The GST is a Value added
Tax (VAT) and is proposed to be a comprehensive indirect tax levy on manufacture, sale and consumption of goods
as well as services at the national level. It will replace all indirect
taxes levied on goods and services by the Indian Central and State governments.
It is aimed at being comprehensive for most goods and services.
The taxes which will be
subsumed into GST include central excise duty, services tax, additional
customs duty, surcharges and state-level value
added tax
DUAL GST
A dual GST module for the
country has been proposed by the EC(Empowered Committee of State Finance
Ministers (EC). This dual GST model has been accepted by centre. Under this
model GST have two components viz. the Central GST to be levied and collected
by the Centre and the State GST to be levied and collected by the respective
States. Central Excise duty, additional excise duty, Service Tax, and additional
duty of customs (equivalent to excise), State VAT, entertainment tax, taxes on
lotteries, betting and gambling and entry tax (not levied by local bodies)
would be subsumed within GST. Other taxes which will be subsumed with GST are
Octroi, entry tax and luxury tax thus making it a single indirect tax in India.
HISTORY
The Constitution (One
Hundred and Twenty-Second Amendment) Bill, 2014 was introduced in the Lok Sabha
by Finance Minister Arun Jaitley on 19 December 2014, and passed by the House
on 6 May 2015. In the Rajya Sabha, the bill was referred to a Select Committee
on 14 May 2015. The Select Committee of the Rajya Sabha submitted its report on
the bill on 22 July 2015. The bill was passed by the Rajya Sabha on 3 August
2016, and the amended bill was passed by the Lok Sabha on 8 August 2016
The bill, after
ratification by the States, received assent from President Pranab Mukherjee on
8 September 2016 and was notified in The
Gazette of India on the same date.
Ratification
The Act was passed in
accordance with the provisions of Article 368 of the Constitution, and has been
ratified by more than half of the State Legislatures, as required under Clause
(2) of the said article. On 12 August 2016, Assam became the first state to
ratify the bill, when the Assam Legislative Assembly unanimously approved
it.[14][15] State Legislatures that ratified the amendment are listed below:
WORKING
Goods and Services Tax
would be levied and collected at each stage of sale or purchase of goods or
services based on the input tax credit method. This method allows
GST-registered businesses to claim tax credt to the
value of GST they paid on purchase of goods or services as part of their normal
commercial activity. Taxable goods and services are not distinguished from one another
and are taxed at a single rate in a supply chain till the goods or services
reach the consumer. Administrative responsibility would generally rest with a
single authority to levy tax on goods and services.[1] Exports would be zero-rated and imports would
be levied the same taxes as domestic goods and services adhering to the
destination principle.
EFFECT
·
would
mitigate cascading or double taxation,
·
facilitating
a common national market.
·
The
simplicity of the tax should lead to easier administration and enforcement.
·
From the
consumer point of view, the biggest advantage would be in terms of a reduction
in the overall tax burden on goods, which is currently estimated at 25%-30%,
·
free
movement of goods from one state to another without stopping at state borders
for hours for payment of state tax or entry tax and
·
reduction
in paperwork to a large extent
CHANGES
“The tax rate under GST
may be nominal or zero rated for the time being. It has been proposed to
insulate the revenues of the States from the impact of GST, with the
expectation that in due course, GST will be levied on petroleum and petroleum
products.” The central government has assured states of compensation for any
revenue losses incurred by them from the date of introduction of GST for a
period of five years.
The Central Goods and
Services tax grants power to the officers to discharge their duties under the
GST Act.
GST threshold was set at ₹10 lakh (US$15,000) for the north-east and hill states and ₹20 lakh (US$30,000) for other states in the first GST
council meet
Problems in the Present Structure
Present Indirect structure is marked with following problems:
Multiplicity
of Taxes
Presently, the Constitution empowers the Central Government to
levy excise duty on manufacturing and service tax on the supply of services.
Further, it empowers the State Governments to levy sales tax or value added tax
(VAT) on the sale of goods. This exclusive division of fiscal powers has led to
a multiplicity of indirect taxes in the country. In addition, central sales tax
(CST) is levied on inter-State sale of goods by the Central Government, but
collected and retained by the exporting States. Further, many States levy an
entry tax on the entry of goods in local areas. Taxes by Union Government,
State Governments and the local governments have resulted in difficulties and
harassment to the tax payer. He has to contact several authorities and maintain
separate records for each of them.
Complex
The taxes are levied by central government as well as state
government. So, a person has to maintain accounts which will comply with all
the applicable laws. This multiplicity of taxes at the State and Central levels
has resulted in a complex indirect tax structure in the country that is ridden
with hidden costs for the trade and industry.
