Justification of GST | Benefits of GST | - GST In India

Tuesday, 21 March 2017

Justification of GST | Benefits of GST |

Justification of GST
The introduction of GST at the Central level will not only include comprehensively more indirect
Central taxes and integrate goods and service taxes for the purpose of set-off relief, but may
also lead to revenue gain for the Centre through widening of the dealer base by capturing value
addition in the distributive trade and increased compliance. In the GST, both the cascading
effects of CENVAT and service tax are removed with set-off, and a constant chain of set-off from the original producer’s point and service provider’s point up to the retailer’s level is
established which reduces the burden of all cascading effects. This is the real meaning of GST,
and this is why GST is not simply VAT plus service tax but an improvement over the previous system of VAT and disjointed service tax. Moreover, with the introduction of GST, burden of Central Sales Tax (CST) will also be removed. The GST at the State-level is, therefore, justified for-
(a) Additional power of levy of taxation of services for the States
(b) System of comprehensive set-off relief,

(c) Subsuming of several taxes in the GST
(d) Removal of burden of CST.

Dual GST

Dual GST means, the proposed model will have two part called

1. CGST – Central goods and service tax for levied by central Govt.
2. SGST – State goods and service tax levied by state Govt.
There would have multiple statute one CGST statute and SGST statute for every state.

Salient features of the GST model

Salient features of the proposed model are as follows:
(I) the GST shall have two components: one levied by the Centre (referred to as Central GST), and the other levied by the States (referred to as State GST). Rates for Central GST and State GST would be approved appropriately, reflecting revenue considerations and acceptability.
(ii) The Central GST and the State GST would be applicable to all transactions of goods and
services made for a consideration except the exempted goods and services.
(iii) The Central GST and State GST are to be paid to the accounts of the Centre and the States
(iv) Since the Central GST and State GST are to be treated individually, taxes paid against the
Central GST shall be allowed to be taken as input tax credit (ITC) for the Central GST and could be utilized only against the payment of Central GST.
(v) Cross utilization of ITC between the Central GST and the State GST would not be permitted
except in the case of inter-State supply of goods and services.
(vi) Ideally, the problem related to credit accumulation on account of refund of GST should
be avoided by both the Centre and the States except in the cases such as exports, purchase of
capital goods, input tax at higher rate than output tax etc.

(vii) To the extent feasible, uniform procedure for collection of both Central GST and State GST
would be prescribed\ in the respective legislation for Central GST and State GST.
(viii) The States are also of the view that Composition/Compounding Scheme for the
purpose of GST should have an upper ceiling on gross annual turnover and a floor tax rate with
respect to gross annual turnover.

(ix) The taxpayer would need to submit periodical returns, in common format as far as possible, to both the Central GST authority and to the concerned State GST authorities.
(x) Each taxpayer would be allotted a PAN-linked taxpayer identification number with a total of
14/15 digits. This would bring the GST PAN-linked system in line with the prevailing PAN-based
system for Income tax, facilitating data exchange and taxpayer compliance.

Benefits of GST |
1. GST provide comprehensive and wider coverage of input credit setoff, you can use
service tax credit for the payment of tax on sale of goods etc.
2. CST will be removed and need not pay. At present there is no input tax credit available for
3. Many indirect taxes in state and central level included by GST, You need to pay a single GST
instead of all.
4. Uniformity of tax rates across the states
5. Ensure better compliance due to aggregate tax rate reduces.
6. By reducing the tax burden the competitiveness of Indian products in international market is expected to increase and there by development of the nation.
7. Prices of goods are expected to reduce in the long run as the benefits of less tax burden would be passed on to the consumer.

Indirect taxes included under GST |
The following indirect taxes from state and central level is going to integrated with GST

1. VAT/Sales tax
2. Entertainment Tax (unless it is levied by local bodies)
3. Luxury tax
4. Taxes on lottery, betting and gambling.
5. State cesses and surcharges in so far as they relate to supply of goods and services.
6. Entry tax not on in lieu of octroi.
7. Purchase tax (This is not sure still under discussion)

1. Central Excise Duty.
2. Additional Excise Duty.
3. The Excise Duty levied under the medical and Toiletries Preparation Act
4. Service Tax.
5. Additional Customs Duty, commonly known as countervailing Duty (CVD)
6. Special Additional duty of customs- (SAD)
7. Surcharges
8. Cesses The above taxes dissolve under GST; instead only CGST & SGST exists.

Applicability of CGST and SGST
The applicability of taxes is as usual there would be a prescribed limit of annual turnover, also
some goods and services are exempted under GST. Threshold for annual turnover for goods and

services would be 10 lakh for SGST and threshold of CGST for goods may be 1.5 crore and service would have a separate threshold that too will be appropriately high. It is assumed that aggregate total of CGST & SGST would be 20%.