Worldwide GST:
France was the first country to introduce GST in 1954. Worldwide, Almost 150 countries have introduced GST in one or the other form since now. Most of the countries have a unified GST system. Brazil and Canada follow a dual system vis-à-vis India is going to introduce. In China, GST applies only to goods and the provision of repairs, replacement and processing services.
Country
|
Rate of GST
|
Australia
|
10%
|
France
|
19.6%
|
Canada
|
5%
|
Germany
|
19%
|
Japan
|
5%
|
Singapore
|
7%
|
New Zealand
|
15%
|
Rate of GST:
There would be two-rate structure –a lower rate for necessary items and items of basic importance and a standard rate for goods in general. There will also be a special rate for precious metals and a list of exempted items. For goods in general, government is considering pegging the rate of GST from 20% to 23% that is well above the global average rate of 16.4% for similar taxes, however below the revenue neutral rate of 27%.
Model of GST with example:
- The GST shall have two components: one levied by the Centre (referred to as Central GST or CGST), and the other levied by the States (referred to as State GST or SGST). Rates for Central GST and State GST would beapproved appropriately, reflecting revenue considerations and acceptability.
- The CGST and the SGST would be applicable to all transactions of goods and services made for a consideration except the exempted goods and services.
- Cross utilization of ITC both in case of Inputs and capital goods between the CGST and the SGST would not be permitted except in the case of inter-State supply of goods and services (i.e. IGST).
- The Centre and the States would have concurrent jurisdiction for the entire value chain and for all taxpayers on the basis of thresholds for goods and services prescribed for the States and the Centre.
Example: 1 (Comprehensive
Comparison)
|
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Comparison between Multiple
Indirect tax laws and proposed one law
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Particulars
|
Without GST
|
With GST
|
(Rs.)
|
||
Manufacture to Wholesaler
|
||
Cost of Production
|
5,000.00
|
5,000.00
|
Add: Profit Margin
|
2,000.00
|
2,000.00
|
Manufacturer Price
|
7,000.00
|
7,000.00
|
Add: Excise Duty @ 12%
|
840.00
|
–
|
Total Value(a)
|
7,840.00
|
7,000.00
|
Add: VAT @ 12.5%
|
980.00
|
–
|
Add: CGST @ 12%
|
–
|
840.00
|
Add: SGST @ 12%
|
–
|
840.00
|
Invoice Value
|
8,820.00
|
8,680.00
|
Wholesaler to Retailer
|
||
COG to Wholesaler(a)
|
7,840.00
|
7,000.00
|
Add: Profit Margin@10%
|
784.00
|
700.00
|
Total Value(b)
|
8,624.00
|
7,700.00
|
Add: VAT @ 12.5%
|
1,078.00
|
–
|
Add: CGST @ 12%
|
–
|
924.00
|
Add: SGST @ 12%
|
–
|
924.00
|
Invoice Value
|
9,702.00
|
9,548.00
|
Retailer to Consumer:
|
||
COG to Retailer (b)
|
8,624.00
|
7,700.00
|
Add: Profit Margin
|
862.40
|
770.00
|
Total Value(c)
|
9,486.40
|
8,470.00
|
Add: VAT @ 12.5%
|
1,185.80
|
–
|
Add: CGST @ 12%
|
–
|
1,016.40
|
Add: SGST @ 12%
|
–
|
1,016.40
|
Total Price to the Final
consumer
|
10,672.20
|
10,502.80
|
Cost saving to consumer
|
–
|
169.40
|
% Cost Saving
|
–
|
1.59
|
Notes:· Input
tax credit available to wholesaler is Rs.980 and Rs.1,680 in
case of without GST and with GST respectively.
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·
Likewise Input tax credit available to Retailer is
Rs.1,078 and Rs.1,848 in case of without GST and with GST respectively.
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· In
case, VAT rate is also considered to be 12%, the saving to consumer would be
1.15%.
|
IGST Model
(Inter-State Transactions of Goods & Services) and Input tax credit (ITC)
with example:
·
Existing CST (Central state
tax, tax on interstate movement
of goods) shall be discontinued.
·
Center would levy IGST
(cumulative rate for CGST and SGST)on all inter-State transactions of
taxable goods and services with appropriate provision for consignment or stock
transfer of goods and services.
