GST - By Tanmay

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    What is GST ? GST A Global scenario Basic Structure of GST Taxes proposed to be subsumed by GST

    Features of GST Why GST ? How will the dual structure work ? How will it benefit Centre and the States ? What are the benefits of GST for individuals and

    Companies ? Hurdles in implementation How will GST be implemented ? Ensuring uniform implementation Items on which GST may not be applied

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    GST is a broad based and a singlecomprehensive tax levied on goods andservices consumed in an economy.

    GST paid on the procurement of goods andservices can be set off against that payableon the supply of goods or services. But beingthe last person in the supply chain, the end

    consumer has to bear this tax and so, inmany respects, GST is like a last-point retailtax.

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    More than 140 countries have alreadyintroduced GST.

    France was the first country to introduceGST system in 1954.

    Standard GST rate in most countriesranges between 15 - 20%.

    All sectors are taxed with very fewexceptions/ exemptions.

    Full tax credits on inputs 100% set off.

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    The implementation of GST will lead to the abolitionof other taxes such as

    Octroi Central Sales Tax

    State level Sales Tax Entry Tax Stamp Duty Telecom licence fees Turnover Tax Tax on consumption or sale of electricity Tax on transportation of Goods and servicesThus avoiding multiple layers of taxation that

    currently exists in India.

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    Credit of tax paid on purchases would beallowed across the supply chain.

    Credit of State GST may not be allowedagainst Central GST or vice versa.

    State GST paid in one State would becreditable against State GST liability ofanother State.

    Requirement of C forms and F forms would

    be abolished.Certain specified goods may be subject to a

    lower State GST rate or be exempted.

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    A simple tax structure with only one or tworates of taxes.

    Uniform single tax across the supply chain.

    Reduced transaction cost in the hands of thetax payers. Increased tax collections due to wider tax

    base and better compliance.

    Improvement in international costcompetitiveness of indigenous goods andservices.

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    Central GST and State GST would be leviedon different services.

    State GST would be levied on services oflocal nature.

    Single periodical return would be filed underthe dual structure.

    Export of goods and services would be zerorated, meaning exporters of goods and

    services need not pay GST on their exports.GST paid by them on the procurement ofgoods and services will be refunded.

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    It is estimated that India will gain $15billion a year by implementing the Goodsand Services Tax as it would promoteexports, raise employment and boostgrowth. It will divide the tax burdenequitably between manufacturing and

    services.

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    In the GST system, both Central and Statetaxes will be collected at the point of sale.Both components (the Central and StateGST) will be charged on the manufacturingcost. This will benefit individuals as pricesare likely to come down. Lower prices will

    lead to more consumption, thereby helpingcompanies.

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    Implementation of GST calls for effectingwidespread amendments in theConstitution and the various constitutionalentries relating to taxation.

    Such amendments may virtually transformthe Indian federation into an economic

    Union much along the lines of theEuropean Union.

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    It is important to note that states will have to be

    given constitutional powers to tax services. Atpresent, states do not enjoy the power to taxservices.

    The various levies of the Union and the states arealso to be harmonized. In the current scenario it is

    difficult to visualise constitutional amendments ofsuch far reaching implications.

    Services have to be appropriately integrated in thetax network.

    Fate of various area based exemptions /

    concessions provided by Central as well as Stateto be decided.

    Treatment of inter-state branch transfers under theGST scenario to be identified.

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    The empowered committee is likely tofinalise the details of GST by August 2012.But States have to sort out several issueslike agreement on GST rates,constitutional amendments and holdingtalks with industry associations. Experts

    feel the drafting of legislation and theimplementation of law will take time.

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    Uniform Implementation of GST should beensured across all states(unlike staggeredimplementation of VAT).

    The dual structure should be simple tounderstand and implement.

    Creating consumer and supplier awarenessbefore introduction of the dual structure.

    The cost of compliance should be minimum

    i.e. reporting and compliance proceduresshould be identical across all the States.The format of periodical returns should be

    identical across all the States.

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    Dispute settlement machinery should beuniform under the State GST.

    Lower level tax authorities should have

    adequate understanding of the fundamentallydifferent lawStates should have powers to increase /

    decrease the rate of State GST on certain

    specified goods within a permissible limit Introduce electronic State GST and Central

    GST refunds.

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    Alcohol, tobacco, petroleum products arelikely to be out of the GST regime.

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    Lets hope GST isGreat & Simplified Tax !!!

    Thank you.