Chapter 30: Goods & Services Tax (GST)

📚 JAIIB 2026 • AFM • Module D • Chapter 2 of 7 • Unit 30

Goods & Services Tax (GST)
(One Nation, One Tax — India’s Biggest Tax Reform Since Independence!)

GST replaced Sales Tax, Excise, Service Tax, VAT and many more since July 1, 2017. It’s a destination-based, dual tax (Centre + State). This chapter covers Direct vs Indirect tax differences, 4 types of GST, Input Tax Credit, threshold limits, GST Council, and special challenges for banks under GST.

⏱ 18 min read🎯 Current Affairs⚡ 12 Flash Cards

Banky Understands ONE NATION, ONE TAX! 🇮🇳💰

Before GST: Sales Tax + Excise + Service Tax + VAT + Octroi = TAX ON TAX (cascading!). After GST: ONE unified tax. Tax paid on inputs = deducted from output tax (Input Tax Credit). Simple!

“Sir, the bank charges 18% GST on processing fees. Where does this money go?” — “Half to Centre (CGST), half to State (SGST)!” 🏛️
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Section 1 of 9

GST — Everything You Need to Know

📖 Part 1 — Direct vs Indirect Tax + GST Basics

Direct Tax: Paid directly by taxpayer to Govt. Can’t be shifted. IT, Corporate Tax, Wealth Tax, STT. Progressive (higher income = higher tax). Reduces inequality. Higher admin cost.

Indirect Tax: CAN be shifted to others. Levied on goods/services, not income. Collected by intermediary. Regressive (same tax regardless of income). Lower admin cost. Covers everyone. Discourages consumption (savings-oriented).

GST = introduced July 1, 2017. Replaced sales tax, excise, service tax, VAT, octroi, surcharges. Destination-based (tax goes to state where goods CONSUMED, not produced). Dual model (Centre + State both administer). Charged only on VALUE ADDITION at each stage (no “tax on tax”).

NOT in GST regime: Crude oil, petroleum products, electricity, alcoholic liquor for human consumption.

🧑‍💼 Banky: “Direct = I pay MY tax (can’t push to anyone). Indirect = seller collects FROM buyer (pushed forward). GST = the BIGGEST indirect tax reform!” 🇮🇳

📋 Part 2 — 4 Types, ITC, Threshold, Council, Returns

4 Types: (1) CGST = Central (intra-state). (2) SGST = State (intra-state). (3) IGST = Integrated (INTER-state + imports). (4) UGST = Union Territory (Chandigarh, Andaman, etc.).

Intra-state = CGST + SGST. Inter-state/Import = IGST (Centre collects, shares with State).

Input Tax Credit (ITC): Tax paid on inputs = deducted from output tax. No cascading! Only value addition taxed.

Threshold: ₹40 lakh general (₹10 lakh for NE states, Uttarakhand, Sikkim, HP). Below threshold = no registration needed.

GST Council: Governing body. Chairman = Union Finance Minister. Recommends rates, exemptions, rules.

Supplier of goods/services pays GST (generally). Reverse charge = recipient pays in specified cases.

Time of supply: Earliest of payment received, invoice issued, or supply completed.

Returns: GSTR-1 + GSTR-3B. Monthly for turnover > ₹1.5 crore. GSTR-1 quarterly for ≤ ₹1.5 crore. Late fee + interest 18% per annum on delayed payment.

🧑‍💼 Banky: “Same state = CGST + SGST. Different state = IGST. ITC = no double tax! ₹40L threshold (₹10L for NE)!” 📊

🏦 Part 3 — GST Challenges for Banks

Registration: Earlier = one centralised service tax registration. Now = SEPARATE registration for EACH STATE. More compliance burden!

ITC reduced: Earlier = 50% reversal on inputs/input services BUT full credit on capital goods. Now = 50% reversal on ALL including capital goods → higher cost of capital.

Multiple authorities: Each state = different adjudicating authority. Different opinions on same issue → prolonged disputes.

Banking transaction fees: GST @ 18% on processing fees, card charges, fund transfers, ATM charges, loan processing — higher than old service tax!

Inter-branch services: Taxable under GST! Branches provide services to each other → GST applicable → more paperwork. Can claim ITC later but operating cost increases.

