The dual governance structure in India makes the current taxation system very complicated in States as well as in Central. This tax cascading effect at different levels compels the taxpayer to pay tax after tax.
Government has tried and brought few changes in the system since long , but failed to minimize the complexity and maximize the margin for the firm.
GST is believed to be the revolutionary regime in the history of Indian taxation. In the GST system, tax will be levied at a single point by both States and Central (at the point of sale/purchase by the seller of the goods or the service provider)
GST in India – Models
- Single GST : Common GST for goods and services. Each intermediary from production to retail shall pay GST on every next step of value addition after setting off input tax credit out of the charged.
- Dual GST : India may have two GST components viz Central tax and single identical State tax across the nation, States may levy tax above GST on tobacco, petroleum and liquor.
There will be a quadruple structure Central GST up to retail level, Central service tax, State VAT on goods and State VAT on services.
Under this quadruple structure category like petroleum, liquor, tobacco, educational cess, oil cess will remain outside the coverage of GST.
Tax will be levied as SGST and CGST for States and Central respectively.
Tax to be subsumed by GST
In Central – CENVAT (Central Excise Duty)
– Additional duties of Excise
– Excise Duty levied under medicinal & toilet preparation Act
– Service Tax
– Surcharges and Cess
In States – VAT/ Sales Tax
– Entertainment Tax
– Entry Tax ( Not in lieu of octroi )
– Other taxes and duties (includes Luxury tax, Tax on lottery, betting
and gambling, and all cesses and surcharges by States)
GST – Rate & Structure
Two rates would be levied 8-10 percent for lower slab and 16-18 percent for upper slab. An additional tax of 1 percent will be levied by States on precious metals and on the items exempted.
Tax administration would have the power to audit the taxpayers.