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B.COM:–III PROJECT STRUCTURE OF GST IN INDIA NAME:- GOURAV PAREEK
2017
[TYPE
THE COMPANY ADDRESS]
1
1
INDEX Name of the chapter Introduction
Indirect taxation
Introduction to GST
Registration
Input tax credit
Payment
Sl. No.
Topics
1.1
Background
1.2
Outline of GST introduced in India
1.3
Previous tax structure of India
2.1
Evolution of indirect taxation
2.2
India’s tax regime
2.3
Rational for GST
3.1
Emergence of GST in India
3.2
Overview of GST
3.3
Benefits of GST
4.1
Person liable for registration
4.2
Compulsory registration in certain cases
4.3
Procedure for registration
5.1
Meaning of Input tax credit
5.2
Apportionment of credit & block credit
5.3
Availability of credit in special circumstances
6.1
Payment of tax, interest, penalty and other
Pg. No.
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INTRODUTION 1.1
Background
Taxation is one of the vital components of development of any country. The revenue from taxation is used to finance public goods and services such as infrastructure, sanitation, transportation and all other amenities which are provided by the Government. From the view of economists, a tax is non penal, yet compulsory. Transfer of resources from the private to public sector levied on the basis of predetermined criteria and without reference to specific benefit received. Each rupee of tax contributed helps government to provide better infrastructure, rural revival and social well being. Taxation is also considered as a major tool available to government for removing poverty and inequality of the society. On the other hand tax reforms are t he essential component of any comprehensive strategy for structural adjustment & resumption of growth. There are two types of taxes levied in India :1. Direct taxes: - this tax is directly levied on the income, profession, etc., and the tax burden cannot be passed or shifted to other person. 2. Indirect taxes: - this tax is paid indirectly to the government by the ultimate consumer of the goods and services. In indirect tax immediate burden is on the one person and the ultimate burden is on the other person. Goods and Services Taxes (GST) was rolled outs in India with e ffect from 1st July, 2017. GST is the greatest tax reforms in India. It transforms the system of taxation and tax administration into a digital world by adopting the latest information technology. With the introduction of GST India has joined the club of development and progressing nations which are already behaving a common tax on goods and services.
1.2
OUTLINES OF GST INTRODUCED IN INDIA
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1. GST model adopted from – CANADA. 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
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The first country to implement GST is France. India has the highest tax slab in the world i.e. 28%, next is Argentina at 27%. Around 160+ countries have adopted GST. Indian GST has four rate structure, viz. 5%, 12%, 18%, and 28%, with CESS on sin goods and luxury items, and 3% special rate on precious metal like gold. GST has five taxes under 5 legislations, central GST, Sta te GST, Integrated GST, Union Territory GST and compensation CESS. IGST, compensation CESS and CGST charged by the central government. All taxation policies and there implementations will be based on the recommendation on the GST councils. Supply of taxable items under GST. GST bill was introduced under 122 nd constitutional amendment bill, but passed under constitutional act, 2016 Assam was the first state to ratify the GST but Telengana was the first state to pass state GST bill. GST was constituted with its headquarter in Delhi. The union finance minister will be the chair person. State finance minister will be the members, one among them will the chair person of the st ate. 1st July will be observed as the GST day as announced by the CBEC. The threshold limit of the GST is 20 lakhs, for some special category states is 10 lakhs There is a compensation scheme available to suppliers. The limit is ₹1 crore. For some special category state it is ₹ 75 lakhs. The scheme is not available to service suppliers with the exception of restaurants. There is special purpose vehicle called GSTN to the carter to the IT needs of GST. GSTN comes under the companies act 2013 with combined stake of central and state governments is 49%. The rest will be financed by the LIC with 11% and ICICI bank, HDFC bank, and NSE strategic investment corporation with 10% each.
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17.1 Previous tax structure
Previous tax structures were somewhat outdated and have some challenges which need to be addressed. Some of the challenges under the precious indirect tax s tructures could be attributed to central excise where in there are variable rate in Excise duty such as 2% without CENVAT 6%, 10%, 18%, 24%, 27%, coupled with multiple valuation system and various system and various exemption, Further under VAT many states are charging VAT at different rates, which are resulting in imbalance of trade between the states. At the same time under VAT, there was lack of uniformity in terms of registration, due dates of pa yments, return filling assessment procedures, refund mechanism, appellate process etc., Few such challenges were listed below: 1. In taxation of goods, CENVAT was confined to the manufacturing stage and did not intend to the distribution chain beyond the factory gate. As such, CENVAT paid on goods could not be adjusted against the state vat payable on subsequent sale of goods. This was true for both for CENVAT collected domestically produced goods as well as the collecte d as the additional duty of customers on imported goods. 2. CENVAT was itself made up of several components in the nature of CESSESS and SURCHARGES such as the National calamity contingency duty (NCCD), education and higher education cess, additional duty of excise on tobacco and tobacco products etc. This multiplicity of duty complex the tax structures and often used to obstruct the smooth flow of tax credit.
3. While input tax credit of CENVAT or additional duty of customer paid on goods was available to service providers paying service tax, they were unable to neutralize the state VAT or other state taxes paid on the purchase of goods. 4. State VAT was payable on the value of goods inclusive of CENVAT paid at the manufacturing stage and thus the VAT liability of a dealer used to get inflated by this components without compensatory setoff.
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5. Inter-state sale of goods was liable to the Central Sales Tax (CST) levied by the centre and collected by the states. This was an origin based tax and could not be sate-off against VAT in many situations. 6. State VAT and CST were not directly applicable to the import of goods on which special additional duties (SAD) of customers were levied on a uniform rate of 4% by the centre. Input tax credit of these duties was only applicable to only manufacturing excisable goods. Other importers had to claim r efunds of this duty as when they pay VAT on subsequent sales.
7. VAT dealers were unable to set-off any service tax that they may have paid on their procurement of taxable input services. 8. State governments also levied and collected a vari ety of indirect taxes such as luxury tax, entry tax, etc., for which no set-off was available. The above issues have been successfully addressed t o large extent.
INDIRECT TAXATION 2.1 Evolution of indirect Taxation system in India
Goods were subjected to tax by both centre and states. Up t o the manufactures stage central government was collecting excise duty except alcohol for human consumption, narcotics drugs, etc., on which stat e excise was being imposed. Even after GST roll out, states will continue to enjoy state excise duty and sales tax on liquors. States have exclusive powers to collect tax on both intra-state and inter-state sales. service tax was levied and collected by the union government exclusively. There were plenty of taxes collected by the state governments on various subjects li ke luxury tax, purchase tax, entry tax and so on. The following tables illustrates the previous arrangements of taxation :
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TAX
TAX LAW
Customs duty Central excise duty
Customs act, 1962 Central excise act 1944 Central sales tax act, 1956 Finance act, 1994 State VAT act
Central sales tax Service tax VAT
TAXABLE EVENT Import/exports Manufacture
TAX COLLECTION Central govt. Central govt.
