With ‘The Winter Session of Parliament’ supposed to start from Thursday, 26 November, 2015, the Centre is reaching to the opposition parties to ensure passage of the Constitutional Amendment Bill on GST with mutual consensus. Let’s have a look at some of the changes that will come up with GST:
1. Change in Law and procedures :
It’s a major indirect tax reform in the country. The entire indirect tax code will be a new set. Any comparison with the present laws will be inappropriate. Lot of time will be devoted in understanding new concepts and procedures.
2. Change in Tax rates :
Standard rate of 12% for CENVAT, 14.5% for Service tax, residuary rate of VAT at 12.5 % brings overall rate to 28%. But post GST, tax rate is likely to be between 18-20%, gain of 8-10%. A detailed analysis is required to understand the impact of changes in tax rates.
3. Change in Tax Credit system :
Currently, limited inter levy credits are allowed between excise duty and service tax. No cross credits are available across these taxes. When GST is introduced, it will facilitate seamless cross credit across the entire supply chain and across all states with a common tax base.
4. Stock Transfers from one state to another :
Presently, it is free of tax against Form F. But under GST, it will be taxable even though the stock is transferred to one’s branch or consignment agent in another state.
5. Stock Transfers to branches / consignment agents within the state:
Presently, treatment varies from state to state. But under GST, exemption will be given only when BIN of transferor and transferee is the same.
For example, when a dealer of ABC is transferring goods from Branch1 to Branch4 in Rajasthan having same Business Identification Number (BIN), no GST is required to be paid.
6. Sale / Service :
Presently, there are a number of cases where double taxation is in force. The most common example is transfer of intangible goods where VAT and Service tax both are levied, thus causing double taxation. Under GST, since there is no distinction between sale and service as far as levy of GST is concerned. Only one tax will be levied. So the issue will no more be there.
7. Based on HSN :
When GST will be based on HSN, then interpretational issues will be reduced in respect of class of commodities.
8. Software Upgradation:
Continuous Upgradation of software is a big challenge for the software companies as well. Dealers and service providers will have to upgrade their respective accounting and tax software.
9. Training :
Not only staff of the business world, but marketing personnel and common man need to be made aware of the basic working of GST for successful implementation.
Single consultant will be required in place of different consultants for Excise Duty, Service Tax and VAT. No more hassels in running across various departments of tax. Only one common tax code will prevail.
Impact of GST will be tremendous…. Laws will be simplified……………..
If all stakeholders understand intricacies of law and be ready for Upgradation of their systems, financially also they will be on gain side.
(Author Details- CA Neha Gupta, B.Com, ACA, AIR (Final) 36, LNG & Associates, Chartered Accountants, Email: firstname.lastname@example.org)