Unit 4
Unit 4
1 July 2017
The Goods and Services Tax was launched at
midnight on 1 July 2017 by the President of
India, Pranab Mukherjee, and Prime Minister
of India, Narendra Modi. The launch was
marked by a historic midnight (30 June 1
July) session of both the houses of parliament
convened at the Central Hall of the
Parliament.
GST
NEW DELHI: As much as Rs 42,000 crore has already come in as taxes so far in the
first monthly filing under the new Goods and Services Tax (GST) regime and the
revenues are expected to swell further as the filing cycle closes this later this week.
A senior official said that about Rs 15,000 crore has come in as Integrated-GST,
which is levied on inter-state movement of goods, and another Rs 5,000 crore by
way of cess on demerit goods like cars and tobacco.
The remaining Rs 22,000 crore has come in as Central-GST and State-GST, which
would be split equally between the Union and state government.
"Tax deposited till this morning was Rs 42,000 crore," the official said.
So far, 10 lakh tax payers have filed returns and another 20 lakh have logged in and
saved return forms.
"We are seeing good compliance and our estimation is that 90-95 per cent of the
assesses will file returns and pay taxes," he said.
.
Under the GST regime, which was implemented from July 1, businesses are expected to file the
monthly tax return.
Tax for the first month is to be filed by an extended deadline of August 25. The deadline was
extended as the tax return filing website snapped just a day before the due date ended on August
20.
GST unifies more than a dozen central and state levies including excise duty, service tax and VAT,
and the revenue generated is to be split equally between the Centre and states.
In July last year, Rs 31,782 crore of excise duty was collected and Rs 19,600 crore of service tax.
Estimate for the combined sales tax or VAT collection by states was available.
While 72 lakh assessees of the old indirect tax regime have migrated to the GST Network portal,
nearly 50 lakh have completed the migration process.
Besides, of the 15 lakh fresh registrations that have happened, as many as 10 lakh are expected to
file returns for July.
A total of 60 lakh businesses are expected to file returns and pay taxes for July, the official added
TAX
Tax is a financial charge or other levy upon a taxpayer (an individual or
legal entity) by a state or the functional equivalent of a state such that
failure to pay is punishable by law.
The term direct tax generally means a tax paid directly to the
government by the persons on whom it is imposed.
An indirect tax (such as sales tax, a specific tax [a tax per unit], value
added tax (VAT), or goods and services tax (GST)) is a tax collected by
an intermediary (such as a retail store) from the person who bears the
ultimate economic burden of the tax (such as the customer).
Types of Taxes
In India Tax is regulated and administered by
the Ministry of Finance under the
Government of India. Taxation is the
government's main source of revenue and
several types of taxes are applied to different
categories of the population.
The following is a brief description of some of
the taxes that are levied in India by the
government:
Income Tax: The Income Tax Act of 1961 stipulates that
any person who qualifies as an assessee and whose
gross income is more than the exemption limit is
required to pay Income Tax in accordance with the
rates indicated by the Finance Act.
Corporate Tax is the tax charged on the profits earned
by associations and companies by several jurisdictions.
The rate of Corporate Tax in India depends on whether
the profits have been passed on to the shareholders or
not.
Value Added Tax: This is the tax that a
manufacturer needs to pay while purchasing
raw materials and a trader needs to pay while
purchasing goods. VAT is eventually expected to
replace Sales Tax. All goods and services
provided by business individuals and companies
come under the ambit of VAT.
Capital Gains Tax: A Capital Gain can be
defined as an, any income generated by selling
a capital investment (business stocks,
paintings, houses, family business, farmhouse,
etc.). The 'gain' here is the difference between
the price originally paid for the investment
and money received upon selling it, and is
taxable.
Service Tax As per the Finance Act of 1994, all service providers in
India, except those in the state of Jammu and Kashmir, are required
to pay a Service Tax in India.
Fringe Benefit Tax: As per Section 115WB of the Finance Bill,
expenses incurred for employees, by an employer
(individual/company/local authority/trader) for purposes of
entertainment, gifts, telephone, clubbing, festivals etc., will be treated
as Fringe Benefits and will be taxed.
