Goods and Services Tax, “GST” as it is popularly called, is seen as the biggest reform in Indian Indirect Tax system. GST would be a new type of tax where the Union Parliament and the States would simultaneously levy tax on every “transaction of Goods and Services” (technically called “Supply” which shall include all forms of supply such as sale, barter, exchange, transfer, lease, license, etc.).
GST in Contradistinction with the current tax regime
GST would replace the current regime of Indirect taxation in India which comprises of different taxes imposed by the Centre and the States on different Taxable Events. While the Union Parliament imposes tax on Manufacture (Excise Duty), Services (Service Tax), Imports & Exports (Customs Duty); the States impose tax on Sale of Goods (VAT), Entry of Goods (Entry Tax), Entertainment and Luxury (Entertainment and Luxury Tax).
These event based taxes were imperfect for the following two reasons:
a. Certain transactions remaining untaxed: Unless the taxable event arises, no tax is imposed, even if there exists value addition on part of the supplier.
b. Multiple and cascading taxation: In certain cases, event based taxes lead to multiple taxation resulting in cascading effect and distorted market. For example: goods manufactured in one State and sold to another State are chargeable to (1) Excise Duty, (2) Sales Tax, and (3) Entry Tax. All these taxes are cumulative and cascading as no tax is allowed to be set off against the other.
The solution to these distortions was seen in GST, which would be transaction based (i.e. would apply to each transaction of supply) as compared to the current regime which is event based.
Why we decided to write this blog
Model GST Law has been recently circulated by the Government for comments from stake holders. On going through the same we (Athena Law Associates) found that the same is a complex mix of the provisions of current laws sought to be unified in bits and pieces to give shape to a new structure, of course with certain refinements so that it be presented as GST. However, at several places it seems that the Government is rather moving backwards, which is apparent from introduction and re-emphasis of certain archaic provisions; especially those vesting the officers with unbridled and arbitrary powers. Likewise, certain other fundamental provisions such as those relating to valuation, credit, and time of supply also fail to show the progressiveness which keenly expected from GST.
In sum, the Model GST Law is an interesting mix of a new & highly evolved concept, couched in a framework which is largely based upon the complicated, cumbersome and highly controlled legislations currently prevailing.
The Professional’s anxiety
Being professionals working as specialists in the areas concerning Indirect taxes, we were naturally interested in examining the new GST law and to spread awareness on the various important aspects concerning the same. It is also important to garner the views of the stake holders which is only possible when they are made aware of the fine print, through professional’s eye peeping into the fine print.
Thus, we present this site to you all, containing the analysis of various issues in minutest detail possible.