·
The ITC of SGST, CGST shall
be allowed as applicable.
·
Since ITC of SGST shall be
allowed, the Exporting State will transfer to the Centre the credit of SGST
used in payment of IGST. The Importing dealer will claim credit of IGST while
discharging his SGST liability (while selling the goods in state itself).
Thereafter, the Centre will transfer to the importing State the credit of IGST
used in payment of SGST. (Please see example 4 & 5)
·
The relevant information shall
be submitted to the Central Agency which will act as a
clearing house mechanism, verify the claims and inform the respective state
governments or central government to transfer the funds.
·
Advantage of IGST:
·
No refund claim in exporting
State, as ITC is used up while paying the tax.
·
Maintenance of uninterrupted
ITC chain on inter-State transactions.
·
No upfront payment of tax or
substantial blockage of funds for the inter-State seller or buyer.
Example –2
(Input Tax Credit)
Shiva, a
registered dealer had input tax credit for CGST and SGST Rs.750/- and
Rs.1,050/- respectively in respect of purchase of inputs and capital goods. He
manufactured 1800 liters of finished products. 200 liters was normal loss in
the process. The final product was sold at uniform price of Rs.10 per liter as
follows:-
Goods sold
within State – 800 liter.
Finished
product sold in inter-State sale – 650 liter.
Goods sent on
stock transfer to consignment agents outside the State – 350 liter.
Further, CGST and SGST rate on the finished product of
dealer is 5% and 7% respectively. Further IGST rate is 12%.Calculate tax liability of SGST and CGST to be paid after
tax credit.
Solution:
Output Tax
Calculation
Particulars
|
Sales Within State
|
Stock Transfer Outside State
|
Inter State Sales
|
Total
|
Qty. Sold
|
800
|
350
|
650
|
|
Price per unit
|
10
|
10
|
10
|
|
Value of Goods Sold
|
8,000
|
3,500
|
6,500
|
18,000
|
Tax Amount:
|
||||
Tax Amount – CGST(5%)
|
400
|
–
|
–
|
400
|
Tax Amount – SGST(7%)
|
560
|
–
|
–
|
560
|
Tax Amount – IGST(12%)
|
–
|
420
|
780
|
1,200
|
Calculation
of Tax Payable
Particulars
|
CGST
|
SGST
|
IGST
|
Total
|
Tax Payable Amount
|
400
|
560
|
1200
|
|
Less: Input Tax Credit
|
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CGST
|
400
|
–
|
350
|
750
|
SGST
|
–
|
560
|
490
|
1050
|
Balance Payable
|
–
|
–
|
360
|
360
|
Notes:
·
There would be no treatment
for normal loss.
·
Input tax credit of CGST and
SGST of Rs. 750 and Rs. 1050 are paid on inputs. This input tax credit should
first be utilized for payment of CGST and SGST, respectively, and balance is to
be used for payment of IGST. Thus, balance available for payment of IGST is Rs.
350 of CGST and Rs. 490 of SGST and he is liable to pay balance amount of IGST
of Rs. 360 by cash (1200-350-490 = 360). Since credit of SGST of Rs.490 has
been utilized for payment of IGST, the State Government will get debit
of Rs. 490 from the Central Government.
Example –3
(Input Tax Credit)
Now, continuing with the above example 2, suppose the
dealer purchases goods interstate and have input tax credit of IGST available
is Rs.2,000/-. Compute the tax payable.
Solution:
Calculation
of Tax Payable
Particulars
|
CGST
|
SGST
|
IGST
|
|
Tax Payable Amount
|
400
|
560
|
1,200
|
|
Less: Input Tax Credit
|
||||
CGST
|
–
|
–
|
–
|
|
SGST
|
–
|
–
|
–
|
|
IGST
|
400
|
400
|
1,200
|
2000
|
Balance Payable
|
–
|
160.00
|
–
|
160
|
Note: Input tax credit of Rs.2000, IGST is available. This input tax credit should first be utilized for payment of IGST and balance is to
be used first for payment of CGST and remaining for SGST. Likewise in this case Rs.400 and
balance Rs.400 are utilized for CGST and SGST respectively. He is liable to pay
balance amount of SGST of Rs.160 by cash.(2000-1200-400-560 = 160).
