Part C- First Discussion Paper on GST-2nd & 3rd Segment

[Deepak Aggarwal]

GST……Goods and Services Tax

Part-C

First Discussion Paper on GST

• Second Segment explains the process of preparation for GST which is already covered in my first article- Part-A.
• Third Segment explains in detail the comprehensive structure of the GST model in India.
• India is country which have a federal system in which Centre and State both have powers in their domain and legislation in which they operate.
• Due to federal system, a Dual GST structure is recommended in India.
• In Dual GST structure, Central and State will have pre-defined functions and responsibilities.
• GST will have two components. One component will be Central GST (CGST) which will be levied by Central and second will be State GST (SGST) which will be levied by States.
• GST model will be implemented by multiple statutes i.e. one statute for CGST and one statute for SGST for respective state.
• To make uniformity, basic features of law such as chargeability, taxable event and levy including valuation provisions etc. will be same across all statutes as far as practicable.
• GST will be applicable on all transactions of goods and services made for a consideration.
• In GST model, there will be exempted goods and services which will be out of GST purview.
• A threshold limit will be also in GST model, below which no GST will be payable. For SGST a threshold limit of ₹ 10 lacs for both goods and services is suggested across all states. In case of CGST, threshold limit suggested for goods is ₹ 1.5 crore and in case of services, a higher limit is desirable.
• The CGST and SGST will be paid separately to accounts of Central and state government respectively.
• The CGST and SGST will be treated separately. In books of accounts, there will be separate accounts for the utilization or refund of credit.
• Cross utilization of Input tax credit (ITC) between the CGST and SGST will not be allowed.
• The Central government and State government would have concurrent jurisdiction in GST model. CGST will be administered by Central government and SGST will be administered by State government.
• A Composition / Compounding scheme is also suggested in GST model. The Scheme should have an upper ceiling on gross annual turnover and a floor fix rate. A cutoff at ₹ 50 lacs for gross annual turnover and 0.5% for floor rate is also suggested in the model.
• GST model would also have an option of registration or not, in case of turnover below threshold limit fixed in GST.
• There will be periodic returns which need to be submitted to CGST and SGST authorities.
• A PAN linked tax payer identification number having 13/15 digits will be issued under GST model.
• Assessment, Scrutiny, enforcement and audit powers will be vest with respective authorities i.e. in case of CGST; it will be done by Central GST authorities and in case of SGST, will be done by State GST authorities.
• In GST regime, various Central Taxes and State Taxes will be subsumed in GST.
• Central Taxes subsumed in GST are Central Excise duty, Additional Excise duties, Excise duty levied under MTP Act, Service Tax, Additional Custom duty (CVD), Special additional duty (SAD), Surcharges and Cesses.
• State Taxes subsumed in GST are VAT/Sales tax, Entertainment tax, Luxury tax, Taxes on lottery, betting and gambling, State Cesses and Surcharges related to supply of goods and services and Entry tax. Regarding Purchase tax, it is not clear that whether it will be subsumed in GST or not.
• Some specific provisions for specific commodities are also suggested. E.g. Alcoholic beverage, Petroleum products would be kept outside ambit of GST.
• In case of Interstate transactions, IGST model is suggested. A highly IT infrastructure is required in this mode to align In IGST model, Centre would levy IGST which would be CGST plus SGST on all interstate transactions of taxable goods and services.
• In IGST model, appropriate provision will be for Consignment sale or Stock transfer of goods and services.
• A two rate structure is proposed in GST model. One lower rate for necessary items and basic importance and a Standard rate for other items. Also a special rate for precious metal is also suggested.
• There will be an exempted items list on which GST will not be payable.
• Exports will be Zero rated in GST model. Same benefits will be available to SEZs.
• Imports will be taxed in GST model. Both CGST and SGST will be levied on import of goods and services into India.
• Any special industrial area scheme regarding tax exemption or remission will not be encouraged in GST model and all the existing scheme will be discontinue after a legitimate expiry time.