How do we compare the present indirect tax laws vis-à-vis proposed GST law regime ? In this part, an attempt is being made to list down the possible differences between the present tax laws and proposed provisions under GST. This comparison is not final and is only for academic purposes to understand the differences or deviations tax base, origin, structure, approach to tax goods and services, place of provision, powers to levy tax, export and import etc.
Comparison of Present Taxation and Proposed GST
|
S.No |
Particulars |
Present Taxation |
Proposed GST |
| 1. | Structural Architecture | • Two separate VAT systems operate simultaneously at two levels, Centre and State, and tax paid (input tax credit) under one is not available as set off against the other
• Tax on services is levied under separate legislation by Centre, i.e., Finance Act, 1994 which regulates service tax • No comprehensive taxation of services at the State level; few services are taxed under separate enactments • Import of goods in India are not subjected to State VAT |
|
| 2. | Place of Taxation | Taxable at the place of manufacture or sale of goods or rendering of service | It is consumption (destination) based tax |
| 3. | Tax Base | Comparatively narrow | Wider |
| 4. | Excise Duty | Imposed by Centre under separate Act, Central Excise Act, 1944. Taxable event is manufacture; Taxed up to manufacturing point | To be subsumed in CGST; Taxable event will be sale; To be taxed up to retail level |
| 5. | Basic Customs Duty | Imposed by Centre under separate Act, i.e., Customs Act, 1962. Taxable event is import | No change is proposed |
| 6. | CVD/SAD | Imposed by Centre under separate Act, i.e., Customs Act, 1962. Taxable event is import | To be subsumed in CGST; Taxable event will be import |
| 7. | Service Tax | Imposed by Centre under separate Act (Finance Act, 1994). Taxable event is provision of service | To be subsumed in CGST & SGST; Taxable event will be provision of service |
| 8. | Central Sales Tax | Imposed by Centre under CST Act, 1956. Collection assigned to States; Taxable event is movement of goods from one State to another | Is being phased out |
| 9. | State VAT | Imposed by States; Taxable event is sale within the State | To be subsumed in SGST; Taxable event is sale within State |
| 10. | Inter-State Transactions | Imposed on goods & services by the Centre (CST, Service Tax) | To be subsumed in GST and subject to SGST & CGST |
| 11. | Tax on Manufacturing activity | As Excise Duty by Centre | No such powers under GST regime |
| 12. | Powers to levy Tax on Sale of Goods | Inter-State : Centre
Local : State |
Concurrent powers to Centre & State |
| 13. | Powers to levy Tax on Provision of Services | Service Tax by Centre | Concurrent powers to Centre & State; States to tax more than 40 services |
| 14. | Tax on Import in India | Goods are taxed to Customs Duty (comprises Basic Customs Duty, CVD & SAD);
Services are taxed to Service Tax |
Basic Custom Duty on goods : No Change – CVD & SAD on import of goods and import of services : To be subsumed in GST |
| 15. | Tax on Export of Goods & Services | Exempt / Zero-rated | No change is proposed |
| 16.
|
Tax on inter-State Transfer of Goods to Branch / Depot or Agent | Exempt against Form F | Will be taxable |
| 17. | Tax on Transfer of Goods to Branch or Agent within States | Generally exempt but depends upon State procedures | May not be taxable, if BIN of transferor and transferee is same |
| 18. | Cross-Levy set-off / adjustment | Excise duty and Service tax : Cross set off allowed | No cross set-off between CGST and SGST will be allowed |
| 19. | Cascading Effect | Allows cenvat tax credit between Excise Duty & Service Tax, but not with VAT (cross set off is not allowed) | Allows seamless tax credit amongst Excise Duty, Service Tax & VAT |
| 20. | Non-Creditable Goods | Do exist | May exist depending upon negative list / exemptions etc |
| 21. | Credit on Inputs used for Exempted Activities | Not allowed | May not be allowed |
| 22. | Various
Exemptions -Excise Free Zone or VAT Exemption |
Available | May be phased out |
| 23. | Exemption for transit Inter-State Sale and High Seas Sale | Available | May be taxable |
| 24. | Transactions against Declaration Forms | Allowed under the CST / VAT | Forms likely to be abolished |
| 25. | Taxation on Govt. and Non-Profit Public Bodies | Partially taxed | May not change much |
| 26. | Stamp Duty | Presently taxed concurrently by the Centre and State | Status not clear; If subsumed under GST, big relief to real estate industry : to claim input tax |
| 27. | Excise Duty Threshold Limit | Presently ₹ 1.5 crores | Rs.10 lacs to 20 lacs (Turnover of ₹ 1.5 crores & above may be administered by Centre and less than ₹ 1.5 crores may be administered by States) |
| 28. | VAT Threshold Limit | Presently, ₹ 5 lacs to 10 lacs | May be ₹ 10 lacs to ₹ 20 lacs |
| 29. | Service Tax Threshold Limit | ₹ 10 lacs | May be ₹ 10 lacs to ₹ 20 lacs |
| 30. | Classification of Commodities | Excise Duty based on HSN
VAT not applicable |
Likely to be based on HSN |
| 31. | VAT/GST Registration Number
|
Simple TIN (some States : PAN only based) | PAN based |
| 32. | Procedures for Collection of Tax and Filing of Return | For Central Excise & Service Tax, it is uniform. For VAT, it varies from State to State | Likely to be uniform |
| 33. | Tax Administration | Complex due to number of taxes | Likely to be simple and easy, tax friendly |
| 34. | Use of Computer Network | Just started by the States; very minimum; Central taxes are online | Extensive; It will be pre-requisite for implementation of GST |
| 35. | Nature of Present Litigations |
|
Likely to be reduced provided GST legislations are properly drafted |
(To be continued ………)
By: Dr. Sanjiv Agarwal – January 23, 2016
Source: https://www.taxmanagementindia.com/visitor/detail_article.asp?ArticleID=6643&kw=basic-concepts-gst-part-4
