.
• Goods lost, stolen, destroyed, or given as free samples.
• Membership of clubs, health and fitness centers.
• Works contract services for construction of immovable property.

ITC in Special Cases (e.g., Job Work, Capital Goods)**

• Job Work: Principal can avail ITC on inputs sent to job worker and even when directly sent to job worker’s premises.
• Capital Goods: ITC is available on capital goods used in the course or furtherance of business.
• Input Services: ITC can be claimed on input services used for business purposes, subject to eligibility.

Reversal of ITC may be required in case goods are not received back from job worker within prescribed time (1 year for inputs, 3 years for capital goods).