General Awareness

April 04, 2017 @ 01:15 PM

Imbroglio of Sales tax, VAT and GST in India

MBA aspirants must be updated with General Awareness on current topics. General awareness topics With analytically drawn conclusions will benefit You in WAT / Extempore Speech / Essay / GD & PI. 

Today, you will read General Awareness Topic:"Imbroglio of Sales tax, VAT and GST in India"
 
The Value Added Tax (VAT) is a type of indirect tax and is one of major source of revenue to the state. The VAT system was introduced in India by replacing the General Sales Tax laws of each state. The VAT system of taxation was adopted by Indian States and Union Territories in the Year 2005 by replacing the General Sales Tax Laws with New Value Added Tax Acts and the supporting Value Added Tax Rules for proper administration and collection of Tax. Each state or union territory has its own methods to assess the tax liability and collection methods from the dealers who fall under the purview of VAT. 
 
Sales tax is levied on the sale of a commodity which is produced or imported and sold for the first time. If the product is sold subsequently without being processed further, it is exempt from sales tax. Sales tax is levied on the sale of movable goods. Most of the Indian States have replaced Sales tax with Value Added Tax (VAT) from 1 April 2005. VAT is imposed on goods only and not services and it has replaced sales tax.
 
The commercial tax department introduced a new method of levying tax called as the Composition Scheme especially after considering the small dealers whose turnover was low and were unable to maintain the records as per the requirements of VAT Act. These dealers have to pay a lump sum as VAT on the sale value of goods. The VAT paid will not be shown in the invoices. They can account for the total turnover and pay VAT on the same at the end of the return period.
 
In India's prevalent sales tax structure, there have been problems of double taxation of commodities and multiplicity of taxes, resulting in a cascading tax burden. For instance, in this structure, before a commodity is produced, inputs are first taxed, and then after the commodity is produced with input tax load, output is taxed again. This causes an unfair double taxation with cascading effects. Hence, the VAT has been introduced to replace such sales tax structure. Moreover, it seeks to phase out the Central Sales Tax (CST) and several efforts are being made in this regard. 
 
The main motive of VAT has been the rationalization of overall tax burden and reduction in general price level. Thus, it seeks to help common people, traders, industrialists as well as the Government. It is indeed a move towards more efficiency, equal competition and fairness in the taxation system. The main benefits of implementation of VAT are:- 
 
Minimizes tax evasion as VAT is imposed on the basis of invoice/ bill at each stage, so that tax evaded at first stage gets caught at the next stage; 
 
• A set-off is given for input tax as well as tax paid on previous purchases;
• Abolishes multiplicity of taxes, that is, taxes such as turnover tax, surcharge on sales tax, additional surcharge, etc. are being abolished; 
• Replaces the existing system of inspection by a system of built-in self-assessment of VAT liability by the dealers and manufacturers (in terms of submission of returns upon setting off the tax credit);
• Tax structure becomes simpler and more transparent;
• Improves tax compliance; 
• Generates higher revenue growth; 
• Promotes competitiveness of exports; etc.
 
However, if the VAT is considered to be a major improvement over the pre-existing Central excise duty at the national level and the sales tax system at the State level, the Goods and Services Tax (GST) will be a further significant breakthrough – the next logical step -towards a comprehensive indirect tax reform in the country. 
 
In the existing State-level VAT structure there are also certain shortcomings as follows. There are, for instance, even now, several taxes which are in the nature of indirect tax on goods and services, such as luxury tax, entertainment tax, etc., and yet not subsumed in the VAT. In the GST, both the cascading effects of CENVAT and service tax are removed with set-off, and a continuous chain of set-off from the original producer’s point and service provider’s point upto the retailer’s level is established which reduces the burden of all cascading effects. 
 
The present threshold prescribed in different State VAT Acts below which VAT is not applicable varies from State to State. The existing threshold of goods under State VAT is Rs. 5 lakhs for a majority of bigger States and a lower threshold for North Eastern States and Special Category States. A uniform State GST threshold across States is desirable and, therefore, the Empowered Committee has recommended that a threshold of gross annual turnover of Rs. 10 lakh both for goods and services for all the States and Union Territories may be adopted with adequate compensation for the States (particularly, the States in North-Eastern Region and Special Category States) where lower threshold had prevailed in the VAT regime. 
 
Keeping in view the interest of small traders and small scale industries and to avoid dual control, the States considered that the threshold for Central GST for goods may be kept at Rs.1.5 crore and the threshold for services should also be appropriately high. This raising of threshold will protect the interest of small traders.
 
Implementation of GST will streamline the tax administration between the union and the states as well as goods and services. However, in order to implement it, consensus among the states is required. Easy tax structure will not only help in increasing the tax revenue but also in increasing the business activity.
 
Update your GK and read General Awareness Topics, Stay informed and inspired at MBA Rendezvous
 

Crucial Dates, You Should not Miss

TAPMI, Manipal
Admission Application closes on January 16, 2018 for 2018-20
BIMTECH, Greater Noida
Admissions open for PGDM Programmes at BIMTECH. Apply Now !
Lal Bahadur Shastri Institute of Management
Admissions are Open at LBSIM, Delhi. Apply Now !
FORE School of Management
Apply for PGDM & PGDM-IB Programmes. Application Deadline is December 22, 2017.
Goa Institute of Management
PGDM Admissions Open at GIM. Apply Before January 5, 2018
NIRMA
Last Date to Apply for MBA (Full Time) Programme at NIRMA is January 09, 2018
XAT 2018
Application Last Date 30th November 2017
IMI New Delhi
Application closes 4th December 2017
XIM Bhubaneshwar
Last Date 8th December 2017
SIBM Bengaluru
Apply for SNAP 2017 to be held on Dec 17 and apply for SIBM-Bengaluru through the SNAP Form
Institute of Rural Management Anand
IRMASAT will be conducted on February 4,2018, Apply Before December 31,2017
IBSAT 2017
Last date for IBSAT registration is December 12 , 2017
SSBF
Last date to register for SNAP is 24th November, 2017. Last date for SSBF is 2nd January 2018
SIBM Hyderabad
Apply for SNAP 2017 to be held on Dec 17 and apply for SIBM-Hyderabad through the SNAP Form
K J Somaiya Institute of Management Studies & Research, Mumbai
Last date for Application is 31st Jan, 2018
SDMIMD Mysore
Application for PGDM 2018-20 at SDMIMD is open till February 28, 2018
Institute of Management Technology
Application closes on November 24, 2017
MDI Murshidabad
Application for PGPM 2018-20 at MDI Murshidabad is open till November 24, 2017

Admission Open Now

Following Colleges are accepting applications.

INTERNATIONAL MANAGEMENT INSTITUTE

Admissions open for 2018-20

PGDM, PGDM (HRM), PGDM(B & FS), Executive PGDM

Apply Online