Changes made in the taxation system, it is a not simpler process. Nobody can make easily change in the Taxation System except the Tax Authority having power regarding towards the Constitution. So that is why, GST Act is not implemented till now. Article 246 and 254 of the Constitution, gives a power with respect to goods and Service tax imposed by the Union or by such state. But now a question arises to all of us i.e
GST is a comprehensive tax which is levied on production, trading goods or provision of Services in all over India. GST is in line with the principle of destination – based Consumption tax. GST is a tax on Value addition made at each stage and benefit of Setoff will be continued from manufacture/ Service provider up to retailers, so that ultimate Consumer should bear the tax. However GST is based upon VAT Principle. Rate of GST will be uniform across the country. There will be no Distinction between goods and Services.
Now in India, there is a huge number of list in indirect taxes such as Excise duty, Custom duty, Service Tax, VAT, Purchase Tax, Entertainment Tax, Entry Tax, Octroi, Tax on lotteries, betting and gambling, Luxury Tax ,Etc. So that, Government tries to implement a unified tax system which is known as GST instead of all indirect taxes for Developing an economy environment at common national level. GST is removing various difficulties like Cascading Effect (Tax on Tax), Complexities, administration and compliance cost. For removing doubt about cascading effect, there is a one example i.e In Vat system, State is Charging VAT on the excise duty paid to the central government.
Under GST, the taxation burden will be divided equitably between manufacturing and services, through a lower tax rate by increasing the tax base and keep a lower exemption. It is expected to help in building transparency and corruption free tax administration.
There is a planning to implement a dual GST System. Under Dual GST System, CGST (Central goods and service tax) and SGST (State goods and Service tax) are charged by Central and State Government respectively on the taxable value of a transaction of goods and Services. Excise duty, additional excise duty, service tax, custom duty, Education Cesses, Surcharge etc. and VAT, Entertainment tax, Luxury tax, Taxes on lotteries, betting and gambling , Cesses and Entry Tax etc. would be subsumed into CGST and SGST respectively. But on the interstate sale of goods and services, IGST (Integrated) goods and service tax) is applicable and collected by the Central. IGST is a combination of CGST and SGST.
GST is to be operating in all over the country. CGST and SGST is levied on manufacturing and providing Services, So at that time CGST and SGST is charged separately. Taxes paid against CGST allowed as input tax credit while making a payment of CGST only and same thing happens in the SGST i.e taxes paid against SGST allowed as ITC against SGST. Cross utilization of Input tax credit will be not be allowed in the payment of CGST and SGST i.e taxes paid against CGST will not be allowed as ITC while making a payment towards SGST and Vice versa. IGST is levied on the Interstate Sale or Services. In IGST, includes both taxes such as SGST and CGST. Benefit of Credit of IGST will be adjusted against both SGST and CGST Liability and vice-versa. In the Case of Stock / Consignment Transfer, there is a provision made by Parliament for their taxability and same would be treated as under IGST.
Example: A manufacture purchase a raw material to produce finished good of Rs 100 and SGST is Charge on such material at Rs10 & CGST will also be levied on it of Rs 10. Then manufacture sold goods to whole seller for Rs 150 by separately charging both SGST and CGST of Rs 15 each and again goods is sold to directly consumer to Rs 200 by Separately Charging Both SGST and CGST of Rs 20 each. So how will compute the tax liability in the case of GST..??
|Sr. No||Particular||Basic Value||SGST||CGST||Total Value||ITC for SGST||ITC for CGST||Liability|
|1)||Input For Manufacture|
|Cost to Manufacture||100||10||10||120||–||–||10||10|
|2)||A] Manufacture’s Liability|
|Manufacture Sold goods to Whole seller||150||15||15||180||10||10||5||5|
|3)||B] Whole seller’s Liability|
|Whole Seller sold goods to Consumer||200||20||20||240||15||15||5||5|
|4)||Total Tax Collection||20||20|
In GST, Export transaction would be considered as Zero rated because of increasing of competitiveness of Indian goods and services in the foreign market and earning more revenue out of them. Another hand in case of import transaction, it is treated as same as interstate sale or Services. It means that tax on Import, includes both CGST and SGST Tax levied by originating State.
The Combined GST Rate is being discussed by government .The rate of GST is to be proposed between 16% to 20% after GST rate is arrived at the States and the Centre will decide on the CGST and SGST Rates. Currently, Services are taxed at 14% and the combined charge of indirect taxes on the most of goods is around 20%.There are four rate for GST which is based on revenue neutralization rate are as follows:
1] Floor rate for essential goods and services.
2] Standard rate for goods and services which are used in the general cases.
3] Special rate for precious metal i.e Gold, silver, diamond etc.
4] Nil rate.
Under GST registration, there is a provision of threshold limit for small trader having a turnover is below of Rs 10 Lakh to applying registration under CGST, SGST, and IGST. But this amount is proposed by parliament or GST Council committee. If a turnover of trader is around Rs 1.5 Crore then it is administrated by State and otherwise administrated by the central. In GST also, Composition Scheme is available to the dealer having a turnover of Rs 10 to 50 Lakh and pay out floor rate (0.5%) on the turnover. GST Registration number is to be linked with PAN and this number is around 13-14 digit. It is also known as BIN (Business Identification Number).
Every dealer has to file the return under GST Consisting all details of goods and services. Accordingly the dealer has to keep all records and register for filing a return within a time period for requiring automation in administration process. CGST and SGST will be collected by dealer and they will deposit the amount within prescribed time with Central and State Government.
Around 140 countries, have already implemented the GST or VAT. Most of the countries opted unified GST System. Brazil and Canada follow a dual system where GST is levied by both the Union and the State Government. France was the first country to introduce GST System in 1954. Rate of GST vary from countries to countries but lowest rate of GST @ 5% is in Taiwan and simultaneously highest rate is in Denmark @ 25% .
Additional tax not exceeding one per cent levied on the transaction of interstate sale or services by the central government for a period of two year and assigned to the State Government from where the goods and Services are supplied. Union government is to be compensation to the state for the loss of revenue arising by implementing GST in across the country for a period which may extend to five years.
In GST, there is a special provision made by GST Council with respect to the states of Arunachal Pradesh, Assam, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland ,Sikkim, Tripura , Himachal Pradesh and Uttarakhand.
Tax on alcohol, liquor, tobacco, petroleum products, Export duty, toll tax , environment Tax, Road tax, property tax are likely to be out of the GST regime and tax on consumption or sale of electricity, Stamp duty are not to be certain for levying a Goods and Services Tax.
It helps in increasing revenue collection to the central and state government. By implementing, GST, it would promote exporting of goods and services,which would give rise in the employment and boost growth.
In the GST System, both central and state taxes will be collected at the point of Sale or providing a services. Both Components (CGST and SGST) will be charged on the manufacturing cost. This will benefit individuals as prices are likely to go down. Lower prices of goods and services lead to more consumption, thereby helping Companies.
Welcome new taxation System with happiness…!!!