COMPARISON OF PRESENT TAXATION AND PROPOSED GST

How do we compare the present indirect tax laws vis-à-vis proposed GST law regime? In this part, an attempt is being made to list down the possible differences between the present tax laws and proposed provisions under GST. This comparison is not final and is only for academic purposes to understand the differences or deviations tax base, origin, structure, approach to tax goods and services, place of provision, powers to levy tax, export and import etc.

COMPARISON OF PRESENT TAXATION AND PROPOSED GST

Sr. No.	Particulars	Present Taxation	Proposed GST
1	StructuralnArchitecture	- Two separate VATnsystems operatensimultaneously atntwo levels, Centrenand State, and taxnpaid (input taxncredit) under one isnnot available as setnoff against the othern-Tax on services isnlevied undernseparate legislationnby Centre, i.e.,nFinance Act, 1994nwhich regulatesnservice taxn-No comprehensiventaxation of servicesnat the State level;nfew services arentaxed under separate enactmentsn- Import of goods innIndia are notnsubjected to StatenVAT	A dual tax with bothnCentral GST (CGST) &nState GST (SGST) willnbe levied on the samenbase. Thus, all goodsnand services, barringna few exceptions, willnbe brought into thenGST base.nnThere will be nondistinction betweenngoods and services fornthe purpose of taxnwith a commonnlegislation applicablento both It allowsnseamless tax creditnamongst Excise Duty,nService Tax & VAT
2	Place of Taxation	Taxable at the placenof manufacture ornsale of goods ornrendering of service	It is consumptionn(destination) basedntax
3	Tax Base	Comparativelynnarrow	Wider
4	Excise Duty	Imposed by Centrenunder separate Act,nCentral Excise Act,n1944. Taxable eventnis manufacture;nTaxed up tonmanufacturing point	To be subsumed innCGST; Taxable eventnwill be sale; To bentaxed up to retail level
5	Basic CustomsnDuty	Imposed by Centrenunder separate Act,ni.e., Customs Act,n1962. Taxable eventnis import	No change isnproposed
6	CVD/SAD	Imposed by Centrenunder separate Act,ni.e., Customs Act,n1962. Taxable eventnis import	To be subsumed innCGST; Taxable eventnwill be import
7	Service Tax	Imposed by Centrenunder separate Actn(Finance Act, 1994).nTaxable event isnprovision of service	To be subsumed innCGST & SGST;nTaxable event will benprovision of service
8	Central Sales Tax	Imposed by Centrenunder CST Act, 1956.nCollection assigned tonStates; Taxable eventnis movement of goodsnfrom one State tonanother	Is being phased out
9	State VAT	Imposed by States;nTaxable event is salenwithin the State	To be subsumed innSGST; Taxable eventnis sale within State
10	Inter-StatenTransactions	Imposed on goods &nservices by thenCentre (CST, ServicenTax)	To be subsumed innGST and subject tonSGST & CGST
11	Tax onnManufacturingnactivity	As Excise Duty bynCentre	No such powers undernGST regime
12	Powers to levy Taxnon Sale of Goods	Inter-State : CentrenLocal : State	Concurrent powers tonCentre & State
13	Powers to levy Taxnon Provision ofnServices	Service Tax by Centre	Concurrent powers tonCentre & State; Statesnto tax more than 40nservices
14	Tax on Import innIndia	Goods are taxed tonCustoms Dutyn(comprises BasicnCustoms Duty, CVDn& SAD);nServices are taxed tonService Tax	Basic Custom Dutynon goods : No Changen- CVD & SAD onnimport of goods andnimport of services : Tonbe subsumed in GST
15	Tax on Export ofnGoods & Services	Exempt / Zero-rated	No change isnproposed
16	Tax on inter-StatenTransfer of Goodsnto Branch / Depotnor Agent	Exempt against Form F	Will be taxable
17	Tax on Transfer ofnGoods to Branch ornAgent within States	Generally exempt butndepends upon Statenprocedures	May not be taxable, ifnBIN of transferor andntransferee is same
18	Cross-Levy set-offn/ adjustment	Excise duty andnService tax : Crossnset off allowed	No cross set-offnbetween CGST andnSGST will be allowed
19	Cascading Effect	Allows cenvat taxncredit between ExcisenDuty & Service Tax,nbut not with VATn(cross set off is notnallowed)	Allows seamless taxncredit amongst ExcisenDuty, Service Tax &nVAT
20	Non-CreditablenGoods	Do exist	May exist dependingnupon negative list/nexemptions etc.
21	Credit on Inputsnused for ExemptednActivities	Not allowed	May not be allowed
22	VariousnExemptions -nExcise Free Zonenor VAT Exemption	Available	May be phased out
23	Exemption forntransit Inter-StatenSale and High SeasnSale	Available	May be taxable
24	Transactionsnagainst DeclarationnForms	Allowed under thenCST / VAT	Forms likely to benabolished
25	Taxation on Govt.nand Non-ProfitnPublic Bodies	Partially taxed	May not change much
26	Stamp Duty	Presently taxednconcurrently by thenCentre and State	Status not clear; Ifnsubsumed undernGST, big relief to realnestate industry : tonclaim input tax
27	Excise DutynThreshold Limit	Presently u20b9 1.5 crores	Rs.10 lacs to 20 lacsn(Turnover of u20b9 1.5ncrores & above maynbe administered bynCentre and less thannu20b9 1.5 crores may benadministered bynStates)
28	VAT ThresholdnLimit	Presently, u20b9 5 lacs ton10 lacs	May be u20b9 10 lacs to u20b9n20 lacs
29	Service TaxnThreshold Limit	u20b9 10 lacs	May be u20b9 10 lacs to u20b9n20 lacs
30	Classification ofnCommodities	Excise Duty based onnHSN VAT notnapplicable	Likely to be based onnHSN
31	VAT/GST RegistrationnNumber	Simple TIN (somenStates : PAN onlynbased)	PAN based
32	Procedures fornCollection of Tax and Filing ofnReturn	For Central Excise &nService Tax, it is uniform. For VAT, itnvaries from State tonState	Likely to be uniform
33	Tax Administration	Complex due tonnumber of taxes	Likely to be simplenand easy, tax friendly
34	Use of ComputernNetwork	Just started by thenStates; verynminimum; Centralntaxes are online	Extensive; It will benpre-requisite fornimplementation ofnGST
35	Nature of PresentnLitigations	- Sale or Servicen- Classification ofngoodsn- Situs issuenbetween Statesn- Interpretationalnissuesn- Sale or worksncontractn- Valuation ofncompositentransactions, etc.n- Exemptionsn- Suppression/nlimitation	Likely to be reducednprovided GSTnlegislations arenproperly drafted