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GST Related News and Details

Discussion in 'World Economy' started by defc0n, Jun 30, 2017.

  1. defc0n

    defc0n 2nd Lieutant FULL MEMBER

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    @GuardianRED

    Following are the answers to the various frequently asked questions relating to GST:

    Question 1.What is GST? How does it work?

    Answer: GST is one indirect tax for the whole nation, which will make India one unified common market.

    GST is a single tax on the supply of goods and services, right from the manufacturer to the consumer. Credits of input taxes paid at each stage will be available in the subsequent stage of value addition, which makes GST essentially a tax only on value addition at each stage. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages.

    Question 2. What are the benefits of GST?

    Answer:The benefits of GST can be summarized as under:

    • For business and industry
    o Easy compliance: A robust and comprehensive IT system would be the foundation of the GST regime in India. Therefore, all tax payer services such as registrations, returns, payments, etc. would be available to the taxpayers online, which would make compliance easy and transparent.

    o Uniformity of tax rates and structures: GST will ensure that indirect tax rates and structures are common across the country, thereby increasing certainty and ease of doing business. In other words, GST would make doing business in the country tax neutral, irrespective of the choice of place of doing business.

    o Removal of cascading: A system of seamless tax-credits throughout the value-chain, and across boundaries of States, would ensure that there is minimal cascading of taxes. This would reduce hidden costs of doing business.

    o Improved competitiveness: Reduction in transaction costs of doing business would eventually lead to an improved competitiveness for the trade and industry.

    o Gain to manufacturers and exporters: The subsuming of major Central and State taxes in GST, complete and comprehensive set-off of input goods and services and phasing out of Central Sales Tax (CST) would reduce the cost of locally manufactured goods and services. This will increase the competitiveness of Indian goods and services in the international market and give boost to Indian exports. The uniformity in tax rates and procedures across the country will also go a long way in reducing the compliance cost.


    • For Central and State Governments
    o Simple and easy to administer: Multiple indirect taxes at the Central and State levels are being replaced by GST. Backed with a robust end-to-end IT system, GST would be simpler and easier to administer than all other indirect taxes of the Centre and State levied so far.

    o Better controls on leakage: GST will result in better tax compliance due to a robust IT infrastructure. Due to the seamless transfer of input tax credit from one stage to another in the chain of value addition, there is an in-built mechanism in the design of GST that would incentivize tax compliance by traders.

    o Higher revenue efficiency: GST is expected to decrease the cost of collection of tax revenues of the Government, and will therefore, lead to higher revenue efficiency.


    • For the consumer
    o Single and transparent tax proportionate to the value of goods and services: Due to multiple indirect taxes being levied by the Centre and State, with incomplete or no input tax credits available at progressive stages of value addition, the cost of most goods and services in the country today are laden with many hidden taxes. Under GST, there would be only one tax from the manufacturer to the consumer, leading to transparency of taxes paid to the final consumer.

    o Relief in overall tax burden: Because of efficiency gains and prevention of leakages, the overall tax burden on most commodities will come down, which will benefit consumers.

    Question 3. Which taxes at the Centre and State level are being subsumed into GST?

    Answer:

    At the Central level, the following taxes are being subsumed:

    1. Central Excise Duty,
    2. Additional Excise Duty,
    3. Service Tax,
    4. Additional Customs Duty commonly known as Countervailing Duty, and
    5. Special Additional Duty of Customs.
    At the State level, the following taxes are being subsumed:

    1. Subsuming of State Value Added Tax/Sales Tax,
    2. Entertainment Tax (other than the tax levied by the local bodies), Central Sales Tax (levied by the Centre and collected by the States),
    3. Octroi and Entry tax,
    4. Purchase Tax,
    5. Luxury tax, and
    6. Taxes on lottery, betting and gambling.
    Question 4. What are the major chronological events that have led to the introduction of GST?