Inter-state sale
State govt.
Taxable service Intra-state sale
Central govt. State govt.
2.2 INDIA’S TAX REGIME In India the power for taxation has been divided between centre and state under article 246 of the constitution. As per the said article the centre has power to tax under list I of the Schedule VII of the constitution, the state can tax under list II of the schedule and both can make law under list III of the schedule. Therefore, there is a clearly defined and multiple tax regime in India.
Taxation structure existing in country:Taxes levied by Centre
Taxes Levied by State
Value Added Tax( state sales tax)
Central Excise and Custom
Local taxes
Service Tax Direct Taxes
Prior to the introduction of VAT in the Centre and in the States, there was a burden of multiple taxation in the pre-existing Central excise duty and the State sales tax systems. Before any commodity was produced, inputs were first taxed, and then after the commodity got produced with input tax load, output was taxed again. This was causing a burden of multiple taxation (i.e. “tax on tax”) with a cascading effect. Moreover, in the sales tax structure, when there was also a system of multi-point sales taxation at subsequent levels of distributive trade, then along with input tax load, burden of sales tax paid on purchase at each level was also added, thus aggravating the cascading effect further.
In India, VAT was introduced at the Central level for a selected number of commodities in terms of MODVAT
with
effect
from
March
1,
1986,
and
in
a
step-by-step manner for all commodities in terms of CENVAT in 2002-03. Subsequently, after
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Constitutional Amendment empowering the Centre to levy taxes on services, these service taxes were also added to CENVAT in 2004-05. When VAT is introduced in place of Central excise duty, a set-off is given, i.e., a deduction is made from the overall tax burden for input tax. In the case of VAT in place of sales tax system, a set-off is given from tax burden not only for input tax paid but also for tax paid on previous purchases. With VAT, the problem of “tax on tax” and related burden of cascading effect is thus removed. . Before introduction of VAT, in the sales tax regime, apart from the problem of multiple taxation and burden of adverse cascading effect of taxes as already mentioned, there was also no harmony in the rates of sales tax on different commodities among the States. Not only were the rates of sales tax numerous (often more than ten in several States), and different from one another for the same commodity in different States, but there was also an unhealthy competition among the States in terms of sales tax rates – so-called “rate war” – often resulting in, revenue-wise, a counter productive situation. It is in this background that attempts were made by the States to introduce a harmonious VAT in the States, keeping at the same time in mind the issue of sovereignty of the States regarding the State tax matters. The States started implementing VAT beginning April 1, 2005.
After overcoming the initial
difficulties, all the States and Union Territories have now implemented VAT.
2.3 Rationale for GST Despite this success with VAT, there are still certain shortcomings in the structure of VAT both at the Central and at the State level. The shortcoming in CENVAT of the Government of India are as follows:
non-inclusion of several Central taxes in the overall framework of CENVAT, such as additional customs duty, surcharges, etc., and thus keeping the benefits of comprehensive input tax and service tax set-off out of reach for manufacturers/dealers.
no step has yet been taken to capture the value-added chain in the distribution trade below the manufacturing level in the existing scheme of CENVAT.
The introduction of GST at the Central level will not only include comprehensively more indirect Central taxes and integrate goods and service taxes for the purpose of set-off relief, but may also lead to revenue gain for the Centre through widening of the dealer base by capturing value addition in the distributive trade and increased compliance.
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In the existing State-level VAT structure there are also certain shortcomings as follows:
several taxes which are in the nature of indirect tax on goods and services, such as luxury tax, entertainment tax, etc., have yet not been subsumed in the VAT.
CENVAT load on the goods remains included in the value of goods to be taxed under State VAT, and contributing to that extent a cascading effect on account of CENVAT element.
non integration of VAT on goods with tax on services at the State level and cascading effect of service tax.
In the GST, both the cascading effects of CENVAT and service tax are removed with set-off, and a continuous chain of set-off from the original producer’s point and service provider’s point upto the retailer’s level is established which reduces the burden of all cascading effects. GST is not simply VAT plus service tax but an improvement over the previous system of VAT and disjointed service tax.
Implementation of GST will also remove several roadblocks in the existing taxation system in India. Some of these are: a)Tax cascading – The Goods and Services Tax Act will overcome the problem of tax- cascading
through input tax credit mechanisms. Under this system, sellers or vendors of goods and services are eligible to avail tax credits on the amount of GST paid to eligible procurements. Manufacturers can avail credits for the GST paid to procure inputs, capital goods and services used in the manufacturing process. In the same way, wholesalers and retailers can avail credits for the GST paid on procurement of stock. But the final customer who purchases the product for consumption will not be able to avail and utilize any tax credit. Tax cascading can be understood by the following example:A tax is applied on a particular product at each stage and and no credit is available, then tax will be charged at each stage whenever a good or service changes hands. In other words, tax is applied several times and is charged even on the tax which forms part of the inputs. The following taxes will be applied to the product:
While purchasing inputs i.e. raw materials for the product, the manufacturer pays sales tax.
When a wholesaler purchases the product from the manufacturer, then he pays tax on procurement of the product.
When the retailer purchases the product from the wholesaler, the wholesale again charges tax.
Lastly, the customer purchases the product from the retailer; the retailer again charges a tax. This layering of sales tax will significantly increase the final sales price as each party in the supply chain increases the price of the product to recover the tax they paid. The cascading effect will increase then tax is paid on tax.
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There are a large number of products and range of services that are outside the ambit of CENVAT and service tax. The exempts sectors are not allowed to claim any credit of the input tax. In the same way, under the state VAT, no credits are allowed for the inputs procured and used towards exempted sectors. Non-eligibility for availment of credits leads to tax cascading. Due to large number of exemptions, the effect of tax cascading in India is significantly high. b) Complexity – Presently in India, for taxing sale of goods, there is Central Sales tax and
respective VAT Acts for each state and Union territory. The Goods and Services Tax will remove this complication by having a unified code for implementation of State GST in different states. The GST will not only subsume a large number of indirect taxes but also solve the classification issues by introducing only one or two rates of tax. Other than this there would be categories that are exempted or zero rated. Presently the activities in a supply chain are subject to several taxes. For example – the manufacture of goods is subject to excise duty and sale of these manufactured goods is subject to state VAT or CST. The GST will ensure uniform single tax across the entire supply chain. c) Double taxation – The GST will not make any difference between goods and services as GST will
be levied at each stage in the supply chain. This will help in solving the problem of doubl e taxation. The issue is not only between the taxes of customs duties, excise duties and service tax but also between service tax and VAT. The issue of double taxation was addressed by the Honorable Supreme Court in the case of BSNL vs. UOI (2006(3)SCC-1), wherein the Court held that the same activity cannot be regarded as both goods and services and hence both service tax and VAT should not be applicable on the same set of transactions. The implementation of GST will resolve the dilemma of a large number of assessee who are not sure of application of the type of tax on certain specified transactions like software development, sale of sim cards by telecom operators, online subscription of newspapers, value added services provided by telecom operators, right to distribute movies etc. d) Composite contracts – There are a large number of works contracts which involve the supply of
goods and services which are available to customers under different supply chain arrangements. Such situations arise in a gap or overlapping in taxation of goods and services as the States do not have the power to impose tax on services and the Centre does not have the power to impose tax on sale of goods within the state. In such cases, a comprehensive solution can be provided only by implementation of GST. e)Revenue growth- The introduction of GST along with prudent accounting policies, transparency
and supported by a robust electronic controls will bring down the peak rates of taxation and enhance revenue growth. This can be understood by the following table by comparing the present rates of tax and the proposed GST.
