root lacie we a> Ser < ae <> > aT AVAVAV AN a VaAVAVAVA 7 7 aVaAVaVv Aa *. TAVAVAM, OVERVIEW OF GST Itis the responsibility of every citizen to pay their taxes on time but, most of us wonder why ch high amounts in taxes. Here are the most important reasons why we pay tax : a needs contribution (o strengthen its defences. Government requires money to develop and maintain good infrastructure. Money is required to tackle various social challenges. Contribution in the form of Taxes helps the country in paying back loans. Nation requires monetary funds to handle local and national emergencies. a ee A is Tax Taxes are generally an involuntary fee levied on individuals or corporations that is enforced by government, whether local, regional or national in order to finance government activities. It is a monetary burden laid upon individuals or property owners to support the government. It is not a voluntary payment or donation, but an enforced contribution towards the government. In simple words, tax is nothing but it is a money that people have to pay to the Government, which is used to provide public services and meet social and financial obligations. 1,2-7Wo Forms of Taxes ‘There are mainly two forms of taxes namely Direct and Indirect taxes. Direct taxes allow the government to collect taxes directly from the consumers while indirect taxes allow the government to expect stable and assured returns through the society. 1.2.1 Direct Taxes A Direct tax is imposed directly on the taxpayer and paid directly to the government. It cannot be shifted by the taxpayer to someone else. A significant direct tax imposed in India is income tax. 1.2.2 Indirect Taxes ‘An indirect tax is a tax collected by an intermediary from the person who bears the ultimate economic burden of the tax. It can be shifted by the taxpayer to someone else. An indirect tax may increase the price of a good so that consumers are actually paying the tax by paying more for the products. A number of indirect taxes were levied in India, namely, excise duty, customs duty, service tax, central sales tax (CST), value added tax (VAT), entry tax, purchase tax, entertainment tax, tax on lottery, betting and gambling, luxury tax, tax on advertisements, ete. we p Inav SBPD Publications GST However, indirect taxation in India Lee aren pe radigm sh herein a large number of Central and State indi es have heer a single tax ~ Goods and Services Pax (GST). The introd a of G8 step in the field of indirect tax reforms in India, It is important to noty Act will continue in post-GST regime also. 1.2.3 Difference between Direct and Indirect Taxes Direct Taxes Indirect, Direct taxes are paid entirely by a r end-consumer of good: taxpayer directly to the government. Burden of taxes cannot be shifted. Burden of taxes ean he s They help reduce inflation. They enhances inflation, Tax evasion possible. Tax evasion not possib Administrative costs are high. Administrative costs are low, Progressive in nature. Regressive in nature. QO 1.3 What is VAT The Value Added Tax is exactly what its name implies. It is a tax on the Value 44 at each stage of the production and distribution of goods and services. For any firm py the VAT, the “value added” for a particular item is the 37 amount by which the salesp, of the product exceeds the cost of all products purchased to make that item, Becaus tax is paid at each level of production, and often not itemized on the final bill to consume some try to characterize the VAT as a tax on business. But most analysts agree that Value Added Tax is essentially a sales tax on consumer purchase that is collected inst VAT is a tax, which is charged on the increase in value of goods and services at stage of production and circulation. VAT is levied on the difference between the sale of the goods produced or the services rendered, and the cost there of-that is the diffe between the output and inputs. In other words, VAT is nothing but multipoint sales tax is charged and collected at each stage of the production, 1.3.1, Methods of Computation of VAT There are several methods to calculate the value added by a firm. The two com used methods are Addition and Subtraction. 1.3.2. Addition Method This method aggregate all the factor payments including profits to arrive at the! value addition on which the rate is applied to calculate the tax. This type of caleulatict used mainly with Income VAT. This method is not suitable for exempting expat! valuation of imports under the Destination principle, Another drawback of this meth that is does not facilitate matching of invoices for detecting evasion. 