Question 1. Why Are States Unhappy With The Gst?
The replacement of the existing taxes with the GST will lead to a revenue loss for the states. The states want compensation for this and the matter is how they will be compensated. So there are efforts to arrive at a formula that is acceptable to the states.
Question 2. Is Gst An Accepted System Of Taxation Across The World?
Most of the countries across the world have a GST in place. In fact by some estimates more than 140 countries have implemented the GST in their economies.
Question 3. Will The Gst Impact Other Taxes Like Income Tax Or Corporate Tax?
Income tax and Corporation taxes are direct taxes which means that they have to be paid by the person or entity on whom they are levied and cannot be passed on to someone else. They will remain as they exist currently but the change will occur in all indirect taxes present in the country.
Question 4. Will All Goods And Services Be Covered Under The Gst?
Except for a specific list of exempted items all the other goods and services will be covered under the GST making this a comprehensive tax in the Indian Economy. In fact this will be the main tax on the indirect tax side in the economy.
Question 5. Will The Rate Rise In Case Of Gst Making It Costlier?
There will be a standard rate present under the GST. This will make the impact different for various goods and services across the country depending upon the current or existing rate. If the existing rate is higher then the GST will lead to a lower rate but if the rate is lower than the rate will be higher. However it is expected that with multiple taxes eliminated it will ultimately lead to savings for the consumer.
Question 6. Where Is The Gst Going To Be Collected?
The GST is collected at the point of sale so there is no confusion about when this has to be paid. Currently different taxes are collected at different stages of the process so there is a tax on manufacturing, one at the time of sale and even another one when goods move from one place to the other. Under the GST all of these will be eliminated making it easier to implement and follow.
Question 7. Who Bears The Final Tax In The Process?
The GST is an indirect tax which means that the tax is passed on till the last stage wherein it is the customer of the goods and services who bears the tax. This is the case even today for all indirect taxes but the difference under the GST is that with streamlining of the multiple taxes the final cost to the customer will come out to be lower on the elimination of double charging in the system.
Question 8. What Is The Main Change That Will Be Witnessed With The Introduction Of The Gst?
The biggest benefit that will be witnessed with the introduction of the GST is that multiple taxes that currently exist will no longer remain in the picture. This means that taxes like octroi, CENVAT, central sales tax, state sales tax, entry tax, license fees, turnover tax etc will no longer be present and all that will be brought under the GST. Businesses thus will not have to deal with multiple taxes but will be able to undertake the tax compliance in an easy manner.
Question 9. What Are The Stages Covered In The Gst?
All the stages related to a good or a service is covered under the GST. This means that it is a levy that will cover the manufacture, consumption and sale of various goods and services. This will be undertaken at a national level, so it is comprehensive in nature.
Question 10. How To File Gst Return Online?
The data is not disclosed yet but some hints suggest that the return online can be filed by the GST Portal.
Question 11. What Are The Contribution Of It Technology In The Enforcement Of Gst Regime?
The government has registered themselves in nonprofit organization Goods and services Network (GSTN) to share IT infrastructure and services to central and state government, stakeholders as well as taxpayers. The main agenda behind the formation of GSTN Goods and service tax network are that there will be a uniform and transparent interface readily available to all the members, taxpayers, stakeholders and government.
The GSTN will be a framework which will be used to create an elongated feature of various information regarding registrations, return and payments to taxpayers, and also having a server for backing up the states which encompass processing of returns, registrations, audits, assessments, and appeals.
All the governing bodies, accounting departments, RBI and banks are also making themselves ready for this new IT structure for the proper implementation of GST. It will be very helpful in self-assessing of the returns and there will be no manual filing of returns.
Question 12. How Will The Gst Make A Change? Pls Give An Example?
There are various layers in pricing factors in India which are currently prevailing at every step of transfer of Goods and Services from manufacturer/service provider to the end consumer.
