Goods and Services Tax (GST) Bill

The Goods and Services Tax Bill or GST Bill, proposes a national Value added Tax to be implemented in India from 1 April 2017

"Goods and Services Tax” is an indirect tax, levied on manufacture, sale and consumption of goods and services throughout India.

GST was introduced to replace taxes levied by the central and state governments.

Goods and Services Tax would be levied and collected at each stage of sale or purchase of goods or services based on the input tax credit method. 

History

An empowered committee was set up by the Atal Bihari Vajpayee government in 2000 to streamline the GST model

In his budget speech on 28 February 2006, P. Chidambaram, the then Finance Minister, announced the target date for implementation of GST to be on  1st April 2010

The Constitution (122nd Amendment) Bill, 2014 was introduced in the Lok Sabha by Finance Minister Arun Jaitley on 19 December 2014, and passed by the House on 6 May 2015. The Select Committee of the Rajya Sabha submitted its report on the bill on 22 July 2015. The bill was passed by the Rajya Sabha on 3 August 2016, and the amended bill was passed by the Lok Sabha on 8 August 2016. 

Features of GST

1) GST has dual structure

    a) A Central component levied and collected by Central Government (CGST)
        At Central level it will include – Central excise duty, Service tax and additional customs duties

    b) A State component administered by State Government (SGST)
        At state level it will include – VAT, Luxury tax, Entertainment tax

2) Central Sales Tax(CST) will be completely removed

3) GST of export will be zero

4) Both CGST and SGST will be levied on import of goods and services

5) A new article 279A is proposed for the creation of GST council which will be joint forum of Center and states. 2/3rd representatives will be of state and 1/3rd of the center. Union Finance Minister will be the Chairman of the council. 

Rate of Tax

It is estimated that the rate of GST will be between 16 to 27%, this represents the aggregate of Central GST and State GST payable on transaction.

There will be 2 rate structures:

1) Lower rate for necessary items

2) Special rate for precious items and a list of exempted items

The GST bill provides for a 1% additional tax on interstate trade. 

GST workings

Supply Chain Stage	Purchase Value	Value Addition	Sale Price	Rate Of GST	GST On Sale	Input Tax Credit	Net GST
Manufacturer	100	30	130	18%	23	18	5
Whole seller	130	20	150	18%	27	23	4
Retailer	150	10	160	18%	29	27	2

GST On Sale	(Sale Price*GST rate)
Input Tax Credit	(Purchase Value*GST rate)
Net GST	(GST on Sale -Input Tax credit)

Present Vs Future

At Present

1) Centre can only levy tax on services

2) Different taxes are levied on supply of goods like excise duty, entry tax VAT/CST

3) At present the taxes are levied as follows:

Value of Goods	100
(+) Central excise @ 10%	10
Sub Total	110
(+) VAT @ 14%	15.4
Grand Total	125.4

4) There are lots of ambiguity and litigations because manufacture, supply and services are charged differently under present tax system

Under GST regime

1) State and centre will levy taxes on services

2) GST will replace multiple taxes like entry tax, VAT/CST, state cess and surcharges

3) GST will be available as input tax credit

4) A single tax on manufacture, supply as well as on services

5) The GST will be levied simultaneously by state as well as centre. Consequently the taxable value will be the same. For example the rate of GST will be 24% which will be split as 10% Centre GST and 14% as State GST. 

Value of Goods	100
(+) Central GST @ 10%	10
(+) State GST @ 14%	14
Grand Total	124

Benefits

1) GST will reduce logistics cost for industries

2) Results in growth of GDP

3) Multiple taxes will be eliminated which results in smooth flow of goods and services

4) Uniformity of taxes and structures

5) For ultimate consumers –

      a) Due to multiple taxation system in present tax systems lead to high cost of goods and services, under GST the tax system will be transparent no hidden taxes, which results in reduction of value of goods and services

      b) The overall tax burden will be reduced 

Conclusion

All the shortcomings of the present taxation system lead to develop GST. The dual model will be like joint venture between states and centre. Some states might lose revenue after the introduction of GST but will lead to prosper of entire country.

India – Cyprus DTAA Negotiations

India – Cyprus DTAA Negotiations

PRESS RELEASE BY CBDT

New Delhi, 1st July, 2016.

