1 Q. What is it?
The Goods and Services Tax in an indirect tax to belevied when a consumer buys a good or service, it is intended to replace all the indirect taxes that you currently pay (VAT/ Sales Tax, Luxury Tax etc.). It will be comprehensive nationwide indirect tax on the manufacture, sale and consumption of goods and services.
2 Q. What kind of GST model is proposed?
There are 140 countries that have already implemented GST, while most of them follow – uniifed GST, i.e. only Centre imposes tax. India will follow dual system as both Centre and State Governments will be imposing tax. India will be third country to follow a dual system after Brazil and Canada.
3 Q. What are the taxes to be subsumed?
Centre State
1. Central Excise duty 1. State VAT/ Sales Tax
(CENVAT)
2. Additional duties of 2. Purchase Tax
excise
3. Excise duties levied 3. Entertainment Tax
under Medicinal &
Toiletries preparation Act
4. Additional duties of 4. Luxury Tax
customs
5. Service Tax 5. Taxes on Lottery,
betting & gambling
6. Surcharges & Cess 6. Surcharges & Cess
4 Q.What are CGST, SGST and IGST?
The GST needs to have clear provisions on what areas the Centre and the State are allowed to collect revenue from taxation to prevent an overlapping.
The Central GST or CGST is the area where Centre has the powers and State GST or SGST where the state has taxation capabilities. The IGST or Integrated GST is for movement of goods within the states of the Indian Union.
5Q. What are the changes accepted by Union Cabinet?
Union Cabinet agreed to drop 1% manufacturing tax (proposed 1% additional levy over and above GST) and providing guarantee to compensate States for any revenue loss in the first five years of the rollout of GST.
The bill was earlier passed in Lok Sabha in May, 2015, where the Centre had proposed 100% compensation for first 3 years and 75% and 50% for the next two years. However, the select committee of the Rajya Sabha has now recommended 100% compensation for probable loss of revenue for five years.
6Q. Why does GST need a constitutional amendment?
Under the law, only Centre can impose taxes on services provided. But if GST is in place, states need to be allowed to collect service taxes as well. Hence, there needs to be constitutional amendment to empower states to do so. This will be 122nd constitutional amendment bill.
7 Q. Is there a last date for the government to implement GST?
1st April 2017 is set as the deadline for rolling-out theGST.
8 Q. How will it become a law?
The bill passed in Rajya Sabha will now be sent back to the Lok Sabha, which had passed it last year, for the amendments to be cleared by the lower house. It will then need the President’s assent and approval of 15 States, half of India’s 29.
PRESENT SYSTEM
Product sold from Hyderabad to Warangal Price = Rs.1000
↓ VAT @10% = Rs.100
Product sold from Warangal to Vijayawada
Cost = Rs. 1100
Profit = Rs. 1000
Sell Price = 2100
↓ CST @10% = 210
Total Cost of Product = Rs.2310
GST SYSTEM
Product sold from Hyderabad to Warangal
Price = Rs.1000
↓ CGST @5% = Rs.50
SGST @5% = Rs.50
Product sold from Warangal to
Vijayawada Cost = Rs. 1100
Profit = Rs. 1000
Sell Price = 2100
↓ IGST @10% Rs. 210
– CGST (Rs.50)
– SGST (Rs.50) = 110
Total Cost of Product = Rs.2210
