View of GOODS AND SERVICE TAX OVER VALUE ADDED TAX

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Vol.04,Special Issue 02, 13 Conference (ICOSD) February 2019, Available Online: www.ajeee.co.in/index.php/AJEEE

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GOODS AND SERVICE TAX OVER VALUE ADDED TAX Dayawanti Garg (Assistant Professor)

Om Kothari Institute of Management & Research, Kota

Abstract- The Good and Services Tax is an indirect tax lived on the supply of goods and services. This law has replaced many indirect tax laws that previously existed in India. The Goods and Service Tax Act passed in the parliament on 29^th March 2017. The act came into effect on 1^st July 2017. Several countries implemented this tax system followed by France, the first country introduced GST. It’s a new story of VAT which gives a widespread setoff for input tax credit and subsuming many Indirect Tax from state and national level.

Difference between VAT and GST

GST expands to Goods and Services Tax, which is a single tax, levied on the supply of the goods and services that relies on the principle of value addition. While VAT is levied on the sale of goods, in GST the point of taxation is the supply of goods and services. ...

Conversely, GST is a transaction based taxation system.

Problems of VAT

VAT payment problems: Problems with VAT payments can also arise if you have used the output tax (i.e. VAT you have charged on sales) as a source of finance and are unable to pay the VAT over when it is due. The risk of this kind of VAT problem can be reduced with good cash flow forecasting and control.The government is set to roll out GST from July1 2017 the GST will subsume a number of central taxes such as central excise duty and services tax and state levels including VAT, luxury tax, and entertainment tax. VAT is applicable for goods sold and not service. Service tax takes care of services rendered.

However, GST tax bill will be applicable for both goods and services, and will have a uniform pricing. ... GST is essentially riding on the VAT calculation but with uniform taxation across goods and services.

The input tax credit means of the credit of input tax. The purpose of it is to eliminate cascading effect of taxes paid by the supplier on input/services and capital goods which are used by the supplier. This is the foundation of VAT system. This are 4 type of ITC (1) Input tax credit and GST (2) Credit of IGST (3) Credit of CGST and (4) Credit of SGST.

In India, this law is a comprehensive, multi-stage, destination–based tax that is levied on every value addition.

Earlier, in 2011 the previous United Progressive Alliance (UPA) government also introduced a Constitution Amendment Bill to facilitate the introduction of GST in the LokSabha but it was rejected by many states.

Tax Statements-Every transitional have to present these return –(1) Statement of sale, (2) Statement of purchase, and (3) Monthly statement.

1 INTRODUCTION

Goods and service tax is an indirect tax.

In our country it has been introduced from 1^stJuly,2017. Prior to introduction of GST several indirect taxes were levied by the central government and the different state governments in our country. India is a democratic republic country and in our country supreme power of law is vested in constitution. It has been stated in our constitution that “no tax shall be levied or collected except by the authority of law”.

2 MEANING OF GST

GST stands for Goods and Services Tax, which is a destination based value added on items, services, production, sales and consumption. It is important to note that GST is applicable for value addition in

each phase, and no other tax will be levied, resulting in cascade effect.

In this system, the supplier of goods or services is eligible to take advantage of the input tax credit, i.e. GST paid on the purchase of items will be determined against the GST payable on the supply of goods and services.

Therefore, the last consumer carries the tax imposed by the final supplier in the distribution chain.

In India, double GST has been implemented, which are put together by the central and state government on goods and services. The Centre collected tax on interstate sales, which is called CGST. In the case of union territories, the states imposed tax on services called SGST and OTGST. For the interstate

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2 supply of goods and services which are taxable, IGST, i.e., comes under integrated goods and service tax.

After induction of GST in India, there are many indirect taxes, which are as follows:

 At CGST level: excise duty, service tax, surcharge and cess

 At SGST level: Octroi or entry tax, VAT, luxury tax, surcharge and cess

 At the IGST level: Central Sales Tax 2.1 Needs of Goods And Service Tax ; GST In order to provide benefit to the common public improvement has always been made in indirect taxes. For this purpose CENVAT system was introduced in 1984 in respect of Excise duty so that benefits of input Tax credit may be given.

Similarly, in place of old Sales tax VAT system was introduced by different states after the year 2003. Provision of input tax credit was also made in this system. In spite of this necessity of goods and service tax was felt in India. The main reason behind it was the several short-comings in old indirect tax structure. The main short- comings or drawbacks in existing indirect Tax structure were as follows:

Deficiencies in Existing Taxation System 1. Tax on Tax: All the tax levied before

a product reach to the ultimate consumer were included in the cost of the product.