Composite scheme: NOT applicable to banks (banks are SERVICE providers, composite is for goods).

🧑‍💼 Banky: “Banks = separate registration per state! 18% on all fees! Inter-branch services = taxable! GST made banking compliance HARDER, not easier!” 🏦
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Section 2 of 9

Exam-Ready Points

🎯 Must Remember!

  • GST on: Sale, transfer, purchase, barter, lease, import — ALL transactions! Answer = “All of the above.”
  • NOT in GST: Alcoholic liquor for human consumption. Banking/insurance/transport = IN GST.
  • Threshold: ₹10 lakh for NE states, Uttarakhand, Sikkim, HP. ₹40 lakh general.
  • “GST made business more difficult” = NOT correct! GST IMPROVES ease of doing business (uniform rates).
  • GST replaced: Sales tax + Excise + Service tax — ALL of the above.
  • GST = destination based. Tax goes to consuming state, not producing state.
  • Only value addition taxed at each stage (no cascading). ITC eliminates “tax on tax.”
  • Interest on delayed GST payment = 18% per annum.
  • Direct tax: Can’t be shifted. Progressive. Reduces inequality. Higher admin cost.
  • Indirect tax: CAN be shifted. Regressive. Lower evasion. Covers all. Growth-oriented.

📝 Past Exam Questions

Q: GST levied on which transactions?
A: All — sale, transfer, purchase, barter, lease, import.
Q: Which is NOT in GST regime?
A: Alcoholic liquor for human consumption.
Q: Threshold for NE states?
A: ₹10 lakh.
Q: Which is NOT correct about GST?
A: “GST has resulted in doing business more difficult” — WRONG!
Q: Which taxes replaced by GST?
A: All — Sales tax, Excise duty, Service tax.
Section 3 of 9

Last-Minute Flash Cards

GST Launch
July 1, 2017 | Replaced Sales/Excise/Service/VAT
Destination-based. Dual model (Centre + State). Value addition only.
4 Types
CGST + SGST (intra) | IGST (inter) | UGST (UT)
Same state = CGST + SGST. Different state/import = IGST.
NOT in GST
Crude oil | Petroleum | Electricity | Alcohol
Banking, insurance, transport = ARE in GST!
Threshold
₹40L general | ₹10L NE/Uttarakhand/Sikkim/HP
Below threshold = no registration needed.
ITC
Input Tax Credit = deduct input tax from output
No cascading. Only value addition taxed. Tax on tax eliminated.
GST Council
Chairman = Union Finance Minister
Recommends rates, exemptions. Includes State Finance Ministers.
Direct Tax
Can’t shift | Progressive | IT, Corporate Tax
Reduces inequality. Higher admin cost. Paid directly to govt.
Indirect Tax
CAN shift | Regressive | GST
Covers all. Lower evasion. Growth-oriented. Enhances savings.
Banking GST Rate
18% on banking transaction fees
Processing, cards, fund transfers, ATM charges. Higher than old service tax.
Bank Registration
Separate registration per STATE under GST
Earlier = one centralised. Now = each state. More compliance burden.
Late Payment Interest
18% per annum on delayed GST payment
From next day of due date till payment date.
Destination Based
Tax goes to CONSUMING state, not producing
Place of supply determines which state gets the tax revenue.

⚡ Module D • Chapter 2 (Unit 30) Done!

  • GST: July 2017. Replaced all indirect taxes. Destination-based. Dual (Centre + State).
  • 4 Types: CGST + SGST (intra), IGST (inter/import), UGST (UT). ITC eliminates cascading.
  • NOT in GST: Crude oil, petroleum, electricity, alcoholic liquor. Banking = IN GST at 18%.
  • Threshold: ₹40L general, ₹10L NE states. GST Council chaired by Union FM.
  • Banks: Separate registration per state. 50% ITC reversal on ALL. Inter-branch taxable.

Banky says: “One Nation, One Tax! CGST+SGST = intra! IGST = inter! Alcohol NOT in GST! ITC = no cascading! 18% on banking fees!” 🎉🇮🇳💰

Next: Chapter 31 — Cost & Management Accounting Overview! 💪

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