Goods & service Tax (GST)

The Constitution Amendment Bill for Goods and Services Tax (GST) has been approved by The President of India post its passage in the Parliament (Rajya Sabha on 3 August 2016 and Lok Sabha on 8 August 2016) and ratification by more than 50 percent of state legislatures. The Government of India is committed to replace all the indirect taxes levied on goods and services by the Centre and States and implement GST by April 2017.

India is on the fast track to usher in the Goods and Services Tax (GST).

GST is intended to remove inefficiencies in the supply chain due to breakage of credit chain and cascading effect of taxes. It will subsume a plethora of indirect taxes presently levied at the central and state level in India. GST envisages a common national market for goods and services and removal of trade barriers. GST will have impact on supply chain, value additions and pricing of final outputs. Thus, businesses will have to examine transaction restructuring, supply chain optimization, business processes, training enterprise personnel, book keeping and making changes in the IT infrastructure so that they are GST ready.

The model GST law as proposed, adopts many aspects of the existing indirect taxes sought to be subsumed - Excise, Service tax and VAT. Transition to the new tax regime will require businesses to plan properly, taking into account existing issues as also understanding the issues likely to arise.

With GST, it is anticipated that the tax base will be comprehensive, as virtually all goods and services will be taxable, with minimum exemptions.

GST will be a game changing reform for the Indian economy by creating a common Indian market and reducing the cascading effect of tax on the cost of goods and services. It will impact the tax structure, tax incidence, tax computation, tax payment, compliance, credit utilization and reporting, leading to a complete overhaul of the current indirect tax system.

GST will have a far-reaching impact on almost all the aspects of the business operations in the country, for instance, pricing of products and services, supply chain optimization, IT, accounting, and tax compliance systems.

Goods and Services Tax would be levied and collected at each stage of sale or purchase of goods or services based on the input tax credit method. This method allows GST-registered businesses to claim tax credit to the value of GST they paid on purchase of goods or services as part of their normal commercial activity. Taxable goods and services are not distinguished from one another and are taxed at a single rate in a supply chain till the goods or services reach the consumer. Administrative responsibility would generally rest with a single authority to levy tax on goods and services. Exports would be zero-rated and imports would be levied the same taxes as domestic goods and services adhering to the destination principle.

The introduction of Goods and Services Tax (GST) would be a significant step in the reform of indirect taxation in India. Amalgamating several Central and State taxes into a single tax would mitigate cascading or double taxation, facilitating a common national market. The simplicity of the tax should lead to easier administration and enforcement. From the consumer point of view, the biggest advantage would be in terms of a reduction in the overall tax burden on goods, which is currently estimated at 25%-30%, free movement of goods from one state to another without stopping at state borders for hours for payment of state tax or entry tax and reduction in paperwork to a large extent.

What changes there would be if India launches GST- “The tax rate under GST may be nominal or zero rated for the time being. It has been proposed to insulate the revenues of the States from the impact of GST, with the expectation that in due course, GST will be levied on petroleum and petroleum products.” The central government has assured states of compensation for any revenue losses incurred by them from the date of introduction of GST for a period of five years.

  • Value Added Tax/Sales Tax/CST
    • Counsel to companies on VAT and sales tax and cater to all their requirements relating to the said taxes, including registration, filing of returns, assessments, search & seizure issues, appeals and representation before the first appellate authorities and the Tribunal.
    • We advise companies on issues relating to works contracts, turnkey projects, multi State contracts, high sea sales, sales in transit, etc., which require extensive tax planning right at the stage of negotiation with vendors/ customers, as structuring of the contracts has a major bearing on the tax outgo.
  • Excise & Custom Law
    • Compliance: Filling of Corporate and non-Corporate tax returns and appearance before the authorities in case of assessment, withholding tax proceedings and other proceedings.
    • Litigation: Appearance before the Commissioner of Central Excise (Appeals), Appellate Tribunal.
  • Service Tax
    • Counsel to companies and other entities on service tax matters, and cater to all their requirements relating to the said taxes, including registration, filing of periodical returns and representation before the authorities.
    • Service tax is emerging as a major source of revenue to the Government, and being an evolving high fiscal legislation, is undergoing frequent and radical amendments. Clients find it difficult to get to terms with the changes, and here we help them to understand and comply with the law.
    • These Acts’s are now being consolidated under the New GST Act in near future.