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Whether GST is new to India?

In the year 2000, the Vajpayee government started a discussion on GST by setting up an empowered committee headed by Asim Dasgupta., the then Finance Minister of West Bengal.

In 2003, the Kelkar Task Force on Indirect tax had suggested a comprehensive Goods and Service Tax based on VAT principle.

GST is being introduced in the country in 2016, after a long journey and the GST roll out deferred to 1st July, 2017.

GST in World!

i. France was the first country to introduce GST in 1954.
ii. Around 160+ countries are using GST.
iii. Canada follows dual GST model. India will have the dual GST model as proposed by the drafted law.

GST as per Indian Constitution

The Constitution 101st Amendment Act has received presidential assent on 8th September 2016. This act paves the way for introduction of Goods & Services Tax (GST) by making Special provision with respect to goods and services tax.

The GST is a Value added Tax (VAT) is proposed to be a comprehensive indirect tax levy on manufacture, sale and consumption of goods as well as services at the national level. It will replace all indirect taxes levied on goods and services by the Indian Central and State governments.

Single Tax under GST!

Before one to two year all were aware that GST will be one tax across India. Is it so?  Let’s have a look. Currently It has been decided that India is going to implement dual structure in India. So there will be CGST, SGST and IGST. All states will be having their GST Act.

The federal and state governments will jointly administer India's dual GST.

  • A GST for each of the 29 states and seven federally administered union territories i.e. SGST
  • A federal GST i.e. CGST
  • An integrated GST on inter-state supplies of goods and services i.e. IGST

Keeping in mind the federal structure of India, there will be two components of GST - Central GST (CGST) and State GST (SGST). Both Centre and States will simultaneously levy GST across the value chain. Tax will be levied on every supply of goods and services. Centre would 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. 

Entertainment tax, imposed by states on movie, theatre, etc., will be subsumed in GST, but taxes on entertainment at panchayat, municipality or district level will continue.

Registration under GST!

AS per GST draft law the person shall not be liable to register under GST if he is engaged exclusively in the business of supplying goods and/or services that are not liable to tax or are wholly exempt from tax under this Act.

Analysis: Let Mr. X is exclusively making transaction with exempted products under GST and he has not registered under GST.  However, if at any time he made interstate sells with one taxable item along with the regular exempted items, then he is liable to registered under GST. Otherwise he will be default under GST for not registering as per the GST act.

Taxes that may get subsumed under CGST

Central excise & additional excise duty. Service tax. Addl. customs duty. CST. Cesses [levied by the Union]. Surcharges [levied by the Union]

Like - # Central Excise Duty, # Duties of Excise (medicinal and toilet preparations), # Additional Duties of Excise (goods of special importance), # Additional Duties of Excise (textiles and textile products), # Additional Duties of Customs (commonly known as CVD), # Special Additional Duty of Customs (SAD), # Service Tax # Cesses and surcharges in so far as they relate to supply of goods or services

Taxes that may get subsumed under SGST

VAT. Purchase tax. State excise duty [except on liquor]. Entertainment tax.

Like- # State VAT, # Central Sales Tax, # Purchase Tax, # Luxury Tax,# Entry Tax (all forms), # Entertainment Tax (not levied by local bodies), # Taxes on advertisements

# Taxes on lotteries, betting and gambling, # State cesses and surcharges

What’s Out of GST

Alcoholic liquor for human consumption
Petroleum crude, high speed diesel, motor spirit (petrol), natural gas and aviation turbine fuel - GST Council will decide until when

What’s in GST.
Tobacco, tobacco products. Centre may impose excise duty on tobacco.

Whether there is no existence of existing Excise Laws after GST?

Though for most of the manufactured products excise duty will not be applicable, Tobacco and tobacco products will be taxable under existing excise law as of now. In future it may change to GST purview.

Rate of GST

As proposed by the GST Council in India, there will be types of rates like two standard rates - 12% and 18%, 5% for the essentials and 28% for the luxury goods and sin goods. There can be cess also on and above GST rates.

GST benefit?

GST will help flow of credit across the supply chain, will help to remove the cascading effects of GST. GST will be a game changing reform for the Indian economy by creating a common Indian market and reducing the cascading effect of tax on the cost of goods and services. It will impact the tax structure, tax incidence, tax computation, tax payment, compliance, credit utilization and reporting, leading to a complete overhaul of the current indirect tax system.

Supply Vs Consideration Vs Taxability!

Supply with or without consideration will be taxable under GST.
Supply - Sale, Barter, Exchange, Transfer, Rental, lease, license, disposal.

GST on Newspaper
GST may be levied on the sale of newspapers and advertisements. This would mean substantial incremental revenues for the Government.

Impact of any wrong information in return w.r.t. to books

GSTN will capture all the data from all the registered persons like supplier and recipient. All the registered persons need to update their data as per the GST law within the time. The GSTN system will match the invoice and tax details submitted by the supplier to the invoice and tax details of credit claimed by the recipient. If any of the details does not match, then it will automatically lead to disallow of credit. This system will make sure to follow the rules and regulation by both supplier and recipient.

Migration to GST:
All the registered persons need to migrate to GST as per the notification.

Availing Input tax credit under GST vs Existing system

All the unutilized input tax credit can be utilized under GST if:

  • All those credits are allowed under existing laws and under GST laws
  • Used for taxable supplies under GST
  • Persons eligible for input tax credit under this Act
  • Possession of invoices / documents evidencing payment of duty on such inputs
  • Invoices/ documents were issues not earlier than 12 months preceding GST date
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