By taking an example, let us understand that how the GST application will turn the scene for Indian consumers:-
Let’s say, a Good of Rs. 100 including tax of Rs. 10 and all the raw material. After the total manufacturing of that product he adds Rs. 30 to his value
Now the total gross value of the product will be 100+30 = Rs. 130
At an assumed tax rate of 10%, the tax incurred upon the particular product will be thereby Rs. 13
But, here the twist of GST will be that the previous tax paid by him of Rs. 10 while taking the possession of raw materials would be waived off as a value chain
Therefore, the effective GST on the manufacturer will be applicable only 13-10 i.e. Rs. 3
Here the wholesaler obtains the product from the manufacturer for Rs. 130 and adds his margin of let’s say Rs. 20
Now the gross value of the good would be jumped to 130 + 20 = Rs. 150
Here again, the tax applicability will be Rs. 15 as a 10% taxation rule but the GST regime will write off on his output i.e. Rs. 15 against the previously paid tax by the manufacturer of Rs. 13. So, therefore here again the GST regime will only applicable of 15-13 = Rs. 2
In this last stage, the retailer will take the product from the wholesaler from the given Rs. 150 and assume that he adds a value of Rs. 10 to his remuneration, making the gross value of Rs. 160 (150+10). Now here, the tax applicability arises of Rs. 16 but the previous included tax paid by him of Rs. 15 in his last purchase from the wholesaler will put the tax liability dropped down to Rs. 1 only
Thus, from the new GST taxation scheme, the total tax arises from the transactions sums only Rs. 10+3+2+1 = Rs. 16.
Question 13. How Gst Will Be Levied In India With An Effective Administration?
The Indian government is comprised of a dual federal structure and with this anatomy, there will be two components formation:-
- Central GST
- State GST
Both of the components will levy the tax on their level across whole value chain. These components are responsible for collecting the taxes from their respective designated area of operation by applying the incurred GST. The input tax credit of CGST will be accessible for meeting the CGST liability on the outcoming at every stage. Similarly, the credit of SGST paid on inputs will be accessible for meeting SGST on output. However, there will be no overlapping usability of credits.
Question 14. Even After Gst, Should People Need To Pay Income Tax?
GST being an indirect tax levy that seeks to replace transaction taxes, the same would not have an impact on income tax, which is a tax on income. Therefore, income tax would continue to apply on the income of individuals and businesses as is being applied presently.
Question 15. What Is The Best Outcome Customers Can Expect, In Case Of Gst?
Customer can expect transparency as regards taxes levied. By way of illustration, today, a customer buying an IT hardware or consumer durable at a retail store is oblivious to the customs / excise duties built into the price. Further, given that GST seeks to eliminate cascading effect of taxes, in the medium to long run, GST should essentially result in price reduction with businesses opting to pass on tax efficiency to customers in the form of price reduction, subject of course to a reasonable GST rate being imposed on goods and services.
Question 16. Why Is Gst Being Opposed By States?
Key reasons for GST related opposition include:-
- apprehension of loss of fiscal autonomy with respect to determining the list of items that are taxable as well as the rate of tax and
- apprehension, particularly amongst manufacturing-exporting states, of loss of revenue by virtue of the origin based CST levy being replaced by a destination based GST regime.
Question 17. How Will The Rules For Administration Of Cgst And Sgst Be Framed?
The Joint Working Group has also been entrusted the task of preparing draft legislation for CGST, a suitable Model Legislation for SGST and rules and procedures for CGST and SGST. Simultaneous steps have also been initiated for drafting of legislation for IGST and rules and procedures. As a part of this exercise, the Working Group will also address to the issues of dispute resolution and advance ruling.
Question 18. How Are The Legislative Steps Being Taken For Cgst And Sgst?
A Joint Working Group has recently been constituted (September 30, 2009) comprising of the officials of the Central and State Governments to prepare, in a time-bound manner a draft legislation for Constitutional Amendment.
Question 19. Why Does Introduction Of Gst Require A Constitutional Amendment?
The Constitution provides for delineation of power to tax between the Centre and States. While the Centre is empowered to tax services and goods upto the production stage, the States have the power to tax sale of goods. The States do not have the powers to levy a tax on supply of services while the Centre does not have power to levy tax on the sale of goods. Thus, the Constitution does not vest express power either in the Central or State Government to levy a tax on the supply of goods and services. Moreover, the Constitution also does not empower the States to impose tax on imports. Therefore, it is essential to have Constitutional Amendments for empowering the Centre to levy tax on sale of goods and States for levy of service tax and tax on imports and other consequential issues.
As part of the exercise on Constitutional Amendment, there would be a special attention to the formulation of a mechanism for upholding the need for a harmonious structure for GST along with the concern for the powers of the Centre and the States in a federal structure.
Question 20. Will Cross Utilization Of Credits Between Goods And Services Be Allowed Under Gst Regime?
