The new chinwag since the past few years had been the long impending Goods and Services tax in India, which has finally passed and implemented. The history of GST in India dates back to 12 years back when in February 2007, the then FM P Chidambaram announced that GST would be effective from FY10.But, owing to multiple concerns by states about losing their tax sovereignty, GST implementation was successively pushed back. While the implementation of GST is being perceived as the most powerful and beneficial reform in the Indian economy, it has all raised a lot of concerns, complications and implementation dilemmas; a lot of which can only be resolved in due course. For a common man, it is best try and comprehend a few salient features of this Act to begin with.
- Dual system :
India will have a dual GST system- a CGST and a SGST (central GST and state GST) with the tax rates split into two. The structure will provide for a continuous chain of set-offs from the producer to the end consumer. Importantly, an IGST (Integrated GST) mechanism will provide full set-offs for inter- state transactions thereby reducing barriers to entry.
The basic structure is: IGST – CGST – SGST
FEATURES OF GST:
- Rates: Five rates of GST tax would apply- 5%, 12%, 18% and 28%. Tax rate for gold is an exception to ‘four-tax slab-rule’ and the same has been fixed at 3%. A cess over the peak rate of 28% on certain specified luxury and demerit goods, like tobacco and tobacco products, pan masala, aerated waters, motor vehicles, would be imposed for a period of five years to compensate states for any revenue loss on account of implementation of GST
- Alcohol is out of GST and while five specified petroleum products (Crude, Petrol, Diesel, ATF & Natural gas) are out of GST for the time being, a provision has been kept open wherein they can be brought under GST from a later date. Thus at some point if the GST Council decides the to include petroleum, it can be done without a legislative amendment.
- The threshold limit for exemption is fixed at INR 2mn and for special category states it is kept at INR 1mn. For interstate supplier even if the turnover is below INR 2mn, the business has to compulsorily register.
- A composition option (i.e. to pay tax at a flat rate without credits) would be available to small businesses (including to specified category of manufacturers and service providers) having an annual turnover of up to INR 7.5mn. The rate of GST for composition scheme is 2% for manufacturing, 1% for trading and 5% for restaurants.
- Exports would be zero-rated as will be supply to SEZ units; Import of goods would be treated as inter-State supplies and would be subject to IGST in addition to the applicable customs duties.
- Under GST, all invoices will have to be prepared by taxpayers on the GST portal only. With GST filings working on an online system, there are compliance requirements in form of monthly filings. The most common form of documentation will involve 3 online filings per month- a GSTR1 form, a GSTR2 form and a GSTR3 form. Under composition scheme, a GSTR4 form has to be filed every quarter. On an annual basis, a GSTR9 form has to be filed by 31st Dec of the subsequent year. GSTR2 is auto-populated based on suppliers’ GSTR1.
- As per GST rules transition credit can be availed upto 30th Sep, 2017. If the trader has excise paid purchase invoice, full transition credit of such duty will be available on stock in hand
- An international tourist procuring goods in India may while leaving the country seek refund of GST paid. For such refunds the international tourists have to be charged IGST.
- All imports shall be deemed as inter-State supplies and accordingly IGST shall be levied in addition to the applicable Custom duties. Accordingly, goods which are imported into India shall, in addition to the Basic Customs duty, be liable to IGST at such rate as is leviable under the IGST Act, 2017 on a similar article on its supply in India.
|Centre’s Indirect taxes||State Indirect Taxes|
|Central Excise Duty||Central Sales Tax|
|Additional duties of excise (goods of special improtance||Luxury tax|
|CVD, SAD||Entertainment Tax|
|Service Tax||Luxury Tax|
|Excise (on alcohol)|
|Motor vehicles tax|
|Passengers& Goods Taxes|
|Almost 45% of indirect taxes subsumed under GST|
|Central Excise (ex petroleum)||12.7||State VAT(ex alcohol, ex petroleum)||34.4|
|Central Excise (petroleum)||10||VAT (on petroleum)||11.1|
|Service tax||14.5||VAT (on alcohol)||10|
|Customs duty||12.7||Central Sales Tax||4|
|Taxes on income||0.7|
|Direct Tax||49||Taxes on property||12.3|
|Excise on alcohol||12|
|Entry tax/ others||4.1|