Bringing about a change in the indirect taxation system of India, the concept of Goods and Service Tax is presented for discussion. We have listed down below the salient features of the first discussion paper on GST

1. A dual GST structure: Central GST and State GST; tax to be paid to the Accounts of Centre and State separately
2. Input Tax Credit for Central GST only available against Central GST, and the same  rule applies to State GST; cross utilization of ITC allowed between the Centre and State only in case of interstate supply of goods
3. Centre and State to have separate legilation; each state may have its one legislation keeping basic provisions of chargeability, levy, classification unifor to the maximum extent possible
4. Thresholds proposed: State GST Annual Gross Turnover 10 lacs and Central GST 1.5 crores
5. Following Central and State Taxes are proposed to be subsumed:
   • Central Excise Duty, Additional Excise Duties
   • The Excise Duty levied under the Medicinal and Toiletries Preparation Act
   • Service Tax
   • Additional Customs Duty, commonly known as ountervailing Duty (CVD)
   • Special Additional Duty of Customs – 4% (SAD)
   • Surcharges, and
   • Cesses
   • VAT / Sales tax
   • Entertainment tax (unless it is levied by the local bodies)
   • Luxury tax
   • Taxes on lottery, betting and gambling
   • State Cesses and Surcharges in so far as they relate to supply of goods and services
   • Entry tax not in lieu of Octroi
6. Inter-state Goods and Service Tax Model: Centre would levy IGST (CGST plus SGST) on all inter-State transactions of taxable goods and services. The inter-State seller will pay IGST on value addition after adjusting available credit of IGST, CGST, and SGST on his purchases. The Exporting State will transfer to the Centre the credit of SGST used in payment of IGST. The Importing dealer will claim credit of IGST while discharging his output tax liability in his own State. The Centre will transfer to the importing State the credit of IGST used in payment of SGST.
7. GST Rate Structure expected

Special rate for precious metals

Lower rate for necessary items and goods of basic importance

Standard rate for goods in general

8. Zero rating for exports
9. Both CGST and SGST will be levied on import of goods and services into the country. Full and complete set-off will be available on the GST paid on import on goods and services.

Author: Neha Singhi

Contact: +91-33-40083385

neha@nehasinghi.com

Date: November 11, 2009