OVERVIEW OF GOODS AND SERVICE TAX

by August 8, 2018 0 comments

A year on, where do we stand vis-a-vis Goods & Services Tax?

Introduction of GST from 1 of July, 2017 is the most momentous step in the field of indirect tax reforms of independent India by creation of one indirect tax(GST), one nation (economic union) and one common national market. GST is the destination based consumption tax with provision of seamless flow/set off of Input Tax Credit across the entire supply chain for either intra-state supply or inter-state supply of goods or services or both. By amalgamating a large number of Central and State/UT taxes /cesses into a single tax and allowing set-off of priorstage taxes, it has mitigated the ill effects of cascading of taxes and paved the way for a common national market. For the consumers, the greatest gain is in terms of reduction in the overall
tax burden on goods and services. Introduction of GST has also made our products competitive in the domestic and international markets. For assesses, there is online architecture on a common portal (www.gst.gov.in) for registration, payment and filing of returns with obviation of grappling with multiple agencies/states. Studies show that this would instantly spur economic growth. Our GDP growth is 7.7% for the quarter ending March, 2018, which is all time high. There is revenue gain to the Centre and the States/ Union Territories due to widening of the tax base, increase in trade volumes and improved tax compliance. GST collection has already soared to Rupees one lakh crore per month. Last, but not the least, this tax (GST), because of its transpar
ent character, is easier to administer leading to ease of doing business, which would also attract greater FDI. Ranking of India in ease of doing business index has improved to 100 from 130 earlier. Introduction of e-way bill from 1st April, 2018 for inter-sate movement of goods and completion of e-way bill for intra-state movement of goods by 3rd June, 2018 has made movement of goods and thus trading simpler, smoother and swifter. It has led to paradigm shift from departmental policing model to self- declaration model in tandem with self-assessment as in vogue in GST. 6.25 million GST returns were filed in May, 2018 as against 6.05 million Returns filed in April, 2018, which is also a pointer towards growth and compliance.

OVERVIEW OF GOODS AND SERVICE TAX

II. Salient Features of GST

Salient Features of GST

The salient features of GST are stated hereunder:

(i) The GST is applicable/ leviable on supply of goods or services as against the erstwhile concept of tax on the manufacture (Central Excise) and sale of goods (erstwhile State/UT VAT) or provision of services (erstwhile Service Tax). The incidence of taxation has shifted to supply of goods and/or services or as against manufacture or sale or provision of service. It is a destination based consumption tax, where the taxation effectively is on value addition in the entire supply chain.

(ii) It is a dual GST with the Centre and States simultaneously levying it on a common tax base. The GST levied on intra- State/UT supply of goods and / or services by Centre is called by name Central GST(CGST) and by State/ UT is called by name State GST (SGST)/ Union Territory GST (UTGST). Both CGST and SGST/UTGST is levied on a common tax base.

(iii) The GST applies to all goods other than alcoholic liquor for human consumption and five petroleum prod
ucts, viz. petroleum crude, motor spirit (petrol), high speed diesel, natural gas and aviation turbine fuel. It applies to all services barring a few specified in tune with erstwhile scenario under Service Tax.

(iv) Tobacco and tobacco products are subject to GST. In addition, the Centre has retained the power to levy Central excise duty on these products. The States have retained power to levy vAT on’ alcoholic liquor for human consumption’, which is outside the purview of GST.

(v) The GST has replaced the following taxes currently levied and collected by the Centre:

a. Central excise duty

b. Duties of excise (Medicinal and Toilet Preparations)

c. Additional Duties of excise (Goods of Special Importance)

d. Additional Duties of excise (Textiles and Textile Products)

e. Additional Duties of Customs (commonly known as CVD)

f. Special Additional Duty of Customs (SAD)

g. Service Tax

h. Central Surcharges and Cesses in so far as they related to supply of goods and services like SBC & KKC

State taxes subsumed under the GST are

(vi) State taxes subsumed under the GST are:

a. State VAT

b. Central Sales Tax

c. Luxury Tax

d. Entry Tax (all forms)

e. entertainment and Amusement Tax (except when levied by the local bodies)

f. Taxes on advertisements

g. Purchase Tax

h. Taxes on lotteries, betting and gambling: excepting these other actionable claims are outside the purview of GST (Schedule III of CGST Act)

i. State Surcharges and Cesses in so far as they relate to supply of goods and services

(vii) The CGST and SGST is being levied at rates jointly decided by the Centre and States. The rates have been notified on the recommendations of the GST Council. The normal rates fixed are from 5 percent to 28 percent ad valorem. About 50 goods or services are in 28 percent slab.