Cross utilization of credit of CGST between goods and services would be allowed. Similarly, the facility of cross utilization of credit will be available in case of SGST. However, the cross utilization of CGST and SGST would generally not be allowed except in the case of inter-State supply of goods and services under the IGST model.
Question 21. How Will Imports Be Taxed Under Gst?
With Constitutional Amendments, both CGST and SGST will be levied on import of goods and services into the country. The incidence of tax will follow the destination principle and the tax revenue in case of SGST will accrue to the State where the imported goods and services are consumed. Full and complete set-off will be available on the GST paid on import on goods and services.
Question 22. What Is The Scope Of Composition And Compounding Scheme Of Gst?
A Composition/Compounding Scheme will be an important feature of GST to protect the interests of small traders and small scale industries. The Composition/Compounding scheme for the purpose of GST should have an upper ceiling on gross annual turnover and a floor tax rate with respect to gross annual turnover. In particular there will be a compounding cut-off at Rs. 50 lakhs of the gross annual turnover and the floor rate of 0.5% across the States. The scheme would allow option for GST registration for dealers with turnover below the compounding cut-off.
Question 23. What Is The Concept Of Providing Threshold Exemption Into A Tax Regime?
Threshold exemption is built into a tax regime to keep small traders out of tax net.
This has three-fold objectives:-
It is difficult to administer small traders and cost of administering of such traders is very high in comparison to the tax paid by them.
The compliance cost and compliance effort would be saved for such small traders.
Small traders get relative advantage over large enterprises on account of lower tax incidence.
The present thresholds prescribed in different State VAT Acts below which VAT is not applicable varies from State to State. A uniform State GST threshold across States is desirable and, therefore, as already mentioned in Answer to Question 6, it has been considered that a threshold of gross annual turnover of Rs. 10 lakh both for goods and services for all the States and Union Territories might be adopted with adequate compensation for the States (particularly, the States in North-Eastern Region and Special Category States) where lower threshold had prevailed in the VAT regime. Keeping in view the interest of small traders and small scale industries and to avoid dual control, the States also considered that the threshold for Central GST for goods may be kept Rs.1.5 Crore and the threshold for services should also be appropriately high.
Question 24. What Is The Rate Structure Proposed Under Gst?
The Empowered Committee has decided to adopt a two-rate structure a lower rate for necessary items and items of basic importance and a standard rate for goods in general. There will also be a special rate for precious metals and a list of exempted items. For upholding of special needs of each State as well as a balanced approach to federal flexibility, it is being discussed whether the exempted list under VAT regime including Goods of Local Importance may be retained in the exempted list under State GST in the initial years. It is also being discussed whether the Government of India may adopt, to begin with, a similar approach towards exempted list under the CGST.
For CGST relating to goods, the States considered that the Government of India might also have a two-rate structure, with conformity in the levels of rate with the SGST. For taxation of services, there may be a single rate for both CGST and SGST.The exact value of the SGST and CGST rates, including the rate for services, will be made known duly in course of appropriate legislative actions.
Question 25. Which Central And State Taxes Are Proposed To Be Subsumed Under 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:-
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.
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.
The subsumation should result in free flow of tax credit in intra and inter-State levels.
The taxes, levies and fees that are not specifically related to supply of goods & services should not be subsumed under GST.
Revenue fairness for both the Union and the States individually would need to be attempted.
On application of the above principles, the Empowered Committee has recommended that the following Central Taxes should be, to begin with, subsumed under the Goods and Services Tax:
- Central Excise Duty
- Additional Excise Duties
- The Excise Duty levied under the Medicinal and Toiletries Preparation Act
- Service Tax
- Additional Customs Duty, commonly known as Countervailing Duty (CVD)
- Special Additional Duty of Customs – 4% (SAD)
- Surcharges, and
The following State taxes and levies would be, to begin with, subsumed under GST:
- VAT / Sales tax
- Entertainment tax (unless it is levied by the local bodies).
- Luxury tax
- Taxes on lottery, betting and gambling.
- State Cesses and Surcharges in so far as they relate to supply of goods and services.
- 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 foodgrain producing States was 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 could 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 levied by the States may not also be 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 with 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 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 IGST.
Question 26. How Would A Particular Transaction Of Goods And Services Be Taxed Simultaneously Under Central Gst (cgst) And State Gst (sgst)?