    Answer: GST is being introduced in the country after a 13 year long journey since it was first discussed in the report of the Kelkar Task Force on indirect taxes. A brief chronology outlining the major milestones on the proposal for introduction of GST in India is as follows:

    1. In 2003, the Kelkar Task Force on indirect tax had suggested a comprehensive Goods and Services Tax (GST) based on VAT principle.
    2. A proposal to introduce a National level Goods and Services Tax (GST) by April 1, 2010 was first mooted in the Budget Speech for the financial year 2006-07.
    3. Since the proposal involved reform/ restructuring of not only indirect taxes levied by the Centre but also the States, the responsibility of preparing a Design and Road Map for the implementation of GST was assigned to the Empowered Committee of State Finance Ministers (EC).
    4. Based on inputs from Govt of India and States, the EC released its First Discussion Paper on Goods and Services Tax in India in November, 2009.
    5. In order to take the GST related work further, a Joint Working Group consisting of officers from Central as well as State Government was constituted in September, 2009.
    6. In order to amend the Constitution to enable introduction of GST, the Constitution (115th Amendment) Bill was introduced in the Lok Sabha in March 2011. As per the prescribed procedure, the Bill was referred to the Standing Committee on Finance of the Parliament for examination and report.
    7. Meanwhile, in pursuance of the decision taken in a meeting between the Union Finance Minister and the Empowered Committee of State Finance Ministers on 8th November, 2012, a ‘Committee on GST Design’, consisting of the officials of the Government of India, State Governments and the Empowered Committee was constituted.
    8. This Committee did a detailed discussion on GST design including the Constitution (115th) Amendment Bill and submitted its report in January, 2013. Based on this Report, the EC recommended certain changes in the Constitution Amendment Bill in their meeting at Bhubaneswar in January 2013.
    9. The Empowered Committee in the Bhubaneswar meeting also decided to constitute three committees of officers to discuss and report on various aspects of GST as follows:-
    (a) Committee on Place of Supply Rules and Revenue Neutral Rates;

    (b) Committee on dual control, threshold and exemptions;

    (c) Committee on IGST and GST on imports.

    1. The Parliamentary Standing Committee submitted its Report in August, 2013 to the Lok Sabha. The recommendations of the Empowered Committee and the recommendations of the Parliamentary Standing Committee were examined in the Ministry in consultation with the Legislative Department. Most of the recommendations made by the Empowered Committee and the Parliamentary Standing Committee were accepted and the draft Amendment Bill was suitably revised.
    2. The final draft Constitutional Amendment Bill incorporating the above stated changes were sent to the Empowered Committee for consideration in September 2013.
    3. The EC once again made certain recommendations on the Bill after its meeting in Shillong in November 2013. Certain recommendations of the Empowered Committee were incorporated in the draft Constitution (115th Amendment) Bill. The revised draft was sent for consideration of the Empowered Committee in March, 2014.
    4. The 115th Constitutional (Amendment) Bill, 2011, for the introduction of GST introduced in the Lok Sabha in March 2011 lapsed with the dissolution of the 15th Lok Sabha.
    5. In June 2014, the draft Constitution Amendment Bill was sent to the Empowered Committee after approval of the new Government.
    6. Based on a broad consensus reached with the Empowered Committee on the contours of the Bill, the Cabinet on 17.12.2014 approved the proposal for introduction of a Bill in the Parliament for amending the Constitution of India to facilitate the introduction of Goods and Services Tax (GST) in the country. The Bill was introduced in the Lok Sabha on 19.12.2014, and was passed by the Lok Sabha on 06.05.2015. It was then referred to the Select Committee of Rajya Sabha, which submitted its report on 22.07.2015.
    Question 5.How would GST be administered in India?

    Answer:Keeping in mind the federal structure of India, there will be two components of GST – Central GST (CGST) and State GST (SGST). Both Centre and States will simultaneously levy GST across the value chain. Tax will be levied on every supply of goods and services. Centre would levy and collect Central Goods and Services Tax (CGST), and States would levy and collect the State Goods and Services Tax (SGST) on all transactions within a State. The input tax credit of CGST would be available for discharging the CGST liability on the output at each stage. Similarly, the credit of SGST paid on inputs would be allowed for paying the SGST on output. No cross utilization of credit would be permitted.

    Question 6.How would a particular transaction of goods and services be taxed simultaneously under Central GST (CGST) and State GST (SGST)?

    Answer :The Central GST and the State GST would be levied simultaneously on every transaction of supply of goods and services except on exempted goods and services, goods which are outside the purview of GST and the transactions which are below the prescribed threshold limits. Further, both would be levied on the same price or value unlike State VAT which is levied on the value of the goods inclusive of Central Excise.

    A diagrammatic representation of the working of the Dual GST model within a State is shown in Figure 1 below.

    Figure 1: GST within State

    [​IMG]







    Question 7.Will cross utilization of credits between goods and services be allowed under GST regime?

