Introduction to Goods and Services Tax Long Answer Type Questions

Question 1.
Explain the difference between GST and VAT.
Answer:
The difference between GST and VAT are:

Basis	VAT	GST
(a) Structural Difference	(a) Central Taxes: Central Excise/Customs Duty, Central Sales Tax on Goods and Service Tax charged on Services, Surcharge & Cess	A dual-layered tax system with both Central and State GST levied on same base on all the goods and services except Petroleum ,High,
(b) Basis of Levy destination	(b) State Taxes-State VAT, Sales Tax Deducted at Source, WCT, Luxury Tax, Entertainment Tax, Tax on Lottery, Surcharge & Cess	Speed Diesel, Motor spirit and Natural Gas to be brought at a later date, subject to recommendation of GST Council.
(c) Registration	Taxable at the place of (a) Manufacture/Sale of goods, (b) Rendering of services	Taxable at the place of Consumption, a based tax Uniform E-Registration process based on PAN of Entity
(d) Procedures for Collection of Tax and Filing of Returns	Decentralised registration under Central and State Authorities.	Uniform process and common dates for collection/deposit of tax and filing of returns
(e) Validation and of challan/ Returns, Input Credit and payment of tax	Central Excise and Service Tax-Uniform, VAT-Varies from State to State and	System based validation and consistency checks on Input Credit availed, utilisation and Tax Payments
(f) Excise Duty	Excise Duty charged up to the point of Manufacturing	Replaced by CGST (Central Goods and Service Tax, to be charged up to Retail Level
(g) Basic Customs Duty	In case of Import, taxed by Centre under separate act	No Change
(h) Countervailing Duty/Special Additional Duty	In case of Import, taxed by Centre, separately	To be subsumed under GST (CGST)
(i) Service Tax	Charged by Centre on list of Services under Finance Act on Payment/Provision Basis	To be subsumed under SGST (State Goods and Service Tax), based upon Place of Supply Rules
(j) Central Sales Tax (CST)	Applicable at concessional rate of 2% on inter-state transfers against C-Forms, otherwise full rate i.e. 5% to 14.5%	To be subsumed in IGST (Integrated Goods and Service Tax)
(k) State VAT	Except exempt items, all goods are taxed	Subsumed in SGST (State Goods and Service Tax)
(l) Entry Tax	Currently being charged by selected states for interstate transfers, held as import in local area	No entry tax, Additional 1% of Tax to be levied on inter-state supply of selected goods, list yet to be finalised
(m) Tax on Export of Goods and Services	Exempt/Zero rated	No Change
(n) Tax on Inter State Transfer of Goods to Branch or Agent	Exempt against Form F	To be taxable but full credit available to dealers
(o) Tax on Inter State Transfer of Goods to Branch or Agent	Exempt against Form F	To be taxable but full credit available to dealers
(p) Cascading Effect	Credit between Excise Duty & Service Tax available, but no set-off against VAT on Excise Duty	Credit available on the full amount of taxes up to retailer
(q) Cross Set-Off of Levy	Currently set-off of Excise duty and Service tax is allowed	No cross Set-off between CGST and SGST
(r) Disallowance of Credit on selected items	There are certain non- Creditable goods and services under both VAT & CENVAT Rules	No such disallowance, unless specified by GST Council
(s) Disallowance of inputs/input services used in Exempted Goods/Services	Not Allowed	No such disallowance, unless falling under the Negative List which is yet to be finalised by GST Council
(t) Exemptions -Excise Free Zone, VAT Remissions	Some areas enjoy status of Excise/Vat Exemptions i.e. North East, Himachal	No such Exemptions, Investment Refund Scheme (IRS) may be introduced for existing zones based upon recommendations of GST Council
(u) Levy of Tax on Government Bodies, NGOs	Certain Govt, bodies, PSUs and Non-for-profit bodies covered	Not Changed
(v) Threshold Limits for levy of Tax	(a) Central Excise – 1.5 Crores (b) VAT-Varies from Rs.5 to 20 Lacs from state to state (c) Service Tax- ₹ 10 Lacs	CGST-Limits to be decidedSGST-Rs.10 Lacs to 20 Lacs as recommended by GST Council

Question 2.
Explain the difference between the present tax structure and GST.
Answer:
The main differences includes:

Issues	Present Regime	GST Regime
Broad scheme	There are separate laws for separate levy. For e.g. Central Excise Act, 1944, respective State VAT laws.	There will be only one such law because GST shall subsume various taxes as specified above.
Tax rates	There are separate rates. For e.g. Excise 12.36% and Service Tax 14%.	There will be one CGST rate and a uniform rate of SGST across all states.
Cascading effect	This Problem arises because credit of CST and many other taxes not allowed.	This situation will not arise as CST concept is being eliminated, with introduction of IGST.
Tax burden	Under present scenario, tax burden on tax payer is high.	Under this, tax burden is expected to reduce since all taxes are integrated which make it possible the burden to be split equitably between manufacturing and services
Cost Burden on Consumers	Due to presence of cascading effect, certain taxes become part of cost.	As GST mechanism removes such effect by providing credit, cost burden is reduced.
Concurrent Power	At present, there is no such power to both Centre and State on same subject tax matter	Both Centre and State are vested with the power to make law on GST by virtue of proposed Article 246A of the Constitution.
Compliance	Tax compliance is complex because of multiplicity of laws and their provisions to be followed.	Tax compliance would be easier as only one law subsuming other taxes need to be followed.
Transparent Tax Administration	Presently, tax is levied at two stages in broad manner i.e. 1. When product moves out of factory. 2. At retail outlet.	GST is to be levied only at final destination of consumption and not at various points. This brings more transparency and corruption free tax administration.

