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An overview of Goods and Services tax in India

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  • Full Name Full Name Comment goes here.
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  • Dear Sir / Madam

    I shall feel highly obliged for your please clarifying as follows:

    Applicability of Service Tax in case of Indian Resident Individual (self employed) providing services to a 3rd Country’s manufacturing Company (Seller) for sale (business promotion) of their Machines to Buyers in India. Against one such Contract between Seller and Buyer the Commission / Fee received from Seller is in Foreign Exchange of Euros 19,200 (about 13 lacs INR) received/credited to my Bank on April 20 2012. Basic Understanding way back was my appointment as Distributor in India with remuneration as Commission. I am not yet registered for Service Tax. If applicable then when am I (what amount as a senior citizen) supposed to deposit the same after completing ST formalities?

    Thanks and with best of regards

    Rajinder Batra
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An overview of Goods and Services tax in India An overview of Goods and Services tax in India Document Transcript

  • CHRIST UNIVERSITY Department of Commerce I Subject: Other Taxes Topic: Goods and Services Tax Continuous Internal assessment IIIBy,Karthik Ravi – 08D0027Kushal S S – 08D0062Mayank Baid – 08D0041Ramesh Kumar – 08D0044 Submitted to, Dr. Alice Mani
  • Goods and Services Tax Table of ContentsWhat is GST ? .................................................................................................................... 3Roadmap to GST .............................................................................................................. 3Why Goods and service tax? ......................................................................................... 4Benefits of GST .................................................................................................................. 5Indirect taxes subsumed under GST ............................................................................... 5The GST model in India .................................................................................................... 6Dual GST ............................................................................................................................ 6Taxable event .................................................................................................................... 6Tax payer identification number .................................................................................... 7Payment of tax .................................................................................................................. 7Collection of GST .............................................................................................................. 7Input tax credit setoff ....................................................................................................... 7Constitution amendment for levying service tax by the states .................................. 7Applicability of CGST and SGST ................................................................................... 7GST rates ............................................................................................................................ 8Periodical return ................................................................................................................ 8Method: ............................................................................................................................... 8Exract .................................................................................................................................. 9Conclusion ........................................................................................................................ 102|Continuous internal Assessment
  • Goods and Services TaxGoods and Services Tax (GST) is a part of the proposed tax reforms that centerround evolving an efficient and harmonized consumption tax system in thecountry. Presently, there are parallel systems of indirect taxation at the centraland state levels. Each of the systems needs to be reformed to eventuallyharmonize them.In the Union Budget for the year 2006-2007, Finance Minister proposed thatIndia should move towards national level Goods and Services Tax that should beshared between the Centre and the States. He proposed to set April 1, 2010 asthe date for introducing GST. World over, goods and services attract the samerate of tax. That is the foundation of a GST. The first step towards introducingGST is to progressively converge the service tax rate and the CENVAT rate.The goods and service tax (GST) is proposed to be a comprehensive indirect taxlevy on manufacture, sale and consumption of goods as well as services at anational level. Integration of goods and services taxation would give India aworld class tax system and improve tax collections. It would end the longstanding distortions of differential treatments of manufacturing and servicesector. The introduction of goods and services tax will lead to the abolition oftaxes such as octroi, Central sales tax, State level sales tax, entry tax, stampduty, telecom license fees, turnover tax, tax on consumption or sale of electricity,taxes on transportation of goods and services, and eliminate the cascadingeffects of multiple layers of taxation. GST will facilitate seamless credit acrossthe entire supply chain and across all states under a common tax base.As we have parallel systems of indirect taxation at the central and state levels,each of the systems needs to be reformed to eventually harmonise them. Thecentral excise duty should be converted into a full fledged manufacturingStage VAT on goods and services and the states sales tax systems should betransformed into a retail stage destination based VAT, before the two areintegrated. At the central level, beginning has been made by converging widely3|Continuous internal Assessment
