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TMI BlogPart B- First Discussion Paper on GST- 1st SegmentX X X X Extracts X X X X X X X X Extracts X X X X ..... Part B- First Discussion Paper on GST- 1st Segment X X X X Extracts X X X X X X X X Extracts X X X X ..... eds further improvements i.e. justification for GST. Introduction of VAT * In India, VAT was introduced at the Central level for a selected number of commodities in terms of MODVAT w.e.f March, 1986 and later it is extended to all commodities in terms of CENVAT w.e.f. 2002-03. * Later on Service tax was added to CENVAT w.e.f. 2004-05. * Vat was introduced at the State level beginning from A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pril, 2005. Before introduction of VAT - at Central level, there was a burden of multiple taxation i.e. tax on tax. No Input tax credit was allowed in earlier regime. -at State level, in case of multi point sales taxation, burden of sales tax paid on purchase on each level was also added and thus a cascading effect of taxation was there. Also no input credit was allowed in earlier regime. Afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r introduction of VAT -at Central level, a set-off is given i.e. input tax credit introduced. -at State level, a set-off is given for input tax paid and also for tax paid on previous purchases to remove cascading effect of taxation. Justification of GST * Current system of VAT at Central and State level have some shortcomings. Shortcomings- at Central level - Non-inclusion of several Centra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l taxes e.g. additional customs duty, surcharges etc. - Non-inclusion of value added chain in the distribution trade below the manufacturing level Shortcomings- at State level -Non-inclusion of several state taxes e.g. luxury tax, entertainment tax etc. -Cascading effect on account of Cenvat element i.e. excise duty on the goods remains included in the value of goods to be taxed under state VA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T - No credit of input services at state level * After introduction of GST, all shortcomings at Central and State level will be removed. At Central level -GST will provide comprehensively more indirect central taxes -Integrate goods and service taxes for the purpose of set-off relief -Widening of dealer base by capturing the value addition in distributive trade At State level -Removal of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cascading effects of CENVAT i.e. excise duty
-Removal of cascading effects of Service tax
Thus GST is not simply VAT plus Service tax. It is an improvement over the previous system of VAT and Service tax. X X X X Extracts X X X X X X X X Extracts X X X X
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