1. GST would be levied on ‘supply’
of goods and services and hence the present prevalent concepts of levy of
excise on manufacture, VAT/CST on sales, entry tax on entry of goods in local
area would no longer be relevant. The ambit of ‘supply’ is quite wide and also
covers supply of goods and services without consideration from one taxable
person to another.
2. There would be dual GST i.e. both
the Centre and the States would concurrently levy GST across the entire goods
and services supply chain on a common base.
Centre would levy Central GST (CGST)
and States would levy State GST (SGST) on every supply of goods and services
within a State. Integrated GST (IGST) would be levied on all inter-state
supplies by the Centre and then transferred to the Destination State. Unlike in
the present scenario, IGST would have to be paid on all inter-state supplies,
be it in the nature of a sale or stock transfer.
3. Present Central Taxes like
Central Excise, Service Tax, CVD, SAD, CST and State Taxes like VAT, CST, Entry
Tax, Luxury Tax would get subsumed under GST. Customs is outside GST and hence
Basic Customs Duty would continue on imports.
4. GST is a destination based
consumption tax, which essentially implies that the revenue will accrue to the
State where the consumer resides. This is unlike the present origin based levy
where the revenue accrues to the origin state from where the movement
originates.
5. Seamless flow of credit would be
there under GST whereby CGST would be allowed to be set-off against CGST and
IGST, SGST against SGST and IGST and IGST against IGST, CGST and SGST in that
order. However, CGST credit will not be allowed to be set-off against SGST and
vice versa. Thus, under GST, the present cost of 2% CST on inter-state sale
will not be there as IGST would be totally fungible in the Destination State.
However, credit fungibility is
state-centric as credit accumulated in one State cannot be used against tax
pay-outs in another State.
6. Liability for payment of GST
would arise at the time of supply of goods and service. In terms of model law,
receipt of advance payments for supply of goods and/or services would be
considered as ‘time of supply’ and tax liability would arise on such advance
receipt. However, receipt of goods and services is one of the pre-conditions
for allowing input tax credit under GST and hence, even if GST is paid on
advance payments, credit for the same would be available only on receipt of
goods and services.
7. Registration threshold has been
presently kept at Rs. 20 States specified in Article 279A(4)(g) of theàLakhs (Rs. 10 lakhs in constitution i.e. Arunachal Pradesh, Assam,
Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura,
Himachal Pradesh and SpecialàUttarakhand [“other than special
categories states”]; and category states
(not yet specified) ) in the draft model law. Existing registered assesses
would be migrated into GST, first provisionally and then finally subject to
furnishing of requite information. Assesses have the option to take business
segment-wise registration.
8. Option of composition levy is
also prescribed, if aggregate turnover of a tax payer is < Rs. 50 lakhs.
Persons adopting composition levy would be neither entitled to charge GST from
its customers nor to avail credit of input tax. However, composition levy is
not allowable to assesses who affects inter-State supplies.
9. Under GST, every assessee would
have to upload invoice level outward supply details for B2B transactions.
Details of inward supplies and tax credit would be auto-populated based on
sales details uploaded by the vendor. Hence, a robust IT infrastructure at the
end of both supplier and recipient is critical for hassle free tax credits and
avoid denial of credits due to mismatch issues.
10. Provisions relating to payment
of tax under reverse charge, tax deductions at source are expected to continue
under GST regime for specified persons/transactions. Thus, additional compliances
would continue on the part of recipients, so far as tax payments under reverse
charge and deduction at source are concerned.
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