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As you are aware that the Goods and Services Tax (GST), the biggest reform in India’s indirect tax structure rather we can say that the biggest business reform in India since Independence, at last set to become reality and which may be roll out from 1st April 2017. Here’s given below that how GST differs from the current tax regime, how it will work, and what will happen when it is implemented.
Presently, Central Government is empowered to levy excise duty on manufacturing and service tax on the supply of services. Further, State Governments has the power to levy sales tax or value added tax (VAT) on the sale of goods and various other taxes/duties as been empowered under the constitution. This exclusive division of fiscal powers has led to a multiplicity of indirect taxes in the country. This multiplicity of taxes at the State and Central levels has resulted in a complex indirect tax structure in the country that is ridden with hidden costs for the trade and industry.
There is no uniformity of tax rates and structure across States.
There is cascading of taxes due to ‘tax on tax’.
Preparation of GSTreturns.
No credit of excise duty and service tax paid at the stage of manufacture/supply of services are available to the traders while paying the State level sales tax or VAT, and vice-versa.
Further, no credit of State taxes paid in one State can be availed in other States.
Hence, the prices of goods and services get artificially inflated to the extent of this ‘tax on tax’.
Dual GST: Both Centre and States will simultaneously levy GST across the value chain on the same base. Tax will be levied on every supply of goods and services.
CGST: Centre would levy and collect Central Goods and Services Tax (CGST) on intra state supply.
SGST: States would levy and collect the State Goods and Services Tax (SGST) on all transactions within a State.
IGST: The Centre would levy and collect the Integrated Goods and Services Tax (IGST) on all inter-State supply of goods and services and apportioned with the concerned state.
| Central Taxes to be subsumed | States Taxes to be subsumed |
| Central Excise Duty | VAT/Sales Tax |
| Additional Excise Duty | Central Sales Tax (levied by the Centre and collected and retained by the States) |
| The Excise Duty (Medicinal and Toiletries Preparation ) Act | Entertainment Tax |
| Service Tax | Octroi and Entry Tax (all forms) |
| Additional Customs Duty, commonly known as Countervailing Duty (CVD) | Purchase Tax |
| Special Additional Duty of Customs-4% (SAD) | Luxury Tax |
| Cesses and surcharges in so far as they relate to supply of goods and services | Taxes on lottery, betting and gambling State cesses and surcharges in so far as they relate to supply of goods and services |
MODEL GST LAW: The Finance Ministry released the ‘Model GST Law‘ on June 14, 2016. The model outlines the structure of the GST regime. The draft of ‘Integrated GST Bill, 2016‘ is also released along with it. This provides the framework for levy and collection of CGST, SGST and IGST. There are 25 Chapters, 162 Sections, Four schedules, Rules as to valuation under GST Act, 2016. There are 9 Chapters and 33 Sections under IGST Act, 2016.
1. Persons who are liable to registered: If the aggregate turnover in a financial year exceeds Rs. 19 lakhs, it is supplier’s duty to get registered under this law. The cap for suppliers in the Northeastern and hill states is Rs. 9 lakhs. The person who is required to be registered will be considered as taxable person under this law and is liable to pay tax if his aggregate turnover in a financial year exceeds Rs. 20 lakhs (cap for the Northeastern and hill states is Rs. 10 lakh.)
Some categories of persons who shall be required to be registered under this Act irrespective of the threshold like persons making interstate supply, persons required to pay tax under reverse charge, nonresident taxable persons. Etc.
2. Place of registration: The place of registration should be from where the goods or services are supplied. This helps with virtual marketplaces, mainly e-commerce. For each state the taxable person will have to take separate registration even though the taxable person supplying the goods/services or both from more than one state as single entity.
3. Migration of existing taxpayers from GST: Every person already registered under the existing law will be issued a provisional certificate of registration. This certificate shall be valid for a period of six months, hence giving them enough time to make the changes in their model and furnish the required information, before the final certificate is provided.
4. Taxable Event: Supply activities of goods or services such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for consideration are all taxable events. Importation of services, whether or not for consideration or supply specified in schedule I, made or agreed to be made without a consideration are all taxable events.
5. Point of taxation for supply of goods at the earliest of the following dates:
Date on which the goods are removed for supply to the recipient (in the case of movable goods).or
Date on which the goods are made available to the recipient (in the case of immovable goods).
Date of issuing invoice by supplier.
Date of receipt of payment by supplier.
Date on which recipient shows the receipt of the goods in his books of account.
6. Point of taxation for supply of services shall be:-
If the invoice is issued within the prescribed period: - The date of issue of invoice or the date of receipt of payment, whichever is earlier
If the invoice is not issued within the prescribed period:- The date of completion of the provision of services or the date of receipt of payment whichever is earlier.
The date on which the recipient shows the receipt of the services in his books of account, in case where the above provisions do not apply.
7. Determination of Valuation: The value of a supply of goods or services shall normally be the transaction value. In case, the valuation cannot be determined by the transaction or supply value, the valuation can be made by supply or transaction value of similar products and services. {As per GST valuation (Determination of the value of Supply of goods and services) Rules, 2016)}
8. Utilization of credit: Every registered taxable person shall be entitled to take credit of admissible input tax. The input tax credit is credited to the electronic credit ledger.
In the case of excess of credit in any of the three taxes in question, it can be utilized as under:-
| Input tax | Output tax |
| CGST | 1st Preference: CGST 2nd preference: IGST |
| SGST | 1st Preference: SGST 2nd preference: IGST |
| IGST | 1st Preference: IGST 2nd preference: CGST 3rd Preference : SGST |
9. Returns: The following returns must be filed by all the suppliers:-
| S.No. | Form No. | Purpose | Due Date |
| 1 | GSTR-1 | Outward supplies made by supplier(other than compounding tax payer and ISD) | 10th of next month |
| 2 | GSTR-2 | Inward supplies received by a tax payer(other than compounding tax payer and ISD) | 15th of next month |
| 3 | GSTR-3 | Monthly return (other than compounding tax payer and ISD) | 20th of next month |
| 4 | GSTR-4 | Quarterly return for compounding Tax payer | 18th of next month |
| 5 | GSTR-5 | Periodic return by non –resident foreign tax payer | Last day of registration |
| 6 | GSTR-6 | Return for ISD | 13th of next month |
| 7 | GSTR-7 | Return for TDS | 10th of next month |
| 8 | GSTR-8 | Annual Return | 31st December of next Financial year |
10. Refund: claiming refund of any tax and interest, if any, paid on such tax or any other amount paid by him may make an application in that regard to the proper officer of IGST/CGST/SCGST before the expiry of two years from the relevant date in such form and in such manner as may be prescribed.
However the limitation of two years shall not apply where such tax or interest or the amount referred to above has been paid under protest.
A taxable person may also claim refund of any unutilized input tax credit at the end of any tax period subject to condition specified.
11. Transitional Provisions: The Model GST law requires a registered taxable person to take credit of the CENVAT and carry it forward to the next period, while filing a return (unless the said amount was acceptable as CENVAT credit under the previous law and as input tax credit under the current Laws).
We shall be sharing further updates from time to time for preparedness and gear up well in Advance so that the business decision required can be taken by the management accordingly.
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