(viii) The list of exempted goods and services are common for the Centre and the States/UTs.

(ix) Threshold Exemption: Tax payers with an aggregate turnover in a financial year up to Rs.20 lakhs are exempt from tax. [Aggregate turnover {section 2(6)} include the aggregate value of all taxable supplies, exempt supplies and exports of goods and/or services and Inter-state supplies but excludes taxes viz. GST and cess]. Aggregate turnover shall be computed on all India basis for a person {section 2(84)} having the same Permanent Account Number(PAN). For special category states as specified in sub-clause (g) of clause (4) of Article 279A of the Constitution (like seven Ne States, Sikkim, Uttarakhand & Himachal Pradesh), the exemption threshold is Rs. 10 lakhs. All taxpayers eligible for threshold exemption have the option of paying tax with input tax credit (ITC) benefit by getting them registered as a Casual Taxable Person under section 24 of the CGST Act, which would aid them in availing Input Tax Credit. Tax payers making inter-State supplies or paying tax on reverse charge basis are not be eligible for threshold exemption.

(x) Small taxpayers with an aggregate turnover in a financial year up to Rs. 100 lakhs are eligible for Composition Levy (Section 10). The threshold is 75 lakhs in case of seven States of Northeast, Sikkim & Himachal Pradesh. Under the scheme, a taxpayer shall pay tax as a percentage of his turnover during the year without the benefit of ITC and also without levying/charging any GST in his Bill of Supply. The floor rate of tax for CGST and SGST is 1% in case of manufacturer/ trader and 5% in any in case supply of food, non-alcoholic drink and other articles of human consumption like caterer/ restaurant. A tax payer opting for composition levy shall not collect any tax from his customers nor will he be eligible to avail any Input Tax credit in respect of supplies received by him.

The composition scheme is optional. Tax payers making inter-State supplies or paying tax on reverse charge basis or making supplies through an electronic Commerce operator shall not be eligible for composition scheme. The exer
cise of option for composition scheme has to be exercised at the beginning of Financial Year by electronically filing on common portal an intimation in Form GST CMP-01. This would be available from the beginning of next month. Composition Scheme is not available to Pan Masala, Ice Cream, Tobacco and tobacco products, edible Ice etc.

(xi) Tax payers shall be allowed to take credit of taxes paid on inputs (Input Tax Credit) and utilize the same for payment of output tax. However, no Input Tax Credit on account of CGST shall be utilized towards payment of SGST and vice versa. The credit of IGST would be permitted to be utilized for payment of IGST, CGST and SGST in that order.

(xii) International HSN (Harmonised System of Nomenclature) of World Customs organisation [used by over 200 countries and covering over 98 percent of international trade merchandise] is to be used for classifying the goods under the GST regime. Taxpayers whose turnover is above Rs. 1.5 crores but below Rs. 5 crores shall use 2-digit code and the taxpayers whose turnover is Rs. 5 crores and above shall use 4-digit code. Taxpayers whose turnover is below Rs. 1.5 crores are not required to mention HSN Code in their invoices, though there is no bar in mentioning HSN codes.

(xiii) Exports and supplies to SEZ/ SeZ Developer shall be treated as zero-rated supplies. The exporter has an option to either pay output tax and claim its refund or export under bond/ LUT without payment of tax(IGST) and claim refund of Input Tax Credit. The Government has made filing of LUT request online, which is also accepted online.

(xiv) Supplies to EOU’s and from one eoU to another eoU shall be like any other supply. Supply from Manufacturer exporter to Merchant exporter shall also be like any other supply.

(xv) Import of goods and services would be treated as inter-State supplies and would be subject to IGST in addition to the applicable customs duties and Cess. The IGST paid shall be available as ITC for further transactions.

(xvi) The laws, regulations and procedures for levy and collection of CGST and SGST have been harmonized to the extent possible.

Sanjay Saran: Writer was Commissioner of Customs & CGST ( Retd )

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