Some
Specific points for specific products (being high revenue generating products)
·
This tax does not apply to
alcohol and petroleum products. They will
be continued to be taxed as per the existing practices.
·
Tax on Tobacco
products will be subject to GST. But government can levy the extra
tax percent over and above GST rate.
Other key
points:
·
Manufacturing state (the state in India in which the goods are
manufactured) will be allowed to levy an additional tax percent (say
1%) on supply of goods.
·
PAN based identification
number will be allowed to each
taxpayer to have integration of GST withDirect Tax.
·
The taxpayer would need
to submit periodical returns, in common format as far as
possible, to both the CGST authority and to the concerned SGST authorities.
Exemption/Composition
Scheme under GST:
·
The Small Taxpayer: The small taxpayers whose gross annual turnover
is less than 1.5 Crore will not be covered by GST law and no need to
pay tax.
·
Scope of composition
and compounding scheme under GST to be provided for this purpose, an
upper ceiling on gross annual turnover (say Rs.50 Lacs) and a floor tax rate
(say 0.5%) with respect to gross annual turnover should be provided.
·
Treatment for goods exempt
under one state and taxable under the other to be provided.
·
List of exempt items which
shall be outside the purview of GST shall be provided.
GST on
Export & Import with example
·
GST on export would
be zero rated
·
Both CGST and SGST will be
levied on import of goods and services into India. The incidence of tax will
follow thedestination principle i.e. SGST goes to the state where it is
consumed. Complete set-off will be available on the GST paid on import
on goods and services.
Example-4
(Import)
Shri Shiva
imported goods for Rs. 10,000/- and incurred expenses to produce final saleable
goods. BCD @ 10 % was chargeable on imported goods. These manufactured goods
were sold within the state at Rs. 45,000 plus applicable GST. Rate of CGST and
SGST is 5% and 7% respectively. Compute Cost, Sale value and tax payable for
the transaction.
Solution: Calculation
of Net cost of imported goods
Particulars
|
Amount
|
(Rs)
|
|
Cost of Goods imported
|
10,000
|
Add: Basic Customs Duty @ 10%
|
1,000
|
Cost of imported goods (including BCD)
|
11,000
|
Add: CGST on Import @ 5%
|
550
|
Add: SGST on Import @ 7%
|
770
|
Cost of imported goods
(including BCD & GST) (Note below)
|
12,320
|
Calculation
of Sale value after import
Particulars
|
Amount(Rs)
|
Sale Value (before tax)
|
45,000
|
Add: CGST on Import @ 5%
|
2,250
|
Add: SGST on Import @ 7%
|
3,150
|
Sales Value
|
50,400
|
Tax Payable
Calculation
Particulars
|
CGST
|
SGST
|
(Rs.)
|
(Rs.)
|
|
Output tax
|
2,250
|
3,150
|
Less: Input tax credit
|
–
|
–
|
CGST
|
550
|
–
|
SGST
|
–
|
770
|
Net tax payable
|
1,700
|
2,380
|
Note: Please note that GST shall be levied including
Basic Customs Duty considering.
Example-5
(Export)
Now continuing with the above example 4, suppose the same
good is exported after 1 year of use after adding margin and modification
amounting Rs.10,000/- and use factor of 1 year for refund calculation is 0.20.
Therefore the refund will be 0.80 of Duty amount. Compute Export Value and Refund Value.
Solution: Export
Value calculation
Particulars
|
Amount
|
(Rs)
|
|
Cost of Imported Goods(from above example)
|
50,400
|
Add: Margin and Modification Amt.
|
10,000
|
Sale Value
|
60,400
|
Add: CGST on Export @ 5%
|
–
|
Add: SGST on Export @ 7%
|
–
|
Export Value
|
60,400
|
Refund
Calculation
Particulars
|
Amount
|
(Rs)
|
|
Basic Customs Duty(BCD, from above example)
|
1,000.00
|
Refund Factor
|
0.80
|
Refund amount of BDC
|
800.00
|
Add: CGST(from above example)
|
550.00
|
Add: SGST(from above example)
|
770.00
|
Total Refund amount
|
2,120.00
|
The above
example withstand two basic principles of Taxation Laws i.e. Exports are zero
rated and the incidence of tax will follow the destination principle (The taxes will remain with the state
where the goods are used, however use factor can be prescribed by the law).
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