GOOD AND SERVICE TAX

Salient Features of the proposed GST Model

 Dual GST structure with defined functions and responsibilities of Centre and State
 GST to have two components:
 one levied by the Centre, i.e. Central GST (hereinafter “CGST”)
 other levied by the States, i.e. State GST (hereinafter “SGST”)
 Separate Statutes, i.e. one for CGST and separate statute for SGST for each State
 Uniformity across Statutes in basic features such as chargeability, definition of taxable event and
taxable person, measure of levy including valuation, basis of classification, etc
Central and State Taxes to subsume in GST
 CGST to subsume Central Excise Duty, Additional Excise Duties, Excise Duty under the
Medicinal and Toiletries Preparation Act, Service Tax, Additional Customs Duty i.e. CVD, Special
Additional Duty of Customs - 4% i.e. SAD, Surcharges, and Cesses
 SGST to subsume VAT/ Sales Tax, Entertainment Tax (unless it is levied by the local bodies),
Luxury Tax, Taxes on lottery, betting and gambling, State Cesses and Surcharges
 Related to supply of goods and services and Entry tax
 Purchase tax to be subsumed under GST or not, to be decided
Applicability
Applicable on all transactions of goods and services made for a consideration except
 exempted goods and services
 goods which are outside the purview of GST
 transactions which are below prescribed threshold limits
Rate of GST
 Two-rate structure:
 lower rate for necessary items and goods of basic importance
 standard rate for goods in general
 Special rate for precious metals
 Exempted items to be specified
 Single rate of CGST and SGST for taxation of services
 Exact rates of SGST and CGST to be known during the course of legislative actions
Threshold
 SGST - Gross annual turnover of INR 1 Million for goods and services
 CGST - Gross annual turnover of INR 15 Million for goods and for services to be decided
Compounding scheme
 For gross annual turnover of INR 5 Million at a floor rate of 0.5% across States
 Option for registration under GST for dealers with turnover below compounding cut-off
Availability of Input Tax Credits (hereinafter “ITC”)
 No cross ITC amongst CSGT and SGST permissible
 Taxes paid against CGST to be utilized only against payment of CGST and taxes paid against
SGST to be utilized only against payment of SGST
 Alignment of rules for taking and utilization of ITC for CGST and SGST
 Cross utilization of ITC between CGST and SGST permissible only in case of inter-State supply
of goods and services under Integrated Goods and Service Tax (hereinafter “IGST”) Model
 ITC accumulation/ refund permissible only in specific cases such as exports, purchase of capital
goods, input tax at higher rate than output tax
Inter-State transaction of goods and services
 Adoption of IGST Model for taxation of inter-State transaction of goods and services
 Centre to levy IGST proposed to be CGST plus SGST on all inter-State transactions of taxable
goods and services
 IGST proposed to work in the following manner:
 Selling dealer in exporting State to charge IGST on all inter-State transactions to be
collected by the Central Government
 Input SGST used by selling dealer for payment of IGST to be paid by exporting States to
the Central Government
  The Central Government to pay, to importing State, input IGST used for payment of
SGST in importing State on subsequent supplies in that State.
 Buyer in importing State can claim ITC of IGST paid while discharging tax liability in his
State on the basis of invoices
 Relevant information to be submitted to the Central Agency acting as a clearing house
mechanism for verifying claims and inform the respective Governments to transfer funds

Registration
Each taxpayer to be allotted a PAN-linked taxpayer identification number

Goods outside purview of GST

 Alcoholic beverages (Sales Tax/ VAT and State Excise Duty continue to be levied)
 Petroleum products, i.e. crude, motor spirit (including ATF) and HSD (current State and Central
taxes continue to be levied)

Exports
 Exports to be zero-rated
 Similar benefits may be given only to processing zones of Special Economic Zones (hereinafter
“SEZ”).
 No benefits on sales from SEZ to the Domestic Tariff Area

Imports
 GST to be levied on imports with necessary Constitutional amendments
 CGST and SGST to be levied on import of goods and services
 Tax revenue in case of SGST to accrue to the State where imported goods and services are
consumed
 Full set-off available on GST paid on import of goods and services

Collection/ Administration/ Assessment

 The administration of CGST to be with Centre and for SGST with the States
 Uniform procedure for collection of CGST and SGST
 Centre and the States to have concurrent jurisdiction for entire value chain
 Assessment, enforcement, scrutiny and audit to be done by authority collecting tax

Compliances
 Taxpayer to submit periodical returns in common format under CGST and SGST
 Taxpayer to maintain separate details in books of account for utilization/ refund of credit

Special Industrial Area Scheme

 Industrial incentives - Tax exemptions, remissions, etc. to be converted into cash refund schemes
after collection of tax to ensure continuous chain of set-offs
 Special Industrial Area Schemes - Exemptions, remissions, etc. to continue up to legitimate
expiry time both for Centre and the States
 No new exemption, remission, etc. or continuation of earlier exemption, remission
CST
CST to be phased out with the introduction of GST