Goods and Service Tax – GST – By: – Pradeep Jain – Dated:- 3-2-2010 Last Replied Date:- 30-12-1899 – Comments of the Department of Revenue (DoR) on the First Discussion Paper on GST Prepared By: CA Pradeep Jain Siddharth Rutiya Visit us at www.capradeepjain.com Introduction: GST , commonly known as Goods and Service Tax has now become the buzz word of the industry as a whole. Any news, views or comments on this topic influences the industry at large and when the comments are from the Department of Revenue the impact is surely gigantic. Recently, the Department of Revenue has released its comments on the First Discussion Paper on GST. In this article we are attempting to highlight the key comments made by Department of Revenue alongwith the possible future prospects emerging there from. The Various issues and their comments are as follows: – Issue: – The GST shall have two components: one levied by the Centre (hereinafter referred to as Central GST), and the other levied by the States
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rmity between states which is totally absent earlier in current VAT regime. Secondly, t is not possible to collect the custom duty by the states. The custom department working under Centre is doing the same. In this place, the Central government will collect the tax and pass on to the state. This is also a practical solution. Issue: – The present thresholds exemption limits prescribed in different State VAT Acts varies from State to State. A uniform State GST threshold across States is desirable and, therefore, it is recommended that a threshold of gross annual turnover of ₹ 10 lakh both for goods and services for all the States and Union Territories may be adopted 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. Keeping in view the interest of small traders and small scale industries and to avoid dual control, the States also considered that the threshol
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for return filing Electronic Return filing through certified service centres / CAs etc. Audit in 1-2% cases based on risk parameters Lenient penal provisions There may not be any need to have direct link between compensation package, if decided for, and the threshold for registration for North-Eastern and special category States. Comments of author:- Firstly, it is clear that the Central Government does not want to give exemption limit of ₹ 1.5 crore as currently available to industry. The Centre intends to give exemption of same limit as given by states. Even the higher service tax exemption limit for service providers is not acceptable to Centre. But by saying that they are ready to give more than ₹ 10 Lakhs if the states are also ready to give the same, they have moved the ball to the court of state. Further, the same exemption will also apply of IGST transaction. The simple registration, no physical verification and no pre-deposit, simple electronic and longer frequenc
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ill be for SGST alone, in case Centre also brings a Composition Scheme for small assesses. They also suggested that the Centre should leave the administration of Compounding Scheme, both for CGST and SGST to the States. Comments of author:- As the Centre is not interested to give more threshold exemption than the states, hence they intend to apply the same composition scheme for Centre also. A composition scheme upto ₹ 50 Lakhs will there which will address the problems of small players. This was porposed for SGST but the centre wants a separate and new scheme for centre. But it is not told that whether the same will passed on to the buyer and whether he will be able to get the credit of the same and set off against his CGST and SGST liability. If he is not able to do so then it will disadavantageous position for the small units. The taxpayer would need to submit periodical returns , in common format as far as possible, to both the Central GST authority and to the concerned State
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itter for assesses. Issue: – Inter-State Transactions of goods & services: The Empowered Committee accepted the recommendations of the Working Group of concerned officials of Central and State Governments for adoption of IGST model for taxation of inter-State transaction of Goods and Services The scope of IGST Model is that Centre would levy IGST which would be CGST plus SGST on all inter-State transactions 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 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 relevant information is also submitted to the
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for goods and services and for Centre and States. Having more than one rate either for CGST or SGST will complicate the working of IGST model. Issue: – GST Rate Structure: The Empowered Committee has decided to adopt a two-rate structure – a lower rate for necessary items and goods of basic importance and a standard rate for goods in general. There will also be a special rate for precious metals and a list of exempted items. For upholding of special needs of each State as well as a balanced approach to federal flexibility, and also for facilitating the introduction of GST, it is being discussed whether the exempted list under VAT regime including Goods of Local Importance may be retained in the exempted list under State GST in the initial years. It is also being discussed whether the Government of India may adopt, to begin with, a similar approach towards exempted list under the CGST. Comment: – There should be a single rate of SGST both for goods and services. A two rate structure for
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exempted under CENVAT regime. At the end, there must be a common list of exemptions for CGST and SGST. Comment of author: – The Centre wants only one rate should be there for GST. Even he wants to add ahcolic products, pan malsala, gutka etc. to this list and intend to impose further duties, if necessary. But he does not want that any product should be outside the GST. Moreover, Centre is of the opinion that single rate should be there on all goods and services whether essential or otherwise. The list of exempted product or services should be separately circulated and it should also be minimum. Conclusion:- The main dispute between Centre and state is being figured out after this comments from DoR. It is also relating to threshold exemption as well as relating to two tier rates. This also brings about that the centre does not want to give states the power to change the rates of SGST. This is good from point of view of assessee also. Otherwise, it will seem that the old system of VAT a
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