1.3.3. Subtraction Method The value added by the firm is arrived at by subtracting total purchases from s sii : t This is the simplest method i. VAT is payable on each value addition. In this method is collected by applying the rate on the value addition,Overview of GST 3 } 1.4 Sallent Features of Indirect Taxes/Features Promotes social welfare | High taxes are imposed on the harmful products such as alcoholic products, tobacco products etc. ‘Major source of revenue| They are the major source of revenues for the governments. In India, indirect taxes contribute more than 50% of the total tax revenues of the governments. Inflationary in nature | They directly affect the prices of commodities and services and leads to inflationary trend. Shifting of burden GST paid by the suppliers of the goods are recovered from the buyers, hence they shift taxburden to the | consumers. ‘| Wider tax base Indirect taxes can be spread over a wide range. Very heavy direct taxation at just one point may produce harmful effects on social and economic structure. As indirect taxes can be spread widely, they are more beneficial and suitable. Regressive in nature | Indirect taxes are not equitable. The taxes are wrapped in the price. Hence, rich classes and poor classes pays the same amount, which is obviously unfair. 1,5 Indian GST and some Historical Aspects of GST all over the World ‘The concept of GST is not new to the world as nearly 160 countries, have already opted this mode for bringing individually tax rates into a single tax. Though in India it is termed as a new system it has its roots quite long back in some other countries of the world. France was the very first country to implement the GST in the year 1954 and since then almost about 160 countries have adopted this tax system in one or the other way all over the world. To mention here some of the countries with the GST system are Canada, Vietnam, Australia, Singapore, UK, Spain, Italy, Nigeria, Brazil, and South Korea. USA does not have GST as it ensures high autonomy for the states and follows a unique VAT system of taxing. As stated earlier France, the Western European country was the very first country to have implemented GST and as of now the current rate of GST is 19.6 per cent. Most European countries introduced GST back in the 1970s-80s. Now a days a single unified tax system is a global fiscal trend. The one big difference between the Indian model of GST and similar taxes in other countries is the dual GST model. Many countries in the world have a single unified GST system, countries like Brazil and Canada have a dual GST system whereby GST is levied by both the federal and state or provincial governments. It is the Canadian model of dual GST (central and state) implemented in 1991 that the Indian model of the indirect tax reform finds similarities with. Canada introduced GST in the year 1991 at a rate of 5 percent and the Canadian GST model gives options to provinces to go for state or central GST. In India, a dual GST is in place whereby a Central Goods and Services Tax (CGST) and a State Goods and Services Tax (SGST) is levied on the taxable value of every transaction of supply of goods and services. : Q 1.6 Canadian GST/HST Model Tn Canadian model of GST, The tax is applied on the final sale of a product or service in Canada which is called Sales Tax. There are three component of Sales tax in Canada.4 SBPD Publications GST 1.6.1. Goods and Services Tax(GST) ; ‘This lax is levied by the federal government in every province in Canada. This tax i, similar to Contral goods and services tax which is levied by central government on intr; state supply of goods and services by registered person in India. incial Sales 'Tax(PST) . n to GST, every province levies a provincial tax called PST Provincial Sales Tax imilar to state goods and services tax is levied by state government on intre state supply of goods and service by a registered person in India. 1.6.8. HST (GST + PST combined) ‘The combination of GST and PST is called HST (Harmonized Sales Tax). This is similar to integrated goods and services tax which is combination of CGST(Central goods and services) and SGS'Xstate goods and services). Depending on the province or territory of operation relevant tax is collected accordingly. 1.6.4. Registration Any person who runs a business in Canada or provides sales/services in Canada and his turnover for the last four quarters exceeds CAD $ 30,000, is required to register in Goods and Services Tax/ Harmonized Sales TaxWhen the person registers for Goods and Services Tax/ Harmonized Sales, he will receive a business number (BN) which he is required to display this number on his invoices issued by him. 1.6.5. Taxable and Non-taxable Goods All sales made in Canada are classified into three categories: which are taxable, exempt and zero rated (which is taxable at, 0%). O 1.7 Australian GST 1.7.1. Introduction ‘The Australian Goods and Service Tax is levied on physical and digital goods that are traded for consumption within Australia. If a person having a commercial presence in Australia, and his business has a gross income of over AUD $75,000 without tax, is required to register his business for GST. Additionally, if a person has a registered business outside Australia and sells digital products/services to Australia then he has to collect GST and remit it to government. 