The Central GST and the State GST would be levied simultaneously on every transaction of supply of goods and services except the exempted goods and services, goods which are outside the purview of GST and the transactions which are below the prescribed threshold limits. Further, both would be levied on the same price or value unlike State VAT which is levied on the value of the goods inclusive of CENVAT. While the location of the supplier and the recipient within the country is immaterial for the purpose of CGST, SGST would be chargeable only when the supplier and the recipient are both located within the State.
Illustration I: Suppose hypothetically that the rate of CGST is 10% and that of SGST is 10%. When a wholesale dealer of steel in Uttar Pradesh supplies steel bars and rods to a construction company which is also located within the same State for, say Rs. 100, the dealer would charge CGST of Rs. 10 and SGST of Rs. 10 in addition to the basic price of the goods. He would be required to deposit the CGST component into a Central Government account while the SGST portion into the account of the concerned State Government. Of course, he need not actually pay Rs. 20 (Rs. 10 + Rs. 10) in cash as he would be entitled to set-off this liability against the CGST or SGST paid on his purchases (say, inputs). But for paying CGST he would be allowed to use only the credit of CGST paid on his purchases while for SGST he can utilize the credit of SGST alone. In other words, CGST credit cannot, in general, be used for payment of SGST. Nor can SGST credit be used for payment of CGST.
Illustration II: Suppose, again hypothetically, that the rate of CGST is 10% and that of SGST is 10%. When an advertising company located in Mumbai supplies advertising services to a company manufacturing soap also located within the State of Maharashtra for, let us say Rs. 100, the ad company would charge CGST of Rs. 10 as well as SGST of Rs. 10 to the basic value of the service. He would be required to deposit the CGST component into a Central Government account while the SGST portion into the account of the concerned State Government. Of course, he need not again actually pay Rs. 20 (Rs. 10+Rs. 10) in cash as it would be entitled to set-off this liability against the CGST or SGST paid on his purchase (say, of inputs such as stationery, office equipment, services of an artist etc). But for paying CGST he would be allowed to use only the credit of CGST paid on its purchase while for SGST he can utilise the credit of SGST alone. In other words, CGST credit cannot, in general, be used for payment of SGST. Nor can SGST credit be used for payment of CGST.
Question 27. Why Is Dual Gst Required?
India is a federal country where both the Centre and the States have been assigned the powers to levy and collect taxes through appropriate legislation. Both the levels of Government have distinct responsibilities to perform according to the division of powers prescribed in the Constitution for which they need to raise resources. A dual GST will, therefore, be in keeping with the Constitutional requirement of fiscal federalism.
Question 28. What Are The Salient Features Of The Proposed Gst Model?
The salient features of the proposed model are as follows:-
- Consistent with the federal structure of the country, the GST will have two components: one levied by the Centre (hereinafter referred to as Central GST), and the other levied by the States (hereinafter referred to as State GST). This dual GST model would be implemented through multiple statutes (one for CGST and SGST statute for every State). However, the basic features of law such as chargeability, definition of taxable event and taxable person, measure of levy including valuation provisions, basis of classification etc. would be uniform across these statutes as far as practicable.
- The Central GST and the State GST would be applicable to all transactions of goods and services except the exempted goods and services, goods which are outside the purview of GST and the transactions which are below the prescribed threshold limits.
- The Central GST and State GST are to be paid to the accounts of the Centre and the States separately.
- Since the Central GST and State GST are to be treated separately, in general, taxes paid against the Central GST shall be allowed to be taken as input tax credit (ITC) for the Central GST and could be utilized only against the payment of Central GST. The same principle will be applicable for the State GST.
- Cross utilisation of ITC between the Central GST and the State GST would, in general, not be allowed.
- To the extent feasible, uniform procedure for collection of both Central GST and State GST would be prescribed in the respective legislation for Central GST and State GST.
- The administration of the Central GST would be with the Centre and for State GST with the States.
- The taxpayer would need to submit periodical returns to both the Central GST authority and to the concerned State GST authorities.
- Each taxpayer would be allotted a PAN-linked taxpayer identification number with a total of 13/15 digits. This would bring the GST PAN-linked system in line with the prevailing PAN-based system for Income tax facilitating data exchange and taxpayer compliance. The exact design would be worked out in consultation with the Income-Tax Department.
- Keeping in mind the need of tax payers convenience, functions such as assessment, enforcement, scrutiny and audit would be undertaken by the authority which is collecting the tax, with information sharing between the Centre and the States.
Question 29. How Will Gst Benefit The Common Consumers?
