Goods and Service Tax – GST – By: – Dr. Sanjiv Agarwal – Dated:- 9-12-2009 Last Replied Date:- 30-12-1899 – The first Discussion Paper on GST has been released by the Central Government which also provides few (twenty) frequently asked questions (FAQ's) on GST. These FAQ's do not cover all aspects of GST. Some FAQ's given hereunder seeks to explain the concept of GST, as stated in the discussion paper. Q.1 What does GST seeks to achieve? Ans. GST is a major indirect tax reform in India which takes VAT to its logical conclusion. GST would avoid burden of multiple taxation (tax on tax) with a cascading effect. GST seeks to rule out cascading tax effect. Once it introduced, CST will also be removed. Q.2 What is going to be the GST rate structure? Ans. The first discussion paper has outlined the rate structure and thresholds for goods & service in detail. It has prescribed four rates for goods under state GST (SGST) and suggested similar model under Central GST (CGST). Bus
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t is the general approach to proposed GST? Ans. The Government has decided to have a two tier or dual GST to be levied by centre as well as states and that there is going to be a phased approach to GST after initial and periodic review depending upon revenue collection, losses to state if any, level of tax compliance, outgo on account of compensation to states etc. Q.5 How is GST going to be administered? Ans. The GST is likely to be administered by a separate body at central level and at states level. The joint working group for constitutional amendment will suggest the possible tax administration. It could be a two tier structure wherein there is a main inter-state body and a second body, which is a smaller representational body of states. In this, members of states may represent on a rotational basis to avoid it from being too big. It is expected that this body will be independently set up which will derive its authority and power from the constitution itself. It would be premature
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e 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 SGST. Q.8 At what rate, GST will be levied? Ans. As already announced by the government, there will be two taxes- central GST (CGST) and state GST (SGST). The discussion paper suggest that there will be following types of GST rates- (a) for necessary items and goods of basis importance- lower rate (b) for general goods- standard rate (c) for precious metals – special rate (d) exempted items- as per list to be prescribed (e) single service tax rate. Thus, we will have at least four different rates. What rates will be announced is not yet known. It is understood that there is no consensus among states
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may extend beyond present regime in GST regime, the tax exemption and incentives will be converted into cash refund schemes after collection of tax, so that the GST chain is not disturbed. While no new exemption would be allowed, existing special industrial area scheme could continue till their expiry time. Q.12 What shall be the basis of levy of GST in case of inter- state transactions where billing is done on a different basis (say in case of telecom sector)? Ans. In certain segments such as banking or insurance or electricity, services are provided at one point while service is utilized at various geographic points. At times, services is broken based on certain geographical locations. These should be subjected to integrated GST (IGST). In case of telecommunication industry, IGST would be adopted as the tax collected will be divided between states and in India telecom circles are presently divided on the basis of telecom circles which may or may not exactly relate to specific states
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and credit would also be allowed faster and electronically. Q.14 Will there be any composition scheme for small traders in GST regime? Ans. Yes, there is hope that small service providers and businessmen will be provided some relief in GST. Following persons may be liable to pay only state GST manufacturers with turnover upto ₹ 1.50 crore – traders with turnover upto ₹ 50 lakhs – small service providers (limit to be prescribed) The discussion paper suggests that a composition scheme for such assessees will be notified and no details are proposed in the paper. Q.15 Presently, centralized registration is allowed in indirect taxes to taxpayers having multi location operations. Whether in GST, there will be provision of centralized registration? Ans. Though the first discussion paper is silent on the issue of registration (or centralized registration), it is for sure that manufacturers, dealers and service providers will have to obtain registration mandatorily. The registration
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