GST (Goods and Services Tax): A single unified tax on all goods and services in India, replacing multiple indirect taxes like VAT, excise, and service tax.

Key Features:

• Destination-based consumption tax (paid where consumed)
• Input Tax Credit (ITC) available for businesses
• Unified tax rate across India regardless of state
• Simplified compliance through GSTN portal

GST 2.0 Reform (Sept 22, 2025): Simplified from 5 slabs (0%, 5%, 12%, 18%, 28%) to 4 rates (0%, 5%, 18%, 40%) for better compliance and ease.

Customs Duty: A tax imposed on goods imported into India by the central government. It protects domestic industry and generates government revenue.

Components of Customs Duty:

• Basic Customs Duty (BCD): Primary tax ranging 0-40% based on product type
• Social Welfare Surcharge (SWS): 10% levied on BCD amount
• IGST (Integrated GST): 5%, 12%, or 18% on total of CIF + BCD + SWS
• Additional Duties: Anti-dumping, countervailing duty, safeguard duty (variable)

HSN Classification: All imported goods classified by 8-digit HSN code determining applicable BCD rate.

Social Welfare Surcharge (SWS): An additional 10% levied on Basic Customs Duty amount.

Calculation:

SWS = BCD Amount × 10%

Example: If BCD on ₹1 Lakh import @ 10% = ₹10,000
Then SWS = ₹10,000 × 10% = ₹1,000
Total with SWS = ₹11,000

Purpose: To fund social welfare and development initiatives in India.

IGST (Integrated GST): GST applied on imported goods and inter-state supplies.

Difference:

• GST: Applied on domestic goods/services (intra-state)
• IGST: Applied on imports and inter-state supplies
• Same rates: 5%, 12%, 18% for IGST on imports
• ITC available on IGST just like regular GST

For Imports: IGST calculated on (CIF Value + BCD + SWS) base, not just invoice value.

GST 2.0 Reforms (Effective Sept 22, 2025):

• 0% Rate: Essential items - dairy, lifesaving drugs, books, education materials
• 5% Rate (Merit): Daily essentials - food, agriculture, medicines, basic goods
• 18% Rate (Standard): General goods - electronics, telecom, restaurants, air travel
• 28% Rate (Old): Phasing out - luxury cars, air-conditioning, cement (transitional)
• 40% Rate (Demerit/New): Sin goods - tobacco, pan masala, aerated drinks, luxury items

Key Benefits: Simpler structure, better compliance, reduced burden on essentials, relief for businesses.

Effective Import Tax Rate: Average around 30.98% for general goods (varies by product).

Calculation Example:

Import Value: ₹100,000 @ 10% BCD:

• BCD (10%): ₹10,000
• SWS (10% of BCD): ₹1,000
• IGST Base: ₹111,000
• IGST (18%): ₹19,980
• Total Tax: ₹30,980

Effective Rate: 30.98%
Landed Cost: ₹130,980

Customs Duty Exemptions/Concessions (2025-26):

• Nil Duty: Capital goods for manufacturing, spare parts for ocean vessels, lifesaving medical equipment
• 5% Concessional: Raw materials, agricultural equipment, specified chemicals
• Project Imports: Reduced/nil duty on machinery for government projects
• Medical Exemptions: Lifesaving drugs, specified cancer medications, medical devices
• FTA Benefits: Reduced rates under Free Trade Agreements with other countries
• Specified Industries: Special concessions for solar, renewable energy, semiconductor manufacturing

Claim Process: Submit appropriate documentation and certifications to customs authorities to avail exemptions.

GST Calculation on Discounts: GST is calculated on the final price after discount, not on MRP.

Formula:

MRP = ₹1,000
Discount = 10% = ₹100
Price after discount = ₹900
GST @ 18% = ₹900 × 18% = ₹162
Final Price = ₹900 + ₹162 = ₹1,062

Not: GST on MRP (₹1,000 × 18% = ₹180) = WRONG

Key Point: GST must be charged on the selling price, not on list price or MRP.

GST is paid by consumers but collected and paid to the government by businesses. Consumers see it added to the final price. Businesses can claim Input Tax Credit (ITC) for GST paid on purchases.

Registered businesses: Can claim ITC on GST paid on inputs. Exporters get GST refunds if tax credit exceeds liability. Consumers cannot claim GST refunds.

Consequences: Goods can be seized, penalties up to 25% of duty, prosecution possible. Always declare correct value and pay full duty as per regulations.

Yes: GST applies on used goods sold by registered dealers. The rate depends on the product category (usually 5% or 18%).

Check HSN: Visit CBIC website, use HSN finder on GST portal, or consult a customs broker for your specific product classification.