Present Taxation Vs PDF

7/22/2015
Present Taxation Vs. Expected GST - A Comparitive Analysis - Service Tax Articles
Present Taxation Vs. Expected GST - A Comparitive

Analysis
Vishal Jain A (../profile.asp?member_id=390305)
on 27 June 2015
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Introduction
India has a federal structure of government where the powers are shared between the Central Government and the State
Governments. At The taxes are levied by Central Government as well as State Government for different transactions. The
present structure of indirect taxation have a lot of shortcomings such as tax cascading effect, inability of States to levy
service tax, levy of excise duty by Centre only at manufacturing point, complexity in determining the nature of transaction
(sale vs. service), difficulty in determining whether the sale is local sale or inter-state sale, interpretational issues as to
whether an activity is sale or service or works contract, non-uniformity in provisions and rates in State VAT laws,
complexities in administration, narrow tax base, etc.
It is expected the proposed GST structure model would preserve and protect the fiscal powers of the States & Union and at
the same time it will address all the above-mentioned shortcomings of the present structure of indirect taxation by
subsuming a plethora of Central and State taxes into a consolidate levy of GST.
PRESENT TAXATION VS. EXPECTED GST
PARTICULARS
PRESENT TAXATION
EXPECTED GST
Structure
A dual tax with both Central GST
Tax on goods is levied at 2 levels,
(CGST) and State GST (SGST) would
Centre (CENVAT) and State (VAT),
be levied on the same. Thus, all the
and tax paid under one (input tax
goods and services, barring a few
credit) is not available as set-off
exceptions, will be brought into the
against the other.
GST base.
Structure
Tax on services is levied by Centre

There would be no distinction between
under
separate
legislation.
No
goods and services for the purpose of
comprehensive taxation of services at
GST with a common legislation
State level except that few services are
applicable to both.
taxed under separate enactments.
GST would allow seamless tax credit at
Imports in India are not subjected to
all levels till the goods or services
VAT or CENVAT.
reaches the consumer.
Tax Base
Narrower
Will be comparatively Wider
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1/14
7/22/2015
Place of Taxation
Taxable at the place of sale of goodsConsumption (Destination) based tax

or provisioning of services
Duties / Taxes
To be subsumed in GST and
Imposed by Centre under separate Act subjected to CGST & SGST (Local
Supply) / IGST (Inter-State Supply)
Excise Duty
Taxable Event: Manufacture of Goods

Taxable Event: Supply of Goods
Taxed up to Manufacturing Point
To be taxed Retail Level
Service Tax
To be subsumed in GST and

Imposed by Centre under separate Act subjected to CGST & SGST (Local
Supply) / IGST (Inter-State Supply)
Taxable Event: Provision of Service
Taxable Event: Supply of Services
Imposed by States
State VAT
To be subsumed in GST
subjected to CGST & SGST
Taxable Event: Sale of Goods within

Taxable Event: Supply of Goods within
the State
the State
subjected to IGST (Centre)
Central Sales Tax
and
and
Imposed by Centre under separate Act

Taxable Event: Supply of Goods from
but Collection assigned to States
one State to another State
Taxable Event: Sale of Goods from
CST may continue initially and it will be
one State to another State
phased out gradually with time
(Additional Tax up to 1% in form of
CST may be there along with IGST)
Basic Customs Duty
- No Change Taxable Event: Import of Goods

CVD / SAD
Taxable Event: Import of Goods
and
Taxable Event: Import of Goods
Power to levy Duties / Taxes

Power to levy tax on
Manufacture
ofExcise Duty by Centre
Goods
Inter-State Provision of Services
No such powers in GST
Inter-State Supply of Services
2/14
7/22/2015
Service Tax by Centre

Provision
ofLocal Provision of Services
Services
IGST by Centre
Local Supply of Services
CGST & SGST by Centre &
State
Inter-State Sale of Goods

Sale of Goods
CST by Centre
Local Sale of Goods
VAT by States
Import of Goods
Inter-State Supply of Goods

IGST by Centre
Local Supply of Goods
CGST & SGST by Centre &
State
Import of Goods
Basic Customs Duty by Centre

