OF GST IN INDIA
In the Union Budget for 2009-2010, the Finance Minister announced that GST would be in effect from April 1, 2010 in India. However , at the end of January, Asim Dasgupta, Chairman of the Empowered Committee of State Finance Ministers made a statement that GST implementation in India would be deferred.
Goods and Service Tax (Goods and Service Tax) is a tax on goods and services, which is leviable at each point of sale or provision of service, in which at the time of sale of goods or providing the services the seller or service provider can claim the input credit of tax which he has paid while purchasing the goods or procuring the service. The sellers or service providers collect the tax from their customer, who may or may not be the ultimate customer, and before depositing the same to the exchequer, they deduct the tax they have already paid. This is simply very similar to VAT which is at present applicable in most of the states and can be termed as National level VAT on Goods and Services with only one difference that in this system not only goods but also services are involved and the rate of tax on goods and services are generally the same.
Working of GST:
The dealers registered under GST (Manufacturers, Wholesalers and Retailers and Service Providers) are required to charge GST at the specified rate of tax on goods and services that they supply to customers. The GST payable is included in the price paid by the recipient of the goods and services. The supplier must deposit this amount of GST with the
Government. If the recipient of goods or services is a registered dealer , he will normally be able to claim a credit for the amount of GST he has paid, provided he holds a proper tax invoice. This
"input tax credit" is setoff against any GST (Out Put), which the dealer charges on goods and services, which he supplies, to his customers.
The net effect is that dealers charge GST but do not keep it, and pay GST but get a credit for it. This means that they act essentially as collecting agents for the Government. The ultimate burden of the tax falls on the last and final consumer of the goods and services, as this person gets no credit for the GST paid by him to his sellers or service providers.
Benefits expected from GST are:
1. GST provide comprehensive and wider coverage of input credit setoff, you can use service tax credit for the payment of tax on sale of goods etc.
2. Many indirect taxes in state and central level subsumed by GST, You need to pay a single GST instead of all.
3. Uniformity of tax rates across the states
4. By reducing the tax burden the competitiveness of Indian products in international market is expected to increase and there by development of the nation.
5. Prices of goods are expected to reduce in the long run as the benefits of less tax burden would be passed on to the consumer.
The following are the points of distinction between the Empowered Committee of the State Finance Ministers and the Report of the Thirteenth Finance Commission Task Force on GST are as follows. However to introduce the GST successfully in India, the Centre and State Governments must reach a consensus on the structure of GST
* RATE OF TAX: According to the Empowered Committee, there should be multiple SGST rates for goods. Standard rate i.e 7% - 8% and lower rate i.e 4%-5%. Single rate for services( both for CGST and SGST. On the other hand, single rate of GST for all goods and services i.e 5% for CGST and 7%for SGST is put forward by Thirteenth Finance Commission.
* THRESHOLD LEVEL: According to the Empowered Committee, multiple thresholds for SGST to be Rs 1 million and proposed threshold for CGST to be Rs 15 million. On the other hand, uniform threshold i.e. Rs 1 million for both CGST and SGST is put forward by Thirteenth Finance Commission.
* TAXES TO BE SUBSUMED: According to the Empowered Committee, subsume most of the transaction based levies but may exclude octroi, purchase tax on food grains, electricity cess, stamp duties . On the other hand, subsume purchase tax, stamp duty ,electricity duty is put forward by Thirteenth Finance Commission.
* ECONOMY COVERAGE: According to the Empowered Committee, Alcoholic products and Petroleum Products to be kept out of GST. Tobacco products to be subject to GST with input tax credit. On the other hand, Alcohol , emission fuels and tobacco to be subject to dual levy of GST and excise without any credit of the excise component. Also comprehensive taxation adopted for real estate and financial services is put forward by Thirteenth Finance Commission.