Features of Indian GST

Features of Indian GST

(1)  In India, GST will be a "Dual GST" with both central GST and State GST components levied on the same base. All goods and services, barring a few exceptions, will be brought into the GST base. Importantly, there will be on distinction between goods and services for the purpose of the tax with common legislations applicable to both.

(2) Reason for Dual GST: India is a federal country where both the Centre and the State have separate powers to levy and collect taxes through appropriate legislations; and accordingly, both the levels of Government have distinct responsibilities to perform.

(3) The power to levy tax is drawn from the Indian Constitution, which has been amended through Constitution (101st Amendment) Act, 2016 assented by the president of India on 8 September 2016. Since, GST requires different kind of taxation powers than the ones provided for in the present Constitution, thus certain Constitutional Amendments have been necessitated in this context.

(4) All the amendments in the Constitution of India have been made effective from 16 September 2016, except in respect of creation of GST Council, which have been made effective from 12 September 2016.

(5) Concurrent power have been conferred upon the parliament and the State Legislatures, through Article 246A of the Constitution of India, to make law's governing GST.

Every state will legislate its own GS law, such as, Delhi GST Act, UP GST Act, MP GST Act, Gujarat GST Act, and so on, in addition to CGST Act by the Central Government. IGST (Intergrated GST Act by the Central Government.

(6) GST Council has been created to examine issues relating to GST and make recommendations to the Union and the State on various parameters, like rates of tax, exemption list, threshold limit, etc.

(7) The rates of CGST and SGST will be recomb mended by the GST Council keeping in view -

(a) the revenue considerations.

(b) Total tax burden; and 

(c) the acceptability of the tax.

(8) In relation to levy tax on supply of goods, there might be 5 tier rate-structure; Exempted, Lower, Standard, Luxury and Bullion. In relation to taxation of services, there might be a single, or might be double rates.

(9) GST will subsume various central and state indirect taxes/duties on supplies of goods and services.

(12) Specified petroleum goods will be included into the GST regime from the date to be goods and services, except those which are kept out of the purview of the GST.

(10) The Central and State GST will be levied on all transactions involving supply of

(11) Alcoholic liquor for human consumption will be kept outside the GST structure.

 recommended by GST Council.

(13) Concept of 'declared goods of special importance' will be dispensed with.

(14) Excise duty would be a matter of history in relation to goods covered within the scope of GST.

(15) Exports will be zero-rated and will be relieved of all embedded taxes and levies at both Central and State level.

(16) Import of goods and services would be treated as inter-state supplies and would be subject to IGST in addition to the applicable customs duties. The IGST paid shall be available as input tax credit for further transactions.

(17) Taxpayers with an aggregate turnover in a financial year up to specified limits, which may be between INR 10 lakhs and 25 lakhs, would be exempt from tax Aggregate turnover, to be computed on all India basis, shall include aggregate value of all taxable and non-taxable supplies, exempt supplies and exports of goods and /or services and exclude taxes viz. GST

Tax Cascading

 

Tax Cascading

Tax cascading occurs under the center as well as the state taxes. The most significant contributing factor to tax cascading is the partial coverage by central and state taxes, Mining, agriculture, wholesale and retail trade, and range of the center. The exempt sectors are not allowed to claim any credit for the Cen vat, or the service tax paid on their inputs.

Similarly, under the State VAT, on credits are allowed for the input to the exempted sectors, which include the entire service sector and sale of exempted goods. Another major contributing factor to tax cascading is the central sales is allowed by any state government.

Other important indirect taxes or duties

 Other important

indirect taxes or duties

(a) Betting and gambling tax;
(b) Entertainment tax;
(c) Entry tax and Octroi.;
(d) Lottery tax;
(c) Property tax;
(d) Research and development cess;
(e) Stamp duty;
(f) Tax on consumption or sale of electricity;
(g) Taxes on transporation of goods and services;
(h) Telecom License fees.
(i) Toll tax, passenger tax and road tax.
(j) Turnover tax.

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Customs duty

 Customs duty

---- Indian Customs have been assigned a number of risks, more important of which are:

(I) Collection of customs duties on imports an export as per basic Customs Laws (The Customs Act, 1962 and the Customs Tariff Act, 1975).

(II) Enforcement of the various provisions of the Customs Act governing imports and export of cargo, baggage, postal articles and arrival & departure of vessels, aircrafts etc.