Question 3.
Explain the impact on Prices of Goods and Services using GST dual model?
Answer:
The GST is expected to foster increased efficiencies in the economic system thereby lowering the cost of supply of goods and services. Further, in the Indian context, there is an expectation that the aggregate incidence of the dual GST will be lower than the present incidence of the multiple indirect taxes in force.

Consequently, the implementation of the GST is expected to bring about, if not in the near term but in the medium to long term, a reduction in the prices of goods and services. The expectation is that the dealers would start passing on the benefit of the reduced tax incidence to the customers by way of reduced prices. As regards services, it could be that their short term prices would go up given the expectation of an increase in the tax rate from the present 10% to. approximately 14% to 16%.

Question 4.
Explain the benefits of using GST dual model.
Answer:
Benefits of Dual GST include – The Dual GST is expected to be a simple and transparent tax with one or two CGST and SGST rates. The dual GST is expected to result in:

Reduction in the number of taxes at the Central and State level.
Decrease in effective tax rate for many goods.
Removal of the current cascading effect of taxes.
Reduction of transaction costs of the taxpayers through simplified tax compliance.
Increased tax collections due to wider tax base and better compliance.

Certainty of implementation: The Finance Minister has made a categorical statement in Parliament that GST will be implemented on April 1, 2013. In his subsequent media interactions, he has further indicated that he is keen to implement the GST even if some of the States are not ready or willing to implement GST by this date. Accordingly, based on the present indications, as also on the basis of our subsequent interactions with senior Government Officials, we believe that the April 1, 2013 timeline for introduction of the dual GST will be met.

Question 5.
Write a note on Indian GST Model.
Answer:
GST is introduced in the parliament as The Constitution Amendment Act 2016 and it is regulated by the Union Finance Ministry of India. It is a consumption based tax levied on the supply of goods and services which mean that it will be imposed at each stage of sale or purchase of goods or services based on the input tax credit method. Introduction to GST and its 3 types- CGST, SGST, IGST AND UTGST are effectively supporting such major economic development programs.

1. Central Goods & Service Tax (CGST):
As per the Central Goods & Services Tax Act 2016, CGST is the centralized part of GST that subsumes the present central taxations and levies- Central Sales Tax, Central Excise Duty, Services Tax, Excise Duty under Medical & Toiletries Preparation Act, Additional Excise Duties Countervailing Duty (CVD), Additional Custom Duty and other centralized taxations.

2. State Goods & Services Tax (SGST):
SGST is an important part of GST. It stands for State Goods & Services Tax as per the 2016 GST bill. Various taxations and levies under the state authority are subsumed by SGST as one uniform taxation. It includes the amalgamation of State Sales Tax, Luxury Tax, Entertainment Tax, Levies on Lottery, Entry Tax, Octroi and other taxations related to the movement of commodities and services under state authority through one uniform taxation- SGST.

3. Integrated Goods & Services Tax (IGST):
GST focuses on the concept of one tax, one nation. IGST stands for Integrated Goods and Services Tax which is charged on the supply of commodities and services from one state to another state. For example, if the supply of goods and services occurs between Gujarat and Maharashtra, IGST will be applicable.

4. Union Territory Goods & Services Tax (UTGST):
As we have already learned about CGST and SGST which are intra-state taxations and IGST which is inter-state, the union territories in India are accounted under a specialized taxation called Union Territory Goods and Services Tax as per the GST regime 2016. It will subsume the various taxations, levies and duties with one uniform taxation in Union Territories as well.

Question 6.
What would be the role of GST Council?
Answer:
A GST Council would be constituted comprising the Union Finance Minister (who will be the Chairman of the Council), the Minister of State (Revenue) and the State Finance/Taxation Ministers to make recommendations to the Union and the States on –

The taxes, cesses and surcharges levied by the Centre, the States and the local bodies which may be subsumed under GST.
The goods and services that may be subjected to or exempted from the GST.
The date on which the GST shall be levied on petroleum crude, high speed diesel, motor sprit (commonly known as petrol), natural gas and aviation turbine fuel.
Model GST laws, principles of levy, apportionment of IGST and the principles that govern the place of supply.
The threshold limit of turnover below which the goods and services may be exempted from GST.
The rates including floor rates with bands of GST.
Any special rate or rates for a specified period to raise additional resources during any natural calamity or disaster.
Special provision with respect to the North East States, J&K, Himachal Pradesh and Uttarakhand.
Any other matter relating to the GST, as the Council may decide.

