How the GST launch impacts you: All your questions about the tax reform answered

Do registered dealers have to record Aadhaar/PAN while selling goods to unregistered dealers?

As the nation prepares for the rollout of the Goods and Services Tax (GST) from midnight today, the government has prepared a FAQ sheet based on several questions it received on Twitter. 

Here is a summary of some the most frequently asked questions and their answers: 

What is Goods and Services Tax?

It is a destination based tax on consumption of goods and services. It is proposed to be levied at all stages right from manufacture up to final consumption with credit of taxes paid at previous stages available as setoff. In a nutshell, only value addition will be taxed and burden of tax is to be borne by the final consumer.

Which of the existing taxes are proposed to be subsumed under GST?

The GST would replace the following taxes:
 

(i) taxes currently levied and collected by the Centre:

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. Central Surcharges and Cesses so far as they

relate to supply of goods and services

(ii) State taxes that would be subsumed under the GST are:

a. State VAT

b. Central Sales Tax

c. Luxury Tax

d. Entry Tax (all forms)

e. EntertainmentandAmusementTax(exceptwhen

levied by the local bodies)

f. Taxes on advertisements

g. Purchase Tax

h. Taxes on lotteries, betting and gambling

i. State Surcharges and Cesses so far as they relate to supply of goods and services

Which are the commodities proposed to be kept outside the purview of GST?

Alcohol for human consumption is kept out of GST by way of definition of GST in the constitution. Five petroleum products viz. petroleum crude, motor spirit (petrol), high speed diesel, natural gas and aviation turbine fuel have temporarily been kept out and GST Council shall decide the date from which they shall be included in GST. Furthermore, electricity has been kept out of GST.

What will be status of Tobacco and Tobacco  products under the GST regime?

Tobacco and tobacco products would be subject to GST. In addition, the Centre would have the power to levy Central Excise duty on these products.

What type of GST is proposed to be implemented?

It would be a dual GST with the Centre and States simultaneously levying it on a common tax base. The GST to be levied by the Centre on intra-State supply of goods and / or services would be called the Central GST (CGST) and that to be levied by the States/ Union territory would be called the State GST (SGST)/ UTGST. Similarly, Integrated GST (IGST) will be levied and administered by Centre on every inter-state supply of goods and services.

How would a particular transaction of goods and services be taxed simultaneously under GST?

The Central GST and the State GST would be levied simultaneously on every transaction of supply of goods and services except the exempted goods and services, goods which are outside the purview of GST and the transactions which are below the prescribed threshold limits. Further, both would be levied on the same price or value unlike State VAT which is levied on the value of the goods inclusive of CENVAT. While the location of the supplier and the recipient within the country is immaterial for the purpose of CGST, SGST would be chargeable only when the supplier and the recipient are both located within the State.

Suppose hypothetically that the rate of CGST is 10% and that of SGST is 10%. When a wholesale dealer of steel in Uttar Pradesh supplies steel bars and rods to a construction company which is also located within the same State for, say Rs. 100, the dealer would charge CGST of Rs. 10 and SGST of Rs. 10 in addition to the basic price of the goods. He would be required to deposit the CGST component into the central governemnt account while the state GST portion into the account of the concerned State Government. Of course, he need not actually pay Rs. 20 (Rs. 10 + Rs. 10) in cash as he would be entitled to setoff this liability against the CGST or SGST paid on his purchases (say, inputs). But for paying CGST he would be allowed to use only the credit of CGST paid on his purchases while for SGST he can utilize the credit of SGST alone. In other words, CGST credit cannot, in general, be used for payment of SGST. Nor can SGST credit be used for payment of CGST.

What are the benefits of GST?

By amalgamating a large number of Central and State taxes into a single tax and allowing set-off of prior-stage taxes, it would mitigate the ill effects of cascading and pave the way for a common national market. For the consumers, the biggest gain would be in terms of a reduction in the overall tax burden on goods, which is currently estimated at 25%-30%. Introduction of GST would also make our products competitive in the domestic and international markets. Studies show that this would instantly spur economic growth. There may also be revenue gain for the Centre and the States due to widening of the tax base, increase in trade volumes and improved tax compliance. Last but not the least, this tax, because of its transparent character, would be easier to administer.

What are the benefits available to small tax payers under the GST regime?

Tax payers with an aggregate turnover in a financial year u p t o [Rs.20 lakhs & Rs.10 Lakhs for NE and special category states] would be exempted from tax. A person whose aggregate turnover in the preceding financial year is less than Rs.50 Lakhs can opt for a simplified composition scheme where tax will payable at a concessional rate on the turnover in a state. [Aggregate turnover shall include the aggregate value of all taxable supplies, exempt supplies and exports of goods and/or services and exclude taxes viz. GST.] Aggregate turnover shall be computed on all India basis. For NE States and special category states, the exemption threshold shall be [Rs. 10 lakhs]. All taxpayers eligible for threshold exemption will have the option of paying tax with input tax credit (ITC) benefits. Tax payers making inter-State supplies or paying tax on reverse charge basis shall not be eligible for threshold exemption.

An individual buys a car for personal use and after a year sells it to a car dealer. Will the transaction be a supply in terms of CGST/SGST Act? Give reasons for the answer.

No, because supply is not made by the individual in the course or furtherance of business. Further, no input tax credit was admissible on such car at the time of its acquisition as it was meant for non-business use.

A dealer of air-conditioners  transfers an air conditioner from his stock in trade, for personal use at his residence. Will the transaction constitute a supply?

Yes. As per Sl. No.1 of Schedule-I, permanent transfer or disposal of business assets where input tax credit has been availed on such assets shall constitute a supply under GST even where no consideration is involved.

Whether provision of service or goods by a club or association or society to its members will be treated as supply or not?

Yes. Provision of facilities by a club, association, society or any such body to its members shall be treated as supply. This is included in the definition of ‘business’ in section 2(17) of CGST/SGST Act.

Are all goods and services taxable under GST?

Supplies of all goods and services are taxable exceptalcoholic liquor for human consumption. Supply of petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel shall be taxable with effect from a future date. This date would be notified by the Government on the recommendations of the GST Council

What are the different types of supplies under the GST law?

(i) Taxable and exempt supplies. (ii) Inter-State and Intra-State supplies, (iii) Composite and mixed supplies and (iv) Zero rated supplies.

Whether transfer of right to use goods will be treated as supply of goods or supply of service? Why?

Transfer of right to use goods shall be treated as supply of service because there is no transfer of title in such supplies. Such transactions are specifically treated as supply of service in Schedule-II of CGST/SGST Act.

Whether Works contracts and Catering services will be treated as supply of goods or supply of services? Why?

Works contracts and catering servicesshall be treated as supply of services as both are specified under Sl. No. 6 (a) and (b) in Schedule-II of the model GST law.

Whether supply of software would be treated as supply of goods or supply of services under GST law?

Development, design, programming, customization, adaptation, upgradation, enhancement, implementation of information technology software shall be treated as supply of services as listed in Sl. No. 5 (2)(d) of Schedule –II of the model GST law.

What is meant by zero rated supply under GST?

Zero rated supply means export of goods and/or services or supply of goods and/or services to a SEZ developer or a SEZ Unit

Can any person other than the supplier or recipient be liable to pay tax under GST?

Yes, the Central/State government can specify categories of services the tax on which shall be paid by the electronic commerce operator, if such services are supplied through it and all the provisions of the Act shall apply to such electronic commerce operator as if he is the person liable to pay tax in relation to supply of such services.

Here is the entire list of FAQs answered by the government