FREQUENTLY ASKED QUESTIONS ON GST (PART-3)

[Dr. Sanjiv Agarwal]

Frequently Asked Questions (FAQs) on GST and their answers which would help the readers to know and understand about the concept and nuances of proposed Goods and Services Tax (GST) and its models.

These FAQs have been compiled with sole objective of providing a means of better understanding of GST. For details, readers may refer to Government portals / literature.

Q.15    Is there going to be any threshold limit for exemption under GST regime?

Ans.    Yes, there is likelihood of threshold exemption limit in GST based on gross turnover as in present case. Centre and few states are in favour of ₹ 25 lakh limit while some other states want a lower limit of ₹ 10 lakh per annum. However, Committee headed by Chief Economic Advisor (MOF) has recommended a higher threshold limit of ₹ 40 lakh to ensure compliance and minimize the burden on smaller assessees.

Q 16.   What is the concept of providing threshold exemption for GST?

Ans.   Threshold exemption is built into a tax regime to keep small traders out of tax net. This has three-fold objectives:

1. It is difficult to administer small traders and cost of administering of such traders is very high in comparison to the tax paid by them.
2. The compliance cost and compliance effort would be saved for such small traders.
3. Small traders get relative advantage over large enterprises on account of lower tax incidence.

The present thresholds prescribed in different State VAT Acts below which VAT is not applicable varies from State to State. A uniform State GST threshold across States is desirable and, therefore, it has been considered that a threshold of gross annual turnover of ₹ 10 lakh both for goods and services for all the States and Union Territories might be adopted with adequate compensation for the States (particularly, the States in North-Eastern Region and Special Category States) where lower threshold had prevailed in the VAT regime. Keeping in view the interest of small traders and small scale industries and to avoid dual control, the States also considered that the threshold for Central GST for goods may be kept ₹ 1.5 Crore and the threshold for services should also be appropriately high.

Q.17.   How will export of goods / services be taxed ?

Ans.    Export transactions of goods or services shall be zero rated, i.e. no GST will be payable on export transactions.

Q.18.   How imports are likely to be taxed under GST regime ?

Ans.    The import of goods or services will be deemed as supply of goods or services or both, in the course of inter-state trade or commerce and thus it will attract IGST (CGST plus SGST). Thus, import of goods will attract Basic Customs Duty and IGST, while import of services will attract IGST.  

Q.19    What are the prerequisites for GST Models?

Ans.    All the Models of GST require the following pre-requisites for successful implementation of GST:

• Extensive Computerization and strong IT infrastructure
• E-filing of periodical returns
•  E-payment of tax
• Common tax period
• National portal for access of information
• National Agency
• Trained and well equipped staff.

 Q.20   Why is Dual GST required? 

Ans.    India is a federal country where both the Centre and the States have been assigned the powers to levy and collect taxes through appropriate legislation. Both the levels of Government have distinct responsibilities to perform according to the division of powers prescribed in the Constitution for which they need to raise resources. A dual GST will, therefore, be in keeping with the Constitutional requirement of fiscal federalism.

Q.21    What is meant by dual GST ?

Ans.    Dual GST signifies that GST would be levied by both, the Central Government and the State, on supply of goods or services. 

Under GST, the power to tax on supply of all goods and services would be vested in the hands of both, the State and the Centre. However, in certain cases, such as the inter-state transactions, the power to tax would be vested with the Central Government, while the revenue would in some appropriate manner, get distributed to the States. Considering the dual taxation power to tax transactions under GST, the structure is referred to as Dual GST.

Q.22    What are benefits of dual GST ?

Ans.    The dual GST is expected to be a simple and transparent tax with one or two CGST and SGST rates. The dual GST is expected to result in:-

• reduction in the number of taxes at the Central and State level
• decrease in effective tax rate for many goods
• removal of the current cascading effect of taxes
• reduction of transaction costs of the taxpayers through simplified tax compliance
• increased tax collections due to wider tax base and better compliance

(To be continued……)