Goods and Service Tax (GST) -Indirect Tax

• Through 101st Amendment Act guided by Art 301 Govt introduced GST includes both Goods and Services
• Art 279 A is introduced to make GST workable. Enforced from 1 July 2017.
• Exceptions
  1. Except for Alcohol and Electricity, all items included.
  2. 5 Petroleum products are temporarily out of GST (to control losses to the State): Crude Oil, petrol, diesel, ATF and Natural Gas.

• GST Council

  1. Constitutional Body. Responsible for Tax rates, listing of items and any dispute resolution among States and provide participation of all States and UTs.
  2. Headed by FM. Represented by FM of States. Vice Chairperson from respective State FM.
  3. Voting: 2/3rd State and 1/3rd Center. The decision is based on majority voting.
  4. Quorum = 50% and Majority = 75% members present.
• It preserves the Principle of Cooperative Federalism. But if Tax rates are decided States have no autonomy to modify it which goes against Cooperative Federalism.
• GST tried to provide a Single Tax for the supply of all goods and services (solved the problem of multiple taxations).
• It is a destination based tax (opposite of VAT) guided by 1 Tax 1 Nation 1 Market to decrease cascading effect and decrease cost of production and increase export and control inflation.
• GST is based on IT technology hence the minimum interface between tax officials and citizens.
• It is a part of Ease of Doing Business by doing away with multiple taxation, multiple filling and multiple compliances. Now all firms can file the same tax, get a GST number to get the benefit of Input Tax Credit.

• For PAN India Company a person should take different GST numbers in different States because State has State GSTs.
• Taxes subsumed under GST
  1. Central Taxes = Excise Duty (Medicinal and Toiletry Goods), Additional Duties of Excise (Goods of special importance), Additional Custom Duties, Special Additional Custom duties, Service Tax, Central Surcharges and Cess.
  2. State Taxes = State VAT, Central Sales Tax, Luxury Tax, Entry Tax, Entertainment tax, Tax on Ads (other than Newspapers), Tax on Lotteries, Betting and Gambing, Purchase Tax, State Surcharge and Cess.

Provisions of GST

1. As it is a Destination Based Tax, Chances is that UP Govt (Destination State) can earn more GST than Maharashtra which is manufacture state. Hence Govt came up with Cess @ 15% on more luxurious goods to compensate lossmaking states at 15% over peak rate of 28% but at times the effective rate is < 40%. Hence, effective rate of cess is 12%.
2. Exemption limit in plain area increased from 20 to 40 lakh rs. and in Northeast and Hilly regions, increased from 10 to 20 lakhs.
3. Govt introduced GST Composition Scheme:

1. If a Trader, manufacturer and restaurant; if annual turnover <= 1.5 crore then the Trader and Manufacture must pay 1% of GST and Restaurant can pay 5% of GST. But they are not eligible for input tax credit mechanism.
2. In service sector 18% is GST but if any enterprise has turnover of 50 lakhs then you can pay 6% They are not eligible for input tax credit off. Under it Center and State share is 50:50.
3. 4 Types of GST: CGST, SGST, UTGST and IGST imposed on imported goods or custom duties and interstate trade distributed to state as per FC recommendations.
4. Rates

1. 0% = Essential goods. Unbranded. Unpacked. Export and supplies to SEZ are 0 rated.
2. 5% = Packed essential goods. Branded. Important for consumption of masses.
3. 12% = Daily health and hygiene. Basic Raw material for industries, few construction items (except Cement).
4. 18% = Majority services.
5. 28% = Luxury goods and Cement.
6. Separate rate for precious metals = 3% and semi precious stones = 0.25%.
7. For administrative convenience, if a Business have turnover < 1.5 crore 90% belongs to State and 10% = Central. But if Business > 1.5 crore turnover then Centre: State share has 50:50.
8. Now J&K is also a part of GST.

5. Exceptions

• Except Alcohol and Electricity all items included.
• 5 Petroleum products are temporarily out of GST (to control losses to the State): Crude Oil, petrol, diesel, ATF and Natural Gas.

6. Input Tax Credit Off of State GST will be adjusted from State GST.
7. e-filing of returns from e-payment, netbanking, RTGS.
8. Refund of taxes to be sought by taxpayers or any other person is within 2 years time period from date.
9. Self assessment of tax payable by registered person provided by audit and he should comply provisions.
10. Formation of advanced ruling authority in every State to enable tax payers to seek a binding clarity on taxation matter, Center should adopt such authority.
11. GST Appellate Tribunal = Head Commissioner Level to solve disputes relating to GST amount.
12. Anti Profiteering Clause: To ensure that benefit of GST and Input Tax credit off can pass to consumers like Monetary Transmission of RBI.
13. 3 Tier Structure

1. Standing Committee on Anti Profiteering
2. Screening Committee at State Level
3. NAPA: (National Anti Profiteering Authority) to ensure that benefits that occur to entities due to decreased cost are passed on to customers. Entities that hike prices to get profits will be checked.

14. They will 1st identify business and ask him to comply. They can ensure payment of compensation to consumers at 18% from date of imposing high prices. If they do not accept, they can cancel its licence.

Index of eight core industries

• The eight core sector industries include coal, crude oil, natural gas, refinery products, fertiliser, steel, cement and electricity.
• The eight Core Industries in decreasing order of their weightage: Refinery Products> Electricity> Steel> Coal> Crude Oil> Natural Gas> Cement> Fertilizers.

• The eight core industries comprise 40.27% of the weight of items included in the Index of Industrial Production (IIP).

Index of Industrial Production (IIP)

• The Index of Industrial Production (IIP) is an index which details out the growth of various sectors in an economy such as mineral mining, electricity, manufacturing, etc.
• It is compiled and published monthly by the Central Statistical Organisation (CSO), Ministry of Statistics and Programme Implementation six weeks after the reference month ends, i.e a lag of six weeks.
• The Base Year of the Index of Eight Core Industries has been revised from the year 2004-05 to 2011-12 from April, 2017.

• The combined Index of Eight Core Industries stood at 125.8 in May 2021, which increased by 16.8 per cent (provisional) as compared to the Index of May 2020.
• The production of Coal, Natural Gas, Refinery Products, Steel, Cement and Electricityindustries increased in May 2021 over the corresponding period of last year.

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The summary of the Index of Eight Core Industries is given below:

• Coal – Coal production (weight: 10.33 per cent) increased by 6.9 per cent in May, 2021 over May, 2020.
• Crude Oil – Crude Oil production (weight: 8.98 per cent) declined by 6.3 per cent in May, 2021 over May, 2020.
• Natural Gas - Natural Gas production (weight: 6.88 per cent) increased by 20.1 per cent in May, 2021 over May, 2020.
• Petroleum Refinery production (weight: 28.04 per cent) increased by 15.3 per cent in May, 2021 over May, 2020. corresponding period of previous year.
• Fertilizers – Fertilizers production (weight: 2.63 per cent) decreased by 9.6 per cent in May, 2021 over May, 2020.
• Steel – Steel production (weight: 17.92 per cent) increased by 59.3 per cent in May 2021 over May 2020.
• Cement – Cement production (weight: 5.37 per cent) increased by 7.9 per cent in May 2021 over May 2020.
• Electricity – Electricity generation (weight: 19.85 per cent) increased by 7.3 per cent in May, 2021 over May, 2020.