NEXT IAS GS PRE CUM MAIN FOUNDATION COURSE for CSE - 2022 INDIAN ECONOMY ALL INDIA GOODS AND SERVICES TAX (GST) SALIENT FEATURESNEXT IAS | GS Pre Cum Main Foundation Course for CSE-2022 by Kapuria Sir An all India GST was recommended by Kelkar task force which was setup in 2004 for implementation of the Fiscal Responsibility and Budget Management Ac: popularly known as FRBM Act, 2003. The Act had laid down some rules to be followed by the government to achieve fiscal consolidation, fiscal accountability and transparency. Principle rules were as follows: 1. The government shall bring down its revenue deficit to zero by 2008-09. 2. The government shall bring down fiscal deficit not more than 3 percent of the GDP by 2008-09. According to Kelkar task force this could be achieved if the government merged all indirect taxes of the centre as well as state into one all India tax called the Good and Services Tax which would not only subsume indirect taxes on goods but also on services. Such a tax will reduce cascading burden of multiple indirect taxes of the centre and states, reduce prices, increase demand, investment, GDP and tax revenues as well as tax to GDP ratio thereby reducing fiscal as well as revenue deficit. Taking note of these recommendation the government constituted an empowered committee of Finance Ministers of all States and Union Territories which was entrusted with the task of travelling from state to state to get feedback of the states as well as to ccnvince states to be a part of the all India GST and thus bring about consensus. As a result of the efforts of the Empowered Committee it was possible to finally pass the GST Ac: in August 2016 following which the all India GST was introduced w.e. 1* July 2017. Salient feature of the all India GST are as follows: 1. GST will subsume the following indirect taxes of the centre and States: (a) Central Taxes: Central Excise Duty. Duties of Excise (Medicinal and Toilet Preparations, Additional Duties of Excise (Textile and Textile Products, Additional Duties of Customs called Countervailing Duty (CVD), Special Additional Duty of Customs (SAD), Service Tax, Central Surcharges and Cesses on goods and Services. (b). State Taxes: VAT, Central Sales Tax, Luxury Tax, Entry Tax (including Octroi), Entertainment and ‘Amusement Tax (except that levied by local bodies), Taxes on Advertisements (other than those in newspapers). Purchase Tax, Taxes on betting, gambling and lotteries, State Surcharges and cess on goods and services. 2. It will be a duel tax imposed both by the Centre and States with revenues shared equally. 3. Centre's share of GST will go into CGST account and States’ share into SGST account. 4, There will also be IGST - Inter-State Goods and Services Tax on inter state transactions which will be imposed by the Centre, Revenues from IGST will be shared between the Centre and the consuming State, As GST merges CenVAT (Excise Duty) of the Centre, and VAT of States, it will be in the nature of a national level VAT. 6. Asa national level VAT, it will be imposed at each stage in the supply chain from the manufacture to wholesaler, retailer and final consumer. At each stage in the supply chain, there will be Input Tax Credit so that tax is paid only on value added. As GST will apply on the supply of goods or services, it will be a destination based tax in the sense that the tax will go to the consuming State ie. State, in which the commodity is used or service rendered. The consuming State will share the tax with the Centre. As such, the concept of supply of Page 12NEXT IAS | GS Pre Cum Main Foundation Course for CSE-2022 by Kapuria Sir goods or services will replace the earlier concept of tax on the manufacture or sale of goods or provision of services. 9. Since Service Tax also merges with GST, tax on services will be brought at par with tax on goods in the sense that tax paid on services like those of transporters etc. In the course of manufacturing or trading ofa commodity, itwill also enjoy Input Tax Credit just as tax on goods and raw materials. 10. All those businesses/service providers with annual turnover below Rs. 20 lakh shall be exempt from GST. The corresponding threshold in North Eastand Special States would be Rs. 10 lakh. 11, All those with annual turnover between Rs.20 lakh and Rs.75 lakhs (subsequently raised to Rs. 1 crore shall be governed by a Composite Tax Scheme under which the tax rates will be 1 per cent, 2 per cent and 5 per cent for traders, manufactures and restaurants respectively. They will be given the option to come under GST if they wish to. 12, There will be no Input Tax Credit available under the Composite Tax Scheme. Under the scheme, no tax will be charged from customers. In other words, those covered under the Scheme wil pay tax as a percentage of their turnover to the government. This will also be shared equally between the Centre and States. 13, Asa pre-condition put forward by States, VAT imposed by States on alcohol for human consumption shall not be merged with GST. 14, Also, VAT on five petroleum products imposed by States (Crude, Petrol, Diesel, Natural Gas and Aviation Fuel) shall not be merged with GST. 15, Electricity Tax imposed by the States on electricity bill will also not be subsumed in GST. 16. States will be fully compensated by the Centre for a period of five years from the date of implementation of GST in the eventof loss of revenue incurrent by States under GST. Base year for this compensation will be 2015-16 ie. revenue earned by a State in 2015-16 with annual growth of 14 percent in these revenues 17. States will have administrative control to audit and scrutinize 90 percent of all those businesses having annual turnover up to 1.5 crore. The Centre will control the remaining 10 percent. 18. Administrative control of businesses with annual turnover above 1.5 crore will be shared equally by the Centre and States - 50 percent of these by the Centre and 50 percent by States. 19. There will be an anti-profiteering clause under GST to ensure that the benefit of lower tax paid at each stage (due to Input/Tax Credit available at each stage) is passed on to consumers in the form of lower prices. 20. The entire responsibility for smooth implementation of GST will rest with GSTN - Goods and Services Tax Network set up in 2013 as a non-profit SPV to create IT backed infrastructure. This technological infrastructure would be the basis for registration of all those covered under GST, collection of GST, filing returns as well as for online transfer of Input Tax Credit at the all-india level. Without this network, GST cannot be implemented as GST is completely technology driven with all the collections, returns and Input Tax Credit (ITC) to be done online. 21. Exports shall be zero-rated in the sense that exporters will pay GST but will get full refund of GST. 22. Imports shall be treated as inter-State transactions and subjected to IGST in addition to the prevailing rate of custom duty. Page 13