Goods and Services Tax – GST – By: – Dr. Sanjiv Agarwal – Dated:- 28-12-2015 Last Replied Date:- 4-1-2016 – In a federal country like India where the power to tax domestic trade is divided between the Central Government and the State Government, the designing of a destination based GST becomes extremely complicated. A conventional national GST cannot be implemented without the States losing their fiscal autonomy. Dual GST signifies that GST would be levied by both, the Central Government and the State, on supply of goods or services. Under the Constitution, presently the taxing powers are presently split between the State and the Centre. In case of certain transactions, the power to tax is vested with the Centre and while in certain others
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he Centre and the States, but independently. It will have two components: one levied by the Centre (hereinafter referred to as CGST), and the other levied by the States and Union Territories (UTs) [hereinafter referred to as SGST] Both the CGST and SGST will operate over a common base. That is, the base will be identical. Benefits of Dual GST The dual GST is expected to be a simple and transparent tax with one or two CGST and SGST rates. The dual GST is expected to result in:- reduction in the number of taxes at the Central and State level decrease in effective tax rate for many goods removal of the current cascading effect of taxes reduction of transaction costs of the taxpayers through simplified tax compliance increased tax collections d
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points in the supply chain. It also eliminates tax cascading, which occurs because of truncated or partial application of the Centre and State taxes, said the survey. Despite improvements in the country s tax design and administration over the past few years, the systems at both Central and State levels are still complex, said the survey. The complexities, it says, are policy related and also due to the present system of multiple rates and exemptions at State and Centre level. The survey noted that deficiencies in CENVAT (Central value added tax) and service tax are grave and need to be looked at. For instance, CENVAT s already narrowed base is being further eroded by a variety of area-specific exemptions. The introduction of GST would thus
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