Impact of GST on Indian Tax System

GSTBy CA. Pathik Shah

Accommodation Times News Services

In India, there is two type of taxes are levied. These taxes are direct or indirect tax.

“Indirect taxes” according to John Stewart Mill, “are those which are demanded from one person on the expectation and intention that he shall indemnify himself at the expense of another – such are excise and customs.

Currently in India, Service tax, Value added Tax, Excise, luxury tax, entertainment taxes etc. are Indirect taxes. Now government is contemplating to subsume all such major indirect taxes in to one single tax as “Goods and Service Tax Act”.

Here are essential points on to understand about Goods and Service Tax:

1)      Currently, excise duty is levied on manufacture of goods; whereas GST would be levied on ‘supply’ of goods and services.

2)      Currently, state from where movement originates of goods or services gets revenue. GST is a destination based consumption tax; the revenue will accrue to the State where the consumer resides.

3)      Under GST, every assessee would have to upload each invoice details related to sales. Details of purchase and tax credit would be auto-populated based on sales details uploaded by the vendor. In current system there is no such requirement to upload details for each invoice except in few states.

4)      Currently, Central Government charges excise on goods and State Government charges VAT on goods. In GST, there would be dual GST i.e. Centre would levy Central GST (CGST) and States would levy State GST (SGST) on every supply of goods and services. IGST would be levied for Interstate supply.

5)      Many states has VAT registration threshold of Rs. 10 lakh / 5 lakh and for Excise threshold is Rs. 1.5 crore. For GST, registration threshold has been presently kept at Rs. 20 Lakhs (Rs. 10 lakhs in case of North East States and Sikkim) in the draft model law.

6)      Customs is outside GST and hence Basic Customs Duty would continue on imports.

7)      Currently, seamless flow of credit of Excise and CST is not happening. In GST, seamless flow of credit would be there; 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.

8)      Currently, excise is payable on manufacture of goods, VAT is payable on sale of goods. GST would be payable on supply of goods / service or on receipt of advance amount.

9)      Currently, standard rate of Excise duty 12.50%, Service tax 15%, VAT 12.50%. Standard rate for GST is proposed at 18%.

10)  Currently, C forms are used for interstate transfer of goods. F forms are used branch transfer of goods. In GST, there will not be any such form and goods will be moved based on GST invoice only.

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