GST – CONCEPT & STATUS – As on 3rd June, 2017
GST
Dated:- 10-6-2017
Introduction:
The introduction of Goods and Services Tax (GST) would be a very significant step in the field of indirect tax reforms in India. By amalgamating a large number of Central and State taxes into a single tax, it would mitigate cascading or double taxation in a major way and pave the way for a common national market. From the consumer point of view, the biggest advantage would be in terms of a reduction in the overall tax burden on goods, which is currently estimated to be around 25%-30%. Introduction of GST would also make Indian products competitive in the domestic and international markets. Studies show that this would have a boosting impact on economic growth. Last but not the least, this tax, because of its transparent and self-policing character, would be easier to administer.
Genesis:
2. The idea of moving towards the GST was first mooted by the then Union Finance Minister in his B
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domains. The Centre has the powers to levy tax on the manufacture of goods (except alcoholic liquor for human consumption, opium, narcotics etc.) while the States have the powers to levy tax on sale of goods. In case of inter-State sales, the Centre has the power to levy a tax (the Central Sales Tax) but, the tax is collected and retained entirely by the originating States. As for services, it is the Centre alone that is empowered to levy service tax. Since the States are not empowered to levy any tax on the sale or purchase of goods in the course of their importation into or exportation from India, the Centre levies and collects this tax as additional duties of customs, which is in addition to the Basic Customs Duty. This additional duty of customs (commonly known as CVD and SAD) counter balances excise duties, sales tax, State VAT and other taxes levied on the like domestic product. Introduction of GST would require amendments in the Constitution so as to concurrently empower the Ce
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ntegrated tax – IGST) on inter-State trade or commerce (including imports) in goods or services. The Central Government will have the power to levy excise duty in addition to the GST on tobacco and tobacco products. The tax on supply of five specified petroleum products namely crude, high speed diesel, petrol, ATF and natural gas would be levied from a later date on the recommendation of GST Council.
4.1 A Goods and Services Tax Council (GSTC) shall be constituted comprising the Union Finance Minister, the Minister of State (Revenue) and the State Finance Ministers to recommend on the GST rate, exemption and thresholds, taxes to be subsumed and other features. This mechanism would ensure some degree of harmonization on different aspects of GST between the Centre and the States as well as across States. One half of the total number of members of GSTC would form quorum in meetings of GSTC. Decision in GSTC would be taken by a majority of not less than three-fourth of weighted votes cast
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he following major decisions have been taken by the GSTC:
(i) The threshold exemption limit would be ₹ 20 lakh. For special category States enumerated in article 279A of the Constitution, threshold exemption limit has been fixed at ₹ 10 lakh.
(ii) Composition threshold shall be ₹ 50 lakh. Composition scheme shall not be available to inter-State suppliers, service providers (except restaurant service) and specified category of manufacturers.
(iii) Existing tax incentive schemes of Central or State governments may be continued by respective government by way of reimbursement through budgetary route. The schemes, in the present form, would not continue in GST.
(iv) There would be four tax rates namely 5%, 12%, 18% and 28%. The tax rates for different goods and services have been finalized. Besides, some goods and services would be under the list of exempt items. The exempted services has been finalized which is same as the services exempted under existing service tax
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payers having turnover above ₹ 1.5 crore shall be divided equally in the ratio of 50% each for the Central and State tax administration.
(vii) Powers under the IGST Act shall also be cross-empowered on the same basis as under CGST and SGST Acts with few exceptions.
(viii) Power to collect GST in territorial waters shall be delegated by Central Government to the States.
(ix) Formula and mechanism for GST Compensation Cess has been finalised.
(x) Nine rules on registration, composition levy, valuation, tax invoice, input tax credit, payment, returns, refund and transitional provisions have been recommended.
(xi) www.gst.gov.in, managed by GSTN, shall be the Common Goods and Services Tax Electronic Portal.
(xii) Rate of interest on delayed payments and delayed refund has been recommended.
(xiii) Rate of TCS has been recommended.
Salient Features of GST:
6. The salient features of GST are as under:
(i) GST would be applicable on “supply” of goods or services as against the
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r-State supplies and would be subject to IGST.
(vii) CGST, SGST /UTGST& IGST would be levied at rates to be mutually agreed upon by the Centre and the States under the aegis of the GSTC.
(viii) GST would replace the following taxes currently levied and collected by the Centre:
a) Central Excise Duty;
b) Duties of Excise (Medicinal and Toilet Preparations);
c) Additional Duties of Excise (Goods of Special Importance);
d) Additional Duties of Excise (Textiles and Textile Products);
e) Additional Duties of Customs (commonly known as CVD);
f) Special Additional Duty of Customs (SAD);
g) Service Tax;
h) Cesses and surcharges insofar as they relate to supply of goods or services.
(ix) State taxes that would be subsumed within the GST are:
a) State VAT;
b) Central Sales Tax;
c) Purchase Tax;
d) Luxury Tax;
e) Entry Tax (All forms);
f) Entertainment Tax (except those levied by the local bodies);
g) Taxes on advertisements;
h) Taxes on lotteries, betting and g
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nal.
(xiv) The list of exempted goods and services would be kept to a minimum and it would be harmonized for the Centre and the States as well as across States as far as possible.
(xv) Exports would be zero-rated.
