Sourav Bagaria

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GST Act may be called the *Central / State Goods and Services Tax Act, 2016. It extends to the *whole of India (CGST Act) / State wise (SGST Act). It shall come into force on such date as the Central or a State Government may, by notification in the Official Gazette, appoint in this behalf.

While each State GST Act would extend to the relevant State, the Central GST Act extends to the whole of India and includes Jammu & Kashmir (‘J&K’).

Salient Features of GST

Introduction of GST is a significant step in field of indirect tax reforms.

The salient features about this legislation were first time discussed in its first discussion paper in year 2009. We will reproduce the features discussed here again to understand this act very well.

(i) The GST shall have two components: one levied by the Central (hereinafter referred to as CGST), and the other levied by the States (hereinafter referred to as SGST). Rates for CGST and SGST would be prescribed appropriately, reflecting revenue considerations and acceptability. This dual GST model would be implemented through multiple statutes (one for CGST and SGST statute for every State).

(ii) The Central GST and the State GST would be applicable to all transactions of goods and services made for a consideration except the exempted goods and services, goods which are outside the purview of GST and the transactions which are below the prescribed threshold limits.

(iii) Since the CGST and SGST are to be treated separately, taxes paid against the CGST shall be allowed to be taken as input tax credit (ITC) for the CGST and could be utilized only against the payment of CGST.

(iv) Cross utilization of ITC between the Central GST and the State GST would not be allowed except in the case of inter-State supply of goods and services under the IGST model which is explained later.

(v) Tobacco and tobacco products would be subject to GST.

(vi) A common threshold exemption would apply to both CGST and SGST.

(vii) Credit of CGST paid on inputs may be used only for paying CGST on the output.

(viii) Credit of SGST pain on inputs may be used only for paying SGST on the output.

(ix) The taxpayer would need to submit periodical returns, in common format as far as possible, to both the Central GST authority and to the concerned State GST authorities.

(x) Each taxpayer would be allotted a PAN-linked taxpayer identification number with a total of 13/15 digits. This would bring the GST PAN-linked system in line with the prevailing PAN-based system for Income tax, facilitating data exchange and taxpayer compliance.

(xi) Keeping in mind the need of tax payer’s convenience, functions such as assessment, enforcement, scrutiny and audit would be undertaken by the authority which is collecting the tax, with information sharing between the Centre and the States.

(xii) Export of Goods and Services- ZERO Rated

(xiii) Additional Tax of 1% on Inter State Taxable Supply of Goods by State of Origin and NON CENVATABLE.

Taxes to be Subsumed in GST

As per Lok Sabha debate, GST to Replace following Taxes.

Central Taxes to Subsumed

1. Central Excise duty (CENVAT)
2. Additional Excise Duty
3. Excise duty levied under Medicinal & Toiletries Preparation Act.
4. Additional duties of customs (ADC)
5.Countervailing Duty (CVD)
5. Service Tax
6. Surcharges & Cess, KKC.

State Taxes to Subsumed

1. State VAT
2. Central Sales Tax
3. Purchase Tax
4. Entertainment Tax (unless it will levied by Local Bodies)
5. Luxury Tax
6. Entry Tax (All forms)
7. Taxes on lottery, betting & gambling
8. Surcharges & Cess

Only single Tax GST will be levied on all the Goods & Services. The above taxes will be abolished.