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Goods from producer to wholesaler
Present taxes (Rs.)
GST (Rs.)
Cost of production
80,000
80,000
Producers margin of profit
20,000
20,000
Producer’s price
1,00,000
1,00,000
Central Excise duty at 14%
14,000
Nil
VAT at 12.5%
14250
Nil
Central GST at (expected rate )12%
Nill
12,000
State GST at (expected rate) 8% Total Price
Nill
8,000
1,28,250
1,20,000
Goods from wholesaler to retailer
Present taxes (Rs.)
GST (Rs.)
Cost of goods to wholesaler
1,14,000
1,00,000
Profit margin at 5% Total
5,700
5,000
1,19,700
1,05,000
VAT at 12.5%
712.5
Nill
Central GST (expected rate )12%
Nil
600
State GST at (expected rate) 8% Total
Nill
400
1,20,412.5
1,06,000
Goods from retailer to final consumer
Present taxes (Rs.)
GST (Rs.)
Cost of goods to wholesaler
1,20,412.5
1,06,000
Profit margin at 10% Total
12,041.25
10,500
1,32,453.75
1,16,500
VAT at 12.5%
1,505.15
Nill
Central GST (expected rate )12%
Nill
1,050
State GST at (expected rate) 8% Total price to the final consumer
Nill
840
1,33,958.9
1,18,390
Tax component in the price to the final consumer
30,467.65
22,890
Final price exclusive of taxes
1,03,491.25
95,500
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2.2 EMERGENCE OF GST IN INDIA
The gst is in nearly in 160+ countries and in 19584, France was the first country to introduce GST. As the tax ensure various benefits, its introduction has been in the agenda of the country of every ruling party. The journey to introduce GST in India has been long and its a result of larger section in society, particularly, trade and industry and the foreign establishments who have business interests in India. when the government of India set up the empowered committee of state finance ministers with Hon’b le state finance ministers of west Bengal, Karnataka , Madhya Pradesh, Maharashtra, Punjab, Uttar Pra desh, Gujarat, Delhi, and Meghalaya, as members, it had the following objectives :
To monitor the implementation of uniform floor rates of sales tax by states and union territories. To monitor the phasing out of the sales tax based incentive schemes; to decide milestone and methods of states to switch over to VAT; and
To monitor reforms in the central sales tax system existing in the country. Subsequently honourable state finance ministers of Assam, Tamil Naidu, Jammu & Kashmir, Jharkhand and Rajasthan were also notified as the members of the empowered committee.
On august 12, 2004, the government of India decided to reconstruct the Empowered committee with all the honourable finance/taxation ministers of states as its members. Later on, it was decided to register the body as a society under the society registration act, 1860. GST has been in the pipe line for a long time, for its passage and implementation. Here is the brief flash back mirroring the key milestones of the journey in India:
2003: The kelkar task force of indirect taxes had suggested a comprehensive goods and service tax (GST) based on VAT principle. February 2007: an announcement was made by the union finance minister in the central budget (200708) to the effect that GST would be introduced with the effect from April 07, 2010.
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September, 2009: the empowered committee (EC) decided to constitute a working group consisting of principle secretaries/(finance/taxation) and commissioner of trade taxes of all states/UTs to give their recommendation on : I. II. III.
The commodities and services that should be kept in the exempted l ist. The rules and principles and taxing the transaction of ser vices including the transaction of interstate services, and Finalization of the model suggested for inter-state transaction/movement of goods including stock transfers in consultation with the state bank of India and some other nationalised banks.
November, 2009: based on ther inputs of Government(s) of centre and st ates, Empowred committee realised its First discussion paper on GST. March, 2011: The constitution(One hundred and fifteen amendment) bill, 2011to give concurrent taxcing powers to the union and states was introduced in lok shabha. The bill s uggested the creation of goods and service tax councils and a Goods and Service tax dispute settlement authority. The bill was lapsed in 2014 and was replaced in the the constitution (122 nd amendment) Bill, 2014. November 2012: A “committee on GST design”, consisting of the official of t he government of India, State government and empowred committee was constituted. January 2013: The Empowered committee deliberated on the proposed design including the constitution (115th) Amendment bill and submitted the report. Based on the report. the EC recommended the certain changes in the amendment constitution bill and decided to constitute three below mentioned committees of officer to discuss and report on various aspect of GST: i. Committee on place of supply Rules and Revenue Neutral Rates ; ii. Committee on dual control, threshold and exemptions; iii. Committee on IGST and GST on imports. March 2013: a not for profit, non government, private limited company was incorporated in the n ame of Goods and service Tax Network (GSTN) and special purpose vehicle setup by the Government primarily to provide IT infrastructure and serviced to the central and state governments, Tax payers and other stakeholders for implementation of the Goods and Service Tax (GST). August, 2013: The parliamentary standing committee submitted its report to the Lok Sabha. The recommendation of the Empowered committee and the recommendation of the parliamentar y standing committee were examined by the ministry in the consultati on with the legislative department. Most of the recommendation made by the Empowered committee and the parliamentary standing committee were accepted and the draft Amendment bill was suitably revised. September, 2013: the final draft constitutional amendment bill incorporating the above stated changes was sent to the Empowered committee (EC) for consideration. November, 2013: the EC once again made certain recommendation on the bill after its meeting in the shilling. Certain recommendation on which were incorporated in the draft constitution (115 th amendment) bill and the revised draft was again sent to the empowered committee for its consideration. June, 2014: the draft constitution amendment bill in March 2014 was sent to the Empowered committee after approval of the new government. December, 2014: the constitution (122 nd amendment) bill 2014 seeking to amend the constitution to introduce the Goods and Service Tax (GST) and subsume the state value added Tax, octroi and entry tax , luxury tax etc, was introduced in the Lok Sabha on December 19, 2014by the honourable finance minister of India Mr. Arun Jaitley.
