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Present Taxation Vs Good and Service Tax (GST):

August 16, 2016
S. No Basis Current Scenario (Excise/ Custom Duty, Service Tax, CST, VAT) GST Scenario (Goods and Service Tax)
1. Architecture / Structural Difference

Central taxes: - Excise/Custom duty, Central sales tax charged on services, surcharge and cess.

State Taxes: - VAT, Purchase, Luxury Tax, Entertainment Tax, Tax on Lottery, 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 speed diesel, motor spirit and natural gas to be brought at a later date subject to recommendation of GST council.

2. Place of taxation / basis of levy Taxable at the place of manufacture/sale of goods. Rendering of services Taxable at the place of consumption, at destination based tax
3. Tax base Comparatively narrow Wider
4. Tax administration Complex due to number of taxes Tax friendly, simple and easy
5. VAT / GST registration Decentralized registration under central and state authorities Uniform e- registration process based on PAN of entity.
6. Procedure of collection of tax and filing of returns Central excise/service tax uniform, VAT varies from State to State Uniform process and common dates for collection
7. Validation of Challan / returns, input credit and payment of tax Part validation by system, full verification subject to assessments by relevant Central/State authorities System based validation and consistency checks on input credit availed, utilization and tax payments
8. Excise Duty Imposed by Centre under separate Act, Central Excise Act, 1944. Taxable event is manufacture; i.e. excise duty charged up to the point of manufacturing. Replaced by CGST to be charged up to retail level.
9. Basic Custom Duty In case of import, taxed by Centre under separate act, i.e.  Customs Act, 1962. Taxable event is import No change
10. Countervailing duty/ Special Additional Duty In case of import, taxed by Centre under separate Act, i.e., Customs Act, 1962. Taxable event is import. To be subsumed under GST (CGST)
11. Service Tax Charged by Centre on list of services under Finance Act on payment/provision basis. Taxable event is provision of service To be subsumed under SGST based upon place of Supply Rules
12. Central Sales Tax Imposed by Centre under CST Act, 1956. Collection assigned to States. Applicable at concessional rate of 2% on inter-state transfers against C forms, otherwise full rate i.e. 5% to 14.5%/. Taxable event is movement of goods from one state to another To be subsumed in IGST.
13. State VAT Imposed by states; taxable event is sale within the State To be subsumed in SGST;
14. Inter-state transactions / entry tax Currently being charged by selected states for inter-state transfers, held as import in local area. Imposed on goods & services by the Centre (CST, Service Tax) No entry tax, Additional 1% of tax to be levied on inter-state supply of selected goods, list yet to be finalized.
15. Tax on export of goods and services Exempted/zero rated No change
16. Tax on inter-state transfer of goods to branch or agent Exempt against form F To be taxable but full credit available to dealers.
17. Tax on transfer of goods to branch or agent within state Generally exempted, depends upon state procedure

Might be taxable, unless TIN of transfer and transferee is same.

i.e May not be taxable, if TIN of transferor and transferee is same

18. 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.
19. Cross set-off of levy Currently set-off of excise duty and service tax is allowed No cross set-off between CGST and SGST
20. Non-Creditable goods / 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.
21. Exemptions- excise free zone, VAT Remissions Some areas enjoy status of Excise/VAT exemptions No such exemptions, investment refund scheme may be introduced for existing zones based upon recommendation of GST Council.
22. Levy of tax on government bodies, NGOs Partially taxed. Certain government bodies, PSUs and Non-profit covered Not changed.
23. Threshold limit Central Excise- 1.5 Crores
VAT- varies from Rs. 5 to 20 Lacs from state to state.
Service Tax- Rs. 10 Lacs
CGST- limits to be decided.
SGST- Rs. 10 Lacs to 20 Lacs as recommended by GST council.


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