Taxes that will not be subsumed

1. Stamp Duty

2. Electricity Duty

3. Other Entry taxes and Octroi

4. Entertainment Tax (levied by local bodies)

5. Basic customs duty and safeguard duties on import of goods into India

6. Professional Tax

COMPARISON

Difference between Present Tax Structure and GST Structure

Sr. NOISSUESPRESENT REGIMEGST REGIME
1.Broad SchemeThere are separate laws for separate levy. For e.g. Central Excise Act, 1944, respective State VAT laws.There will be only one such law because GST shall subsume various taxes as specified above.
2.Tax RatesThere are separate rates. For e.g. Excise 12.36 % and Service Tax 14%.There will be one CGST rate and a uniform rate of SGST across all states.
3.Cascading EffectThis Problem arises because credit of CST and many other taxes not allowed.This situation will not arise as CST concept is being eliminated with introduction of IGST.
4.Tax BurdenUnder present scenario, tax burden on tax payer is high.Under this, tax burden is expected to reduce since all taxes are integrated which make it possible the burden to be split equitably between manufacturing and services
5.Cost Burden on ConsumersDue to presence of cascading effect, certain taxes become part of costAs GST mechanism removes such effect by providing credit, cost burden is reduced
6.Concurrent PowerAt present, there is no such power to both Centre and State on same subject tax matterBoth Centre and State are vested with the power to make law on GST by virtue of proposed Article 246A of the Constitution.
7.ComplianceTax compliance is complex because of multiplicity of laws and their provisions to be followed.Tax compliance would be easier as only one law subsuming other taxes need to be followed
8.Transparent Tax AdministrationPresently, tax is levied at two stages in broad manner i.e. 1. When product moves out of factory. 2. At retail outlet.GST is to be levied only at final destination of consumption and not at various points. This brings more transparency and corruption free tax administration.

REGISTRATION REQUIREMENT

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The Goods and Service Tax or GST is a taxation system where there is a single tax in the economy for goods and services. This taxation system is meant to create a single taxation system in the entire country for all goods and services.

The registration liability under proposed GST is on every person whose Aggregate Turnover exceeds 9 lacs ( 4 lacs for North Eastern States including Sikkim). This limit includes all supplies, whether on own account or on behalf of principal, except supplies in the capacity of a registered job worker, which shall be treated as supplies by the principal. The said threshold is to be computed on an all India basis.

However, tax liability shall arise only once the aggregate turnover in a financial year exceeds INR 10 lakhs (INR 5 lakhs for North eastern states).

Under GST Aggregate Turnover includes all Taxable, Non-taxable, Exempt Supplies, Exports of Goods and Services computed on All India basis for Single PAN. And Aggregate Turnover does not include Value of Supplies on which GST is payable on Reverse Charge basis and Value of Inward Supplies.
North Eastern States includes Seven Sister States (Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, and Tripura),and the Himalayan state of Sikkim.

The following categories of persons shall be compulsorily required to be registered under GST Act: (Limit of Rs.9 lakh /4 lakh is not available to following)

(i) persons making any inter-State taxable supply,

(ii) casual taxable persons,

(iii) persons who are required to pay tax under reverse charge,

(iv) non-resident taxable persons,

(v) persons who are required to deduct tax under section 37;

(vi) persons who supply goods and/or services on behalf of other registered taxable persons whether as an agent or otherwise,

(vii) input service distributor;

(viii) persons who supply goods and/or services, other than branded services, through electronic commerce operator,

(ix) every electronic commerce operator,

(x) an aggregator who supplies services under his brand name or his trade name, irrespective of the threshold limit of 9 lakh/4 lakh and

(xi) such other person or class of persons as may be notified by the Central Government or a State Government on the recommendations of the Council.

Time limit for registration is: within 30 days from the date of liable to get register arises.

Other Points to be Kept in Mind

1. It is important to note that in terms of the envisaged GST regime, registration would have to be applied individually for each State.

2. A person shall not be liable to registration if his aggregate turnover consists of only goods and / or services which are not liable to tax.

3. A person having multiple business verticals in a State may obtain a separate registration for each business vertical, subject to such conditions as may be prescribed. For example one firm has textile show room; mobile phone show room; car show room in the State; then separate registrations can be obtained for each of these activities in the same State.

4. A person, though not liable, may get himself registered voluntarily.

5. Every person shall have a Permanent Account Number issued under the Income Tax Act, 1961, in order to be eligible for grant of registration.

6. If a person, other than an Input Service Distributor, is already registered under an earlier law, it shall not be necessary for him to apply for fresh registration and he shall follow the procedure as may be prescribed in this regard.

