Escolar Documentos
Profissional Documentos
Cultura Documentos
Prior to GST
y Multiple taxation in pre-existing central excise duty and State
off against that payable on the supply of goods or services. But being the last person in the supply chain, the end consumer has to bear this tax and so, in many respects, GST is like a lastpoint retail tax.
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VAT.
y France was the first country to introduce GST system in 1954. y Typically it is a single rate system but two/three rate systems
are also prevalent. Canada and Brazil alone have a dual VAT.
y Standard GST rate in most countries ranges between 15-20%. y All sectors are taxed with very few exceptions/ exemptions.
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China
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Background in India
The effort to introduce the new tax regime was reflected, for the first time, in 2006-2007 Union Budget Speech. The then Finance Minister Mr. P. Chidambaram remarked that there is a large consensus that the country must move towards a national level GST that must be shared between the centre and the states. He proposed 1 April, 2010 as the date for introducing GST. After successful introduction of Value Added Tax (VAT) in almost all the states and continuous increase in number of services under the service tax net.
Finance Minister Pranab Mukherjee while presenting the Budget on July 6, 2009, said that GST would come into effect from April 2010.
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Example
Stage of supply chain Purchase value of Input Value addition Value at which supply of goods and services made to next stage 130 Rate of GST GST on output Input Tax credit Net GST= GST on output Input tax credit 13-10=3
100
30
10%
13
10
130
20
150
10%
15
13
15-13=2
150
10
160
10%
16
15
16-15-1
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the State level. (non inclusion of various duties on input.) y Certain indirect taxes not subsumed in VAT continue to be charged. y Load of CENVAT and Service Tax remains included in the value of goods charged under VAT leading to a cascading effect. y CST does not carry any set-off relief and distortation in VAT due to export of tax from one state to other state.
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to exporters due to Improvement in cost competitiveness of goods and services. GST is unbiased tax structure as is neutral to business processes, business models, product substitutes and geographical locations. Empowered Committee (EC) has suggested a Dual GST comprising Central GST and State GST.
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goods and services outside purview of GST and those below the threshold limits.
CGST and SGST to be paid in separate accounts of Centre
Cross utilization of credits between Central GST and State GST not permitted except in case of inter-state supply of goods and services under the IGST model.
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Preparation Act. y Service Tax. y Additional Customs Duty. y Special Additional Duty of Customs 4% (SAD). y Surcharges and; y Cesses.
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y Purchase Tax Disagreement between states on Purchase Tax subsuming. Issue is being discussed in consultation with the Govt. of
India. Tax on Alcoholic products: Sales Tax/VAT and Excise Duty to continue. Tax on Tobacco products: Would be subjected to GST with ITC. Centre may be allowed to levy excise duty over and above GST Without ITC.
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Tax on Petroleum Products: Basket of Petroleum Products, i.e. crude, motor spirit (including ATF) and HSD kept out of GST. Sales Tax could continue to be levied with prevailing floor rate. Centre could also continue its levies. Decision of GST on Natural Gas to be taken later. Taxation of Services:
y Concurrent power to Centre and States to levy tax on all goods and
services. y Integrated GST (IGST) model comprising of CGST and SGST to be adopted for inter-state transactions.
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toll tax, passenger tax and road tax not subsumed in GST. y Exports to be zero rated.
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initial years. y The Govt. of India may adopt a similar approach for CGST. y There may be a single rate for taxation of services under CGST and SGST. y Rates will be made known duly in course of legislative actions.
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exporters of goods and services need not pay GST on their exports. GST paid by them on the procurement of goods and services will be refunded.
Benefits allowed only to processing zones of SEZs. No benefit for DTA sales from SEZs.
Constitutional Amendments. The tax incidence to follow Destination Principle. SGST to accrue to the state where the imported goods are consumed. Full and complete set-off on GST on imported goods and services.
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be shared by the Central Government through the use of its own IT infrastructure facility.
y The issues of tying up the State Infrastructure facilities with the
Central facilities as well as further improvement of the States' own IT infrastructure, including TINXSYS, is now to be addressed expeditiously and in a time bound manner.
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of the Government of India and sales tax system of the State Governments. y Introduction of CENVAT and State VAT has given set-off for input taxes. y Incompleteness in CENVAT is that it has yet not been extended to include chain of value addition in the distributive trade below the stage of production. y Not included several Central taxes, such as Additional Excise Duties, Additional Customs Duty, Surcharges etc. in the overall framework of CENVAT, and thus kept the benefits of comprehensive input tax and service tax set-off out of the reach of manufacturers/ dealers.
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Continued
y In the present State-level VAT scheme, CENVAT load on the
goods has not yet been removed and the cascading effect of that part of tax burden has remained unrelieved.
y There are several taxes in the States, such as, Luxury Tax,
Entertainment Tax, etc. which have still not been subsumed in the VAT.
y There has also not been any integration of VAT on goods with
tax on services at the State level with removal of cascading effect of service tax.
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Continued
y With the introduction of GST at the State level, the additional
improvement over the previous system of VAT and disjointed services tax - a justified step forward.
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Question 2: How can the burden of tax, in general fall under GST?
CENVAT and State VAT unsuccessful to fully remove the
out.
Widening coverage of tax compliance will lead to higher
revenues, which may in turn lead to the possibility of lowering average tax.
