Journal Press India

Editorial

India moved into a new regime by the introduction of Goods and Services Tax (GST) on July 1, 2017 which is a landmark step in the field of indirect tax reforms in India to avoid cascading or double taxation and other issues leading towards a common national market. Amalgamation of large number of Central and State taxes into a single tax has been achieved by the introduction of the GST. The biggest advantage is in terms of a reduction in the overall tax burden on goods, which has been estimated to be around 25%-30% making Indian products competitive in the domestic and international markets. Studies show that this would have a positive impact on economic growth in the long term period. GST is likely to be easier to administer because of its transparent and self policing character.

Constitution (One Hundred and First) Amendment Act, 2016: The Constitution (122nd Amendment) Bill was introduced in the 16th Lok Sabha on 19.12.2014.

Goods and Services Tax Council (GSTC) has been constituted comprising the Union Finance Minister, the Minister of State (Revenue), and the State Finance Ministers to recommend on the GST rate, exemption and thresholds, taxes to be subsumed and other features. This mechanism would ensure some degree of harmonization on different aspects of GST between the Centre and the States as well as across States. One half of the total number of members of GSTC would form quorum in meetings of GSTC. Decision in GSTC would be taken by a majority of not less than three-fourth of weighted votes cast. Centre and minimum of 20 States would be required for majority because Centre would have one- third weightage of the total votes cast and all the States taken together would have two-third of weightage of the total votes cast.

Salient Features of GST

(i) GST would be applicable on “supply” of goods or services as against the present concept of tax on manufacture of goods or on sale of goods or on provision of services.

(ii) GST would be based on the principle of destination based consumption taxation as against the present principle of origin-based taxation.

(iii) It would be a dual GST with the Centre and the States simultaneously levying it on a common base. The GST to be levied by the Centre would be called Central GST (Central tax- CGST) and that to be levied by the States [including Union territories with legislature] would be called State GST (State tax- SGST). Union territories without legislature would levy Union territory GST (Union territory tax- UTGST).

(iv) An Integrated GST (Integrated tax- IGST) would be levied on inter-State supply (including stock transfers) of goods or services. This would be collected by the Centre so that the credit chain is not disrupted.

(v) Import of goods would be treated as inter-State supplies and would be subject to IGST in addition to the applicable customs duties.

(vi) Import of services would be treated as inter-State supplies and would be subject to IGST.

(vii) CGST, SGST/UTGST, & IGST would be levied at rates to be mutually agreed upon by the Centre and the States under the aegis of the GSTC.

(viii) GST would replace the following taxes currently levied and collected by the Centre: a) Central Excise Duty; b) Duties of Excise (Medicinal and Toilet Preparations); c) Additional Duties of Excise (Goods of Special Importance); d) Additional Duties of Excise (Textiles and Textile Products); e) Additional Duties of Customs (commonly known as CVD); f) Special Additional Duty of Customs (SAD); g) Service Tax; h) Cesses and surcharges insofar as they relate to supply of goods or services.

(ix) State taxes that would be subsumed within the GST are: a) State VAT; b) Central Sales Tax; c) Purchase Tax; d) Luxury Tax; e) Entry Tax (all forms); f) Entertainment Tax (except those levied by the local bodies); g) Taxes on advertisements; h) Taxes on lotteries, betting, and gambling; i) State cesses and surcharges insofar as they relate to supply of goods or services.

(x) GST would apply to all goods and services except Alcohol for human consumption.

(xi) GST on five specified petroleum products (Crude, Petrol, Diesel, ATF, & Natural gas) would be applicable from a date to be recommended by the GSTC.

(xii) Tobacco and tobacco products would be subject to GST. In addition, the Centre would continue to levy Central Excise duty.

(xiii) A common threshold exemption would apply to both CGST and SGST. Taxpayers with an annual turnover of Rs. 20 lakh (Rs. 10 lakh for special category States (except J&K) as specified in article 279A of the Constitution) would be exempt from GST. A composition scheme (i.e. to pay tax at a flat rate without credits) would be available to small taxpayers (including to manufacturers other than specified category of manufacturers and service providers) having an annual turnover of up to Rs. 1 crore (Rs. 75 lakh for special category States (except J&K and Uttarakhand) enumerated in article 279A of the Constitution). As decided in the 23rd meeting of the GSTC, this limit shall be raised to Rs. 1.5 crore after necessary amendments in the Act. The threshold exemption and compounding scheme would be optional.

(xiv) The list of exempted goods and services would be kept to a minimum and it would be harmonized for the Centre and the States as well as across States as far as possible.

(xv) All Exports and supplies to SEZs and SEZ units would be zero-rated.

(xvi) Credit of CGST paid on inputs may be used only for paying CGST on the output and the credit of SGST/UTGST paid on inputs may be used only for paying SGST/UTGST. In other words, the two streams of input tax credit (ITC) cannot be cross utilized, except in specified circumstances of inter-State supplies for payment of IGST. The credit would be permitted to be utilized in the following manner: a) ITC of CGST allowed for payment of CGST & IGST in that order; b) ITC of SGST allowed for payment of SGST & IGST in that order; c) ITC of UTGST allowed for payment of UTGST & IGST in that order; d) ITC of IGST allowed for payment of IGST, CGST, & SGST/ UTGST in that order. ITC of CGST cannot be used for payment of SGST/UTGST and vice versa.

There are many other important features which can be gone through by the readers from the latest updates of the Government of India from their official website.

(http://www.cbec.gov.in/resources//htdocs-cbec/gst/01122017_Updated_PPT_on_GST_new.pdf)

India is moving fast on the path of transformation and we need to provide inputs which may help in the smooth transition. I invite you to participate in the XIX Annual International Conference on the broad theme, “Managing Digital Revolution: Inventing Future India” and Seminar Session on “Digital Governance” scheduled to be held from Jan. 5 to 6, 2018 at Delhi Technological University, Delhi. I present to you the current issue of DBR and request you to share your feedback to enable us to further improve DBR.

Prof. Ajay Kumar Singh