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Beginner’s Guide to GST in India – Goods and Services Tax in India gstindiaguide.com/gst-india/ Indirect taxes in India have been in a constant state of evolution. Now, with the passage of the One Hundred and First Amendment Act of the Constitution of India enabling the introduction of a comprehensive Goods and Services Tax – GST in India, the Indian system of indirect taxation awaits what is being believed to be the most revolutionary step towards rationalization of indirect taxes in India. In short, GST will take place of all indirect taxes to create a single market. HSN Codes of all Commodities – CLICK HERE Possible GST, IGST, CGST & IGST Rates of all Commodities – CLICK HERE GST Calculator – CLICK HERE GST in India – Goods and Services Tax in India Evolution of the Indian System of Indirect Taxation There are multiple general / industry-specific levies. These are discussed here : Customs Customs duty is a levy on import into India and export out of India. It is a central levy. The presence of customs as a formal levy goes back to 18th century. There existed a separate Sea Customs Act, Land Customs Act and provisions for air customs. These were consolidated into Customs Act, 1962, which is the present law for levy of customs. In 1986, a Customs Tariff Act was introduced based on the Harmonized System of Nomenclature. Customs duty was started with a rate of 5%. The rates were increased post-independence. The total duty burden eventually crossed 100%. Thereafter, the rates were gradually reduced in the 1990s. Countervailing duty and special additional duty were also introduced in lieu of excise and sales tax respectively. India also rationalized its structure of customs duty in line with WTO guidelines, which aimed at free trade. Customs - GST in India – Goods and Services Tax in India Excise - GST in India – Goods and Services Tax in India Excise Excise is a levy on manufacture. Initially, there was a separate Act for each commodity. By 1944, there were 16 such enactments. A need was felt to consolidate these and the Central Excise Act of 1944 was introduced. Later, in 1986 the Central Excise Tariff Act was made effective for classification of goods in line with International Standards (Harmonized System of Nomenclature). MODVAT was introduced in Excise in the year 1986. It aimed at avoiding the cascading effect of taxes. The coverage of MODVAT was expanded over time. Presently, it is known as CENVAT. CENVAT allows the cross-utilization of credit across Excise and Service Tax. Service Tax Service tax is a levy on provision of services. It is a central levy. It was introduced for the first time in India in the year 1994, when only 3 services were made taxable. Its scope and coverage were constantly expanded, and by 2012, 117 services were brought under the tax net. Thereafter, the positive list regime was replaced by the negative list regime, where all services except those specified were made taxable. The present rate of service tax is 15%. The concept of CENVAT is also present in the present regime of service tax, which lowers / eliminates the cascading effect. The present scheme of CENVAT combines the credit in respect of Excise and Service Tax, thereby enabling cross-utilization. For detailed understanding of Service Tax, following pages may be visited: Service Tax Referencer Service Tax Presentations New Jurisdictions Krishi Kalyan Cess & Swachh Bharat Cess Analysis Budget 2016 Service Tax Articles Service-wise Implications Tax News Updates Service Tax - GST in India – Goods and Services Tax in India Sales Tax - VAT - GST in India – Goods and Services Tax in India Sales Tax Sales tax in India is a state levy. The VAT mechanism was introduced in Sales Tax in the year 2005. Other levies Various other levies such as luxury tax, entertainment tax, stamp duty and entry tax exist presently which make the system complex. Luxury Tax - GST in India – Goods and Services Tax in India Problems in the Present Structure The present system of indirect structure is marked with the following problems: Multiplicity of Taxes Presently, there are a number of taxes, some of which are levied by the Centre, others being levied by States. This multiplicity makes it complex to comprehend the law. Cascading Effect The present system has various instances where a tax is levied on tax, thereby resulting in cascading effect. For example, VAT is levied on the value of goods inclusive of Excise. Non-Availability of Cross-Credit There is non-availability of credit across different laws in most of the cases, especially between the Central and State levies. For example, credit of VAT is not available against central excise or service tax and vice-versa. Similarly, credit of CST is not available against VAT. Double Taxation Interpretational issues among the various levies result in double taxation in certain industries. For example, overlapping of the definition of goods and services is seen in case of restaurants. Hence, it is doubly taxed as VAT and service tax both are levied. Multiple Compliances Presently, different laws exist for different levies. Therefore, compliances have also been prescribed separately for each. This makes it difficult to meet the compliance and payment deadlines, and makes it difficult to focus on core business activities. Further, different records have to be maintained for each Authority. Proposed System of GST in India Various models of GST are followed across the world. India, being federal in its structure, needs to maintain the fiscal autonomy of the States. Therefore, concurrent dual GST has been recommended for India by the Empowered Committee. This means that the GST will have two components, one levied by the Centre (CGST), the other levied by States (SGST). Both such taxes will be levied concurrently all supply of goods and/or services. However, inter-state supply of goods and services will attract Integrated GST (IGST) in lieu of CGST and SGST. Input tax paid would be set-off against the output duty liability in the prescribed manner. This would ensure seamless flow of credit and minimized cascading. Benefits of GST in India GST regime is expected to bring in the following benefits: Simplification As GST consolidates a number of taxes, it will result in significant simplification. The interpretational issues such as overlapping of the definition of goods and services, multiplicity of definitions etc. will be minimized. Further, compliances will be integrated. A simple and efficient Portal is being developed to ensure that most of the compliances are done electronically over this Portal. Common market The distortions in the taxation structures of different States hinder the development of India as a common market due to the existence of an unhealthy competition among the tax rates of different states. Introduction of GST will project the image of India as a unified market, and the distortions in tax implications of doing business in different States will be minimized. Cheaper goods Seamless flow of credit, lower cascading effect, removal of double taxation and availability of cross-credit are expected to lower the cost of production, which will in turn lead to reduction in prices if the benefit of reduced costs is passed on to the consumers. Boost to GDP growth Introduction of GST is expected to give a boost to business and attract foreign investments. This will in turn give a boost to the growth rate of GDP in India. Simplified administration A single tax in replacement of multiple levies will significantly bring down the costs and efforts spent by the concerned Governments in administration. GST so far in India The journey of GST so far has been presented in the GST Timeline. The Constitutional Amendment Act has been passed. Thereafter, GST Council also has been formed, which is in the process of discussing various aspects of GST in India such as GST rates, exemptions, etc. The GST bills are expected to be presented in the Parliament in the winter session. For the details of form and manner in which GST will be issued, various laws, reports and guidelines have been issued by the Government. GST Portal www.gst.gov.in has been made live for migration of existing assessees. Understanding GST For enhancing the understanding of GST in India, following pages may be visited: Current vs Proposed Regime of Indirect Taxes in India Structure of GST in India and its governing laws Understanding the proposed GST law What is taxable in GST? At what rate shall goods and services be taxable under GST? Who shall be liable to pay GST? When shall GST be paid? What shall be the place of supply? 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