GST Simplified Series#1
Concept, Levy, Scope &
Applicability
We
are pleased to share that we have launched Series ‘GST Simplified’
wherein we would attempt to explain nitty-gritty of GST in most lucid manner
through write-ups, presentations and videos.
Series#1 explains ‘Concept,
levy, scope & applicability of GST.
Current Indirect Tax Structure is grappled with following inherent imperfections:
GST
has been an attempt to put an end to aforesaid challenges and that’s why is it
quoted that ‘GST is not just a tax reform but a business reform’.
Let’s
now understand how will GST mitigate current challenges and ride to the path of
transparent tax structure.
Concept of GST
Note: Basic Customs Duty shall continue to be levied on
imports/exports.
Constitutional Amendment
States
and Central Government are empowered to levy tax under Article 246 of
Constitution of India read with 7th Schedule comprising following 3
lists:
i. List
I: Union List
ii. List
II: State List
iii. List
III: Concurrent List
As
of now, State Governments cannot levy tax on supply of services and Centre
cannot levy tax on sale of goods within the state. To pave the way for
constitutionally valid GST law, new Article 246A has been incorporated to
empower both Centre & States to levy tax on goods and services.
Why GST
Will apply where ?
GST
will apply to whole of India except J&K in its current form. There has been
lot of debates and discussion on how J&K will come under legal framework of
GST since J&K being Special State is having its own taxation powers and
laws and do not follow Central Excise Duty/Service & VAT.
Will
apply on which items ?
Indirect
taxation law is moving towards negative list based regime wherein every item is
taxable except if it is specifically kept out Following items are kept out of
GST:
ü
Electricity
ü
Property
transaction leviable to Stamp Duty / Property Taxes
ü
Petroleum
products* (excluded as of now)
ü
Alcohol
for human consumption
(*)Petroleum
Products to include 5 items- petroleum crude, motor spirit (petrol), high speed
diesel, natural gas and aviation turbine fuel. These have been kept out as of
now but might be included at later stage
GST
on ‘Supply’
GST
will apply on ‘Supply’ of goods and/or services in India. The word ‘Supply’ is
quite wide in its scope. The same will be explained in detail in next series.
GST
Council
From
planning to formulation to structuring to implementation to operationalization,
for every critical issue all states have been kept in loop by way of various
meetings of Empowered Committee of State Finance Ministers. However, post
necessary amendment in Constitution in respect of GST, this place has been
replaced by GST Council. Model GST Law
contains enabling provisions to the effect that critical aspects of GST like
rates, exemptions, special provisions etc. will be firmed up on recommendation
of GST Council. It has been done to ensure participative decision making and
consensus amongst all states so that GST can be implemented across states with
minimum deviations from Model GST Law. GST Council will comprise of representative
from each State including Union Territories with partial State Hood and also
Union Minister of State. The Council will be chaired by Finance Minister.
About Author:
CA. Nikhil M. Jhanwar is
practicing Chartered Accountant in Delhi/NCR specialising in Indirect Tax,
Start-up Advisory, Corporate Finance. He is also GST Faculty of ICAI. He can be
reached at nmjhanwar@gmail.com/+91-8860876960.