UNDERSTANDING GST:
Goods and Service Tax (GST), as we all know has been in consideration for years now and the basic concept is also clear to many. Yet there are a few technical concepts that may need broad deliberations to reduce the ambiguities upon its implementation.
We list down few of these for simple understanding.
GST is a comprehensive tax levy on manufacture, sale and consumption of goods and service at a national level.
GST is a tax on goods manufactured, imported, sold or consumed in India. Same principle holds good for any type of services provided (as covered under Service Tax currently). Once implemented, it is going to reduce the multiplicity of tax structure as being followed currently.
The multiple taxes which are proposed to be subsumed in GST are: Central Excise Duty, Additional Excise Duties, Service Tax, Additional Customs Duty (CVD) and Special Additional Duty of Customs (SAD), etc., and at State level, taxes like VAT/ Sales Tax, Central Sales Tax, Entertainment Tax, Octroi and Entry Tax, Purchase Tax and Luxury Tax, etc.
However, the taxes that are likely to remain out of the ambit of GST are, Stamp Duty, Basic Customs Duty (BCD), Vehicle Tax, Electricity Duty, any octroi, if levied.
GST PAYABLE:
- There will be four types of GST Rates applicable:
- CGST: Central GST- levied on all transactions of goods and services transacted for value
- SGST: State GST- levied on all transactions of goods and services transacted for value
- IGST: Inter-state GST- levied on all Inter-state transactions including consignment/ stock transfers
- Additional Tax- a compensatory tax to the origination state in case of interstate sale for initial two years, which would be like CST levied presently.
- The respective GST rates will be notified later
- In case of Imports, GST (CGST & SGST) will be levied including the value of Basic Customs Duty (BCD). The GST paid on Imports will be available as Input Tax Credit
- In case of Export of Goods and Services, the GST rate will be Zero, however the Input Tax Credit (ITC) can be claimed as refund or adjusted against other taxable sale/ supply of goods and services.
GST INPUT TAX CREDIT:
- The GST Input Tax Credit is not so tricky.
- In the proposed system of GST in India, Very clearly, Input Tax Credit of CGST & SGST from Goods and Services as Input and Capital Goods has to be first utilized towards payment of CGST and SGST respectively, and if any balance is available, the same can be utilized for payment of IGST.
For example, a Company has a Input Credit of Rs. 1,000 and Rs. 750 for CGST and SGST respectively. Through the sale of items to another State, the Output Tax levied is Rs. 400 for CGST, Rs. 300 for SGST and Rs. 1,250 for IGST. Hence, the credit of CGST (Rs. 1,000) will be adjusted towards CGST payable of Rs. 400 first, and remaining Rs. 600 towards IGST payable. Further, the credit of SGST (Rs. 750) will be adjusted towards SGST payable of Rs. 300 first, and remaining Rs. 450 towards IGST payable.s Therefore, IGST payable (Rs. 1,250) will have balance of Rs. 200 to be paid after all credits being utilized.
- Similarly, Input Tax Credit of IGST can be utilized against output tax of IGST, CGST and SGST (in same order).
For example, a Company has a Input Credit of Rs. 1,000 for IGST. Through the sale of items to another State, the Output Tax levied is Rs. 200 for CGST, Rs. 150 for SGST and Rs. 750 for IGST. Hence, the credit of IGST (Rs. 1,000) will be adjusted towards IGST payable of Rs. 750 first, then Rs. 200 towards CGST payable and remaining Rs. 50 will be adjusted towards SGST payable. Therefore, here SGST payable will have balance of Rs. 100 to be paid after all credits being utilized in order specified.
IMPORTANT POINTS TO NOTE:
- GST registration is likely to have integration with Direct Taxes and will be similar to as PAN is used for various transactions
- In the proposed system same procedure for collection of tax and filing of return will be used for reporting to CGST and SGST authorities regardless of any State.
- There is a likeliness that Small Taxpayers whose Gross Annual Turnover does not exceed Rs. 1.50 crores on national basis and Rs. 0.10 crores in each state, will not be covered by GST provisions.
- The threshold of Gross Annual turnover will include Export and Exempted Supplies.
- The GST provisions will provide conditions for goods that are exempted in one state and taxable in another. Similarly, items that are exempt from GST being levied will clearly be notified in the law.
- Anomalies like, software to be treated as goods or services, will get eliminated under GST provisions. In proposed GST regime transactions against declaration forms will be abolished.
- Multiplicity of tax rates as being applied currently will get eliminated with no cascading of taxes.
- GST regime will require assessee to file common e-Returns (Monthly / Quarterly) for CGST, SGST, IGST & Additional Tax. However, for following different categories of taxpayers, separate returns for will have to filed:
- a) Normal/ Regular & Casual Taxpayer (GSTR-1, 2 ,3 & 8)
- b) Compounding Taxpayer (GSTR- 4 & 8)
- c) Foreign Non-Resident Taxpayer (GSTR-5),
- d) Input Service Distributor (GSTR- 6) ,
- e) Tax Deductor (GSTR-7)
- Development of common national market: GST would introduce a uniform taxation law across states and different sectors in respect of indirect taxes which would make it easier to supply goods and services hassle free across the country which represents parity in the prices of goods and services. This will help in promoting economic efficiency and sustainable long term economic growth.
Disclaimer: All information stated in the blog is basis the information available in public domain and final facts will only be available after the GST legislation is enacted
