Shift From MVAT to GST and the Changes between them

Shift From MVAT and the Changes between them

Shift From MVAT to GST

Shift From MVAT to GST : The idea of moving towards the GST was first mooted by the then Union Finance Minister in his Budget for 2006-07. Initially, it was proposed that GST would be introduced from 1stApril, 2010. The Empowered Committee of State Finance Ministers (EC) which had formulated the design of State VAT was requested to come up with a roadmap and structure for the GST.

Joint Working Groups of officials having representatives of the States as well as the Centre were set up to examine various aspects of the GST and draw up reports specifically on exemptions and thresholds, taxation of services and taxation of inter-State supplies. Based on discussions within and between it and the Central Government, the EC released its First Discussion Paper (FDP) on GST in November, 2009. This spells out the features of the proposed GST and has formed the basis for discussion between the Centre and the States so far.

Shift From MVAT to GST

The salient features of GST are as under:

GST would be applicable on “supply” of goods or services as against the present concept of tax on the manufacture of goods or on sale of goods or on provision of services.

GST would be based on the principle of destination based consumption taxation as against the present principle of origin based taxation.

It would be a dual GST with the Centre and the States simultaneously levying it on a common base. The GST to be levied by the Centre would be called Central GST (CGST) and that to be levied by the States [including Union territories with legislature] would be called State GST (SGST). Union territories without legislature would levy Union territory GST (UTGST).

An Integrated GST (IGST) would be levied on inter-State supply (including stock transfers) of goods or services. This would be collected by the Centre so that the credit chain is not disrupted.

Import of goods would be treated as inter-State supplies and would be subject to IGST in addition to the applicable customs duties.

Import of services would be treated as inter-State supplies and would be subject to IGST.

CGST, SGST /UTGST& IGST would be levied at rates to be mutually agreed upon by the Centre and the States under the aegis of the GSTC.

Shift From MVAT to GST

GST would replace the following taxes currently levied and collected by the Centre:

a) Central Excise Duty;

b) Duties of Excise (Medicinal and Toilet Preparations);

c) Additional Duties of Excise (Goods of Special Importance);

d) Additional Duties of Excise (Textiles and Textile Products);

e) Additional Duties of Customs (commonly known as CVD);

f) Special Additional Duty of Customs (SAD); g) Service Tax;

h) Cesses and surcharges insofar as they relate to supply of goods or services.

Shift From MVAT to GST

State taxes that would be subsumed within the GST are:

a) State VAT;

b) Central Sales Tax;

c) Purchase Tax;

d) Luxury Tax;

e) Entry Tax (All forms);

f) Entertainment Tax (except those levied by the local bodies);

g) Taxes on advertisements;

h) Taxes on lotteries, betting and gambling;

i) State cesses and surcharges insofar as they relate to supply of goods or services.

Shift From MVAT to GST

GST would apply to all goods and services except Alcohol for human consumption.

GST on five specified petroleum products (Crude, Petrol, Diesel, ATF & Natural gas) would be applicable from a date to be recommended by the GSTC.

Tobacco and tobacco products would be subject to GST. In addition, the Centre would continue to levy Central Excise duty.

Shift From MVAT to GST

 A common threshold exemption would apply to both CGST and SGST. Taxpayers with an annual turnover of Rs. 20 lakh (Rs. 10 lakh for special category States as specified in article 279A of the Constitution) would be exempt from GST. A compounding option (i.e. to pay tax at a flat rate without credits) would be available to small taxpayers (including to specified category of manufacturers and service providers) having an annual turnover of up to Rs. 50 lakh. The threshold exemption and compounding scheme would be optional.

The list of exempted goods and services would be kept to a minimum and it would be harmonized for  the Centre and the States as well as across States as far as possible.

Exports would be zero-rated.

Shift From MVAT to GST

Credit of CGST paid on inputs may be used only for paying CGST on the output and the credit of SGST/UTGST paid on inputs may be used only for paying SGST/UTGST. In other words, the two streams of input tax credit (ITC) cannot be cross utilized, except in specified circumstances of inter-State supplies for payment of IGST. The credit would be permitted to be utilized in the following manner:

a) ITC of CGST allowed for payment of CGST & IGST in that order;

b) ITC of SGST allowed for payment of SGST & IGST in that order;

c) ITC of UTGST allowed for payment of UTGST & IGST in that order;

d) ITC of IGST allowed for payment of IGST, CGST & SGST/UTGST in that order. ITC of CGST cannot be used for payment of SGST/UTGST and vice versa.