  • Goods and Services Taxvarying tax rates and extending input tax credit to convert excise duties into aCENVAT. The reformed indirect tax system GST-Goods and service tax is proposed to implement on 1st April 2010 in India. Several countries implemented this tax mechanism followed by France, the first country introduced GST. Goods and service tax is a new version of VAT which gives a comprehensive setoff for input tax credit and subsuming many indirect taxes fromstate and national level. The GST Implementation is not yet declared bygovernment and the drafting of GST law is still under process and a clearpicture will be available only after announcement of Implementation. As thename denotes the goods and service tax is integrated in GST for setoff benefitof Input tax credit.One of the main reasons of the introduction of GST is to avoid cascading effectof taxes in India. For example manufacturing of a product attract CENVAT. Themanufacturer pays CENVAT on goods produced. So the CENVAT element isloaded on the product. According VAT rules, the sales tax is payable on theaggregate selling price which include CENVAT. Here there is no set off benefitsavailable. Likewise there are many situations in the nature of cascading effectfor instance, State VAT on CST, Entry tax on VAT etc. Now Government hasdecided to abolish tax on tax effect by implementing GST.Indirect taxes like luxury tax, entertainment tax, are yet to be included in theVAT. These taxes are still existing and payable.4|Continuous internal Assessment
  • Goods and Services TaxSeveral taxes like additional customs duty, surcharges not included underCENVAT. Input tax and service tax set off is out of reach to the manufacturerand dealers. 1. GST provide comprehensive and wider coverage of input credit setoff, you can use service tax credit for the payment of tax on sale of goods etc. 2. CST will be removed and need not pay. At present there is no input tax credit available for CST. 3. Many indirect taxes in state and central level subsumed by GST, You need to pay a single GST instead of all. 4. Uniformity of tax rates across the states 5. Ensure better compliance due to aggregate tax rate reduces. 6. By reducing the tax burden the competitiveness of Indian products in international market is expected to increase and there by development of the nation. 7. Prices of goods are expected to reduce in the long run as the benefits of less tax burden would be passed on to the consumer. 8. Overall tax compliance cost will reduce for government and can concentrate on GSTThe following indirect taxes from state and central level is going to integratedwith GST 1. VAT/Sales tax 2. Entertainment Tax ( unless it is levied by local bodies) 3. Luxury tax 4. Taxes on lottery, betting and gambling. 5. State cesses and surcharges in so far as they relate to supply of goods and services. 6. Entry tax not on in lieu of octroi. 7. Purchase tax ( This is not sure still under discussion )5|Continuous internal Assessment
  • Goods and Services Tax 1. Central Excise Duty. 2. Additional Excise Duty. 3. The Excise Duty levied under the medical and Toiletries Preparation Act 4. Service Tax. 5. Additional Customs Duty, commonly known as countervailing Duty ( CVD) 6. Special Additional duty of custums-4% ( SAD) 7. Surcharges 8. CessessThe above taxes dissolve under GST; instead only CGST & SGST exists. Many countries are following single GST. But it is proposed that dual CST is suitable for federal country like India. The end user, i.e. consumer cannot recover taxes but a business can recover by claiming input tax setoff.Dual GST means, the proposed model will have two component calledCGST – Central goods and service tax for levied by central Govt.SGST – State goods and service tax levied by state Govt.There would have multiple statute one CGST statute and SGST statute for everystate.Supply of goods and supply of services will be considered as taxable eventunder GST. Any economic activity which is not supply of goods is treated asupply of service.6|Continuous internal Assessment
  • Goods and Services Tax Each tax payer allotted a pan based identification number containing 13 or 15 digit number.The central GST would be paid to central and state GST paid to stategovernment in the prescribed account head.It is same as VAT; Tax is collected on the basis of value addition on each stageof sale. Both CGST and SGST would have to be charged in an every service billand sale bill and paid after adjusting input credit available on both.The input tax credit of SGST can be utilized for the payment of SGST only andinput tax credit on CGST can be utilized for the payment of CGST only. Thismeans that cross utilization of input tax credit will not be allowed.Making it clearer; input tax credit of CGST cannot be utilized forthe payment of SGST and vice versa. However there is an exemption for theabove in the case of interstate transaction .For interstate transaction IGST isproposed and would be implemented along with CGST and SGST.The power of levying service tax is rest with central Government and aconstitutional amendment is necessary for empowering states for levying servicetax.The applicability of taxes is as usual there would be a prescribed limit of annualturnover, also some goods and services are exempted under GST. The dealerwhose turnover is below prescribed limit need not pay tax.7|Continuous internal Assessment
