This comparison is according to the suggestions on several discussion study produced by a board of states finance ministers and the report of the task force on goods and services tax appointed by the financing commission.
Right before going on topic we must specify GST and the aim for it.
Just what is Goods and Services Tax?
GST is a tax on goods and services with extensive and constant chain of set-off gain from the producer’s point and service provider’s point up to the retailer level. This is essentially a tax only on value inclusion at each stage and a distributor at every level is enabled to set-off through a tax credit system. Within GST structure, all various levels of production and distribution may possibly be rendered as a mere tax pass through and the tax basically sticks on last consumption within the taxing jurisdiction.
Purpose for Goods and Services Tax
a) The likelihood of tax solely landed on domestic consumption.
b) The performance and equity of the system is maximized.
c) There must be no export of taxes throughout taxing jurisdictions.
d) The market must be incorporated into a single open market.
e) It improves the cause of co-operative federalism.
Our relative conversation will definitely be based only on significant points building general GST.
A double structure has been recommended by the finance official. The two elements are: Central GST (CGST) being enforced by the center and state GST (SGST) by the states. The task force has also highly recommended for the double levy imposed concurrently by the center and the states, but separately to promote co-operative federalism. Both the CGST and SGST must be levied on a common and exact same base.
Both have suggested for consumption type goods and services tax, that is, there must be no distinction between raw products and capital goods in permitting input tax credit. The tax base should thoroughly extend over all goods and services around final consumption point.
Additionally both of these are of the view that the goods and services tax should be structured on the destination principle. Base on the force this will lead in the shift from production to consumption whereby imports will definitely be liable to both CGST and SGST and transport should be sustained of the worry of goods and services tax by zero rating. Consequently, profits will accrue to the state in which the usage occurs or is deemed to take place.
The crew on GST stated the estimation of CGST and SGST obligation should be based upon the invoice credit method. i.e., allow credit for tax spent on all intermediate goods and services on the grounds of invoices provided by the provider. Because of this, all various stages of production and distribution can be taken a simple tax pass-through and the tax will efficiently ‘attach’ on final consumption within the taxing jurisdiction. This will facilitate removal of the cascading effect at numerous stages of production and distribution.