GST- OVERVIEW
By: – RUPESH NAGPAL
Goods and Services Tax – GST
Dated:- 2-12-2010
The reformed indirect tax system GST-Goods and Service Tax is proposed to implement in INDIA on and from 1st April 2011 (Still not clear how the Government be doing this). Do you know, several countries implemented this tax mechanism followed by France which was the first country introduced GST. To simplify the understanding about the Goods and Service Tax (Papularly known as GST and hereinafter called as "GST") it may be called a new version of VAT which gives a comprehensive setoff for input tax credit and subsuming many indirect taxes from state and national level. The GST Implementation deadline is not yet cleared by government (i.e. 01/04/2011) and the clarification (within the Committee of State Finance Ministers) of draft of GST law is still under process and a clear picture will be available only after fresh announcement of Implementation is made by our Union Finance Minis
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irect taxes like luxury tax, entertainment tax, (which are charged as extras to VAT) are yet to be included in the VAT. These taxes are still existing and payable.
iii. Shortfall of Existing CENVAT
Several taxes like additional customs duty, surcharges not included under CENVAT. Input tax and service tax set off (to a certain extent) is out of reach to the manufacturer and dealers.
Benefits of GST
1. GST provide comprehensive and wider coverage of input credit setoff, you will be able to use service tax credit for the payment of tax on sale of goods etc.
2. CST will be removed and need not to collect and pay. As we all know that at present there is no input tax credit available for CST.
3. Many indirect taxes in state and central level subsumed by GST, You will have to pay a single GST instead of all.
4. There is likely to be Uniformity of tax rates across the states (as proposed)
5. It may ensure better compliance due to aggregate tax rate reduces.
6. By reducing the tax burd
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Additional Customs Duty, commonly known as countervailing Duty ( CVD)
6. Special Additional duty of custums-4% ( SAD)
7. Surcharges
8. Cessess
The above taxes dissolve under GST; instead only CGST & SGST exists.
The GST model in India
Many countries are following single GST. But it is proposed that dual GST is suitable for federal country like India. The end user, i.e. consumer cannot recover taxes but a business can recover by claiming input tax setoff.
Dual GST
Dual GST means, the proposed model will have two component called
1. CGST – Central goods and service tax levied by Central Govt.
2. SGST – State goods and service tax levied by State Govt.
There would have multiple statute one CGST statute and SGST statute for every state.
Taxable event
Supply of goods and supply of services will be considered as taxable event under GST. In simple way any economic activity which is not supply of goods will be treated as supply of service.
Tax payer identification number
Each ta
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there may be an exemption for the above in the case of interstate transaction. As I understand for interstate transaction IGST is proposed and would be implemented along with CGST and SGST.
Constitution amendment for levying service tax by the states
The power of levying service tax is rest with central Government and a constitutional amendment is necessary for empowering states for levying service tax hence there is very much chance that the deadline for the implementation of GST can only be fixed once there is a constitutional amendment to make this effective.
Applicability of CGST and SGST
The applicability of taxes is as usual there would be a prescribed limit of annual turnover, also some goods and services are exempted under GST. The dealer whose turnover is below prescribed limit need not pay tax.
In my opinion and to the best of my knowledge and belief threshold for annual turnover for goods and services would be 10 lakh for SGST and threshold of CGST for goods may be 1.5
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