Accounts would be settled periodically between the Centre and the State to ensure that the credit of SGST used for payment of IGST is transferred by the originating State to the Centre. Similarly the IGST used for payment of SGST would be transferred by Centre to the destination State. Further the SGST portion of IGST collected on B2C supplies would also be transferred by Centre to the destination State. The transfer of funds would be carried out on the basis of information contained in the returns filed by the taxpayers.

Shift From MVAT to GST

Input Tax Credit (ITC) to be broad based by making it available in respect of taxes paid on any supply of goods or services or both used or intended to be used in the course or furtherance of business.

Shift From MVAT to GST

Electronic filing of returns by different class of persons at different cutoff dates.

Various modes of payment of tax available to the taxpayer including internet banking, debit/ credit card and National Electronic Funds Transfer (NEFT) / Real Time Gross Settlement (RTGS).

Shift From MVAT to GST

Obligation on certain persons including government departments, local authorities and government agencies, who are recipients of supply, to deduct tax at the rate of 1% from the payment made or credited to the supplier where total value of supply, under a contract, exceeds two lakh and fifty thousand rupees.

Refund of tax to be sought by taxpayer or by any other person who has borne the incidence of tax within two years from the relevant date.

Obligation on electronic commerce operators to collect ‘tax at source’, at such rate not exceeding two per cent. (2%) of net value of taxable supplies, out of payments to suppliers supplying goods or services through their portals.

System of self-assessment of the taxes payable by the registered person.

Shift From MVAT to GST

Audit of registered persons to be conducted in order to verify compliance with the provisions of Act.

Limitation period for raising demand is three (3) years from the due date of filing of annual return or from the date of erroneous refund for raising demand for short-payment or non-payment of tax or erroneous refund and its adjudication in normal cases.

Limitation period for raising demand is five (5) years from the due date of filing of annual return or from the date of erroneous refund for raising demand for short-payment or non-payment  of tax or erroneous refund and its adjudication in case of fraud, suppression or willful misstatement.

Shift From MVAT to GST

Arrears of tax to be recovered using various modes including detaining and sale of goods, movable and immovable property of defaulting taxable person.

Officers would have restrictive powers of inspection, search, seizure and arrest.

Goods and Services Tax Appellate Tribunal would be constituted by the Central Government for hearing appeals against the orders passed by the Appellate Authority or the Revisional Authority. States would adopt the provisions relating to Tribunal in respective SGST Act.  

Provision for penalties for contravention of the provision of the proposed legislation has been made.

Advance Ruling Authority would be constituted by States in order to enable the taxpayer to seek a binding clarity on taxation matters from the department. Centre would adopt such authority under CGST Act.

An anti-profiteering clause has been provided in order to ensure that business passes on the benefit of reduced tax incidence on goods or services or both to the consumers.

Elaborate transitional provisions have been provided for smooth transition of existing taxpayers to GST regime.

Shift From MVAT to GST

Registration to GST in Simple Steps :

Shift From MVAT to GST

Difference between GST Regime and M-VAT Regime :

