Goods and Services Tax

Goods and Service Tax – GST – By: – Nagesh Bajaj – Dated:- 7-11-2011 Last Replied Date:- 30-12-1899 – While the Government is trying hard with opposition parties to implement the Goods and Services Tax from April next year, a study carried out by the Comptroller and Auditor General of India [CAG] has brought out shocking details of the manner in which several states are operating the Value – Added Tax (VAT) system. Of the 23 states studied, it was found that in 10 states, there was a dip in the average growth of revenue during the past – VAT regime against those relating to pre-VAT period. Those included major states like Gujarat and Tamil Nadu. Though the report attributed the loss of revenue despite increase in tax base to tax evasion th

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etail price of goods despite sharp decline in the rate of tax. As a result, the benefit of ₹ 40 crore was illegally retained by the manufacturers and dealers in the VAT chain instead of passing on the gains to consumers. In another major revelation, in some states, tax exempted manufacturers collected taxes from the purchaser of their goods without remitting it to the state. Consequently, the states incurred a sizeable revenue loss as the purchaser of those goods also claimed input tax credit on those transactions. CAG suggested e- filing of returns be made mandatory in GST and taxpayers must provide basic data for scrutiny to establish the trail of transactions leading to input tax credit. Timeframe for scrutiny of tax returns should

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Goods and Service Tax – GST – By: – Nagesh Bajaj – Dated:- 4-11-2011 Last Replied Date:- 30-12-1899 – The Centre and States recently arrived at a broad consensus on rolling out independent India's biggest tax reforms that will simplify the manner in which corporates, small enterprises and traders will be levied taxes on goods and services. But the main point on which the Government still has to work a lot is the IT Infrastructure . IT infrastructure is going to play a major role in the smooth implementation of Goods and Service Tax. Unique Identification Authority of India (UIDAI) Chairman Nandan Nilekani is working on the IT preparedness for GST .IT infrastructure will play a huge role in interstate GST. Inter-state GST (IGST) will be

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he IT infrastructure needed for the smooth rollout of the proposed goods and services tax (GST) regime. The proposed panel would be authorised to take decisions about the size, features and functionalities of such a system (on GST). The proposed panel will also choose the appropriate technology for GST implementation and select the vendor who will deliver it in a time-bound manner. In a recent development towards the IT Infrastructure, the government announced that it will float a special purpose vehicle (SPV) for setting up information technology (IT) infrastructure for the proposed Goods and Services Tax (GST). The SPV, called GST N (Network), will have the Union government, the states and a technology partner as its stakeholders. Unique

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Goods and Service Tax – GST – By: – Nagesh Bajaj – Dated:- 3-11-2011 Last Replied Date:- 30-12-1899 – When a ray of hope is coming in the successful implementation of Goods and Services Tax (GST),suddenly a momentum changes in favour of those who are strictly opposing the rolling out of the GST. In the last meeting of the Empowered Group of State Finance Ministers on GST to thrash out all pending issues , three major issues arises in front of the Government , with several states giving a thumbs-down to the draft Constitutional Amendment Bill prepared by the Centre. These major issues are: 1. Veto Power: In this meeting , states ruled by political parties other than the Congress came out openly against the proposal to give veto power to the

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Amendment Bill and may be incorporated in GST Legislation. 3. Petroleum Products: Another major issue is relating to the Petroleum products. Finance Minister Mr. Pranab Mukherjee suggestion to include petroleum products within the GST ambit has underlined the need for a fresh discussion paper on the GST. However, most of the states are looking positively towards the inclusion of petroleum products under the GST, but its implementation at this stage is not advisable. In addition to these issues, some of the statements which are given by the Finance Ministers against the current structure of GST are: GST implementation from April next year is not possible [Mr.Raghavji ,MP Finance Minister] States are left with no powers in the proposed draft

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Goods and Service Tax – GST – By: – Nagesh Bajaj – Dated:- 2-11-2011 Last Replied Date:- 30-12-1899 – The central and state governments moved closer to ushering in a nationwide goods and services tax on April 1, 2011, that will simplify the manner in which corporates, small enterprises and traders will be levied taxes on goods and services. The reform would eliminate multiple indirect taxes levied by states and the central government, that will not only make life easier for most manufacturing companies but also allow products and services to be priced uniformly across the country. On Wednesday, federal and state finance ministers emerged from a meeting saying they had narrowed differences that have delayed implementation. States are worrie

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entation of the goods and service tax (GST) can give a trillion-dollar boost to the economy, taking the total output to $2 trillion in a short span of time. The gain from GST will propel the country from one-trillion dollar economy to two trillion-dollar economy in a short span of time. Well designed GST will see an increase of 2 to 2.5 per cent in the GDP. The government will also float a special purpose vehicle (SPV) for setting up information technology (IT) infrastructure for the proposed Goods and Services Tax (GST). The SPV, called GST N (Network), will have the Union government, the states and a technology partner as its stakeholders. In a presentation given to the empowered committee of state finance ministers today, Unique Identifi