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May, 2015: constitutional amendment bill (122 nd) was passed by lok sabha on July 22, 2015. May, 2015: In rajya sabha the bill was referred to a 21-members select committee of rajya sabha on June 22, 2015. July, 2015: select committee submitted its report to rajya sabha on 22 nd July, 2015. June, 2016: on June 2016 the ministry of finance released draft model on GST in public domain with certain amendments. August, 2016: on august, 03 2016 the constitution (122 nd amendment) bill, 2014 was passed by Rajya sabha with certain amendments. August 2016: The changes made by the Rajaya sabha were unanimously passed by lok sabha , on August, 08 2016. September, 2016: The bill was adopted by majority of state legislature where approval of atleast 50% of the state assembly was required. September, 2016: Final assent of the Hon’ble president of India was given on 8 th September 2016. April, 2017: Parliament passes the following four bills: (i) Central goods and service tax (CGST) bill (ii) Integrated goods and service tax(IGST) bill (iii)Union territory goods and services(UTGST) bill (iv)Goods and service tax (compensation to states) bill
April, 2017: President assent was given to four key lesistation on goods and service tax.
July, 2017: on 1st July 2017 GST becomes a reality
Overview of GST WHAT IS GOODS AND SERVICE TAX ? 5.1 Goods and Service Tax is a tax on goods and services, which is leviable at each point of sale or
provision of service, in which at the time of sale of goods or providing the services the seller or service provider can claim the input credit of tax which he has paid while purchasing the goods or procuring the service.
HOW WILL IT WORK? 5.2 GST will be paid at each step till final distribution stage. It will be charged by
dealers(manufacturer, trader and service provider) on the price of goods and services. While GST is paid at each step in the supply chain of goods and services, the paying dealers don’t actually bear the burden of the tax because GST is an indirect tax and ultimate burden of the GST has to be taken by the last Customer. This is because they include GST in the price of the goods and services they sell and can claim credits for the most GST included in the price of goods and services they buy. The cost of GST is borne by the final consumer, who can’t claim GST credits, i.e. input credit of the tax paid.
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The working of GST with respect to manufacturer, trader and consumer can be seen in the illustrations given below. The manufacturers will get the input credit of all the taxes paid by them on the raw material and also on t he services.
Let us assume the rate of GST is 16 percent and a toy manufacturer used following inputs for manufacturing toys and sells the goods at Rs 120 lakh to trader:-
Manufacturer Item no 1 2 3
Particulars
(Rs
Amount
Raw material Stores and spares Services Total value of inputs
Rate of tax
(
Input tax paid
in lakhs)
in percent)
(R s in lakhs)
50 25 25 100
16 16 16
8 4 4 16
The output tax to be paid Sale Value
Rate of tax
( in percent)
output tax to be paid
(R s in lakhs) Rs 120 lakh
16
19.2
Net Tax payable by manufacturer
Total output tax to be paid
Rs 19.2 lakh
Total Input tax Paid
Rs 16 lakh
Net Tax to be Paid
Rs 3.2 lakh
Suppose trader use services amounting to Rs 5 lakh paying service tax at rate of 16 percent amounting to Rs 0.8 lakh. Therefore total input tax paid by trader is:-
Trader Item no 1 2
Particulars
Amount
Goods purchased from manufacturer Services Total value of inputs
(Rs
Rate of tax
(
Input tax paid
in lakhs)
in percent)
(R s in lakhs)
120
16
19.2
5 125
16
0.8 20
If trader sell goods to consumer by adding Rs 5 lakh pr ofit margin .The output tax payable by trader is :Sale Value
Rate of tax
( in percent)
output tax to be paid
(R s in lakhs) Rs 130 lakh
16
20.8
15
Net Tax payable by Trader
Total output tax to be paid Total Input tax Paid Net Tax to be Paid
Rs 20.8 lakh Rs 20 lakh Rs 0.8 lakh
Net Tax payable by consumer
Sale Value
Rate of tax
( in percent)
output tax to be paid
(R s in lakhs) Rs 130 lakh
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20.8
From the above illustration it can be seen that the manufacturer and the trader gets credit of the tax paid on good and services and had to pay tax on value added only. Further, the government will get tax of Rs 20.8 lakh which is tax on final sale value of the product though from different sources as detailed below:-
Description
Output tax (Rs in lakh)
Input tax credit (Rs in lakh)
Raw material supplier Stores and spares supplier Service provider I Manufacturer Service Provider II Trader Total Tax payable to Government
8
0
Net tax payable to government (Rs in lakh) 8
4
0
4
4 19.2 0.8 20.8
0 16 0 20
4 3.2 0.8 0.8 20.8
16
composition of manufacturer and dealer
25 20
19.2
20.8
20
16 Output Tax
15
Input Tax Credit
10
Net Tax Payable
5
3.2 0.8
0 Manufacturer
Trader
Composition of tax paid by the consumer
0.8
0.8
3.2 8
raw material stores& spares service providerI manufacturer service providerII
4
trader
4
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Benefits of GST Benefits for centre
As per the existing taxation system the centre does not has power to tax on production of goods. The power to levy tax on sales rests with state except in case of inter state sales. Therefore, introduction of GST would empower centre to tax sales also. Benefits of GST for Centre: Increase in GDP Increase in exports Power to tax after production down to distribution point Ensures better compliance and prevent tax evasion
Benefits to state
There is no uniformity in rate of taxes among the states. Even after i ntroduction of VAT there are different rates of tax in different states. Therefore, there was rate war among states. GST will lead to uniformity in tax rates. Other benefits for state are:-
Benefits for states Will get power to tax services Will reduce rate wars, therefore, outflow of investment to other states due to rate war will be prevented Introduction of comprehensive system of reliefs including set off of CENVAT and service taxes Increase in revenue due to broadening of tax base Removal of burden of CST
Benefits to industry Benefits to industry Will provide comprehensive input tax credit, the service tax can be set off with sales tax No need to pay CST Many central and state indirect taxes will be subsumed in GST, therefore, a single tax is to be paid. Uniformity in tax procedure throughout the country Reduced tax burden will increase competitiveness of Indian products in foreign markets
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Benefits to consumer Benefits to consumer Reduced tax burden will be passed on to consumers in form of reduced prices. Better compliance and increased tax revenue will enable the government to spend more on welfare
The GST at the Central and at the State level will thus give more relief to industry, trade, agriculture and consumers through a more comprehensive and wider coverage of input tax set-off and service tax set-off,
subsuming
of
several
taxes
in
the
GST
and
phasing
out of CST. With the GST being properly formulated by appropriate calibration of rates and adequate compensation where necessary, there may also be revenue/ resource gain for both the Centre and the States, primarily through widening of tax base and possibility of a significant improvement in tax compliance. In other words, the GST may usher in the possibility of a collective gain for industry, trade, agriculture and common consumers as well as for the Central Government and the State Governments. The GST may, indeed, lead to the possibility of collectively positive-sum game.
