Yojana August 2017 Comprehensive Summary ⟋ Gist: GST (Goods and Service Tax)

Why? Trader in T. Nadu can sell in HP would worrying about rates of each state? Can truck from J&K to Kerala without being stopped anywhere at check post? . Launched on 1st July 2017 at Central Hall of Parliament. One Nation, One Market and One Tax - 2nd major surgical strike for tax evaders - freer movement of commodity, attract foreign investors, benefit to customer by competition. Indirect Tax - to create single market of $ 2.3 trillion.

GST (Goods and Service Tax): Yojana August 2017 Summary (Important) (In English)

Benefits to Customers:

  • Uniform single indirect tax across India
  • Seamless flow of input tax credit
  • Removal of tax barriers at inter-state borders
  • Reduced logistic costs
  • End to end IT enabled system
  • Minimal interface with tax authorities
  • Wider choice
  • More employment for people
  • Govt. to witness tax buoyancy & tax collection cost to be reduced - uniformity in tax

GST Features

  • Reduction in multiplicity of taxes & compliance cost
  • Less developed and consuming states to get boost
  • Average tax burden on companies to come down
  • Simplified and automated procedure
  • Minimum number of floor rates of Tax
  • Common law under single administration
  • Enhance India՚s position as investment destination of globe
  • Imports under Integrated GST - increased ease of doing business and protection from cheap imports

Prior Scenario

  • Center: Levy taxes on manufacture of goods (except liquor)
  • State: Levy tax on sale of goods
  • For inter-state sales: Center has power to levy tax but collection and retention of tax by states
  • For services, Center could levy tax
  • Cascading of tax
  • Tax arbitrage b⟋w inter-state and intra-state sales with who takes the advantage of artificial barriers

GST Launch

  • Already in 160 nations (UK, South Korea, Japan, Germany, Italy, Canada, Australia, Russia, China, Singapore, Malaysia)
  • India at 130th position out of 190 nations in Ease of Doing Business Index - 2017
  • India՚s ranking in Paying Taxes is 172 out of 190 nations in World Bank՚s Doing Business Report
  • 1st in France in 1954
  • VP Singh launched MODVAT (Modified VAT) in 1986
  • 1st in India under AB Vajpayee - Finance Minister of W. Bengal Asim Dasgupta who designed GST Model, later in 2003 - Kelkar tax reforms
  • In 2006 - FM said GST would come in force by 2010
  • It required constitutional amendment - 122nd Amendment introduced in 2014 - passed by Lok Sabha in 2015, moved to Rajya Sabha & later joint session - report was submitted on July 22,2015. Revised bill in 2016 and passed in Aug, 2016President was notified on 8th Sept 2016
  • 101st Amendment Act 2016 - all goods and services except liquor under GST - provide compensation to state for loss of revenue for 5 years (base year as 2015 - 16 with 14% annual growth rate)
  • 5 petroleum commodities - crude oil, petrol, high speed diesel, natural gas & aviation turbine fuel - temporarily out of GST
  • Inter-state supply of goods and services will have Integrated GST - destination based consumption tax (levied at point of consumption and not production)

GST Council

  • Quorum is 50% of total members
  • States -2⟋3rd weightage & Center - 1⟋3rd weightage
  • Decision by 75% majority
  • Chairperson is FM
  • Harmonization of GST b⟋w center and state
  • Would consider: What is to be exempted? Date to levy GST on petroleum products? Model GST laws? Threshold limit of turnover for exemption? Floor rates and specific rates?
  • Decision taken by majority not less than 3⟋4th of weighted votes present and voting
  • Center has 33% in voting so state support is must
  • Before the rollout - 18 meetings were held
  • As an example of cooperative federalism
  • Threshold limit for exemption is ₹ 20 lakh (₹ 10 lakh for special category states - NE States, Sikkim, Uttarakhand & Himachal Pradesh)
  • Govt. has right to convert area based exemption scheme to reimbursement based scheme
  • GST rates - on principle of equivalence - close to the current tax incidence of goods and services
  • Tax rates as - 5% , 12% , 18% and 28% with 3% for gold & 0.25% for rough and semi-precious stones (UK & USA have highest slab of 17%)
  • Cess over peak rate of 28% on luxury and sin goods
  • Exports and supplies to SEZ are zero rated
  • Electronic filling of taxes to be done
  • 90% of taxpayers with turnover < ₹ 1.5 crore would vest with State; 10% of taxpayers with turnover < ₹ 1.5 crore would vest with center; taxpayers with turnover > ₹ 1.5 crore will be equally divided b⟋w center and state
  • Idea is to protect poor section of the society, overall revenue of state and center are protected and that tax incidence on goods and services does not increase or decrease substantially from present tax incidence
  • Composition Scheme: For persons with aggregate income less than ₹ 75 lakh - filing on quarterly basis - rates will be manufacturer (1%) , restaurants (2.5%) , traders (0.5%) of the turnover each under CGST and SGST
  • Tackling Tax Leakage: Idea is to match invoice. Input tax credit will be available if taxable supplies received by buyers gets matched with taxable supplies received by supplier - IT backbone is geared to match more than 3 billion invoice per month - would check fraud and tax evasion