With the introduction of GST, all the cascading effects of CENVAT and service tax will be more comprehensively removed with a continuous chain of set-off from the producer’s point to the retailer’s point than what was possible under the prevailing CENVAT and VAT regime. Certain major Central and State taxes will also be subsumed in GST and CST will be phased out. Other things remaining the same, the burden of tax on goods would, in general, fall under GST and that would benefit the consumers.
Question 30. How Will Gst Benefit The Small Entrepreneurs And Small Traders?
The present threshold prescribed in different State VAT Acts below which VAT is not applicable varies from State to State. The existing threshold of goods under State VAT is Rs. 5 lakhs for a majority of bigger States and a lower threshold for North Eastern States and Special Category States. A uniform State GST threshold across States is desirable and, therefore, the Empowered Committee has recommended that a threshold of gross annual turnover of Rs. 10 lakh both for goods and services for all the States and Union Territories may be adopted with adequate compensation for the States (particularly, the States in North-Eastern Region and Special Category States) where lower threshold had prevailed in the VAT regime.
Keeping in view the interest of small traders and small scale industries and to avoid dual control, the States considered that the threshold for Central GST for goods may be kept at Rs.1.5 crore and the threshold for services should also be appropriately high. This raising of threshold will protect the interest of small traders. A Composition scheme for small traders and businesses has also been envisaged under GST as will be detailed in Answer to Question 14. Both these features of GST will adequately protect the interests of small traders and small scale industries.
Question 31. How Will Gst Benefit The Exporters?
The subsuming of major Central and State taxes in GST, complete and comprehensive set-off of input goods and services and phasing out of Central Sales Tax (CST) would reduce the cost of locally manufactured goods and services. This will increase the competitiveness of Indian goods and services in the international market and give boost to Indian exports. The uniformity in tax rates and procedures across the country will also go a long way in reducing the compliance cost.
Question 32. How Will Gst Benefit Industry, Trade And Agriculture?
GST will give more relief to industry, trade and agriculture through a more comprehensive and wider coverage of input tax set-off and service tax set-off, subsuming of several Central and State taxes in the GST and phasing out of CST.
The transparent and complete chain of set-offs which will result in widening of tax base and better tax compliance may also lead to lowering of tax burden on an average dealer in industry, trade and agriculture.
Question 33. How Can The Burden Of Tax, In General, Fall Under Gst?
The present forms of CENVAT and State VAT have remained incomplete in removing fully the cascading burden of taxes already paid at earlier stages. Besides, there are several other taxes, which both the Central Government and the State Government levy on production, manufacture and distributive trade, where no set-off is available in the form of input tax credit.
These taxes add to the cost of goods and services through tax on tax which the final consumer has to bear. Since, with the introduction of GST, all the cascading effects of CENVAT and service tax would be removed with a continuous chain of set-off from the producer’s point to the retailer’s point, other major Central and State taxes would be subsumed in GST and CST will also be phased out, the final net burden of tax on goods, under GST would, in general, fall. Since there would be a transparent and complete chain of set-offs, this will help widening the coverage of tax base and improve tax compliance. This may lead to higher generation of revenues which may in turn lead to the possibility of lowering of average tax burden.
Question 34. What Is The Justification Of Gst?
There was a burden of tax on tax in the pre-existing Central excise duty of the Government of India and sales tax system of the State Governments. The introduction of Central VAT (CENVAT) has removed the cascading burden of tax on tax to a good extent by providing a mechanism of set off for tax paid on inputs and services upto the stage of production, and has been an improvement over the pre-existing Central excise duty. Similarly, the introduction of VAT in the States has removed the cascading effect by giving set-off for tax paid on inputs as well as tax paid on previous purchases and has again been an improvement over the previous sales tax regime.
But both the CENVAT and the State VAT have certain incompleteness. The incompleteness in CENVAT is that it has yet not been extended to include chain of value addition in the distributive trade below the stage of production. It has also not included several Central taxes, such as Additional Excise Duties, Additional Customs Duty, Surcharges etc. in the overall framework of CENVAT, and thus kept the benefits of comprehensive input tax and service tax set-off out of the reach of manufacturers/dealers. The introduction of GST will not only include comprehensively more indirect Central taxes and integrate goods and services taxes for set-off relief, but also capture certain value addition in the distributive trade.