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ering the tax needs to be created. There is a hope that the legislation will be introduced in parliament in the session that begins on July 26. Pranab Mukherjee has set a deadline of August 20 for states to give their final consent on the new duty structure and all other pending issues, including the proposed constitutional amendment. This is to enable him to move the GST Bill in the monsoon session of Parliament. The empowered group of state FMs has decided to meet on August 4 in the Capital to thrash out all pending issues. LAWCRUX TEAM Import export trade, Custom duty, Central excise duty, GST, Indirect tax services, indirect tax, advance license, foreign trade policy, tax planning, e-book, EOU, SEZ, NEPZ, EPCG, DFRC, CBCC, DGFT, DEPB {

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Goods and Service Tax – GST – By: – Nagesh Bajaj – Dated:- 23-10-2011 Last Replied Date:- 30-12-1899 – The actual challenge before the Finance Minister is not of drafting a model GST but of its proper implementation and smooth transition from the prevailing system. The challenges which the Government has to face in introducing GST are as follows: * Rapid increase in Assesses: The dual GST model will widen the tax net by taxing every economic supply in the distribution network. This will lead to rapid increase in assesses. It will require some of the businesses to restructure their distribution network to reduce additional tax burden on the consumer with a view to be price competitive. Though it will generate revenue in a neutral and transparent way, the Government will have to ensure that the ultimate consumer is not burdened with tax beyond his capacity. * Place of Supply: One of the main challenge in introducing in GST is defining the place of supply in respect of certain services a

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from bringing about any change in this structure. In order to enable the Centre and the State Governments to levy GST, the Constitution of India requires amendment to provide for powers to levy and collect GST both by the Union and the States. However, in a landmark decision, the UPA Government has resolved to amend the Constitution to enable states to have the same powers as the Centre in administering the proposed Goods and Services Tax (GST). For the purpose, a new Fourth List is proposed to be created in the Seventh schedule of the Constitution. The Fourth List visualises a governing council headed by Union Finance Ministry and comprising state finance ministers as its members. The council will have overriding powers on issue of indirect taxes. * Improvement in Banking System: In case of destination based principle of taxation, the recipient State will have to levy the tax as per the law of the dispatching State. This is bound to create problems if there is no uniform law and rate

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st track. IT infrastructure will play a huge role in interstate GST. IGST will be collected and passed on the states. It will have to be transferred electronically . * Effective Credit Mechanism: The success of dual GST model will depend on effective credit mechanism to avoid cascading effect of multi-stage taxation in the supply chain. The credit mechanism is the lifeline of GST. As far as Central GST is concerned, there is no difficulty in giving credit of Central GST anywhere in India as is evidenced by success of the present CENVAT scheme. But, in case of State GST presently there are issues in giving credit in relation to inter-State transactions. The challenges posed by GST are no different from what other countries have faced while implementing major tax reforms. Despite the various impediments to the proposed transition, once implemented GST is likely to usher in a more taxpayer friendly regime that could help make various business decisions 'tax neutral' . Until the ti

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Goods and Service Tax – GST – By: – Nagesh Bajaj – Dated:- 18-10-2011 Last Replied Date:- 30-12-1899 – In Japan, the equivalent of VAT or GST is known as Consumption Tax(CT) and was introduced in January 1989. It requires re-calculation and payments to the tax authorities at each transaction point in the onward sales chain. The Japanese Consumption Tax rate is currently 5% and out of which 4% is national levy and 1% regional levy. Companies are not required to formally register with the Japanese Tax authorities for Consumption Tax . The tax authorities takes into account the first tax filing as the application for registration and a tax office will be allocated to the company. A foreign, non-resident trader is required to appoint a tax age

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company s transactions related to the supply of the relevant goods or services. If there is any consumption tax due that should be paid simultaneously with the filing of the tax return. The tax authorities require payments of CT liabilities to be made in Japan at an authorised bank or post office. There may be a statutory obligation for foreign companies providing goods or services in Japan to charge Consumption Tax. This includes the ongoing compliance requirements to file periodic tax returns and pay over any consumption tax due to the Japanese tax office. Following are the situations which require Japanese compliance: * Where goods are delivered within Japan * Supply of services. For e.g: consulting services, sports events, entertainmen

