GST-The Future of India

Prepared by – Chinmay Gangwal

3

We have to get ready for TAX Planning and Surprises

Sr. No

Particulars

1) GST- Meaning and it’s Structure

2) Types of GST- Proposed

3) Functioning of GST

4) Benefits and Disadvantages

Contents :-

GST- Meaning and it’s Structure‘G’ – Goods‘S’ – Services‘T’ – Tax

GST is a Comprehensive tax levied on which is levied on production, trading goods and provision of Services.

GST is a tax on Value addition made at each stage and benefit of setoff will be continued from manufacture / service providers up to retailers ,So that ultimate Consumer Should bear the tax.

Reasons for Change in Taxation System :- There are huge number of list in Indirect taxes.

Complexities.

Cascading Effect.

Administration Cost.

Compliance Cost.

Two-Chain GST

Dual Chain GST

in India

Types of GST- India

In India, there is a planning to implement a dual GST System.

Under Dual GST System, CGST ( Central goods and Service tax) and SGST (State goods and Service tax) are charged by Central and State respectively on the transaction of goods and services.

CGST

SGST

Tax Collected by Central

Excise Duty, AED, Service Tax, Custom Duty, Education Cess and Surcharges Etc.

Tax Collected by State

VAT,CST, Entertainment Tax, Luxury Tax, taxes on Lotteries, Octroi & Entry Tax, Cesses Etc.

Functioning of GST

CGST and SGST are levied on manufacturing, trading and providing Services and it is collected separately by central and State.

Taxes paid against CGST allowed as input tax credit while making a payment of CGST only and other hand in SGST.

Cross Utilization of Input Tax Credit will not be allowed in the payment of CGST and SGST i.e taxes paid against CGST will not be allowed as ITC while making a payment towards SGST and Vice Versa.

SGST CGST

Example:

A manufacture purchase a raw material to produce finished good of Rs 100 and SGST is Charge on such material at Rs 10 & CGST will also be levied on it of Rs 10. Then manufacture sold goods to whole seller for Rs 150 by separately charging both SGST and CGST of Rs 15 each and again goods is sold to directly consumer to Rs 200 by Separately Charging Both SGST and CGST of Rs 20 each. So how will compute the tax liability in the case of GST..??

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Particular Basic Value

SGST

CGST

Total Value

ITC for SGST

ITC for CGST

Liability

                CGST

SGST

1) Input For Manufacture

               

  Cost to Manufacture

100 10 10 120 - - 10 10

2) A] Manufacture’s Liability

               

  Manufacture Sold goods to Whole seller

150 15 15 180 10 10 5 5

3) B] Whole seller’s Liability

               

  

Whole Seller sold goods to Consumer

200 20 20 240 15 15 5 5

4) Total Tax Collection             20 20

What about tax on Inter-state Sale or Services …??

On Inter-state sale, IGST is Charged by Central. IGST is a combination of both taxes such as CGST and SGST.

Benefit of Credit of IGST will be adjusted against both SGST and CGST Liability and vice- versa.

Tax revenues accrues to the destination/ importing State based on Place of Supply Rules.

Extra Tax on Inter State Sale :-

Additional tax not exceeding 1% levied on the transaction of inter state sale or services by the central government for a period of Two year and assigned to the State government from where the good and Services are supplied.

Treatment of Export and Import under GST

In GST, Export transaction would be considered as Zero –rated because of increasing of Competitiveness of Indian goods in the foreign market and Earning more revenue out of them.

Import transaction is treated as same as inter sale or services , it means that tax on Import includes both CGST and SGST levied by originating state.

Rates and it’s structures under GST :-

The Combined GST rate is being discussed by government. The rate of GST is to be proposed between 16% to 20% after GST rate is arrived at the states and Centre will decided on CGST and SGST Rates.

There are four rate for GST based on (RNR Based) :-

1) Floor rate for essential good and services.2) Standard rate for general goods and services.3) Special rate for precious metal.4) Nil rate.

Registration Procedure under GST :-

There is a provision of threshold limit for small trader having a turnover is below 10 lakh to applying registration under GST.

If a turnover of trader is below of Rs 1.5 crores then it is administrated by State (SGST) only and other wise it is administrated by both government.

GST Registration number is to be linked with PAN and this No. is around 13-14 digit. It is also known as BIN ( Business Identification Number)

Composition Scheme under GST :-

In GST also,

Composition Scheme is available to the dealer having a turnover of Rs 10 to 50 lakh and pay out floor rate (0.5% ) on turnover.

Role of Dealers towards GST :-

Every dealer has to file the return under GST Consisting all details of goods and services.

CGST and SGST will be collected by dealer and they will deposit the amount within prescribed time with Central and State Government.

Taxes are not be subsumed :- Tax on Alcohol , liquor, tobacco, Petroleum products. Export Duty. Toll Tax. Environment Tax. Road Tax.

Tax on consumption or sale of electricity.

Stamp dutyNot Certain

Benefits – Individuals and Companies

Benefits – Individuals and Companies

In the GST System, Both Central and State taxes will be collected at the point of Sale or providing a services.

Both Components ( CGST and SGST ) will be Charged on manufacturing Cost. This will benefit individuals as prices are likely to go down.

Lower prices of good and Services lead to more Consumption, thereby helping Companies

Disadvantages of GST :-

1) Tax on Tobacco, petroleum product, liquor etc are the most important factors not subsumed in GST. 2)No Credit is not available to URD ( Unregistered Dealer) 3) Some Economist say that CGST, SGST, and IGST are nothing but new names for Central Excise/ Service Tax, VAT and CST.

Question :-

I am Sorry by heart for any mistake, error or omission on my part.

Thank YouTHANK

YOU…!!!!