Similarly, in the present State-level VAT scheme, CENVAT load on the goods has not yet been removed and the cascading effect of that part of tax burden has remained unrelieved. Moreover, there are several taxes in the States, such as, Luxury Tax, Entertainment Tax, etc. which have still not been subsumed in the VAT. Further, there has also not been any integration of VAT on goods with tax on services at the State level with removal of cascading effect of service tax. In addition, although the burden of Central Sales Tax (CST) on inter-State movement of goods has been lessened with reduction of CST rate from 4% to 2%, this burden has also not been fully phased out. With the introduction of GST at the State level, the additional burden of CENVAT and services tax would be comprehensively removed, and a continuous chain of set-off from the original producer’s point and service provider’s point upto the retailer’s level would be established which would eliminate the burden of all cascading effects, including the burden of CENVAT and service tax. This is the essence of GST. Also, major Central and State taxes will get subsumed into GST which will reduce the multiplicity of taxes, and thus bring down the compliance cost. With GST, the burden of CST will also be phased out.
Thus GST is not simply VAT plus service tax, but a major improvement over the previous system of VAT and disjointed services tax a justified step forward.
Question 35. What Are The Major Features Of The Proposed Payment Procedures Under Gst?
The major features of the proposed payments procedures under GST are as follows:-
- Electronic payment process- no generation of paper at any stage
- Single point interface for challan generation- GSTN
- Ease of payment ? payment can be made through online banking, Credit Card/Debit Card, NEFT/RTGS and through cheque/cash at the bank
- Common challan form with auto-population features
- Use of single challan and single payment instrument
- Common set of authorized banks
- Common Accounting Codes.
Question 36. What Are The Major Features Of The Proposed Returns Filing Procedures Under Gst?
The major features of the proposed returns filing procedures under GST are as follows:-
- Common return would serve the purpose of both Centre and State Government.
- There are eight forms provided for in the GST business processes for filing for returns. Most of the average tax payers would be using only four forms for filing their returns. These are return for supplies, return for purchases, monthly returns and annual return.
- Small taxpayers: Small taxpayers who have opted composition scheme shall have to file return on quarterly basis.
- Filing of returns shall be completely online. All taxes can also be paid online.
Question 37. What Are The Major Features Of The Proposed Registration Procedures Under Gst?
The major features of the proposed registration procedures under GST are as follows:-
- Existing dealers: Existing VAT/Central excise/Service Tax payers will not have to apply afresh for registration under GST.
- New dealers: Single application to be filed online for registration under GST.
- The registration number will be PAN based and will serve the purpose for Centre and State.
- Unified application to both tax authorities.
- Each dealer to be given unique ID GSTIN.
- Deemed approval within three days.
- Post registration verification in risk based cases only.
Question 38. What Are The Major Features Of The Constitution (122nd Amendment) Bill, 2014?
The salient features of the Bill are as follows:-
- Conferring simultaneous power upon Parliament and the State Legislatures to make laws governing goods and services tax.
- Subsuming of various Central indirect taxes and levies such as Central Excise Duty, Additional Excise Duties, Service Tax, Additional Customs Duty commonly known as Countervailing Duty, and Special Additional Duty of Customs.
- Subsuming of State Value Added Tax/Sales Tax, Entertainment Tax (other than the tax levied by the local bodies), Central Sales Tax (levied by the Centre and collected by the States), Octroi and Entry tax, Purchase Tax, Luxury tax, and Taxes on lottery, betting and gambling.
- Dispensing with the concept of declared goods of special importance under the Constitution.
- Levy of Integrated Goods and Services Tax on inter-State transactions of goods and services.
- GST to be levied on all goods and services, except alcoholic liquor for human consumption. Petroleum and petroleum products shall be subject to the levy of GST on a later date notified on the recommendation of the Goods and Services Tax Council.
- Compensation to the States for loss of revenue arising on account of implementation of the Goods and Services Tax for a period of five years.
- Creation of Goods and Services Tax Council to examine issues relating to goods and services tax and make recommendations to the Union and the States on parameters like rates, taxes, cesses and surcharges to be subsumed, exemption list and threshold limits, Model GST laws, etc. The Council shall function under the Chairmanship of the Union Finance Minister and will have all the State Governments as Members.
Question 39. How Will It Be Used For The Implementation Of Gst?
For the implementation of GST in the country, the Central and State Governments have jointly registered Goods and Services Tax Network (GSTN) as a not-for-profit, non-Government Company to provide shared IT infrastructure and services to Central and State Governments, tax payers and other stakeholders. The key objectives of GSTN are to provide a standard and uniform interface to the taxpayers, and shared infrastructure and services to Central and State/UT governments.