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Goods and Service Tax – GST – By: – Nagesh Bajaj – Dated:- 12-10-2011 Last Replied Date:- 30-12-1899 – Goods and Services Tax in Malaysia may be implemented by the Malaysian Government somewhere in the third Quarter of 2011. 4% GST will replace the current sales and service tax currently levied at rates between 5% and 10%. Companies with revenue RM 500,000 and below would be exempted from imposing GST and about 70% of small and medium sized industries would also be exempted. The taxpayer must be registered with the Royal Malaysian Customs once the taxpayer achieves a certain prescribed annual sales turnover i.e. above RM 500,000. The registered taxpayer would also be required to submit periodic GST returns. Being a broad based tax, GST can

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ull; Only one out of the 11 working adults in the country pay income tax and revenue from this source is meagre. • Out of the total population of 28 million people in the country, only 1 million pay income tax. • 40% of the country s total revenue comes from the oil and gas industry. Oil and Gas is not a reliable source of revenue over the medium to long term because the commodities are depleting natural resources, and their prices are volatile. • The country has been stuck with Fiscal Deficits for more than a decade. The budget deficit is projected to have reached to a record high of more than 7% of the country s Gross Domestic Product [GDP] last year. The country cannot continue raising Debts to finance its deficits, otherw

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ecomes, it would be more costly for the Government to administer and for businesses to comply with it. Ø Pricing and embracing appropriate technology in areas such as GST collection at every stage of the supply chain. Ø To create awareness among the public so that they will understand GST better. GST is a grossly misunderstood concept and that s why certain quarters oppose the idea of having it and leads to its postponement. It is responsibility of the Government to educate all the stakeholders in the economy about the system to give them a bigger picture of the GST. A strong political will is needed to ensure GST becomes a reality in the Malaysian economy because any tax reform of this nature tends to meet with resistance a

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Allied Laws – Goods and Services Tax (Malaysia) – Article – TMI Updates – Highlights

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Goods and Service Tax – GST – By: – Nagesh Bajaj – Dated:- 5-10-2011 Last Replied Date:- 30-12-1899 – Taxation in New Zealand is collected at a national level by the Inland Revenue Department (IRD) on behalf of the Government of New Zealand. National taxes are levied on personal and business income, as well as on the supply of goods and services. Goods and services tax (GST) is an indirect tax introduced in New Zealand on October 1, 1986 at 10%, and later increased to 12.5% on July 1, 1989, and is to be increased to 15% on October 1, 2010. This brought a major change in New Zealand taxation policy as until this point almost all revenue had been raised through direct taxes. Now 19% of the New Zealand Government's core revenue comes from GST. Most products or services sold in New Zealand incur GST at a rate of 12.5%. End-users pay this tax on all liable goods and services directly, in that the purchase price of goods and services includes GST. All businesses are required to register

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d income. Calculate GST by dividing the sales and the income figure by 9. Similarly claim GST @12.5% for purchases and expenses. Calculate GST by dividing the purchases and expenses figure by 9. Taxable goods and services includes: Goods include all types of personal and real property, except money. Services covers everything other than goods or money, e.g. TV repairs, doctor's services and gardening services Taxable goods and services don't include: goods and services supplied by businesses that aren't registered for GST, and exempt supplies such as: rent from Domestic Accommodation. interest you receive donated goods and services sold by a non-profit body, and certain financial services. GST-registered organizations only pay GST on the difference between what they sell and what they buy: income less expenditure. This is accomplished by reconciling GST received through sales and GST paid (through purchases) at regular periods typically every 2 months .H

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e only exceptions are for businesses which claim a mainly wholesale client-base. Otherwise, displaying a prominent GST-exclusive price (i.e. larger and more obvious than the GST-inclusive price), is illegal. Recently, GST increased to 15% in May 2010 budget which is going to be implemented from Oct 1, 2010. As a result, businesses will need to make many critical decisions about issues such as pricing points, updating business systems, GST stipulations in long-term contracts, logistics around repricing consumer goods, and updating promotional material. This new rate will also create challenge for tourism operators who have set their prices up to 2012. The most immediate concern for the majority of SMEs, particularly those selling goods and services directly to consumers, will how much to increase prices. Hence all the businesses including SMEs in New Zealand have to take crucial decisions in dealing with this new tax rate i.e.15% as Oct, 2010 is not so far away. LAWCRUX TEAM – Articles

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Goods and Service Tax – GST – By: – Nagesh Bajaj – Dated:- 3-10-2011 Last Replied Date:- 30-12-1899 – In Canada Goods and Services Tax (GST) is a multi-level value added tax introduced on January 1, 1991, by Prime Minister Brian Mulroney and Finance Minister Michael Wilson. The GST replaced a hidden 13.5% Manufacturers Sales Tax (MST); Mulroney claimed the GST was implemented because the MST hurt the manufacturing sector's ability to export and also replaced the Federal Telecommunications Tax of 11%.The introduction of the GST was very controversial. As of May 18th, 2010, the GST rate is 5%. The European model has helped to become the Canada s economy more efficient and competitive with lower-priced goods in the international market. H