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REGISTRATION 3.1 Persons liable for registration:
(1) Every supplier shall be liable to be registe red under this Act in the State or Union territory, other than special category States, from where he makes a taxable supply of goods or services or both, if his aggregate turnover in a financial year exceeds twenty lakhs rupees: Provided that where such person makes taxable supplies of goods or services or both from any of the special c ategory States, he shall be liable to be registered if his aggregate turnover in a financial year exceeds ten lakh rupees. (2) Every person who, on the day immediately preceding the appointed day, is registered or holds a licence under an erstwhile law, shall be liable to be registered under this Act with effect from the appointed day. (3) Where a business carried on by a taxable person registered under this Act is transferred, whether on account of succession or otherwise, to another person as a going concern, the transferee or the successor, as the case may be, shall be liable to be registered with effect from the date of such transfer or succession. (4) Notwithstanding anything contained in sub-sections (1) and (3), in a case of transfer pursuant to sanction of a scheme or an arrangement for amalgamation or, as the case may be, demerger of two or more companies pursuant to an order of a High Court, Tribunal or otherwise, the transferee shall be liable to be registered, with effect from the date on which the Registrar of Companies issues a certificate of incorporation giving effect to such order of the High Court or Tribunal. Persons not liable for registration : (1) The following persons shall not be liable to registration, namely: – (a) any person engaged exclusively in the business of supplying goods or services or both that are not liable to tax or wholly exempt from tax under this Act or under the Integrated Goods and Services Tax Act; (b) an agriculturist, to the extent of supply of produce out of cultivation of land. (2) The Government may, on the recommendations of the Council, by notification, specify the category of persons who may be exempted from obtaining registration under this Act. Central Government vide
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Notification No. 05/2017-Central Tax, dt. 19-06-2017 has w.e.f 22nd June 2017 amended section 23 of CGST Act, 2017 to include the persons who are only engaged in making supplies of taxable goods or services or both, the total tax on which is liable to be paid on reverse charge basis by the recipient of such goods or services or both under section 9(3) of the CGST Act, 2017 in the categor y of persons exempted from obtaining registration under the aforesaid Act.
3.2 Compulsory registration in certain cases: Following categories of persons shall be required to be re gistered under this Act, –– i. ii. iii. iv. v. vi. vii. viii. ix.
x. xi. xii.
persons making any inter-State taxable supply; casual taxable persons making taxable supply; persons who are required to pay tax under reverse charge; person who are required to pay tax under sub-section (5) of sec 9 non-resident taxable persons making taxable supply; persons who are required to deduct tax under section 51, whether or not separately registered under this Act; persons who make taxable supply of goods or services or both on behalf of other taxable persons whether as an agent or otherwise; Input Service Distributor, whether or not separately registered under this Act; persons who supply goods or services or both, other than supplies specified under sub-section (5) of section 9, through such electronic commerce operator who is required to collect tax at source under section 52; every electronic commerce operator; every person supplying online information and database access or retrieval services from a place outside India to a person in India, other than a registered person; and such other person or class of persons as may be notified by the Government on the recommendations of the Council.
3.3 Procedure for registration (1)
(2)
(3)
Every person who is liable to be registered under section 22 or section 24 shall apply for registration in every such State or Union territory in which he is s o liable within thirty days from the date on which he becomes liable to registration, in such manner and subject to such conditions as may be prescribed: Provided that a casual taxable person or a non-resident taxable person shall apply for registration at least five days prior to the commencement of business. Explanation. — Every person who makes a supply from the territorial waters of India shall obtain registration in the coastal State or Union territory where the nearest point of the appropriate baseline is located. A person seeking registration under this Act shall be granted a single registration in a State or Union territory: Provided that a person having multiple business verticals in a State or Union territory may be granted a separate registration for each business vertical, subject to such conditions as may be prescribed. A person, though not liable to be registered under section 22 or section 24 may get himself registered voluntarily, and all provisions of this Act, as are applicable to a registered person, shall apply to such person.
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(4)
(5)
(6)
(7) (8)
(9)
A person who has obtained or is required to obtain more than one registration, whether in one State or Union territory or more than one State or Union territory shall, in respect of each such registration, be treated as distinct persons for the purposes of this Act. Where a person who has obtained, or is required to obtain registrati on in a State or Union territory in respect of an establishment, has an establishment in another State or Union territory, then such establishments shall be treated as establishments of distinct persons for the purposes of t his Act. Every person shall have a Permanent Account Number issued under the Income Tax Act, 1961 in order to be eligible for grant of registration: Provided that a person required to deduct tax under section 51 may have, in lieu of a Permanent Account Number, a Tax Deduction and Collection Account Number issued under the said Act in order to be eligible for grant of registration. Notwithstanding anything contained in sub-section (6), a non-resident taxable person may be granted registration under sub-section (1) on the basis of such other documents as may be prescribed. Where a person who is liable to be registered under this Act fails to obtain registration, the proper officer may, without prejudice to any action which may be taken under this Act or under any other law for the time being in force, proceed to register such person in such manner as may be prescribed. Notwithstanding anything contained in sub-section (1), : – (a) any specialised agency of the United Nations Organisation or any Multilateral Financial Institution and Organisation notified under the United Nations (Privileges and Immunities) Act, 1947, Consulate or Embassy of foreign countries; and (b) any other person or class of persons, as may be notified by the Commissioner, shall be granted a Unique Identity Number in such manner and for such purposes, including refund of taxes on the notified supplies of goods or services or both received by them, as may be prescribed.
(10) The registration or the Unique Identity Number shall be granted or rejecte d after due verification in such manner and within such period as may be prescribed. (11) A certificate of registration shall be issued in such form and with effect from such date as may be prescribed. (12) A registration or a Unique Identity Number shall be deemed to have been granted after the expiry of the period prescribed under sub-section (10), if no deficiency has been communicated to t he applicant within that period.
TAX CREDIT 4.1 INPUT TAX CREDIT Eligibility and conditions for taking input tax credit : 1. Every registere d person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person. 2. Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless, a. he is in possession of a tax invoice or debit note issued by a supplier registered under t his Act, or such other tax paying documents as may be prescribed;
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b. he has received the goods or services or both Explanation- For the purposes of this clause, it shall be deemed that the registered person has received the goods where the goods are delivered by the supplier to a recipient or any other person on the direction of such registered person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to goods or otherwise; c. subject to the provisions of section 41, the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilization of input tax credit admissible in respect of the said supply; d. he has furnished the return under section 39: PROVIDED that where the goods against an invoice are received in lots or instalments, the registered person shall be entitled to take credit upon receipt of the last lot or instalment: e. Provided further that where a recipient fails to pay to the supplier of goods or services or both, other than the supplies on which tax is payable on reverse charge basis, the amount towards the value of supply along with tax payable thereon within a period of one hundred and eighty days from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed by the recipient shall be added to his output tax liability, along with interest thereon, in such manner as may be prescribed: Provided also that the recipient shall be entitled to avail of the credit of input tax on payment made by him of the amount towards the value of supply of goods or services or both along with tax payable thereon. 3. Where the registered person has claimed depreciation on the tax component of the cost of capital goods and plant and machinery under the provisions of the Income Tax Act, 1961, the input tax credit on the said tax component shall not be allowed. 4. A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the due date of furnishing of the return under section 39 for the month of September following the end of financial year to which such invoice or invoice rela ting to such debit note pertains or furnishing of the relevant annual return, whichever is earlier.
