By:- Siddhant Jain

WHAT IS GST?

System of indirect taxation under which the host of indirect tax such as VAT, ST, central excise duty, octroi, etc. shall be merged & there will be a single levy for every service or goods with a single rate of tax.

Reason for Adoption

GST is likely to improve tax collections and boost India'seconomic development by breaking tax barriersbetween States and integrating India through a uniformtax rate.

Subsuming of Taxes

Central Excise DutyAdditional Excise

Duty

Special Additional Duty

Countervailing Duty

Service Tax

Centre GST

Subsuming of Taxes

Lottery Tax Entertainment Tax

Entry Tax (other than for local body)

Luxury Tax

Value Added Tax/ Sales Tax

State GST

Proposed Key Features

Dual GST : Central GST & State GST

Destination based State GST

Common Base

Uniform Classification

Uniform Forms – Returns, Challans ( in electronic mode)

No cascading of Central and State taxes

Cross credit between Centre and State not allowed

Tax levied from production to consumption

One Common return for both Central and State GST

Uniform collection procedure for central and state GST

13 digit PAN based Common TIN registration

TINXSYS ( Tax Information Exchange System) to track

transactions

Balance of Fiscal Autonomy to Center and States and

need for Harmonization

Proposed Key Features

GST Rate Structure

Two Rate Structure

lower rate for necessary items and goods of basic importance

Standard Rate for goods in general

Note: • Special Rates also available•Exports are fully exempted with Zero rates.

CGST: Centre GST

Levied by the Centre through a separate statute on alltransactions of goods and services made for aconsideration.

Exceptions would be exempted goods and services,goods kept out of GST and transactions below prescribedthreshold limits.

CGST would be levied across the value chain.

Rates for CGST would be prescribed appropriatelyreflecting revenue considerations and acceptability.

SGST: State GST

Levied by the States through statute on all transactions ofgoods and services made for a consideration.

Exceptions would be exempted goods and services, goodskept out of GST and transactions below prescribed thresholdlimits.

Basic features of law such as chargeability, taxable event,measure, valuation, classification would be uniform across theseStatutes as far as practicable.

State GST would be paid to the accounts of the respectiveState.

Inter State Transactions

Centre would levy IGST which would be CGST + SGST.

IGST would be levied on all inter-State transactions of taxable

goods and services with appropriate provision for consignment

or stock transfer of goods and services.

Inter-State dealer will pay IGST after adjusting available, IGST,

CGST and SGST on purchases.

Illustration for IGST

Illustration for IGST

Credit Utilization

CGST• CGST credit can be utilized only against CGST liability

SGST• SGST credit can be utilized only against SGST liability

IGST

• IGST consist of 2 components i.e. CGST & SGST –Available CGST credit can be utilized against CGST portion while SGST credit against SGST portion

Some Special Cases

Taxes on items containing alcohol and petroleum product are

kept out of GST. They will continue to be taxed as per existing

practices.

Tax on Tobacco products will be subject to GST. But

government can levy the extra Excise duty over and above GST.

Exports are fully exempted with Zero rates.

Imports will be treated as that manufactured in India.

PAN based identification number will be allowed to each

taxpayer to have integration of GST with Direct Tax.

Favorable Impact of GST

Seamless credit to trade and industry throughout supply chain will improve

competitiveness

Common Tax Base will eliminate tax cascading

CST phase-out will reduce supply chain cost

Economy in production scale & efficiency in distribution

Simplified structure to reduce transaction cost

Boost up of exports.

Major Challenges to GST

Rapid increase in assessee

Legislative challenge

Effective credit mechanism

IT Infrastructure

Why are some States against GST; will they lose money?

•Some States have sought assurances that their existing revenues will be protected. The central government has offered to compensate States in case of a loss in revenues. •Some States fear that if the uniform tax rate is lower than their existing rates, it will hit their tax kitty. The government believes that dual GST will lead to better revenue collection for States.•However, backward and less-developed States could see a fall in tax collections. GST could see better revenue collection for some States as the consumption of goods and services will rise.

Implementation Scenario

Past Near Past Implementation

National GST Dual GST ????????????

Business Man: Sir do you really think that ‘negative list of services’ is amilestone in the road towards GST ?

CA: Well…..I think it is not a milestone, it seems to be a Pavement tothe GST road.

Business Man: Not understood Sir ……!!

CA: I mean the negative list has a capacity to exist along with Centre-state disconnects on the services to be covered there under which arepartially forming part of the GST disconnects.

Business Man: Sir………I still could not understand anything.

CA: OK….I will tell you in your language…….states asked for35services to be included in the negative list….correct?

Business Man: Yes Sir.

CA: And Government kept only 17 services in the list and have notincluded therein many services specified by the states. correct?

to be contd…….

GST- HUMOUR

GST- HUMOUR

Business Man: Yes Sir.

CA: Now Empowered Committee of states is saying that their demandwas not taken into consideration and negative list will lead to doubletaxation and litigation….correct?

Business Man: Yes Sir.

CA: So the negative list of services when implemented willComplement the Centre -States contended road to GST, and can fit inas pavement along with that road whenever it comes into

existence….Understood??

Business Man: No Sir……..I mean. Yes Sir……I mean I will think overit…and am sure that I will understand!!!