Features of GST

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Salient Features of GST:

  • It would be applicable on the supply of goods or services which replaces the existing system of manufacture of goods or sales of goods or provision of services.
  • It is based on the principle of destination based consumption rather than origin based taxation.
  • It is a dual based GST with the centre and states simultaneously.
  • Based on the federal structure of India, GST will be levied concurrently to the Central government (CGST) and the state government (SGST). It is expected that the design and the base structure of both GST to be similar. The inter-state supplying of goods attracted towards Integrated GST (IGST), which is a combination of CGST and SGST.
  • Union territories without legislature will levy the union called as (UTGST).
  • An integrated DST (IGST) will be levied by the centre, so that supply chain will not be disrupted.
  • Import of goods and services will come under IGST, with addition to applicable custom duties.
  • CGST, SGST, IGST, UTGST mutually agreed upon by the centre and state governments under the aegis of the GSTC.
  • GST would be applicable to all the goods and services except alcohol (human consumption).
  • GST on the five petroleum products like diesel, petrol, natural gas, crude, ATF would be applicable from the date which is to be recommended by the GSTC.
  • GST would replace the levied taxes which is collected by the centre
    • Central Excise Duty
    • Medicinal and toilet preparation.
    • Textile and textile products.
    • Duties of customs also known as CVD.
    • Special additional duties of customs (SAD).
    • Cesses, surcharges in so far as they related to supply of goods or services.
    • Service tax.
  • State tax that would be included in the GST are:
    • Central Sales Tax.
    • Purchase Tax
    • Luxury Tax
    • State VAT.
    • Entry Tax.
    • Entertainment Tax.
    • Taxes on advertisements.
    • Taxes on betting, lotteries and gambling.
    • State cesses and surcharges insofar related to the supply of goods or services.
  • Tobacco and tobacco products will be subjected to GST. In addition the central would continue to impose central excise duty.
  • A threshold exemption would be applicable to both the CGST and SGST. The taxpayers with an annual turnover of Rs.20lac (10 lac for special category states which are specified in the constitution) will be exempt from the GST. Another one is compounding scheme ( pay tax at a flat rate without any credits) for small tax payers (including special category of manufacturers and service providers) having annual turnover of Rs.50 lac. The compounding scheme and the threshold exemption would be optional.
  • The list of exempted goods and services would be kept minimum as far as possible in order to harmonise centre and the state and the across the states.
  • Credit of CGST paid on inputs would only be used to pay CGST on outputs. Credits of UGST and SGST paid on inputs only are used to pay UGST/SGST on outputs.
  • The two streams of Input Tax Credits (ITC) would not be cross utilized (except in some circumstance that the inter-state supplies of goods for the payment of IGST).
  • The credits will be utilised in the following order:
    • ITC of CGST would be allowed for the payment of IGST and CGST.
    • ITC of SGST would be allowed for the payment of IGST and SGST.
    • ITC of UTGST would be allowed for the payment of IGST and UTGST.
    • ITC of IGST would be allowed for the payment of IGST, SGST, CGST and UTGST.
    • ITC of CGST cannot be allowed for the payment of SGST and UGST and vice versa.
  • Electronic filing of returns will be for different class of persons at different cut-off dates.
  • Obligations can be made on certain people who are in government departments, government agencies, and local authorities who are recipients of supply can deduct the tax by 1% from the payment made or credited to the supplier where the total value of supply exceeds two lakhs and fifty thousand rupees.
  • Refund of tax can be sought by the tax payer or any person who has borne the tax incidence within two years from the relevant date.
  • Various modes of payment will be available for the tax payers (internet banking, credit/debit card, National Electronic Funds Transfer (NEFT), Real Time Gross Settlement (RTGS).
  • A system will be there to do self-assessment for the taxes which are payable by the registered person.
  • Audit will be conducted to the registered persons in order to verify compliance with the provisions of the act.
  • Officers would have restrictive powers to search, seizure, inspection and arrest.
  • Arrear of taxes would be recovered from detaining the sales of goods and property of the defaulting taxable persons.
  • Obligations on electronic commerce operators for collecting the “tax at source” at such rate not exceeding the tax of 1% for taxable supplies.
  • Advance Ruling authority would be constituted by states in order to provide clarity to the tax payers on the taxation matters from the department. In the same way centre also adopts such authority under CGST act.
  • An anti-profiteering clause has been declared in order to ensure that business passes on the reduced tax incidence on the goods or services or both to the consumers.
  • Elaborate transitional provisions for the existing taxpayers to GST regime.
  • Limitation period for raising demands will be 3 years from the due date of the annual returns filing or from the erroneous refund for raising demand for short payment or non-payment of tax or erroneous refund of adjudication in the normal cases.
  • Limitation period for raising demands will be 5 years from the due date of the annual returns filing or from the erroneous refund for raising demand for short payment or erroneous refund in case of suppression, fraud, or will-full misstatement.
  • A penalty for contravention of the provision of the proposed legislation has been made.
  • Accounts would be periodically settled for centre and the state.
  • Exports would be zero rated.