7. A causal taxable person or a non resident taxable person shall, at the time of submission of application for registration, make an advance deposit of tax of an amount equivalent to the estimated tax liability for the period for which the registration is sought. The certificate of registration issued to such class of persons shall be valid for a period of 90 days, which may be extended up to 90 days further.

8. Powers have been provided for cancellation of registration, if the assessee contravenes the provisions or obtains the registration by fraudulent means. However, such cancellation may be revoked, in terms of the prescribed procedure.

9. The concept of a single/centralized registration for multiple places of business has not been provided

10. A person, may also get himself registered voluntarily

11. A non-resident taxable person may be granted registration on the basis of any other document as may be prescribed.

12. The registration or the *Unique Identity Number*, shall be granted or, as the case may be, rejected after due verification in the manner and within such period as may be prescribed.

13. The proper officer shall not reject the application for registration or the Unique Identity Number without giving a notice to show cause and without giving the person a *reasonable opportunity* of being heard.

14. A certificate of registration shall be issued in the prescribed form, with effective date as may be prescribed.

15. A registration or an Unique Identity Number shall be deemed to have been granted after the period, if no deficiency has been communicated to the applicant by the proper officer within that period.

16. Any rejection of application for registration or the Unique Identity Number under the CGST Act / SGST Act shall be deemed to be a rejection of application for registration under the SGST Act / CGST Act.

17. The grant of registration or the Unique Identity Number under the CGST Act / SGST Act shall be deemed to be a grant of registration or the Unique Identity Number under the SGST/CGST Act.

COMPOSITION SCHEME

1. Person whose aggregate annual turnover in a financial year does not exceed Rs 50 lakhs may pay tax under composition at a rate not below 1% of turnover.

2. No composition scheme will b allowed to dealer who makes inter state supplies.

3. Person cannot opt for both composition and regular. Say a person having PAN has three business registered then he will have to opt for composition in respect of all businesses.

4. Right now there is no bar on service providers to opt for Composition.

5. Composition dealer not to collect any tax and shall not be entitled to take Input Tax Credit (ITC).

6. If it is detected that person was not eligible for composition Scheme And He claims himself as Composite Dealers then penalty equal to tax payable may b levied.

7. Composition dealer will have to file *four quartely* and *one annual return*

INPUT TAX CREDIT

Every taxable person shall, subject to specified conditions, be entitled to take credit of input tax, as self-assessed, in his return and such amount shall be credited, on a provisional basis, to his electronic credit ledger to be maintained in the manner as may be prescribed.

Principal shall be entitled to take credit of input tax on inputs / capital goods sent to a job-worker (either by principal or directly), if the said inputs capital goods, after completion of job-work, are received back by the principal:

i. within 180 days in case of inputs

ii. within 2 years in case of capital goods

In case inputs / capital goods are not received in the aforesaid time frame, credit shall be reversed (along with interest), which can be re claimed at the time when inputs / capital goods are received back.

However, a taxable person who has not furnished a valid return as per law shall not be allowed to utilize such credit till he discharges his self assessed tax liability.

The duplication of claims of input tax credit shall be communicated to the recipient and the corresponding tax value shall be added to the output tax liability of the recipient.

Verification and matching will be carried out qua the credit notes relating to an outward supply, issued by the supplier, with the corresponding reduction in the claim for input tax credit by the corresponding receiver, with similar consequences, with the exception that additions to liability, owing to any mismatches, shall be to the account of the supplier.

Other Points to be kept in mind:

1. Available for inputs/ input services used or intended to be used by a supplier for making supply of taxable goods and services subject to:

i. Possession of tax invoice or other prescribed taxpaying document.

ii. Receipt of the goods and or services

iii. Actual payment of tax charged in respect of such supply

iv. Furnishing of return

2. Not available for goods/services used primarily for personal consumption or use by employees, goods/ services used acquired for construction of immoveable property.

3. Not available beyond a period of one year from the date of issue of invoice in case of new registration.

4. ITC will not be available in respect of any invoice after September following the end of financial year or filing of the annual return, whichever is earlier.

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