Goods and Services Tax

The much awaited Goods and Services Tax (GST) will bring about a sweeping change in the regulatory and tax areas in India. This is a One Nation, One Market, One Tax initiative that has been implemented by the Government. GST has been implemented in one way or the other in several countries, bringing about a ease of doing business and ensuring better controls.

India’s most awaited tax reform Goods and Services Tax (GST) was enacted with effect from July 1, 2017. GST in India is a destination based taxation system. This is because revenue will belong to the states where the goods are finally consumed and not to the State where the goods are produced.

The Goods and Services Tax seeks to strengthen the taxation regime with respect to trade in goods and services which would reduce numerous internal processes and will improve ease of doing business in India. With the process of implementation of the GST law, many significant changes have been set out vis-à-vis the old law which mandates us to unlearn certain concepts and relearn the same in the context of GST law.

The Central level and State level taxes which are subsumed in GST are as follows:

•   Central Level taxes subsumed are Service tax, Countervailing Customs duty, Special Additional Customs Duty, Central Sales Tax, Purchase Tax, Octroi, Entry Tax, Central Excise duty and Additional Excise duty.
•   Similarly, at State Level, the taxes subsumed are Octroi duty, Entry Tax, Entertainment Tax, Purchase Tax, State Sales Tax (VAT), Luxury Tax, Taxes on lottery/ betting/ gambling.

Taxes which are not subsumed are – basic custom duty, export duty, stamp duty, taxes on alcohol, crude, petroleum, high speed diesel, natural gas, spirit, aviation turbine fuel.

Some of the significant changes in the GST regime vis-à-vis that of old indirect tax regime are as under:

• The concept of ‘sale’ of goods and ‘provision’ of services has been replaced by ‘supply’ of goods and services.
• The classification of services (SAC codes) has been changed. For the first time, there are multiple rates with regard to services viz. 0%, 5%, 12%, 18% and 28%.
• Location of supplier and place of supply determines whether the transaction is intra-state or inter-state. There shall be levied Central GST and State GST in case of intra-state supplies and Integrated GST leviable in case of inter-state supplies.
• Registration to be obtained in each state from where taxable supply is to be made. Each registered unit and establishment in different states have been considered as distinct persons under GST law.

Under the GST, assessment focuses on self-assessment by the taxpayers themselves. So the taxpayer is required to self-assess the taxes payable, and furnish a tax return as prescribed. The compliance verification is done by the department through scrutiny of returns, audit and/or investigation. Thus, the compliance verification is to be done through documentary checks rather than physical controls. The obligation is on the taxpayer for keeping and maintaining accounts and records. The GST Act and “Accounts and Records” Rules provide that every registered person shall keep and maintain all records at his principal place of business. It also provides that every registered person whose turnover during a financial year exceeds the prescribed limit shall get his accounts audited by a chartered accountant or a cost accountant.

August Consulting offers assistance with compliances under these regulations.