Question 40. How Will Be Inter-state Transactions Of Goods And Services Be Taxed Under Gst In Terms Of Igst Method?
In case of inter-State transactions, the Centre would levy and collect the Integrated Goods and Services Tax (IGST) on all inter-State supplies of goods and services under Article 269A (1) of the Constitution. The IGST would roughly be equal to CGST plus SGST. The IGST mechanism has been designed to ensure seamless flow of input tax credit from one State to another. The inter-State seller would pay IGST on the sale of his goods to the Central Government after adjusting credit of IGST, CGST and SGST on his purchases (in that order). The exporting State will transfer to the Centre the credit of SGST used in payment of IGST. The importing dealer will claim credit of IGST while discharging his output tax liability (both CGST and SGST) in his own State. The Centre will transfer to the importing State the credit of IGST used in payment of SGST.Since GST is a destination-based tax, all SGST on the final product will ordinarily accrue to the consuming State.
Question 41. How Would Gst Be Administered In India?
Keeping in mind the federal structure of India, there will be two components of GST . Central GST (CGST) and State GST (SGST). Both Centre and States will simultaneously levy GST across the value chain. Tax will be levied on every supply of goods and services. Centre would levy and collect Central Goods and Services Tax (CGST), and States would levy and collect the State Goods and Services Tax (SGST) on all transactions within a State. The input tax credit of CGST would be available for discharging the CGST liability on the output at each stage. Similarly, the credit of SGST paid on inputs would be allowed for paying the SGST on output. No cross utilization of credit would be permitted.
Question 42. What Are The Major Milestones Pertinent To Gst Bill Introduction In India?
GST is being introduced in the country after a 13 year long journey since it was first discussed in the report of the Kelkar Task Force on indirect taxes.
A brief chronology outlining the major milestones on the proposal for introduction of GST in India is as follows:-
- In 2003, the Kelkar Task Force on indirect tax had suggested a comprehensive Goods and Services Tax (GST) based on VAT principle.
- A proposal to introduce a National level Goods and Services Tax (GST) by April 1, 2010 was first mooted in the Budget Speech for the financial year 2006-07.
- Since the proposal involved reform/ restructuring of not only indirect taxes levied by the Centre but also the States, the responsibility of preparing a Design and Road Map for the implementation of GST was assigned to the Empowered Committee of State Finance Ministers (EC).
- dBased on inputs from Govt of India and States, the EC released its First Discussion Paper on Goods and Services Tax in India in November, 2009.
- In order to take the GST related work further, a Joint Working Group consisting of officers from Central as well as State Government was constituted in September, 2009.
- In order to amend the Constitution to enable introduction of GST, the Constitution (115th Amendment) Bill was introduced in the Lok Sabha in March 2011. As per the prescribed procedure, the Bill was referred to the Standing Committee on Finance of the Parliament for examination and report.
- Meanwhile, in pursuance of the decision taken in a meeting between the Union Finance Minister and the Empowered Committee of State Finance Ministers on 8th November, 2012, a ?Committee on GST Design?, consisting of the officials of the Government of India, State Governments and the Empowered Committee was constituted.
- This Committee did a detailed discussion on GST design including the Constitution (115th) Amendment Bill and submitted its report in January, 2013. Based on this Report, the EC recommended certain changes in the Constitution Amendment Bill in their meeting at Bhubaneswar in January 2013.
- The Empowered Committee in the Bhubaneswar meeting also decided to constitute three committees of officers to discuss and report on various aspects of GST as follows:-
- Committee on Place of Supply Rules and Revenue Neutral Rates.
- Committee on dual control, threshold and exemptions.
- Committee on IGST and GST on imports.
The Parliamentary Standing Committee submitted its Report in August, 2013 to the Lok Sabha. The recommendations of the Empowered Committee and the recommendations of the Parliamentary Standing Committee were examined in the Ministry in consultation with the Legislative Department. Most of the recommendations made by the Empowered Committee and the Parliamentary Standing Committee were accepted and the draft Amendment Bill was suitabl revised.
- The final draft Constitutional Amendment Bill incorporating the above stated changes were sent to the Empowered Committee for consideration in September 2013.
- The EC once again made certain recommendations on the Bill after its meeting in Shillong in November 2013. Certain recommendations of the Empowered Committee were incorporated in the draft Constitution (115th Amendment) Bill.The revised draft was sent for consideration of the Empowered Committee in March, 2014.