Sub: Indo- Cyprus Double Taxation Avoidance Agreement

An official level meeting between India and Cyprus took place in New Delhi on 28 and 29 June, 2016, to finalize the new India Cyprus Double Taxation Avoidance Agreement, wherein all pending issues, including taxation of capital gains, were discussed, and in-principle agreement was reached on all pending issues. It was agreed to provide for source based taxation of capital gains on transfer of shares. However, a grandfathering clause would be provided for investments made prior to 1.4.2017, in respect of which capital gains would be taxed in the country of which taxpayer is a resident. These provisional agreements will now be placed before the Cabinet for its approval, subsequent to which the new tax treaty can be signed by the two countries.

Both sides also discussed the issue of notification of Cyprus under section 94A of Income-tax Act, 1961. It was agreed that India will consider rescinding the said notification with effect from 1st November, 2013, and will be initiating the process for the same. Both sides expressed satisfaction with the progress achieved in the meeting, and hoped that it would lead to resolution of all pending matters at the earliest.

Cyprus claims DTAA negotiations successfully concluded, Sec. 94A blacklisting to be retrospectively revoked

Source: Cyprus Ministry of Finance

Cyprus Govt. puts out statement claiming successful completion of DTAA negotiations with India; Cyprus says with agreement reached on all 'pending issues', CBDT to retrospectively revoke classification of Cyprus u/s 94A as 'Notified Jurisdictional Area'; Re-negotiated DTAA provides for source based taxation of gains from alienation of shares, however investments made prior to April 2017 to be grandfathered.

Note: CBDT, in November 2013 had notified Cyprus u/s 94A of the Income-tax Act for not providing information requested by Indian Income tax authorities under Exchange of Information provisions

Disclosure of Assets and Liabilities in the Income Tax Returns (ITR)

Disclosure of Assets and Liabilities in the Income Tax Returns (ITR)

The Central Board of Direct Taxes (CBDT) has notified the forms for filing the return of income for the AY 2016-17 (FY 2015-16). Apparently, the new form requires certain category of tax payers to furnish the details of the assets and liabilities.

The newly notified forms require mandatory disclosure of assets and liabilities of the taxpayer in Income Tax Return, provided the following conditions are satisfied:

1.      The assessee is an Individual or HUF, and

2.      The total Income of such assessee exceeds Rs. 50 Lakhs.

Details of all assets held by the taxpayer and corresponding liabilities are to be disclosed at ‘cost’ in Schedule AL of the relevant ITR form for the following categories of assets/liabilities.

Format for disclosure of assets and liabilities will vary based on the ITR applicable for the assessee:

In ITR – 1, ITR – 2A, ITR – 2 and ITR – 4S

Schedule AL		Asset and Liability at the end of the year (Applicable in a case where total income exceeds Rs. 50 lakh)
	A	Particulars of Asset			Amount (Cost) (Rs.)
DETAILS OF ASSET AND LIABILTY		1.	Immovable Asset
			a	Land	1a
			b	Building	1b
		2.	Movable Asset
			a	Cash in hand	2a
			B	Jewellery, bullion etc.	2b
			c	Vehicles, yachts, boats and aircrafts	2c
		3		Total	3	0
	B	Liability in relation to Assets at A			B

In ITR – 3 and ITR - 4

Schedule AL		Asset and Liability at the end of the year (other than those included in Part A – BS of the return of the Firm in which partner) (Applicable in a case where total income exceeds Rs. 50 lakh)
DETAILS OF ASSET AND LIABILTY	A	Particulars of Asset				Amount (Cost) (Rs.)
		1.	Immovable Asset
			a	Land		1a
			b	Building		1b
		2.	Movable Asset
			a	Financial Asset
				i	Deposits in Bank (including balance in any account)	2ai
				ii	Shares and securities	2aii
				iii	Insurance policies	2aiii
				iv	Loans and Advances given	2aiv
				v	Cash in hand	2av
			b	Jewellery, bullion etc.		2b
			c	Archaeological collections, drawings, painting, sculpture or any work of art		2c
			d	Vehicles, yachts, boats and aircrafts		2d
		3		Total		3	0
	B	Liability in relation to Assets at A				B