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Posted by Khurana Khurana & Associates LLP Chartered Accountants in Goods and Service Tax.
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  1. GST is a single tax on the supply of goods and services, right from the manufacturer to the consumer. Credits of input taxes paid at each stage will be available in the subsequent stage of value addition, which makes GST essentially a tax only on value addition at each stage.
  2. The benefits of GST can be summarized as under:-

For business and industry –

  1. Easy compliance: A robust and comprehensive IT system would be the foundation of the GST regime in India.
  2. 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.
  3. 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.
  4. Improved competitiveness: Reduction in transaction costs of doing business would eventually lead to an improved competitiveness for the trade and industry.
  5. Gain to manufacturers and exporters: The subsuming of major Central and State taxes in GST, complete and comprehensive setoff of input goods and services and phasing out of Central Sales Tax (CST) would reduce the cost of locally manufactured goods and services. This will increase the competitiveness of Indian goods and services in the international market and give boost to Indian exports.

For Central and State Governments –

  1. Simple and easy to administer
  2. Better controls on leakage: GST will result in better tax compliance due to a robust IT infrastructure. Due to the seamless transfer of input tax credit from one stage to another in the chain of value addition.
  3. Higher revenue efficiency: GST is expected to decrease the cost of collection of tax revenues of the Government, and will therefore, lead to higher revenue efficiency.

For the consumer

  1. Single and transparent tax proportionate to the value of goods and services
  2. Relief in overall tax burden: Because of efficiency gains and prevention of leakages, the overall tax burden on most commodities will come down, which will benefit consumers.
  3. At the Central level, the following taxes are being subsumed:-
    1. Central Excise Duty,
    2. Additional Excise Duty,
    3. Service Tax,
    4. Additional Customs Duty commonly known as Countervailing Duty, and
    5. Special Additional Duty of Customs.
  4. At the State level, the following taxes are being subsumed:-
    1. State Value Added Tax/Sales Tax,
    2. Entertainment Tax (other than the tax levied by the local bodies),
    3. Central Sales Tax (levied by the Centre and collected by the States),
    4. Octroi and Entry tax,
    5. Purchase Tax,
    6. Luxury tax, and
    7. Taxes on lottery, betting and gambling.
  5. Keeping in mind the federal structure of India, there will be two components of GST – Central GST (CGST) and State GST (SGST). Both Centre and States will simultaneously levy GST across the value chain. Tax will be levied on every supply of goods and services. Centre would levy and collect Central Goods and Services Tax (CGST), and States would levy and collect the State Goods and Services Tax (SGST) on all transactions within a State. The input tax credit of CGST would be available for discharging the CGST liability on the output at each stage. Similarly, the credit of SGST paid on inputs would be allowed for paying the SGST on output. No cross utilization of credit would be permitted.
  6. The Central GST and the State GST would be levied simultaneously on every transaction of supply of goods and services except on exempted goods and services, goods which are outside the purview of GST and the transactions which are below the prescribed threshold limits. Further, both would be levied on the same price or value unlike State VAT which is levied on the value of the goods inclusive of Central Excise.
  7. Cross utilization of credit of CGST between goods and services would be allowed. Similarly, the facility of cross utilization of credit will be available in case of SGST. However, the cross utilization of CGST and SGST would not be allowed except in the case of inter State supply of goods and services under the IGST model.
  1. In case of interstate transactions, the Centre would levy and collect the Integrated Goods and Services Tax (IGST) on all interstate supplies of goods and services under Article 269A (1) of the Constitution. The IGST would roughly be equal to CGST plus SGST. The IGST mechanism has been designed to ensure seamless flow of input tax credit from one State to another. The interstate seller would pay IGST on the sale of his goods to the Central Government after adjusting credit of IGST, CGST and SGST on his purchases (in that order). 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 (both CGST and SGST) in his own State. The Centre will transfer to the importing State the credit of IGST used in payment of SGST. Since GST is a destination based tax, all SGST on the final product will ordinarily accrue to the consuming State.
  2. In case of Imports – The Additional Duty of Excise or CVD and the Special Additional Duty or SAD presently being levied on imports will be subsumed under GST. As per explanation to clause (1) of article 269A of the Constitution, IGST will be levied on all imports into the territory of India. Unlike in the present regime, the States where imported goods are consumed will now gain their share from this IGST paid on imported goods.
  3. For the implementation of GST in the country, the Central and State Governments have jointly registered Goods and Services Tax Network (GSTN) as a not for profit, non Government Company to provide shared IT infrastructure and services to Central and State Governments, tax payers and other stakeholders.
  1. GST to be levied on all goods and services, except alcoholic liquor for human consumption. Petroleum and petroleum products shall be subject to the levy of GST on a later date notified on the recommendation of the Goods and Services Tax Council;
  2. Compensation to the States for loss of revenue for a period of five years;
  3. Creation of Goods and Services Tax Council to examine issues relating to goods and services tax
  4. The major features of the proposed registration procedures under GST are as follows:-
    1. Existing dealers: Existing VAT/Central excise/Service Tax payers will not have to apply afresh for registration under GST.
    2. New dealers: Single application to be filed online for registration under GST.
    3. The registration number will be PAN based and will serve the purpose for Centre and State.
    4. Unified application to both tax authorities.
    5. Each dealer to be given unique ID GSTIN.
    6. Deemed approval within three days.
    7. Post registration verification in risk based cases only.
  5. The major features of the proposed returns filing procedures under GST are as follows:-
    1. Common return would serve the purpose of both Centre and State Government.
    2. There are eight forms provided for in the GST business processes for filing for returns. Most of the average tax payers would be using only four forms for filing their returns. These are return for supplies, return for purchases, monthly returns and annual return.
    3. Small taxpayers: Small taxpayers who have opted composition scheme shall have to file return on quarterly basis.
    4. Filing of returns shall be completely online. All taxes can also be paid online.


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