Cascading
effects of taxes
In current indirect tax structure in India, there is cascading
of taxes due to ‘tax on tax’. No credit of excise duty and service tax paid at
the stage of manufacture is available to the traders while paying the State
level sales tax or VAT, and vice versa. Further, no credit of State taxes paid
in one State can be availed in other States. Hence, the prices of goods and
services get artificially inflated to the extent of this ‘tax on tax’.
Multiple
Compliance
A business person might have to comply with multiple compliance
in terms of indirect taxes in India.
Tax
Arbitrage
The problem of tax arbitrage for a single nation poses an
invisible barrier for free trade. In many cases, a small difference in rate of
tax can result in manifold implications and thus, can induce the business to
move into a lower tax territory. As an example, the different rate of VAT as
levied on sale of goods in different states .
GST is seen as a solution to the above problems.
GST shall subsume the following taxes in the times to come once
the law is in force:
The proposed GST regime shall have the following features:
·
It shall be a
destination based taxation
·
It shall have a Dual
Administration – Centre and state
·
State wise
determination of taxable person – no more centralized registration
·
Seamless credit
amongst goods and services
Tax-Rate
under the proposed GST
As per the decisions made by all will of GST Council on November
3rd, 2016, The tax rates would be at 4 slabs of 5%, 12%, 18% and 28%. Although
rates have come down, tax collection would go up due to increased tax
elasticity. The government is working on a special IT platform for smooth
implementation of the proposed Goods and Services Tax (GST). The IT special
vehicle (SPV) christened as GST N (Network) will be owned by three
stakeholders—the centre, the states and the technology partner NSDL, then Central Board of Excise and
Customs (CBEC) Chairman S Dutt Majumdar said while addressing a "National
Conference on GST". On the possibility of rolling out GST, he said,
"There was no need for alarm if GST was not rolled out in April 1, 2012.
Renewed
GST concerns
With heterogeneous State laws on VAT, the debate on the
necessity for a GST has been reignited The best GST systems across the world
use a single GST, while India has opted for a dual-GST model. Critics claim
that CGST, SGST and IGST are nothing but new names for Central Excise/Service
Tax, VAT and CST, and hence GST brings nothing new to the table. The concept of
value-added has never been utilized in the levy of service, as the Delhi High
Court is attempting to prove in the case of Home Solution Retail, while under
Central Excise the focus is on defining and refining the definition of
manufacture, instead of focusing on value additions. The Revenue can be very
stubborn when it comes to refunds, as the Maharashtra Government proves, and
software entities that applied for refunds on excess service tax paid on inputs
discovered
The all-new Cenvat Credit Rules, 2014 do little to clarify
eligibility for input credits, by using general terms such as "any goods
which have no relationship whatsoever with the manufacture of a final
product" and "services used primarily for personal use or consumption
of any employee.
BENEFITS
OF GST
GST has been envisaged as an efficient tax
system, neutral in its application and distributionally attractive. The
advantages of GST are:
- Wider tax base, necessary for
lowering tax rates and eliminating classification disputes
- Elimination of multiplicity of
taxes and their cascading effects
- Rationalization of tax
structure and simplification of compliance procedures
- Harmonization of center and
state tax administrations, which would reduce duplication and compliance
costs
- Automation of compliance
procedures to reduce errors and increase efficiency
·
Destination
principle
·
The GST structure
would follow the destination principle. Accordingly, imports would be subject
to GST, while exports would be zero-rated. In the case of inter-state
transactions within India, State tax would apply in the state of destination as
opposed to that of origin.
·
Taxes
to be subsumed
·
GST would replace most
indirect taxes currently in place
- The power to make laws in
respect of supplies in the course of inter-state trade or commerce will be
vested only in the Union Government. States will have the right to levy
GST on intra-state transactions, including on services.
- The Centre will levy IGST on
inter-state supply of goods and services. Import of goods will be subject
to basic customs duty and IGST.
- GST is defined as any
tax on supply of goods and services other than on alcohol for human
consumption.
- Central taxes such
as Central Excise duty, Additional Excise duty, Service tax,
Additional Custom duty and Special Additional duty as well
as state-level taxes such as VAT or sales tax, Central Sales tax,
Entertainment tax, Entry tax, Purchase tax, Luxury tax and Octroi will
subsume in GST.
- Petroleum and petroleum
products, i.e., crude, high speed diesel, motor spirit, aviation turbine
fuel and natural gas, shall be subject to GST - date to be
notified by the GST Council.
- Provision will be made for
removing imposition of entry tax /Octroi across India.
- Entertainment tax,, imposed by
states on movie, theatre, etc., will be subsumed in GST, but taxes on
entertainment at panchayat, municipality or district level
will continue.
- GST may be levied on the sale
of newspapers and advertisements. This would mean substantial
incremental revenues for the Government.
- Stamp duties, typically imposed
on legal agreements by states, will continue to be levied.
- Administration of GST will be
the responsibility of the GST Council, which will be the apex policy
making body for GST. Members of GST Council comprise Central and State
ministers in charge of the finance portfolio
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