Direct taxes such as income tax are borne by the person liable to pay the tax; this means that the tax burden cannot be shifted to anyone else. The liability of indirect taxes on the other hand, can be shifted to another person. So, the person liable to pay the tax can collect the tax from someone else and then pay it to the government; thus shifting the tax burden.
When is Tax Levied?
A taxable event such as manufacture, sale and provision of a good has to occur for the tax to be collected. Under the current system, each taxable event is subject to multiple taxes such as excise, VAT/ CST and service tax. But under GST, products will no longer have multiple taxes, and will not incur excise duty as well as VAT at different points of time. There will no longer be any difference between goods and services in terms of taxation
The term GST is defined in Article 366 (12A) to mean “any tax on supply of goods or services or both except taxes on supply of the alcoholic liquor for human consumption”.
The GST tax falls in this category. The current indirect tax has one major problem - the cascading effect. When you buy something, you pay a tax on tax itself. India has excellently converged the “One Nation One Tax” slogan with the diverse nature of transactions and inequalities that exist in our nation.
GST is levied at each stage in the supply chain, where a transaction takes place. Value-addition: This is the process of adding to the value of a product/ service at each stage of its production, exclusive of initial costs. Under GST, the tax is levied only on the value-added. GST Act is the result of the great effort of a tri-way partnership between the Government, Professionals and the Business Sector.
GST will be collected at the point of consumption. The taxing authority with appropriate jurisdiction in the place where the goods/ services are finally consumed will collect the tax.
Due to GST, there is an abolishment of 17 taxes and 22 cesses. This is a relief to investors in India and Abroad
LIMITATIONS OF CURRENT TAX REGIME
1. Cascading effect of Tax
2. Multiple Registrations
3. Different Points of taxation
4. Lack of Uniformity
MAIN FEATURES OF GST
1. All transactions and processes only through electronic mode.
2. It is a PAN based Registration
3. 3. Registration is mandatory if turnover is more than 20 lacs.
4. Voluntary registration can also be taken.
5. Input tax credit is available on taxes paid on all procurements ( Except few specified Items)
6. It helps in fighting for huge tax evasions.
7. It would be applicable on the supply of goods or services. – Other than alcoholic liquor for human consumption and five petroleum products.
8. When registered under composition scheme of gst then there we have to file only quarterly returns.
9. One Tax for Manufacturing, Trading & Service
10. More Revenue to government + Lower Burden on Existing Tax payers : Both are possible
11. Returns are generated automatically.
12. Multiple registrations
13. Online Matching of All Invoices
14. Boost for Make in India – IGST on Imports at full rate
15. HSN Code Based Classification
16. The refund can be granted within 60 days.
17. Provisional refund of 90% to exporters within 7 days.
18. Interest payable if refund is not sanctioned in time.
BENEFITS OF GST
1. It reduces the cascading effect of taxes.
2 .Overall reduction in prices.
3. Benefits to small tax payers
4. Self regulating tax system
5. It is a consumption based tax.
6. Reduction in multiplicity of taxes
7. Protection of domestic industry
WHO IS LIABLE TO GET REGISTERED UNDER GST?
· GST registration is mandatory for any business whose turnover in a financial year exceeds Rs 20 lakhs (Rs 10 lakhs for North Eastern and hill states).
· Every person who is registered under an earlier law (i.e., Excise, VAT, Service Tax etc.) needs to register under GST, too.
· When a business which is registered has been transferred to someone/demerged, the transfereeØ shall take registration with effect from date of transfer.
· Anyone who deals in inter-state supply of goods
· Casual taxable person
· Non-Resident taxable person
· Agents of a supplier
· Those paying tax under the reverse charge mechanism
· Input service distributor
· E-commerce operator or aggregator
· Person who supplies via e-commerce aggregator
· Person supplying online information and database access or retrieval services from a place outside India to a person in India, other than a registered taxable person
TYPES OF GST
There are four types of GST
a. Central Goods and Service Tax( CGST)
b. State Goods and Service Tax( SGST)
c. Union Territory Goods and Service Tax( UTGST)
d. Integrated Goods and Service Tax( IGST)
a. Central Goods and Service Tax( CGST): CGST is a tax on all intra-State (within the same state) supplies of goods or services or both. The amount of CGST will go to Central Government.
b. State Goods and Service Tax( SGST): SGST is a tax on all intra-State (within the same
State) supplies of goods or services or both. The amount of CGST will go to State Government.
c. Integrated Goods and Service Tax (IGST): IGST is a Tax on inter-state (outside state) supply of goods and services, Integrated GST (IGST) will be collected by Centre. IGST will also apply on imports.
CENTRAL TAXES TO SUBSUME UNDER GST:
CENTRAL EXCISE DUTY:
· Additional Excise duties
· Excise Duty levied under the Medicinal and Toiletries Preparation Act
· Additional custom duty, commonly known as countervailing duty(CVD)
· Special Additional duty of customs – 4% SAD
· Surcharges and cesses
· Includes purchase tax
· Entertainment tax ( Unless it is levied by the local bodies)
· Luxury Tax
· Taxes on Lottery, betting and gambling
· State Cesses and Surcharges in so far as they relate to supply of goods and services
· Entry tax not in lieu of Octroi
· Custom duty
· Excise on Tobacco products and petroleum products
· Excise duty on liquor
· Sales tax on petroleum products
· Stamp duty
· Taxes and duty on Electricity