1.7.2. GST Rates GST is set at a flat rate of 10% and is required to be included in the invoice of your product or service. 1.7.8. GST Invoices A GST invoice sent to a customer is required to contain the following details. (i) Document should be titled Tax Invoice. (ii) The seller's identity (iii) The seller's Australian business number (ABN) (iv) The date the invoice was issued (v) A brief description of the items sold, including the quantity (if applicable), the price, the GST amount (if any) payable - this can be shown separately or as a statement such as "Total price includes GST’. 1.7.4, Reverse Charge Mechanism Ifa merchant, registered outside Australia, is selling produets/services to a Business customer in Australia, then Tax will be paid under Reverse Charge Mechanism.Overview of GST. 5 31,8 Kelkar-Shah Mode! ‘This model of a unified goods and services tax has merged Central Excise, Service Tax and State VAT into one common base. Similar to HST (Harmonized Sales Tax) model in Canada, ther which are levied by the central and state government, The colle central government, ‘Phe model proposes the collection of tax from big industries to be done by the Central government while the states government collects tax from the smaller industries. Further it proposed to collect Central Excise and Service Tax to be collected by the Centre and the VAT (sales tax) to be collected by the states. are two different rates 1 of tax will be by the ‘This model, just like Kelkar-Shah’s, envisages a combination of Central Excise, Service ‘Tax and VAT to make it a common base of goods and services tax to be levied both by the Centre and the states separately. ‘This means that the Central Excise Act will be abolished and the goods tax will be only on the sale of goods. It will merge in it the service tax. ‘To put this in legal language, the “ taxable event” for the GST will be the act of sale of goods and services. The concept of manufacture will simply vanish. The difference between the Bagchi-Poddar and Kelkar-Shah models is that in the former, the collection is at two levels, by the Centre and the states, while in the latter the collection is only by the Centre. ‘The Bagchi-Poddar model also clearly envisages that a Constitutional amendment is necessary to bring the taxing powers on goods and services under the Concurrent List and to abolish the present division of taxing powers between the Centre and the states. Arguments against the combined GST in the Bagchi-Poddar model are the following : 1. The amendment of the Constitution as envisaged in this model will not be practicable immediately and it will in any case create a huge political upheaval in the country. 9, Revenue: Total collection of revenue will remain the same. There is no reason why we should create such an upheaval for merely a theoretical pursuit. 3, The states may impose different rates of service tax on the same service. 4, Aservice having an all-India character will get different treatment in different states Even the model itself admits that its success assumes complete similarity of rates and procedures in all the states, which is most unlikely to happen. 0 1.10 Genesis of GS’ 1.10 Genesis of GST nh Dee 2004 Jdea of National GST was mooted by Kelkar Task Force in 2004. 2008 Union Finance Minister, Shri P. Chidambaram, announced in his budget (2007-08) that GST would be introduced from April 1, 2010. 2014 | on 19-12-2014 NDA Government tabled the Constitution (122nd Amendment) Bill, 2014 on GST in the Parliament. 2015 | on 06-05-2015 the LokSabha passed the Bill. 2016 > on 03-08-2016 the RajyaSabha passed the Bill. > Subsequent to ratification of the Bill by more than 50% of the States, Constitution (122nd Amendment) Bill, 2014 received the assent of the President on 8th September, 2016 and became Constitution (101st Amendment) Act, 2016.‘SBPD Publications GST 2017 V the Central GST legislations - Central Goods and Servieag a 2017, Y Integrated Goods and Services Tax Bill, 2017, V Union Territory Goods and Services Tax Bill, 2017 and Y Goods and Services Tax (Compensation to States) Bill, OI introduced in LokSabha. > on 29-08-2017 LokSabha passed these bills and with the receipe a President’s assent on 12th April, 2017, the Bills were enact L > on 01.07.2017 GST was implemented. Note : France was the first country to implement GST in the year 1954, Within, years of its advent, about 160 countries across the world have adopted GST. Q 1.11 Component of GST © Central Goods and Service Tax (CGST) © State Goods and Service Tax (SGSTYUnion Territory Goods and Service ‘Tax (UTGg, @ Integrated Goods and Service Tax (IGST) Q 1.12 Provisions of Constitution of India Article 265 : It states that “no tax shall be levie of law”, * Article 246 : It gives the respective authority to Union and State Governments fy levying tax. Whereas Parliament may make laws for the whole of India or any part oft territory of India, the State Legislature may make laws for whole or part of the State, Seventh Schedule to Article 246 : It contains three lists which enumerate th matters under which the Union and the State Governments have the authority! make laws. d or collected except by author Seventh schedule to Article 246 of the Indian Constitution List I List II List IT Union List State List Concurrent List Union List : It contains the matter in respect of which the Central Government bi power to make Laws. State List: It contain the matter in respect of which the State Government has powel to make Laws. Concurrent List : It contain the matter in respect of State Governments has power to make Laws. Q 1.13 Constitution (One Hundred and First Amendment) Act, 2016 1.13.1 Requirement for Amendment in Constitution Constitution gives the separate power to Central Government and State Governmet! to enact the law. which both Central as wellOverview of GST a Consequently, a constitutional amendment was made for integration of the central excise duty including additional duties of customs, state VAT, central sales tax and certain state specific taxes and service tax levied by the centre into a comprehensive goods and service tax. 1.18.2 Significant Provisions of Constitution (101st Amendment) Act, 2016 1.18.2.1 Article 246A : Power to make laws with respect to GST.) . Parliament of India has exclusive power to make laws with respect to goods and services tax where the supply of goods, or of services, or both takes place in the course of inter-State trade or commerce. ‘The legislature of every State, has the power to make laws with respect to goods and services tax imposed by the Union or by such State. 1.18.2.2 Article 269A : Levy and collection of GST on inter-state supply. (1) Goods and services tax on supplies in the course of inter-State trade or commerce shall be levied and collected by the Government of India. (2) Such tax shall be apportioned between the Union and the States in the manner as may be provided by Parliament by law on the recommendations of the Goods and Services Tax Council. (8) Import of goods and/or services in to the territory of India shall be deemed to be supply of goods and/or services in the course of inter-State trade or commerce. (4) The amount apportioned to a State from Goods and services tax on supplies in the course of inter-State trade or commerce shall not form part of the Consolidated Fund of India. (6) Where an amount collected as IGST has been used for payment of SGST or vice versa, such amount shall not form part of the Consolidated Fund of India. (© Parliament may, by law, formulate the principles for determining the place of supply when a supply of goods, or of services, or both takes place in the course of inter-State trade or commerce. 1.13.28 Article 279A : Constitution of GST Council Goods and Services | The President shall, within 60 days from the date of Tax Council commencement of the Constitution (One Hundred and First Amendment) Act, 2016, by order, constitute a Council to be called the Goods and Services Tax Council. Members in GST | The GST Council shall consist of the following members, namely : Council (@) the Union Finance Minister. (Chairperson). (b) the Union Minister of State in charge of Revenue or Finance (Member) (c) the Minister in charge of Finance or Taxation or any other Minister nominated by each State Government (Members). Recommendation of| The GST Council shall make recommendations to the Union } GST Council and the States on : (a) the taxes, cesses and surcharges levied by the Union, the States and the local bodies which may be subsumed in the goods and services tax;SBPD Publications GST (©) the goods and services that may be subjected to, -- from the goods and services tax; co (©) model Goods and Services Tax Laws, principte, a apportionment of Integrated Goods and Services . ly the principles that govern the place of supply. > "® (@ the threshold limit of turnover below which, se1 re ©) sp Pradesh, Assam, Jammu and Kashmir, Manipur, Meg’ Mizoram, Nagaland, Sikkim, Tripura, Himachal and Uttarakhand; and (h) any other matter relating to the goods and services ta, the Council may decide. Bo rrvices may be exempted from goods and ser, ¢% TVices ¢, : (©) CGST and SGST wil be levied at the rates fed center and the States which will be notifies ad commendations of the GST Council; © any special rate or rates for a specified period, ty, additional resources during any natural calamity orgy rial provision with respect tothe States