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BASIC CONCEPTS OF GST (PART-9)

Goods and Services Tax - GST - By: - Dr. Sanjiv Agarwal - Dated:- 18-2-2016 - Challenges for GST Implementation Any change in taxation is difficult to implement, and in a federal republic like India where states are as powerful as they are, problems get compounded. The biggest of all challenges continue to be to understand the enormity of GST. It will impact every one and every part of business from manufacturing to financial reporting to tax accounting to supply chain to consumption. This will .....

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the economy in initial period of GST regime. However, over a period, as things settle down, competition shall bring down the cost of production and so the prices. On concern over inclusion of real estate transactions in GST, it can be said that real estate does not fall in the definition of goods and services. There will have to be many amendments of Constitutional provisions if it is to be included, namely Entries 63, 54,18 and 19 of State List and Entry 84 of Union List. This will bring about .....

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rity among the states in terms of their gross domestic production and tax base and revenue. As a result, it will affect different states and their revenues differently as also diverse impact on people. However, it should be borne in mind that all kinds of goods and services tax (GSTs) in federal countries all over the world are imperfect. Brazil's GST is so complicated that economists have called it a patchwork quilt. In European Union also the structure is defective such that in poorer coun .....

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to success of GST.The problems with implementing Goods & Services Tax (GST) can be broadly classified into two major categories. Legislative Challenge: The Constitution of India provided powers to the Union and the States to levy and collect taxes as per Union, State and Concurrent List. The challenge is whether this can be treated as the basic structure of the Constitution thereby restricting the Government from bringing about any change in this structure. In order to enable the Centre and .....

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he tax net by taxing every economic supply in the distribution network. This will lead to rapid increase in assesses. It will require some of the businesses to restructure their distribution network to reduce additional tax burden on the consumer with a view to be price competitive. Though it will generate revenue in a neutral and transparent way, the Government will have to ensure that the ultimate consumer is not burdened with tax beyond his capacity. Logistics: GST has to be implemented simul .....

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on the basis of Destination Principle (i.e. taxed in state where goods/service is sold/ rendered) and State govts are fearful of losing money. Though Central government has put forward a tax revenue sharing program, but States aren't entirely convinced about it. To allocate revenue to the respective States: In case of destination based principle of taxation, the recipient State will have to levy the tax as per the law of the dispatching State. This is bound to create problems if there is no .....

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person collecting the tax on his supply in case of inter-State transactions should deposit the tax in the account of the State where the supply has been made. Then on the basis of revenue reports of the respective Governments, the banks can allocate the revenue to the respective States or the Central Government, as the case may be. The banking system needs to be improved fur this purpose. The challenge can be met by proper training and up gradation of tax administration with technological interf .....

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cost and cascading effect of tax. The challenge for the Government is to introduce a seamless mechanism across India. The success of dual GST model will depend on effective credit mechanism to avoid cascading effect of multi-stage taxation in the supply chain. The credit mechanism is the lifeline of GST. As far as Central GST is concerned, there is no difficulty in giving credit of Central GST anywhere in India as is evidenced by success of the present CENVAT scheme. But, in case of State GST p .....

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