CONCEPT

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OBJECTIVES

Presently, the State Government levies tax on sales of certain goods in the form of value added tax, luxury tax, Entertainment Tax, Advertisement Tax, etc.

Similarly, the Central Government levies tax on, manufacture of certain goods in the form of Central Excise duty, provision of certain services in the form of service tax, inter-State sale of goods in the form of Central Sales tax.

Accordingly, there is multiplicity of taxes which are being levied on the same supply chain.

PRESENT TAX SYSTEM

The present tax system on goods and services is facing certain difficulties as under—

(i) there is cascading of taxes as taxes levied by the Central Government are not available as set off against the taxes being levied by the State Government ;

(ii) certain taxes levied by State Government are not allowed as set off for payment of other taxes being levied ;

(iii) the variety of Value Added Tax Laws in the country with disparate tax rates and dissimilar tax practices divides the country into separate economic spheres; and

(iv) the creation of tariff and non-tariff barriers such as, check posts, etc., hinder the free flow of trade throughout the country. Besides that, the large number of taxes create high compliance cost for the taxpayers in the form of number of returns, payments, etc.

In view of the aforesaid difficulties, all the above mentioned taxes are proposed to be subsumed in a single tax called the goods and services tax which will be levied on supply of goods or services or both at each stage of supply chain starting from manufacture or import and till the last retail level. So, any tax that is presently being levied by the Central Government or the State Government on the supply of goods or services is going to be converged in goods and services tax which is proposed to be a dual levy where the Central Government will levy and collect tax in the form of central goods and services tax and the State Government will levy and collect tax in the form of state goods and services tax on intra-State supply of goods or services or both.

Goods and Services Tax

This legislations will confer power upon the Central & State Government for levying goods and services tax on the supply of goods or services or both which takes place within the State. The proposed legislation will simplify and harmonise the indirect tax regime in the country.

ADVANTAGES

Reduce cost of production
Reduce inflation in the economy,
Make the Indian trade and industry more competitive, domestically as well as internationally.
Seamless transfer of input tax credit from one stage to another in the chain of value addition,
Incentivise tax compliance by taxpayers.
Broaden the tax base,
Result in better tax compliance due to a robust information technology infrastructure.

What is GST Regime PROVIDING?

Would levy tax on all intra-State supplies of goods or services or both except supply of alcoholic liquor for human consumption at a rate to be notified, not exceeding twenty per cent. as may be recommended by the Goods and Services Tax Council (the Council)

Would provide for composition levy for small taxpayers
Provide for empowerment to State Government to notify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis ;
Provide for authorization of officer of central tax to be proper officer under the proposed Act ;
Provide the scope of supply under the Act ;
Provide for empowerment to State Government to exempt either absolutely or conditionally goods or services or both ;
Provide for time and value of supply of goods or services or both ;
Broad base the input tax credit by making it available in respect of taxes paid on any supply of goods or services or both used or intended to be used in the course or furtherance of business ;
Provide for eligibility, conditions and time period for taking input tax credit ;
Provide for apportionment of input tax credit, availability of credit in special circumstances like new registration, shifting from composition levy to normal levy, exempted supplies becoming taxable, etc ;
Provide for matching of invoices of suppliers and recipients for the purpose of grant of input tax credit ;
Create liability for registration on every supplier in the State and liability for registration under the Act with effect from the appointed day on every person who is registered under an existing law ;
Provide for registration, cancellation and revocation and the deeming provisions ;
Provide for self-assessment of the taxes payable by the registered person ;
For furnishing details of outward supplies, inward supplies and return, annual return alongwith payment of tax, information return, etc ;
Maintenance of electronic cash ledger, electronic credit ledger and electronic tax liability ledger ;
Provisions for an “Input Service Distributor”, “job worker”, etc ;
Provide for elaborate transitional provisions for smooth transition of existing taxpayers to goods and services tax regime ;
Provide period of issuance of tax invoice, documents other than tax invoice to be treated as tax invoice, etc ;

Prohibition on unregistered person to collect tax ;
Provide for levy and payment of interest on delayed payment of tax ;
Provisions to keep and maintain books of accounts for such period and at such places;
Provide for deduction of tax at source ;
Impose obligation on electronic commerce operators to collect tax at source, at such rate not exceeding one per cent. of net value of taxable supplies, out of payments to suppliers supplying goods or services through their portals;
Provide for scrutiny of returns, inspection of goods in movement;
Provide for procedure and time limit for determination of tax not paid, short paid or erroneously refunded or input tax credit wrongly availed or utilized for reason of fraud or wilful misstatement or suppression of tax or otherwise;
Provide power of revision to the Commissioner;
Provide for conduct of audit of registered persons in order to verify compliance with the provisions of the Act;
Provide for refund of excess tax and grant of interest on delayed refund;
Provide for recovery of arrears of tax using various modes including detaining and sale of goods, movable and immovable property of defaulting taxable person;
Provide for powers of inspection, search, seizure and arrest to the officers;
Provide for Authority for advance ruling, Appellate authority for advance ruling;
Adopt the Goods and Services Tax Appellate Tribunal established by the Central Government under the Central Goods and Services tax Act, 2017 for hearing appeals against the orders passed by the Appellate Authority or the Revisional Authority;
Make provision for penalties for contravention of the provisions of the proposed Legislation;
Provide for an anti-profiteering clause in order to ensure that businesses pass on the benefit of reduced tax incidence on goods or services or both to the consumers;
Provide for non-appealable orders; and
Provide for compounding of any offence under the proposed Act.

proposals for delegation of legislative power

The SGST Act empowers the State Government to make rules for:

collection of taxes under section 9 ;
restrictions and conditions applicable to person opting for composition levy on under section 10 ;
value of the supply of goods or services or both under section 15 ;
conditions and restrictions on availing input tax credit and categories of tax paying documents under section 16 ;
depreciation on capital goods and plant and machinery as specified under section 18 ;
conditions and restrictions to allow input tax credit on inputs sent to a job-worker for job-work under section 19 ;
conditions and restrictions to allow input tax credit on capital goods sent to a job worker for job work under section 19 ;
manner of distribution of input tax credit by input service distributor under section 20 ;
manner and conditions for getting registered under section 25 ;
conditions for getting separate registration for business vertical under section 25 ;
period in which tax invoice is to be issued under section 31 ;
particulars to be declared on a tax invoice and a time in which such invoices are to be issued under section 31 ;
particulars to be declared on a credit or debit note under section 34 ;
particulars required to be maintained by a registered person at his principal place of business under section 35 ;
form and manner in which details of outward supplies are to be declared under section 37 ;
form and manner in which details of inward supplies are to be declared under section 38 ;
form and manner in which a return is to be filed by the registered person under section 39 ;
conditions and restrictions for provisional acceptance and claim of input tax credit under section 41 ;
calculation of interest on delayed payment of tax under section 50 ;
manner in which tax is to be deducted at source under section 51 ;
manner in which tax is to be collected at source under section 52 ;

manner and time for transfer of input tax credit under section 53
form and manner in which application of refund is to be made under section 54 ;
condition and restrictions on refund in certain cases under section 55 ;
manner in which consumer welfare fund is to be constituted under section 57 ;
manner in which consumer welfare fund is to be utilised under section 58 ;
form in which a bond for provisional assessment is to be filed under section 60 ;
manner in which returns are to be scrutinised under section 61 ;
frequency and manner in which audit will be taken by tax authorities under section 65 ;
manner in which advance ruling pronounced is to be certified under section 98 ;
form, manner and fee for appeal to Appellate Authority under section 100 ;
manner in which Advance Ruling pronounced by the Appellate Authority is to be certified under section 101 ;
appeals to Appellate Authority under section 107 ;
constitution of selection committee and their manner of working for selection of the Technical Member (Centre) and Technical Member (State) of the National Bench and Regional Benches under section 110 ;
verification of memorandum of cross objection under section 112 ;
manner in which President exercise his financial and administrative powers under section 114 ;
time, form and manner in which persons furnish information return under section 150 ;
form and manner in which statistics is to be collected under section 151 ;
fee for taking a copy of any order or document under section 163 ;
powers and discharge such functions under section 171 ; and
any other matter which is to be, or may be, prescribed, or in respect of which provision is to be made, by rules.

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