4.2 Apportionment of credit and blocked credit : (1)
(2)
(3)
(4)
Where the goods or services or both are used by the registered person partly for the purpose of any business and partly for other purposes, the amount of credit shall be restricted to so much of the input tax as is attributable to the purposes of his business. Where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax Act, and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies. The value of exempt supply under sub-section (2) shall be such as ma y be prescribed, and shall include supplies on which the recipient is liable to pay tax on reverse charge basis, transactions in securities, sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building. A banking company or a financial institution including a non-banking financial company, engaged in supplying services by way of accepting deposits, extending loans or advances shall have the option to either comply with the provisions of sub-section (2), or avail of, every month, an amount equal to fifty per cent of the eligible input tax credit on inputs, capital goods and input services in that month and the rest shall lapse. Provided that the option once exercised shall not be withdrawn during the remaining part of the financial year. Provided further that the restriction of fifty per cent. shall not apply to the
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(5)
tax paid on supplies made by one registered person to another registered person having the same Permanent Account Number Notwithstanding anything contained in sub-section (1) of section 16 and subsection (1) of section 18, input tax credit shall not be available in respect of the following namely: for making the following taxable supplies, namely: (a) motor vehicles and other conveyances except when they are used
further supply of such vehicles or conveyances; or
transportation of passengers; or
imparting training on driving, flying, navigating such vehicles or conveyances; for transportation of goods. (b) the following supply of goods or services or both, (i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery except where an inward supply of goods or services or both of a particular category is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply; (ii) membership of a club, health and fitness centre, (iii) rent-a-cab, life insurance, health insurance except where (A) the Government notifies the services which ar e obligatory for an employer to provide to its employees under any law for the time being in force; or (B) such inward supply of goods or services or both of a particular cat egory is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as part of a taxable composite or mixed supply; and (iv) travel benefits extended to employees on vacation such as leave or home travel concession. works contract services when supplied for construction of immovable property, (other than plant and machinery), except where it is an input service for further supply of works contract service; goods or services or both received by a taxable person for construction of an immovable property (other than plant and machinery) on his own account, including when such goods or services or both are used in the course or furtherance of business;
4.3 Availability of credit in special circumstances 1. Subject to such conditions and restrictions as may be prescribeda.A person who has applied for registration under the Act within thirt y days from the date on which he becomes liable to registration and has been granted such registration shall, be entitled to take credit of input tax in respect of inputs held in stock and inputs contained in s emi-finished or finished goods held in stock on the day immediately preceding the date from which he becomes liable to pay tax under the provisions of this Act. b. A person, who takes registration under sub-section (3) of section 25 shall, be entitled to take credit of input tax in respect of inputs held in stock and inputs contained in semi finished or finished goods held in stock on the day immediately preceding the date of grant of registrati on. c. Where any registered person ceases to pay tax under section 10, he shall be entitled to take credit of input tax in respect of inputs held in stock, inputs contained in semifinished or finished goods held in
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stock and on capital goods on the day immediately preceding the date from which he becomes liable to pay tax under section 9 PROVIDED that the credit on capital goods shall be reduced by such percentage points as may be prescribed (d) Where an exempt supply of goods or services or both by a registered person becomes a taxable supply, such person shall be entitled to take credit of i nput tax in respect of inputs held in stock and inputs contained in semi -finished or finished goods held in stock relatable to such exempt supply and on capital goods exclusively used for such exempt s upply on the day immediately preceding the date from which such supply becomes taxable: PROVIDED that the credit on capital goods shall be reduced by such percentage points as may be prescribed . 2. A registered person shall not be entitled to take input tax credit under sub-section (1), in respect of any supply of goods or services or both to him after the expiry of one year from the date of issue of tax invoice relating to such supply. 3. Where there is a change in the constitution of a registered person on account of s ale, merger, demerger, amalgamation, lease or transfer of the business with the specific provision for transfer of liabilities, the said registered person shall be allowed to transfer the input tax credit which remains unutilized in his electronic credit ledger to such sold, merged, demerged, amalgamated, leased or transferred business in such manner as may be prescribed. 4. Where any registered person who has availed of input tax credit opts to pay tax under section 10 or, where the goods or services or both supplied by him become wholly exempt, he shall pay an amount, by way of debit in the electronic credit ledger or el ectronic cash ledger, equivalent to the credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock and on capital goods, reduced by such percentage points as may be prescribed, on the day \immediately preceding the date of exercising such option or, as the case may be, the date of such exemption: Provided that after payment of such amount, the balance of input tax credit, if any, lying in his electronic credit ledger shall lapse. 5. The amount of credit under sub-section (1) and the amount payable under sub-section (4) shall be calculated in such manner as may be prescribed 6. In case of supply of capital goods or plant and machinery, on which input tax credit has been taken, the registered person shall pay an amount equal to the input tax credit taken on the said capital goods or plant and machinery reduced by such percentage points as may be prescribed or the tax on the transaction value of such capital goods or plant and machinery determined under section 15, whichever is higher: Provided that where refractory bricks, moulds and dies, jigs and fixtures are supplied as scrap, the taxable person may pay tax on the transaction value of such goods determined under section 15.
PAYMENT 5.1 Payment of Tax, Interest, Penalty and other Amounts 1.
Every deposit made towards tax, interest, penalty, fee or any other amount by a person by internet banking or by using credit or debit cards or National Electronic Fund Transfer or Real Time Gross Settlement or by such other mode and subject to such conditions and restrictions as may be prescribed, shall be credited to the electronic cash ledger of such person to be maintained in such manner as may be prescribed. 2. (2) The input tax credit as self-assessed in the return of a registered person shall be credited to his electronic credit ledger, in accordance with section 41, to be maintained in such manner as may be prescribed.
