Professional Documents
Culture Documents
Why is GST
A good and service tax (GST) or value added tax (VAT) is a tax on domestic consumption. It is multi-stage tax for which the tax burden is intended to fall on the final consumer. Under GST, registered dealer is to charged GST on its output and pay GST on inputs. Difference of OUTPUT GST and input GST he has to pay to the tax authorities. To avoid cascading effect tax is paid on only on 2 the vale addition at each stage.
Tax Cascading
Manufacturer 1 Raw materials Labour Others Profit Total ex-factory Central Excise@12% Sale Price Sales Tax @12% Total paid by M2 50 30 10 10 100 12 112 13 125 Raw materials Labour Others Profit Total ex-factory Central Excise @12% Sale Price Sales Tax @12% Total sale price Effective tax rate : 76 / 175 = 43%
9
Centre CX @12% Manufacturer-1 Basic Cost Value Addition Total Manufacturer-2 ValueAddn.+ Taxes Total Sales Dealer 1 Basic Cost ValueAddn.+ Taxes Total Sales Dealer 2 ValueAddn.+ Taxes Total Service Provider Basic Cost ValueAddn.+ Taxes 70 30 100 50 150 150 40 190 60 250 250 50 12 6 18 Centre
State VAT@12%
13.4
18-13.4=4.6 4.8
7.2 30
10
State VAT
Empowered Committee of State Finance Ministers set up in 1999. West Bengal State FM is Chairman. All State FMs and the Centre are represented on it. Uniform rates of tax were negotiated and introduced in all States in stages. 12.5%, 4%, 1% & exempted items. Petroleum products, liquor, goods of local importance, etc were exempted. There are deviations. Compensation from the Centre (100%, 75% & 50% in first 3 years) promised to States losing revenue, based on historical growth rate of each State (Total compensation payable : Rs 20,000 cr) State VAT introduced from 1.4.2005. TN & UP were the last to join. Now, all States have joined.
12
Reduction of CST
Till 1.4.2007, a uniform CST rate of 4% for all interState sales. To be reduced to 0% by 1.4.2010, when GST is introduced. Reduced from 4% to 3% w.e.f. 1.4.2007 Loss of States to be compensated mainly by nonmonetary measures : (1) Introduction of VAT on tobacco (2) Abolition of Form D (3) Centre setting apart revenue from certain specified services for the State Any shortfall to be made good by the Centre by way of Budgetary allocations.
13
Under this model both goods and services would be subject to concurrent taxation by the Centre and the States. This model is closer to the model recommended by the Kelkar Committee in 2002. inter-state services for which the place of destination would be difficult to determine. The State tax on these services may be collected by the Centre, and then apportioned among the States in some manner.
15
16
SGST@8%
9.00 4.50
8.00 4.00
3.60
3.20
5.40
4.80
There would a single registration or taxpayer identification number, based on the Permanent Account Number (PAN) for direct taxation. Three additional digits would be added to the current PAN to identify registration for the Centre and State GSTs.
20
21
22
28
Sub-Working Groups to give report by Jun-Jul 2009 on (1) Items which require special rates (2) Mechanism for inter-State transactions & (3) Rules for inter-State services Rates to be finalised, between the Centre & the States Constitutional amendment easier, if there is consensus Model legislations IT infrastructure Dispute Resolution Mechanism 29 Compensation Mechanism
Thank you..
30