What is GST ?

GST A Global scenario Basic Structure of GST Taxes proposed to be subsumed by GST Features of GST Why GST ? How will the dual structure work ? How will it benefit Centre and the States ? What are the benefits of GST for individuals and Companies ? Hurdles in implementation How will GST be implemented ? Ensuring uniform implementation Items on which GST may not be applied

 GST

is a broad based and a single comprehensive tax levied on goods and services consumed in an economy. paid on the procurement of goods and services can be set 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 last-point retail tax.

GST

 More

than 140 countries have already introduced GST. France was the first country to introduce GST system in 1954. Standard GST rate in most countries ranges between 15 - 20%. All sectors are taxed with very few exceptions/ exemptions. Full tax credits on inputs 100% set off.

The implementation of GST will lead to the abolition of other taxes such as Octroi Central Sales Tax State level Sales Tax Entry Tax Stamp Duty Telecom licence fees Turnover Tax Tax on consumption or sale of electricity Tax on transportation of Goods and services Thus avoiding multiple layers of taxation that currently exists in India.

 Credit

of tax paid on purchases would be allowed across the supply chain. Credit of State GST may not be allowed against Central GST or vice versa. State GST paid in one State would be creditable against State GST liability of another State. Requirement of C forms and F forms would be abolished. Certain specified goods may be subject to a lower State GST rate or be exempted.

simple tax structure with only one or two rates of taxes. Uniform single tax across the supply chain. Reduced transaction cost in the hands of the tax payers. Increased tax collections due to wider tax base and better compliance. Improvement in international cost competitiveness of indigenous goods and services.

 Central

GST and State GST would be levied on different services. State GST would be levied on services of local nature. Single periodical return would be filed under the dual structure. Export of goods and services would be zero rated, meaning 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.

It is estimated that India will gain $15 billion a year by implementing the Goods and Services Tax as it would promote exports, raise employment and boost growth. It will divide the tax burden equitably between manufacturing and services.

 In

the GST system, both Central and State taxes will be collected at the point of sale. Both components (the Central and State GST) will be charged on the manufacturing cost. This will benefit individuals as prices are likely to come down. Lower prices will lead to more consumption, thereby helping companies.

 Implementation

of GST calls for effecting widespread amendments in the Constitution and the various constitutional entries relating to taxation. Such amendments may virtually transform the Indian federation into an economic Union much along the lines of the European Union.

It is important to note that states will have to be given constitutional powers to tax services. At present, states do not enjoy the power to tax services. The various levies of the Union and the states are also to be harmonized. In the current scenario it is difficult to visualise constitutional amendments of such far reaching implications. Services have to be appropriately integrated in the tax network. Fate of various area based exemptions / concessions provided by Central as well as State to be decided. Treatment of inter-state branch transfers under the GST scenario to be identified.

 The

empowered committee is likely to finalise the details of GST by August 2012. But States have to sort out several issues like agreement on GST rates, constitutional amendments and holding talks with industry associations. Experts feel the drafting of legislation and the implementation of law will take time.

 Uniform

Implementation of GST should be ensured across all states(unlike staggered implementation of VAT). The dual structure should be simple to understand and implement. Creating consumer and supplier awareness before introduction of the dual structure. The cost of compliance should be minimum i.e. reporting and compliance procedures should be identical across all the States. The format of periodical returns should be identical across all the States.

 Dispute

settlement machinery should be uniform under the State GST. Lower level tax authorities should have adequate understanding of the fundamentally different law States should have powers to increase / decrease the rate of State GST on certain specified goods within a permissible limit Introduce electronic State GST and Central GST refunds.

 Alcohol,

tobacco, petroleum products are likely to be out of the GST regime.

Lets hope GST is Great & Simplified Tax !!! Thank you.