A COMPARATIVE VIEW ON GOODS AND SERVICES TAX

August 2018 ยท 2 minute read

This contrast is based on the recommendations of the First Discussion Paper produced by the Empowered committee of nations fund ministers (hereafter called EC) and the Report of the Task Force on GST comprised from the Thirteenth Finance commission.

Before going on discussion we ought to establish GST and the Objective behind it.

What is GST?

GST is a tax on products and services with comprehensive and continuous chain of set-off benefits from the Producer’s stage and Service supplier’s point upto the retailer level. It is essentially a tax only on value addition at every stage and a supplier at each point is permitted to set-off through a tax credit mechanism. Under GST structure, all different stages of manufacturing and distribution could be interpreted as a mere taxation pass and the tax basically sticks on final consumption within the taxing jurisdiction.

Objective behind GST

A) The prevalence of taxation only drops on national consumption. B ) The efficiency and equity of the system is already optimized. C) There should be no export of taxation across taxing authorities. D) The Indian marketplace ought to be integrated into one common market. E) It enhances the cause of co-operative federalism.

Our comparative discussion will be based only on important points assembling overall GST.

GST MODEL

A dual structure has been recommended by the EC. GST tax consultant has also suggested for its dual lie imposed simultaneously by the centre and the states, but independently to market co-operative federalism. Both the CGST and SGST ought to be levied on a common and identical base.

Both have indicated for ingestion type GST, that is, there should be no differentiation between raw materials and capital goods in allowing input . The tax base should extend over all services and goods upto final consumption point.

Also both are of the view that the GST should be ordered on the destination principle. According to Task Force that this will lead to the shift in production to consumption where imports will probably be liable to both CGST and SGST and exports must be relieved of the load of goods and services tax by no evaluation. Consequently, earnings will accrue to the state where the consumption takes place or is required to take place.

The Task Force on GST stated the computation of CGST and SGST accountability should be dependent on the Invoice credit method. I.e., let credit for tax paid on all of intermediate products and services on the basis of invoices issued from the supplier. This will facilitate elimination of this cascading effect at different stages of manufacturing and supply.