    Answer :Cross utilization of credit of CGST between goods and services would be allowed. Similarly, the facility of cross utilization of credit will be available in case of SGST. However, the cross utilization of CGST and SGST would not be allowed except in the case of inter-State supply of goods and services under the IGST model which is explained in answer to the next question.

    Question 8.How will be Inter-State Transactions of Goods and Services be taxed under GST in terms of IGST method?

    Answer:In case of inter-State transactions, the Centre would levy and collect the Integrated Goods and Services Tax (IGST) on all inter-State supplies of goods and services under Article 269A (1) of the Constitution. The IGST would roughly be equal to CGST plus SGST. The IGST mechanism has been designed to ensure seamless flow of input tax credit from one State to another. The inter-State seller would pay IGST on the sale of his goods to the Central Government after adjusting credit of IGST, CGST and SGST on his purchases (in that order). The exporting State will transfer to the Centre the credit of SGST used in payment of IGST. The importing dealer will claim credit of IGST while discharging his output tax liability (both CGST and SGST) in his own State. The Centre will transfer to the importing State the credit of IGST used in payment of SGST.Since GST is a destination-based tax, all SGST on the final product will ordinarily accrue to the consuming State.

    A diagrammatic representation of the working of the IGST model for inter-State transactions is shown in Figure 2 below.

    Figure 2

    [​IMG]












    Question 9.How will IT be used for the implementation of GST?

    Answer:For the implementation of GST in the country, the Central and State Governments have jointly registered Goods and Services Tax Network (GSTN) as a not-for-profit, non-Government Company to provide shared IT infrastructure and services to Central and State Governments, tax payers and other stakeholders. The key objectives of GSTN are to provide a standard and uniform interface to the taxpayers, and shared infrastructure and services to Central and State/UT governments.

    GSTN is working on developing a state-of-the-art comprehensive IT infrastructure including the common GST portal providing frontend services of registration, returns and payments to all taxpayers, as well as the backend IT modules for certain States that include processing of returns, registrations, audits, assessments, appeals, etc. All States, accounting authorities, RBI and banks, are also preparing their IT infrastructure for the administration of GST.

    There would no manual filing of returns. All taxes can also be paid online. All mis-matched returns would be auto-generated, and there would be no need for manual interventions. Most returns would be self-assessed.

    Question 10.How will imports be taxed under GST?

    Answer :The Additional Duty of Excise or CVD and the Special Additional Duty or SAD presently being levied on imports will be subsumed under GST. As per explanation to clause (1) of article 269A of the Constitution, IGST will be levied on all imports into the territory of India. Unlike in the present regime, the States where imported goods are consumed will now gain their share from this IGST paid on imported goods.

    Question 11.What are the major features of the Constitution (122nd Amendment) Bill, 2014?

    Answer :The salient features of the Bill are as follows:

    1. Conferring simultaneous power upon Parliament and the State Legislatures to make laws governing goods and services tax;
    2. Subsuming of various Central indirect taxes and levies such as Central Excise Duty, Additional Excise Duties, Service Tax, Additional Customs Duty commonly known as Countervailing Duty, and Special Additional Duty of Customs;
    3. Subsuming of State Value Added Tax/Sales Tax, Entertainment Tax (other than the tax levied by the local bodies), Central Sales Tax (levied by the Centre and collected by the States), Octroi and Entry tax, Purchase Tax, Luxury tax, and Taxes on lottery, betting and gambling;
    4. Dispensing with the concept of ‘declared goods of special importance’ under the Constitution;
    5. Levy of Integrated Goods and Services Tax on inter-State transactions of goods and services;
    6. GST to be levied on all goods and services, except alcoholic liquor for human consumption. Petroleum and petroleum products shall be subject to the levy of GST on a later date notified on the recommendation of the Goods and Services Tax Council;
    7. Compensation to the States for loss of revenue arising on account of implementation of the Goods and Services Tax for a period of five years;
    8. Creation of Goods and Services Tax Council to examine issues relating to goods and services tax and make recommendations to the Union and the States on parameters like rates, taxes, cesses and surcharges to be subsumed, exemption list and threshold limits, Model GST laws, etc. The Council shall function under the Chairmanship of the Union Finance Minister and will have all the State Governments as Members.
    Question 12.What are the major features of the proposed registration procedures under GST?

    Answer:The major features of the proposed registration procedures under GST are as follows:

    1. Existing dealers: Existing VAT/Central excise/Service Tax payers will not have to apply afresh for registration under GST.
    2. New dealers: Single application to be filed online for registration under GST.
    iii. The registration number will be PAN based and will serve the purpose for Centre and State.