(III) Discharge of various agency functions and enforcing various prohibitions and restrictions on imports and exports under Customs Act and other allied enactments.

(IV) Prevention of smuggling including interdiction of narcotics/drug trafficking; and

(V) International passenger processing.

----- The Constitutional provisions have given to the Union, the right to legislate and collect duties on imports and exports as per Entry 83 of List I TO Sch VII of the Constitution. The Customs Act, 1962 is the basic Statute, effective from I February 1963, empowering duties to be levied on goods imported into or exported from India.

---- The categories of goods and the rates of duties leviable have been specified int he schedules to the customs Tariff Act, 1975. The First schedule to the said Act specifies various categories of import commodities in a systematic and well considered d manner, it accordance with the Internationa scheme of classification of internationally traded goods - termed Harmonized system of commodity classification Different rates of duties have been prescribed by the legislature on different commodities/group of commodities mentioned in the Furst sockeye.

---- The durries are levied both on specific and ad valorem basis; while there are few cases where at times specific-cum ad valorem duties are also Tariff Act. 1975 incorporates commodities subject to exports duties and rates thereof.

----- Where ad valorem duties (i.e. duties with reference to value) are collected, which are the predominate mode of levy, the value of the goods for customs duty purposes is determined as per provisions laid down under sec 14 of the customs Acts and the Customs Valuation (Determination of prices of Imports Goods) Rules. 2007 issued thereunder.

----- Customs duties on import are primarily of three types: -

(a) Basic customs Duty (levied u/s 12 of the Customs Act).

(b) Additional Customs Duty (CVD) under sections 3(1) and 3(3) of the customs Tariff Act, in lieu of excise duty.

(c) Special Additional Duty of customs (SAD) under sec 3(5) of the customs Tariff Act to counterbalance the sales tax, value added tax, local tax or any other charges for the time being leviable on a like article on its sale, purchase or Transporation in India.

Existing indirect tax structure in India

 

Existing indirect tax structure in India

As per Act.246(1) of Constitution of India, the parliament has exclusive powers to make laws with respect to any matters enumerated in List I of the seventh schedule to the Constitution of India (Called union List).

As per Art. 246 (3), the state governments have exclusive powers to make laws with respect to the matter enumerated in List II (called state List)-

Schedule VII of the Constitution consists of following three lists --

(1) List I (Union List) contain entries over which the central government has a power to legislate.

(II) List II (State List) contains entries over which the state government has a power to legislate, and

(III) List III (Concurrent List) contains entries over which both the central government and the state government has a power.

Broad indirect taxes/duties in Schedule VII of the Constitution

UNION LIST (LIST I)

 > Entry 83 - Duties of Customs

> Entry 84 - Duties of Excise

> Entry 92A - Taxes on sale or purchase of goods between two State (CST)

> Entry 92B- Taxe on the consignment of goods, where such consignment takes place in the course of inter-state trade.

> Entry 92C - Taxes on services

> Entry 91-Stamp duty in respect of bill of exchange, cheques,promissory notes, bills of lading.

> Letter of credit, insurance policies, transfer of shares, debentures, proxies & receipts.

STATE LIST (LIST II)

>Entry 51 - Excise duty on Alcoholic Liquors, Opium & Narcotics.

> Entry 52 - Taxes on entry of goods.

> Entry 53 - Taxes on the consumption or sale of electricity

> Entry 54 - Taxes on sale and purchase of goods where such sale/ purchase takes within the state (VAT), subject to Entry 92A of List I.

> Entry 55 - Taxes on advertisements other than in newspaper, radio ad television.

> Entry 62 - Taxes on luxuries, entertainments, amusements, betting and gambling.

> Entry 63 - Stamp duty in respect of document other than those specified in List I.

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Marketing model

 Marketing Model

Taxpayers would have to decide whether they would like to reorganize their marketing model. As seamless credit of input tax is available across the states, the industries must revisit their marketing model, number of warehouses required across India, and the number of marketing teams.

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Human resources

 Human resources

Taxpayers might require additional human resources which are well qualified and trained to meet this challenge, due to -

(i)  Increase in number of registrations, particularly, the service providers'

(ii) Increase in number of details and information required to be given in each return.

(iii) Increase in number of details and information required to be given in each return;

(iv)  Maintenance of additional records and documents.

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