Topic :- A Study On Restrictions And Power Of Transition With Special Reference To Gst Subject :- Corporate Tax Planning & Management Class :- III Semester MBA By Dr.Shenbagavalli Associate Professor Koshys Institute of Management Studies Bangalore
INTRODUCTION GST is the spiral procedure of 17 indirect taxes and 22 types of cess into one single tax. GST is a simple tax but its implementation has been complex as it has a five layered taxation slab for various commodities. Luxury goods become costlier, items of mass consumption is cheaper. It is nothing new most of the countries in the world are already implementing GST to make their goods internationally competitive. Expect that at the highest layer of 28% on luxury goods. 28% tax is the highest percentage of tax in the world when compared to the highest 17% of tax. There are many areas, which have to be addressed as a part of transition to GST. This study concentrate about registration, carry forward of credits, change in tax, analysis between indirect tax and GST and goods in transit to achieve the power of transition. GST is a second major surgical strike on tax evaders, brings most of the traders in to the tax net. Key words: GST, Input tax credit (ITC), Transition, Tax evaders, Goods in transit, value added tax (VAT).
DIFFER FFEREN ENT T TAX AXES ES IN CEN ENTRA TRAL L BEF EFORE RE GST Central ral Excise se Duties s of Excise se Ad Additi tiona nal Duties es of Excise se Ad Additi tiona nal Duties( es( Textiles es & t texti tile e product duct) CENTRAL AL TAX Ad Additi tional nal Duties es of custom oms(C s(CVD) D) Special al Ad Additi tional onal Duties s of customs(SA ms(SAD) D) Services ces Tax Centra ral l surcha charges rges & c cesses ses so fa far as they relate e to supply y of G &S
DIFFER FFEREN ENT TAXE XES IN STATE E LEVEL EL BEFORE RE GST State VAT Central ral Sales s Tax Luxury y Tax Entry Tax (all forms) s) Enter ertai tainmen ent t & Amusem emen ent t Tax STATE TE TAX (expec ect t when levied ied by the local al bodies ies) Taxes s on adverti tisem semen ents ts Purcha hase se Tax Taxes s on Lot otteries ries, , Bet etting ng &Gambling State e surc rcharges harges &cesses es so fa far as they relat ate e to to supply of goods ds & servic vices es
GST T TAXA XATIO TION N SYSTE STEM
VAT CON ONCEPT CEPT AND ITS S APPLICA ICATION ION IN GST VAT in core concept in GST Concept of Vat (Value Added Tax) Was first proposed in 1918 by German Industrialist Dr. Wilhelm Von Siemens France was the first country to introduced VAT on 10 th April 1954 European countries introduced VAT on goods and services European Union decided to adopt VAT w.e.f 1978(after1977) (@ Rate between 19% to 25%) China introduced VAT in 1984 & full fledged Vat was implemented in china in 1994 (@ 17%) In Japan, there is ‘Consumption Tax’ of 5% {4% national levy and 1% regional levy} About 160 countries have introduced VAT except USA ( major revenue central level based on income tax and there is retail tax @ state level) Concept of VAT was developed To o avoi oid d casc scading ding effec ect t of taxes. es. Transparent tax collection system Reduces the tax evasion Ensure better tax compliance and increase tax revenue. In India this system was named as Modvat was introduced in 1986 (Modified value added tax). Modvat was renamed as Cenvat w.e.f. 1/4/2000 at central level – benefit (Credit) to the manuf. those who are paying CVD on imported goods. This system of tax was introduced in service tax in India w.e.f. 2002 . The credit of excise duty and service tax was made inter changeable .Where as Cenvat not extended to sales tax because it is coming under the jurisdiction of state. However the state government have introduced sales tax VAT after 2005.
