GOODS AND SERVICES TAX , INDIA
Tax Structure In India and GST
Timeline
Recommendations by Committee
Major Challenges in Implementation
Problems in the current taxation system for that GST plans to improve
Benefits over the current system
Tax Structure in India :
Direct Taxes Indirect Taxes
levied and paid by the same person.
levied on someone else but goes from the pocket of someone else.
eg. Income Tax : Mrunal garnered total income of Rs.10lakhs in 2012 and thus Income Tax Deptt of India would levy tax on his income which he himself is liable to pay eg. Service Tax :Mrunal goes to dine at some expensive restaurant and eats vegetarian dishes worth Rs.1000 and pays Rs.123.6 as Service tax. Now here the Restaurant owner is actually liable to submit the service tax to government but he asks Mrunal to pay him first so that he can submit it to the government.
GOODS AND SERVICES TAX
GST is a proposal of tax in India which would be a comprehensive tax after merging many indirect taxes. Not only it will replace Central Indirect taxes but will replace state levied indirect taxes too.
France was the first country to introduce it.
In India, a dual GST is being proposed wherein a central goods and services tax (CGST) and a state goods and services tax (SGST) will be levied on the taxable value of a transaction.
Features :
1. It will be collected on VAT method ie tax at every stage of value addition.
2. It will be imposed at an uniform rate @ 20% (Centre state share = 12 and 8 percent respectively)
Will prices grow up after implementation of GST ?
In fact, the prices of commodities are expected to come down in the long run as dealers will be allowed to avail the CENVAT credit of Excise duty paid by Manufacturers and more over he will be allowed to avail the CENVAT credit of tax paid on services also. This passing of the benefits of reduced tax incidence to consumers by slashing the prices of goods will definitely reduce the prices.
Implications of GST on imports and exports
Imports would be subject to GST. Exports, however, will be zero-rated, meaning exporters of goods and services need not pay GST on their exports. GST paid by them on the procurement of goods and services will be refunded as similar to the present scenario.
Can states decide to opt out of GST?
In a deviation from its earlier stand, the government has agreed for a phased roll-out of GST. States will also have the flexibility to opt out of GST.
How will it become a reality?
The GST can be implemented only through a Constitutional Amendment Bill, which means it needs to be approved by not less than two-thirds of the members present and voting in each House of Parliament. The GST must also be ratified by the legislatures of at least one-half of the states.
TIMELINE
2000 NDA setup empowered committee under AsimDasGuptato design GST model.
2006-07 Union Finance Min Chiddu announced GST would be implemented from Apr 1 , 2010 and asked the empowered committee with state finance ministers to submit their views.
2008 The reports were received by GOI (under the leadership of Mohan LOL)
2009 1.Committee of Principle Secretaries of the states setup
2.Discussions with the then Fin-Min (And now the proud successor to the lady who loved to travel abroad on sarkari money)Pranab Da.
3.Detailed Discussion Papers prepared
4. Tax Rate Proposal :Mostly the GST rates are between 15-20% worldover and the same is expected for India too (After all we are too afraid to innovate and loves to immitate).
2011 Constitution 115th Amendment Bill introduced to enable state legislatures to frame laws for levying GST .
1.it seeks to enable President (sorry The President) to setup within 60 days of passage of the bill a GST COUNCIL with Chiddu(Union Fin-Min) as Chairperson &MoS for Revenue + Fin-Min of all the states as members.
GST Council will thus work on GST rates , exemption lists etc.
2. setup a GST DISPUTES SETTLEMENT AUTHORITY : with a chairperson and 2 members.
And finally it was referred to the Parliamentary Committee on Finance for examinations. (hopefully there won’t be kanjoos examiners of UPSC :P)
It recommended that sections proposing a Dispute Settlement Authority to decide disputes arising among states and take action against the states should be removed from the Bill, and that the GST Council itself should evolve a mechanism to resolve the disputes.
The committee also recommended that decisions in the GST Council be taken by voting and not by consensus. It said one-third weightage for central representatives and two-third weightage for state representatives may be provided, with the decision taken by the Council being passed with more than three-fourth votes of the representatives present. The quorum for holding meetings of the Council is proposed to be raised to half from one-third
2011
Part II GST NETWORK : IT strategy of GST headed by the AADHAR Babu (NandanNilekani).
Objective : Common portal for centre and states to enable electronic processing of registrations, returns , payments etc.
NSDL (National Securities Depository ltd.) :technnology partner to operate as IT backbone of GST.
2012 Finance ministry formed a committee of seven members under the chairmanship of Yogendra Garg, commissioner export, Mumbai, to frame a model legislation of GST for the Centre.
