Goods and Service Tax – GST – By: – Pradeep Jain – Dated:- 18-11-2009 Last Replied Date:- 30-12-1899 – Prepared By: – CA Pradeep Jain, Sukhvinder Kaur, LLB (FYIC) Siddharth Rutiya Introduction: – The indirect tax regime in India is evolving into GST in the year 2010. The steps towards introduction of GST have commenced. The Empowered Committee of State Finance Ministers has introduced the First Discussion Paper on GST in India on November 10, 2009. A dual structure of Central GST (CGST) and State GST (SGST) is proposed to be imposed on the manufacture of goods and on provision of services. 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. For sale or services transactions between two states (inter-state), the Government has proposed to impose Inter State GST (IGST) which will include both CGST and SGST. Between the Inter-stat
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e scope of IGST model, as discussed in First Discussion Paper, is that the IGST will be levied by the Centre and it would be CGST plus SGST on all inter-state transactions of taxable goods and services. It is proposed that the inter-state seller will pay IGST on value addition after adjusting available credit of IGST, CGST and SGST on his purchases. 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 in his own State. The Centre will transfer to the importing State the credit of IGST used in payment of SGST. The major advantages of IGST Model as per discussion paper are as under: Maintenance of uninterrupted ITC chain on inter-State transactions. – No upfront payment of tax or substantial blockage of funds for the inter-state seller or buyer. – No refund claim in exporting State, as ITC is used up while paying the tax. – Self monitoring model. – Level of co
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er says that the service provider exemption from CGST should be kept high as currently they are enjoying exemption of ₹ 10 Lakhs. But there is no hint given for exemption limit for service providers from SGST. Even the discussion paper brings out a peculiar situation wherein the State Authorities will be empowered under their respective state GST statutes to exempt various goods that are of peculiar nature looking to the specificity existing in that state. If such a power is being granted to the states then the situation will be that certain goods will be exempted by SGST in that state, however, CGST will be levied on those products. Thus, it is clear that there will be separate exemption for CGST and SGST. Further, if the CGST is exempt then the assessee will not be allowed to take the credit of CGST. Similarly, if the SGST is exempt then credit of the same will not be allowed. Now, suppose an assessee is granted exemption from CGST but SGST is applicable, then the credit of CGS
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ayable and credit of the same is available. As such, everyone intends to purchase the goods from inside the state. Although it is very premature to say as only discussion paper is published for the GST but we have prepared the article on our understanding of the said paper. Looking to the recommendations as depicted in the discussion paper the situation as picturized by us in this article seems to be more factual but nothing can be expressed with utmost certainty as the law and GST code is yet to be released by the Government. Before Parting: – Thus, from the above discussion, the inter-state transactions appear to be more beneficial to the assessee who is providing output service or is manufacturing final product. This is because the assessee will not be paying the tax in cash and will be able to utilize the credit of IGST to do so. The views expressed by us in this article are the views as understood by us while analyzing the recommendations of Empowered Committee of State Finance Mi
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