Done with GST Jokes? Now read why Modi’s Tax Reforms are going to be a Defining Moment

gst modi
New Delhi: Prime Minister Narendra Modi addresses the special ceremony in the Central Hall of Parliament for the launch of 'Goods and Services Tax (GST)', in New Delhi on Saturday. The GST comes into effect on Saturday after the midnight. PTI Photo / TV GRAB (PTI6_30_2017_000243A)

Kaami Krodhi Laalchi, Inse Bhakti Naa Hoye |
Bhakti Kare Koi Soorma, Jati Waran Kul Khoy ||

What kind of devotion can you expect from a man of sensual pleasures, anger or greed? The valiant person who leaves behind his family and caste can be a true devotee (Sri Narendra Modi ji )

Prime Minister Sri Narendra Modi today has rolled out GST at midnight of 30th June-1st July 2017, in the Parliament House, and written history. PM Modi and Finance Minister Arun Jaitley have ensured India, another Freedom at Midnight from Tax terrorism, Check-Post robbery, Inspector Raj, and multipronged tax levies.

One Nation, One Tax, One Market a revolutionary switch over to an altogether new concept of taxation that is based on ‘supply’ of goods and services (destination based ) from the existing ‘manufacture and sale of goods and provision of service (origin based )

This is considered as a radical step by many experts and hoping India would be a shining star in Global Market soon.

PM Modi, his able Ministers and think tank have taken this historic step for the country’s transformation into a common market.

PM has proudly dubbed GST (Goods and Services Tax) as Good and Simple Tax, while Modi baiters and Congress supporters were busy dubbing it as ‘Great Stupid Tax’.

This can happen only when the antagonists see red in every good step that Modi takes. The enigma is, those who have no knowledge of Taxation were too busy tweeting naive comments on GST. The effect of new rates of GST on goods and Services can be felt in the market only after a couple of day’s or weeks. With regard to its mid-night inauguration, eminent and experienced leaders of Congress party too, have expressed their defeatist mentality for this mid-night fanfare. This could be out of insecure mentality, but a new levy will always takes effect from midnight of a notified date. This has been the legal precedent in Central Excise and Customs levies since Independence, as in terms of General Clauses Act a day starts from 0000 hours midnight, unlike the sunrise time in Hindu calendar.

Before dwelling into the good effects of GST and possible elimination of all ills of the existing taxation systems, let’s briefly scan the salient features of GST (Goods and Services Tax) and how it differs from the hitherto levy and collection of the Central Excise duty, Sales Tax (VAT) and Service Tax.

1) Central Excise Duty was based on the concept of ‘Manufacture’. That means the moment a product is manufactured, packed and kept ready for clearance, it is liable to Central Excise Duty first. Central Excise Duty has to be paid the moment the goods are cleared from the factory premises, irrespective of whether or not the goods are moving on sale or on stock transfer.

2) Sales Tax (VAT) is based on the concept of ‘Sale’. Now let us take the above illustration. In the case, if the goods are cleared to another godown of the manufacturer (stock transfer) no sales tax is collected, but only Excise Duty. if the goods are cleared on sale, then both Excise duty and Sales Tax are collected.

3) GST is destination based consumption taxation whereas the earlier Excise duty and Service Taxes were origin-based taxation.

4) GST, in fact, is a dual GST with the Centre and the States simultaneously levying it on a common base. The GST levied by the Centre is Central GST (CGST) and levied by the States [including Union territories] is State GST (SGST). Union territories will levy Union territory GST (UTGST)

5) Apart from CGST and SGST a third GST is known as IGST i.e. an Integrated GST (IGST) that is levied on inter-State supply (including stock transfers) of goods or services. This would be collected by the Centre so that the credit chain is not disrupted.

6) Import Goods are also subjected to IGST in addition to Basic Customs Duty and Import of Services are subjected to IGST.

An important point to be noted here is, CGST, SGST and IGST are levied at rates that are mutually agreed upon by the centre and states.