    1. Unified application to both tax authorities.
    2. Each dealer to be given unique ID GSTIN.
    3. Deemed approval within three days.
    vii. Post registration verification in risk based cases only.

    Question 13.What are the major features of the proposed returns filing procedures under GST?

    Answer:The major features of the proposed returns filing procedures under GST are as follows:

    1. Common return would serve the purpose of both Centre and State Government.
    2. There are eight forms provided for in the GST business processes for filing for returns. Most of the average tax payers would be using only four forms for filing their returns. These are return for supplies, return for purchases, monthly returns and annual return.
    3. Small taxpayers: Small taxpayers who have opted composition scheme shall have to file return on quarterly basis.
    4. Filing of returns shall be completely online. All taxes can also be paid online.
    Question 14.What are the major features of the proposed payment procedures under GST?

    Answer:The major features of the proposed payments procedures under GST are as follows:

    1. Electronic payment process- no generation of paper at any stage
    2. Single point interface for challan generation- GSTN
    iii. Ease of payment – payment can be made through online banking, Credit Card/Debit Card, NEFT/RTGS and through cheque/cash at the bank

    1. Common challan form with auto-population features
    2. Use of single challan and single payment instrument
    3. Common set of authorized banks
    vii. Common Accounting Codes


    Source : http://www.gstindia.com/about/
     
    Last edited: Jun 30, 2017
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  2. defc0n

    defc0n 2nd Lieutant FULL MEMBER

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    Goods and Services Tax (GST) Bill, explained

    The Goods and Services Tax (GST), the biggest reform in India’s indirect tax structure since the economy began to be opened up 25 years ago, at last looks set to become reality. The Constitution (122nd) Amendment Bill comes up in Rajya Sabha today, on the back of a broad political consensus and boosted by the ‘good wishes’ of the Congress, which holds the crucial cards on its passage. Here’s how GST differs from the current regimes, how it will work, and what will happen if Parliament clears the Bill. Also Read: GST Bill – The day after, government hints at rate higher than 18 per cent



    [​IMG]

    Stage 1

    Imagine a manufacturer of, say, shirts. He buys raw material or inputs — cloth, thread, buttons, tailoring equipment — worth Rs 100, a sum that includes a tax of Rs 10. With these raw materials, he manufactures a shirt.
    In the process of creating the shirt, the manufacturer adds value to the materials he started out with. Let us take this value added by him to be Rs 30. The gross value of his good would, then, be Rs 100 + 30, or Rs 130.
    At a tax rate of 10%, the tax on output (this shirt) will then be Rs 13. But under GST, he can set off this tax (Rs 13) against the tax he has already paid on raw material/inputs (Rs 10). Therefore, the effective GST incidence on the manufacturer is only Rs 3 (13 – 10).

    Stage 2

    The next stage is that of the good passing from the manufacturer to the wholesaler. The wholesaler purchases it for Rs 130, and adds on value (which is basically his ‘margin’) of, say, Rs 20. The gross value of the good he sells would then be Rs 130 + 20 — or a total of Rs 150.
    A 10% tax on this amount will be Rs 15. But again, under GST, he can set off the tax on his output (Rs 15) against the tax on his purchased good from the manufacturer (Rs 13). Thus, the effective GST incidence on the wholesaler is only Rs 2 (15 – 13).

    Stage 3

    In the final stage, a retailer buys the shirt from the wholesaler. To his purchase price of Rs 150, he adds value, or margin, of, say, Rs 10. The gross value of what he sells, therefore, goes up to Rs 150 + 10, or Rs 160. The tax on this, at 10%, will be Rs 16. But by setting off this tax (Rs 16) against the tax on his purchase from the wholesaler (Rs 15), the retailer brings down the effective GST incidence on himself to Re 1 (16 –15).
    Thus, the total GST on the entire value chain from the raw material/input suppliers (who can claim no tax credit since they haven’t purchased anything themselves) through the manufacturer, wholesaler and retailer is, Rs 10 + 3 +2 + 1, or Rs 16.


    How it would be in a non-GST regime?
    In a full non-GST system, there is a cascading burden of “tax on tax”, as there are no set-offs for taxes paid on inputs or on previous purchases.

