GST - PRITAM MAHURE

[GURU]

By Pritam Mahure, CA
FINALLY, it's out. The ‘First Discussion Paper on GST in India
' (herein after referred as ‘Paper' ) was released by the Empowered
Committee, led by Asim Dasgupta, on 10.11.2009. The paper is a starter
for the approaching GST regime. It just sets rolling the discussion on
the coming GST so the ministry can receive views from the industry and
customer.
The paper delivers clarity on many aspects of proposed Goods and
Service Tax (GST). In the following paras, I have made an attempt to
summarise what the ‘ Paper ' says and what it doesn't.
++ Dual structure: As expected, India is implementing ‘ dual GST ' .
Centre Government would be levying Central GST (CGST) and State
Governments would be levying State GST (SGST). CGST and SGST would be
applicable on all the transactions of goods and services made for a
consideration except:
++ Exempted goods and services which are outside the purview of GST
and
++ Transactions which are below the prescribed threshold limits.
++ Statutes: This dual GST model would be implemented through multiple
statutes (one for CGST and SGST statute for every State). However, an
assurance is given in the paper that the basic features of law such as
chargeability, definition of taxable event and taxable person, measure
of levy including valuation provisions, basis of classification etc.
would be uniform across these statutes as far as practicable.
++ Date of introduction of GST: No date for introduction of the GST is
proposed in the Paper. The deadline for its implementation i.e.
01.04.2010 is likely to be missed.
+ Rate of GST: Rate for SGST and CGST is not specified in the paper
but it is assured that the same would be known at appropriate time.
The rates in GST regime would be:
+ Necessities: Lower Rate
+ Goods of basic importance: Standard rate
+ Precious metal: Special rate
+ Exempted items: Nile Rate
+ Tax credits: The paper specifies that the Credit of CGST would be
available for payment of CGST and credit of SGST would be available
for payment of SGTS. It is also assured that, in due course, the rules
for taking and utilization of credit for the Central GST and the State
GST would be prescribed and would be on similar lines.
Fortunately, cross utilization of tax credit between the Central GST
and the State GST would be allowed in the case of inter-State supply
of goods and services under the IGST model.
+ Interstate GST (IGST) : Centre Government would levy IGST (which
would be CGST plus SGST) on all inter-State transactions of taxable
goods and services with appropriate provision for consignment or stock
transfer of goods and services. The inter-State seller will pay IGST
on value addition after adjusting available credit of IGST, CGST, and
SGST on his purchases. The Exporting State will transfer to the Centre
the credit of SGST used in payment of IGST. The Importing dealer will
claim credit of IGST while discharging his output tax liability in his
own State. The Centre will transfer to the importing State the credit
of IGST used in payment of SGST.
+ Basic threshold: A dual threshold is proposed for CGST and SGST. For
CGST, the basic exemption for goods would remain at Rs. 1.5 crores and
for services a similar exemption would be provided later. For SGST,
the basic exemption for goods and services would be Rs. 10 lakhs.
+ Composition/ Compounding Scheme: There would be a compounding cut-
off at Rs. 50 lakh of gross annual turnover and a floor rate of 0.5%
across the States. The scheme would also allow option for GST
registration for dealers with turnover below the compounding cut-off.
+ Exports: Exports would be zero-rated. Similar benefits may be given
to Special Economic Zones (SEZs). It is also specified that the refund
of CGST/SGST should be granted in a time bound manner.
+ Imports: Both CGST and SGST will be levied on import of goods and
services into the country. Full and complete set-off will be available
on the GST paid on import on goods and services.
+ Special Industrial Area Scheme : After the introduction of GST, the
tax exemptions, remissions etc. related to industrial incentives would
be converted, if at all needed, into cash refund schemes. Regarding
Special Industrial Area Schemes, it is clarified that such exemptions,
remissions etc. would continue up to legitimate expiry time both for
the Centre and the States.
+ Taxes to be subsumed: In CGST the taxes to be subsumed are Central
Excise Duty, Additional Excise Duties, Service Tax, Additional Customs
Duty, commonly known as Countervailing Duty (CVD), Special Additional
Duty of Customs - 4% (SAD), Excise Duty levied under the Medicinal and
Toiletries Preparation Act, Surcharges and cesses.
Whereas SGST will subsume VAT/Sales tax, Entertainment tax (unless it
is levied by the local bodies), Luxury Tax, Taxes on lottery, betting
and gambling, State Cesses and Surcharges in so far as they relate to
supply of goods and services, Entry tax not in lieu of Octroi.
+ Products outside GST regime: Items containing Alcohol and petroleum
products will be outside the GST regime. However in respect of ‘
Purchase Tax ' no decision is made whether it should be part if GST
regime or outside it.
+ Compliances and procedures: The assessees would be allotted PAN
based registration numbers and would be required to file periodic
returns for SGST & CGST. Also, appropriate accounting codes will be
prescribed for Central GST and State GST separately.
+ Administration: Administration of CGST and SGST would be parallel
meaning SGST will be administered by State Government and CGST by
Central Government. In view of the introduction of GST, IT
Infrastructure will be improved. Further, requisite Constitutional
amendments will also be carried out. It is mentioned that specific
provisions would also be made to the issues of dispute resolution and
advance ruling.
It is apparent that now paper gives clarity on many fronts though
clarity still eludes on the taxable event in GST, rate, carry forward
of cenvat credit etc. However, these things too will achieve certainty
in due course.