2. Due to several taxes more burden of taxes on consumer

3. Conflicts between the revenue interest of the different state government

4. Lack of coordination in providing input tax credit

5. Administration expenses to be high 6. No reduction in tax evasion and

black money

2.2 Disadvantages of VAT

 As the VAT is based on full billing system, VAT implementation is expensive.

 It is not a simple task to calculate value added in every stage is not an easy task. Thus VAT is difficult to understand.

 VAT is regressive in nature. Thus it will affect the poor people more than the rich because they spend more proportion of their income.

 All purchase and sales records should be maintained which will

cause increased in compliance cost.

 The consumers need to be cognizant for successful implementation of VAT otherwise tax negligence will be extensive through fake invoices.

2.3 The differences between VAT and GST

The fundamental differences between VAT and GST are explained, with the help of following points:

1. VAT or value added tax is an indirect tax, in which at the state level, every stage of production and distribution of goods and services is taxed with credit for the tax paid in the previous phase. GST is extended by Goods and Services Tax, which is a single tax, which is imposed on the supply of goods and services that depend on the principle of price rise.

2. While VAT is being levied on the sale of goods, tax is the supply of goods and services in GST.

3. Registration and payment is made offline under the VAT regime, while GST is completely an online system, in which registration, return filing, and all other work through a common GST portal managed by the goods and services network (GSTN) Can be done.

4. When it comes to registering the supplier, registration in the VAT system becomes compulsory when the supplier's business is more than Rs. 10 million On the contrary, if the supplier's total turnover is Rs. More than. 20 lakhs, then it is necessary to get the registration under the GST.

5. VAT system is a summary based system of taxation in which the seller of the goods has to submit returns at the end of the particular period. On the contrary, GST is a transaction based taxation system.

6. In the case of VAT, the seller collects state revenue, while, in GST, the revenue collection is done by the consumer state.

7. In the VAT system, the manufacturer of the product is charged on excise duty and intra- state sales on its production, which causes double taxation. On the

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3 other hand, excise duty has been reduced in GST, and therefore there is no possibility of double taxation on such items.

8. Under the VAT system, in the case of interstate sales, the input tax credit cannot be availed. For example: Suppose, the Central Excise (CENVAT) is imposed on fabric construction and VAT is levied on the sale within the state.

Although both CENVAT and VAT are value-added, but the set-off is not possible because they are installed by the Central Government of CENVAT, and the state government imposes VAT. On the contrary, GST theory is based on 'one country one tax', so there is an input tax credit available for interstate sales.

2.4 Persons Liable for GST Registration – Section 22 of the CGST Act:

a) State or UTs:

Every supplier of goods or services, or both, needs to register in the state or union territory, if its business is more than Rs. 20 lakhs.

b) Special Category States:

In the case of Special Category States namely AP, J & K, Assam, Nagaland, Mizoram, Sikkim, Uttrakhand, etc., the person will be liable for getting registered if his turnover is more than Rs. 10 lakhs.

c) Aggregate Turnover:

Means aggregate value of all taxable supplies, exempt supplies, Exports, and inter-State supplies of persons having the same PAN but excludes taxes.

d) Registration:

Any person who is registered before the due date i.e. July 1, 2017, is liable to be registered under the CGST Act.

e) Registration of Transferee or Successor:

If a registered business by aassessee is transferred to another person, then such a person, be it successor or a transferee, shall be liable to be registered under the Act.

f) Registration in case of amalgamation or demerger:

A transfer due to sanction of a scheme or an arrangement for amalgamation or a demerger takes place of two or more companies in accordance with the order of the High Court or Tribunal, the transferee shall be liable to be registered.

2.5 Persons Not Liable to be Registered – Section 23 of the CGST Act:

Following persons are not liable for registration:

• Exempted Goods or Services:

Any person who is specially engaged in the supply of goods or services which are totally tax free or are not liable for payment of tax under CGST or IGST Act.

• An Agriculturist:

Only for those supplies which are produced from land cultivation.

c) Notified Person:

In addition, on the recommendation of the GST Council, the Government can issue notification and specifying persons of special category who are not liable for registration.