    Thus, if we consider the same example as above, the manufacturer buys raw materials/inputs at Rs 100 after paying tax of Rs 10. The gross value of the shirt (good) he manufacturers would be Rs 130, on which he pays a tax of Rs 13. But since there is no set-off against the Rs 10 he has already paid as tax on raw materials/inputs, the good is sold to the wholesaler at Rs 143 (130 + 13).

    With the wholesaler adding value of Rs 20, the gross value of the good sold by him is, then, Rs 163. On this, the tax of Rs 16.30 (at 10%) takes the sale value of the good to Rs 179.30. The wholesaler, again, cannot set off the tax on the sale of his good against the tax paid on his purchase from the manufacturer.

    The retailer, thus, buys the good at Rs 179.30, and sells it at a gross value of Rs 208.23, which includes his value addition of Rs 10 and a tax of Rs 18.93 (at 10% of Rs 179.30). Again, there is no mechanism for setting off the tax on the retailer’s sale against the tax paid on his previous purchase.

    The total tax on the chain from the raw material/input suppliers to the final retailer in this full no-GST regime will, thus, work out to Rs 10 + 13 + 16.30 + 18.93 = Rs 58.23. For the final consumer, the price of the good would then be Rs 150 + 58.23 = Rs 208.23.

    Compare this Rs 208.23 — with a tax of Rs 58.23 — to the final price of Rs 166, which includes a total tax of Rs 16, under GST.

    Also read | Looking forward to GST becoming reality, says FICCI

    What’s it like in today’s mixed scenario?
    Currently, we have Value-Added Tax (VAT) systems both at the central and state levels. But the central VAT or CENVAT mechanism extends tax set-offs only against central excise duty and service tax paid up to the level of production. CENVAT does not extend to value addition by the distributive trade below the stage of manufacturing; even manufacturers cannot claim set-off against other central taxes such as additional excise duty and surcharge.

    Likewise, state VATs cover only sales. Sellers can claim credit only against VAT paid on previous purchases. The VAT also does not subsume a host of other taxes imposed within the states such as luxury and entertainment tax, octroi, etc.

    Once GST comes into effect, all central- and state-level taxes and levies on all goods and services will be subsumed within an integrated tax having two components: a central GST and a state GST.

    This will ensure a complete, comprehensive and continuous mechanism of tax credits. Under it, there will be tax only on value addition at each stage, with the producer/seller at every stage able to set off his taxes against the central/state GST paid on his purchases. The end-consumer will bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages.

    Also read | GST and federalism: Some questions BJP must answer

    What will the Bill in Parliament today do?
    It basically seeks to amends the Constitution to empower both the Centre and the states to levy GST. This they cannot do now, because the Centre cannot impose any tax on goods beyond manufacturing (Excise) or primary import (Customs) stage, while states do not have the power to tax services. The proposed GST would subsume various central (Excise Duty, Additional Excise Duty, service tax, Countervailing or Additional Customs Duty, Special Additional Duty of Customs, etc.), as well as state-level indirect taxes (VAT/sales tax, purchase tax, entertainment tax, luxury tax, octroi, entry tax, etc). Once the Bill is passed, there will only be a national-level central GST and a state-level GST spanning the entire value chain for all goods and services, with some exemptions.

    [​IMG]WHAT GOES?

    Central taxes That The GST will replace

    # Central Excise Duty
    # Duties of Excise (medicinal and toilet preparations)
    # Additional Duties of Excise (goodsof special importance)
    # Additional Duties of Excise (textiles and textile products)
    # Additional Duties of Customs (commonly known as CVD)
    # Special Additional Duty of Customs (SAD)
    # Service Tax
    # Cesses and surcharges in so far as they relate to supply of goods or services

    State taxes That The GST will Subsume

    # State VAT
    # Central Sales Tax
    # Purchase Tax
    # Luxury Tax
    # Entry Tax (all forms)
    # Entertainment Tax (not levied by local bodies)
    # Taxes on advertisements
    # Taxes on lotteries, betting and gambling
    # State cesses and surcharges

    Also read | Confident of getting GST passed in Parliament: Rajnath Singh

    The GST Council
    WILL CONSIST of the union Finance Minister (chairman) and MoS in charge of Revenue; Minister in charge of Finance or Taxation, or any other Minister, nominated by each state
    DECISIONS WILL be made by three-fourths majority of votes cast; Centre shall have a third of votes cast, states shall together have two-thirds
    MECHANISM for resolving disputes arising out of its recommendations may be decided by the Council itself