Sales Tax: a tax based on the cost of the item purchased and
collected directly from the buyer
Tax Planning is an application to reduce tax liability through the
finest use of all accessible allowances, exclusions, deductions,
exemptions, etc, to trim down income and/or capital profits.
Tax evasion
India is divided into various States and Union Territories and each
State and Union Territory has certain powers in respect of that
particular State.
Taxation under Constitution
In the basic scheme of taxation in India, it is
envisaged that
(a) Central Government will get tax revenue from
Income Tax (except on Agricultural Income),
Excise (except on alcoholic drinks) and Customs
(b) State Government will get tax revenue from
sales tax, excise on liquor and tax on Agricultural
Income
(c) Municipalities will get tax revenue from octroi
and house property tax.
Excise Duty is an indirect tax levied and collected
on the goods manufactured in India.
Customs duty is a kind of indirect tax which is
realized on goods of international trade. In
economic sense, it is also a kind of consumption
tax. Duties levied by the government in relation to
imported items are referred to as import duty.
In the same vein, duties realized on export
consignments is called export duty
Octroi (O. Fr. Octroyer, to grant, authorize) is a
local tax collected on various articles brought
into a district for consumption.
The Central sales tax Act 1956 was enacted by
the Parliament and received the assent of the
president on 21.12.1956.
Objectives of CST
To formulate principles regarding when a sale or
purchase of goods takes place:
In the course of inter state trade
In the course of import/export trade
It aims to find out determination of taxable
turnover
It aims to find out Registration of dealers
It implies how and when central sales tax is
imposed
Constitutes Of Sales Tax Act in India
According to S2 (g), a sale refers to any transfer of
property in goods by one person to another for cash or,
deferred payment or, for any other valuable
consideration. It also includes the following:
1. A sale or purchase of goods is said to take place when
the transfer of property in the existing goods or future
goods takes place for consideration of money.
2. The goods have been divided into different categories
and different rates of sales tax are charged for different
categories of goods.
3.In most of the cases related to the sales tax,
the tax on the sale or purchase of goods is at
single point.
4. Under the provisions of some state laws the
assesses are divided into several categories such
as manufacturer, dealer, selling agent etc. and
such as assess is required to obtain a
registration certificate to that effect
What are goods?
Goods, for the purposes of the Act, include
the following:
Materials.
Articles.
Commodities.
All kinds of movable property. (Movable
property is property, which is capable of being
lifted, carried, drawn, turned or conveyed or
in any way made to change place or position.
Sales Tax In India
Sales tax is levied on the sale of a commodity
which is produced or imported and sold for the
first time. If the product is sold subsequently
without being processed further, it is exempt
from sales tax.
Sales tax can be levied either by the Central or
State Government, Central Sales tax department.
Also, 4 per cent tax is generally levied on all inter-
State sales. State sales taxes that apply on sales
made within a State have rates that range from 4
to 15 per cent.
Sales tax is also charged on works contracts in
most States and the value of contracts subject
to tax and the tax rate vary from State to
State.
However, exports and services are exempt
from sales tax.
Sales tax is levied on the seller who recovers
it from the customer at the time of sale.
Sales Tax in India is that form of tax which is imposed
by the government on sale/purchase of a particular
commodity within the country.
It is imposed under Central Government (Central Sales
Tax) and the State Government (Sales Tax) Legislation.
Normally, each state has its own sales tax act and levies
the tax at various rates.
Apart from sales tax, certain states also impose extra
charges such as works contracts tax, turnover tax &
purchaser tax. Thus, sales tax plays a major role in
acting as a major generator of revenue for the various
State Governments.
The Central Sales Tax (CST) Act that comes under
the direction of Central Government takes into
consideration all the interstate sales of
commodities.
Hence, we see that sales tax is to be paid by every
dealer when he sells any commodity, during
inter-state trade or commerce, irrespective of the
fact that there may be no liability to pay tax on
such a sale of goods under the tax laws of the
appropriate state.