of Arma lay des Date of Levy of Tax | The Goods and Services Tax Council shall re on Petroleum, Diesel] on which the goods and services tax be levied on petrolen commend the dat ete, crude, high speed diesel, motor spirit (commonly known ¢ Harmonised Structure of Goods and Services Petrol), natural gas and aviation turbine fuel. While discharging the functions conferred by this article, th Goods and Services Tax Council shall be guided by the need f a-harmonised structure of goods and services tax and for th development of a harmonised national market for goods an services, Q 1.14 Number of Legislations eer OF teagislations ‘There are 35 GST Act in India ; Name of Act No. of Act The Central Goods and Service; 8 Tax Act, 2017 1 State Goods and Services Tax Act, 2017 [29 state and 2 union territory with their own legislatures i.e, Delhivand Puducherry], at ‘The Union Territory Goods and Services Tax Act, 2017 1 The Integrated Goods and Services Tax Act, 2017 1 The Goods and Serviees Tex (Compensation to States) Ad, BOLT b 1.15 Many provision of CGST, 2017 are also Applicable to |GST and UTGST. Many provisions of CGST Act, per Section 20 of IGST Act, 2017 +2017 are also applicable to IGST Act and UTGST A* and section 21 of UTGST Act, 2017.7 wy 416 Benefit/Advantages of GST Overview of GST. Benefit to Govern- ment (i) Aunified common national market to boost Foreign Invest- ment and “Make in India” campaign; (i) Boost to export/manufacturing activity, generation of more employment, leading to reduced poverty and increased GDP growth; (ii) Improving the overall investment climate in the country which will benefit the development of states; (iv) Uniform SGST and CGST rates to reduce the incentive for tax evasion. Benefit to Customer @ Simpler tax system; Gi) Reduction in prices of goods and services due to elimination of cascading; iii) Uniform prices throughout the country; (iv) Transparency in taxation system. Benefit to Trade and Industry () Reduction in multiplicity of taxes; (ii) Mitigation of cascading/double taxation; (iii) Development of common national market. O ¥A7 DemeritDisadvantages of GST Cumbursome returns and filling process The process of filling of GST returns is very cumbursome. A registered person has to file many returns on monthly basis like GSTR-1, GSTR-3B, quarterly return like ITC-04. The concept of matching in GST returns is very complicated. Cascading of taxes ‘GST was introduced to ensure free flow of credit and eliminate the cascading effect of taxes however we observed that free flow of credit is restricted on many occasions. Credit of many inputs is blocked under GST law as per’section 17 of the Act, even if inward supplies are used for in course or furtherance of business. Blockage of working capital Multiple statewise registrations under GST as against sin- gle centralised regis- tration Under GST concept of supply’ is recognised even if it is between two branches in different states of a same establishment. One branch of entity shall charge GST while making supplies of branch in other state which will result in blockage of working capital. Under erstwhile service tax regime there used to be a single centralised registration of an entity and compliance have to be made at single point, In GST there is a concept of statewise registration, so if an entity has offices in ten states then it has to register at all ten locations. Cost of compliance in such case will be very high. Interferance in day to day business ‘here is a rule in GST that if the payment of supply is not done within 180 days from the date of supply then the related ITC has to be reversed by the recipient. He has to pay tax alongSBPD Publications GST with interest on such reversal. This is unnecessary interferance of government in day to day business activities of businessman, Government should be concerned with tax collection and not the way in which to people are doing business. Delay in payment exceeding 180 days may be agreeable to both the parties and GST should not define the way to conduct business. Problem in availing ITC in case of default of supplier Hurried implemen- tation of GST lead to confusion among professionals and business In order to avail the input tax credit, buyer has to ensure the supplier has paid the taxes to government. Now it will be very harsh to disallow the credit to buyer who has made full payment to the supplier including taxes. He is denied the credit because his supplier has to paid the taxes to government. It is the duty of government to punish the erring citizens and buyer should not be penalised for default of supplier. GST was introduced on July 1, 2017, in the middle of financial year 2017. This created difficulty on the part of businesses to shift to a new tax regime immediately. Tax rules of the previous regime for the first quarter of 2017 and adhering to newly