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and services. The Federal Goods and Services Tax (GST) is collected by the Canada Revenue Agency (CRA). GST is a tax that applies at a rate of 5% to the supply of most goods and services in Canada . Three provinces ( Nova Scotia , New Brunswick , and Newfoundland and Labrador ) harmonized their provincial sales tax with GST to create HST. HST applies to the same base of goods and services as GST, but at a rate of 13%. Of this, 5% is the federal part and 8% is the provincial part Some specific products and services are exempt from GST. Such as Most health, medical, and dental services performed by licensed physicians or dentists for medical reasons; Child-care services; Long-term residential accommodation; Most goods and services provide

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goods and services that are not exempt from GST is a lot more than those which are zero-rated. Certain lower income segments of the population, while not exempt from paying GST, may be eligible to receive quarterly GST credits. The GST/HST credit is a tax-free payment that helps offset all or part of the GST or HST paid. Provincial Sales Tax (PST) is also called Retail Sales Tax (RST). In Quebec this tax is called QST. The tax is collected at the provincial level. Each province could charge consumers differently. The following list shows the current rates. The rates could change in the future. Ontario 8% British Columbia 7% Alberta 0% ( Alberta does not collect provincial sales tax) Manitoba 7% Quebec 7.5% Prince Edward Island ( PEI )

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Allied Laws – GST in CANADA – Article – TMI Updates – Highlights

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Allied Laws – GST and Economic Growth – Article – TMI Updates – Highlights

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Goods and Service Tax – GST – By: – Nagesh Bajaj – Dated:- 30-9-2011 Last Replied Date:- 30-12-1899 – To make India as a financial super power, the introduction of GST is must. There are much apprehension relating to proposed GST regime regarding the growth in Indian Economy and its effects thereof. As we know in India economy, destination based taxation requires high compliance cost and efficient administration. Taxation both direct and indirect plays an important role in promoting economic growth as well as equitable distribution. As we are facing the cascading system of indirect taxes in India and with the introduction of GST, all the cascading effects of Cenvat and service tax will be more comprehensively removed with a continuous chai

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r, GST will redistribute the burden of taxation equitably between manufacturing and services bringing about a qualitative change in the tax system. It will lower the tax rate by broadening the tax base and minimizing exemptions. The greatest impact of the implementation of the GST would create a common market across the country and reduce compliance costs and thus, create a equitable distribution. In the absence of significant fiscal options, incentivized policy to attract investors to states would shift to greater emphasis on structural reforms. The over macroeconomic effect of reduction in economic distortions due to GST would be to provide an impetus to economic growth. Thirteenth Finance Commission estimates the impact of the introducti

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ing sectors would benefit from economies of scale. Output of sectors including textiles and readymade garments; minerals other than coal, petroleum, gas and iron ore; organic heavy chemicals; industrial machinery for food and textiles; beverages; and miscellaneous manufacturing is expected to increase. The sectors in which output is expected to decline include natural gas and crude petroleum; iron ore; coal tar products; and nonferrous metal industries. The results of the NCAER Study are also suggested of the GST s positive environmental impact on the economy. Vijay kelkar, Chairman of the 13th Finance Commission said that the proposed GST would benefit the Indian economy by at least $15 billion (about ₹ 73000 crore) per year. A fall

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Goods and Service Tax – GST – By: – Nagesh Bajaj – Dated:- 27-9-2011 Last Replied Date:- 30-12-1899 – As we are expecting that the new regime GST will have a significant effect on the Indian Trade and will have a great impact on the day to day business established in India. Mr. Jose Cyriac, Additional Secretary (Revenue) Ministry of Finance said in the Seminar organized by the Banglore Chamber of Industry and Commerce that GST will be Trade Friendly . According to FM, a new GST regime will generate the targeted revenues with the minimization of exemption. It will broaden the tax base and lower the tax rates. GST is based on destination principle, so the distortions will be reduced fostering a common market across the country. The complianc

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nditions, limitation and procedures. Similar benefits may be given to Special Economics Zones (SEZs). Such benefits will only be allowed to the processing zones of the SEZs. No benefit to the Sales from an SEZ to Domestic Tariff Area (DTA) will be allowed. Both CGST and SGST will be levied on Import of goods and services into the country. The incidence of tax will follow the principle of destination based tax. The SGST of that State will be applicable where the goods and services are consumed. Full and complete set-off will be available on the GST paid on imports on goods and services. In GST, the relief is given to whom those who have Small businesses. They are out of the purview of the GST, means that the businesses with an annual turnove

