Goods and Service Tax – GST – By: – Dr. Sanjiv Agarwal – Dated:- 9-12-2009 Last Replied Date:- 30-12-1899 – So far, VAT at the state or Cenvat at the central level, along with services tax, have been major steps in tax reforms. Before the present tax regime, there was the sales tax regime, where there was a cascading effect on tax. VAT has removed this burden, but it had deficiencies. The Cenvat load remains. There were several state taxes which were not subsumed in any one tax. The inter-state sales tax or CST was not fully relieved. All this will be accomplished by the state GST. If VAT was a major improvement in the indirect tax system, GST will be the next logical step and a major breakthrough in the history of tax reforms in the country. With the GST, the positive impact on the GDP and state domestic product may be as high as a 2 per cent gain. As a first major step in the GST direction, the release of first discussion paper is a major break through. The second step is the need f
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both for goods and services for all the States and Union Territories will be prescribed 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. After taking into consideration the interest of small traders and small & medium scale industries and to avoid dual control, it has been proposed that the threshold for Central GST for goods will be lakh Rs.l.5 crore and the threshold for services should also be appropriately high. Service Tax under GST Service Tax is presently levied at 10.3% (inclusive of Education Cess) percent tax on more than 105 services. States do not levy or collect service taxes at present, but get a share from the Centre's collections. It is proposed that states will keep the entire collection from certain services from this year. States would also tax another set of proposed new services, collect and appropriate as \ part of compensation fo
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s of taxable goods and services with appropriate provision for consignment or stock transfer of goods and services. 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 off GST used in payment off GST. 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 relevant information will also be submitted to the Central Agency which will act as a clearing house mechanism, verify the claims and inform the respective governments to transfer the funds. The advantages of IGST model are as follows- Maintenance of uninterrupted input tax credit 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
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ct to gross annual turnover. In particular, there would be a compounding cut-off at ₹ 50 lakh of gross annual turnover and a floor rate of 0.5% across the States. The scheme would also allow option for GST registration for dealers with turnover below the compounding cut-off. Documentation and compliance Due to the dual structure of the GST, the assessees will be required to maintain separate accounts for Central GST and State GST. There will be one periodical return for both CGST and SGST with one copy each to be submitted to the respective GST authority. Conclusion 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 ind
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