introduced GST for the remaining quarters created compliance issues. Instead of single or dual rate GST sys- tem, there are stan- dard tax rates and multiple rates of CESS Instead of a more simplified tax structure, the GST Council rolled out GST in India with five stardard rates. This, according to many economists, makes the structure complex instead of simplifying it. Given multiple states in India, each had its own issues with regards to GST rates. Each wanted lower rates to be implemented for particular goods they produced. This made the GST Council resort to implementing multiple tax rates under GST. GST was first introduced with a tax rate as high as 28%. Although, the GST Council has been continuously reducing rates and most items of daily use now fall in 0% to 5% tax bracket. . Q 1.18 Concept of GST fa Applicability GST is applicable to whole of India including Jammu and Kashmir, 2. | Levy 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. The same is applicable on importation of service whether for consideration or not. Import of goods are subject to custom duty and GST. 3. | Continuous Chain| GST offer tax credit at every stage i.e. tax only on value of Tax Credit addition. 4, | Burden on Final | The supplier at each stage is Permitted to avail credit of Consumer GST paid on the purchase of goods and/or services and can set off this credit against the GST payable on the supply of goods and services to be made by him. Thus, only the finalOverview of GST iu | consumer bears the GST charged by the la a supply chain, with set-off benefits at all the previous stages, 5. Destination bared| GST would be based on the principle of di S Consumption Tax | consumption taxation as against the present principle of | origin based taxation. Tax revenue will be levied and collected i by the consuming state. 6 No Cascading of | Value added at each stage is taxed under GST, so there is Taxes no tax on tax or cascading of taxes. Q 1.19 Need for GST 1.19.1 Deficiency/Challenges/Short-coming in Existing Tax Regime 1. Non-creditable of several local levies in State VAT : Credit of several state levies are not allowed like entertainment tax, luxury tax, entry tax etc. 2. Cascading of Taxes : (a) levy of CST:- Credit on CST paid on inter-state purchase are not allowed. (b) Excise duty are included while computation of VAT. For Example : 1. Sales tax is calculated by manufacturer on Basie value + Excise Duty. Due to this, CST becomes the part of the cost. In this, excise duty has been included in the sale tax, due to which tax was taxed. 2. VAT dealer on his subsequent intra-state sale of goods charges VAT (applicable in the respective state) on : basic value + Excise duty charged by manufacturer + profit by dealer. In this also tax was taxed. 3. Non-Integration of VAT & Service Tax: ‘Though CENVAT and State-Level VAT are essentially value added taxes, set off of one tax against the credit of another is not possible as CENVAT is a central levy and State-Level VAT is a State levy For Example : Inputs Available Output Liability Set off Against Central Central Central tax can be adjusted Excise Duty ; Excise Duty only against central input Service tax ~ Service tax tax and State tax can be State State adjusted only against State VAT (Intra-state) VAT (Intra -state) input tax. 4, Double Taxation : Double taxation of a transaction as both goods and services like catering services (restaurant services and outdoor catering services). 1.19.2 Cure of Ills of Existing Indirect Tax Regime 1. Taxes subsume in GST/Types of Indirect taxes before GST. (A) State taxes subsumed (a) State VAT; (b) Central Sales Tax; (©) Purchase Tax; @) Luxury Tax; (e) Entry Tax (All forms);SBPD Publications G: (Entertainment 'Tax (except those levied by the local bodies); (Taxes on advertisements; (h) Taxes on lotteries, betting and gambling; (i) State cesses and surcharges insofar as they relate to supply of goods or service: (B) Central taxes subsumed (a) Centr excise Duty; (b) Duties of Excise (Medicin and Toilet Preparations); of (Goods of Special Importance); (@) Additional Duties of (Textiles and Textile Products); (c) Additional Duties of Customs (commonly known as CVD); (Special Additional Duty of Customs(SAD); ice Tax; 8 and surcharges insofar as they relate to supply of goods or services. 