CA Ameet Agrawal

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
  1. State Goods & Services tax (SGST) subsuming VAT, Entry tax, Luxury tax, octrai, entertainment tax, tax on puchase
  1. 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.
  1. 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.
  1. 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.
IN GST REGIME IN EXCISE AND VAT REGIME
Stage 1- Manufacturer selling to Trader

Sale price of Cement/MT= Rs.20,00.00

CSGT@10% = Rs. 200.00

SGST@10% = Rs. 200.00

Total = Rs. 2,400.00

Stage 1- Manufacturer selling to Trader

Sale price of Cement = Rs.20,00.00

Excise Duty@12.5% = Rs. 250.00

VAT@14.5% (on Basic +Excise) = Rs. 326.00

En.Tax @1%(on Basic+Excise+VAT = Rs. 26.00

Total = Rs. 2,602.00

Stage 2- Trader selling to End User

Sale price of Cement/MT = Rs.22,00.00

CSGT@10% = Rs. 220.00

SGST@10% = Rs. 220.00

Total = Rs. 2,640.00

 

NET TAX PAYABLE BY DEALER

CGST Payable on Sale : Rs. 220.00

Input Credit of CGST : Rs. 200.00

Net CGST Payable : Rs. 20.00

SGST Payable on Sale : Rs. 220.00

Input Credit of SGST : Rs. 200.00

Net SGST Payable : Rs. 20.00

(It is assumed that Trader keeps Rs. 200/MT profit)

Note :

1.In GST Regime a trader is eligible for cenvat of CGST unlike of Excise and En try Tax

Hence the cost of goods to end user is less as compared to present tax regime.

2. In GST regime, concept of Ist dealer registration will be abolished as the Trader can pass CSGT to subsequent seller and can take cenvat of CGST. The dealer is not required to take registration under Excise. The margin of the dealer will not get disclose to buyer and the trader can compete with manufacturer.

Stage 2- Trader selling to End User

Sale price of Cement = Rs. 2,476.00

VAT@14.5% = Rs. 359.00

Total = Rs. 2,835.00

 

 

 

NET TAX PAYABLE BY DEALER

VAT Payable on Sale : Rs. 359.00

Input Credit of VAT : Rs. 326.00

Net VAT Payable : Rs. 33.00

 

 

 

 

 

 

(It is assumed that Trader keeps Rs.2000/MT profit)

 

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 GST and 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 CHAKRAIntegrated 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.
  1. 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.
  1. Supply of goods by principal to his agent and vice versa
  1. 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.
  1. Services by any Court or Tribunal established under any law for the time being in force.
  1. The functions performed by the Members of Parliament, Members of State Legislature, Members of Panchayats, Members of Municipalities and Members of other local authorities.
  1. The duties performed by any per son who holds any post in pursuance of the provisions of the Constitution in that capacity; or
  1. 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
  1. Services by a foreign diplomatic mission located in India.
  1. Services of funeral, burial, crematorium or mortuary including transportation of the deceased.
  1. Sovereign Service provided by Government to the citizen of India.
  1. Education & Health service provided by Government:
  1. 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.

(Author can be reached at ca.ameetagrawal@gmail.com)

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6 responses to “GST: “One Nation Tri Taxation””

  1. mahesh says:

    we are basically lubricant manufacturers. We sell our products through depots located throughout india. Whether it is necessary to have depots or not.
    Secondly, our products are below 20 L/ kg. Hence we sell through MRP basis only. In new GST regime, whether mrp has any relevance. Last but not least, please clarify on percentage of tax for SEZ, EOU & export transaction.

    Note: our lubricants comes under GST 18%

    input : Containers – 18%, lube oil – 18% and additives – 28%
    out put : Lubricant oil – GST 18%
    What is the final impact of GST on our business.

    Kindly give us suggestion on the above the issue.

    Thanks

  2. VENU says:

    GST IS A GREAT IDEA. A LITTLE BIT CONFUSED BUT IT IS ALMOST UNDERSTANDING ON READING THE PROVISIONS OF LAW AND STUFF ADDED MY PEOPLE IN THE NET

  3. Payal says:

    Querries regarding gst-
    1. We have two units, one in sez and one in dta, we need 2 registrations or One? currently there are different tin numbers and ecc but pan and iec are common.

    2. Section 25(2) says multiple business verticals MAY be granted separate registration, subject to conditions as may be prescribed. That is a lot to do with interpretation now.

    3. When advance is received, gst becomes payable, but when deposit is rcd, gst is not payable. To prove that it was deposit and not advance, do we need to return that after receiving full payment of invoice or adjusting that in final invoice is allowed?

    4. Controversy: you invoice goods when gst is 12%, and gst increases to 18% before you receive payment. Act says on this transaction, 18% get will apply. Does it mean seller is required to raise a supplementary invoice. Why would the buyer pay additional gst if he has sold part of the goods as per lower gst for personal use?

    5. Itc not available if invoice not paid within 180 days. What happens to invoices raised before implementation of gst

    6. If the supplier transfers excess credit to buyer, buyer is responsible with recovery of principle and interest, it should be supplier as buyer may not be fully aware of itc

  4. Santosh says:

    I have a office I let out is payer liable to pay GST on it
    Is receiver has to take GST for rent income which is taxable under it act

  5. Sarbjit Randhawa says:

    The aim of GST has been totally defeated. From the way things have unfolded, the Finance Ministry, in their anxiety of rolling out the GST by 01 July, has totally confused the issue. I also wonder why this magical date of 01 July has been selected and why not the beginning of a financial year? The worst is that June is only available for fresh registration and understanding the compliance rules of the GST. In such a short time, will the small business operators be able to adjust to the provisions of the confused GST Law and Rules?

  6. raj says:

    Dear sir,
    We are looking forward to articles on:-
    01.Gst in case of composition scheme of vat registration.
    02.transition provisions from vat and cst to gst era for assessments pending for refunds/demands/appeals/tribunals etc. it is always noticed that in business it is easier follow new rules from present fro future but is very difficult to get out of past vexatious,tedious tax assessments involving complications, mutilocational communication gaps in complainces, paper works etc. how the gst address past vat/cst refunds and demand/dues issues. step wise transition process from vat/cst to gst era viz: way bills to vat returns and assessment orders including refunds/dues

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