YOJANA ANALYSIS – AUGUST 2017
BY – SHYAM S KAGGOD
CASCADING EFFECT
A B CSelling
Price= ₹ 100Selling
Price= ₹ 130
Tax @ 10%
Will buy it
at ₹ 110 &
adds profit
of ₹ 20Tax @ 10%
Will buy it
at ₹ 143
INPUT TAX CREDIT
A
Tax paid is ₹ 100
B
Tax paid is ₹ 120
C
Tax paid is ₹ 130
Tax to be paid
is ₹ 400
INPUTS
OUTPUT
Tax Paid to the
government is
₹ 50
WHY GST?
Cascading effect
Multiplicity of indirect taxes
Setting off not allowed/difficult in some case
The transportation costs will add to the costs
Lines between goods and services have blurred (eg-
IPR are considered goods for imposing sales tax and
as services for imposing service tax)
PROBLEM
Raw materials
Internal-VAT
External-Customs, CVD etc
Research/Technology
Internal-service tax
External-customs or
service tax
Others
Interstate tax
Entry tax
Octroi
GST
Streamlining/subsuming all the indirect taxes-
one nation one indirect tax
First introduced in 2011 and again in December
2014
115th CAB and 122nd CAB
GST
PROVISIONS OF GST BILL
The bill empowers both central and state governments
to take decisions/make laws regarding taxes
GST council
Set up by the president
Union Finance Minister + state Finance ministers
Functions-model GST laws, taxes/surcharge/cess to
be levied by the centre and state, exemptions to be
given etc
GST council to decide regarding resolution of disputes
PROVISIONS OF GST BILL
PROVISIONS OF GST BILL
The additional Interstate GST will be levied by
central government (additional levy of 1%
withdrawn)
Exemption-alcoholic liquor for human
consumption, GST council to decide when to
impose taxes on crude petroleum, high speed
diesel, petrol, natural gas and Aviation Turbine
Fuel (ATF)
Compensation to be given for 5 years
COMPENSATION & CESS
The government has imposed cess under GST
The cess collected will be used to provide
compensation
GST WILL SUBSUME
GST-EXEMPTIONS
OLD VS NEW
Old method GST
Goods and services were taxed
separately
No differentiation between Goods
and services
Different states different tax rates Uniform tax rates across the
country
National market not possible National market can be
established
Tax on production (origin based
taxation)
Tax on consumption (target/end
based taxation)
Cascading effect No cascading effect
Many indirect taxes Only one
Setting off in some cases not allowed Setting off is allowed
GST EXAMPLE
SUBRAMANIAN COMMITTEE
Simplify tax administration, protect revenues and encourage
compliance
Three rates-Standard rate (17% to 18%),Lower rate
(12%),Sin rate/demerit rate (40%)
Alcohol and real estate must be brought under GST
1% Interstate GST should not be implemented
Compensation to reinforce trust between centre and states
GST implementation must be evaluated every 1 or 2 years
SUBRAMANIAN COMMITTEE
GSTN (GST NETWORK)
COMPOSITION SCHEME
BENEFITS OF GST IMPLEMENTATION
GST BENEFITS – EASE OF DOING BUSINESS
Increase tax compliance, reduce tax burden,
eliminate cascading effect, boost tax revenues,
improve tax administration etc
It will replace host of indirect taxes and cesses
Businesses dealing with exempted goods and
having a turnover of ₹ 20 lakh will be exempted
GST – BENEFITS
Coverage of textile, clothing and real estate
Expansion of tax base – the number of tax payers
and direct tax collections
Logistics cost
GST & LOGISTICS
Home Market effect
Centralizing hub operations – Nagpur (Zero Mile
City)
Reason Time taken out of
the total
Transportation
time
40%
Check posts 25%
Other official
stoppages
35%
GST – CONCERNS
Compliance burden
GST – CONCERNS
Anti-Profiteering Measures
Set of rules/guidelines that prevent the companies
from making excessive profits with introduction of
GST
Were cleared by GST council on June 18, 2017
A National Anti-Profiteering Authority will be set up
Has a sun-set clause of two years
GST - CONCERNS
Tax rate - multiple tax rates
Revenue protection
Inflation
Training and Infrastructure
Compliance amongst the small businesses
GST – CONCERNS
The gold should be brought under the higher
tariff
Health and education should be brought under
the ambit of GST
Tax over GST would be counter-productive
MULTIPLE TIERS
Need/Necessity
There are too many groups using too many goods. Hence
based on the goods used by these groups different tax rates
are needed
The government needs to maintain revenue neutrality
It may lead to inflation (if all/majority of the commodities
used by poor are in higher slab)
It may also become regressive in nature
Disadvantages
Administrative difficulties
Goes against the central idea of GST-One Nation, One
Indirect Tax
May lead to inflation
MULTIPLE TIERS
Worries with the present tiers and commodities
allocation
Old wine in a new bottle
Better structure required
Complicated structure
Way ahead
Exemptions should be phased out
Taxes on all the goods and services should be rationalized
Fiscal space for GST rationalization through reforms in
Direct Tax structure
GLOBAL EXPERIENCE
Rationalization of tax rates
Inflation
Compliance
Has been regressive in some cases
QUESTIONS
GST has led to co-operative federalism/economic Union of India-elaborate
GST though revolutionary needs fine-tuning if India wants to reap the benefits-discuss
GST implementation rather than reducing the litigation may lead to tax terrorism-discuss
GST regime represents an improvement in form as well as content compared to previous tax regime-explain
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