What is GST?
The Goods and Services Tax (GST) is a full fledge value added tax (VAT) system on the supply of goods or services in India. France was the first country to introduce this value added tax system in 1954 devised by a public servant.
Adoption Of GST in other countries:
Different countries have different structures of GST. The countries which have a centralized government control results in a more effective implementation of GST. The countries like Brazil and Canada which has a dual (Central and State) government have adopted GST in a different manner. The different models of GST are discussed as under-
(1) Australian Model: In Australia GST is a federal tax, collected by the Centre and distributed to the states. But India is a heterogeneous country and there is no chance that states may allow the Centre to collect all the taxes while they become just spending institutions;
(2) Canadian Model: The GST in Canada is dual between the Centre and the states and has three varieties:
(i) Federal GST and provincial retail sales taxes (PST) administered separately - followed by the largest majority;
(ii) Joint federal and provincial VATs administered federally (Harmonious Sales Tax - HST); and
(iii) Separate federal and provincial VAT administered provincially (QST) - only for Quebec as it is like a breakaway province.
Proposed structure Of GST in India:
In India due to the presence of dual govt. the proposed structure is related to that of Canadian model. In India a dual GST is proposed whereby a Central Goods and Services Tax (CGST) and a State Goods and Services Tax (SGST) will be levied on the taxable value of every transaction of supply of goods and services. The transaction which will take place between two states will be subjected to inter state GST. In India the introduction of GST will lead to a substitution of all the Indirect Tax by a single tax known as GST. The following are the proposed features of GST-
What are taxable under GST?:
All the goods are services are proposed to be taxed under GST. This means that there will be no separate laws for goods and services. However the goods and services which will be available for taxation under GST will be subjected to certain exemptions which will be stated in the draft law.
Applicability of both CGST and the SGST on all transactions:- A transaction of ’supply of goods’ will attract both the CGST & SGST as applicable on goods. Similarly, a ‘supply of service’ will attract both the CGST & SGST as applicable on services.
Applicability of other indirect taxes : It is proposed that the taxes to be subsumed under CGST will include Central Excise Duty (CENVAT), Service Tax and Additional Duties of Customs (Basic custom duty will continue to be lived) and the taxes to be subsumed under the SGST will include Value Added Tax, Central Sales Tax, Purchase Tax, Entertainment Tax, Luxury Tax, Octroi, Lottery Taxes, Electricity Duty and State surcharges relating to supply of goods and services.
The taxes under GST will be collected at each stage of production on the value added.
Refund of un-utilised CC on inputs and input services :-It is envisaged that under the proposed Dual GST model there would be refund of unutilized accumulated CCs at the end of each fiscal year and that refunds would not be restricted only to those relating to exports.
Status of Software Technology Parks/ 100% Export Oriented Units/Special Economic Zone units:-Typically, in view of the common list of exemptions, the exemption would extend to both the CGST and the State GST. With regard to the position on the Software Technology Parks/ 100% Export Oriented Units/Special Economic Zone units, it is envisaged that the status quo will remain.
Taxation of Inter-State sale transactions: Presently, inter-State sales are subject to Central Sales Tax (CST), which is origin based i.e. the state from which the goods were sold was subjected to CST but under GST regime there is no place for CST and inter state GST will be charged by the destination state i.e the state to which the goods are sold. This removes one of the major drawbacks of CST that it is not available for setoff with VAT. Thus in thegoods selling state it will be zero rated.
Registrations under GST :- The position in this regard is not clear at present. However it is expected that there will be fresh registration for dealers
Difference between existing tax and GST:
There are large number of difference between existing sales tax structure and GST however some of them are discussed below-
(1) Under proposed GST there will be only one tax structure in place of the multiple taxes which are levied by central and state government at present.
(2) The taxes will be available for setoff with each other under GST where as in the present sales tax system the taxes charged by Central government are not available for setoff with the taxes charged by state government.
(3) There will be no cascading effect of taxes on the goods transacted between the two states which was one of the drawbacks of the existing tax system
(4) The prices of the goods and services will gradually reduce due to simplified systm
Hurdles in Implementation of GST in India
(1) Implementation of GST calls for effecting widespread amendments in the Constitution and the various constitutional entries relating to taxation. In the current scenario it is difficult to visualise constitutional amendments of such far reaching implications going through, more so in view of the fact that sharing of legislative powers is such an essential element of our federal polity and it may be perceived to be a basic feature of the Constitution;
(2) Services have to be appropriately integrated in the tax network;
(3) Under GST it is proposed that there will be only one or two tax rates ranging between 12-16% this might lead to increase in price of some goods substantially.
(4) Another contentious issue that is bound to crop up in this regard is the manner of sharing of resources between the Centre and the states some states might face severe revenue crises.
CONCLUSION: Thus implementation of GST is necessary for the growth of the economy. However, proper steps should be taken for its implementation so that it can be effectively followed. The structure of proposed GST will be clearer when the white paper on GST will be presented.