So, what are the existing Central and State taxes that are replaced by GST?

a) Central Excise Duty

b) Duties of Excise (Medicinal and Toilet Preparations);

c) Additional Duties of Excise (Goods of Special Importance);

d) Additional Duties of Excise (Textiles and Textile Products);

e) Additional Duties of Customs (commonly known as CVD);

f) Special Additional Duty of Customs (SAD);

g) Service Tax;

h) Cesses and surcharges insofar as they relate to supply of goods or services.

a) State VAT, b) Central Sales Tax; c) Purchase Tax; d) Luxury Tax; e) Entry Tax (All forms); f) Entertainment Tax (except those levied by the local bodies); g) Taxes on advertisements; h) Taxes on lotteries, betting and gambling; i) State cesses and surcharges insofar as they relate to supply of goods or services.

GST is applicable to all goods and services except Alchohol for human consumption.
GST on five specified petroleum products (Crude, Petrol, Diesel, ATF & Natural gas) would be applicable from a date to be recommended by the GSTC.

Tobacco and tobacco products would be subject to GST. In addition, the Centre would continue to levy Central Excise duty.

A common threshold exemption would apply to both CGST and SGST. Taxpayers with an annual turnover of Rs. 20 lakh (Rs. 10 lakh for special category States as specified in Article 279A of the Constitution) would be exempt from GST. A compounding option (i.e. to pay tax at a flat rate without credits) would be available to small taxpayers (including to specified category of manufacturers and service providers) having an annual turnover of up to Rs. 50 lakh. The threshold exemption and compounding scheme would be optional.

Exports would be zero-rated, as Exports of goods and services will always be kept outside the taxes. This is done keeping in view of the basic concept, that goods and services are subject to Government taxes if the subjected Goods and Services are consumed/utilised within India (known as Home consumption)

Uninterrupted and seamless chain of input tax credit (hereinafter referred to as, “ITC”) is one of the key features of Goods and Services Tax.

The TV channels are probably scaring you by repeatedly flashing the slab rates of GST from 5% to 28%, but in reality the net effect will be far less than what they are unable to explain to the consumers.

ITC is a mechanism to avoid cascading of taxes. Cascading of taxes, in simple language, is ‘tax on tax’. Under the present system of taxation, the credit of taxes being levied by Central Government is not available as set-off for payment of taxes levied by State Governments, and vice versa.

One of the most important features of the GST system is that the entire supply chain would be subject to GST to be levied by Central and State Government concurrently. As the tax charged by the Central or the State Governments would be part of the same tax regime, the credit of tax paid at every stage would be available as a set-off for payment of tax at every subsequent stage.

This is an important feature of GST. General public should be aware of the fact that in respect of most of the goods and Services, the levy of 0%, 5%, 8%, 12%, 18% and 28%, may not scare the consumers. These are truly the real GST rates, but the final impact on the prices will be less, in view of the legal provisions inbuilt to curtail the cascading effect of tax on tax. So most of the dealers/manufacturers/Service Providers would take credit of GST already paid on their inputs/input services. This chain of paying tax at one place by someone, taking credit of the same tax paid by you at your place would be a continuous phenomenon.

By this time you must have received SMS from your Banks to get registered with for GST in r/o current accounts? This is for the reason of extending the input credits to your business. Banks will be paying GST on their various services that are provided to you (Bank Customers), like cheque bounce charges, ATM card annual charges, ATM withdrawals charges, A/c statements print outs etc. So stay tuned for this huge but smooth, and seamless chain of ‘tax paid/tax taken ‘ roller coaster. Consumers are ultimately benefited.

NO GST is levied upto Rs 20 lakhs of turnover.

No unjust enrichment of profits is allowed which is earned via credit availment. Provision is in place in the present GST to watch. The good intention is that the ‘customer should get the benefit’ ultimately. Hence the ultimate sellers will reduce the prices proportionately keeping in view of his competitors. 