Sr.No.	Particulars	Provision under GST Regime	Provision under M-VAT Regime
1	Applicability	GST will be made Applicable on Manufacturers, Traders and Service Providers	M-VAT was liable to be paid by Traders (Buyers & Sellers of Taxable Goods) only.
2	Taxability of Intra-State and Inter-State Transactions	Refer Annexure-I	Refer Annexure-I
3	Credit of Capital Goods	Will be Fully Available except for following few items:1. Motor Vehicles 2. Goods/Service for Personal Consumption 3. ITC For Exempted Supplies 4. Goods Lost/Stolen or distributed as free samples	Available full for Certain Items and for Certain Items 3% was retained
4	Credit of Taxes paid on Services	Credit of CGST/SGST/IGST Paid on Services Received will be made Available	Credit of Service Tax Paid on Services Received was not admissible and therefore it was a cost for Traders
5	Taxability of Stock Transfers to Inter-State Branches	Taxable since different Registration for each state will be there but full ITC will be made Available to Transferee branch	Was not liable for CST and F Form was supposed to be submitted by Transferee which was later to be submitted in Department by Transferor
6	Returns & Payment Dates	Periodicity: Monthly GSTR-1 – Details of outward supplies of taxable goods (10th of Subsequent Month) GSTR-2 – Details of inward supplies of taxable goods and/or services claiming input tax credit (15th of the subsequent month) GSTR-3 – Monthly return on the basis of finalization of details of outward supplies and inward supplies along with the Payment of Tax (20th of the next month) GSTR-9 – Annual Return (31st December of next financial year)	Periodicity: Quarterly Form 231/232/233/III-E: Quarterly VAT/CST Return along with Payment of Tax(21st of Month Succeeding Quarter)
7	Audit	Applicable: Dealers crossing Turnover of Rs. 1 croreDue Date: 31st December of next Financial Year	Applicable: Dealers crossing Turnover of Rs. 1 croreDue Date: 15th January of next Financial Year
8	Conditions for Claiming Input Tax Credit	The two major shifts of claiming Input Tax Credit are:1. Payment to Supplier must be made within 180 days 2. Every single Purchase Invoice must be matched with Invoice of Supplier while uploading return for the month and Supplier must make payment of Tax	No such conditions were existed under M-VAT initially at time of Return Filing.However, filing of Annexures J1 & J2 was to be made and mismatch in J1 & J2 in subsequent yearsled to payment of Credit Amount.
9	Payment of Tax Under RCM for Purchases from Unregistered Suppliers	For Every Purchases made or Services received from Unregistered Suppliers for an amount exceeding Rs. 5,000 per day, GST has to be paid by Registered Recipient under Reverse Charge Mechanism and a Payment voucher should be issued to such supplier.	No Such Provisions were present under M-VAT
10	Point of Taxation	GST will be charged at the Time of Raising Invoice or at the Time of Receiving Money from Recipient whichever is earlier (Advances from Customers will be liable for GST)	VAT has to be charged at the time of Raising Invoice
11	Threshold Limit for Non – Registration	Rs. 20 Lakhs	Rs. 10 Lakhs
12	Penalty for Late Filing of Returns	Rs. 100 for per day of Late Filing (Maximum Penalty – Rs. 5,000)Penalty @ 0.25% of Annual Turnover will be levied for Late Filing of Annual Return	Varied from Rs. 1,000 to Rs. 5,000
13	Interest on Late Payment of Tax	18% p.a. Interest on day wise basis will be levied	Interest @ 1.25% for 30 days of delay, Interest @ 1.5% for next 60 days of delay, Interest @ 2% for further delay was charged
14	Treatment of Discount	Discount initially reflected in invoice will not be subject to GST. Discounts allowed subsequently will also not amount to GST subject to the conditions for giving discount were pre-defined among Supplier & Recipient and a Credit is needed to be issued in this regard.	Similar Provisions existed under VAT Regime except that there was no condition for Pre-Defining Discount Terms
15	Invoicing Requirements	Few Important things which are must required to be mentioned in invoice are:> Name, Address, GST TIN of Supplier > Name, address, GST TIN of Recipient (If recipient is registered Person under GST) > Product Details such as https://taxguru.in/goods-and-service-tax/gst-enrolment-hsn-codes-exhaustive-list.html, Rate of GST applicable on it, Quantity Sold, Rate and Amount > CGST/SGST/IGST must be reflected separately	Similar things were required to be presented under VAT except for mentioning of HSN Code and Quantity of Goods Sold
16	Time Limit for Retention of Books of Accounts & Records	60 Months (5 Years) from end of September of Next Financial Year i.e. 5 Years 6 Months from end of Financial Year	5 Years from end of Financial Year
17	GST Compliance Rating	A Rating System will prevail under GST. Every Registered Dealer will be rewarded Rating by Department based on Compliance of GST Provisions.Please Note that such Rating of every dealer will be made reflected on GST Portal. So, it is advisable to maintain your rating good to avoid loss of Business Reputation	No such provisions were existed previously
18	Mandatory Receipt of Goods for Claiming Input Tax Credit	Input Tax Credit will be made available after Receipt of both Invoice and Goods	Only Receipt of Invoice was sufficient to Claim Input Tax Credit
19	Set-Off of Taxes	Note: CGST & SGST Cannot be Set-Off against each other
20	Treatment of Sales Return	Reversal of Tax on Goods Returned by Recipient will be allowed provided goods are received within 30th September of Subsequent Financial Year	Reversal of Tax on Goods Returned by Recipient was allowed provided goods were received within 6 months from Sale Date
21	Mode of Payment for Interest & Penalties	Interest and Penalty levied must be paid in Cash or through Banking means only i.e. it cannot be Set-Off against Input Credit Available	Earlier, dealers were able to Set-Off Interest and Penalty through balances in M-VAT & CST available also
22	Issue of Debit / Credit Notes	Revision of Sales & Purchases Details Uploaded is not possible under GST, so Dealers need to Issue Debit & Credit Notes in order to rectify there Uploaded Data	Revised Returns could have been uploaded before / after audit

Shift From MVAT to GST

Check here to know more on GST and to download GST Billing Rules :

Check here to know more on GST HSN Code with Rate :

Check here to know more on GST HSN CODE in Excel Format :

Check here to know more on GST Delivery Challan :

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