What is GST?, What is Goods and Service Tax, GST and India. The Goods and Services Tax, Globally known as VAT or GST is levied on “Taxable Supply”. Since India is a federal country, it has Central as well as State as its participants. The GST also has two components such as CGST (Central Goods and Services Tax) and SGST (State Goods and Services Tax), these are levied by Central and State respectively and these are applied on both, whether it is Goods or Services. These taxes are levied on each stage and benefit of taxes paid on previous stage will be given as input credit.
The credit of taxes paid on input is available in case of CGST, whether the transaction is Inter State or Intra State. But there are restrictions that CGST input can be claimed from CGST output only and same SGST input can be set off against output SGST. In case of interstate transactions a combined CGST and SGST is levied in the form of IGST ( Integrated Goods and Services Tax) and same will be available for setoff to both CGST and SGST.
What is Goods and Service Tax (What is GST)?
Ans. It is a destination based tax on consumption of goods and services. It is proposed to be levied at all stages right from manufacture up to final consumption with credit of taxes paid at previous stages available as setoff. In a nutshell, only value addition will be taxed and burden of tax is to be borne by the final consumer.
New Article 366(12A) of the Indian Constitution, defines Goods and Service Tax(GST) to mean a tax on supply of goods or services, or both, except taxes on supply of alcoholic liquor for human consumption.
Note that the word ‘supply’ is used and not ‘sale’. Thus in many cases, free supplies will be subject to GST.
For example, GST will be payable on free supplies made to related persons. No GST will be payable on free gifts and free samples to unrelated person, but input tax credit in respect of such goods will have to be reversed.
Inter-state stock transfers and branch transfers will also be subject to GST-that is, IGST will be payable thereon.
For stock transfers and branch transfers within the State, CGST and SGST will be payable only where the taxable person has more than one GST registration within the State. In case of single registration within the State, Delivery challan will be sufficient and no payment of GST is required.
Further no GST will be payable if goods are sent for job work outside the factory.
New Article 366(26A) defines service to mean anything other than goods.
GST IS A CONSUMPTION BASED TAX BASED ON VAT PRINCIPLE
Ans. GST is a consumption based tax, i.e. tax will be payable in the State in which goods and services or both are finally consumed. Exports are not taxable, because the place of consumption is outside India. Imports are taxable, because the place of consumption is in India.
GST is based on VAT system of allowing input tax credit of tax paid on inputs, input services and capital goods, for payment of tax on output supply.
Thus, the States from which goods are supplied will not get any tax as goods are consumed in another State.
GST and INDIA;
The introduction of GST to replace the existing multiple tax structure of Central and State taxes is not only desirable but imperative in the emerging economic environment. The GST will bring harmonisation in indirect taxation system in India. In GST, both the cascading effect of CENVAT and Service Tax are removed with setoff, and a continuous chain of setoff from the original producers’ point and service providers’ point up to retailers’ level would be established. In GST taxes are levied on single point as against on multiple stages in present taxation system. This will bring more transparency and administration of taxes.
India is emerging as a manufacturing hub and our economy is more globalized now. There are various trade agreements, treaties have been signed by India in various parts of the world. The Indian companies are spreading their area of operation in all over the world. There is demand of free import all over the world. So we need a simple and single nationwide taxation system, to empower our trade and industries to compete with International traders.
Now we can achieve following goals by implementing GST;
- It will reduce cascading effect of taxes;
- Compliance cost will reduce;
- Few numbers of rates;
- Time saving due to call of Entry, Octroi taxes;
- Reduction of corruption;
- Simplification of tax collection and administration;
- Lower burden of taxes on end consumers;
- Give edge to the industry on their foreign competitors;
- Easy flow of resources across the country;
- Reduction in inflation;
- Widening tax base and tax collection of Central as well as States
Which of the existing taxes are proposed to be subsumed under GST?
Ans. The GST would replace the following taxes:
(i) 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. Central Surcharges and Cesses so far as they relate to supply of goods and services
(ii) State taxes that would be subsumed under the GST are:
- a. State VAT
- b. Central Sales Tax
- c. Luxury Tax
- d. Entry Tax (all forms)
- e. Entertainment and Amusement Tax (except when levied by the local bodies)
- f. Taxes on advertisements
- g. Purchase Tax
- h. Taxes on lotteries, betting and gambling
- i. State Surcharges and Cesses so far as they relate to supply of goods and services