Indirect Taxes: India: Goods and services consumption tax heralds new era.

• Author: Kanabar, Dinesh
• Position: COVER INDIA

India is witnessing one of the most significant events in its fiscal history with the introduction of the goods and services tax (GST), a single comprehensive destination-based consumption tax.

The country's current indirect tax system consists of the following taxes levied by the federal and state governments:

Federal Taxes Central excise duty on manufacture of goods Service tax on provision of service Additional customs duty and special additional customs duty on imports Central sales tax (CST) on interstate sales Cess and surcharge State/Union Territory Taxes Value-added tax (VAT) on local sales within the state Entry tax, octroi, and local body tax on entry of goods within a municipal or state area Purchase tax Entertainment tax and luxury tax Taxes on gambling, betting, and lotteries The GST framework will subsume all of the above indirect taxes levied by the federal and state governments. GST will include within its ambit the following levies: Federal Taxes State/Union Territory Taxes Central goods and services tax State goods and services tax (CGST) on supply of goods or (SGST)/union territory goods services within the same and services tax (UTGST) on state/union territory with supply of goods or services legislature! within the same state/union territory with legislature Integrated goods and services tax (IGST) on interstate supply of goods or services Compensation cess on supplies of specific goods Indias federal government is moving relentlessly to achieve its goal of introducing the GST. The CGST Act, IGST Act, UTGST Act, and Compensation to States Act have already received presidential approval. These acts would be effective from the date designated by the federal government. The state governments are also in the process of passing their respective GST bills to introduce the SGST Act in line with the federal government. As of this publication, twelve states have already passed their bills, and the government has urged the remaining states to pass their own bills no later than the end of May 2017.

With the constant synchronized efforts of the various governments, GST will likely be implemented shortly. In fact, various media reports suggest that the government envisions GST to be implemented in India as of July 1, 2017.

Implementing GST will bring with it a mammoth change in indirect tax levying in India, accompanied by various problems at the ground level for implementation and transition. This article discusses issues that could emerge and that warrant close attention during the transition to the new tax regime.

Chargeability

The primary change is the shift of chargeability from divergent company functions like manufacturing, sales, provision of service, etc. to the supply end. Under the existing indirect tax system, each levy is determined by separate charging provisions, and determining who should pay what levy according to what piece of legislation becomes onerous for companies to sort out. There are excise duties on manufacture, VAT on sales, service taxes on provision of services, and more. However, with GST, the levy would be on supply, which broadly defined includes sales, transfers, barters, exchanges, licenses, rentals, leases, and disposal for consideration in the course or furtherance of business. Furthermore, specific transactions have also been identified that would be deemed "supply" even if they are made without...