The major freebie in the GST enactment is strict provision to curtail undue enrichment of profits, by the tax payer is in place. This is ‘Anti profiteering mechanism’. This provision will make mandatory to pass on the input credit enjoyed by them to the customers/buyers. This will greatly check the final price of the products or services. Great leap forward for Centre-State friendship. Wherever CGST is paid, credit can be taken elsewhere. So with SGST and IGST.

Accounts would be settled periodically between the Centre and the State to ensure that the credit of SGST used for payment of IGST is transferred by the originating State to the Centre. Similarly, the IGST used for payment of SGST would be transferred by Centre to the destination State. Further the SGST portion of IGST collected on B2C supplies would also be transferred by Centre to the destination State. The transfer of funds would be carried out on the basis of information contained in the returns filed by the taxpayers.
Service Sector

Many fear that the Service sector is badly hit and with 18% and some services under 28% service, it will hurt the service receivers. This fear is unfounded. If service receiver also happens to be connected with an output Service provider he will adjust the GST paid on it. If the Service receiver is a dead end consumer, then he has to bear the tax brunt. But an interesting aspect is, in such cases the service provider would never increase his charges post 1st July 2017. Check for yourself like the ones, UrbanClap, HouseJoy ETC. This is for sure.

Check Post robbery is stopped all across the country effective July 2017. The notorious Sales Tax check posts at interstate borders are gone! What a pleasant scenario come July 2017? No longer Q s of trucks, roadside resting Truck drivers, bribe collections running in crores and sharing the booty with up to Ministers.

The many States have already closed Check Post. Law and order checkings may continue, but certainly not waybill checkings anymore.

What Government assures to taxpayers in their own version

Ease of Doing Business:

(i) Simpler tax regime with fewer exemptions; (ii) Reductions in the multiplicity of taxes that are at present governing our indirect tax system leading to simplification and uniformity; (iii) Reduction in compliance costs – No multiple record keeping for a variety of taxes- so lesser investment of resources and manpower in maintaining records; (iv) Simplified and automated procedures for various processes such as registration, returns, refunds, tax payments, etc; (v) All interaction to be through the common GSTN portal- so less public interface between the taxpayer and the tax administration; (vi) Will improve environment of compliance as all returns to be filed online, input credits to be verified online, encouraging more paper trail of transactions.

(A) Make in India:

(i) Will help to create a unified common national market for India, giving a boost to Foreign investment and “Make in India” campaign; (ii) Will prevent cascading of taxes as Input Tax Credit will be available across goods and services at every stage of supply; (iii) Harmonization of laws, procedures and rates of tax; (iv) It will boost export and manufacturing activity, generate more employment and thus increase GDP with gainful employment leading to substantive economic growth; Page 11 of 15 (v) Ultimately it will help in poverty eradication by generating more employment and more financial resources; (vi) More efficient neutralization of taxes especially for exports thereby making our products more competitive in the international market and give boost to Indian Exports; (vii) Improve the overall investment climate in the country which will naturally benefit the development in the states; (viii) Uniform SGST and IGST rates will reduce the incentive for evasion by eliminating rate arbitrage between neighboring States and that between intra and inter-State sales; (ix) Average tax burden on companies is likely to come down which is expected to reduce prices and lower prices mean more consumption, which in turn means more production thereby helping in the growth of the industries . This will create India as a “Manufacturing hub”.

So, finally let us all listen to our Prime Minister, Home Minister and his think tank Intellectuals in making a prosperous and super power India, but certainly not to listen to SM trolls who manufacture stupid trends who dubbed GST as ‘Great Stupid Tax’.

Lets repose our trust in Modiji and be confident that it is all ‘Good and Simple Tax‘ and certainly not a ‘Great Stupid Tax’ as the loser Congress dubs it.

Who else can serve our Nation better than Sri Narendra Modi ji ?

Kaami Krodhi Laalchi, Inse Bhakti Naa Hoye |
Bhakti Kare Koi Soorma, Jati Waran Kul Khoy ||