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service tax set-off. y Phasing out of CST and subsuming of other taxes. y Low impact of tax to industry, trade and agriculture.
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indigenous produce goods in International market. Also the uniformity in GST rate across the country would bring down the compliance cost.
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Question 5: How will GST benefit the small entrepreneurs and small traders?
y Present threshold prescribed in State VAT Act varies from
State to State. y Present threshold is five lakhs for majority of bigger states and lower threshold for North Eastern States and Special Category States. y Uniform threshold rate of Rs. 10 lakh both for goods and services for all the states and Union territories. y Central GST for goods may be kept at 1.5 crores.
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Question 8: How would a particular transaction of goods and services be taxed simultaneously under Central GST (CGST) and State GST (SGST)?
y SGST would be chargeable only when the supplier and the
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Example:
y Suppose hypothetically that the rate of CGST is 10% and that of SGST
is 10%. When a wholesale dealer of steel in Uttar Pradesh supplies steel bars and rods to a construction company which is also located within the same State for , say Rs. 100, the dealer would charge CGST of Rs. 10 and SGST of Rs. 10 in addition to the basic price of the goods. He would be required to deposit the CGST component into a Central Government account while the SGST portion into the account of the concerned State Government. Of course, he need not actually pay Rs. 20 (Rs. 10 + Rs. 10 ) in cash as he would be entitled to set-off this liability against the CGST or SGST paid on his purchases (say, inputs). But for paying CGST he would be allowed to use only the credit of CGST paid on his purchases while for SGST he can utilize the credit of SGST alone.
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Question 10: What is the concept of providing threshold exemption for GST?
Threshold exemption is built into a tax regime to keep small
It is difficult to administer small traders and cost of administering of such traders is very high in comparison to the tax paid by them. The compliance cost and compliance effort would be saved for such small traders. Small traders get relative advantage over large enterprises on account of lower tax incidence.
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a)
a)
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Question 11: What is the scope of composition and compounding scheme under GST?
y Composition/Compounding Scheme an important feature of
GST to protect the interests of small traders and small scale industries.
y Should have an upper ceiling of Rs. 50 lakhs on gross annual
turnover and a floor tax rate of 0.5 with respect to gross annual turnover across the states.
y Scheme to allow re registration for dealers with turnover below
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Question 13 : Will cross utilization of credits between goods and services be allowed under GST regime?
y Cross utilization of credit of CGST between goods and services
would be allowed.
y Facility of cross utilization of credit will be available in case of
SGST.
y The cross utilization of CGST and SGST would generally not
be allowed except in the case of inter-State supply of goods and services under the IGST model.
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Question 14: How will be Inter-State Transactions of Goods and Services be taxed under GST in terms of IGST method ?
y IGST would be CGST plus SGST on all inter-State transactions y
y y y
of taxable goods and services. The inter-State seller will pay IGST on value addition after adjusting available credit of IGST, CGST, and SGST on his purchases. The Exporting State will transfer to the Centre the credit of SGST used in payment of IGST. The Importing dealer will claim credit of IGST while discharging his output tax liability in his own State. The Centre will transfer to the importing State the credit of IGST used in payment of SGST.
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transactions.
2. No upfront payment of tax or substantial blockage of funds
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and Central and State Governments should be able to computerize their processes expeditiously.
5. As
all inter-State dealers will be e-registered and correspondence with them will be by email, the compliance level will improve substantially.
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the production stage, the States have the power to tax sale of goods.
y The States do not have the powers to levy a tax on supply of
services while the Centre does not have power to levy tax on the sale of goods.
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Continued
y Constitution does not vest express power either in the Central
tax on imports.
y Therefore, it is essential to have Constitutional Amendments
for empowering the Centre to levy tax on sale of goods and States for levy of service tax and tax on imports and other consequential issues.
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Question 16: How are the legislative steps being taken for CGST and SGST ?
(September 30, 2009) comprising of the officials of the Central and State Governments to prepare, in a time-bound manner a draft legislation for Constitutional Amendment.
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Question 17: How will the rules for administration of CGST and SGST be framed?
y The Joint Working Group, as mentioned above, has also been
entrusted the task of preparing draft legislation for CGST, a suitable Model Legislation for SGST and rules and procedures for CGST and SGST. Simultaneous steps have also been initiated for drafting of legislation for IGST and rules and procedures. As a part of this exercise, the Working Group will also address to the issues of dispute resolution and advance ruling.
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entry tax.
y Sales from an SEZ to DTA would not get the benefit of zero
rating hence, exporters would need to claim refunds of the CGST and SGST from the Central and State Governments, respectively.
y Issues on destination principle could crop up, say a typical
transaction involving import at the Chennai Port, imported goods passing thro' Andhra Pradesh and reaching, let's say, Bangalore, the destination. It could be hard to enthuse the guys in Tamil Nadu to facilitate an import transaction, for which, Karnataka would get the tax revenue.
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works contractors could arise, who are currently entitled to go under the composition scheme under the state VAT laws, irrespective of any cut off limit.
y Paper makes no mention on how the carried forward /
unutilized credit, both under the central laws as well as under the VAT laws would get treated under GST. In the absence of any mention of the intent to restrict the carried forward input tax credit, one hopes that the Government would allow for this unutilized credit to be carried forward under the GST regime without any restrictions.
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