Question 7.
Who can be theprimary Authorized SignatoryinGST?
Answer:
A primary Authorized Signatory is the person who is primarily responsible to perform action at the GST Common Portal on behalf of the taxpayer. All communication from the GST Common Portal relating to taxpayer will be sent to the primary Authorized Signatory.

Proprietor – The proprietor or any person authorized by the proprietor.
Partnership – Any authorized partner or any person authorized by the partners.
Company, LLP, Society or Trust – The person authorized by Board or Governing body can act as Primary Authorized Signatory.

In case there is a single Authorized Signatory for a business entity, the single Authorized Signatory will be assumed to be the primary Authorized Signatory.

In case there are multiple Authorized Signatories for a single business entity, one Authorized Signatory need to be designated as primary Authorized Signatory. The e-mail address and mobile number of the Authorized Signatory needs to be provided during enrolment.

Question 8.
Explain the merits and demerits of GST Composition Scheme.
Answer:
Merits:

Limited Compliance: Lesser compliance w. r. t. furnishing of returns, maintenance of books of records, issuance of invoices more focus on business.
Limited Tax Liability: on comparison with regular taxpayers, person taxed under Composite Scheme will be liable to pay tax at a rate not more than 2.5% instead of a standard rate of 18%.
High Liquidity: Unlike normal tax payers, tax payers under Composite Scheme will be liable to pay taxes at a lower rate resulting in lesser chunk on his working capital.

Demerits:

Limited Territory for Business: A taxpayer registered under the composition scheme is barred from carrying out inter-state transactions and cannot affect import-export of goods and services.
No Credit of Input Tax: Under the scheme, the credit of input tax paid on the purchases of inputs from a normal tax payer will not be allowed. The buyer of goods supplier by scheme holder will also not enjoy input tax credit resulting in price distortion, cascading, loss of business to scheme holders.
No Collection of Tax: Though the rate of tax for a scheme holder is lower the burden of such tax is kept on the taxpayer himself, leading to higher cost of sales.
Penal Provision: As per the Model GST Law, if the taxpayer who has previously been given registration under composition scheme is found to be not eligible to the composition scheme or if the : permission granted earlier was incorrectly granted, then such taxpayer will be liable to pay the differential tax along with a penalty.
Not applicable to the supplier supplying goods through E-commerce.

Question 9.
Write short notes on GST council/structure. Nov 2017
Answer:
The Goods & Services Tax Council {GST Council} has been created in September 2016 under Article 279-A of the Constitution of India. The main objective of GST is to develop a harmonized national market of goods and services. It has its Secretariat office in New Delhi.

Composition of GST Council: GST Council is a federal forum with both centre and states in India on board. It is made, of –

The Union Finance Minister (as Chairman).
The Union Minister of State in charge of Revenue or Finance.
The Minister in charge of Finance or Taxation or any other Minister, nominated by each state government.

The decisions of the GST Council are made by three-fourth majority of the votes cast. The centre has one-third of the votes cast, and the states together have two-third of the votes cast. Each state has one vote, irrespective of its size or population.

The Secretary (Revenue) will be appointed as the Ex-officio Secretary to the GST Council.
The Chairperson, Central Board of Excise and Customs (CBEC), will be included as a permanent invitee (non-voting) to all proceedings of the GST Council.
One post of Additional Secretary to the GST Council in the GST Council Secretariat (at the level of Additional Secretary to the Government of India) will be created.
Four posts of Commissioner in the GST Council Secretariat (at the level of Joint Secretary to the Government of India) will also be created.

Question 10.
Explain the Functions of GST Council. Nov 2017
Answer:
As per Article 279A (4), the Council will make recommendations to the Union and the States on important issues related to GST, like –

Taxes, cesses and surcharges to be subsumed under the GST.
Goods and services which may be subject to, or exempt from GST.
The threshold limit of turnover for application of GST.
Rates of GST.
Model GST laws, principles of levy, apportionment of IGST and principles related to place of supply.
Special provisions with respect to the eight north eastern states, Himachal Pradesh, Jammu and Kashmir and Uttarakhand.
GST rates will include the floor rates with bands, special rates for raising additional resources during natural disasters / calamities, special provisions for certain States, etc.

Question 11.
Explain the powers of GST Council. Nov 2017
Answer:
Powers of GST Council:

The taxes, cesses and surcharges levied by the Union, the States and the local bodies which may be subsumed in the GST
The goods and services that may be subjected to, or exempted from the GST
Model GST Laws, principles of levy, apportionment of IGST & Principals of that govern the place of supply
The threshold limit of turnover below which goods and services may be exempted from GST
The rates including floor rates with bands of GST
Any special rate or rates for a specified period, to raise additional resources during any natural calamity or disaster
Special provision with respect to the States of Arunachal Pradesh, Assam, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand
Any other matter relating to the GST, as the Council may decide.

Statutory Powers:

When petroleum products should be brought in the GST net.
Distribution of revenue of IGST and CGST among Union and States.
Continuation of 1% tax on supply Of goods to inter-state.
Compensation to States for loss of revenue for period upto five years.