Page 52 - Plastics News September 2016

FEATURES
Q: How will imports be taxed under GST ?
A:With Constitutional Amendments, both CGST and
SGST will be levied on import of goods and services
into the country. The incidence of tax will follow the
destination principle and the tax revenue in case of SGST
will accrue to the State where the imported goods and
services are consumed. Full and complete set-off will be
available on the GST paid on import on goods and services.
Q: Will cross utilization of credits between
goods and services be allowed under GST
regime?
A:Cross utilization of credit of CGST between goods
and services would be allowed. Similarly, the facility
of cross utilization of credit will be available in case of
SGST. However, the cross utilization of CGST and SGST
would generally not be allowed except in the case of
inter-State supply of goods and services under the IGST
model which is explained in answer to the next question.
Q: How will be Inter-State Transactions of
Goods and Services be taxed under GST in
terms of IGST method ?
A:The Empowered Committee has accepted the
recommendation for adoption of IGST model for
taxation of inter-State transaction of Goods and Services.
The scope of IGST Model is that Centre would levy
IGST which would be CGST plus SGST on all inter-State
transactions of taxable goods and services. The inter-
State seller will pay IGST on value addition after adjusting States for levy of service tax and tax on imports and
available credit of IGST, CGST, and SGST on his purchases.
The Exporting State will transfer to the Centre the credit
of SGST used in payment of IGST. The Importing dealer
will claim credit of IGST while discharging his output tax
liability in his own State. The Centre will transfer to
the importing State the credit of IGST used in payment
of SGST. The relevant information is also submitted to
the Central Agency which will act as a clearing house
mechanism, verify the claims and inform the respective
governments to transfer the funds.
The major advantages of IGST Model are:
a) Maintenance of uninterrupted ITC chain on inter-State
transactions.
b) No upfront payment of tax or substantial blockage
of funds for the inter-State seller or buyer.
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c) No refund claim in exporting State, as ITC is used up
while paying the tax.
d) Self monitoring model.
e) Level of computerisation is limited to inter-State
dealers and Central and State Governments should
be able to computerise their processes expeditiously.
f) As all inter-State dealers will be e-registered and
correspondence with them will be by e-mail, the
compliance level will improve substantially.
g) Model can take ‘Business to Business’ as well as
‘Business to Consumer’ transactions into account.
Q: Why does introduction of GST require a
Constitutional Amendment?
A:The Constitution provides for delineation of power
to tax between the Centre and States. While the
Centre is empowered to tax services and goods upto the
production stage, the States have the power to tax sale of
goods. The States do not have the powers to levy a tax on
supply of services while the Centre does not have power
to levy tax on the sale of goods. Thus, the Constitution
does not vest express power either in the Central or
State Government to levy a tax on the ‘supply of goods
and services’. Moreover, the Constitution also does not
empower the States to impose tax on imports. Therefore,
it is essential to have Constitutional Amendments for
empowering the Centre to levy tax on sale of goods and
other consequential issues. As part of the exercise on
Constitutional Amendment, there would be a special
attention to the formulation of a mechanism for upholding
the need for a harmonious structure for GST along with
the concern for the powers of the Centre and the States
in a federal structure.
Q: How will the rules for administration of
CGST and SGST be framed?
A: The Joint Working Group, as mentioned above,
has also been entrusted the task of preparing draft
legislation for CGST, a suitable Model Legislation for SGST
and rules and procedures for CGST and SGST. Simultaneous
steps have also been initiated for drafting of legislation
for IGST and rules and procedures. As a part of this
exercise, the Working Group will also address to the issues
of dispute resolution and advance ruling.