  • Goods and Services TaxThreshold for annual turnover for goods and services would be 10 lakh for SGSTand threshold of CGST for goods may be 1.5 crore and service would have aseparate threshold that too will be appropriately high.The rate structure would be as follow; but not finalA lower rates for essential commoditiesStandard rates for general goodsSpecial rates for precious metalsFor services may be single rates for CGST andSGST.GST rates is not yet announced by government, however it is assumed thataggregate total of CGST & SGST would be 14 % to20%.Taxpayer would have to submit periodical return as prescribed by law incommon format for CGST and SGST.We will more updates on GST in coming days, please subscribe our newsletterfor stay update with us.The GST system is based on the same concept as VAT. Here, set-off is availablein respect of taxes paid in the previous level against the GST charged at thetime of sale. The GST model has some aspects which are as follows:Components: GST will be divided into two components, namely, Central Goodsand Service Tax and State Goods and Service Tax.Rate: Rates charged across all states and the central level will be uniform alongwith the regulations, definitions and classifications.Applicability: GST will be applicable to all Goods and Services sold or providedin India, except from the list of exempted goods which fall outside its purview.8|Continuous internal Assessment
  • Goods and Services TaxPayment: GST will be charged and paid separately in case of Central and Statelevel.Input Tax credit: The facility of Input Tax Credit at Central level will only beavailable in respect of Central Goods and Service tax. In other words, the ITC ofCentral Goods and Service tax shall not be allowed as a set-off against StateGoods and Service tax and vice versa. The budget speech of 2006-2007 contained a proposal to introduce Goods and Services Tax (GST) in India with effect from April 01, 2010. It has been reiterated in the budget speech of 2009-10 that the process for smooth introduction of GST with effect from April 01, 2010 would be accelerated. The proposed GST is not instead of CST alone, but would also subsume many other Central and State taxes. TheEmpowered Committee of the State Finance Ministers (EC), on the request ofCentral Government and after due consultation among States, has prepared amodel and roadmap for the GST. The Central Government has given itssuggestions to the EC on the model. The Centre and the States have agreed uponthe basic structure in keeping with the principles of fiscal federalism enshrined inthe Constitution. The broad contour of the GST model is that it will be a dual GSTcomprising of a Central and a State GST.Government of India and the States, including Gujarat, together fund on equalbasis, a nation-wide computerization project called “Tax Information ExchangeSystem(TINXSYS)” to enable exchange of critical data on inter-State sale amongStates. To facilitate the development of capability in States to share their datathrough TINXSYS, the Government of India also supports projects forcomputerization of various State VAT administrations. Government of India hassanctioned financial assistance for projects in the North Eastern States, HimachalPradesh and Jammu & Kashmir. The budget for 2009-10 has provision of Rs408crore for a Mission Mode Project, to provide financial support to computerisationneeds of the Commercial Taxes Departments of States.This information was given by Minister of State for Finance, Shri S.S.Palanimanickam in reply to a question raised by Shri P.P. Chauhan in Lok Sabha.9|Continuous internal Assessment
  • Goods and Services TaxPan Linked identification: Each taxpayer shall be provided with an unique 13to 15 digit ID number for filing periodical returns with the Central and Stategovernment.Thus, we get an overview of what the system of GST (Goods and Service tax) islikely to be and upon its implementation what benefits are we going to derivefrom it. All in all a very good proposal which one can look forward to whichreduces the complexities of the tax system in respect to both, the taxpayer andthe Tax authorities. Refurbishing the current tax system requires implementation of such a new methodology that it is able to eliminate the drawbacks ofthe present system of taxation in India. India waits for the GST, Goodsand Service Tax, to arrive the scenario for a better tax system. Added to it theDirect Tax Code can also replace the Income Tax Act, 1961). But before gettingintroduced to this system of GST, one must have a general idea about the wholesystem.The dilemma of multiplicity of taxes is being experienced in India over a numberof years, though introduction of CENVAT and VAT has considerably helped inreduction of such multiplicity but still the sorrow continues to prevail. The problemon account of CENVAT is that taxes like Additional Custom Duty, AdditionalExcise Duty, etc. are not included in it, whereas, Vat fails to include taxes such asLuxury tax, Entertainment tax and others. Added to this one of the maincomponent of overall tax structure, Service Tax is ignored in both the cases. Thus,to overcome such miseries implementation of GST is being considered.GST or Goods and Service Tax will include a uniform rate of taxation in allrespect and would allow an implementation of an incessant link from the primaryproducer of goods and service to the retailer’s stage and will also eradicate allcascading effects in such process.10 | C o n t i n u o u s i n t e r n a l A s s e s s m e n t