Municipal/Local Taxes
Octroi/entry tax: Certain municipal
jurisdictions levy an Octroi/entry tax on the
entry of goods
It is a tax on sale
Though it is a Central Tax But it is collected and retained by the
State from where movement of goods commences
Sale of goods shall be deemed to take place in the course of
inter-State trade or commerce, if
Occasions the movement of goods; or
Transfer of documents of title during movement of goods
A sale within the State, which is not an inter-State sale or export
or import, is a intra-State sale
Tax generally depends upon location of goods That is, state
where invoice is raised is immaterial
WHAT ARE THE CONDITIONS FOR CST
ACT TO BECOME APPLICABLE.
Sales Tax
TAX LEVIED
Last point sales tax.
M D W R C
TAX LEVIED.
Multi point sales tax.
M D W R C
TAX LEVIED
Background of Vat in India
V.A.T @ 5%
(Rs.700) Rs.14700
Nokia 5800
Rs.14000
Uttaranchal 01-04-2006 1
Rajasthan, Gujarat, MP, Chhattisgarh and 01-04-2006 4
Jharkhand
Uttar Pradesh and Tamil Nadu Tamil Nadu Value Added Tax Act
2006 has come into effect from 1st
January 2007
For for more information on VATFOR
MORE INFORMATION ON VAT REFER:
www.tnvat.gov.in
VAT
Value Added Tax (VAT) Definition Most of the
states in India, with effect from April1,2005
have adopted Value added Tax.
Value added tax or VAT is an indirect tax,
which is imposed on goods and services at
each stage of production, starting from raw
materials to final product.
VAT is levied on the value additions at
different stages of production.
VAT
Value added tax (VAT) is an indirect tax on goods.
vat is imposed only on the amount of value
addition. It is a multi-point tax levied as a
proportion of value addition, where the tax
burden can be shifted from one person to
another person till the ultimate consumer can
consume the goods.
VAT is charged by state government
VAT is a intra state sales tax (sales within the
state)
Concept of VAT
Output Tax-
It is the Tax Charged/Chargeable by a registered
Dealer on Local Sales effected by him.
EXAMPLE:
A sells Goods to B of Rs 1,00,000 VAT Rate is
4%.Here VAT is 4% of 1,00,000. Here A will
collect Rs 4000 from B.
In this case Rs 4,000 is Output Tax for A and
Input Tax for B.
The Output Tax of A will become Input Tax for
B.And B can take credit of this Input Tax
provided A is a Registered Dealer.
RATES OFVAT ITEMS
G
o 0% Natural and un-processed produces in unorganized sector
Good of social importance
o Life saving drugs
d Newspapers
National flag barred from taxation
s
1% Gold
Silver
U Precious and semi-precious stones
n
5% Basic necessities
d Industrial and agricultural inputs
e Declared goods
Medicines and drugs
r AED items
V Capital goods
Disadvantages:
It promotes the acquisition of bogus bills by the
dealers for claiming false VAT credit.
Example
'Mr.A'',a manufacturer, sold goods to distributor
''Mr. B'' for Rs.10,000.
B sells the same goods to C,a wholesaler, for
Rs.16,000.
C sells the goods to retailer D for Rs.24,000.and
D sells the goods to the final consumer E for
Rs.35,000.
VAT Rate is 12.5% which is charged separately.
Compute VAT liability as per Tax Credit Method.
Computation of VAT liability (in Rs.
Sale VAT on
Net VAT
Sale by Price(befo Sales @ VAT Credit
Payable
re VAT) 12.5%
A 10,000 1,250 0 1,250
B 16,000 2,000 1,250 750
C 24,000 3,000 2,000 1,000
D 35,000 4,375 3,000 1,375
Total VAT to the Government 4,375
Advantages of VAT
Basically, the VAT was introduced as a better
alternative to sales tax, as to avoid the
economic distortions caused by the latter.
There are as many reasons in favor of the use
of VAT.
These are explained below:
value Added Taxes (VAT) in India
Value Added Tax (VAT) is nothing but a general consumption tax that is assessed on the value added
to goods & services. It is the indirect tax on the consumption of the goods, paid by its original
producers upon the change in goods or upon the transfer of the goods to its ultimate consumers. It
is based on the value of the goods, added by the transferor. It is the tax in relation to the difference
of the value added by the transferor and not just a profit.
