Goods and Service Tax

Goods and Service Tax

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GST
Goods and Service Tax

What is GST?

Goods & Service Tax: The Constitution Amendment Bill for Goods & Service Tax (GST) has been approved by The President of India post its passage in the Parliament (Rajya Sabha on 3 August 2016 and Lok Sabha on 8 August 2016) and ratification by more than 50 percent of state legislatures. The Government of India is committed to replace all the indirect taxes levied on goods and services by the Centre and States and implement GST by April 2017.

But first let us understand what actually Goods & Service Tax is. It has been long pending issue to streamline all the different types of indirect taxes and implement a “single taxation” system. This system is called as Goods & Service Tax (GST is the abbreviated form of Goods & Services Tax). The main expectation from this system is to abolish all indirect taxes and only GST would be levied. As the name suggests, the GST will be levied both on Goods and Services. GST is a tax that we need to pay on supply of goods & services. Any person, who is providing or supplying goods and services is liable to charge GST.

Salient features of Goods & Service Tax bill:-

The proposed amendments shall subsume a number of indirect taxes which are presently being levied by the Central and State governments into GST thereby doing away with the cascading of the taxes and providing a common national market for goods and services. The aim to be achieved in bringing out such amendments is to confer simultaneous power on the parliament and the state legislatures to enact laws for levying GST concurrently on every transaction of purchase and supply of goods and services. Taking into account the federal republic nature of the country, the GST would be implemented concurrently by the central and state governments, CGST and SGST respectively.

Subsuming of various Central Indirect Taxes and levies such as Central Excise Duty, Service tax, Additional Custom and Excise duties respectively, and Central Surcharges and Cesses so far as they relate to the supply of goods and services.

Subsuming of State Value Added Tax / Sales Tax shall be done by the Goods & Service Tax bill, Entertainment tax (other than those levied by local bodies), Octroi and Entry tax, Purchase tax, Central Sales tax (levied by state and collected by states), Taxes on lottery, betting and gambling, and Luxury tax, this tends to be a complex topic so it is important find a yacht crew tax specialist who will explain it with more details.

Compensation to the States shall be provided for the loss of revenue incurred which arose on account of the implementation of the Goods and Services Tax for a period, which may extend to five years.

Creation of Goods & Service Tax Council to be done in order to examine the issues relating to goods and services tax and make recommendations for the same to the Union and the States on parameters like rates, exemption list and threshold limits. The said Council shall function under the Chairmanship of the Union Finance Minister and will have the Union Minister of State in charge of Revenue or Finance as member, along with the Minister in-charge of Finance or Taxation or any other Minister nominated by each State Government. It is further contested that every decision of the Council shall be taken by a majority of not less than three-fourths of the weighted votes of the members present and voting in accordance with the following principles-

(a) The vote of the Central Government shall have a weightage of one-third of the total votes cast, and

(b) The votes of all the State Governments taken together shall have a weightage of two-thirds of the total votes cast in that meeting

Levy of Integrated Goods and Service tax (IGST) on inter-state transactions of goods and services to be done.

Levy of an Additional Tax on Supply of Goods, not exceeding one per cent. in the course of inter-State trade or commerce to be collected by the Government of India for a period of two years, and assigned to the States from where the supply originates.

CHALLENGES:

With regards to Tax Threshold

The threshold limit for turnover above which Goods & Service Tax would be levied will have to be strictly observed and analyzed. First of all, the threshold limit should be such that it benefits the small scale traders and service providers. The first major impact of setting higher tax threshold would naturally lead to less revenue to the government as the margin of tax base shrinks; second it may have on such small and not so developed states which have set low threshold limit under current VAT regime.

With respect to nature of taxes

There are various kind of taxes that would be part of GST such as excise duty, service tax, and different levels of taxes at State level. Remarkably, there are numerous other taxes which are union and state states based which is still out of Goods & Service Tax.

With respect to number of enactments of statutes

There are two types of laws in Goods & Service Tax, one at a center level which would be called ‘Central GST and the second one at the state level to be known as ‘State GST . This would be leading to different rates of taxes both at central and state level leading to lack of proper balance in the tax system in the country.

With respect to Rates of taxation

 Frankly speaking, the tax rate in current Goods & Service Tax is not in accordance with the state’s requirement of fund. They don’t have the power to increase their revenue if there is increase in their expenditure states.

Some of the related articles:

  1. Goods and Service Tax
  2. Compliance under GST Regime – Returns & ITC Matching
  3. GST REGISTRATION

Author: This blog is written by Ajinkya Nikam, a passionate blogger & intern at  Aapka Consultant.

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