: June 03, 2016 |
: Tax Laws
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Silent Features of Goods & Services Tax (GST) Bill
Union of India is about to introduce a much awaited, discussed The Uniform Tax Bill i.e Goods & Service Tax Bill.
To cut down the administrative huddles & puzzled present tax system in Indian the Modi led Government is keen on introducing GST. The Rational behind the uniform Tax System is to simplifying the tax System & to boost the revenue which is expected to rose up to 1.5% of present Tax collection. Experts are also of the view that it can help to minimize the fiscal deficit.
There are some miss understanding with state governments that it may lose its revenue if GST is applied but on finding one can insure that the GST will help State as well as Central to stand up its revenue collections.
Silent Features of GST
(i) GST would be applicable on supply of goods or services as against the present concept of tax on the manufacture or on sale of goods or on provision of services.
(ii) GST would be a destination based tax as against the present concept of Origin based tax.
(iii) It would be a dual GST with the Centre and the States simultaneously levying it on a common base. The GST to be levied by the Centre would be called Central GST (CGST) and that to be levied by the States would be called State GST (SGST).
(iv) CGST and SGST would be levied at rates to be mutually agreed upon by the Centre and the States.
(v) 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 CAD)
f. Special Additional Duty of Customs (SAD)
g. Service Tax
h. Cesses and surcharges
(vi) State taxes that would be replaced within the GST are
a. State VAT
b. Central Sales Tax
c. Luxury Tax
d. Entry Tax (other than those in lieu of octroi)
e. Entertainment Tax (not levied by the local bodies)
f. Taxes on advertisements
g. Taxes on lotteries, betting and gambling
h. State ceases and surcharges insofar as they relate to supply of goods or services
(vii) Credit of CGST paid on inputs may be used only for paying CGST on the Out-put and the credit of SGST paid on inputs may be used only for paying SGST. In other words, the two streams of input tax credit cannot be mixed except in specified circumstances of inter-State sales.
(viii) GST would apply to all goods and services barring a few to be specified.
(ix) Tobacco and tobacco products would be subject to GST. In addition, the Centre could continue to levy Central Excise duty and the States to levy sales tax / VAT.
Let us simplify GST in Common Language -
What is GST?
Goods and Services Tax -- GST -- is a comprehensive tax levy on manufacture, sale and consumption of goods and services at a national level.
Through a tax credit mechanism, this tax is collected on value-added goods and services at each stage of sale or purchase in the supply chain.
The system allows the set-off of GST paid on the procurement of goods and services against the GST which is payable on the supply of goods or services. However, the end consumer bears this tax as he is the last person in the supply chain.
Experts say that GST is likely to improve tax collections and boost India's economic development by breaking tax barriers between States and integrating India through a uniform tax rate.
What are the benefits of GST?
Under GST, the taxation burden will be divided equitably between manufacturing and services, through a lower tax rate by increasing the tax base and minimizing exemptions.
It is expected to help build a transparent and corruption-free tax administration. GST will be is levied only at the destination point, and not at various points (from manufacturing to retail outlets).
Currently, a manufacturer needs to pay tax when a finished product moves out from a factory, and it is again taxed at the retail outlet when sold.
Will LBT replace by GST?
Yes, surely, with implementation of GST Bill, The much twisting LBT will be replaced.
How will it benefit the Centre and the States?
It is estimated that India will gain $15 billion a year by implementing the Goods and Services Tax as it would promote exports, raise employment and boost growth. It will divide the tax burden equitably between manufacturing and services.
What are the benefits of GST for individuals and companies?
In the GST system, both Central and State taxes will be collected at the point of sale. Both components (the Central and State GST) will be charged on the manufacturing cost. This will benefit individuals as prices are likely to come down. Lower prices will lead to more consumption, thereby helping companies.
What type of GST is proposed for India?
India is planning to implement a dual GST system. Under dual GST, a Central Goods and Services Tax (CGST) and a State Goods and Services Tax (SGST) will be levied on the taxable value of a transaction.
All goods and services, barring a few exceptions, will be brought into the GST base. There will be no distinction between goods and services.
Which other nations have a similar tax structure?
Almost 140 countries have already implemented the GST. Most of the countries have a unified GST system. Brazil and Canada follow a dual system where GST is levied by both the Union and the State governments.
France was the first country to introduce GST system in 1954.
Will this be an extra tax?
No-It will not be an additional tax. CGST will include central excise duty (Cenvat), service tax, and additional duties of customs at the central level; and value-added tax, central sales tax, entertainment tax, luxury tax, octroi, lottery taxes, electricity duty, state surcharges related to supply of goods and services and purchase tax at the State level.
What will be the rate of GST?
The combined GST rate is being discussed by government. The rate is expected around 14-16 per cent. After the total GST rate is arrived at, the States and the Centre will decide on the CGST and SGST rates.
Currently, services are taxed at 10 per cent and the combined charge indirect taxes on most goods are around 20 per cent.
Will goods and services cost more after this tax comes into force?
The prices are expected to fall in the long term as dealers might pass on the benefits of the reduced tax to consumers.
Why some States are against GST; will they lose money?
The governments of Madhya Pradesh, Chhattisgarh and Tamil Nadu say that the information technology systems and the administrative infrastructure will not be ready by April 2014 to implement GST. States have sought assurances that their existing revenues will be protected.
The central government has offered to compensate States in case of a loss in revenues.
Some States fear that if the uniform tax rate is lower than their existing rates, it will hit their tax kitty. The government believes that dual GST will lead to better revenue collection for States.
However, backward and less-developed States could see a fall in tax collections. GST could see better revenue collection for some States as the consumption of goods and services will rise.
How will GST be implemented? /Constitutional Amendment needed
The empowered committee is almost to finalize the details of GST. But States have to sort out several issues like agreement on GST rates, constitutional amendments and holding talks with industry associations. Experts feel the drafting of legislation and the implementation of law will take time.
Suitable legislation for the levy of GST (Central GST Bill and State GST Bills) drawing powers from the Constitution can be introduced in Parliament or the State Legislatures only after the enactment of the Constitution Amendment Bill. Unlike the Constitutional Amendment, the GST Bills would need to be passed by a simple majority. Obviously, the levy of the tax can commence only after the GST law has been enacted by the respective legislatures. Also, unlike the State VAT, the date of commencement of this levy would have to be synchronized across the Centre and the States. This is because the IGST model cannot function unless the Centre and all the States participate simultaneously
What are the items on which GST may not be applied?
Alcohol, tobacco, petroleum products are likely to be out of the GST regime.
What is date of application of GST Bill & structure of implementation?
1 June 2016, the basic structure of GST implementation will be of 5 year.
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