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olic beverages would be kept out of the purview of GST. Sales Tax / Vat could be continued to be levied on alcoholic beverages as is prevailing in the present. There is no objection if some States impose Vat on it and if impose excise duty that may also not to be affected. On the other hand, tobacco products would be subjected to GST. Centre may be allowed to levy excise duty on tobacco products over and above GST. So far as petroleum products are concerned, it is decided that the basket of petroleum products, i.e. crude, motor spirit (including ATF) and HSD would be kept outside GST as is the prevailing practice in India . Sales Tax could continue to be levied by the States on these products with prevailing floor rate. Similarly, Centre co

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Allied Laws – GST in AUSTRALIA – Article – TMI Updates – Highlights

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Goods and Service Tax – GST – By: – Nagesh Bajaj – Dated:- 25-9-2011 Last Replied Date:- 30-12-1899 – In the European Union, the consumption tax is called Value Added Tax or VAT. In some countries like New Zealand and Canada called their consumption tax as a goods and service tax (GST). In Australia, GST provisions are set out in a piece of Legislation called the A New Tax System (Goods and Service Tax ) Act 1999 and the GST was implemented on 11th July, 2000. In Australia, GST is a part of the broader tax reform which replaces some indirect taxes. Australia s GST is equivalent to consumption taxes as prevailed in other parts of the world. In Australia, administration of the GST is handled by the Australian Taxation Office known as A.T.O.

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aws. Transactions under GST are also called Supplies. Supplies are classified into three categories :- 1. Taxable 2. Input – taxed 3. GST free A GST rate of 10% will be charged on most goods and services consumed in Australia. If registered , there are two types of sales which are treated differently:- Suppliers of GST free goods and services are not have to pay GST, when they make a sale but they will be entitled to GST credits. Suppliers of input taxed goods and services do not have to charge GST on sales but they are not be entitled to claim GST credits from their purchases of inputs. GST is not payable on input taxed supplies where financial supplies, residential rent, residential premises and supplies of food made by school tuckshops

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m Australia may include a payment of GST. Import Duty/ GST will be charged on following terms :- If the goods (1) have a value over AUD $ 1000 or (2) contain alcohol or tobacco of any quantity or value. On the contrary, if goods are valued under AUD $1000 and do not contain alcohol or tobacco then not required to pay any Custom Import Duty/ GST or associated Custom charges. All imported goods are assigned a tariff classification obtained from the Australian Customs Tariff which determines the rate of duty will pay for the product. To conclude the above, Australian goods and services tax revenue will be about A $ 13 billion ($ 12 billion ) more than estimated, Treasurer Wayne Swan said, increasing the funds available to states and to fund th

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Goods and Service Tax – GST – By: – Nagesh Bajaj – Dated:- 21-9-2011 Last Replied Date:- 30-12-1899 – The First Discussion Paper produced by the Empowered Committee of state Finance Ministers has come out with an innovative way to deal with inter-state transaction of goods and services. The forthcoming GST will be dual in nature and will be levied on all transactions of goods and services. Centre will impose CGST while the state will impose SGST on the same transaction. IGST will be combination of these two, i.e., (CGST plus SGST). As per Indian constitution the taxation of interstate sales is possible only in the state where it was consumed. Unfortunately, this led some states to issue notices to dealers not resident within their jurisdictions to file returns. To remove this problem a law was enacted by the Parliament in 1956 authorizing the central government to levy a tax on interstate sales called the Central Sales Tax (CST). The centre delegated the power to administer the tax to

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nd the revenue accrues to the state where the final consumer is located. The Task Force has suggested that the success of every model depended on the following pre-requisite: a. E-filing of return every month with dealer wise transaction details. b. E-payment of taxes. c. National Portal for access to information by member states and dealers. d. National agency for overseeing the flow of information and taxes. e. Strong IT infrastructure for the above issues. f. The intra and inter-state rates of tax should be equal to avoid evasion and camouflaging the intra state transactions or inter-state transactions. If we will give a look on the IGST Model suggested by the First Discussion Paper, it fulfills the all abovesaid requirements. 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 p

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ut addressing the fundamental concerns of IT infrastructure and information support system the adoption of IGST model would not be adequate. Hence they have suggested for Modified Bank Model instead of IGST Model. Conclusion: The model suggested by the First Discussion Paper is innovative in many ways. However, nothing has been said in the FDP in respect of stock transfer from one state to another. It is suggestive that stock transfers should also be taxed under IGST in the origin state and the credit of the same should be available in the destination state so that there shouldn't be any hindrance in the value chain. But the Empowered Committee of the State Finance Ministers should be appreciated for adopting such a model. LAWCRUX TEAM Import export trade, Custom duty, Central excise duty, GST, Indirect tax services, indirect tax, advance license, foreign trade policy, tax planning, e-book, EOU, SEZ, NEPZ, EPCG, DFRC, CBCC, DGFT, DEPB {http://www.lawcrux.com} Author: Nagesh Bajaj L