2. Single Taxable Event Simultaneous introduction of GST at both Centre and State levels would integrate taxes on goods and services for the purpose of set-off relief and will ensure that both the cascading effects of CENVAT and service tax are removed and a continuous chain of set- off from the original producer's point/ service provider's point upto the retailer's level/ consumer's level is established. Note : Custom Duty, Export Duty, Research and Development Cess, Stamp Duty, Anti- dumping Duty, Safeguard Duty, Vehicle Tax, Excise on Liquor, Tax on Sale and Consumption of Electricity, Toll Tax, Entertainment Tax (Levied by Local Bodies), Road Tax., Professional ‘Tax etc. are not subsumed in GST Act, Q 1.20 Others Important Points under GST 1. Dual GST Model It would be a dual GST with the Centre and the States simultaneonsly 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 (Andaman and Nicobar Islands, Lakshadweep, Dadra and Nagar Haveli, Daman and Diu and Chandigarh) would levy Union territory GST (UTGST). An Integrated GST (IGST) would be levied on inter-State supply of goods or services, This would be collected by the Centre so that the eredit chain is not disrupted. Note : 1. IGST rate will be equal to the total sum of CGST and SGST/UTGST. 2. Definition of taxable event and taxable person, classification and valuation of goods and services, procedure for collection and levy of tax and the like would be uniform in all the GST legislations, as far as feasible. This would be necessary to preserve the essence of dual GST. 2. Composition Levy This scheme has been made for the benefit of small dealer, small manufacturer and small service provider by reducing their burden of compliances. For example—Less number of returns, less maintenance of books and records as coinpared to others dealer,Overview of GST 13 Under this scheme, if a registered person whose aggregate turnover in the financial year is not more than 150 lakhs (special category states would decide the composition limit jn their own state) then he has an option to pay taxes at a low rate but he cannot avail the credit of input tax. 3. Sequance of Utilisation of ITC rae Section 49A (Relevant Part) Credit Of Utilisation Order IGST 1. 1GST 2, CGST 38. SGST/ UTGST CGST/UTGST 1 IGST 2. CGST SGST/ 1. 1IGST UTGST 2, SGST/UTGST 4, Applicable to all Goods and Services) { GST would apply to all goods and services except Alcohol for human consumption. GST on the following five specified petroleum products would be applicable from a date to be recommended by the GSTeouncil. ¥ Crude oil, ¥ Petrol, v Diesel, ¥ Aviation Turbine Fuel (ATF) and ¥ Natural gas ‘The Union Government shall retain the power to levy duties of excise on the aforesaid products besides tobacco and tobacco products manufactured or produced in India. ods and Services Tax Network (GSTN) Goods and Services Tax Network (GSTN) has been set to provide a shared IT infrastructure and services to Central and State Governments, taxpayers and other stakeholders for implementation of GST. The functions of the GSTN, inter alia, include : > facilitating registration; > forwarding the returns to Central and State authorities; > matching of tax payment details with banking network; > providing various reports to the Central and the State Governments based on the taxpayer return information; > providing analysis of taxpayers’ profile; and > running the matching engine for matching, reversal and reclaim of input tax credit. 6. Intra-state Supply . If in the case of supply of goods and/or services, the location of the supplier and the place of supply of goods/services are in the same State or same Union territory then it shall14 SBPD Publications GST he treated as intra-State supply. Intra-state supply attracts both Central Goods and Servic 'ax (CGST) and State Goods and Services Tax (SGST). For example, if Electronics dealer in Maharashtra sold % 10,00,000 worth laptop to dealer in Maharashtra and the applicable GST rate is 18%, then CGSTof ¥ 90,000 and SG§ of € 90,000 would be applicable. 7. Inter-state Supply A supply of goods and/or services in the course of inter-State trade or commerce mear any supply where the location of the supplier and the place of supply are in different State two different union territory or in a state and union territory. Inter-state supply attract Integrated Goods and Services Tax (IGST). . For example, if-Electronics dealer in Maharashtra sold % 10,00,000 worth laptop to dealer in Karnataka and the applicable GST rate is 18%, then IGST of @ 180,000 would b applicable. Illustration 1. Intra-State Supply In case of intra-state supply of goods/ services, the supplier would charge dual GST i.e, CGST and SGST at specified rates on the supply. I. Intrastate supply of goods by Ram to John (Assumed rate is 9%) Amount () Value charged for supply of goods 5,000 Add : CGST@9% 450 ‘Add : SGST@9% 450 Total price charged by Ram from John for intra-state supply 5,900 of goods/services II. Suppose above goode/services are supplied in intra-state by John to Sita. Value addition @ 20% ‘Amount Value charged for supply of goods/services [5,000 x 120%] 6,000 Add : CGST @ 9% 540 Add : SGST @ 9% 540 Total price charged by John from Sita for intra-state supply 7,080 of goods/services John will avail credit of CGST and SGST paid by him on the purchase of goods/ services and wilt utilise such credit for being set off against the CGST and SGST payable on the supply of goods/services made by him to Sita. Computation of CGST, SGST payable by John to Government Amount (%) CGST payable 540 Less : Credit of CGST 450Overview of GST al Government T payable to Cen C ~~ SGST payable of reven’ Transaction Central Supply of goodservices by Ram to John 450 Supply of goods/services by John to Sita 90 [Total - _ ‘| 540 Illustration 2. Inter-State Supply In case of inter-State supply of goods/ services, the supplier would charge IGST at specified rates on the supply. 