Goods and Service tax (GST) is the most talked about topic in the field of indirect taxation today in India. Everybody is keenly waiting for the proposed GST draft which will replace the existing system of VAT in India. The central government wants the GST to be implemented in India by 1st April, 2011. Although there are and will be been many hurdles which are to be crossed before GST is implemented in India.
With the advent of GST the whole picture of indirect taxation in India will change. GST will help bringing to an end tax cascading i.e. tax on tax. But before GST is implemented all over the nation, the IT infrastructure connecting all the states must be developed.
For the successful administration of GST the inter connectivity through the IT infrastructure among centre and all states is must. In the current VAT regime no credit of CST is available against the output tax or CST payable on sales of the dealers, whereas the credit of GST paid on interstate purchase of goods by the buyer of such goods will be allowed to be set off against the GST payable by him when selling such goods, in the dual system of GST.
For allowing the credit of such GST paid on interstate purchases, there must be inter-connectivity among states and centre for proper verification of the GST claim of the buyer paid on interstate purchases by him. This can be explained with the help of following example:
Suppose buyer “A” who is a registered dealer in Punjab purchases goods from Delhi and pays GST to the seller in Delhi. Now he will be eligible to get the credit of GST paid by him at Delhi on his purchases.
But how the department in Punjab will be able to verify the GST claim of “A” paid by him in Delhi? The authorities will be able to verify the GST claim of “A” only if they can have access to the information about the return filed by the seller in Delhi. Such information can be possible only if there is exchange of information between authorities at Delhi and at Punjab which is possible through IT infrastructure only.
The e-filing of VAT returns have been started in almost all the states before the implementation of GST, which is a step forward towards preparations for the introduction of the GST regime. Now the next step is to connect the IT infrastructure of all the states with each other for the proper administration of GST and this should be done before the implementation of the GST.
Author: Amit Bajaj Advocate