Taxation under Goods and Services Tax (GST)


Taxation under Goods and Services Tax (GST)

Understand in detail about the Taxation under Goods and Services Tax (GST) Regime in India

What is the taxable event under GST?

Tax shall be accrued to the taxing authority under whose jurisdiction the product is consumed or supplied.

Which taxes have been clubbed together under the new domain of GST?

With the advent of GST some of the taxes which have been subsumed are stated below:

At the Central level:

  1. Central Excise Duty,
  2. Additional Excise Duty,
  3. Service Tax,
  4. Additional Customs Duty.

At the State level:

  1. Subsuming of State Value Added Tax/Sales Tax,
  2. Entertainment Tax (other than the tax levied by the local bodies),
  3. Central Sales Tax (levied by the Centre and collected by the States),
  4. Octroi and Entry tax,
  5. Purchase Tax,
  6. Luxury tax, and
  7. Taxes on lottery, betting and gambling

How is a composite supply taxed?

Goods or services in a composite supply cannot be supplied separately. In a composite supply, the tax rate of the principal supply will apply on the whole supply.

For example, in case of transportation of goods, the supply of goods, packing material, insurance form a composite supply and the supply of goods is the principal supply. The packing material or insurance cannot be supplied separately if there is no supply of goods.

How is a mixed supply taxed?

A mixed supply will have the tax rate of the good/service attracting the highest rate of tax.

For example, a gift box comprising sweets, chocolates, cakes, dry fruits, aerated drinks and fruit juices supplied for a single price is a mixed supply. Each of the goods mentioned above can also be sold separately. Since aerated drinks have the highest GST rate of 28%, aerated drinks will be treated as principal supply and 28% will apply on the entire gift box

How are exports taxed under GST?

Export of goods and/or services qualify as an inter-State supply. Exports of goods and services are treated as zero rated supplies. The exporter has the option undertake the export of goods/ services in either of the following ways:

  • Export of goods/services or both under a bond or Letter of undertaking (LUT) without paying IGST claiming the refund of unutilized ITC   
  • Export of goods/services or both on payment of IGST and subsequently claiming refund of IGST paid towards the export of goods/ services

In addition, the conditions which are required to be fulfilled for a service to qualify as export and be subject to zero-rated tax have been specified in the GST law.

How are imports taxed under GST?

Imports qualify as an inter-State supply under GST. In addition to custom duty which is levied on import of goods, IGST is leviable on import of both goods and services.

The importer of services will be eligible to claim ITC towards IGST paid on import of goods and services, however credit of Basic Custom Duty paid on import of goods will not be available to the importer and shall be a cost to the importer.

To know more about GST in India

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