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VAT vs GST, Current Tax Structure and proposed GST Regime
1. Structural Difference
Current Scenario – a)Central Taxes:-Central Excise/Custom Duty, Central Sales Tax on Goods and Service Tax charged on Services, Surcharge & Cess b)State Taxes-State Vat, Sales Tax Deducted at Source, WCT, Luxury Tax, Entertainment Tax, Tax on Lottery, Surcharge & Cess GST Scenario A dual layered tax system with both Central and State GST levied on same base on all the goods and services except Petroleum ,High Speed Diesel, Motor spirit and Natural Gas to be brought at a later date, subject to recommendation of GST Council.
2. Basis of Levy
Current Scenario – Taxable at the place of
a)Manufacture/Sale of goods,b)Rendering of services
GST Scenario – Taxable at the place of Consumption, a destination based tax
3. Registration
Current Scenario – Decentralised registration under Central and State Authorities. GST Scenario – Uniform E-Registration process based on PAN of Entity
4. Procedures for Collection of Tax and Filing of Returns
Current Scenario – Central Excise and Service Tax-Uniform, VAT-Varies from State to State and GST Scenario – Uniform process and common dates for collection/deposit of tax and filing of returns
5. Validation and of Challan/Returns, Input Credit and Payment of Tax
Current Scenario – Part validation by system, full verification subject to assessments by relevant Central/State authorities GST Scenario – System based validation and consistency checks on Input Credit availed, utilisation and Tax Payments [divider style=”solid” top=”20″ bottom=”20″]
5. Excise Duty
Current Scenario – Excise Duty charged up to the point of Manufacturing GST Scenario – Replaced by CGST (Central Goods and Service Tax, to be charged up to Retail Level
6. Basic Customs Duty
Current Scenario – In case of Import, taxed by Centre under separate act GST Scenario – No Change
7. Countervailing Duty/Special Additional Duty
Current Scenario – In case of Import, taxed by Centre, separately GST Scenario – To be subsumed under GST (CGST)
8. Service Tax
Current Scenario – Charged by Centre on list of Services under Finance Act on Payment/Provision Basis GST Scenario – To be subsumed under SGST (State Goods and Service Tax), based upon Place of Supply Rules
9. Central Sales Tax (CST)
Current Scenario – Applicable at concessional rate of 2% on inter-state transfers against C-Forms, otherwise full rate i.e. 5% to 14.5% GST Scenario – To be subsumed in IGST (Integrated Goods and Service Tax)
10. State VAT
Current Scenario – Except exempt items, all goods are taxed GST Scenario – Subsumed in SGST (State Goods and Service Tax) [divider style=”solid” top=”20″ bottom=”20″]
11. Entry Tax
Current Scenario – Currently being charged by selected states for interstate transfers, held as import in local area GST Scenario – No entry tax, Additional 1% of Tax to be levied on inter-state supply of selected goods, list yet to be finalised
12. Tax on Export of Goods and Services
Current Scenario – Exempt/Zero rated GST Scenario – No Change
13. Tax on Inter State Transfer of Goods to Branch or Agent
Current Scenario – Exempt against Form F GST Scenario – To be taxable but full credit available to dealers
14. Tax on Transfer of Goods to Branch or Agent within State
Current Scenario – Generally Exempt; Depends Upon State Procedures GST Scenario – Might Be taxable , Unless TIN of Transferor and Transferee is same
15. Cascading Effect
Current Scenario – Credit between Excise Duty & Service Tax available, but no set-off against VAT on Excise Duty GST Scenario – Credit available on the full amount of taxes up to retailer
16. Cross Set-Off of Levy
Current Scenario – Currently set-off of Excise duty and Service tax is allowed GST Scenario – No cross Set-off between CGST and SGST [divider style=”solid” top=”20″ bottom=”20″]
17. Disallowance of Credit on selected items
Current Scenario – There are certain non-creditable goods and services under both VAT & CENVAT Rules GST Scenario – No such disallowance, unless specified by GST Council
18. Disallowance of inputs/input services used in Exempted Goods /Services
Current Scenario – Not Allowed GST Scenario – No such disallowance, unless falling under the Negative List which is yet to be finalised by GST Council
19. Exemptions –Excise Free Zone, VAT Remissions
Current Scenario – Some areas enjoy status of Excise/Vat Exemptions i.e. North East, Himachal GST Scenario – No such Exemptions, Investment Refund Scheme (IRS) may be introduced for existing zones based upon recommendations of GST Council
20. Levy of Tax on Government Bodies, NGOs
Current Scenario – Certain Govt. bodies, PSUs and Non-for-profit bodies covered GST Scenario – Not Changed
21. Threshold Limits for levy of Tax
Current Scenario – a) Central Excise-1.5 Croresb) VAT-Varies from Rs. 5 to 20 Lacs from state to statec) Service Tax- Rs.10 Lacs GST Scenario – CGST-Limits to be decidedSGST-Rs.10 Lacs to 20 Lacs as recommended by GST Council
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