20-03-2014, 03:09 PM
Goods and Service Tax
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Why is GST
A good and service tax (GST) or value added tax (VAT) is a tax on domestic consumption. It is multi-stage tax for which the tax burden is intended to fall on the final consumer.
Under GST, registered dealer is to charged GST on its output and pay GST on inputs. Difference of OUTPUT GST and input GST he has to pay to the tax authorities.
To avoid cascading effect tax is paid on only on the vale addition at each stage.
Why there is need to GST
The design of the CENVAT and state VATs was dictated by the constraints imposed by the Constitution, which allows neither the Centre nor the States to levy taxes on a comprehensive base of all goods and services and at all points in their supply chain.
The Centre is constrained from levying the tax on goods beyond the point of manufacturing, and the States in extending the tax to services.
Why there is need to GST
This division of tax powers makes both the CENVAT and the state VATs partial in nature and contributes to their inefficiency and complexity.
The CENVAT is levied on goods manufactured or produced in India. This gives rise to definitional issues as to what constitutes manufacturing, and valuation issues for determining the value on which the tax is to be levied.
Goods & Services Tax (GST)
The EC has been discussing GST for about 2 years now. There is a broad consensus between Centre & States on the policy areas relating to GST to be introduced by 1.4.2010. This will be a dual GST –
Under this model both goods and services would be subject to concurrent taxation by the Centre and the States. This model is closer to the model recommended by the Kelkar Committee in 2002.
inter-state services for which the place of destination would be difficult to determine. The State tax on these services may be collected by the Centre, and then apportioned among the States in some manner.
Dual GST – Other features:
Procedures for collection of Central and State GSTs would be uniform. There would be one common tax return for both taxes, with one copy given to the Central authority and the other to the relevant State authority.
GST – Dispute Resolution Mechanism
Likely disputes between States and perhaps between Centre & the States have to be resolved. A mechanism has to be evolved.
Presently, for CST, there is a CST Appellate Tribunal, under a retd. Supreme Court Judge. This may have to be strengthened with regional benches, as the number of cases will be large.