Goods and Services Tax – GST – By: – Dr. Sanjiv Agarwal – Dated:- 13-8-2016 Last Replied Date:- 18-8-2016 – After 25 years India started walking on the road to economic reforms and as India marches towards introduction of GST in 2016-17 in 70th year of its independence, we may liberalize ourselves from the clutches of multiplicity of taxes levied by both, centre as well as states. However, the GST which is proposed in the current form is a combination of three types of taxes- Central GST, State GST and Integrated GST. There cannot be a better way to celebrate India's independence. The dream to have GST in India may soon be a reality now. The month of August once again became historic after August of 1947 when India attained independence from British raj. August 2016 created a historic achievement once again as India march ahead on the road to fiscal freedom on tax front as 122nd Constitutional Amendment has been approved by both the houses of Indian Parliament i.e, on 3rd August 2
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56) Service Tax (1994) and a host of state levied taxes including Value Added Tax (VAT). GST aims at subsuming many multiple taxes presently levied by Central and State Governments with the objective to follow one nation – one market – one tax policy and scrap the cascading effect of taxes on cost i.e. payment of tax on taxes. GST would therefore, bring in economies of scale, operational efficiency, lower cost of production and benefits accruing to consumers. GST is expected to change the way businesses are done, provide host of opportunities to professionals, reduce corruption and consumer will eventually benefit. Constitutional Amendment The Constitution (122nd Amendment) Bill, 2014 as amended has now been passed by both the houses of Parliament in August, 2016 – on 3rd August by Rajya Sabha and on 8th August by Lok Sabha ( and that too unanimously in both houses). The major amendments made in the original Constitutional Amendment Bill while passage thereof include the following : Th
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tainment Tax (other than the tax levied by the local bodies), Central Sales Tax (levied by the Centre and collected by the States), Octroi and Entry tax, Purchase Tax, Luxury tax, and Taxes on lottery, betting and gambling. However, it will have to be ensured by the GST Council that states should not levy new taxes in future (unless there is a emergency) to complicate the taxes again over a period. We should not have a sequel of GST like GST-2 after a decade or so. This is important as centre has agreed to compensate the states for any revenue loss arising out of GST. Also, there is a need to discourage local bodies to levy taxes. Their fund requirements may be met by States. Benefits of GST The benefits of GST accruing to various stake holders can be summarized as under: For business and industry Easy compliance: A robust and comprehensive IT system would be the foundation of the GST regime in India. Therefore, all tax payer services such as registrations, returns, payments, etc. woul
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f locally manufactured goods and services. This will increase the competitiveness of Indian goods and services in the international market and give boost to Indian exports. The uniformity in tax rates and procedures across the country will also go a long way in reducing the compliance cost. For Central and State Governments Simple and easy to administer: Multiple indirect taxes at the Central and State levels are being replaced by GST. Backed with a robust end-to-end IT system, GST would be simpler and easier to administer than all other indirect taxes of the Centre and State levied so far. Better controls on leakage: GST will result in better tax compliance due to a robust IT infrastructure. Due to the seamless transfer of input tax credit from one stage to another in the chain of value addition, there is an in-built mechanism in the design of GST that would incentivize tax compliance by traders. Higher revenue efficiency: GST is expected to decrease the cost of collection of tax reve
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levy and collect Central Goods and Services Tax (CGST), and States would levy and collect the State Goods and Services Tax (SGST) on all transactions within a State. Input Tax Credit The input tax credit of CGST would be available for discharging the CGST liability on the output at each stage. Similarly, the credit of SGST paid on inputs would be allowed for paying the SGST on output. No cross utilization of credit between CGST and SGST would be permitted. However, IGST can be set off against IGST, CGST and SGST. GST Preparedness Preparedness for GST in next few months will involve Tax Planning Review, Transactions Review, Training Manpower, Cost Effectiveness in Inventory, logistics & Final goods, business Planning with anticipation of new tax structure with competition, Fastest Implementation & Transition to GST, Procurement and Purchase Orders Implementation, Invoicing Patterns, Proper Implementation of GST Transition in input stage credit, tax management versus business op
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