Governance · Law

Goods And Services Tax : A New Tax Regime

Aditi Singh elucidates the Goods and Services Tax (GST), it’s features and other important factors associated.

INTRODUCTION

Though the journey towards the Goods and Service Tax (GST) regime has been a long and tedious one, but by the passing of the 122nd Constitution Amendment Bill, 2014 both by the Lok Sabha and the Rajya Sabha, the GST regime seems almost impending. On June 14th, 2016 the Draft Model GST Law was passed by the Government which again brought a step closer to bring major tax reforms in modern India. The Government has aimed to pass the GST on April 1st, 2017.

GST is a tax on goods and services with comprehensive and continuous chain of set-off benefits from the producer’s point and service provider’s point up to the retailer’s level. So under this system, tax will levied on the value added on every level and the supplier can set off the previously paid GST on the Goods and Services. This in return will put less burden on the consumer who will pay the GST charged by the last supplier, with set-off advantages at the earlier stages.

 

ADVANTAGES OF THE GOODS AND SERVICES TAX

The main purpose of such reforms is to remove the cascading effects, introduce the concept of single tax, promote ease of doing business and interlink every manufacturing/ distribution/production entity into one network. It will merge all the existing tax into one tax. Expensive products may become less expensive as tax rates are reduced under the GST system. Processed food will be made available at cheaper rates, as the applicable GST is likely to be lower than the current combined tax on such products.  As it aims to remove various tax barriers, it will help in free flow of goods and services throughout the nation and thus removing economic distortions and increasing economic growth and development. It will also facilitate building a transparent and corruption less tax regime.

 

SOME KEY ELEMENTS OF THE PROPOSED LAW

A few important aspects of the proposed law need to be taken into account.

(1) Liability To Tax 

The liability to tax will arise if the aggregate turnover exceeds Rs.10 lakh and for N.E.   States (including Sikkim), this limit is above Rs.5 lakh. The taxable event under GST regime will be supply of goods or services.

(2) Point Of Taxation

GST will be levied on the happening of the following events:-

a) Where the goods are movable, the date on which the goods are removed for supply to the recipient;

b) In the case of immovable properties, it will be the date on which the goods are made available to the concerned person;

c) Date of issue of invoice by the supplier;

d) When payment is given to the supplier;

e) Date when the receipt of goods is acknowledged by book entries by the recipient.

(3) Registration Of Dealers

The section 19 of Model GST Law deals with registration procedures. It is required when a dealer’s aggregate turnover in a F.Y. exceeds Rs. 9 lakh. But the limit can be reduced to Rs. 4 lakh, if the dealer is stationed in North Eastern States. The dealer can get the registration in the State where taxable goods and services are provided. He is required to give some proof of his identity like PAN, etc.

Under the existing indirect tax laws, even a person who is not ‘engaged’ in a particular business activity i.e. even if the activity is not performed on routine basis, registration would be required in certain cases. But the model law provides for registration of casual taxable person and non-resident taxable person who undertake transactions in India occasionally or for limited period without having fixed place of business.

(4) Rate Of GST

Indirect taxes are essentially regressive in nature because the burden of this tax generally passes on fully to the ultimate consumer without making any distinction as to whether the consumer is rich or poor, big or small, or strong or weak. Therefore it imposes more burden than the direct tax.

For GST, it is not practical to impose progressive rates, therefore, the Government has to come up with such low rate which can cause less hardship to people with low income.  A Govt. panel headed by Chief Economic Adviser, Arvind Subramanian, has recommended three broad rates for GST: 17-18% as the standard rate for most goods and services, 12% for essential items and 40% for luxury items and tobacco. Precious metals are taxed at 2-6%.

Whatever be the tax rate decided, it should be simple and in the general interest of the people.

 

CONCLUSION

The increasing problem of tax avoidance and tax invasion has accelerated the need of a uniform tax system. The Government by implementing GST has aimed to rationalize tax structure and to bring uniformity in the tax structure.

However, there are certain problems in implementing GST. There is an increase in cost of compliance and inflation rates. It is not easy to understand the state and centre relationship. Also this regime is trying to remove the difference between goods and services. Further common man is still not aware of the benefits and usage of such system. Also, bringing a common rate of interest will make the services expensive for the common people. If the Government is able to overcome the hurdles, then having such uniform tax system will help in bringing corruption – free tax system and will also facilitate trade growth in the country.

 

REFERENCES

1. Reema Upal, All about GST Returns, Tax Guru

Access at : http://taxguru.in/others/gstreturns.html last visited at: 08.10.2016.

2. Dr. G. Gokul Kishore,  GST – A look at draft rules on registration and invoices, available at: http://www.lakshmisri.com/NewsandPublications/Publications/Articles/Tax/gstalookatdraftrulesonregistrationandinvoices  last visited at: 08.10.2016.

3. Mr. V Lakshmikumaran, and Mr. G Shivadass, GST Implications on Business in India, available at: https://www.ukibc.com/events/gstimplicationsbusinessindia/ last visited at: 08.10.2016.

4. R Sahana, Determining place of Supply under GST, Ta India Online, available at: http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=28092 last visited at: 08.10.2016.

5. GST, Chartered Secretary, the Journal for Corporate professional, 46, 8 (1-152), 2016, available at https://www.icsi.edu/WebModules/LinksOfWeeks/ICSI_Aug_final_CS.pdf.

6. Iype Mathew, GST – Designing a compliance friendly regime, available at: http://www.lakshmisri.com/NewsandPublications/Publications/Articles/Tax/gstdesigningacompliancefriendlyregime last visited at: 08.10.2016.

7. Input Tax Credit under GST Progressive or Regressive?, Taxsutra available at: http://www.idt.taxsutra.com/experts/column?sid=274 last visited at: 08.10.2016.

8. Dr. G. Gokul Kishore, GST – Ensuring credit without artificial fetters, available at: http://www.lakshmisri.com/NewsandPublications/Publications/Articles/Tax/gstensuringcreditwithoutartificialfetters last visited at: 08.10.2016.

9. Karthik, Time of supply-model under GST, Taxsutra, 2016 available at: http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=27654 last visited at: 08.10.2016.

10. V. Sivasubramanian, How can Centre fund compensation to States with GST rate at RNR?, 2016 available at: http://www.idt.taxsutra.com/experts/column?sid=262 last visited at: 08.10.2016.

11. Saurabh Bhutra, Input tax credit availment under the GST law, Taxindia online, 2016, available at: http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=27464 last visited at: 08.10.2016.

Leave a Reply