All over the world, VAT is payable on the goods and services as they form a part of national GDP.
More than130 countries worldwide have introduced VAT over the past 3 decades; India being
amongst the last few to introduce it.
It means every seller of goods and service providers charges the tax after availing the input tax
credit. It is the form of collecting sales tax under which tax is collected in each stage on the value
added of the goods. In practice, the dealer charges the tax on the full price of the goods, sold to the
consumer and at every end of the tax period reduces the tax collected on sale and tax charged to
him by the dealers from whom he purchased the goods and deposits such amount of tax in
government treasury.
VAT is a multi-stage tax, levied only on value that is added at each stage in the cycle of production
of goods and services with the provision of a set-off for the tax paid at earlier stages in the
cycle/chain. The aim is to avoid 'cascading', which can have a snowballing effect on the prices. It is
assumed that because of cross-checking in a multi-staged tax; tax evasion would be checked, hence
resulting in higher revenues to the government.
Neutral tax- the vat is regarded as a neutral tax
because it does not influence the business mans
decision as to how he carries on the business.
The VAT is applied only to value added by each
firm and not to gross receipts.
Spread over a large number of firms: the vat is
spread over a large number of firms instead of
being concentrated on a single point in the chain
of production as is the cause with sales tax or
purchase tax or a manufacturers tax.
Importance of VAT in India
ndia, particularly being a trading community, has always believed in accepting and
adopting loopholes in any system administered by State or Centre. If a well-
administered system comes in, it will not only close options for traders and
businessmen to evade paying their taxes, but also make sure that they'll be
compelled to keep proper records of sales and purchases.
Under the VAT system, no exemptions are given and a tax will be levied at every
stage of manufacture of a product. At every stage of value-addition, the tax that is
levied on the inputs can be claimed back from tax authorities.
At a macro level, two issues make the introduction of VAT critical for India
Industry watchers believe that the VAT system, if enforced properly, will form part
of the fiscal consolidation strategy for the country. It could, in fact, help address
issues like fiscal deficit problem. Also the revenues estimated to be collected can
actually mean lowering of fiscal deficit burden for the government.
International Monetary Fund (IMF), in the semi-annual World Economic Outlook
expressed its concern for India's large fiscal deficit - at 10 per cent of GDP.
Moreover any globally accepted tax administrative system would only help India
integrate better in the World Trade Organization regime.
Minimum of loss of revenue through evasion-
with a single stage sales tax, successful evasion
means that the total tax yield is lost, but if the
value added tax is successfully evaded at any
stage of production, only a portion of the total
tax is yield at risk.
Easier to Enforce- the VAT is regarded superior
to retail sales tax because it is easier to
enforce through cross checking.
Encourages exports
Increase efficiency in production and
distribution.
Selectivity- vat may be selectively applied to
specific goods or business entities.
Disadvantages of VAT
VAT is regressive- it is claimed that the tax is
regressive. i.e., its burden falls
disproportionately on the poor, since the poor
are likely to spend more of their income than
than relatively rich person.
VAT is too difficult to operate from the
position of both the administration and
business
VAT is inflationary- some businessmen seize
almost any opportunity to raise prices, and the
introduction of VAT certainly offers such an
opportunity.
VAT favors the capital Intensive Firm: it is also
argued that VAT places a heavy direct impact of
tax on the labor intensive firm compared to the
capital intensive competitor, since the ratio of
value added to selling price is greater for the
former.
VAT replaces sales tax
However, most of the states in India, from April 01, 2005,
have supplemented the sales tax with the new Value Added
Tax (VAT). VAT in India is classified under the following tax
slabs:
0% for the essential commodities
1% on gold ingots as well as expensive stones
4% on capital merchandise, industrial inputs, and
commodities of mass consumption
12.5% on all other items
Variable rates (depending on state) are applicable for
tobacco, liquor, petroleum products, etc.
A Central Sales Tax which is at the rate of 4% is also levied
on inter-State sales but would be eliminated gradually