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Central Goods and Service Tax(CGST) from the eye of First discussion paper on GST:-

 The various Central, State and Local levies were examined to identify their possibility of being subsumed under GST. While identifying, the following principles were kept in mind:

(i)      Taxes or levies to be subsumed should be primarily in the nature of indirect taxes, either on the supply of goods or on the supply of services.

(ii)     Taxes or levies to be subsumed should be part of the transaction chain which commences with import/ manufacture/ production of goods or provision of services at one end and the consumption of goods and services at the other.

(iii)    The subsumation should result in free flow of tax credit in intra and inter-State levels.

(iv)    The taxes, levies and fees that are not specifically related to supply of goods & services should not be subsumed under GST.

(v)     Revenue fairness for both the Union and the States individually would need to be attempted.

3.4    On application of the above principles, it is recommended that the following Central Taxes should be, to begin with, subsumed under the Goods and Services Tax:

     (i)      Central Excise Duty

     (ii)     Additional Excise Duties

     (iii)    The Excise Duty levied under the Medicinal and Toiletries Preparation Act

     (iv)    Service Tax

     (v)     Additional Customs Duty, commonly known as Countervailing Duty (CVD)

     (vi)    Special Additional Duty of Customs – 4% (SAD)

     (vii)   Surcharges, and

     (viii) Cesses.

Following State taxes and levies would be, to begin with, subsumed under GST:

     (i)      VAT / Sales tax

     (ii)     Entertainment tax (unless it is levied by the local bodies).

     (iii)    Luxury tax

     (iv)    Taxes on lottery, betting and gambling. 

     (v)     State Cesses and Surcharges in so far as they relate to supply of goods and services.

     (vi)    Entry tax not in lieu of Octroi.

Purchase tax: Some of the States felt that they are getting substantial revenue from Purchase Tax and, therefore, it should not be subsumed under GST while majority of the States were of the view that no such exemptions should be given. The difficulties of the foodgrains producing States and certain other States
were appreciated as substantial revenue is being earned by them from Purchase Tax and it was, therefore, felt that in case Purchase Tax has to be subsumed then adequate and continuing compensation has to be provided to such States.  This issue is being discussed in consultation with the Government of India.

Tax on items containing Alcohol: Alcoholic beverages would be kept out of the purview of GST.  Sales Tax/VAT can be continued to be levied on alcoholic beverages as per the existing practice. In case it has been made Vatable by some States, there is no objection to that. Excise Duty, which is presently being levied by the States may not be also affected.

Tax on Tobacco products: Tobacco products would be subjected to GST with ITC. Centre may be allowed to levy excise duty on tobacco products over and above GST without ITC.

Tax on Petroleum Products: As far as petroleum products are concerned, it was decided that the basket of petroleum products, i.e. crude, motor spirit (including ATF) and HSD would be kept outside GST as is the prevailing practice in India. Sales Tax could continue to be levied by the States on these products with prevailing floor rate.  Similarly, Centre could also continue its levies.  A final view whether Natural Gas should be kept outside the GST will be taken after further deliberations.

Taxation of  Services :         As indicated earlier, both the Centre and the States will have concurrent power to levy tax on all goods and services. In the case of States, the principle for taxation of intra-State and inter-State has already been formulated by the Working Group of Principal Secretaries/Secretaries of Finance/Taxation
and Commissioners of Trade Taxes with senior representatives of Department of Revenue, Government of India.  For inter-State transactions an innovative model of Integrated GST will be adopted by appropriately aligning and integrating CGST and SGST. The working of this model is elaborated below.