Bills Cleared

  • Central GST Bill, 2017
  • Integrated GST Bill, 2017 - For inter-state & imported goods
  • GST (Compensation to States) Bill, 2017
  • Union Territory GST Bill, 2017

Taxes under GST

  • Subsume 17 taxes - 8 central and 9 state taxes & 23 cess under 1 net
  • Replace 34 state VAT of 97 types, central excise forms with 13 return forms with 12 forms and 1 challan
    1. Central Excise Tax
    2. Commercial Tax
    3. State VAT
    4. Food Tax
    5. Central Sales Tax
    6. Octroi
    7. Entertainment Tax
    8. Entry Tax
    9. Purchase Tax
    10. Luxury Tax
    11. Advertisement Tax
    12. Tax on lottery, betting and gambling

No GST on sale and purchase of securities as by Securities Transaction Tax

GSTN (GST Network)

  • Non-profit organization created for all concerned parties to collaborate on single portal with authorized capital of ₹ 10 crore (24.5% by center, 24.5% by state and remaining by private banks)
    1. Facilitate registration
    2. Filing of taxes⟋returns
    3. Provide MIS report to center⟋state
    4. Accounting of fund transfer b⟋w center and state
    5. Match tax payment with banks
    6. Run matching engine for matching, reversal and reclaim input tax credit
  • Envisage credit of Input tax credit of 80 lakh taxpayers to be processed in 10 days after monthly filing - with 2.6 to 3 billion B2B invoice
  • 69 lakh existing taxpayers migrated to GST
  • 5 lakh new entities have applied and 3 lakhs have been granted
  • Applications are checked by validating PAN, Aadhaar & DIN⟋CIN
  • A section 25 private limited company with Strategic Control with Govt.
GST Network
  • Develop back end module for 25 states
  • Infosys appointed as managed Service Provider
  • 34 GST Suvidha Providers appointed
  • Has designed offline excel based template to prepare and file monthly return with maximum ease and minimum cost
  • Excel will generate JSON file that will be uploaded on GST portal
  • Tool can pull 19,000 line items from excel to generate 5Mb file in one go
  • Mobile App: GST Rate Finder launched - for android - have GST rate, chapter heading of Harmonized System of Nomenclature (HSN)

Cascading of Taxes

Cascading of Taxes
  • Japan, Australia, Canada - witnessed inflation after GST
  • Higher compliance cost for MSME can led to rise in inflation
  • What will reduce price - lower effective tax rate on large number of goods, input tax credit and improvement in supply chain
  • Tax GDP ratio could increase form 10% to 16%
  • India՚s public debt stand at 67%- highest amongst Asian economies except Japan

GST Benefits

  • Easier compliance
  • Easier inter-state movement of goods
  • Single interface for all
  • Reduction in Tax Burden
  • Reduce Biasness
  • Reduce litigation
  • Create Common Market
  • Enhance Export Competitiveness
  • Improve Ease of Doing Business for MSMEs
  • Transparent
  • Abolition of multiple layers of taxes
  • Mitigate cascading of tax
  • Increase voluntary compliance
  • Efficient administration by government

Challenges under GST

  • IT Preparedness & Infrastructure
  • Officers Training
  • New Registrants
  • Transitional Issues
  • Pending Cases and Past Disputes
  • Tax Administration (Alignment and Merger)
  • Inventory Check and Recording
  • Preparation for Procedure to be followed in Organization

Anti-Profiteering

  • If there is reduction in rate of tax on the supply of goods or services or benefit of input tax credit is now available under GST, then registered person must pass on the benefit by reduction in prices
  • National Anti-Profiteering Authority - chaired by secretary level officials to enforce it will refer suspect cases to director-general of safeguards under CBEC for investigation
  • Anti-Profiteering Rules, 2017 were laid down - 3 tier committee - standing committee, state and national committee
  • Empowered to make company lower the price, refund money to consumer or deposit it in Consumer Welfare Fund
  • If found guilty - will have to pay 18% interest on quantum of tax reduction that was not passed to consumer

Ways Forward

  • Malaysia - single GST rate 6%
  • Singapore - Single GST rate of 7%
  • India should move forward to single minimal rate for GST with minimum exemptions
GST (Goods and Service Tax): Yojana August 2017 Summary (Important) (In Hindi)

Examrace Team at Aug 25, 2021