2013 The Goods and Services Tax Bill is likely to be taken up in the winter session of Parliament, said J D Seelam, Minister of State for Finance.
RECOMMENDATIONS BY PARLIAMENTARY COMMITTEE ON FINANCE
1. Decision by voting not consensus
2. No dispute settlement authority
3. Modified bank model instead of Inter-State GST
4. Subsume entry tax in GST
5. Automatic compensation mechanism
6. Power to states in natural calamity
7. GST monitoring and evaluation cell
MAJOR CHALLENGES IN THE IMPLEMENTATION OF GST
Some CM of a BJP ruled state to a jholachap media person : Arreyehhumarekhilaaf congress kisaazishhaitaakihumareyahan development naho sake.
(States collect VAT at different rates ranging from 0% to 20% & the challenge is to convince them to be satisfy with their share of 8% as proposed.)
However, the central government has said it will compensate states for the potential revenue loss. Mr Chiddu has set aside Rs. 9,000 crore towards the first installment of the balance of central sales tax (CST) compensation. Also, instead of an earlier proposal for a uniform GST rates across the country, the Union Government has agreed to have a floor rate of taxation with a narrow band
Administrative mechanism: In India, a merger between two government agencies is next to impossible, as long as appraisals and promotions are linked to seniority and regretfully, not performance.
And integrating the revenue collection services of 28 (29 if Telangana is included)odd states and an extremely powerful Central Service into one GST collection agent.
Federal structureof the Indian constitution. Taking away the power of the states to tax items under the state list is tantamount to infringing upon the basic structure of the Constitution.
MeriMarzi :Items are being thrown in and out of the GST basket at fancy. Petroleum (which constitutes a major chunk of the import and manufacturing and consequentially a large part of Customs, Central Excise and Sales Tax) was very vehemently kept out of the ambit of GST until recently. Now Oil companies, sensing the chance of availing extensive tax credits have managed to bring it in.
Alcohol is still kept out of the purview, and the states whose subsistence is dependent on incomes from liquor will never give up control over Abkari.
PROBLEMS IN THE CURRENT TAXATION SYSTEM GST PLANS TO IMPROVE
Ambiguous definitions Taxation at Manufacturing Level is levied on goods manufactured or produced in India which gives rise to definitional issues as to what constitutes manufacturing. Result = dterminations through judicial proceedings #more burden on judiciary.
Less Complexity A strong single taxation system wherein various Central and State statutes will be subsumed into one comprehensive enactment. Process of judicial decisions would be speedy too with one statute covering all aspects of indirect taxes.
Exclusion of Services from state taxation Services remain outside the scope of state taxation powers and GST would include tax on all such services where states can not legislate.
BENEFITS OVER THE CURRENT SYSTEM
Economy common market across states , will lead to increased compliance and increase India's tax-to-gross domestic product ratio
Corporate Average tax burden on companies will fall. Reducing production costs will make exporters more competitive.
Exporters Phasing out of Central Sales Tax (CST) would reduce the cost of locally manufactured goods and services.
Result = increase the competitiveness of Indian goods and services in the international market and give boost to Indian exports
Centre And State Approximately $ 15 billion a year of profits are predicted by the government with the implementation of GST as it is speculated to bring about raise in employment, promotion of exports and consequently a significant boost in overall economic growth
Another positive aspect of this proposal is that it is aimed at equitable division of tax burden between the manufacturing and services.
Individuals And Companies With the collection of both the central and state taxes proposed to be made at the point of sale , both components will be charged on the manufacturing costs and the individual will benefit from lowered prices in the process which will subsequently lead to increase in consumption thereby profiting companies
Name Namit
References 1.Indian Economy , 5th edition , Ramesh Singh , Chapter 17 : Tax Structure In India 2.http://en.wikipedia.org/wiki/Goods_and_Services_Tax_(India)
3. http://centreright.in/2013/02/why-gst-is-not-a-good-idea/#.UmEVm9KBnPI
4. http://www.dnaindia.com/money/1265576/report-all-you-ever-wanted-to-know-about-gst
5. http://newindianexpress.com/business/news/GST-Bill-likely-in-winter-session/2013/09/12/article1780121.ece
6. http://articles.economictimes.indiatimes.com/2013-08-13/news/41374977_1_services-tax-state-gst-goods-and-services
7. http://www.caclubindia.com/articles/gst-what-why-when--3393.asp#.UmFF5RBbzYM
8. http://profit.ndtv.com/news/cheat-sheet/article-gst-decoded-why-chidambaram-has-given-rs-9000-crore-to-states-317055
Tax Structure In India and GST
Timeline
Recommendations by Committee
Major Challenges in Implementation
Problems in the current taxation system for that GST plans to improve
Benefits over the current system
Tax Structure in India :
Direct Taxes Indirect Taxes
levied and paid by the same person.
