Latest Expert Exchange Queries

GST Demo Service software link: https://ims.go2customer.com
Username: demouser Password: demopass
Get your inventory and invoicing software GST Ready from Binarysoft info@binarysoft.com
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
 
 
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing | GST - Goods and Services Tax
 
 
 
 
Popular Search: Central Excise rule to resale the machines to a new company :: ACCOUNTING STANDARDS :: VAT RATES :: TAX RATES - GOODS TAXABLE @ 4% :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: articles on VAT and GST in India :: due date for vat payment :: ACCOUNTING STANDARD :: empanelment :: TDS :: form 3cd :: ARTICLES ON INPUT TAX CREDIT IN VAT :: VAT Audit :: list of goods taxed at 4% :: cpt
 
 
News Headlines »
 How to save income tax? Here are 6 investments with tax free income
 10 Top salary deductions that can save tax for you
 What are the tax saving options beyond Section 80C?
 The penalties for not paying tax on time
 How to make your salary tax efficient
 I-T Department may go into overdrive this quarter
 Ways to reduce the TDS deduction from your salary
 4 Tips for choosing who prepares your 2017 Tax Returns
 Processing of income-tax returns under section 143(1) of the Income-tax Act which were filed in Forms ITR-1 to 6 & applicability of section 143(1)(a)(vi)
 Price Waterhouse gets 2-year ban in Satyam case
 How to save income tax under section 80C

Clearing the cobwebs from the concept of GST
November, 10th 2014

In the interest of clear thinking, I am writing this treatise on GST which is one of the most topical subjects.

The immediate provocation for my writing this article is that when I met many senior people in the private sector recently, I found that there was a lot of vagueness in their minds about the true nature of

Turnover tax, VAT and GST. Also I found, the same lack of clarity in the minds of the teachers of general economic theories in higher institutions. I found some court judgements to suffer from lack of clarity.

Many countries call this system VAT and some others call it GST. In Canada, Australia, Singapore and New Zealand it is called GST.

On my visit to Canada, when I enquired of a junior officer of the Finance Ministry how their VAT was doing, he replied that there was no VAT in Canada. He added, there was GST in the country.

The three taxes which have to be distinguished are Turnover taxes, VAT and GST. Turnover tax is a tax which is on the total turnover of sale as a percentage. It can also be a fixed rate on the basis of weight or length. In a turnover tax on a product (output) there is no credit given for the tax paid for the input. When the input tax credit is allowed it is called a Value Added Tax.

For, the tax is on the value added on the raw material and machinery (input). If it is not allowed, it becomes a Turnover tax.

Thus, central excise duty or service tax can be both turnover tax as well as value added tax depending on whether the government decides to allow the credit of input tax to be adjusted against the final duty payable on the output.

In this context, I may refer to the judgement of Home Solution Retail India Ltd. Vs. UOI - 2011 (24) S.T.R. 129 (Del.) which has held that the service of renting of immovable property for commercial use is not service under Section 65(105)(zzzz) of the Finance Act 2007 though any service connected with such immovable property is service. This judgment has heavily depended on the proposition that service tax is a Value Added Tax and if there is no value addition, then there is no service.

The High Court has relied on the judgment of the Supreme Court in the case of All India Federation of Tax Practitioners vs. UOI-2007(7)S.T.R.625(S.C.), which held that "

.service tax is VAT. Just as excise duty is a tax on value addition on goods, service tax is a tax on value addition by rendition of service".

Really this portion is not a part of the Supreme Court Judgment but only a statement of economic background of indirect taxes.

But the economic background has not been depicted correctly since both service tax and excise duty are not necessarily value added tax but can also be turnover tax.

Central Excise was turnover tax before 1986. And service tax was introduced as a turnover tax in 1994 but later made into a value added tax by allowing input tax credit.

There is difference between VAT and GST. GST necessarily includes service tax, but VAT can only be on goods without including service tax.

An example, is the state VAT in India, which does not include service tax. The expression VAT has two meanings. First, it refers to the concept of taxing the value added.

Second, it also refers to the actual tax rate imposed on goods and services in a particular country.

Conclusion:
(1) The full expression of the tax is Value Added on Goods and Services Tax. So it can be called VAT or GST, for short. So, both are same when both include service tax. But if service tax is not included, then it is only VAT.

(2)Turnover tax with credit of input tax becomes VAT. So excise duty or service tax can be both turnover tax or VAT depending on whether credit of input tax is given or not which is the discretion of the Government.

 

 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2018 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - Our Experience

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions