The assessee who is eager to know what is the difference between GST and Present tax system and GST Tax is a boon or bane to the Indian economy. You can easily find out the difference if you go through this article. Here if you observe clearly a detailed explanation is given based on different conditions.
Present Tax Structure and GST Structure
|Conditions||Present Taxation||GST System|
1. The Goods Tax is levied by 2 ways, Central VAT is known (CENVAT) & State (VAT) and tax paid under one input tax credit is not available as a set-off against the other.
2. Under separate legislation Tax on services is levied by Central Government. Except few services, no comprehensive taxation of services are levied at State level.
3. In India Imports are not subjected to VAT or Central VAT (CENVAT).
1. A dual tax with both CGST (Central GST) & SGST (State GST) would be charged.
2. There is no separate tax levied for goods and services. GST is a common tax applicable to both of these.
3. Till the goods or services reaches the consumer this GST tax would allow smooth and continuous tax credit at all levels.
|Tax Base||Limited to the extent.||Comparing with the present scenario it is wider.|
|Place of Taxation||Place of Taxation is at the sale of goods or provisioning of services.||GST is Destination based tax.|
Types of Taxes
This tax is levied by Central Government for manufacturing of Goods under separate Act and taxed up to manufacturing point.
Excise Duty will be subsumed in GST and levied as Central GST and State GST for local supply of goods or as Integrated GST for Inter-State Supply of goods at the Retail level.
This tax is levied by Central Government for providing of Service under separate Act.
Service Tax will be subsumed in GST and levied as Central GST and State GST for local supply of services or as Integrated GST for Inter-State Supply of services.
VAT is levied separately by States for the sale of goods within the State.
Here in GST, it is subjected to CGST and SGST if the supply of goods is within the State.
|Central Sales Tax (CST)||
This tax is charged by the Central Government for the sale of Goods from one state to another but the amount levied is assigned to the Sate Governments.
CST is also subsumed in GST and subjected to IGST levied by Central Govt for the Supply of goods from one state to another.
|Special Additional Duty of Customs/ Additional Customs Duty||
This Tax is levied by the Central Government for importing of goods under separate Act.
CST is also subsumed in GST and subjected to IGST levied by Central Govt for importing goods.
|Threshold Limit of Excise Duty||Rs.1.5 Crores||Rs. 10 Lakhs to Rs. 20 Lakhs|
|Threshold Limit of VAT||Rs. 5 Lakhs to Rs.10 Lakhs||Rs. 10 Lakhs to Rs. 20 Lakhs|
|Threshold Limit of Service Tax||Rs.10 Lakhs||Rs. 10 Lakhs to Rs. 20 Lakhs|
|Broad scheme||In this system there are separate laws for charging separate taxes. For eg: VAT Rules & laws are different and Central Excise laws & Rules are different||As GST is subsuming various taxes there will be only one law.|
|Tax rates||For different types of tax there are different tax rates. For eg: Excise Duty the rate is 12.36 % and Service Tax Rate is 14%.||There will be one CGST rate and a uniform rate of SGST across all states.|
|Cascading effect||As the credit of CST and many other taxes are not allowed this is effecting from cascading effect.||Here in the concept of GST, the CST tax is being eliminated so no cascading effect.|
|Tax burden||We can see that under present scenario the tax burden on the assessee is high.||Since all taxes are subsumed and the burden is equitably split between the manufacturing and services so the tax burden is reduced.|
|Cost Burden on Consumers||Certain taxes become part of cost due to the presence of the cascading effect.||In GST, this cascading effect doesn’t exist so probably the cost burden is reduced.|
|Concurrent Power||At present, there is no such power to both Centre & State on the same subject tax matter.||Both Centre & 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 the multiplicity of laws and their provisions to be followed.||The Tax compliance would be easier as there is only one law which is subsuming all other taxes.|
|Transparent Tax Administration||At present the tax is levied at two stages.
1. When a product moves out of the factory.
2. At retail outlet.
|GST is to be levied only at the final destination of consumption and not at various points. This brings more transparency and corruption-free tax administration.|
The Taxes that are not subsumed in GST
These are the taxes which are not subsumed in GST Tax system. These taxes are levied as per their because they are not included in the GST regime.
- Exports Duty.
- Road and Passenger Tax.
- Basic Customs Duty.
- Stam Duty.
- Property Tax.
- Toll Tax.
- Electricity Duty.
So for these reasons Central Government proposed and passed a bill for implementation of GST Tax.