GST: “One Nation Tri Taxation”

BIG QUESTION : WHAT IS GST?

Ghero Sab Transaction (cover all transactions in tax net)

Lets understand GST (Goods & Services Tax).

In India there is so called Dual concept GST (but Three GST Law)

1. Central Goods & Services tax (CGST) subsuming Excise Duty, CVD,Service Tax and any other Central Tax

2. State Goods & Services tax (SGST) subsuming VAT, Entry tax, Luxury tax, octrai, entertainment tax, tax on puchase

3. Integrated Goods & Services Tax (IGST) = CST

The Constitution has empowered concurrently the Centre and the states to levy GST on the supply of goods and/or services within the state. Thus, it will result in one central law on GST (CGST) and about 29 state laws on GST (SGST) as each state will have one SGST.

Further, the Centre has been empowered to levy GST on the supply of goods and/or services in the course of inter-state trade or commerce (IGST).

The net result of this is 31 legislations of GST (CGST, IGST and 29 SGSTs).

The Constitutional amendment has not entirely replaced the existing indirect taxes and has inherited some of the existing indirect taxes like Value Added Tax (VAT) (levied by the states on sale of goods) and Central Excise Duty (levied by the Center on manufacture of goods) on specified products such as petrol, diesel, aviation fuel and alcohol. In addition to GST, tobacco and tobacco products will be subjected to Central Excise Duty also. Thus, what we end up is 31 GST legislations, 29 VAT legislations and a union legislation on Central Excise.

Again a Next big Question “WHY GST ?”

1. The main purpose of GST is to eliminate the dispute of whether a transaction is sale of goods or services (Example sale of SIM Card , Software etc). GST is expected to eliminate all such disputes because all transactions shall be taxed at the same rate and no distinction is made between goods and services.

2. Uniformity of tax rates and structures: GST will ensure that indirect tax rates and structures are common across the country, thereby increasing certainty and ease of doing business. In other words, GST would make doing business in the country tax neutral, irrespective of the choice of place of doing business.

3. Removal of cascading: A system of seamless tax-credits throughout the value- chain, and across boundaries of States, would ensure that there is minimal cascading of taxes. This would reduce hidden costs of doing business.

What is the Objective of GST?

1. Ensuring availability of input credit across the value chain2. Simplification of tax administration and compliance. Harmonization of tax base, laws, and administration procedures across the country. Minimizing tax rate slabs to avoid classification issues. Prevention of unhealthy competition among states.6. Increasing the tax base and raising compliance.

Let’s understand the GST from our national Flag

Saffron color : Central Goods & Services tax (CGST) to be levied by central Government on all intra supply of sales and services in all states. (CGST in lieu of Excise and Service tax

Green color : State Goods & Services tax (SGST) to be levied by respective state Government on all intra state supply of sales and services in respective state. (SGST in lieu of VAT)

ASHOK CHAKRA– Integrated Goods & Services tax (IGST) to be levied on all supply other than on intra state supply. (The Goods & Services will move across the states on wheel of IGST (white color on the national flag is Input Credit of IGST– White color color of harmony and peace)

On what transaction GST will be levied.

As per prima facie reading GST is levied on almost every supply of goods and services including the following transactions

1. Permanent transfer/ disposal of business assets where input tax credit has been availed on such assets.

2. Supply of goods or services between related persons, or between distinct persons as specified in section 10, when made in the course or furtherance of business.

3. Supply of goods by principal to his agent and vice versa

4. Importation of services by a taxable person from a related person or from any of his other establishments outside India, in the course or furtherance of business. (RCM)

GST will not be levied on the following

1. Services by an employee to the employer in the course of or in relation to his employment.

2. Services by any Court or Tribunal established under any law for the time being in force.

3. The functions performed by the Members of Parliament, Members of State Legislature, Members of Panchayats, Members of Municipalities and Members of other local authorities.

4. The duties performed by any per son who holds any post in pursuance of the provisions of the Constitution in that capacity; or

5. The duties performed by any person as a Chairperson or a Member or a Director in a body established by the Central Government or a State Government or local authority and who is not deemed as an employee before the commencement of this

6. Services by a foreign diplomatic mission located in India.

7. Services of funeral, burial, crematorium or mortuary including transportation of the deceased.

8. Sovereign Service provided by Government to the citizen of India.

9. Education & Health service provided by Government:

10. Any transactions as may be notified from time to time. ( may be just like mega exemption notification in service tax)

GST will also be levied on certain input supply of goods & Services (RCM)

Central or a State Government may, on the recommendation of the Council, by notification, specify categories of supply of goods and/or services the tax on which is payable on reverse charge basis and the tax thereon shall be paid by the recipient of such goods and/or services and all the provisions of this Act shall apply to such person as if he is the person liable for

paying the tax in relation to the supply of such goods and/or services.

There shall be levied a tax called the Central/ State Goods and Services Tax (CGST/SGST) on all intra – State supplies of goods and/ or services on the value determined under section 15 and at such rates as may be notified by the Central/ State Government in this behalf on the recommendation of the Council and collected in such manner as may be prescribed.

Section 2(55) “input tax” in relation to a taxable person, means the IGST, including that on import of goods, CGST and SGST charged on any supply of goods or services to him and includes the tax payable under sub – section (3) of section 8 i.e under Reverse charge Mechanism , but does not include the tax paid under section 9; (i.e Composition scheme)

“Input Tax Credit” means credit of ‘input tax’ as defined above.