    The levy of GST

    BOTH Parliament, state Houses will have the power to make laws on the taxation of goods and services
    PARLIAMENT’S LAW will not override a state law on GST
    EXCLUSIVE POWER to Centre to levy, collect GST in the course of interstate trade or commerce, or imports. This will be known as Integrated GST (IGST)
    CENTRAL LAW will prescribe manner of sharing of IGST between Centre and states, based on GST Council’s views

    What’s Out of GST…

    Alcoholic liquor for human consumption
    Petroleum crude, high speed diesel, motor spirit (petrol), natural gas and aviation turbine fuel — GST Council will decide until when

    … AND What’s In

    Tobacco, tobacco products. Centre may impose excise duty on tobacco

    The journey so far…
    Budget 2006-07: GST by April 1, 2010, announced. Subsequently, Empowered Committee (EC) of state Finance Ministers tasked with drawing up roadmap and design

    April 2008: EC, headed by the then West Bengal Finance Minister Asim Dasgupta, submits report to the central government, which offers its views and comments in October and December of that year. Joint working groups are then set up to examine options on exemptions and thresholds, taxation of services and inter-state supplies, etc

    November 2009: EC releases its First Discussion Paper

    March 22, 2011: The Constitution (115th Amendment) Bill is introduced in Lok Sabha; is referred to Parliamentary Standing Committee on Finance, which submitted its report on August 7, 2013. Bill lapsed as term of the Lok Sabha ended in 2014

    December 19, 2014: Constitution (122nd Amendment) Bill introduced in Lok Sabha

    May 6, 2015: Constitution Amendment Bill passed by Lok Sabha

    May 12, 2015: Bill referred to a 21-member Select Committee of Rajya Sabha headed by Bhupender Yadav

    July 22, 2015: Select Committee submits its report

    Monsoon and Winter Sessions 2015, Budget Session 2016: Bill not tabled in the face of opposition led by the Congress and persistence of sticking points

    …And Ahead
    The President shall constitute the GST Council

    The GST Council shall make recommendations on:

    # Taxes to be subsumed
    # Exemptions
    # Model GST laws, Principles of Levy, etc.
    # Threshold for exemption
    # Rates, including floor and bands
    # Special rate/rates for specified period
    # Date from which GST to be levied on crude, high speed diesel, natural gas, aviation turbine fuel and petrol
    # Special provisions for the Northeast, J&K, etc.

    Parliament will have to pass legislation on central GST (CGST) and Integrated GST (IGST)

    All 29 states and 9 UTs will have to pass their state GST (SGST) Acts

    Dates of implementation of CGST, SGST and IGST have to be negotiated and synchronised

    Also read | GST to be simple with 1 pc additional tax removal, say experts

    TAX GAINS
    BIGGEST BENEFIT is that it will disincentivise tax evasion. If you don’t pay tax on what you sell, you don’t get credit for taxes on your inputs. Also, you will buy only from those who have already paid taxes on what they are supplying. Result: a lot of currently underground transactions will come overground.

    LOWER TAX RATES will follow from GST covering all goods and services, with tax only on value addition and set-offs against taxes on inputs/previous purchases. Right now, we have more tax on fewer items; with GST, there will be less tax on more items. Ideally, no good or service should be tax-exempt, as this will break the input tax chain.

    Source : http://indianexpress.com/article/ex...goods-services-tax-economy-explained-2950335/
     
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  3. defc0n

    defc0n 2nd Lieutant FULL MEMBER

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    What is GST (Goods & Services Tax) : Details & Benefits

    Last updated: June 19, 2017 | by Sreekanth Reddy

    The present structure of Indirect Taxes is very complex in India. There are so many types of taxes that are levied by the Central and State Governments on Goods & Services.

    We have to pay ‘Entertainment Tax’ for watching a movie. We have to pay Value Added Tax (VAT) on purchasing goods & services. And there are Excise duties, Import Duties, Luxury Tax, Central Sales Tax, Service Tax….hhmmm..

    As of today some of these taxes are levied by the Central Government and some are by the State governments. How nice will it be if there is only one unified tax rate instead of all these taxes?

    In this post, let us understand – what is Goods and Services Tax and its importance. What are the benefits of GST Bill to Corporates, common man and end consumer? What are the advantages, disadvantages and challenges?