(xvi) Credit of CGST paid on inputs may be used only for paying CGST on the output and the credit of SGST/UTGST paid on inputs may be used only for paying SGST/UTGST. In other words, the two streams of input tax credit (ITC) cannot be cross utilized, except in specified circumstances of inter-State supplies for payment of IGST. The credit would be permitted to be utilized in the following manner:
a) ITC of CGST allowed for payment of CGST & IGST in that order;
b) ITC of SGST allowed for payment of SGST & IGST in that order;
c) ITC of UTGST allowed for payment of UTGST & IGST in that order;
d) ITC of IGST allowed for payment of IGST, CGST & SGST/UTGST in that order.
ITC of CGST cannot be used for payment of SGST/UTGST and vice versa.
(xvii) Accounts would be settled
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.
(xxi) Obligation on certain persons including government departments, local authorities and government agencies, who are recipients of supply, to deduct tax at the rate of 1% from the payment made or credited to the supplier where total value of supply, under a contract, exceeds two lakh and fifty thousand rupees.
(xxii) Refund of tax to be sought by taxpayer or by any other person who has borne the incidence of tax within two years from the relevant date.
(xxiii) Obligation on electronic commerce operators to collect 'tax at source', at such rate not exceeding two per cent. (2%) of net value of taxable supplies, out of payments to suppliers supplying goods or services through their portals.
(xxiv) System of self-assessment of the taxes payable by the registered person.
(xxv) Audit of registered persons to be conducted in order to verify compliance with the provisions of Act.
(xxvi) Limitation period for raising demand is three (3) years from the due date of filing of annual re
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vision for penalties for contravention of the provision of the proposed legislation has been made.
(xxxii) Advance Ruling Authority would be constituted by States in order to enable the taxpayer to seek a binding clarity on taxation matters from the department. Centre would adopt such authority under CGST Act.
(xxxiii) An anti-profiteering clause has been provided in order to ensure that business passes on the benefit of reduced tax incidence on goods or services or both to the consumers.
(xxxiv) Elaborate transitional provisions have been provided for smooth transition of existing taxpayers to GST regime.
Benefits of GST:
7. (A) Make in India:
(i) Will help to create a unified common national market for India, giving a boost to Foreign investment and “Make in India” campaign;
(ii) Will prevent cascading of taxes as Input Tax Credit will be available across goods and services at every stage of supply;
(iii) Harmonization of laws, procedures and rates of tax;
(iv) It will boost
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b”.
(B) Ease of Doing Business:
(i) Simpler tax regime with fewer exemptions;
(ii) Reductions in the multiplicity of taxes that are at present governing our indirect tax system leading to simplification and uniformity;
(iii) Reduction in compliance costs – No multiple record keeping for a variety of taxes- so lesser investment of resources and manpower in maintaining records;
(iv) Simplified and automated procedures for various processes such as registration, returns, refunds, tax payments, etc;
(v) All interaction to be through the common GSTN portal- so less public interface between the taxpayer and the tax administration;
(vi) Will improve environment of compliance as all returns to be filed online, input credits to be verified online, encouraging more paper trail of transactions;
(vii) Common procedures for registration of taxpayers, refund of taxes, uniform formats of tax return, common tax base, common system of classification of goods and services will lend greater cert
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front end services to the taxpayers namely registration, payment and return. Besides providing these services to the taxpayers, GSTN would be developing back-end IT modules for 27 States who have opted for the same. The migration of existing taxpayers has already started from November, 2016. The Revenue department of both Centre and States are pursuing the presently registered taxpayers to complete the necessary formalities on the IT system operated by GSTN for successful migration. About 75 percent of existing registrants have already migrated to the GST systems.
8.1 GSTN has selected 34 IT, ITeS and financial technology companies, to be called GST Suvidha Providers (GSPs). GSPs would develop applications to be used by taxpayers for interacting with the GSTN.
Other Legislative Requirements:
9. Four Laws namely CGST Act, UTGST Act, IGST Act and GST (Compensation to States) Act have been passed by the Parliament and since been notified on 12th April, 2017. Twenty three States have p
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s ACES (Automated Central Excise & Service Tax) would require re-engineering. DG Systems has already constituted a Steering Committee for implementation of GST System for CBEC. The name of IT project of CBEC under GST is 'SAKSHAM' involving a total project value of ₹ 2,256 crores.
10.1 It was also felt that the organizational structure and deployment of human resources needed a review for smooth and effective implementation of GST. A Working Group has after extensive deliberations and studies, submitted its Report which has been approved by the Government.
10.2 Augmentation of human resources would be necessary to handle large taxpayers' base in GST scattered across the length and breadth of the country. Capacity building, particularly in the field of Accountancy and Information Technology for the departmental officers has to be taken up in a big way. A massive four-tier training programme is being conducted under the leadership of NACEN. This training project is aimed at impar
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so continue to handle the work relating to levy and collection of customs duties.
10.5 The following information is available on the CBEC website www.cbec.gov.in :
(i) Presentation on GST
(ii) GST – Concept & Status
(iii) GST Tax rates for goods and services
(iv) FAQs on GST in English, Hindi and eight regional languages
(v) CGST, IGST, UTGST and GST (Compensation to States) Act
(vi) Nine finally approved Rules
(vii) Constitutional Amendment Act
Way Forward:
11. Looking forward, there are number of goal posts that need to be met before GST can be rolled out in the country. The following tasks are required to be completed within defined time frame:
(i) Passage of SGST laws by all State legislatures;
(ii) Recommendation of remaining Model GST Rules by GST Council;
(iii) Notification of GST Rules;
(iv) Establishment and upgradation of IT framework;
(v) Meeting implementation challenges;
(vi) Effective coordination between Centre & State tax administrations;
(vii) Reorgan
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