Activity

GST tax consultant relies upon the recommendations of the First Discussion Paper made by the Empowered committee of states finance ministers (hereafter referred as EC) and the Report of the Task Force on GST constituted by the Thirteenth Finance commission.

Prior to going on discussion we ought to establish GST and the Goal supporting it.

What’s GST?

GST is a tax on goods and services with continuous and comprehensive chain of set-off benefits from the Producer’s stage and Service provider’s point upto the merchant level. It is essentially a tax only on value addition at each stage and a provider at every stage is allowed to set-off through a tax credit mechanism. Under GST structure, all different phases of manufacturing and distribution could be interpreted as a mere tax pass through and the tax essentially sticks final consumption within the taxing jurisdiction.

Objective behind GST

A) The incidence of tax only drops on domestic consumption. B ) The equity and efficiency of the system is already optimized. C ) There should be no export of taxes across taxing jurisdictions. D) The Indian marketplace should be integrated into a single common market. E) It enhances the cause of co-operative federalism.

Our comparative discussion will be based only on important points assembling overall GST.

GST MODEL

A dual structure has been advocated from the EC. The two elements are: Central GST (CGST) to be levied by the middle and state GST (SGST) from the nations. The Task Force has also suggested for its double levy imposed concurrently by the centre and the nations, but to market co-operative federalism. Both the CGST and SGST ought to be imposed on a common and identical base.

Both have indicated for ingestion type GST, that is, there should be no differentiation between raw materials and capital goods in permitting input . The tax base should comprehensively extend over all goods and services upto final consumption stage.

Also both are of the view that the GST should be structured on the destination principle. According to Task Force this is going to result in the change in production to consumption where imports will probably be liable to both CGST and SGST and exports should be relieved of the load of products and services tax by zero rating. Consequently, revenues will accrue to the state where the consumption occurs or is required to take place.

The Task Force on GST said the computation of CGST and SGST liability ought to be dependent on the Invoice credit technique. I.e., let credit for tax paid on all of intermediate products and services on the basis of bills issued by the supplier. As a result, all different phases of production and distribution could be interpreted as a mere tax pass-through and the tax will effectively’stick’ on final consumption within the taxing jurisdiction. This will facilitate elimination of this cascading effect at various phases of manufacturing and distribution.