INDIRECT IRECT TAX X (CA CASC SCADIN ADING )VS VS GST T (EXA XAMPL PLES ES IN RS RS.) INDIRECT SYSTEM BEFORE GST TAX GST SYSTEM PERCENTAGE-10% THE PERCENTAGE-10% THE MANUFACTURER PAYS MANUFACTURER PAYS INR 100 TO BUY INR 100 TO BUY RAW MATERIALS(NO PROFIT RAW MATERIALS(NO PROFIT & LOSS) & LOSS) STAGE -1(MANUFACTURER) (100+10=110) STAGE -1(MANUFACTURER) (100+10=110) STAGE-2 (WS) (100+40=140+14=154) STAGE-2 (WS) (110+40=150+15=165) STAGE-3 (RET) (140+30= 170+17=187) STAGE-3 (RET) (165+30= 195+19.5=214.5 Actual Action cost 10% Tax liability Total Action cost 10% Tax Total Buys Raw Material 100 10 10 110 Buys Raw Material 100 10 110 Whole lesale saler 140 14 4 154 Wholesaler 150 15 165 Retailer 170 17 3 187 Retailer 195 19.5 214.5 total 170 44.5 214.5 total 170 17 187
REGISTRATION Requirement of registration Relief to very small taxable person(less than 20 lakhs) A) GST payable once registered if turnover in a financial year exceeds 20 lakhs ( Aggregate turnover 20 lakhs) Persons requiring registration without threshold limit of 20/10 lakhs. i) persons making any inter state taxable supply ii) casual taxable persons making taxable supply iii) Persons who are required to pay tax under reverse charge iv) Persons who are required to pay tax under section 9(5) {urban club} v) Non resident taxable persons making taxable supply. vi) persons who are supply G&S or both on behalf of other taxable persons whether as an agent or otherwise. B) Special category states are exempted from this limit( Article 279A(4)(g)of Constitution of India &sec22 Ex iii of CGST Act. ( Aggregate turnover less than 10 lakhs) Any person engaged exclusively in the business of supply G&S or both that are not liable for tax or wholly exempt from tax An agriculturist to the extent of supply of produce out of cultivation of land.
CA CASUAL AL TAXAB XABLE E PERSON SON Casual taxable person as a person who occasionally undertakes transactions involving supply of goods or services or both. casual taxable person has no fixed place of business. Hence, persons running temporary businesses in fairs or exhibitions or seasonal businesses . All persons who are classified as casual taxable persons are mandatorily required to obtain GST registration, irrespective of the annual aggregate turnover. Further, the application for GST registration for a casual taxable person must be made at least 5 days prior to the commencement of business. GST registration application for casual taxable persons can be made using FORM GST REG-01. Unlike regular taxpayers, casual taxable persons are required to deposit tax in advance for GST registration. The amount of tax to be deposited would be equal to the expected tax liability during the validity period of GST registration. Hence on applying for GST registration, a temporary reference number is generated for payment of GST deposit. On paying the GST deposit, the electronic cash ledger of the taxpayer is credited and GST registration certificate is released The validity of GST registration for a casual taxable persons is the validity period specified in the GST registration application or 90 days from the date of registration, whichever is earlier. In case a casual taxable person needs extension of the validity period mentioned in the GST registration certificate, then FORM GST REG-11 must be submitted. Along with the request for extension of validity period, advance GST deposit must also be made by the taxpayer based on the expected tax liability. If the officer verifying the application is satisfied and advance GST deposit is made, the GST registration can be extended by up to another 90 days.
COMPOS POSITION ITION SCHEM EME UNDER ER GST Eligibility: Turnover must be below RS. 75 lakhs (50 lakhs for North eastern state) Tax Rate: Fixed tax rate on the total sales turnover(not more than 1%for manufacturers, 2.5% for restaurant sectors and 0.5% for other supplies of turnover)Reverse tax will not cover. Input tax credit : Not eligible for ITC Place of supply: Applies only to the Intra state supplies Return: No monthly filing , only Quarterly return filing Billing: Issues only bill of supply and not tax invoice Applicability: Only goods can opt for composition scheme whereas service providers have been kept outside except service of restaurant.
INPUT TAX CREDIT Review's i) Royalty (Financial Accounting ): ii) Minimum Alternative Tax(MAT) U/S 115JB of the Income Tax Act: All the companies are liable to pay MAT at 18.5% (plus surcharge and cess as applicable) progressively Increased form7.5% in the year 2000 to 18.5% in 2015.It is calculated based on book profit. Normal tax rate of tax is 30% on Taxable business income. Example- Company ‘ABC ‘books a profit of 8,00, 0,000 000. After claiming all applicable deductions, exemptions and depreciation, the gross taxable income comes out to be Rs. 4,00,000 MAT= 8,00,000* 18.5%= 1,48,000, Tax payable as per normal provision=4,00,000*30%=1,20,000(1,48000- 1,20,000=28000) This excess of Rs 28000 can be carried forward and set- off against regular tax payable in future.
Availability ITC ( INPUT TAX CREDIT)based on transaction
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