levied on someone else but goes from the pocket of someone else.
eg. Income Tax : Mrunal garnered total income of Rs.10lakhs in 2012 and thus Income Tax Deptt of India would levy tax on his income which he himself is liable to pay eg. Service Tax :Mrunal goes to dine at some expensive restaurant and eats vegetarian dishes worth Rs.1000 and pays Rs.123.6 as Service tax. Now here the Restaurant owner is actually liable to submit the service tax to government but he asks Mrunal to pay him first so that he can submit it to the government.
GOODS AND SERVICES TAX
GST is a proposal of tax in India which would be a comprehensive tax after merging many indirect taxes. Not only it will replace Central Indirect taxes but will replace state levied indirect taxes too.
France was the first country to introduce it.
In India, a dual GST is being proposed wherein a central goods and services tax (CGST) and a state goods and services tax (SGST) will be levied on the taxable value of a transaction.
Features :
1. It will be collected on VAT method ie tax at every stage of value addition.
2. It will be imposed at an uniform rate @ 20% (Centre state share = 12 and 8 percent respectively)
Will prices grow up after implementation of GST ?
In fact, the prices of commodities are expected to come down in the long run as dealers will be allowed to avail the CENVAT credit of Excise duty paid by Manufacturers and more over he will be allowed to avail the CENVAT credit of tax paid on services also. This passing of the benefits of reduced tax incidence to consumers by slashing the prices of goods will definitely reduce the prices.
Implications of GST on imports and exports
Imports would be subject to GST. Exports, however, will be zero-rated, meaning exporters of goods and services need not pay GST on their exports. GST paid by them on the procurement of goods and services will be refunded as similar to the present scenario.
Can states decide to opt out of GST?
In a deviation from its earlier stand, the government has agreed for a phased roll-out of GST. States will also have the flexibility to opt out of GST.
How will it become a reality?
The GST can be implemented only through a Constitutional Amendment Bill, which means it needs to be approved by not less than two-thirds of the members present and voting in each House of Parliament. The GST must also be ratified by the legislatures of at least one-half of the states.
TIMELINE
2000 NDA setup empowered committee under AsimDasGuptato design GST model.
2006-07 Union Finance Min Chiddu announced GST would be implemented from Apr 1 , 2010 and asked the empowered committee with state finance ministers to submit their views.
2008 The reports were received by GOI (under the leadership of Mohan LOL)
2009 1.Committee of Principle Secretaries of the states setup
2.Discussions with the then Fin-Min (And now the proud successor to the lady who loved to travel abroad on sarkari money)Pranab Da.
3.Detailed Discussion Papers prepared
4. Tax Rate Proposal :Mostly the GST rates are between 15-20% worldover and the same is expected for India too (After all we are too afraid to innovate and loves to immitate).
2011 Constitution 115th Amendment Bill introduced to enable state legislatures to frame laws for levying GST .
1.it seeks to enable President (sorry The President) to setup within 60 days of passage of the bill a GST COUNCIL with Chiddu(Union Fin-Min) as Chairperson &MoS for Revenue + Fin-Min of all the states as members.
GST Council will thus work on GST rates , exemption lists etc.
2. setup a GST DISPUTES SETTLEMENT AUTHORITY : with a chairperson and 2 members.
And finally it was referred to the Parliamentary Committee on Finance for examinations. (hopefully there won’t be kanjoos examiners of UPSC :P)
It recommended that sections proposing a Dispute Settlement Authority to decide disputes arising among states and take action against the states should be removed from the Bill, and that the GST Council itself should evolve a mechanism to resolve the disputes.
The committee also recommended that decisions in the GST Council be taken by voting and not by consensus. It said one-third weightage for central representatives and two-third weightage for state representatives may be provided, with the decision taken by the Council being passed with more than three-fourth votes of the representatives present. The quorum for holding meetings of the Council is proposed to be raised to half from one-third
2011
Part II GST NETWORK : IT strategy of GST headed by the AADHAR Babu (NandanNilekani).
Objective : Common portal for centre and states to enable electronic processing of registrations, returns , payments etc.
NSDL (National Securities Depository ltd.) :technnology partner to operate as IT backbone of GST.
2012 Finance ministry formed a committee of seven members under the chairmanship of Yogendra Garg, commissioner export, Mumbai, to frame a model legislation of GST for the Centre.
