GST 2016

GOODS AND SERVICE TAX (GST)

(ONE COUNTRY ONE TAX)

HISTORY

Goods and Service Tax is the next Logical reform after VAT with a lot of discussions in the parliament to keep us away from various confused and complex tax structure. This step was taken in the financial year 2006-07, by the then P. Chidambaram (Union Finance Minister) that this should be started from 01^st April, 2010. Then Group of State Finance Ministers and their Secretaries, Advisors and Department of Revenue of Union Finance Ministers, the Member-Secretary of Empowered Committee as Co-convenors was created. This group was named as Empowered Committee.

After lot of discussions in 9 years, Finally GST has been accepted by the Parliament in Rajya sabha. This Tax will be applicable with effect from 1^st April, 2017.

Previous situation of Taxation Structure for Levy and collection

Previous Tax Structure was as per following:

Central Government authorized itself to levy and collect taxes and duties only on the manufacture of the goods and services i.e. Excise as well as Custom duties and Services taxes.

But authorized State Government to levy taxes (VAT and Other Taxes) on the sale and purchase of these manufactured goods within india except the sale and purchase of goods from foreign countries.

Now GST has been assigned as unique institutional mechanism that would ensure the design structure and operation of jointly two (Goods and services). This is 122^nd constitution amendment bill, 2014.

Features of GST

1)      GST would be on GOODS AS WELL AS SERVICES @ 18% Combined EXCEPT Alcohol for Human Consumption, Electricity and Real Estate.

2)      GST levied by three categories of persons:

a.       CENTRAL:  GST levied by Central is called CGST

b.      STATE:  GST levied by State is called SGST

c.       INTEGRATED STATES:   GST levied on inter-state supply of Goods and Services (Including Stock Transfer) is called IGST.

3)      GST will replace following Taxes levied and collected by CENTRAL.

a.       All Duties whether Excise as well as Custom

b.      Service Tax

c.       All Cesses and Surcharges

4)      GST will replace following Taxes levied and collected by STATE.

a.       VAT

b.      CST

c.       Purchase Tax

d.      Luxury Tax

e.       Entry Tax

f.        Entertainment Tax

g.       Advertisement Tax

h.       State Cesses and Surcharges

5)      Exports are Zero Rated.

6)      Tax credit taken on CGST paid on inputs can be only used for paying CGST & IGST on output and credit of SGST on inputs can be used for SGST& IGST.

Exemption Limit of Turnover

the Central or a State Government may, on the recommendation of the Council, by notification, specify categories of supply of goods and/or services the tax on which is payable on reverse charge basis and the tax thereon shall be paid by the person receiving such goods and/or services and all the provisions of this Act shall apply to such person as if he is the person liable for paying the tax in relation to such goods and/or services.

The Proper Officer will permit a Registered taxable person, whose aggregate turnover in a financial year does not exceed [fifty lakh of rupees][50 Lakh Rupees], to pay, in lieu of the tax payable by him, an amount calculated at such rate as may be prescribed, but not less than one percent of the turnover during the year:

Provided that no such permission shall be granted to a taxable person who effects any inter-State supplies of goods and/or services. Provided further that no such permission shall be granted to a taxable person unless all the registered taxable persons, having the same PAN as held by the said taxable person, also opt to pay tax under the provisions of this sub-section

Taxable Persons of GST

Any Person carrying on business at any place in INDIA

EXCEPT Agriculturist

EXCEPT          person whose income does not exceed 10 Lakh Rupees.

EXCEPT person whose income does not exceed 5 Lakh Rupees (NE)

EXCEPT person working as employee services

Benefits of GST

-         Wider Tax base, thereby lowering the tax rates

-         Removal of Multiplicity of taxes

-         Reduction of Compliance Costs

-         Companies can now maintain one system thereby less number of errors and increased efficiency

Key takeaways for Companies

-         Understand the Companies Key areas

-         Track Policy Changes and design the impact on your company

-         Identify for any issues/ concern which needs authority representation

References; a. Business Newspapers, EY Article, and Notification approved by Rajya Sabha on 3rd August 2016