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Goods and Service Tax – GST – By: – Nagesh Bajaj – Dated:- 16-9-2011 Last Replied Date:- 30-12-1899 – The proposed GST Scheme has created a sense of fear among states that they will lose their autonomy over levy of taxes. Presently, states enjoy total autonomy atleast in respect of state taxes. It is upto state governments to decide – what to levy, type of levy, rate of tax and how to tax. Some state governments have expressed deep concerns that the introduction of GST regime will affect their fiscal autonomy. The reason behind this apprehension is that the design of GST is based upon a common base and an uniform rate across states. Also, after the implementation of GST, states would not have any power to make any unilateral changes. The Task Force on Goods and Services has defined the full autonomy in the exercise of taxation powers. It would mean that the centre or state, as the case may be: a) Retain the power to enact the tax; b) Enjoy the risks and rewards of ownership of the tax

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ue loss to the states. But the states are making it a political issue. Some states in their recent budget presentations have complicated the indirect tax regime by adding layers to tax slabs and raised taxes with an eye on enhancing the extent of compensation. So, the compensation has become a matter of grand bargain between centre and the states. Generally state governments use their fiscal policy as an instrument for the purpose of social welfare and sometimes for consolidating their vote bank. In fact, some of the state governments want to use the tool of taxation for maintenance of their vote bank. As per the recommendation of the Task Force, the present Empowered committee of state Finance Ministers may, upon the introduction of GST, be transformed into a permanent constitutional body known as the Council of Finance Ministers. This council shall comprise of the Union Finance Ministers and all State Finance Ministers. The Union FM would be the chairman of this council. The council

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the Indian economy and common man in the long run. Hence, both the centre and the states will have to show endurance upto some extent for better tomorrow. With the inclusion of the tax on services as well as tax on manufacture, the tax base of the state governments will increase significantly, whereas the taxbase of the centre on the other hand will increase only to the extent of tax on sales. Certainly, the widen taxbase would ensure more revenue for the states. Hence it is not right to say that the centre will be benefited more. State governments can achieve their objective of social and economic welfare through increased revenue and support inform of compensation by the centre. They shouldn t politicize this issue. Conclusion: The expected harmonious levy in GST regime across the states would lead to the unification of Indian market as the inter-state trade barriers would be removed. The uniform rate of tax, subsuming of major central and state taxes in GST, full set-off mechanism a

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Goods and Service Tax – GST – By: – Nagesh Bajaj – Dated:- 14-9-2011 Last Replied Date:- 30-12-1899 – In 2006, the UPA Government announced that a comprehensive GST would be launched on 1st April, 2010 and it was believed that the introduction of GST is a difficult task, as our current structure of indirect taxes is driven by the multiplicity of taxes. Some levied by the Centre and others by the States. Under the Chairmanship of Dr. Asim Dasgupta, the Empowered Committee carve out the design and structure of GST. The new regime GST gives an opportunity to bring together the machinery of the Centre and the States to jointly work for better enforcement. Prime Minister has also realized and stated that we have travelled a long way on implemen

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egarding the final structure of GST by the end of the month. But, States like Karnataka and Gujarat opposed the deadline i.e. April 1, 2010 as having inadequate ground level preparations and some States also pointed out that the preparation of IT infrastructure HSN code and legislation is essential, especially for tracking the movement of goods and services. There is much dispute over the reduction rate of Central Sales Tax .Due to CST reduction, some States were losing revenue in crores annually. Dr.Asim Dasgupta also said that 'CST loss is a serious issues for States'. The another controversy arose in the matter of petroleum and in alcohol. There are restrictions on availing credit of taxes paid on fuels. Further, the Task Force h

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warned about the issues includes consensus over rates, differential rates on certain items, compensation mechanism for States losing out on revenue etc and also required a constitutional amendment for its implementation. The First Discussion Paper released by Empowered committee of finance Minister on 10th Nov,2009 envisages an extremely diluted form of GST and the implementation of the GST should be postponed to 1st Oct,2010. In an Interview with CNBC-TV 18, Rajeev Dimri Head Indirect taxes at BMR and associates told that The government could make some preparatory changes. The GST was implemented on April 1st 2010 but, now it is excepted that it will implemented on April, 2011. Another interview with Anil Khandelwal Chief Financial Office

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Goods and Service Tax – GST – By: – Nagesh Bajaj – Dated:- 8-9-2011 Last Replied Date:- 30-12-1899 – IT infrastructure will be one of the basic requirements for successful implementation of Goods and Services tax. It should be well in place before introduction of GST. Based on the experience of different state governments, we can say that without an efficient e-governance it is not possible to administer value added tax regime effectively. The Input Tax Credit (ITC) is an important aspect of VAT and it is difficult to monitor ITC in the absence of fully developed computerized system. At present, the e-filing of returns as well as filing of various forms under VAT, excise duty and service tax is a bitter experience for the taxpayers. Inspite of the confirmatory claims made by both the central government and the state governments, the system is not adequate. The hardware developed is quite slow in responding to the taxpayers requirements. Not even hardware but software application is al

