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GST - A Brief Overview

GST will be a destination-based tax on a comprehensive base of goods and services across the value chain. It aims to address the complexities in the current multiple taxation regime.

It will subsume the plethora of indirect taxes levied by various levels of government and help to (a) lower the tax incidence on organized manufacturing, (b) expand the narrow tax base, and (c) provide ease of doing business. The following taxes are to be subsumed.

Particulars Centre State
Taxes to be subsumed under GST that finds a mention in the Constitutional Amendment Bill Central Excise Duty (CENVAT) Additional Excise Duties Service Tax Additional Custom Duty in the nature of countervailing duty Special Additional Duty of Customs Surcharges and Cess that relate to supply of goods and services Sales Tax (VAT) Central Sales Tax (levied by Centre) Entertainment Tax (unless levied by local bodies) Purchase Tax Octroi & Entry Tax in lieu of Octroi Luxury Tax State Surcharges and cesses that relate to supply of goods and services Taxes on lottery, betting and gambling
A few other taxes that may be subsumed. Cess on rubber, tea, coffee, etc. Surcharges (National Calamity, Education Cess, etc.) State Excise Duty. (Except Liquor)
Taxes on items to be subsumed under GST in due course by GST Council. Petrol and Petroleum Products. Petrol and Petroleum Products.
Taxes that would be definitely kept out of GST. Basic Customs Duty, Anti Dumping Duty Export Duty. Alcoholic liquor for human consumption.
Taxes that are unlikely to be subsumed in GST. Excise Duty on tobacco products Specific Cess Specific Central Cess like education and oil cess. Property Tax, Tax on consumption of Electricity Stamp Duty.

Considering the federal structure of government, it will have two components – CGST and SGST. While CGST will be levied and collected by the central government, SGST will be levied and collected by the state government in whose jurisdiction the goods / services are consumed. It would be applicable to all transactions of goods and service.

In case of inter-state sale of goods and import of goods in the country, IGST would be applicable. IGST again would have two components – CGST and SGST. SGST would go to the state where the ultimate consumption of goods takes place. The GST framework does not allow for any specific region-wise exemptions (available for backward areas) or other exemptions; else, these would result in breaking the value chain. The Empowered Committee of State Finance Ministers had recommended withdrawal of area-based exemptions and their replacement with direct central/state government subsidies.

GST Highlights

GST is a huge reform for indirect taxation in India, the likes of which the country has not seen post Independence. GST will simplify indirect taxation, reduce complexities, and remove the cascading effect. Experts believe that it will have a huge impact on businesses both big and small, and change the way the economy functions. Introduction of Goods and Services Tax (GST) to replace the existing multiple tax structures of Centre and State Taxes was imperative in the emerging economic environment. GST is not a tax change, but a game changing reform for the Indian economy by creating a common Indian Market and reducing the cascading effect of tax on the cost of goods and services. For the first time in the history of independent India, a change in Law has been brought which will have a far reaching impact on almost all the aspect of business operations in the country, for instance pricing of products and services, supply chain optimization, IT, Accounting and tax compliance systems.

Key Highlights of GST

Powers to levy GST lie with State and Centre concurrently. Thereby current disputes with regard to Service Tax v/s VAT will fall considerably.
Introduction of new concept of taxation like Reverse Charge Mechanism on Goods.
All Interstate Stock Transfers would now become taxable.
State wise Registrations is mandatory for every business unit.
State wise three monthly returns are to be filed with Tax Authorities.
Majority of the process and procedures under GST is online thereby promoting ease of doing business.
GST is levied at each stage in the Supply chain, where a transaction takes place.
Unlike the current Indirect Taxes, GST will be collected at the point of consumption. The taxing authority with appropriate jurisdiction in the place where the goods/ services are finally consumed will collect the tax.

GST Compliance & Services

Application for new Registration under GST.
Monthly/Quarterly and Annual GST Return Filing.
Consultancy related to GST Compliance.