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GST Knowledge Series #3: GST Rate: An Unresolved Issue

Goods and Service Tax - GST - By: - CA. Chitresh Gupta - Dated:- 29-7-2015 Last Replied Date:- 30-12-1899 - One of the crucial issue for successful implementation of GST relates to the determination of the GST rate. Since the GST is primarily intended as an exercise in reforming the consumption tax in India and not an exercise for additional resource mobilisation through discretionary changes, the CGST and SGST rates should be such rates which would yield the same revenue as collected from the v .....

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ILL BE THE ESTIMATED TAX BASE FOR GST? The Tax Base for GST will depends on the following factors: Exempted goods and Services : Currently, there are exemptions available to many goods under the various Vat Acts and there is also concept of declared goods under Central Sales Tax. Whether these exemptions and concept of declared goods will continue under GST is not clear. Goods which are outside the purview of GST : The government has introduced the GST Constitutional 122nd Amendment Bill 2014. T .....

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the government is not able to arrive at consensus for the threshold. Currently, under Excise it is ₹ 1.50 Crores, under Service Tax it is ₹ 10 lacs and under various Vat Act, it ranges from ₹ 5 lacs to ₹ 20 lacs. Thus unless the government has clarified the above, the exact tax base which will be liable to GST can t be estimated. Consequently, determination of GST rate will be herculean task. [B] WHAT WILL BE RATE STRUCTURE UNDER GST? As per the First Discussion Paper rel .....

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Goods of Local Importance may be retained in the exempted list under State GST in the initial years. It is also being discussed whether the Government of India may adopt, to begin with, a similar approach towards exempted list under the CGST. The States are of the view that for CGST relating to goods, the Government of India may also have a two-rate structure, with conformity in the levels of rate under the SGST. For taxation of services, there may be a single rate for both CGST and SGST. [C] WH .....

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t. However, in order to provide for an alternate buoyant source of revenue to the third-tier of Government. The rate of CGST and SGST on all non-SIN goods is recommended by Task Force at the single rate of 5 percent and 7 percent, respectively. For SIN goods comprising of emission fuels, tobacco products and alcohol, both the Central government and the State government may continue to levy taxes as at present, in addition to CGST and SGST. The empowered committee of state finance ministers has v .....

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methodology, said Committee Chairperson and West Bengal Finance Minister Asim Dasgupta. This brings out the divide between the tax experts and the political class on the GST structure. The Constitution (122nd Amendment), Bill, 2014 Floor rates with bands of goods and services tax: As per the Bill, the proposed GST council shall make recommendations to the Union and the States on the rates including floor rates with bands of goods and services tax; any special rate or rates for a specified period .....

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al in rates across various States compromises the objectives of a single common market significantly. The matter becomes even more complex if such variation in rates is permitted in the case of services. Services, being intangible, are difficult to be related to geographical locations and pose significant challenges in deciding the precise place where they are liable to be taxed. If the autonomy is permitted only in respect of goods, (and not services), it leads to different problems of distingu .....

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mic Relations stated that states should be allowed to have floor rates under SGST allowing them to move up the rate if they wished. The reason presumably is that some advanced economies do this. It is important to keep India s SGST rate structure as simple as possible. The states have performed this task well so far under their VAT structure where they essentially have one general rate and one lower rate, with a list of goods of local importance from which they can select about a dozen commoditi .....

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oods, not exceeding one percent in the course of inter-State trade or commerce. This additional tax will be collected by the Government of India for a period of two years, and assigned to the States from where the supply originates. Recently, the Select Committee of Rajya Sabha known to be suggesting that this additional @ 1% tax on inter-state supply of goods should be confined to inter-state movement of goods for consideration only. Sub Penal of Empowered Committee Recommended the revenue neut .....

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