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dit 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 the payment of SGST. The central agency will act as a clearing house. It will verify the claims and inform the respective governments to transfer the funds. Hence, there is maintenance of uninterrupted input tax credit chain on inter-state transactions. IGST model is completely a self-monitoring model. A close look on the IGST model suggests a facilitation of robust IT system with all the necessary information for computation of the tax credit. The most important task before the Empowered committee and the central government will be to build up information technology (IT) platform and infrastructure. The major responsibilities of IT infrastructural requirement will be shared by the central government through the use of its own IT infrastructure facility. The tax information network (TIN) system, built by NSDL for income-tax would be a right

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launch of GST. States don't possess an adequate IT infrastructure base in comparison to the Centre. It would create a great mess during functioning of IGST model. Hence, states should be equally equipped before introduction of goods and services tax. States should be merged into TIN, one by one, at an administrative level so that they get themselves accustomed with this network. While doing this state VAT should be kept apart. Conclusion: The system of IT infrastructure would be of much importance in the GST regime. If we will go into common market without adequate preparation and without a minimum level of e-governance across the states, there would be serious difficulties. So the government of India should take special measures to introduce computerization in tax administration in all states. Since new software application will have to be developed and installed within a short span of time there may be possibility of errors. It may take few years for settling down. LAWCRUX TEAM I

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Goods and Service Tax – GST – By: – Nagesh Bajaj – Dated:- 7-9-2011 Last Replied Date:- 30-12-1899 – The scheme of GST should be supported by a strong tax-administration infrastructure for it s optimum success. Without an efficient tax-administration the implementation of goods and services tax will be just like pouring water in the bottomless bowl. So, the structure, design and the business process of tax administration is an important factor in the determination of the revenue performance. To put in the words of Casanegra de Jantscher, tax administration is tax policy. Although various improvements have been recently made in the tax laws and administration over the past few years such as Large Taxpayer Unit (LTU) Scheme and Automation in Central Excise and Service Tax (ACES), the systems at both Central and state level remain complex. The tax systems suffer from substantial compliance gaps, except in the highly organized sectors of the economy. Tax administration is a typical issue

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cation. However, the states may, if necessary, undertake post-registration verification to eliminate any potential abuse. In future, the string corresponding to PAN will be replaced by the Unique Identification Number (UIN) proposed to be issued to all residents. It should be mandatory for all registrant dealers to obtain an e-mail ID and also open an internet banking account with any bank. The form must capture the e-mail ID and the internet bank account number. GST Invoice According to Task Force, VAT Invoices are crucial control document of VAT since it forms the primary source of information. Recommendations relating to VAT invoices are as under: i) The law should require a supplier making a taxable supply to another taxable person to provide a VAT invoice with that supply or the payment for it. The requirement should be enforceable by some penalty. ii) The VAT invoice should be standardized across all states so as to contain a minimum of information. Payment on monthly basis: The

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d as a single taxable entity eligible for CGST input credit across units / branches in that state. Strong, Broad and common IT infrastructure: The Central Government shall establish a common IT infrastructure which will serve the needs of both CGST and SGST. A Taxpayers Information Network (TIN) will be established by the centre keeping in view the information requirement of CBEC and the state tax administration. The TIN will be shared between the centre and the state. The payment of tax and transaction reporting should be made through a combined payment and transaction reporting statement in form no. GST-1. This statement should detail all business to business transactions relating to sale. This statement should be common for both CGST and SGST compliance and it should be mandatory to file this statement electronically on a monthly basis while making payment of taxes. Uniform Laws for SGST: Electronic filing of all other returns, if any, should also be mandatory. Therefore, the return

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Goods and Service Tax – GST – By: – Nagesh Bajaj – Dated:- 1-9-2011 Last Replied Date:- 30-12-1899 – Transportation & logistics is a much wider term. It covers various service providers and services provided by all modes of transportation (e.g., air, road, rail and sea). It also comprises related services such as warehousing, handling and value added services such as packaging, labeling, assembling etc. Transport service is used both as intermediate input and in final consumption. Also the transport equipments are subject to multiple taxation at both central and state levels. The present taxation regime leads to cascading effect of embedded taxes on the downstream industry (oil industry) which do not get rebated thereby leading to enha

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portation of persons by road transport. ii) Transportation of persons by rail. iii) Transportation of persons by air for domestic journey. iv) Transportation of persons by air in economy class for international journey. v) Transportation of persons by other than cruise ship from port in India. To rationalize the present indirect tax regime for transport services, the 13th Finance commission s Task Force has given some important suggestions: i) The tax on vehicles and the tax on goods and passengers levied by the state governments should be subsumed in the GST. ii) All transport equipments and all forms of services for transportation of goods and services by railways, air, road and sea must form an integral part of the comprehensive GST base