Basic Customs Duty by Centre
Import of Goods or
CVD and SAD by Centre
IGST by Centre
Services in India
Import of Services
Import of Services
IGST by Centre
Tax on Special Transactions

Tax on Export of
Exempt / Zero-rated
Goods and Services
- No Change -
Tax on Inter-State
Imposed by Centre (CST on Inter-State
Sale of Goods /
Sale of Goods and Service Tax on
Provision
of
Inter-State Provision of Services)
Services
and
Tax on Inter-State
Transfer of Goods to Exempt against Form F
Branch or Agent
To be taxable
Tax on Transfer of
Goods to Branch or
Generally Exempt
Agent
within
the
State
Might be taxable, unless BIN (Business

Identification No.) of transferor and
transferee is same
Credit / Set-off
Excise Duty and Service Tax: CrossIGST and CGST: Cross set-off is
set-off is allowed
allowed
Cross-Levy set-off
Excise Duty and VAT: Cross set-off isIGST and SGST: Cross set-off is
not allowed
allowed
Service Tax and VAT: Cross set-off isCGST and SGST: Cross set-off is not
not allowed
allowed
3/14
7/22/2015
Cascading Effect
Allows tax credit between Excise Duty

Will have seamless tax credit
and Service Tax, but no credit for VAT
Non-Creditable
Goods
Exists
Credit
on
Inputs
used for Exempted Not allowed
Activities
Might exist
- No Change -
Procedural Aspects
Excise
Duty
Threshold Limit
VAT
Limit
Threshold
Service
Tax
Threshold Limit
Classification
Commodities
of
Rs.1.5 Crores
Rs.10 Lakhs to Rs.20 Lakhs
Rs. 5 Lakhs to Rs.10 Lakhs
Rs.10 Lakhs
Excise Duty: HSN

HSN
VAT: None
Excise Duty: PAN Based
Registration No.
Service Tax: PAN Based
PAN based BIN (Business Identification

No.)
VAT: Simple TIN (Some States, it is

PAN Based)
Procedures
for Excise Duty and Service Tax: Uniform
Collection of Tax and
Will be uniform
Filing of Return
VAT: Varies from State to State
Administration
Use of
Network
Computer
Complex due to number of taxes
Will be comparatively Simple
Very minimum
Extensive
Just started by the States
It is necessity for GST implementation
Exemptions, Forms and Other Aspects

Various Exemptions
Excise Free Zone Exists
or VAT Exemption
May go away in a phased manner
Exemption for transit

Inter-State Sale and Exists
High Sea Sales
Might be taxable
4/14
7/22/2015
Transactions against
Exists under CST Act, 1956
Declaration Forms
Taxation
and
Bodies
Will be abolished
on Govt.
Non-ProfitPartially taxed and Partially exempted Might not change
Status of the same is not clear

Stamp Duty
Electricity Duty
Presently taxed concurrently by the

If subsumed under GST, a big relief to
Centre and the States
real estate sector as to claiming input
tax credit
Presently taxed by States
Status of the same is not clear
Sale vs. Service

Local Sales vs. Inter-State Sales
Classification of Goods
Litigations
Will be reduced provided GST Laws

are properly drafted
Interpretational Issues
Sale vs. Service vs. Works Contract
Valuation of Composite Transactions,
etc.
INDIRECT TAXES ON GOODS

PRESENT TAXATION
EXPECTED GST
Intra-State (i.e. Local) Sales of Goods

Manufacturer
Excise Duty (Centre) and VAT (State)
Trader
Manufacturer as well as Trader

CGST (Centre) & SGST (State)
Only VAT (State)

Intra-State Stock-Transfer of Goods
Manufacturer
Excise Duty (Centre)
Trader

(STATUS NOT YET CLEAR)
No VAT
5/14
7/22/2015
Inter-State Sales of Goods

Manufacturer
Excise Duty (Centre) and CST (Origin
State)
IGST (Centre) in addition to 1% Additional
Trader
Tax / CST (Origin State)
Only CST (Origin State)

