BASIC CONCEPTS OF GST (PART-4)

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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

  • A dual tax with both Central GST (CGST) & State GST (SGST) will be levied on the same base. Thus, all goods and services, barring a few exceptions, will be brought into the GST base.
  • There will be no distinction between goods and services for the purpose of tax with a common legislation applicable to both It allows seamless tax credit amongst Excise Duty, Service Tax & 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
  • Sale or Service
  • Classification of goods
  • Situs issue between States
  • Interpretational issues
  • Sale or works contract
  • Valuation of composite
    transactions, etc.
  • Exemptions
  • Suppression / limitation
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

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