2013 The Goods and Services Tax Bill is likely to be taken up in the winter session of Parliament, said J D Seelam, Minister of State for Finance.
RECOMMENDATIONS BY PARLIAMENTARY COMMITTEE ON FINANCE
1. Decision by voting not consensus
2. No dispute settlement authority
3. Modified bank model instead of Inter-State GST
4. Subsume entry tax in GST
5. Automatic compensation mechanism
6. Power to states in natural calamity
7. GST monitoring and evaluation cell
MAJOR CHALLENGES IN THE IMPLEMENTATION OF GST
Some CM of a BJP ruled state to a jholachap media person : Arreyehhumarekhilaaf congress kisaazishhaitaakihumareyahan development naho sake.
(States collect VAT at different rates ranging from 0% to 20% & the challenge is to convince them to be satisfy with their share of 8% as proposed.)
However, the central government has said it will compensate states for the potential revenue loss. Mr Chiddu has set aside Rs. 9,000 crore towards the first installment of the balance of central sales tax (CST) compensation. Also, instead of an earlier proposal for a uniform GST rates across the country, the Union Government has agreed to have a floor rate of taxation with a narrow band
Administrative mechanism: In India, a merger between two government agencies is next to impossible, as long as appraisals and promotions are linked to seniority and regretfully, not performance.
And integrating the revenue collection services of 28 (29 if Telangana is included)odd states and an extremely powerful Central Service into one GST collection agent.
Federal structureof the Indian constitution. Taking away the power of the states to tax items under the state list is tantamount to infringing upon the basic structure of the Constitution.
MeriMarzi :Items are being thrown in and out of the GST basket at fancy. Petroleum (which constitutes a major chunk of the import and manufacturing and consequentially a large part of Customs, Central Excise and Sales Tax) was very vehemently kept out of the ambit of GST until recently. Now Oil companies, sensing the chance of availing extensive tax credits have managed to bring it in.
Alcohol is still kept out of the purview, and the states whose subsistence is dependent on incomes from liquor will never give up control over Abkari.
PROBLEMS IN THE CURRENT TAXATION SYSTEM GST PLANS TO IMPROVE
Ambiguous definitions Taxation at Manufacturing Level is levied on goods manufactured or produced in India which gives rise to definitional issues as to what constitutes manufacturing. Result = dterminations through judicial proceedings #more burden on judiciary.
Less Complexity A strong single taxation system wherein various Central and State statutes will be subsumed into one comprehensive enactment. Process of judicial decisions would be speedy too with one statute covering all aspects of indirect taxes.
Exclusion of Services from state taxation Services remain outside the scope of state taxation powers and GST would include tax on all such services where states can not legislate.
BENEFITS OVER THE CURRENT SYSTEM
Economy common market across states , will lead to increased compliance and increase India's tax-to-gross domestic product ratio
Corporate Average tax burden on companies will fall. Reducing production costs will make exporters more competitive.
Exporters Phasing out of Central Sales Tax (CST) would reduce the cost of locally manufactured goods and services.
Result = increase the competitiveness of Indian goods and services in the international market and give boost to Indian exports
Centre And State Approximately $ 15 billion a year of profits are predicted by the government with the implementation of GST as it is speculated to bring about raise in employment, promotion of exports and consequently a significant boost in overall economic growth
Another positive aspect of this proposal is that it is aimed at equitable division of tax burden between the manufacturing and services.
Individuals And Companies With the collection of both the central and state taxes proposed to be made at the point of sale , both components will be charged on the manufacturing costs and the individual will benefit from lowered prices in the process which will subsequently lead to increase in consumption thereby profiting companies
Name Namit
References 1.Indian Economy , 5th edition , Ramesh Singh , Chapter 17 : Tax Structure In India 2.http://en.wikipedia.org/wiki/Goods_and_Services_Tax_(India)
3. http://centreright.in/2013/02/why-gst-is-not-a-good-idea/#.UmEVm9KBnPI
4. http://www.dnaindia.com/money/1265576/report-all-you-ever-wanted-to-know-about-gst
5. http://newindianexpress.com/business/news/GST-Bill-likely-in-winter-session/2013/09/12/article1780121.ece
6. http://articles.economictimes.indiatimes.com/2013-08-13/news/41374977_1_services-tax-state-gst-goods-and-services
7. http://www.caclubindia.com/articles/gst-what-why-when--3393.asp#.UmFF5RBbzYM
8. http://profit.ndtv.com/news/cheat-sheet/article-gst-decoded-why-chidambaram-has-given-rs-9000-crore-to-states-317055
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