Goods and Services Tax (GST): Salient Features
The introduction of GST is going to be a very important step in the field of indirect tax reforms in India. It is perceived that GST would increase the competition of our products in both Domestic and International markets. Many studies have proven that such a situation would create an instant growth in the economy.
Some of the Salient Features of GST are as follows:
- According to present concept, the tax is applied on manufacture and sale of goods or provision of services. But GST would be applicable on the supply of goods or services.
- The GST will have a dual effect between Centre and States simultaneously levying it on a common tax base. The GST which will be levied by the Centre on intra-State supply of goods and/or services would be called Central GST (CGST) and that to be levied by the States would be called State GST (SGST).
- The GST will be applicable to all goods other than alcoholic liquor for human consumption and five petroleum products, which are petroleum crude, motor spirit (petrol), high speed diesel, natural gas and aviation turbine fuel. It would apply to all services barring a few to be specified.
- Tobacco and Tobacco products will be subjected to GST and the Centre can levy Central Excise duty on these products.
- The GST will replace the following taxes currently levied and collected by the Centre:
- Central Excise Duty
- Duties of Excise (Medicinal and Toilet Preparations)
- Additional Duties of Excise (Goods of Special Importance)
- Additional Duties of Excise (Textiles and Textile Products)
- Additional Duties of Customs (commonly known as CVD)
- Special Additional Duty of Customs (SAD)
- Service Tax
- State taxes that would be subsumed under the GST are:
- State VAT
- Central Sales Tax
- Luxury Tax
- Entry Tax in lien of octroi (ETILOO)
- Entertainment Tax (not levied by local bodies)
- Taxes on advertisements
- Purchase Tax
- Taxes on Lotteries, Betting and Gambling
- State cesses and surcharges insofar as they relate to supply of goods and services
*ETILOO: is a tiny tax, but difficult to comply with and inflicts enormous pain on the economy. It divides the Indian common market and acts like a tariff on import of goods into a local/municipal area from the rest of the country.
- An Integrated GST (IGST) would be levied and collected by the Centre on inter-State supply of goods and services. The accounts would be settled periodically between the Centre and the States to ensure that the SGST portion of IGST is transferred to the destination State where the goods or services are eventually consumed.
- The tax payers shall be allowed to take credit of the taxes paid on inputs (input tax credit) and utilize the same for payment of output tax. But no input tax credit on account of CGST shall be utilized towards payment of SGST and vise versa. The credit of IGST would be permitted to be utilized for payment of IGST, CGST and SGST in that order.
- Harmonised System of Nomenclature (HSN) code will be used for classifying goods under GST regime. Taxpayers whose turnover is higher than Rs. 1.5 Crores but below Rs.5 Crores shall use 2 digit code and the taxpayers whose turnover is Rs.5 Crores and above shall use 4 digit code.
- Exports shall be treated as zero-rated supply. No tax is payable on export goods but credit of the input tax related to the supply shall be admissible to exporters.
- The import of goods and services would be treated as inter-State supplies and would be subject to IGST in addition to the applicable customs duties.
- The laws, regulations and procedures for levying and collecting CGST and SGST will be in harmony to possible extent.