news round up - Taxmann

136 GOODS & SERVICES TAX - MAGAZINE [Vol. 1
in this value chain (such as excise duty on manufacture, VAT on sale, etc.).
As these taxes are levied on different taxable events they have their
limitations. To illustrate further, let’s take an example of excise duty.
Excise duty is levied on ‘manufacture’ and it fails to tax the value addition
at distribution level. Additionally, at present, ‘goods’ suffer two levies
(Excise and VAT) whereas ‘taxable services’ suffer only one levy, i.e.,
service tax. This leads to distortion: distortion arises because the relative
prices of services would be lower as compared to goods. Even, as current
tax system treats goods and services differently, in certain cases there is
double taxation (software being one of such case where the industry has
taken conservative stand and both VAT and service tax is being currently
levied). Also, there are restrictions on availment of credit such as a service
provider cannot avail credit of VAT and a trader cannot avail credit of
service tax.
The above lacunas affect free flow of goods and services. Additionally, it
brings uncertainty in the trade which is not good for the economy as a
whole. GST is now being projected as a solution to all these problems.
Whether GST will cure all the problems prevalent in the current tax
structure?
Though not all, but surely, most of the current issues will be resolved such
as the classification, valuation, double taxation disputes, etc. On a positive
note, most of the credit which is not available will be available in GST
regime such as the service provider will be eligible to avail credit of VAT,
luxury tax, entertainment tax, etc. The compliances are also expected to
reduce drastically.
How GST is different from the current taxes?
GST is different from the current tax structure in many ways. Currently,
taxes treat goods and services differently. As mentioned above, ‘goods’
attract excise at manufacturing level and VAT at the time of sale. In
contrast, services attract only one levy, i.e., service tax on provision of
taxable services.
This distinction, in GST regime, would lose its importance as both goods
and services would be treated at par for taxing purposes. A transaction in
goods and services for a consideration would attract CGST and SGST.
Also, the State Government now gets the power to tax services and Central
Government gets the power to levy tax at the distribution and retail level.
When would GST be introduced?
As the news are unfolding, the proposed date, i.e., April 2010 for implementing
GST seems unlikely. However, any date near October 2010 or
April 2011 seems likely.
What about the legislations and the rules?
GST would be implemented with single CGST statute which would be
applicable across India. However, for SGST, each State will have its own
GOODS & SERVICES TAX CASES ❑ JANUARY 20 - FEBRUARY 4, 2010 ◆ 46