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Department of Revenue has agreed to most of the recommendations put forward by Empowered committee in FDP on GST relating to harmonious structure of rate, taxation base, exemptions, chargeability, definition of taxable event, taxable person, valuation, classification etc.However, there are certain areas where Department of Revenue has suggested changes or deviated from FDP. The said areas of differences are discussed below:

Key areas of difference

  • Department of Revenue has recommended a uniform threshold limit for both goods and services across States and Centre
  • According to Department of Revenue, annual turnover threshold could be Rs 10 lakhs or more but should not be applicable to inter­state supplies
  • Periodic returns to be filed before Central IGST authority for inter-state transactions.
  • With regard to levies to be subsumed under state taxes, Department of Revenue has suggested to subsume electricity duty, octroi, purchase tax and taxes levied by local bodies within GST
  • Contrary to FDP, Department of Revenue has recommended for inclusion of Alcoholic beverages within the ambit of GST to avoid cascading effect
  • There may be a dispensation to levy sales tax / VAT and State excise duty in addition to GST on Alcoholic beverages
  • As mentioned in FDP, Department of Revenue has advocated for levy of GST on Tobacco products with Input tax credit.
  • According to Department of Revenue, keeping crude petroleum and natural gas out of GST would result in cascading effect of taxes due to non-availability of credit of taxes paid on capital goods and input services. To avoid the same, it is suggested that Diesel, ATF and motor spirit be subject to GST and credit of GST paid on the same may be disallowed on selective basis to avoid misuse.
  • Department of Revenue has suggested that SGST on imports be levied and collected by Centre. Further, based on destination principle same should be passed on to respective states.
  • It is proposed that there should be a single rate of GST for goods and services given that a two rate structure is inherited with problems like raw materials and intermediaries being taxable at higher rate compared to finished goods, accumulation of excess input tax credit etc.
  • Department of Revenue has suggested that there should be a common list of exempted products for SGST and CGST.

Way forward

  • As FDP, Thirteenth Finance Commission and comments of Department of Revenue suggested a need for constitutional amendment, the next step towards GST implementation is to table the draft amendment / law in parliament
  • A clear roadmap should be defined in terms of steps being followed and to be taken by Government for GST implementation
  • Proposed GST rate of goods and services to be placed in public domain before initiation of legislative action.

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