The most awaited indirect tax reform in India is the introduction of Good and Services Tax (GST). GST is a comprehensive tax on manufacture, sale and consumption of goods and services at a nationallevel and aimed to remove the cascading effect of tax, standardise the procedural aspect and create a single, unifed Indian market to strengthen the economy. Its effective implementation would change the tax administration and the manner of conducting business in India. In short, the GST is likely to be a game changer for the industry

What is GST and what is its applicability?

GST is a tax on supply of goods and services. It is proposed to implement dual GST in India. GST would be applicable to all the industry except alcohol, petroleum products and power. However, gradually, these sectors may also be included within the ambit of GST.

When is GST likely to be implemented?

Considering the progress made till date, implementation before 1st April 2013 seems unlikely. The Industry expects the Finance Minister to come up with a certain date for implementation of GST in the Union Budget 2012-13.

What could be the rate of GST?

Answer: The objective of GST was to have one single rate across the country for all goods and services. However, after constant deliberation between the States and the Center, it was decided to have two rates for goods i.e. concessional and standard rate along with a list of exempted goods.

The standard and concessional rate of GST on goods for the first three years from the date of implementation of GST would be as in the table.

Services are however likely to be taxed @16% (8+8) under the GST regime.

What is the fundamental change between GST and the current indirect tax regime?

With the introduction of GST, the taxable event would shift to supply of goods and services. Thus, even branch transfers would be subject to GST.

Under GST, the cascading effect, that is, tax on tax, would be removed. The base for calculating SGCT and CSGT would remain the same unlike currently where VAT is payable on sale price plus the excise duty.

The tax on inter-state supply of goods (IGST) would be available for offset unlike CST which is a cost today.

The incidence of tax will follow the consumption principle unlike originating principal and the tax revenue in case of SGST will accrue to the State where the goods and services and goods are consumed.

What are the taxes that are likely to be subsumed in GST?

Answer: The taxes proposed to be subsumed under SGST and CGST are in the table:

Purchase tax : The food grain-producing states felt that they are getting substantial revenue from purchase tax and, therefore, it should not be subsumed under GST, while others were of the contrary view.

The difficulties of the food grain-producing States was appreciated as substantial revenue is being earned by them from purchase tax and it was, therefore, felt that in case purchase tax was subsumed, then adequate and continuing compensation has to be provided to such States.

This issue is being discussed in consultation with the Government of India.

How will GST benefit industry, trade and agriculture?

As GST will give more relief to industry, trade and agriculture through a more comprehensive and wider coverage of input tax set-off, subsuming of several Central and State taxes in the GST and phasing out of CST.

The transparent and complete chain of set-offs will help widen tax base, achieve better tax compliance, lower tax burden on an average dealer in industry, trade and agriculture.

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