2.6 GST slabs have been fixed at 5%, 12%, 18% and 28%.

Procedure for GST Registration:

a) Details to be furnished:

Before applying for registration process, person has to declare the following:

• PAN

• Mobile number

• E-mail address

• State or UT

In Part A of FORM GST REG-01 on the Common Portal, either directly or through a Facilitation Centre notified by Commissioner.

b) Reference Number:

On successful verification of PAN, mobile number and e-mail, a temporary reference number will be generated and the applicant will be notified.

c) Application:

Using the reference number, the applicant will submit an application electronically in Part B of the FORM GST REG-01, which will be duly verified or verified through electronic verification code (EVC), along with the documents specified in the form d) Specified Documents:

The following specified documents are required to be submitted along with the application:

A. Documents required for Private Limited Company, Public Company (limited company) / One Person Company (OPC):

i) Company documents

• PAN card of the company

• Registration Certificate of the company

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• Memorandum of Association (MOA)/

Articles of Association (AOA)

• Copy of Bank Statement

• Declaration to comply with the provisions

• Copy of Board resolution ii) Director related documents

• PAN and ID proof of directors iii) Registered Office documents

• Copy of electricity bill/ landline bill, water bill

• No objection certificate of the owner

• Rent agreement (in case premises are rented)

B. Documents required for Limited Liability Partnerships (LLPs):

i) LLP Documents

• PAN card of the LLP

• Registration Certificate of the LLP

• LLP Partnership agreement

• Copy of Bank Statement of the LLP

• Copy of Board resolution

ii) Designated Partner related documents

• PAN and ID proof of designated partners

iii) Registered Office documents

• Copy of electricity bill, landline bill, water bill

C. Documents required for Normal Partnerships

i) Partnership documents

• PAN card of the Partnership

• Partnership Deed

• Copy of Bank Statement

ii) Partner related documents

• PAN and ID proof of designated partners

iii) Registered Office documents

• Copy of electricity bill / landline bill, water bill

• Documents required for Sole proprietorship / Individual

iv) Individual documents

• PAN card and ID proof of the individual

• Copy of Cancelled cheque or bank statement

v) Registered Office documents

• Copy of electricity bill/ landline bill, water bill

• Rent agreement ( in case premises are rented)

D. Acknowledgement:

On the receipt of an application, an acknowledgement shall be issued to the applicant in FORM GST REG-02

3 GST ADVANTAGES

1. GST is a transparent tax and also reduces the number of indirect taxes.

2. There will be no cost for GST registered retailers, so no hidden tax will be done and the cost of doing business will be reduced.

3. Benefit people as prices will come down which in turn will help companies as consumption will increase.

4. There is no doubt that in production and distribution of goods, services are increasingly used or consumed and vice versa.

5. Separate taxes for goods and services, which is the present taxation system, requires division of transaction values into value of goods and services for taxation, leading to greater complications, administration, including compliances costs.

6. In the GST system, when all the taxes are integrated, it would make possible the taxation burden to be split equitably between manufacturing and services.

7. GST will be levied only at the final destination of consumption based on VAT principle and not at

various points (from

manufacturing to retail outlets).

This will help in removing economic distortions and bring

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5 about development of a common national market.

8. GST will also help to build a transparent and corruption free tax administration.

9. Presently, a tax is levied on when a finished product moves out from a factory, which is paid by the manufacturer, and it is again levied at the retail outlet when sold.

10. GST is backed by the GSTN, which is a fully integrated tax platform to deal with all aspects of GST.

4 CONCLUSION

Adopting a new GST system and migration will involve initial difficulties and learning ability for the entire ecosystem.

Still After much deliberation, our GST Council has finalized the rates for all goods and major service categories under various tax slabs, and GST is expected to

fill the gap in the existing system and promote the Indian economy. . It is being done by integrating indirect taxes for all the states in India.

Tax rate under GST is fixed at 0%, 5%, 12%, 18% and 28% on various commodities and services, and approximately 50% of goods and services have a rate of 18% tax.

REFERENCES

1. The Economic Times (2009) Featured Articles from The Economic Times.

2. Gst India (2015) Economy and Policy.

3. Mehra P (2015) Modi govt.’s model for GST may not result in significant growth push.

The Hindu.

4. Sardana M (2005) Evolution Of E?Commerce In India Part 3.

5. TRAI (2015) Highlights of Telecom Subscription Data as on 28th February.

6. Patrick M (2015) Goods and Service Tax:

Push for Growth. Centre for Public Policy Research (CPPR).

7. SKP (2014) GST: Impact on the Telecommunications Sector in India.