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GST HYPED ARE THE MERITS HIDDEN ARE THE THREATS

Goods and Service Tax - GST - By: - Pradeep Jain - Dated:- 4-8-2015 Last Replied Date:- 6-8-2015 - Introduction:- The Goods and Services Tax (GST) is the most awaited reformation in the indirect tax structure of India which is planned to be implemented w.e.f. April 1, 2016. It has been the most happening topic in the parliament since December 19, 2014 when The Constitution (122nd Amendment) (GST) Bill, 2014 was first presented by the Finance Minister, Mr. Arun Jaitley in the Lok Sabha. In this p .....

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ncurrently by the central and state governments as the Central GST (CGST) and the State GST (SGST) respectively. Exports will be zero-rated and imports will be levied the same taxes as domestic goods and services adhering to the destination principle. Benefits of GST:- A number of countries in the world have already switched to GST. There are a number of advantages of GST over the existing indirect tax structure due to which India is looking forward to implement the same. Some of the key advanta .....

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ndirect tax is kept keeping in view the cascading effect and due provisions are framed to lower down the same. However, more the no. of taxes, more the cascading effect. When we talk of excise duty, service tax or VAT, there are Cenvat credit rules which allow the credit of input tax/duty suffered by the material or service so used. Still there are cases where the cascading effect is clearly visible but there is no mechanism in the law to deal with it. For eg. entry tax, octroi, etc. Almost ever .....

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ing at present will get subsumed in GST and credit will be allowed on the inward taxes . Resolution of classification related disputes:- One major area of dispute is the classification of goods and/or services . It would be interesting to know that there have been cases where the litigation arose on the fact whether a particular item/activity is goods (i.e. excise duty will be levied) or service (i.e. service tax will be levied). More interestingly, the said litigation was settled down by the Su .....

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rds. In the year 2006, Supreme Court gave a landmark judgment in the case of M/s BSNL and others wherein it was held that if the sale of the SIM card is merely incidental to the service being provided and facilitates the identification of the subscribers, their credit and other details, it would not be assessable to sales tax. While giving this decision, Supreme Court held that both the taxes cannot be levied on single transaction. But interestingly, even after this judgment there are several tr .....

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indirect taxes which are levied by different bodies, Central Government, State Government, Local bodies, etc. All these governing bodies have their separate offices, rules and regulations. An assessee has to move from one office to another for procedural formalities. Also, there are cases where for complying the rules of one governing body, the assessee fails to comply with rules of another governing body. Implementation of GST will bring substantial reduction in these formalities as there would .....

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be maintained by employing man, money and energy. This ultimately leads to inefficient utilization of nation s resources. Increase in product competitiveness in international market:- With the implementation of GST, in long run, there will be reduction in overall cost of products manufactured in India. This will make Indian products more competitive in International market. It is worth mentioning here that many of our top competitors in the international market have already switched to GST. Impl .....

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ide:- Earlier GST was proposed to be implemented with a rate of 27%. However, later on it has been clarified that the rate will be around 16-18%. Perhaps it has been done to bring GST rates at par with those prevailing in the international market. Normally, GST rate varies from 16% to 20% in international market. However, it is worth noting here that Malaysia has recently adopted GST in year 2015 only with the rate of 6%. Also, there is example of Australia which has GST rate of 10%. Thus, keepi .....

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It has been proposed that Decision in GSTC shall be taken at a meeting, by a majority of not less than three-fourths of the weighted votes of the members present and voting, in accordance with the following principles, namely:- (a) The vote of the Central Government shall have a weightage of onefourth of the total votes cast, and (b) The votes of all the State Governments taken together shall have a weightage of three-fourth of the total votes cast, in that meeting. And the vote of each state sh .....

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to levy an Additional Tax not exceeding 1% on supply of goods in course of inter-state trade or commerce would be levied and collected by the Central Government. This tax would be assigned to the States in which the supply originates for two years or as recommended by the GST Council. This will be a non-vatable tax. Thus, this tax itself seems to be against the very basic vision of GST which says that there will be no-cascading effect in GST. This 1% tax will ultimately become cost of goods as .....

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may not take effective steps for smooth run of GST as they are being compensated for the losses. It is also possible that the actual loss is much lower than that shown on records in order to get higher compensation. The Central Government will have to take steps to ensure that this proposal in the GST bill is not misused by the States. GST Proposal: Not friendly to important service sector like banks:- It is much hyped that GST will bring Indian goods a step forward in the International market. .....

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increase the cost of transaction, particularly, in case of imports and exports where huge amount is transacted. It is also interesting to note that in most of the countries, banking sector is excluded from the purview of GST. The cost of transaction there is obviously on the lower side. On the other hand, the cost of banking transaction, which ultimately becomes the cost of product, will increase after implementation of GST. Similar is the case with other important services like advertisement a .....

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