What is GST?
August 3rd, 2016 will be recorded as a red letter day in the history of Indian taxation due to the near consistent passage of 122nd Constitutional Bill in Rajya Sabha, paving the way for roll-out of GST in India from 1st of April 2017. GST Bill has significantly evolved over the past decade and is touted as the single most tax amend in India since independence. It is estimated to boost GDP by 1.5 to 2%. ‘One India, One Tax ’will be the modern existence with GST subsuming over ten indirect taxes and making India a common market. Apart from elimination of overflowing issue, the benefits of simplified compliance, technological backing and uniform process across India will devote well to ‘comfort of doing Business’. However, the success of a business will significantly depend on the capability to understand and follow to this new reality as certain existing business practices will have to undergo changes.
GST is a comprehensive tax raised on manufactures, seller and consumption of goods and services across India. GST is a Destination based Consumption tax & the taxable event is fund as against the existing taxable events of sale, manufacture or provision of service. blueprint Model GST Law was made public in June 2016, and the government has sought public opinion on the same. It is great time that businesses, industry/trade bodies, professional associations and the like provide valid inputs at an early period, and ensure the final GST Law addresses all the concerns to make the transition smooth
Background of GST
The Indirect tax regime in India has undergone many transformations over the past 5 to 6 decades. Introduction of Modified Value Added Tax scheme in 1986, fungibility of credit between Excise and Service Tax (2004), rollout of VAT (2005 onwards) hold the years increased transparency in tax administration, reduced hassles to tax payers, and eliminated the descend issue, thus benefitting the consumer. However, the federal structure of India has resulted in tax being administered by Centre and State both. Lack of facility to utilize credits across these two entities has resulted in partial descend still left in the system. Added to this, the burden of compliance has also increased due to involvement of multiple companies. Goods and Services Tax precisely addresses these concerns by driving uniformity across India through a single tax and ensuring an unconditional progress of tax credit. Conceptually, GST is similar to VAT, meaning tax will be applied only on the cost addition at every point in the supply chain.
Some of the salient features of GST are:
Goods and Services Tax Registration threshold is proposed at Rs 4 Lakh for NE states + Sikkim, and Rs 9 Lakh for Rest of India. However, the accountability to pay tax will be only after crossing the threshold of Rs 5 Lakh for NE states + Sikkim and Rs 10,00,000 for Rest of India. Approximately 7-8 million businesses are likely to be registered under Goods and Services Tax. Small dealers with turnover below Rs 50 Lakh have the option of adopting Composition scheme and pay flat 1 to 5% tax on turnover.
In the consideration of the federal structure of India, Dual GST has been chosen as the apt model wherein tax would be accordingly levied by both Centre and the states on supply of goods and services.
The components of Dual GST are:
- SGST: State Goods and Services Tax
- CGST: Central Goods and Services Tax
- IGST: Integrated Goods and Services Tax
Intra-state activity CGST+SGST will be applicable and on Interstate activity, IGST will be applicable.
After Implement of GST
The taxes which will get subsumed under GST are:
|Subsumed in GST||Not subsumed in GST|
|Central Excise||Basic Customs duty|
|Service Tax||Alcohol for human consumption|
|VAT / Sales Tax||Petrol / Diesel / Aviation fuel / Natural Gas*|
|Entertainment Tax||Stamp duty and Property tax|
|Luxury Tax||Toll tax|
|Taxes on lottery||Electricity Duty|
|Octopi and Entry Tax|
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