- The 115th Constitutional (Amendment) Bill, 2011, for the introduction of GST introduced in the Lok Sabha in March 2011 lapsed with the dissolution of the 15th Lok Sabha.
- In June 2014, the draft Constitution Amendment Bill was sent to the Empowered Committee after approval of the newGovernment.
- Based on a broad consensus reached with the Empowered Committee on the contours of the Bill, the Cabinet on 17.12.2014 approved the proposal for introduction of a Bill in the Parliament for amending the Constitution of India to facilitate the introduction of Goods and Services Tax (GST) in the country. The Bill was introduced in the Lok Sabha on 19.12.2014, and was passed by the Lok Sabha on 06.05.2015. It was then referred to the Select Committee of Rajya Sabha, which submitted its report on 22.07.2015.
Question 43. Which Taxes At The Centre And State Level Are Being Subsumed Into Goods And Services Tax (gst)?
At the Central level, the following taxes are being subsumed:-
- Central Excise Duty,
- Additional Excise Duty,
- Service Tax,
- Additional Customs Duty commonly known as Countervailing Duty, and
- Special Additional Duty of Customs.
At the State level, the following taxes are being subsumed:-
- Subsuming of State Value Added Tax/Sales Tax,
- Entertainment Tax (other than the tax levied by the local bodies), Central Sales Tax (levied by the Centre and collected by the States),
- Octroi and Entry tax,
- Purchase Tax,
- Luxury tax, and
- Taxes on lottery, betting and gambling.
Question 44. What Are The Benefits Of Goods And Services Tax (gst)?
The benefits of GST can be summarized as under:-
For business and industry:
- Easy compliance: A robust and comprehensive IT system would be the foundation of the GST regime in India. Therefore, all tax payer services such as registrations, returns, payments, etc. would be available to the taxpayers online, which would make compliance easy and transparent.
- Uniformity of tax rates and structures: GST will ensure that indirect tax rates and structures are common across the country, thereby increasing certainty and ease of doing business. In other words, GST would make doing business in the country tax neutral, irrespective of the choice of place of doing business.
- Removal of cascading: A system of seamless tax-credits throughout the value-chain, and across boundaries of States, would ensure that there is minimal cascading of taxes. This would reduce hidden costs of doing business.
- Improved competitiveness: Reduction in transaction costs of doing business would eventually lead to an improved competitiveness for the trade and industry.
- Gain to manufacturers and exporters: The subsuming of major Central and State taxes in GST, complete and comprehensive set-off of input goods and services and phasing out of Central Sales Tax (CST) would reduce the cost of locally manufactured goods and services. This will increase the competitiveness of Indian goods and services in the international market and give boost to Indian exports. The uniformity in tax rates and procedures across the country will also go a long way in reducing the compliance cost.
For Central and State Governments:
- Simple and easy to administer: Multiple indirect taxes at the Central and State levels are being replaced by GST. Backed with a robust end-to-end IT system, GST would be simpler and easier to administer than all other indirect taxes of the Centre and State levied so far.
- Better controls on leakage: GST will result in better tax compliance due to a robust IT infrastructure. Due to the seamless transfer of input tax credit from one stage to another in the chain of value addition, there is an in-built mechanism in the design of GST that would incentivize tax compliance by traders.
- Higher revenue efficiency: GST is expected to decrease the cost of collection of tax revenues of the Government, and will therefore, lead to higher revenue efficiency.
For the Consumers:
- Single and transparent tax proportionate to the value of goods and services: Due to multiple indirect taxes being levied by the Centre and State, with incomplete or no input tax credits available at progressive stages of value addition, the cost of most goods and services in the country today are laden with many hidden taxes. Under GST, there would be only one tax from the manufacturer to the consumer, leading to transparency of taxes paid to the final consumer.
- Relief in overall tax burden: Because of efficiency gains and prevention of leakages, the overall tax burden on most commodities will come down, which will benefit consumers.
Question 45. What Is Goods And Services Tax (gst)? How Does It Work?
- Goods and Services Tax (GST) is one indirect tax for the whole nation, which will make India one unified common market.
- GST is a single tax on the supply of goods and services, right from the manufacturer to the consumer. Credits of input taxes paid at each stage will be available in the subsequent stage of value addition, which makes GST essentially a tax only on value addition at each stage. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages.
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