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3. (3) The amount available in the electronic cash ledger may be used for making any payment towards tax, interest, penalty, fees or any other amount payable under the provisions of the Act or the rules made there under in such manner and subject to such conditions and within such time as may be prescribed. 4. (4) The amount available in the electronic credit ledger may be used for making any payment towards output tax under this Act or under the Integrated Goods and Services Tax Act in such manner and subject to such conditions and within such time as may be prescribed. 5. (5) The amount of input tax credit available in the electronic credit ledger of the registered person on account ofa. integrated tax shall first be utilised towards payment of integrated tax and the amount remaining, if any, may be utilised towards the payment of central tax and Stat e tax, or as the case may be, Union territory tax, in that order; b. the central tax shall first be utilised towards payment of central tax and the amount remaining, if any, may be utilised towards the payment of integrated tax; c. the State tax shall first be utilised towards payment of State tax and the amount remaining, if any, may be utilised towards payment of integrated tax; d. the Union territory tax shall first be utilised towards payment of Union territory tax and the amount remaining, if any, may be utilised towards payment of integrated tax; e. the central tax shall not be utilised towards payment of State tax or Union territory tax; and f. the State tax or Union territory tax shall not be utilised towards payment of central tax. 6. The balance in the electronic cash ledger or electronic credit ledger after payment of tax, interest, penalty, fee or any other amount payable under this Act or the rules made the reunder may be refunded in accordance with the provisions of section 54. 7. All liabilities of a taxable person under this Act shall be recorded and maintained in an electronic liability register as may be prescribed. 8. Every taxable person shall discharge his tax and other dues under this Act or the rules made thereunder in the following order, namely: a. self – assessed tax, and other dues related to returns of previous tax periods; b. self-assessed tax, and other dues related to the return of current tax period; c. any other amount payable under the Act or the rules made thereunder including the demand determined under Section 73 or 74. 9. Every person who has paid the tax on goods and /or services under this Act shall, unless the contrary is proved by him, be deemed to have passed on the full incidence of such tax to the recipient of such goods or services or both. Explanation.1- For the purposes of this section, a. the date of credit to the account of the Government in the authorised bank shall be deemed to be the date of deposit in the electronic cash ledger; b. the expression: i. “tax dues” means the tax payable under this Act and does not include interest, fee and penalty; and ii. “other dues” means interest, penalty, fee or any other amount payable under this Act or the rules made the reunder.
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Questionnaire Question asked by a chartered accountant
1) What is Goods and Service Tax (GST)? It is a destination based tax on consumption of goods and services. It is proposed to be levied at all stages right from manufacture up to final consumption with credit of taxes paid at previous stages available as setoff. In a nutshell, only value addition will be taxed and burden of tax is to be borne by the final consumer.
2) What are GST rate slabs? The Goods and Services Tax (GST) will be levied at multiple r ates ranging from 0 per cent to 28 per cent. GST Council finalised a four-tier GST tax structure of 5%, 12%, 18% and 28%, with lower rates for essential items and the highest for luxury and de-merits goods that would also attract an additional cess. Service Tax will go up from 15% to 18%. The services being taxed at lower rates, owing to the provision of abatement, such as train tickets, will fall in the lower slabs. In order to control inflation, essential items including food, which presently constitute roughly half of the consumer inflation basket, will be taxed at zero rate. The lowest rate of 5% would be for common use items. There would be two standard rates of 12 per cent and 18 per cent, which would fall on the bulk of the goods and services. This includes fast-moving consumer goods. Highest tax slab will be applicable to items which are currently taxed at 30-31% (excise duty plus VAT). Ultra luxuries, demerit and sin goods (like tobacco and aerat ed drinks), will attract a cess for a period of five years on top of the 28 per cent GST. The collection from this cess as well as that of the clean energy cess would create a revenue pool which would be used for compensating states for any loss of revenue during the first five years of implementation of GST. Finance minister said that the cess would be lapsable after five years. The structure to agreed is a compromise to accommodate demand for highest tax rate of 40% by states like Kerala. While the Centre proposed to levy a 4% GST on gold but the final decision on this was put off. During a press conference, finance minister Mr. Jaitley said, “GST rate on gold will be
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finalised after the fitting to the approved rates structure of all items is completed and there is some idea of revenue projections”. The principle for determining the rate on each item will be to levy and collect the GST at the rate slab closest to the current tax incidence on it. The GST will subsume the multitude of cesses currently in place, including the Swachh Bharat Cess, the Krishi Kalyan Cessand the Education Cess. Only the Clean Environment Cess is being retained, revenues from which will also fund the compensations.
3) Which of the existing taxes are proposed to be subsumed under GST? GST is set to replace various taxes as mentioned below: Taxes currently levied and collected by the Centre: a. Central Excise duty b. Duties of Excise (Medicinal and Toilet Preparations) c. Additional Duties of Excise (Goods of Special Importance) d. Additional Duties of Excise (Textiles and Textile Products) e. Additional Duties of Customs (commonly known as CVD) f. Special Additional Duty of Customs (SAD) g. Service Tax h. Central Surcharges and Cesses so far as they relate to supply of goods and services State taxes that would be subsumed under the GST a. State VAT b. Central Sales Tax c. Luxury Tax d. Entry Tax (all forms) e. Entertainment and Amusement Tax (except when levied by the local bodies) f. Taxes on advertisements g. Purchase Tax h. Taxes on lotteries, betting and gambling i. State Surcharges and Cesses so far as they relate to supply of goods and services.
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The GST Council shall make recommendations to the Union and States on the taxes, cesses and surcharges levied by the Centre, the States and the local bodies which may be subsumed in the GST.
4) What will be status of Tobacco and Tobacco products under the GST regime? Tobacco and tobacco products would be subject to GST. In addition, the Centre would have the power to levy Central Excise duty on these products. Commodities Proposed to be kept outside GST Alcohol for human consumption, Petroleum Products viz. petroleum crude, motor spirit (petrol), high speed diesel, natural gas and aviation turbine fuel & Electricity. Taxation of such Commodities in GST Regime The existing taxation system (VAT & Central Excise) will continue in respect of the above commodities. 5) What type of GST is proposed to be implemented? It would be a dual GST with the Centre and States s imultaneously levying it on a common tax base. The GST to be levied by the Centre on intra-State supply of goods and / or services would be called the Central GST (CGST) and that to be levied by the States would be called the State GST (SGST). Similarly Integrated GST (IGST) will be levied and administered by Centre on every inter-state supply of goods and services.
6) 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.
7) Which authority will levy and administer GST? Centre will levy and administer CGST & IGST while respective stat es will levy and administer SGST.
8) How a particular transaction of goods and services would be taxed simultaneously under Central GST (CGST) and State GST (SGST)?
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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, 8 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 (sa y, 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.
9) What are the benefits which the Country will accrue from GST?
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Introduction of GST would be a very significant step in the field of i ndirect tax reforms in India. By amalgamating a large number of Central and State taxes into a single tax and allowing set-off of prior-stage taxes, it would mitigate the ill effects of cascading and pave the way for a common national market. For the consumers, the biggest gain would be in terms of a reduction in the overall tax burden on goods, which is currently estimated at 25%30%. Introduction of GST would also make our products competitive in the domestic and international markets. Studies show that this would instantly spur economic growth. There may also be revenue gain for the Centre and the States due to widening of the tax base, increase in trade volumes and improved 10 tax compliance. Last but not the least , this tax, because of its transparent character, would be easier to administer.
10) What is IGST? Under the GST regime, an Integrated GST (IGST) would be levied and collected by the Centre on inter-State supply of goods and services. Under Article 269A of the Constitution, the GST on supplies in the course of interState trade or commerce shall be levied and collected by the Government of India and such tax shall be apportioned between the Union and the States in t he manner as may be provided by Parliament by law on the recommendations of the Goods and Services Tax Council.
