BASIC CONCEPTS OF GST (PART-4)

[Dr. Sanjiv Agarwal]

How do we compare the present indirect tax laws vis-à-vis proposed GST law regime ? In this part, an attempt is being made to list down the possible differences between the present tax laws and proposed provisions under GST. This comparison is not final and is only for academic purposes to understand the differences or deviations tax base, origin, structure, approach to tax goods and services, place of provision, powers to levy tax, export and import etc.

 

Comparison of Present Taxation and Proposed GST

S.No	Particulars	Present Taxation	Proposed GST
1.	Structural Architecture	• Two separate VAT systems operate simultaneously at two levels, Centre and State, and tax paid (input tax credit) under one is not available as set off against the other • Tax on services is levied under separate legislation by Centre, i.e., Finance Act, 1994 which regulates service tax • No comprehensive taxation of services at the State level; few services are taxed under separate enactments • Import of goods in India are not subjected to State VAT	A dual tax with both Central GST (CGST) & State GST (SGST) will be levied on the same base. Thus, all goods and services, barring a few exceptions, will be brought into the GST base. There will be no distinction between goods and services for the purpose of tax with a common legislation applicable to both It allows seamless tax credit amongst Excise Duty, Service Tax & VAT
2.	Place of Taxation	Taxable at the place of manufacture or sale of goods or rendering of service	It is consumption (destination) based tax
3.	Tax Base	Comparatively narrow	Wider
4.	Excise Duty	Imposed by Centre under separate Act, Central Excise Act, 1944. Taxable event is manufacture; Taxed up to manufacturing point	To be subsumed in CGST; Taxable event will be sale; To be taxed up to retail level
5.	Basic Customs Duty	Imposed by Centre under separate Act, i.e., Customs Act, 1962. Taxable event is import	No change is proposed
6.	CVD/SAD	Imposed by Centre under separate Act, i.e., Customs Act, 1962. Taxable event is import	To be subsumed in CGST; Taxable event will be import
7.	Service Tax	Imposed by Centre under separate Act (Finance Act, 1994). Taxable event is provision of service	To be subsumed in CGST & SGST; Taxable event will be provision of service
8.	Central Sales Tax	Imposed by Centre under CST Act, 1956. Collection assigned to States; Taxable event is movement of goods from one State to another	Is being phased out
9.	State VAT	Imposed by States; Taxable event is sale within the State	To be subsumed in SGST; Taxable event is sale within State
10.	Inter-State Transactions	Imposed on goods & services by the Centre (CST, Service Tax)	To be subsumed in GST and subject to SGST & CGST
11.	Tax on Manufacturing activity	As Excise Duty by Centre	No such powers under GST regime
12.	Powers to levy Tax on Sale of Goods	Inter-State : Centre Local : State	Concurrent powers to Centre & State
13.	Powers to levy Tax on Provision of Services	Service Tax by Centre	Concurrent powers to Centre & State; States to tax more than 40 services
14.	Tax on Import in India	Goods are taxed to Customs Duty (comprises Basic Customs Duty, CVD & SAD); Services are taxed to Service Tax	Basic Custom Duty on goods : No Change - CVD & SAD on import of goods and import of services : To be subsumed in GST
15.	Tax on Export of Goods & Services	Exempt / Zero-rated	No change is proposed
16.	Tax on inter-State Transfer of Goods to Branch / Depot or Agent	Exempt against Form F	Will be taxable
17.	Tax on Transfer of Goods to Branch or Agent within States	Generally exempt but depends upon State procedures	May not be taxable, if BIN of transferor and transferee is same
18.	Cross-Levy set-off / adjustment	Excise duty and Service tax : Cross set off allowed	No cross set-off between CGST and SGST will be allowed
19.	Cascading Effect	Allows cenvat tax credit between Excise Duty & Service Tax, but not with VAT (cross set off is not allowed)	Allows seamless tax credit amongst Excise Duty, Service Tax & VAT
20.	Non-Creditable Goods	Do exist	May exist depending upon negative list / exemptions etc
21.	Credit on Inputs used for Exempted Activities	Not allowed	May not be allowed
22.	Various Exemptions -Excise Free Zone or VAT Exemption	Available	May be phased out
23.	Exemption for transit Inter-State Sale and High Seas Sale	Available	May be taxable
24.	Transactions against Declaration Forms	Allowed under the CST / VAT	Forms likely to be abolished
25.	Taxation on Govt. and Non-Profit Public Bodies	Partially taxed	May not change much
26.	Stamp Duty	Presently taxed concurrently by the Centre and State	Status not clear; If subsumed under GST, big relief to real estate industry : to claim input tax
27.	Excise Duty Threshold Limit	Presently ₹ 1.5 crores	Rs.10 lacs to 20 lacs (Turnover of ₹ 1.5 crores & above may be administered by Centre and less than ₹ 1.5 crores may be administered by States)
28.	VAT Threshold Limit	Presently, ₹ 5 lacs to 10 lacs	May be ₹ 10 lacs to ₹ 20 lacs
29.	Service Tax Threshold Limit	₹ 10 lacs	May be ₹ 10 lacs to ₹ 20 lacs
30.	Classification of Commodities	Excise Duty based on HSN VAT not applicable	Likely to be based on HSN
31.	VAT/GST Regis­tration Number	Simple TIN (some States : PAN only based)	PAN based
32.	Procedures for Collection of Tax and Filing of Return	For Central Excise & Service Tax, it is uniform. For VAT, it varies from State to State	Likely to be uniform
33.	Tax Administration	Complex due to number of taxes	Likely to be simple and easy, tax friendly
34.	Use of Computer Network	Just started by the States; very minimum; Central taxes are online	Extensive; It will be pre-requisite for implementation of GST
35.	Nature of Present Litigations	Sale or Service Classification of goods Situs issue between States Interpretational issues Sale or works contract Valuation of composite transactions, etc. Exemptions Suppression / limitation	Likely to be reduced provided GST legislations are properly drafted

(To be continued ………)

Discussions to this article

[Ashok Aggarwal]

Very good analysis and comparison between present situation and that after implementation of proposed GST law. Let us hope that the procedures will be simple and more system based to avoid harassment of trade & industry at the hands of those who enforce the law. If the trade will be running to tax departments of Central & State Governments even after GST is reality, the very purpose of bringing GST would be defeated.

At Sr N. 18 it is mentioned that no cross set off between CGST and SGST would be allowed against present Excise duty and Service tax. It may be noted that cross set off at present is allowed only between Central Excise duty and Service Tax and this position would not change because CGST will comprise of both ie Central Excise duty and Service Tax.

[Dr. Sanjiv Agarwal]

Dear Ashok ji ,

At serial no 18 , kindly see that in the present taxation regime , service tax and excise duty set off is allowed as both are central taxes whereas in the proposed GST regime , CGST is a central tax and SGST is a state tax , therefore , cross set off will not be allowed.

Thanks & Regards ,

CA Neha Somani

[Ashok Aggarwal]

I know that cross set off between CGST and SGST iwill not be allowed. The point is that it has been mentioned at point no 18 where it is mentioned that at present Cross set off between Central Excise and Service tax is allowed. Hence the comment against this point is not relevant because the cross set off between C.E duty and Service tax will still be allowed because both will be subsumed in CGST and the credit of CGST irrespective of type of tax will be allowed against payment of CGST.