Ebook on GST and Detail Information about GST

Ebook on GST and Detail Information about GST : The Goods and Services Tax (GST) is the most awaited reformation in the indirect tax structure of India which is planned to be implemented w.e.f. April 1, 2016. It has been the most happening topic in the parliament since December 19, 2014 when The Constitution (122nd Amendment) (GST) Bill, 2014 was first presented by the Finance Minister, Mr. Arun Jaitley in the Lok Sabha. In this piece of writing, the authors have made an attempt to give an insight of merits and probable threats in GST proposals.

Ebook on GST

Ebook on GST and Detail Information about GST

About GST

Benefits of GST

Removing cascading effects

Resolution of classification related disputes

Rationalization of tax structure & simplification of compliance procedure

Reduction in duplicity of information and compliance costs

Increase in product competitiveness in international market

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About GST:-

GST is a Value Added Tax proposed to be levied in lieu of manufacture, sale and consumption of goods and services. It will replace all indirect taxes whether levied on goods and services by the Central and State governments including Central Excise Duty, Countervailing Duty, Service Tax, Value added tax, Octroi and entry tax, luxury tax, etc.

It will be implemented concurrently by the central and state governments as the Central GST (CGST) and the State GST (SGST) respectively. Exports will be zero-rated and imports will be levied the same taxes as domestic goods and services adhering to the destination principle.

To know more details on GST read article on GST blog.

Benefits of GST:-

A number of countries in the world have already switched to GST. There are a number of advantages of GST over the existing indirect tax structure due to which India is looking forward to implement the same. Some of the key advantages of GST are as follows:-

Wider the tax base, lower the tax rates:-

Currently, a no. of taxes and duties are being imposed on the same item right from the stage of manufacture until the same is consumed. These are levied in form of import duty, excise duty, octroi, luxury tax, service tax, VAT, etc. The total of these taxes is around 35%-40%; while rate of GST is to be kept around 16%-18%. This is one of the key rationales of introducing GST.

Removing cascading effects:-

The foundation of an indirect tax is kept keeping in view the cascading effect and due provisions are framed to lower down the same. However, more the no. of taxes, more the cascading effect. When we talk of excise duty, service tax or VAT, there are Cenvat credit rules which allow the credit of input tax/duty suffered by the material or service so used. Still there are cases where the cascading effect is clearly visible but there is no mechanism in the law to deal with it. For eg. entry tax, octroi, etc.

Almost every goods are subject to these taxes but no credit is allowable as these are collected normally by local bodies. Thus, ultimately these taxes form part of the cost of product which is further subject to excise duty or service tax or VAT. Thus, cascading effect do exists. This particularly happens when the same goods or service suffers a no. of taxes and no set off facility is available. Implementation of GST will bring drastic reduction in the cascading effect as most of the indirect taxes prevailing at present will get subsumed in GST and credit will be allowed on the inward taxes .

Resolution of classification related disputes:-

One major area of dispute is the “classification of goods and/or services”. It would be interesting to know that there have been cases where the litigation arose on the fact whether a particular item/activity is goods (i.e. excise duty will be levied) or service (i.e. service tax will be levied). More interestingly, the said litigation was settled down by the Supreme Court decisions. One such case was of Software. Sales tax department issued notices treating the same as sale of goods while service tax department issued notices treating the same as provision of services.

This issue was settled down by Supreme Court in year 2004 in the case of M/s Tata Consultancy Service. In this case, it was held that if a property is capable of being abstracted or consumed or used or transmitted, it is leviable to tax as sale of goods. There was another case of sim cards.

In the year 2006, Supreme Court gave a landmark judgment in the case of M/s BSNL and others wherein it was held that if the sale of the SIM card is merely incidental to the service being provided and facilitates the identification of the subscribers, their credit and other details, it would not be assessable to sales tax. While giving this decision, Supreme Court held that both the taxes cannot be levied on single transaction. But interestingly, even after this judgment there are several transactions which are subject to both service tax and excise duty.

Further, there is a concept of works contract, both in the VAT law as well as in service tax. Though in both the laws, there is a provision of abatement or composite scheme, still there is part of total value which is subject to both VAT and service tax. All these problems will come to an end after implementation of GST.

Rationalization of tax structure & simplification of compliance procedure:-

At present, there are multiple indirect taxes which are levied by different bodies, Central Government, State Government, Local bodies, etc. All these governing bodies have their separate offices, rules and regulations. An assessee has to move from one office to another for procedural formalities. Also, there are cases where for complying the rules of one governing body, the assessee fails to comply with rules of another governing body.

Implementation of GST will bring substantial reduction in these formalities as there would be only two governing bodies namely Centre for CGST & State for SGST. This will save time, money and energy of assessees.

Reduction in duplicity of information and compliance costs:-

In the present structure, same information is to be filed at several places for the same goods/service. This increases cost of assessee and also the duplicity of information. Not only assessees, overall cost of government; is also increased as the same information is being stored at several places which has to be maintained by employing man, money and energy. This ultimately leads to inefficient utilization of nation’s resources.

Increase in product competitiveness in international market:-

With the implementation of GST, in long run, there will be reduction in overall cost of products manufactured in India. This will make Indian products more competitive in International market. It is worth mentioning here that many of our top competitors in the international market have already switched to GST. Implementing GST in India will be a step forward in making our product more cost effective in international market.