Expected Model of GST

[CA Akash Phophalia]

• As per recommendations by Joint Working Group appointed by Empowered Committee in 2007, the GST in India may have four components in its tax structure as – (a) Central tax on goods upto retail level, (b) Central Service Tax, (c) State Vat tax on goods, and (d) State VAT on services. As far as tax rate structure is concerned each of the above four components may have four–rate categories.
• The Central GST will be administered by the Central Government and the State GST will be administered by the State Governments. The different taxes will be subsumed as under :-

Subsumed in Central Tax	Subsumed in State Tax
Central Excise Duties (CENVAT)	Value Added Tax
Additional duties of excise	Purchase Tax
Additional customs duties in the nature of excise duties (countervailing duties)	State Excise Duty (except Liquor)
Cessess levied by the Union	Entertainment Tax (unless it is levied by the local bodies)
Service Tax	Luxury Tax
Central Sales Tax	Octroi and Entry Taxes
Surcharges levied by the Union	Taxes on Lottery, Betting and Gambling

• Proposed GST will have two components Central GST and State GST.
• Taxable event will shift to sale rather than manufacture.
• Exports will be zero rated and will be freed from all duties and taxes.
• JSW also prepared the list of exempted goods.
• Certain products or components will be kept out of the GST structure so as taxes by local bodies.
• Cross utilization between State GST and Central GST is not expected to be allowed.

This is just for your reference. It does not constitute our professional advice or recommendation.

Discussions to this article

[Srikanthan S]

Dear Mr Akash Phophalia, thanks for the summary.

However, you have mentioned that 'taxable event will shit to sale rather than manufacture'. Is it not 'supply' of goods/services which will be taxable event? That's why industries are looking at the fate of 'stock transfers or branch transfers' on which there could be a levy. Do kindly clarify.

Regards,

S.Srikanthan

[KASTURI SETHI]

Taxable event will be on supply and Supply will be defined. It will include Stock transfer, branch transfer.

[KASTURI SETHI]

Srikanthan S. is right.

[CA Akash Phophalia]

Respected Sir

This is the recommendation given by Joint Working Group as appointed by Empowered Committee. The basic thing which is conveyed is the shift of taxable event from manufacture.

Further you all learned people may be correct that the taxable event is on supply.

As the GST is yet in draft, therefore, it is difficult to conclude about the taxable event. On the basis of material available I found that the taxable event will no longer be manufacturing but will be sale or supply.

[Srikanthan S]

Yes; you are right. The basic shift of the taxable event is from manufacture. The Constitution (One hundred twenty second Amendment) Bill, 2014 proposes to insert Clause (12A) in Article 366.

(12A) – “goods and service tax” means any tax on supply of goods, or services or both except taxes on the supply of the alcoholic liquor for human consumption. [the term 'supply' has not been defined].

As a result, the concepts 'sale' , 'manufacture' which are of great significance under the existing indirect tax law are likely to lose relevance once GST is introduced.

Regards,

Srikanthan