As per the proposed structure of GST to be implemented, there are 3 taxes: CGST, SGST, IGST and following classes of tax rates:
- Exempted Goods and Services- on which no tax is payable.
- Zero rated goods and services- on export out of India
- @5%, 18% & 28% rated goods and services.
In case of taxable goods and services falling in 5% rate, the tax will be -
5% SGST and 5% CGST in case of local sale and service within the State and 10% IGST in case of Interstate sale and service.
Therefore it can be understood that tax revenue collected by central or state authority shall be allocated between union and state equally as far as GST is concerned in the first instance and then the compensation to states will be made out of IGST collections.
Since the whole system of allocation of revenue is problem of govt with which business entity should not be involved for the purpose of transparency, control and complexity of law, I think there should be ONE GST LAW in place of THREE GST LAWS in the country as proposed and states should be given power to make rules thereunder for respective states.
One law in which a particular type of goods or services is taxable at prescribed rate only e.g. @5% can be more beneficial and easy for the tax collectors i.e. business entities. Most of the people deal with a particular class of goods and services and therefore will be covered by one tax rate applicable to them. Their monthly GST returns will show sales, tax collected, purchase, input tax claimed and balance tax paid on net value addition (gross profit). Income tax authorities will get verified details of gross profit earned for the month, quarter & year and after deducting expenses and depreciation etc income tax payable will be computed easily. After tax audit, only mismatched figures will be scrutinized by income tax authorities.
Therefore, in my opinion there should be only one law on GST prescribing classification of goods and services and applicable tax rates. Administration of tax payers should be joint authority of union and state and allocation of revenue should be 50:50 with compensation to non-consuming state. Thus, consuming state will collect revenue from buyers and selling state will collect revenue from production activity. This will promote export import like trade between states and each state will try to industrialize itself for local wealth.