CS Professional:Advanced Tax Laws [Ch-1 An Overview on GST]

 Goods and Services Tax 

• CBIC-Central Board of Indirect Taxes & Customs 
• apex regulatory body to regulate,administer,levy and administrate indirect taxes in India.
• part of Revenue Department under Finance Ministry,Government of India.

HISTORICAL BACKGROUND OF INDIRECT TAX

1. post-independence period:central excise duty levied on few raw material and intermediate goods but not on consumer goods.
2. first tax reform suggested by Taxation Enquiry Commission (1953-54)
3. mid-1970s:central excise duty's scope extended to most manufactured goods.
4. in 1991 the New Economic policy brought with itself significant reform for the indirect taxation system under the chair Professor Raja J Chelliah.
5. 1999-2000:tax rates merged into 3 rates
6. 2000-01:3 rates merge into a unified rate called Central Value Added Tax (CENVAT)
7. Services tax introduced in 1994 on Insurance,Telecommunication and Stock Broking @5%
8. in 2017 5% increased to 15% (including Cess)
9. pre-2012: positive list approach for services
10. Post-2012:Negative list approach, 17 items on the list not taxed, rest all services taxed.
11. 2004: CENVAT and Service tax merged to cross-utilize credit
12. transition from sales tax to VAT commenced with a discussion in Chief Ministers meeting in 1995.
13. Haryana first implemented VAT in 2003; Uttar Pradesh last to implement from 1/1/2008.

INTERNATIONAL PERSPECTIVE

OECD: Organisation for Economic Co-operation and Development

• international norms to social,economic and environmental challenges.
• improving economic performance,creating jobs,fostering strong education and fighting international taxation invasion.
• 37 members
• on 12/4/2017 published 'International VAT/GST Guidelines' to consider while designing their respective VAT/GST regimes.

Ottawa Taxation Framework Conditions

• neutrality
• efficiency
• certainty and simplicity
• effectiveness and fairness
• flexibility

• as of 2018,168 countries and territories have adopted VAT/GST
• US being the largest economy, doesn't have a GST regime but rums on sales tax still.
• France, first country to introduce VAT in 1954 @2.1,5.5,10 and 20%.
• Malaysia introduced GST in April,2015 @6% but by may,2018 sales and service tax was reintroduced;scraping GST completely off.
• GST launched in India on 01/07/2017

PROVISIONS UNDER THE INDIAN CONSTITUTION

1. Article 265:prohibits arbitrary tax collection,i.e,tax only collected under authority of law and it's legislative competence.
2. Article 245:Part XI-relationship between union and states
3. Article 246:Respective authority of union and states for levying taxes for their particular territories.
• Article 246A:power to make laws for GST. (newly inserted)

GST is an indirect tax which means the final consumer is burdened with its payment.it is a destination-based tax. it is levied on all stages right from manufacturing to consumption with credits provided at previous stages. hence, only value additions will be taxed.it consists of the following acts which received the president's assent on 12/04/2017 and became effective as on 01/07/2017:

• Central GST act,2017

• State GST act,2017

• Integrated GST act,2017

• Union Territory GST act,2017

• Goods and Services (Compensation to States) act,2017

ADVANTAGES OF GST

1. TO CITIZENS
• simple
• price reduction due to termination of cascading effect in taxes
• price uniformity
• taxation system transparency
• increased employment
2. TO TRADE/INDUSTRY
• no tax multiplicity
• no cascading/double taxes
• efficient neutralization like exports
• common national market
• fewer rates and exemptions
3. CENTRAL/STATE GOVERNMENTS
• unified national market
• boost to export/manufacturing-employment-reduced poverty and increased GDP
• improved investment climate
• uniform SGST/IGST rates to reduce tax evasion
• less compliance costs

COMPOSITION SCHEME

• Section 10 of CGST act,2017
• threshold turnover<1.5 crores; for select states the limit shall be 75 crores
• for opting-GST CMP-02 and other monthly/quarterly/annual forms
• adopters known as Compounding Vendors, required to pay tax @ fixed rates without Input Tax Credit.

1. Reverse charge mechanism under section 24 of CGST act
2. EXEMPT SUPPLY: section 6 and 11 of CGST act which includes
• supply attracting nil rate tax like jaggery,salt,tender coconut water,cereals
• wholly exempt
• non-taxable
3. Section 11 of CGST act OR Section 6 of IGST act-power to grant exemption by notification/special order and explanations.

Important Case Laws

• Del small ice cream manufacturers welfare's association vs. Union of India (2021)-DELHI HIGH COURT
• National Highway Authority of India vs. Sahakar Global ltd. (2020)-DELHI HIGH COURT