11) How GST returns will be filed? For properly updating the invoices, Indian taxpayers and businesses have to file certain returns with the Government. These returns have to be mandatorily filed a s any noncompliance towards the same may lead to disallowance of input tax credit, apart from attracting penalties and interests, etc. Proper filing of information and passing the same in the returns is a mandatory process for smooth flow of credit to the last recipient. The returns have been designed so that all transactions are in sync with each other and that no transaction is left unattended between the buyer and the seller. All the data is stored in GSTN, which can be accessed by the users/taxpayers anytime online. Depending on the type of GST registration (Regular, Composite, etc) businesses will need to file upto 37 GST returns every year. These returns can be f iled using any GST Return Filing Software or directly from GSTN portal. Learn all about GST Returns.
12) What would be the role of GST Council?
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A GST Council would be constituted comprising the Union Finance Minister (who will be the Chairman of the Council), the Minister of State (Revenue) and the State Finance/Taxation Ministers to make recommendations to the Union and the States on (i) the taxes, cesses and surcharges levied by the Centre, the States and the local bodies which may be subsumed under GST; (ii) the goods and services that may be subjected to or exempted from the GST; (iii) the date on which the GST shall be levied on petroleum crude, high speed diesel, motor sprit (commonly known as petrol), natural gas and aviation turbine fuel; (iv) model GST laws, principles of levy, apportionment of IGST and the principles that govern the place of supply; (v) the threshold limit of turnover below which the goods and services may be exempted from GST; (vi) the rates including floor rates with bands of GST; (vii) any special rate or rates for a specified period to raise additional resources during any natural calamity or disaster; (viii) special provision with respect to the North- East States, J&K, Himachal Pradesh and Uttarakhand; and (ix) any other matter relating to the GST, as the Council may decide.
13) Who is liable to pay GST under the proposed GST regime? Under the GST regime, tax is payable by the taxable person on the supply of goods and/or services. Liability to pay tax arises when the taxable person crosses the threshold exemption, i.e. Rs.10 lakhs (Rs. 5 lakhs for NE States) except in certain specified cases where the taxable person is liable to pay GST even though he has not crossed the threshold limit. The CGST / SGST is payable on all intra-State supply of goods and/or services and IGST is payable on all inter- State supply of goods and/or services. The CGST /SGST and IGST are payable at the rates specified in the Schedules to the respective Acts.
14) What are the benefits available to small tax payers under the GST regime? Tax payers with an aggregate turnover in a financial year up to [Rs.10 lakhs] would be exempt from tax. [Aggregate turnover shall include the aggregate value of all taxable and non-taxable supplies, exempt supplies and exports of goods and/or services and exclude taxes viz.GST.] Aggregate turnover shall be computed on all India basis. For NE States and Sikkim, t he exemption threshold shall be [Rs. 5 lakhs]. All taxpayers eligible for threshold exemption
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will have the option of paying tax with input tax credit (ITC) benefits. Tax payers making inter-State supplies or paying tax on reverse charge basis shall not be eligible for threshold exemption.
15) How will the goods and services be classifi ed under GST regime? What is HSN under GST? HSN (Harmonised System of Nomenclature) code shall be used for class ifying the goods under the GST regime. Taxpayers whose turnover is above Rs. 1.5 crores but below Rs. 5 crores shall use 2 digit code and the taxpayers whose turnover is Rs. 5 crores and above shall use 4 digit code. Taxpayers whose turnover is below Rs. 1.5 crores are not r equired to mention HSN Code in their invoices. Services will be classified as per the Services Accounting Code (SAC). Read about HSN and SAC.
16) How will imports be taxed under GST? Imports of Goods and Services will be treated as inter-state supplies and IGST 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 14 will be available on the GST paid on import on goods and services.
17) How will Exports be treated under GST? Exports will be treated as zero rated supplies. No tax will be payable on exports of goods or services, however credit of input tax credit will be available and same will be available as refund to the exporters.
18) What is the scope of composition scheme under GST? Small taxpayers with an aggregate turnover in a financial year up to [Rs. 50 lakhs] shall be eligible for composition levy. Under the scheme, a taxpayer shall pay tax as a percentage of his turnover during the year without the benefit of ITC. The floor rate of tax for CGST and SGST shall not be less than [1%]. A tax payer opting for composition levy shall not collect any tax from his customers. Tax payers making inter- state supplies or paying tax on reverse charge basis shall not be eligible for composition scheme. Please note that the composition scheme is optional.
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19) What is GSTN and its role in the GST regime? GSTN stands for Goods and Service Tax Network (GSTN). A Special Purpose Vehicle called the GSTN has been set up to cater to the needs of GST. The GSTN shall provide a shared IT infrastructure and services to Central and State Governments, tax payers and other stakeholders for implementation of GST. The functions of the GSTN would, inter alia, include: facilitating registration; forwarding the returns to Central and State authorities; computation and settlement of IGST; matching of tax payment details with banking network; providing various MIS reports to the Central and the State Governments based on the tax payer return information; providing analysis of tax payers’ profile; and running the matching engine for matching, reversal and reclaim of input tax credit. The GSTN is developing a common GST portal and applications for registration, payment, return and MIS/ reports. The GSTN would also be integrating the common GST portal with the existing tax administration IT systems and would be building interfaces for tax payers. Further, the GSTN is developing back-end modules like assessment, audit, refund, appeal etc. for 19 States and UTs (Model II States). The CBEC and Model I States (15 States) are the mselves developing their GST back-end systems. Integration of GST front-end system with back-end systems will have to be completed and tested well in advance for making the transition smooth.
20) How are the disputes going to be resolved under the GST regime? The Constitution (one hundred and first amendment) Act, 2016 provides that the Goods and Services Tax Council shall establish a mechanism to adjudicate any dispute 16 (a) between the Government of India and one or more States; or (b) between the Government of India and any State or States on one side and one or more other Sates on the other side; or (c) between two or more States, arising out of the recommendations of the Council or implementation thereof.
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Questionnaire Q1. Is GST is good for Indian economy ?
Strongly agree 14
Agree 20
Disagree 9
Strongly Agree 7
20 20 18
14 16
14 12
9
10
7
8 6 4 2 0 Strongly Agree
Agree
Disagree
Strongly Disagree
Source:- Primary Data Analysis :- In this above table we can see that out of 50 peoples 14 peoples are strongly agree that GST is good for Indian economy and 20 peoples are agree that it is good while other 9 & 7 peoples are disagree and strongly disagree about the GST. The table shows that majority of peoples think that the GSt will lead to a better Indian Economy.
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Q2. Is GST is good for Tax evasion ? Strongly agree 45
Agree 3
Disagree 2
Strongly Disagree 0
45 45
40
35
30
25
20
15
10
3 5
2 0
0 Strongly Agree
Agree
Disagree
Stronly Disagree
Source:- Primary Data Analysis:- it is seen from the above table that out of 50 peoples 45 peoples strongly agree that GST will reduce the Tax evasion from India. And 3 people agree while 2 peoples disagree and 0 peoples disagree. So we can clearly see that GST will help to reduce the tax evasion.
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