Whereas it has
been ubiquitously accepted and stated that the new scheme under GST will
replace the multiple taxation system currently in place in India, it has also
been realized that the new system would also be implemented on a tier-based
manner, where the Centre and State will both replace their own multiple taxation
with GST, whereby there will be a Centrally administered CGST and a
State-administered SGST simultaneously operating in the market. The taxes that
will be subsumed by the SGST include State Value Added Tax/Sales Taxes, Entertainment
Tax (other than the tax levied by the local bodies), Central Sales Tax (levied
by the Centre and collected by the States), Octroi and Entry tax, Purchase Tax,
Luxury tax, and Taxes on lottery, betting and gambling. The CGST will absorb Central
Excise Duty, Additional Excise Duty, Service Tax, Additional Customs Duty
commonly known as Countervailing Duty, and Special Additional Duty of Customs[i].
Both the CGST and the SGST will be levied simultaneously on every transaction
of supply of goods and services except on exempted goods and services, goods
which are outside the purview of GST and the transactions which are below the
prescribed threshold limits. In addition to the SGST and CGST that will be
simultaneously charged on intra-State supplies, and IGST (Integrated GST) that
will be levied on inter-State supply of goods and services.
CGST:
It is the tax
levied by the Centre on the intra-state supply of goods and services, under the
CGST Act[ii].
The Centre and State both simultaneously tax intra-State transactions and share
the revenue between them by way of a revenue-sharing agreement. CGST applies to
both goods and services, and makes a
provision for levy and collection of tax by the Central Government and for matters
connected therewith or incidental thereto. By a Notification of the Central
Board of excise and Customs on 19th June 2017[iii],
a Common Goods and Services Tax Electronic Portal[iv]
for facilitating registration, payment of tax, furnishing of returns,
computation and settlement of integrated tax and electronic way bill has been
introduced. The seller at each stage can avail a credit on input tax as against
output tax, facilitating to curb the cascading effect of previous taxation
scheme to some extent. The Schedules to the Act specify and enlist the status
of various activities and transactions that will be regarded as “supply” of goods or services, or
neither, as the case may be.
SGST:
This is the
rate of tax leviable by the States on intra-State sale of goods and services,
administered by the respective State Govt. in each State. The tax credit in
respect of SGST can be set off only against CGST and IGST, and is subject to
the compliance with respect to the invoice and returns requirements. Each State
has to frame and enact an SGST Act of its own. The Union Territory Goods and
Services Act has been enacted by the Centre to govern the imposition of GST on Union
territories of the Andaman and Nicobar Islands, Lakshadweep, Dadra and Nagar
Haveli, Daman and Diu, Chandigarh and other territory.
IGST:
Integrated GST
is the tax levied under the IGST Act[v]
on the supply of goods and/or services, in the case of inter-State trade across
India. It also includes the supply of goods or services in the course of import
into India and export from India. IGST would replace the current Central Sales
Tax that is levied on inter-State sale of goods and services. The IGST would
also be shared between the Central and State Govts. The input credit for IGST
may be adjusted against CGST, SGST or IGST. IGST will not be imposed as a third
tax in addition to any other tax, but only as the single tax levied on inter-State
sales of goods and services.
The taxation scheme that has gone live today
is indeed a moment that the Indian economy had waited for eagerly, and its
practical impacts are yet to be seen. However, the public vigor to welcome GST
has been evident since the idea was introduced, with public opinion ranging
from blatantly whimsical speculations to proper economic forecasts doing its
rounds on the internet and elsewhere. Now that it has finally seen daylight, we
need to let GST take over the market and come into full-swing operation, to see
how the market responds.
[i]
Source: Frequently Asked Questions (FAQs) on Goods and Services Tax (GST),
Press Information Bureau, Government of India, Ministry of Finance, posted on 03-August-2016
[ii] THE
CENTRAL GOODS AND SERVICES TAX ACT, 2017 (NO. 12 OF 2017) published in the
Gazette of India on 12th April 2017
[iii] Notification
No. 4/2017 – Central Tax, by the DEPARTMENT OF REVENUE, Ministry of Finance.
[v] THE
INTEGRATED GOODS AND SERVICES TAX ACT, 2017 (NO. 13 OF 2017), published in the
Gazette of India on 12th April 2017
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