Sandeep Ahuja & Co.

Established in the year 1986, we are a leading chartered accountancy firm based in Delhi & NCR rendering comprehensive professional services which include statutory audit, internal audit, direct tax, transfer pricing, GST, bank audit, propriety audit, cost accounting, internal financial controls and risk advisory.

Thursday, May 7, 2015

Highlights of Goods & Service Tax (GST) Passed at Loksabha

As GST is passed by Lok Sabha, some important points in this aspect are given below:

Single Taxation System:-

GST is single taxation system for Goods and services such as vat, service tax, excise, entertainment tax, Luxury tax etc. Single taxation system across the country for goods & services is the basic principal behind GST.

Only Two Taxes :-

New proposal of GST is having only two taxes on all goods and services:-
1. State Level GST (SGST)
2. Central Level GST (CGST)

Following taxes will be subsumed with CGST :-

Central Level GST (CGST)
State Level GST (SGST)
1.Central Excise Duty
1.Vat/Sales Tax
2.Additional Excise Duty
2.Entertainment Tax(unless it is levied by local bodies
3.The Excise Duty levied under Medicinal and toiletries preparation Act.
3.State Cess and Surcharge to the   extend related to supply of goods and services.
4.Service Tax
4.Tax on lottery
5.Additional Custom Duty (CVD)
5.Luxury Tax
6.Special Additional Duty


8.Ed. Cess and SHEC

Basic Principal for Subsuming of Taxes in GST:-
a) Those taxes which commences with import/ manufacture/ production of goods or provision of services at one end and the consumption of goods and services at other end.
b) The taxes, levies and fees which are not related to supply of goods and services should not be subsumed under GST.

GST Rate Structure
a) Two rate Structure
b) A lower rate for necessary items and goods of basic importance.
c) Standard rate for goods in General
d) Special rate

Input Tax Credit
1. Taxes paid against CGST allowed as ITC against CGST and SGST allowed as ITC against SGST.
2. Cross utilization of ITC between the Central GST and State GST would not be allowed.
Exemption: Inter State Supply of goods and services

IGST Model and ITC:
a) Centre would levy IGST levy (CGST and SGST)
b) The ITC will be allowed in this transaction will be SGST,IGST,CGST as applicable.
c) Appropriate provision will be provided for consignment or Stock transfer.

Threshold Limit

Turnover of Goods
Applicable Taxes
Below Rs 10 lacs               
Neither SGST nor CGST
Between Rs 10 lacs and Rs 1.5 Crore
Above Rs 1.5 Crore
Both SGST and CGST

Turnover of Services                        
Applicable Taxes
Below Rs 10 lacs
Neither SGST nor CGST
Between Rs 10 lacs and Rs .........*
Above Rs ...........*
Both SGST and CGST
* would be approximately high may be at or around Rs 1.5 Crore.

Threshold Limit (Interstate):-

1.The threshold exemption should not apply to dealers and service providers who under take Inter-State Supplies.
2.The GST Council recommends to the Union and the States on the threshold limit of turnover below which goods and services may be exempted from goods and service tax.

Taxes that may or may not be subsumed

A) Import Taxes
Basic Custom Duty, Anti-Dumping Duty, Safeguard Duty

B)Export Duty

Purchase Tax, Stamp Duty, Vehicle Tax, Electricity Duty, Other Entry Tax and Octroi

Area Based Exemption
1. Numerous Area Based Exemptions (Uttaranchal, Himachal Pradesh etc)
2. Under GST regime, Area Based Exemption is not expected to be continued.
3. Provide Direct Investment Linked Cash Subsidy.

Zero Rating Vs Exemptions

Zero Rating         
Actual Benefit is given
Theoretical Benefit
Tax relief at all levels
Tax Relief only at one level
Credit Chain Continues
Credit Chain Broken
No tax on value added at all
Tax on value added of a particular dealer is foregone/exempted

Revenue Neutral Rate (RNR)

Since the GST is primarily intended as an exercise in reforming the consumption tax in India and not an exercise for additional resource mobilization through discretionary changes, the CGST and SGST rates should be such rates which would yield the same revenue as collected from various taxes which will be subsumed in the CGST and SGST, that is, it should be RNR. That is to say the revenue to Government is same as it is earned prior to introduction of GST.

The GST Registration Number would be a 12 Digit Alpha Numeric PAN Based Number

Other Points  

1. Alcohol and petroleum product are kept out of GST.
2. Tax on tobacco products will be subjected to GST. But Govt. can levy the extra excise duty over and above GST.
3. The Small taxpayer whose gross turnover is less than 1.5 crore are exempted from CGST an SGST.
4.  PAN based identification number will be allowed to each taxpayer to have integration of GST with Direct tax.
5. Exports are fully exempted with Zero rates.
6. For 5 years loss of revenue generated by state will be compensated by Central
(Compensation will be on a tapering basis i.e. 100% for first three years,75% in the fourth year and 50% in the 5th year.)
7. GST is a Destination-based Tax.
8. Additional Tax of not more than 1 % on supply of goods in the course of interstate trade for a period not exceeding 2 years, or period recommended by GST.
The additional tax shall be assigned to the states from where such supplies originate
9.  New Form GST 1 will be introduced
10. No need to file these forms-ERI and 6,Vat Form, CST Form,ST3

Contributed by Ms. Tanya Gagneja (Article Assistant)

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