GST is considered to be the biggest Indirect tax reform in India after independence that will result in a single indirect tax for the whole nation and will eliminate tax on tax effect. India will be one market as against several markets and multiple taxes in present regime. At the same time, tax base is likely to be widened due to large coverage of tax payers and lower threshold limits.
Impact of GST will be positive for those sectors who are currently paying higher rate of tax than probable standard rate of GST i.e. 17 – 19%. However, for those who are bearing lower taxes currently will face new challenges due to inflated cost of their supply.
Few key things a common man should know about this law are:
1. It’s a destination based tax as against the current origin based tax. Most of the indirect taxes like Central Excise duty, Additional Customs duty, Service tax, Sales tax, VAT, Entry tax, Entertainment tax, Luxury tax, Octroi, taxes on lottery, etc. shall get subsumed in GST with few exceptions.
2. GST rates: may have three tier rate structure, standard rate, lower rate for essential items and higher rate for luxury items.
3. Threshold: GST will be applicable if aggregate turnover of taxable or non-taxable items exceeds Rs. 10 Lakhs in a financial year and for North Eastern states Rs. 5 Lakhs
4. Administration: It will be a dual GST structure, Central GST (CGST) to be levied by Centre and State GST (SGST) by States on all transactions within the State. In case of Inter-State supply, the Centre would levy and collect IGST. For CGST and IGST, CBEC will be the administrative authority and for SGST the State commercial tax departments
5. IT system: All tax payer services like registrations, Returns, payments, etc to be done online. Composition levy scheme for the registered taxable person having turnover upto 50 Lakhs.
6. Rating: GST compliance rating system is introduced based on record of compliance records.
7. Input tax Credit (ITC) of tax paid at each stage will be available in the subsequent stage of value addition. ITC of CGST will be available for payment of CGST and IGST. ITC of SGST will be available for payment of SGST and IGST. ITC of IGST will be available for payment of IGST, CGST and SGST in same order.
8. TCS – E-commerce operator to collect tax at source, at the time of credit or payment. TDS: Central or State Government may mandate their departments to deduct tax at 1% on payment or credit to the supplier where total value of supply under the contract exceeds Rs 10 Lakhs
9. Refund can be claimed within a period of two years. Returns for different intervals: Monthly Return, Quarterly Return for composition scheme, TDS Returns, First Return, Annual Return, Final Return on cancellation of registration
10. Migration of existing taxpayers by a provisional registration valid for a period of 6 months and will get final registration thereafter. Advance ruling mechanism is also proposed.
(Author is CMA, CS, LLM and can be reached at firstname.lastname@example.org)