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Basic Concepts Of Gst (Part-4)
January, 23rd 2016

How do we compare the present indirect tax laws vis-à-vis proposed GST law regime ? In this part, an attempt is being made to list down the possible differences between the present tax laws and proposed provisions under GST. This comparison is not final and is only for academic purposes to understand the differences or deviations tax base, origin, structure, approach to tax goods and services, place of provision, powers to levy tax, export and import etc.

 

Comparison of Present Taxation and Proposed GST

S.No

Particulars

Present Taxation

Proposed GST

1.

Structural Architecture

• Two separate VAT systems operate simultaneously at two levels, Centre and State, and tax paid (input tax credit) under one is not available as set off against the other

• Tax on services is levied under separate legislation by Centre, i.e., Finance Act, 1994 which regulates service tax

• No comprehensive taxation of services at the State level; few services are taxed under separate enactments

• Import of goods in India are not subjected to State VAT

  • A dual tax with both Central GST (CGST) & State GST (SGST) will be levied on the same base. Thus, all goods and services, barring a few exceptions, will be brought into the GST base.
  • There will be no distinction between goods and services for the purpose of tax with a common legislation applicable to both It allows seamless tax credit amongst Excise Duty, Service Tax & VAT
2.

Place of Taxation

Taxable at the place of manufacture or sale of goods or rendering of service

It is consumption (destination) based tax

3.

Tax Base

Comparatively narrow

Wider

4.

Excise Duty

Imposed by Centre under separate Act, Central Excise Act, 1944. Taxable event is manufacture; Taxed up to manufacturing point

To be subsumed in CGST; Taxable event will be sale; To be taxed up to retail level

5.

Basic Customs Duty

Imposed by Centre under separate Act, i.e., Customs Act, 1962. Taxable event is import

No change is proposed

6.

CVD/SAD

Imposed by Centre under separate Act, i.e., Customs Act, 1962. Taxable event is import

To be subsumed in CGST; Taxable event will be import

7.

Service Tax

Imposed by Centre under separate Act (Finance Act, 1994). Taxable event is provision of service

To be subsumed in CGST & SGST; Taxable event will be provision of service

8.

Central Sales Tax

Imposed by Centre under CST Act, 1956. Collection assigned to States; Taxable event is movement of goods from one State to another

Is being phased out

9.

State VAT

Imposed by States; Taxable event is sale within the State

To be subsumed in SGST; Taxable event is sale within State

10.

Inter-State Transactions

Imposed on goods & services by the Centre (CST, Service Tax)

To be subsumed in GST and subject to SGST & CGST

11.

Tax on Manufacturing activity

As Excise Duty by Centre

No such powers under GST regime

12.

Powers to levy Tax on Sale of Goods

Inter-State : Centre

Local : State

Concurrent powers to Centre & State

13.

Powers to levy Tax on Provision of Services

Service Tax by Centre

Concurrent powers to Centre & State; States to tax more than 40 services

14.

Tax on Import in India

Goods are taxed to Customs Duty (comprises Basic Customs Duty, CVD & SAD);

Services are taxed to Service Tax

Basic Custom Duty on goods : No Change - CVD & SAD on import of goods and import of services : To be subsumed in GST

15.

Tax on Export of Goods & Services

Exempt / Zero-rated

No change is proposed

16.

 

Tax on inter-State Transfer of Goods to Branch / Depot or Agent

Exempt against Form F

Will be taxable

17.

Tax on Transfer of Goods to Branch or Agent within States

Generally exempt but depends upon State procedures

May not be taxable, if BIN of transferor and transferee is same

18.

Cross-Levy set-off / adjustment

Excise duty and Service tax : Cross set off allowed

No cross set-off between CGST and SGST will be allowed

19.

Cascading Effect

Allows cenvat tax credit between Excise Duty & Service Tax, but not with VAT (cross set off is not allowed)

Allows seamless tax credit amongst Excise Duty, Service Tax & VAT

20.

Non-Creditable Goods

Do exist

May exist depending upon negative list / exemptions etc

21.

Credit on Inputs used for Exempted Activities

Not allowed

May not be allowed

22.

Various

Exemptions -Excise Free Zone or VAT Exemption

Available

May be phased out

23.

Exemption for transit Inter-State Sale and High Seas Sale

Available

May be taxable

24.

Transactions against Declaration Forms

Allowed under the CST / VAT

Forms likely to be abolished

25.

Taxation on Govt. and Non-Profit Public Bodies

Partially taxed

May not change much

26.

Stamp Duty

Presently taxed concurrently by the Centre and State

Status not clear; If subsumed under GST, big relief to real estate industry : to claim input tax

27.

Excise Duty Threshold Limit

Presently ₹ 1.5 crores

Rs.10 lacs to 20 lacs (Turnover of ₹ 1.5 crores & above may be administered by Centre and less than ₹ 1.5 crores may be administered by States)

28.

VAT Threshold Limit

Presently, ₹ 5 lacs to 10 lacs

May be ₹ 10 lacs to ₹ 20 lacs

29.

Service Tax Threshold Limit

₹ 10 lacs

May be ₹ 10 lacs to ₹ 20 lacs

30.

Classification of Commodities

Excise Duty based on HSN

VAT not applicable

Likely to be based on HSN

31.

VAT/GST Regis­tration Number

 

Simple TIN (some States : PAN only based)

PAN based

32.

Procedures for Collection of Tax and Filing of Return

For Central Excise & Service Tax, it is uniform. For VAT, it varies from State to State

Likely to be uniform

33.

Tax Administration

Complex due to number of taxes

Likely to be simple and easy, tax friendly

34.

Use of Computer Network

Just started by the States; very minimum; Central taxes are online

Extensive; It will be pre-requisite for implementation of GST

35.

Nature of Present Litigations

  • Sale or Service
  • Classification of goods
  • Situs issue between States
  • Interpretational issues
  • Sale or works contract
  • Valuation of composite
    transactions, etc.
  • Exemptions
  • Suppression / limitation

Likely to be reduced provided GST legislations are properly drafted

 

 
 
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