The Goods and Services Tax (GST) is a Value Added Tax (VAT) to be implemented in India, from April 2016.GST stands for “Goods and Services Tax”, and is proposed to be a comprehensive indirect tax levy on manufacture, sale and consumption of goods as well as services at the national level. While there is so much being discussed on the GST on a daily basis, it is imperative that we look at some of the salient features of it, for a better understanding.
The dual mode
To minimize the number of taxes applicable at the center and states separately a base paper has been made to subsume the taxes into the two major heads that is CGST at the Centre and SGST at the state level. Following is the list of the taxes likely to be subsumed under the CGST
- Central Excise Duty
- Additional Excise Duty
- Excise Duty-Medicinal and Toiletries Preparation Act.
- Service Tax
- Countervailing Duty
- Special Additional Custom Duty or SAD
- Surcharge and Cess.
Similarly the list below indicated the taxes that will be subsumed under the SGST
- Value Added Tax or VAT
- Entertainment Tax
- Luxury Tax
- Tax on Lottery, Betting and Gambling
- Surcharge and Cess
Despite the large list of the taxes that are going to be subsumed under the two heads, there are other taxes which are not getting accommodated. These are Purchase tax, Stamp Duty, Vehicle Tax, Electricity Duty, Entry Tax and Octroi. There are still disputes related to Entry Tax and Octroi being charged by the states on interstate supply of Goods and services. For this there is a separate module being debated.
The rate of GST
The proposal of pegging the revenue neutral GST rate between 18 to 22% is being considered. The figure is an aggregate of the CGST and SGST payable on the transaction. The government had not yet decided whether the goods and services would have the same revenue neutral rate of tax.
There is also a proposal to have a two rate structure for the GST. There would be the normal rate for the goods in general, while a special rate would be applicable on the exempted items and precious metals.
The Interstate transfer of Goods and Services
The existing Central Sales Tax will be discontinued and the Integrated Goods and Services Tax or IGST will come into place. The composition of IGST would be CGST plus SGST. It would be applicable on the interstate transfer of Goods and Services and would be levied by the Center.
The GST Network
The government has proposed a special IT platform for the smooth roll out of the GST. The special purpose vehicle or SPV has been given the name of GST-N, where N stands for the Network. There will be three partners jointly owning the Network, namely the Center, States and the technology partner NSDL. Conceptually also the idea is correct because there is already a consensus to have the GST at the state and national level.
Registration under GST
The GST is likely to be linked to the existing PAN. It would be the new business identification number containing around 13 to 14 digits. The composition would be the ten digits of the PAN number along with two digits for the state code and one or two check number to counter the use of fakes.