1. Supply of goods/services by Ranbir of Haryana to Sukhbir of Haryana ‘Amount (2) | ‘Value charged for supply of goods/services 10,000 ‘Add : CGST @ 9% 900 900 ‘Add : SGST @ 9% Total price charged by goods/services Ranbir is the first stage sup of CGST, SGST or IGST. Il. Suppose above goods/se Ranbir from Sukhbir for intra-State supply of 11,800 plier of goods/services and hence, does not have any credit rvices are supplied by Sukhbir of Haryana to Ashish of Delhi : Amount () Value charged for supply of goods/services 12,000 2,160 Add : IGST @1 8% ‘otal price charged by Si goods/services of IGST payable to Government sakhbir from Ashish for inter-State supply of] 14,160 Computation Amount @ IGST payable 2,160 Less : Credit of CGST 900 Less : Credit of SGST 900 IGST payable to Central Government 360 the payment of IGST to Haryana State will transfer SGST credit of = 900 utilised in the Central Government.ba SBPD Publications GST UL. Suppose above goods/services are supplied by Ashish of Delhi toNeera, or, Ashish will avail credit of IGST paid by him on the purchase of goods/services any utilise such credit for being set off against the CGST and SGST payable on the local 84 % of goods/services made by him to Neeraj. 7 | Amour Value charged for supply of goods/services Tio Add : CGST @ 9% i Add : SGST @ 9% i Total price charged by Ashish from Neeraj for local supply of goods/services [tiie Computation of CGST, SGST payable to Government Amount @ CGST payable 135) Less : Credit of GST 1,35 CGST payable to Central Government Ni SGST payable 1350 Less : Credit of IGST ( 2,160, € 1,350) 810 SGST payable to State Government 5 Central Government will transfer IGST credit of 810 utilised in the payment of $03 to State 2 (Importing State). Note : Rates of CGST, SGST and IGST have been assumed to be 9%, 9% and 18 respectively. Statement of revenue earned by Central and State Governments Revenue to| Revenue to | Revenue te Transaction Central Government|Governmen Government} of State 1 of State 2 Supply of goods/services by Ranbir to Sukhbir| 900 900 Supply of goods/services by Sukhbir to Ashish| 360 ‘Transfer by Haryana Govt. to Centre Govt. 900 (600) Supply of goods/services by Ashish to Neeraj 540 Transfer by Centre to Delhi Govt. 610) 810 Total 1,350 Nil 1,350 GST rates on some common items. Tax Rate Product 0% | 50% of the consumer price basket, including foodgraine 3%__| Precious stons, Gold and Silver ornaments 5% | Household necessities such as edible oil, sugar, spices, tea, and cof (except instant) are included. Coal, Mishti/Mithai (Indian Sweets), Life-saving drugs are also covered under this GST slabOverview of GST 17 is includes computer Hair oil, toothpaste and soaps, eapital goods and industrial intermediaries motorcycles are included here, Differences between VAT, Service Tax & Excise Duty with GST There are many differences between old tax regime of VAT, Service Tax, Excise etc ind GST. GST has tried to mitigate the short comings of the old tax regime, some remarkable lifferences between VAT, Service Tax, Excise duty and GST are mentioned below : Conttetioon VAT —_| Service Tax | Excise Duty Gst Meaning ‘Tax charged on| Tax charged on| An excise duty isa)Tax charged on the value addi-| the services pro-| type of tax charged] supply of goods and tion to commo-| vided is known| on goods produced] service is known as dities is known| is Service Tax. | within the country| Goods and Service as VAT. (as opposed. to| tax (GST). customs duties, char-ged on goods from outside the country). Introduced in| Concerned State| Finance Act, | The Central Excise| Central Goods & the year Act 1994 Act, 1944 Service Tax Act, Statute 2017 and Integrated Goods & Service Tax Act, 2017 Rate Variable, for| Uniform for all) Variable, for differ-| The GST council different types| services. ent types of com-| has fitted over 1300 of commodities modities goods and 500 services under four tax slabs of 5%, 12%, 18% and 28% under GST. This is aside the tax on gold that is kept at 3% and rough precious and semi- precious stones that are placed at a special rate of 0.25% under GST. i : vt. | Central Govt. State Govt. and Leviedby |StateGovt. —_| Central Go pisces Area Within the state| All over the] Within the state | Alloverthe country country subject to -| certain exception.