GST: A New Reform

A Brief Introduction:

GST is a comprehensive value added Tax on Goods & Services, collected at each stage of supply chain, and with applicable set off in respect of the tax remitted at previous stages. It is a destination based consumption tax i.e. on final consumption. India has adopted concurrent Dual GST Model for implementing GST i.e. Tax levied by Centre & State on both Goods & Services –

1.   Central Goods & Service Tax (CGST): It is a Central level tax levied by Central Govt. which subsumes current central taxes such as Central Excise Duty, Central Sales Tax, Additional Excise Duties, Service Tax, CVD (Countervailing Duty or Additional Customs Duty), SAD (Special Additional Duties of Custom, surcharges and subsumed. The revenue that shall be collected under CGST shall belong to Central Govt. only.

2.      State Goods & Service Tax (SGST): For the purposes of Intra-State supply of Goods & Services, SGST shall be levied which shall be administered by State Govt. only.

3.      Integrated Goods & Service Tax (IGST): Being a hybrid of CGST & SGST, IGST shall be levied for the purposes of Inter-State supply of goods & services which shall be administered by Central Government.

Since treatment of CGST & SGST to be done separately, Input Tax Credit for CGST shall be allowed to be taken against taxes paid at central level only and utilization of such credit can be done against the payment of CGST only. The same principle shall be applicable on State level also. This concurrent dual GST law does not permit cross set off of Input Tax Credit.

Why GST is necessary for India?

1.      With the launch of GST Bill, GDP Growth shall increase by approx. 1%

2.      Increase in Competition in International market by 5%

3.      Boost in Foreign Direct Investment

4.    Abolition of multiple taxes which will lead to One Nation – One Tax i.e. no more delays due to different taxes levied by different states.

5.      Direct Tax & Indirect Tax Revenue shall get strengthened

6.      Lower transaction cost will in turn lead to minimal corruption.

7.      Strikes balance of fiscal autonomy between Centre & States.

GST, a reform, will change the way of generating revenues to the Central & State Governments which shall ultimately contribute to the growth of Indian economy.

Do not miss our next update on Latest Amendments of GST.

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Updates that you would not like to miss –

1.    In GST, tax evasion up to Rs. 2 crore shall be a bailable offence. To make goods and services tax regime less onerous, the Centre and states have decided to make the penal provisions less stringent.

2.     If a person who had taken voluntary registration but fails to start business for six months, then the ‘Proper Officer’ can cancel the registration on his own motion.

3.   Temporary use of business assets/services for private or non-business use is not Deemed Supply in Revised GST Model Law.

4.      Sale of shares outside the floor of Stock Exchange is not an unlawful activity. Off-market transactions are not illegal. It is always possible for the parties to enter into transactions even without the help of brokers.

5.   Trade discount, as per order of Supreme Court of India, is deductible under VAT even if it is given subsequent to sale via credit note.

Have a great day ahead!