Basic Details about proposed Goods & Service Tax (GST) in India

What type of GST is pro­posed for India?

India is plan­ning to imple­ment a dual GST sys­tem. Under dual GST, a Cen­tral Goods and Ser­vices Tax (CGST) and a State Goods and Ser­vices Tax (SGST) will be levied on the tax­able val­ue of a transaction.

All goods and ser­vices, bar­ring a few excep­tions, will be brought into the GST base. There will be no dis­tinc­tion between goods and services.

Which oth­er nations have a sim­i­lar tax structure?

Almost 140 coun­tries have already imple­ment­ed the GST. Most of the coun­tries have a uni­fied GST sys­tem. Brazil and Cana­da fol­low a dual sys­tem where GST is levied by both the Union and the State governments.

France was the first coun­try to intro­duce GST sys­tem in 1954.

Will this be an extra tax?

It will not be an addi­tion­al tax. CGST will include cen­tral excise duty (Cen­vat), ser­vice tax, and addi­tion­al duties of cus­toms at the cen­tral lev­el; and val­ue-added tax, cen­tral sales tax, enter­tain­ment tax, lux­u­ry tax, octroi, lot­tery tax­es, elec­tric­i­ty duty, state sur­charges relat­ed to sup­ply of goods and ser­vices and pur­chase tax at the State level.

What will be the rate of GST?

The com­bined GST rate is being dis­cussed by gov­ern­ment. The rate is expect­ed around 14–16 per cent. After the total GST rate is arrived at, the States and the Cen­tre will decide on the CGST and SGST rates.

Cur­rent­ly, ser­vices are taxed at 10 per cent and the com­bined charge indi­rect tax­es on most goods is around 20 per cent.

Will goods and ser­vices cost more after this tax comes into force?

The prices are expect­ed to fall in the long term as deal­ers might pass on the ben­e­fits of the reduced tax to consumers.

Why are some States against GST; will they lose money?

The gov­ern­ments of Mad­hya Pradesh, Chhat­tis­garh and Tamil Nadu say that the infor­ma­tion tech­nol­o­gy sys­tems and the admin­is­tra­tive infra­struc­ture will not be ready by April 2010 to imple­ment GST. States have sought assur­ances that their exist­ing rev­enues will be protected.

The cen­tral gov­ern­ment has offered to com­pen­sate States in case of a loss in revenues.

Some States fear that if the uni­form tax rate is low­er than their exist­ing rates, it will hit their tax kit­ty. The gov­ern­ment believes that dual GST will lead to bet­ter rev­enue col­lec­tion for States.

How­ev­er, back­ward and less-devel­oped States could see a fall in tax col­lec­tions. GST could see bet­ter rev­enue col­lec­tion for some States as the con­sump­tion of goods and ser­vices will rise.

How will GST be implemented?

The empow­ered com­mit­tee is like­ly to final­ize the details of GST. But States have to sort out sev­er­al issues like agree­ment on GST rates, con­sti­tu­tion­al amend­ments and hold­ing talks with indus­try asso­ci­a­tions. Experts feel the draft­ing of leg­is­la­tion and the imple­men­ta­tion of law will take time.

What are the items on which GST may not be applied?

Alco­hol, tobac­co, petro­le­um prod­ucts are like­ly to be out of the GST regime.

Source: www.gstindia.com