    What is GST?
    It has been long pending issue to streamline all the different types of indirect taxes and implement a “single taxation” system. This system is called as GST ( GST is the abbreviated form of Goods & Services Tax). The main expectation from this system is to abolish all indirect taxes and only GST would be levied. As the name suggests, the GST will be levied both on Goods and Services.

    GST was first introduced during 2007-08 budget session. On 17th December 2014, the current Union Cabinet ministry approved the proposal for introduction GST Constitutional Amendment Bill. On 19th of December 2014, the bill was presented on GST in Loksabha. The Bill will be tabled and taken up for discussion during the coming Budget session. The current central government is very determined to implement GST Constitutional Amendment Bill.


    GST is a tax that we need to pay on supply of goods & services. Any person, who is providing or supplying goods and services is liable to charge GST.

    How is GST applied?

    GST is a consumption based tax/levy. It is based on the “Destination principle.” GST is applied on goods and services at the place where final/actual consumption happens.

    GST is collected on value-added goods and services at each stage of sale or purchase in the supply chain. GST paid on the procurement of goods and services can be set off against that payable on the supply of goods or services.The manufacturer or wholesaler or retailer will pay the applicable GST rate but will claim back through tax credit mechanism.

    But being the last person in the supply chain, the end consumer has to bear this tax and so, in many respects, GST is like a last-point retail tax. GST is going to be collected at point of Sale.[​IMG]

    The GST is an indirect tax which means that the tax is passed on till the last stage wherein it is the customer of the goods and services who bears the tax. This is the case even today for all indirect taxes but the difference under the GST is that with streamlining of the multiple taxes the final cost to the customer will come out to be lower on the elimination of double charging in the system.

    Let us understand the above supply chain of GST with an example:[​IMG]

    The current tax structure does not allow a business person to take tax credits. There are lot of chances that double taxation takes place at every step of supply chain. This may set to change with the implementation of GST.


    Indian Government is opting for Dual System GST. This system will have two components which will be known as

    • Central Goods and Service Tax (CGST) and
    • State Goods and Service Tax (SGST).
    The current taxes like Excise duties, service tax, custom duty etc will be merged under CGST. The taxes like sales tax, entertainment tax, VAT and other state taxes will be included in SGST.

    So, how is GST Levied? GST will be levied on the place of consumption of Goods and services. It can be levied on :

    • Intra-state supply and consumption of goods & services
    • Inter-state movement of goods
    • Import of Goods & Services
    [​IMG]What is the applicable GST rate?

    The rate (percentage) of GST is not yet decided. As mentioned in the above table, there might be CGST, SGST and Integrated GST rates. It is also widely believed that there will be 2 or 3 rates based on the importance of goods. Like, the rates can be lower for essential goods and could be high for precious/luxury items.

    Benefits of GST Bill implementation

    • The tax structure will be made lean and simple
    • The entire Indian market will be a unified market which may translate into lower business costs. It can facilitate seamless movement of goods across states and reduce the transaction costs of businesses.
    • It is good for export oriented businesses. Because it is not applied for goods/services which are exported out of India.
    • In the long run, the lower tax burden could translate into lower prices on goods for consumers.
    • The Suppliers, manufacturers, wholesalers and retailers are able to recover GST incurred on input costs as tax credits. This reduces the cost of doing business, thus enabling fairer prices for consumers.
    • It can bring more transparency and better compliance.
    • Number of departments (tax departments) will reduce which in turn may lead to less corruption
    • More business entities will come under the tax system thus widening the tax base. This may lead to better and more tax revenue collections.
    • Companies which are under unorganized sector will come under tax regime.
    Challenges for implementing Goods & Services Tax system

    • The bill is yet to be tabled and passed in the Parliament
    • To implement the bill (if cleared by the Parliament) there has to be lot changes at administration level, Information Technology integration has to happen, sound IT infrastructure is needed, the state governments has to be compensated for the loss of revenues (if any) and many more..
    • GST, being a consumption-based tax, states with higher consumption of goods and services will have better revenues. So, the co-operation from state governments would be one of the key factors for the successful implementation of GST
    Since GST replaces many cascading taxes, the common man may benefit after implementing it. But it all depends on ‘what rate the GST is going to be fixed at?’ Also, Small Traders (based on Annual Business turnover) may be exempted from it.

