As per the decisions made by all will of GST Council on November 3, 2016, tax rates would be at 4 slabs of 5%, 12%, 18% and 28%. Luxury and demerit goods will be taxed at 28% plus cess. daily needs will be taxed at 5%.
A Sample GST Invoice Format
An Introduction To GST
GST would be a comprehensive indirect tax on manufacture, sale and consumption of goods and services throughout India, to replace taxes levied by the central and state governments. The GST is consumption based tax levied on the supply of Goods and Services which means it would be levied and collected at each stage of sale or purchase of goods or services based on the input tax credit method. This method allows GST-registered businesses to claim tax credit to the value of GST they paid on purchase of goods or services as part of their normal commercial activity. Taxable goods and services are not distinguished from one another and are taxed at a single rate in a supply chain till the goods or services reach the consumer. Administrative responsibility would generally rest with a single authority to levy tax on goods and services. Exports would be considered as zero-rated supply and imports would be levied the same taxes as domestic goods and services adhering to the destination principle in addition to the Customs Duty which will not be subsumed in the GST.
The introduction of Goods and Services Tax (GST) would be a significant step in the reform of indirect taxation in India. Amalgamating several Central and State taxes into a single tax would mitigate cascading or double taxation, facilitating a common national market. The simplicity of the tax should lead to easier administration and enforcement. From the consumer point of view, the biggest advantage would be in terms of a reduction in the overall tax burden on goods, which is currently estimated at 25%-30%, free movement of goods from one state to another without stopping at state borders for hours for payment of state tax or entry tax and reduction in paperwork to a large extent.
What changes there would be if India launches GST- “The tax rate under GST may be nominal or zero rated for the time being. It has been proposed to insulate the revenues of the States from the impact of GST, with the expectation that in due course, GST will be levied on petroleum and petroleum products.” The central government has assured states of compensation for any revenue losses incurred by them from the date of introduction of GST for a period of five years
As India is a federal republic GST would be implemented concurrently by the central government and by state governments
GST threshold was set at ₹10 lakh (US$15,000) for the north-east and hill states and ₹20 lakh (US$30,000) for other states in the first GST council meet. Centre and states agreed that assessee up to ₹1.5 crore (US$220,000) will be assessed by states and above that will be assessed by centre and states.
Current Indirect Tax Regime in India
Problems in the Present Structure
Present Indirect structure is marked with following problems:
Multiplicity of Taxes
Presently, the Constitution empowers the Central Government to levy excise duty on manufacturing and service tax on the supply of services. Further, it empowers the State Governments to levy sales tax or value added tax (VAT) on the sale of goods. This exclusive division of fiscal powers has led to a multiplicity of indirect taxes in the country. In addition, central sales tax (CST) is levied on inter-State sale of goods by the Central Government, but collected and retained by the exporting States. He has to contact several authorities and maintain separate records for each of them.
The taxes are levied by central government as well as state government. So, a person has to maintain accounts which will comply with all the applicable laws. This multiplicity of taxes at the State and Central levels has resulted in a complex indirect tax structure in the country that is ridden with hidden costs for the trade and industry.
Cascading effects of taxes
In current indirect tax structure in India, there is cascading of taxes due to ‘tax on tax’. No credit of excise duty and service tax paid at the stage of manufacture is available to the traders while paying the State level sales tax or VAT, and vice versa. Further, no credit of State taxes paid in one State can be availed in other States. Hence, the prices of goods and services get artificially inflated to the extent of this ‘tax on tax’.
The problem of tax arbitrage for a single nation poses an invisible barrier for free trade. In many cases, a small difference in rate of tax can result in manifold implications and thus, can induce the business to move into a lower tax territory.
Similarly, Entry tax also acts as barrier for free trade.
GST is seen as a solution to the above problems.
GST shall subsume the following taxes in the times to come once the law is in force:
The proposed GST regime shall have the following features:
· It shall be a destination based taxation
· It shall have a Dual Administration – Centre and state
· State wise determination of taxable person – no more centralized registration
· Seamless credit amongst goods and services
All the existing taxpayers registered under VAT, Service Tax, and Excise are required to furnish the details at GST Common portal for the purpose of migrating themselves into GST regime. To begin with, the taxpayers registered under the State Vat Department needs to provide their details and period for furnishing these details are specified for every state.Once the taxpayers provide their details there will be no need for them to register again with the State or Center once the GST Act is implemented. Enrolment process for other existing taxpayers not registered with VAT will be started at a later date
With heterogeneous State laws on VAT, the debate on the necessity for a GST has been reignited