The Goods and Services Tax (GST) is a full fledge value added tax (VAT) system on the supply of goods or services in India. France was the first country to introduce this value added tax system in 1954 devised by a public servant.
Adoption Of GST in other countries:
Different countries have different structures of GST. The countries which have a centralized government control results in a more effective implementation of GST. The countries like Brazil and Canada which has a dual (Central and State) government have adopted GST in a different manner. The different models of GST are discussed as under-
(1) Australian Model: In Australia GST is a federal tax, collected by the Centre and distributed to the states. But India is a heterogeneous country and there is no chance that states may allow the Centre to collect all the taxes while they become just spending institutions;
(2) Canadian Model: The GST in Canada is dual between the Centre and the states and has three varieties:
(i) Federal GST and provincial retail sales taxes (PST) administered separately - followed by the largest majority;
(ii) Joint federal and provincial VATs administered federally (Harmonious Sales Tax - HST); and
(iii) Separate federal and provincial VAT administered provincially (QST) - only for Quebec as it is like a breakaway province.
Proposed structure Of GST in India:
In India due to the presence of dual govt. the proposed structure is related to that of Canadian model. In India a dual GST is proposed whereby a Central Goods and Services Tax (CGST) and a State Goods and Services Tax (SGST) will be levied on the taxable value of every transaction of supply of goods and services. The transaction which will take place between two states will be subjected to inter state GST. In India the introduction of GST will lead to a substitution of all the Indirect Tax by a single tax known as GST. The following are the proposed features of GST-
What are taxable under GST?:
All the goods are services are proposed to be taxed under GST. This means that there will be no separate laws for goods and services. However the goods and services which will be available for taxation under GST will be subjected to certain exemptions which will be stated in the draft law.
Applicability of both CGST and the SGST on all transactions:- A transaction of ’supply of goods’ will attract both the CGST & SGST as applicable on goods. Similarly, a ‘supply of service’ will attract both the CGST & SGST as applicable on services.
Applicability of other indirect taxes : It is proposed that the taxes to be subsumed under CGST will include Central Excise Duty (CENVAT), Service Tax and Additional Duties of Customs (Basic custom duty will continue to be lived) and the taxes to be subsumed under the SGST will include Value Added Tax, Central Sales Tax, Purchase Tax, Entertainment Tax, Luxury Tax, Octroi, Lottery Taxes, Electricity Duty and State surcharges relating to supply of goods and services.
The taxes under GST will be collected at each stage of production on the value added.
Refund of un-utilised CC on inputs and input services :-It is envisaged that under the proposed Dual GST model there would be refund of unutilized accumulated CCs at the end of each fiscal year and that refunds would not be restricted only to those relating to exports.
Status of Software Technology Parks/ 100% Export Oriented Units/Special Economic Zone units:-Typically, in view of the common list of exemptions, the exemption would extend to both the CGST and the State GST. With regard to the position on the Software Technology Parks/ 100% Export Oriented Units/Special Economic Zone units, it is envisaged that the status quo will remain.
Taxation of Inter-State sale transactions: Presently, inter-State sales are subject to Central Sales Tax (CST), which is origin based i.e. the state from which the goods were sold was subjected to CST but under GST regime there is no place for CST and inter state GST will be charged by the destination state i.e the state to which the goods are sold. This removes one of the major drawbacks of CST that it is not available for setoff with VAT. Thus in thegoods selling state it will be zero rated.
Registrations under GST :- The position in this regard is not clear at present. However it is expected that there will be fresh registration for dealers
Difference between existing tax and GST:
There are large number of difference between existing sales tax structure and GST however some of them are discussed below-
(1) Under proposed GST there will be only one tax structure in place of the multiple taxes which are levied by central and state government at present.
(2) The taxes will be available for setoff with each other under GST where as in the present sales tax system the taxes charged by Central government are not available for setoff with the taxes charged by state government.
(3) There will be no cascading effect of taxes on the goods transacted between the two states which was one of the drawbacks of the existing tax system
(4) The prices of the goods and services will gradually reduce due to simplified systm
Hurdles in Implementation of GST in India
(1) Implementation of GST calls for effecting widespread amendments in the Constitution and the various constitutional entries relating to taxation. In the current scenario it is difficult to visualise constitutional amendments of such far reaching implications going through, more so in view of the fact that sharing of legislative powers is such an essential element of our federal polity and it may be perceived to be a basic feature of the Constitution;
(2) Services have to be appropriately integrated in the tax network;
(3) Under GST it is proposed that there will be only one or two tax rates ranging between 12-16% this might lead to increase in price of some goods substantially.
(4) Another contentious issue that is bound to crop up in this regard is the manner of sharing of resources between the Centre and the states some states might face severe revenue crises.
CONCLUSION: Thus implementation of GST is necessary for the growth of the economy. However, proper steps should be taken for its implementation so that it can be effectively followed. The structure of proposed GST will be clearer when the white paper on GST will be presented.
