Goods and Service Tax – GST – By: – Pradeep Jain – Dated:- 12-11-2009 Last Replied Date:- 13-11-2009 – The article by: CA Pradeep Jain Siddharth Rutiya Visit us at: www.capradeepjain.com Empowered Committee of State Finance Ministers has recently issued the First Discussion paper on Goods and Service tax in India dated November 10, 2009. The complete analysis (as provided under this article later on) signifies a situation wherein there has been no change in the current tax structure. Presently the Excise duty is levied at Central level and VAT is levied at state level, both of these taxonomies have their own administration authorities, their own statues governing them, even further the taxpayer is required to maintain separate records for the two of these, file separate return for each, he is not allowed to cross adjust the tax credit between the two and many more. The similar situation is with the GST model as picturised by the discussion paper. There will be dual tax structure CGST
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the issues relating to the said taxonomy. But still we are reproducing hereunder the highlights of the Discussion paper as follows: – > There will be a Federal system with the objective of having an overall harmonious structure of rates. > GST shall have two components: one levied by Centre referred to as Central GST, and other levied by the States referred to as State GST. > The dual GST model will be implemented through multiple statutes, one for CGST and SGST statute for every State. > CGST and SGST will be applicable to all transactions of goods and services except the exempted goods and services. > CGST and SGST are to be paid to the accounts of the Centre and the States separately. > Taxes paid against the CGST / SGST shall be allowed to be taken as input tax credit (ITC) for CGST / SGST and could be utilized only against the payment of CGST / SGST respectively. > Cross utilization of ITC between the CGST and SGST would not be allowed except in case of inter
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g Central Taxes should be subsumed under GST: > 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 > Cesses. Following State taxes and levies would be 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. The introduction of Discussion paper on GST by Empowered Committee has drawn us to the conclusion that there will remain a tri structure tax regime in the GST model wherein the tax will be levied as Central GST or State GST or Inter-State transactions of GST i.e. IGST. Each of these will be administered
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? The Empowered Committee has not specified the threshold exemption limit applicable to services under CGST. However they have clarified that the same will be in conformity with the existing threshold exemption of ₹ 10 Lakhs. The question is still unanswered and we hope to get the limits clarified by the Government very soon. > IGST (Inter-state transaction of GST) levy will be equal to CGST plus SGST, thus the same will be single rates of separate records are to be maintained in this respect also? It has been clarified that the IGST credit will be allowed to be set off against IGST, CGST or SGST payable by the taxpayer. In the current scenario CST is levied on interstate sale of goods, but the dealers aren't allowed to avail the credit of the same and they are emphasizing on the scenario to buy the goods from within the state so as to avail the credit of VAT. However in this new tax regime the IGST will be levied at the rate which will be equal to CGST plus SGST, this lea
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ed on Petroleum Products? As far as petroleum products are concerned, the discussion paper has clarified that the basket of petroleum products, i.e. crude, motor spirit (including ATF) and HSD would be kept outside GST. Sales Tax will be continued to be levied by the States on these products with prevailing floor rate and similarly, Centre will also continue its levies. > Reduction of non Cenvatable duty on imports! In the present scenario Basic Customs duty along with Customs education cess and Customs Secondary and higher education cess are charged on the value of the imports which are non Cenvatable but in the GST tax regime only Basic Customs duty will be leviable which will be non Cenvatable rest all levies will be covered under GST. This will lead to cheaper imports. > The dual GST model would be implemented through multiple statutes one for CGST and SGST statute for every State. Different statues will govern the SGST levy. This will lead to non uniformity in the tax struct
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