Inter-State Stock-Transfer of Goods
Manufacturer
Excise Duty (Centre)
IGST (Centre) in addition to 1% Additional
Trader
Tax / CST (Origin State) for Manufacturer

as well as Trader
No CST
Import of Goods
Importer (i.e. Buyer)
Importer (i.e. Buyer)
Basic Customs Duty (Centre), CVD (Centre)
Basic Customs Duty (Centre) and IGST
and SAD (Centre)
(Centre)
Note: Additional Tax up to 1% levied by Origin State would NON-VATTABLE just like CST.
INDIRECT TAXES ON SERVICES
PRESENT TAXATION
EXPECTED GST
Intra-State (i.e. Local) Provision of Services

Service Provider
Service Provider
Service Tax (Centre)
Intra-State Provision of Services from HO to BO

Service Provider
Service Provider
No Service Tax
(STATUS NOT YET CLEAR)
Inter-State Provision of Services

Service Provider
Service Provider
6/14
7/22/2015
IGST (Centre)
Inter-State Provision of Services from HO to BO

Service Provider
No Service Tax
Service Provider
IGST (Centre)
Import of Services
Importer (i.e. Service Recipient)
Importer (i.e. Service Recipient)

IGST (Centre)
Conclusion
Though, most of the goods and services would be subsumed in GST, a few goods such as alcoholic liquor and petroleum
products (till it is notified by GST Council) will be kept outside the purview of GST. Clarity is required with respect to
taxation of goods like alcoholic liquor, petroleum products and tobacco in different scenarios. Clarity is also required when
the goods are stock transferred and when services are provided by HO to BO or vice versa.
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k.s.ramanathan (../profile.asp?member_id=580760) 19 July 2015
useful article
Vishal Jain A (../profile.asp?member_id=390305) 04 July 2015
Thank you all for your views and comments:):)
amit gaur (../profile.asp?member_id=23709) 03 July 2015
Thanks for sharing such vital information in brief & crispy way!! It would be highly
appreciable if you could send me its soft copy at amitgaur.ca@gmail.com
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Present Taxation Vs. Expected GST - A Comparitive

Tax on services is levied by Centre

Will be comparatively Wider

Taxable at the place of sale of goodsConsumption (Destination) based tax

Taxable Event: Manufacture of Goods

To be subsumed in GST and

Taxable Event: Sale of Goods within

Central Sales Tax

Imposed by Centre under separate Act

Basic Customs Duty

- No Change Taxable Event: Import of Goods

Imposed by Centre under separate Act

Taxable Event: Import of Goods

Power to levy Duties / Taxes

Inter-State Provision of Services

No such powers in GST

Inter-State Supply of Services

Service Tax by Centre

Inter-State Sale of Goods

Inter-State Supply of Goods

Basic Customs Duty by Centre

Tax on Special Transactions

Might be taxable, unless BIN (Business

Allows tax credit between Excise Duty

Rs.10 Lakhs to Rs.20 Lakhs

Rs. 5 Lakhs to Rs.10 Lakhs

Rs.10 Lakhs to Rs.20 Lakhs

Rs.10 Lakhs to Rs.20 Lakhs

Excise Duty: HSN

Service Tax: PAN Based

PAN based BIN (Business Identification

VAT: Simple TIN (Some States, it is

Complex due to number of taxes

Will be comparatively Simple

Just started by the States

It is necessity for GST implementation

Exemptions, Forms and Other Aspects

May go away in a phased manner

Exemption for transit

Status of the same is not clear

Presently taxed concurrently by the

Status of the same is not clear

Sale vs. Service

Will be reduced provided GST Laws

INDIRECT TAXES ON GOODS

Intra-State (i.e. Local) Sales of Goods

Manufacturer as well as Trader

Only VAT (State)

CGST (Centre) & SGST (State)

Inter-State Sales of Goods

Manufacturer as well as Trader

IGST (Centre) in addition to 1% Additional

Tax / CST (Origin State)

Only CST (Origin State)

Manufacturer as well as Trader

Excise Duty (Centre)

IGST (Centre) in addition to 1% Additional

Tax / CST (Origin State) for Manufacturer

Importer (i.e. Buyer)

Basic Customs Duty (Centre), CVD (Centre)

Basic Customs Duty (Centre) and IGST