GST Goods and Services tax
What is Good s and service Tax (GST)?
It is a destination based tax on consumption of goods and services. It is proposed tobe lived at all stages right from manufacture up to final consumption with credit of taxes paid at previous stages available as setoff. In a nutshell, only value addition will be taxed and burden of tax is to be borne by the final consumer.
What exactly is the concept of destination based tax on consumption?
The tax would accure to the taxing authority which has Jurisdiction over the place of consumption which is also termed as place of supply.
Which of the existing taxes are proposed to be subsumed under GST?
The GST would replace the following taxes
(i) taxes currently levied and collected by the center
a. Central Excise duty
b. Duties of Excise (Medicinal and Toilet Preparations)
c. Additional Duities of Excise (Textiles and Textile products)
d. Additional Duties of Excise (Goods of Special Importance)
e. Additional Duties of Customs ( Commonly Known as CVD)
f. Special Additional Duty of Customs (SAD)
g. Service tax
h. Central Surcharges and cesses so far as they relate to supply of goods and services
(ii) State taxes that would be subsumed under the GST are:
a. State VAT
b. Central Sales Tax
c. Luxury Tax
d. Entry tax (all forms)
e. Entertainment and Amsuement Tax (except when levied by the local bodies)
f. Taxes on adveretisements
g. Purchase Tax
h. Taxes on lotteries, bettin and gambling
i. State Surcharges and Cesses so far as they relate to supply of goods and services
Status of Tobacco and Tobacco products under GST:
Tobacco and Tobacco preoducts would be subject to GST. In addition, the Center would have the power to levy Central Excise duty on these products.
Authority to be levy and administer GST:
Center will levy and adminiter CGST and IGST while respective states will levy and administer SGST.
Taxation Simultaneously:
The Centeral GST and the State GST would be levied simultaneously on every transaction of supply of goods and services except the exempted goods and services, goods which are outside the purview of GST and the transactions which are below the prescribed thereshold limits. Further, both would be levied on the same price or value unlike State VAT which is leived on the value of the goods inclusive of CENVAT. Whiule the location of the supplier and the recipient within the Country is immaterial for the purpose of CGST, SGST would be chargeable only when the supplier and the recipient are both located within the state.
Illustration 1: Suppose hypothetically that the rate of CGST is 10% and that of SGST is 10%. When a whole sale dealer of steel in Uttar Pradesh supplies steel bars and rods to a construction Company which is also located within the same state , sy Rs.100, the dealer would charge CGST of Rs.10 and SGST of Rs.10 in addition to the basic price of the Goods. HE would be required to deposit CGST component into Central Government account while the SGST portion into the account of the concerned state Government. Of course, he need not actually pay Rs.20 (Rs.10 +10) in cash as he would be entitled to set-off his liability against the CGST or SGST paid on his purchases (say, inputs). But for paying CGST he would be allowed to use only the credit of CGST paid on his Purchase while for SGST he can utilize the credit of SGST alone. In other words, CGST credit cannot, in general, be used for payment of SGST. Nor can SGST credit be used for payment of CGST.
Illustration II. Suppose, again hypothetically, that the rate of CGST is 10% and that of SGST is 10%. When an advertising company located in Mumbai supplies advertising services to a company manufacturing soap also located within in the State of Maharashtra for, let us say Rs.100, the ad company would charge CGST of Rs.10 as well as as SGST of Rs.10 to the basic value of the service. He would be required to deposit CGST component into a Central Government account while the SGST portion into the account of the concerned State Government. Of course, he need not again pay Rs.20 (Rs.10+Rs.10) in cash as it would be entitled to set-off this liability against the CGST or SGST paid on his purchase (say, of inputs such as stationery, office equipment, services of an artist etc). But for paying CGST he would be allowed to use only the credit of CGST paid on its purchase while for SGST he can utilise the credit of SGST alone. In other words, CGST credit cannot, in general, be used for payment of SGST. Nor can SGST credit be used for payment of CGST.
Benifits for the Country:
Introduction of 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 and allowing set-off of prior -stage taxes, it would mitigate the ill effects of cascading and pave the way for a common national market. For the consumers, the biggest gain would be in terms of a reduction in the overall tax burden on goods, which is currently estimated at 25%-30%. Introduction of GST would also make India products competitive in the domestic and international markets, Studies show that this would instantly spur economic growth. There may also be revenue gain for the center and the states due to widening of the tax base, increase in trade volumes and improved tax compliance. Last but no the least, this tax because of its transparent character, would be easier to administer.