GST Consumption Based Tax

GST – Consumption Based Tax

Author: Rupa Paul, Amity University, Kolkata.


Tax goods and services (GST), the category tax applied to the various categories of goods and services are recognized as one of the most significant changes in indirect tax in India. GST is said to be a tax based on location or usage. Therefore, the location of use will determine the State that will collect the tax. Basically, taxes can be based on the origin or the source. Real estate tax or production tax is levied on the production of goods or services. Local taxes or usage taxes are levied on where goods and services are confiscated. In the area of ​​tax-based taxation, estimates are allowed for non-existent tax rates, and the estimates are taxed in accordance with domestic production. Therefore, in terms of existing tax law, the collected SGST will generally increase in the State where the consumer of goods or services sold resides and not in the State where the goods are manufactured.


 If we can take goods or services like a horse, GST is a horse rider. Wherever the horse goes, the rider goes with it. GST is called a tax levy because it was paid by the province where goods or services are actually consumed.

There is a good reason behind GST that it is a tax applied. Under current circumstances, taxes are payable in the event that goods are produced. E.g. if goods are sold from Gujarat to Rajasthan, taxes will be paid to the Gujarat government. This is a tax based on origin. Under this system, a working country does not receive tax revenue for that country. This problem is being solved under the proposed GST regime.

As GST taxes are used for spending money, tax money will be deducted from the federal government, and this helps the consuming state to protect their tax base.

Similar actions were taken by the central government under the Income-tax Act, 1961, to save the tax base by amending section 9 several times. The following are some of the issues:

1. Local-based taxation is a liability for underdeveloped Americans who spend more on productivity. The country will continue to be built as an incentive for improved income.

2. The country currently offers various incentives such as Subsidy, Duty Deferment, No-task mode for setting up new units in the background. As the use-based regime becomes operational, American states are more likely to promote such programs and this could affect global growth.

3. Lack of nexus between economic development and related income could cripple developed countries like Maharashtra or Gujarat to participate in GST

4. Commercial countries may try to restrict intellectual property sales to avoid cash flows. This could hamper India’s trade development and India’s overall growth.

5. Under a state-based consumer tax rate it will be used in sales, this could affect retailers as they will have to keep track of tax rates throughout India. Things can get even worse in terms of Sales-in-transit, where the usage situation changes between transit.

6. In the case of intangible services, it is difficult to determine where the service is being used, a tax based on usage can lead to permanent bankruptcy.

Taxes based on destination-based taxation, the producing / selling country receives nothing while the occupying countries receive a full share of the military war between territories in the area of ​​use and tax.


GST or goods or service tax is a destination tax because the goods and services are consumed. In GST, exports are allowed at zero tax and exports are taxed in accordance with domestic production. GST is a tax based on location and charged in one place during the use of goods or services by a major consumer. GST will be charged for all goods and services other than goods outside of the GST ѕсоре, goods and services released and the limit below the limit. GST is said to be a tax based on location or usage. Therefore, the location of use will determine the State that will collect the tax. Tax-based tax based on destination, the producing / exporting country earns nothing while the developing countries receive the full share of the revenue. The disadvantages of taxation on the way to a developing economy with the complexities of economic diversity like ours can be devastating.


Understanding the conflict also includes knowing whether an item is released or not under GST. Due to the wide range of tax purchases extended under GST, GST Exemptions are clearly defined. Not only by knowing the Exemption list, but also understanding what it means to be exempted from an item is important as certain conditions are attached to it such as postponing the ITC.

Also, what the Nil could not measure today can be called a higher tax rate in the future. Therefore, clearly distinguishing different names such as Nil Rated, Exempt, Zero-rated, and Non-GST shipping under GST is important. Items that are exempted from GST are live fish, fresh fish, bird’s eggs in the shell, fresh milk, fresh ginger, garlic, grapes, melon, unroasted coffee beans, unprocessed green tea leaves, etc. Corn, rice, wheat, maize, soybean, hulled cereal grains, etc.

Negative list under GST

  • Services by employee to employer in the course/ relation to employment
  • Services of funeral, burial, crematorium or mortuary
  • Sale of land
  • Sale of completed buildings
  • Actionable claims (other than lottery, betting and gambling)
  • Services by any court or Tribunal
  • Functions performed by the MPs, MLAs etc.
  • Duties performed by any person who holds any post in pursuance of the provisions of the Constitution in that capacity.


GST operates in the provision of goods / services for consideration. However, in some cases even if the business disposes of free goods, they are requested to remove GST from such goods. In this article, we have tried to explore the different types of free offers to potential customers / consumers and have analysed GST results in the same way including tax treatment payable on the purchase of such free products. Experimental activities included in (1) Samples and (2) Buy one that finds two types. Samples refer to a product given to consumers to try before purchase. This method is often used as a direct marketing strategy by FCCG companies to market new products. E.g. Newly launched cookies are provided by movie owners. This is made available to customers free and without obligation to the customer to purchase products.

Samples can be grouped into two categories

Type 1 – Marked as samples. E.g. Pharmaceutical Companies mark certain products such as Medical Samples NO FOR SALE

Type 2 – Standard products with MRP and without declaration that the products are not for sale but for samples

In both cases, the supplier is required to repay the loan due to certain credit limitations on products issued as free samples. However, the type of wrt 2, because this is not counted as samples but is a business asset where the debt was incurred at the time of purchase, it is possible that these types of Type 2 are treated as a Provider under Schedule I and therefore should be paid to GST (instead of debt repayment) . GST will have to be paid according to the sales price of “the same product”.

Free purchase – Such provision can be measured in two categories

Type A – Provided when the consumer receives units of the product at no cost in purchasing certain units of the same product. E.g. Buy 1 Get 2, 1 + 1 Scheme, Buy 4 for 3 prices.

Type B – Excess Missing is referred to in the package as a free offer.

It may be worth noting that in the above example of 3 + 1, no buyer can request 1 product without purchasing another 3 products. Therefore, 3 + 1 or that 1 + 1 process or additional value provided free of charge will only tax you for one price charged by the buyer.


It is encouraging that when the GST was introduced in New Zealand in 1987, there was an effect at a higher return of 45% than expected, mainly due to improved compliance following. VAT has real progress has been made in many countries and the Institute has compensated accordingly many countries. The success story will continue with the implementation of GST in India. There have been problems and disruptions to the introduction of VAT in India. Puducherry was the last but before / State to use VAT. GST extension of VAT also includes services. The initial loss of income to America could be compensated by the institution. When GST is used in good faith the revenue of both the Central Government and the National Government will grow over time.

The main basis behind the implementation of GST is due to the differences between the two Center and Countries on the RNR (Revenue Neutral Rate), compensation package as well A constitutional amendment that needs to be passed by a third party in both houses of Parliament and the assurance of a simple majority at least in part Provincial Conventions. Union Finance Minister Shri Pranab Mukherjee (Energy Summit the Committee) on July 18, 2011 confirmed that it would also include legal issues debt amendments as required by the United States through a delegated committee. The introduction of the GST is a requirement of the desire of multinational companies as many of countries that have implemented GST. Despite several obstacles, there is a GST implementation rate for April 2012. Changes are ongoing they should be ready to accept, accept, and enjoy the fruits of their labour.



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