    France was the first country to introduce this system in 1954. Nearly 140 countries are following this tax system. GST could be the next biggest tax reform in India. This reform could be a continuing process until it is fully evolved. We need to wait few more months for more details on Goods & Services Tax system.

    https://webforms.ey.com/in/en/services/ey-goods-and-services-tax-gst
     
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  4. GuardianRED

    GuardianRED Lieutenant FULL MEMBER

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    Wow ... thanks that was Quick.... A lot to read thru. Still have couple of questions as customer

    1) Is there a a complete list for services that one can see, so that when one is buying commodities such as gold electronics etc or at a restaurant, cinemas etc (when they pile on the tax) - i.e not do be fooled and taken for a ride

    2) How will be GST be enforced? (we see traders going on strike)
     
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  5. defc0n

    defc0n 2nd Lieutant FULL MEMBER

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    Actually, I was reading through these myself. That's why shared these when I saw your message in the chat box.
    As for lists, I guess we will have to wait for the official document on that.

    *edit*

    GST rate list: Here’s what will change from tonight

    In only a few hours from now, India will launch the Goods and Services (GST) that aims to bring the country under a uniform tax regime. The GST launch event will take place at the Parliament at midnight on Friday.

    Live updates of GST launch in Parliament

    GST rates have been fixed for over 1,000 items, and the GST Council has taken care that the new tax slabs are as close to the current structure to ensure that the transition is revenue-neutral.

    Although there are four tax slabs—5%, 12%, 18% and 28%—most of the commodities fall in the 12% and 18% slabs. Here’s a list of items on which tax rates will change after the GST launch.



    [​IMG]
    Click here for enlarge







    [​IMG]



    [​IMG]

    [​IMG]

     
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  6. defc0n

    defc0n 2nd Lieutant FULL MEMBER

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  7. GuardianRED

    GuardianRED Lieutenant FULL MEMBER

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  8. GuardianRED

    GuardianRED Lieutenant FULL MEMBER

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  9. Flyboy!

    Flyboy! Lieutenant FULL MEMBER

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    Can someone explain to me WHY GST is being charged on items like baby food, sanitary napkins and equipment for differently abled ??? Who the fcuk is making these hideous decisions ?
     
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  10. defc0n

    defc0n 2nd Lieutant FULL MEMBER

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    No frikkin clue. They are not going to repack for sure. All sellers have tried to clear off their stocks before gst is implemented.

    Someone knowledgeable in this field needs to explain this stuff. The working mechanism of gst is not clear to me, specifically the items it is targeting.
     
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  11. defc0n

    defc0n 2nd Lieutant FULL MEMBER

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    Last edited: Jul 1, 2017
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  12. SrNair

    SrNair Captain FULL MEMBER

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    At the end the GST is actually spiking up the prices of all kind of stuffs including essential items .
    Dont know what is going on here?
     
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  13. Blackjay

    Blackjay Developers Guild Developers -IT and R&D

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    I am not an expert by long shot,but was reading up on it.Please let me try my best to explain understand that I may very well be wrong.


    GST is added over the final selling price.So you were getting vat and service tax over your MRP in big bazaar,now you will get GST over it.Total price you pay is equal to MRP+GST applicable on MRP.

    No repackaging is gonna happen.Most small traders will simply clear-out their old stock at old prices.Remember that have got two more months to comply.

    Even smaller trader between 20 lakh to 75 lakh turnover(intrastate business),come under composite scheme.They will simply add 1% tax on their final selling price.They won't get any input credit since they are not generating output GST.

    Even smaller one our local kirana guys(I think those are the one you wanted to know about), don't have to do anything because GST only apply for turnover more than 20 lakh..They don't even have to register.All they need to do is to maintain their books so in future they can prove to an officer that their turnover is really less than 20 lakh. In their case whosoever they are buying from wholeseller/dealer will be paying GST to the government,since the invoice chain end there.
     
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  14. Blackjay

    Blackjay Developers Guild Developers -IT and R&D

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    PS just reread your question.Sorry if previous answer went a different route.Inshort, yes GST will be added over your mrp.Just like local supermarkets used to add vat over your MRP in bill.
     
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  15. Blackjay

    Blackjay Developers Guild Developers -IT and R&D

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    They had to fit thousands of goods and services in 4 slabs.Obviously they have messed up in a lot of places.Their are more gems clothes under 1000 have different rate than clothes over 1000.Expect a lot of jeans for 999:D.Restaurant with ac have different rate tag restaurant without ac.Expect to eat while sweating for cheaper food:D.

    Lot of these things will be rationalised later depending on when and how much people protest.For example farmers managed to bring down fertilizer rate from 12 to 5% recently.
     
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