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only and that too restricted to classes other than economy class. Finance Bill, 2010 proposes to fully expand the scope of this service by bringing domestic air travel also in the net. The exclusion of economy class is also being removed and all classes of air travel will be liable to service tax as per the proposed change. As per departmental clarification, modalities of working out the tax amount including exemptions, abatement etc. would be prescribed at the appropriate time. Transport of goods through Railways, which was till now exempted from service tax will have to bear the burden of 10% service tax. It indicates that the government wants to take more and more services in the tax net before implementation of full fledged GST. Conclus

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Goods and Service Tax – GST – By: – Nagesh Bajaj – Dated:- 12-8-2011 Last Replied Date:- 30-12-1899 – The GST Model proposed in the First Discussion Paper produced by the Empowered committee of state finance ministers on Nov 10, 2009, will be dual in nature. It will consist of two components: CGST (Central GST) and SGST (State GST) simultaneously levied by centre and state, respectively, on all transactions of goods and services, except those exempted by law. Both states and centre would independently administer and levy tax on the supply of all goods and services. Currently in the indirect tax structure, the centre is liable to levy tax on manufacture, rendition of services and import of goods. States are empowered to levy and collect tax

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current list (list III). The relevant entries from all the three lists are as under: Entry no. 83 (Union list): It states about duties of customs including export duties. Entry no. 84 (Union list): It states about duties of excise on tobacco and other goods manufactured or produced in India. Entry no. 92A (Union list): It states about taxes on the sale or purchase of goods other than newspaper, where such sale or purchase takes place in the course of inter-state trade or commerce. Entry no. 92B (Union list): It states about taxes on consignment of goods where such consignment takes place in the course of inter-state trade or commerce. Entry no. 92C (Union list): It states about the empowerment of central government to tax services under the

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le of the constitution would require a special majority of parliament (i.e. 2/3rd majority of the total number of members present and voting, which should not be less than half of the total membership of the house), the ratification of at least half of the state legislatures by special majority and the president assent. Conclusion: A joint working group (JWG) has already been constituted on September 30, 2009 comprising of the officials of the central and state governments to prepare, in a time bound manner a draft legislation for constitutional amendment, draft legislation for CSGT, a suitable model legislation for SGST and rules and procedures for CGST and SGST. The empowered committee of state finance ministers is likely to meet Mr. Pran

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VAT and Sales Tax – Started By: – Milan Bajaj – Dated:- 10-8-2011 Last Replied Date:- 10-8-2011 – Can somebody help me by sending me an overview of GST & DTC for the purpose of preparation of Interviews. My email ID milanbajaj88@gmail.com Thank You. – Reply By pradeep khatri – The Reply = Dear Milan, You may search this information on Big 4 s Websites. I think that E&Y s website will provide you with the relevant information. Regards, Pradeep Khatri – Reply By Milan Bajaj – The Reply =

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Goods and Service Tax – GST – By: – Nagesh Bajaj – Dated:- 8-8-2011 Last Replied Date:- 30-12-1899 – The prevalent indirect tax structure in India has a number of exemptions. At central level, 330 exemptions are allowed under CENVAT. These exemptions to service providers and manufacturers depend on the fulfillment of various conditions which are specific to each exemption. Around 99 items are presently exempted under VAT. Individual states can expand this list even for the goods of local importance. It is not possible for the provider of exempt services or manufacturers of exempt goods to avail the benefit of input tax credits. This hampers the free flow of credits down the supply chain and increases the cascading effect. Ultimately whole

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ther commercial departments iv) Public sector enterprises v) Banks and Insurance vi) Health and Education services b) Any service transactions between an employer and employee either as a service provider, recipient or vice-versa. c) Any unprocessed food article which is covered under the public distribution system should be exempt regardless of the outlet through which it is sold. d) Education services provided by non-governmental schools and colleges. e) Health services provided by non-governmental agencies. The exemption list proposed by the Task Force leaves a corner for debate as it consists of services which are rendered by the government in the course of the discharge of the sovereign functions of the state. Sovereign functions are m

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nction, service tax is leviable provided there is a sale of the service on the basis of an invoice or a bill or voucher. Even if it is a statutory function and only a fee is charged, it is still conceptually a commercial sale. And the tax is leviable. The Report of Task Force should have said that these functions are not taxable. Department of Revenue (DOR) in its comment on the first discussion paper on GST favoured for a common list of exemptions for CGST and SGST. Efforts will be made by centre to substantially reduce the number of items presently exempted under CENVAT regime. Around 99 items presently exempted under VAT may continue to remain exempted in GST regime. There should be no scope, with individual states, for expansion of this

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