GST

Question 1

GST

Answer 1

101st constitutional amendment act

It is a comprehensive tax levied on the manufacture, sale, and consumption of goods and services.

Question 2

246A

Answer 2

States can tax both goods and services. Previously, no power to tax services

Inter-state supply of Goods and Services: Only Union can tax (IGST)

Question 3

268A

Answer 3

Service tax subsumed under GST.

Question 4

269A

Answer 4

IGST to be distributed between union and states as per the recommendation of GST council

Question 5

270

Answer 5

CGST to be distributed between center and states as per reco of Finance Commission

Question 6

279A

Answer 6

President to appoint GST council

Question 7

Composition of GST council

Answer 7

Union Representation:

FM as the Chairman
Union Min of State for Finance or Revenue
Votes - 1/3

States Representation:

Each State (Delhi Pondicherry) to nominated minister (usually Fin Min)
One of them to be Vice Chairman - 2/3

Majority Required:

75% of weighted votes for a decision to be taken

Quorum:

50% of Membership

Question 8

Features of GST

Answer 8

The GST is a destination based consumption tax

Made on value addition

GST includes service tax also

Central Value Added Tax, Additional Customs Duty, Special Additional Duty of Customs Central Sales Tax Service Tax, state VAT (Sales tax) are some of the taxes that has been merged to form the GST

The GST proposes a four-tier rate structure. The tax slabs are fixed at 5%, 12%, 18% and 28% besides the 0% tax on essentials.

GST is applied when turnover of the business exceeds Rs 20 lakhs per year (Limit is Rs 10 lakhs for the North-Eastern States)

The centre and states will share GST tax revenues at 50:50 ratio (except the IGST)

The GST Council has adopted a dual GST with two components - the Central GST (CGST) and the State GST(SGST).

The IGST comes to play when the commodity is produced in one state and is traded to another state (interstate trade). In this case, the share of SGST should go to the consuming state (as the GST is a destination based tax).

Question 9

Input Tax credits

Answer 9

Input credit means at the time of paying tax on output, tax paid on Input would be deducted

You are a bread manufacturer. If you pay INR 100 as GST on inputs and Charge 150 as GST from your customers. Then you are liable to pay only INR 50.

Question 10

E-way bill

Answer 10

1. EWay Bill is an Electronic Way bill for movement of goods to be generated on the eWay Bill Portal
2. When? Intrastate ( Value > 50K), Inter-state
3. Based on self declaration
4. As per the new rules, taxpayers who haven’t paid IT for 2 consecutive years cannot generate e-way bills.

Question 11

Composition Scheme

Answer 11

Is an easy, flow procedure and compliance friendly tax scheme for small and medium enterprises (goods and services).

Only Manufacturers of goods, Dealers, and Restaurants (not serving alcohol) can opt for composition scheme.

Less number of tax returns file return on quarterly basis.

Turnover limit for availing this scheme <1.5 crores

Available only for intra-state supplies.

No Input tax can be used. You cannot charge GST from customers

Question 12

Zero rated exports

Answer 12

When a product is exported, it is subjected to 0% IGST

Hence, the GST that the company has already paid on inputs, becomes input credits for the firm. These input credit can be used to offset.

Question 13

GST Council

Answer 13

The GST council is the key decision-making body that will take all important decisions/tax rate, tax exemption, the due date of forms, tax laws, and tax deadlines)

GST Council will be a joint forum for the Centre and the States. Union finance ministers is its chairman

The Council will also set up Anti-profiteering screening committees that will make the National Anti-Profiteering Authority stronger under the GST law.

Question 14

National Anti Profiteering Authority (NAPA)

Answer 14

It is institutional mechanism under GST law to check the unfair profit-making activities by the trading community, with core function of ensuring tax reduction will be passed on to end customer

Formed under CGST Act, 2017

NAPA can take following actions:

1) Reduce prices
2) refund profiteered amount to customers
3) Imposed penalty of up to 10%
4) Deposit money to Consumer welfare fund

Question 15

GST Network (GSTN)

Answer 15

It not for profit organisation jointly owned state govt and central govt.

GSTN has been entrusted with the responsibility of building Indirect Taxation technology platform for GST to help one prepare, file, rectify returns and make payments of your indirect tax liabilities.

GST Suvidha Providers: Private companies that help

Question 16

Authority for advanced ruling (AAR)

Answer 16

Corporates can seek advanced clarifications related to GST related issues E.g. A compact seeking clarification on the applicable Tax slab on it’s planned new product.

It brings tax certainty and facilitates ease of doing business.

Statutory Body under CGST Act

Question 17

Project Saksham

Answer 17

By CBEC (Central Board of Excise and Customs)

Project Saksham is the name given to CBEC’s IT Infrastructure Project Goods and Services tax (GST) + all existing services in Customs, Central Excise and Service Tax.

Will also enable extension of the Indian Customs Single Window Interface for Facilitating Trade (SWIFT) and other taxpayer-friendly initiatives under Digital Indian and Ease of Doing Business of CBEC.

Question 18

Double taxation avoidance agreement (DTAA

Answer 18

Renegotiating Double taxation avoidance agreement

DTAA also referred as Tax Treaty is a bilateral economic agreement between two nations that aims to avoid or eliminate double taxation of the same income in two countries.

India has DTAA with 84 nations.

Question 19

Advanced pricing agreements (APA)

Answer 19

An APA is a contract, usually for multiple years, between a taxpayer and at least one tax authority specifying the pricing method that the taxpayer will apply to its related company transactions

APAs gives certainty to taxpayers, reduce disputes, avoid tax avoidance.

Question 20

General Anti Avoidance Rules (GAAR)

Answer 20

GAAR usually consists of a set of broad rules which are based on general principles to check the potential avoidance of the tax in general.

The government set up a panel under Parthasarathi Shome to review the proposal with regards to GAAR.

Question 21

Base Erosion and Profit Shifting (BEPS)

Answer 21

BEPS refers to tax planning strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations where there is little or no economic activity

OECD and G20 countries along with developing countries that participated in the development of the BEPS Package are establishing a modern international tax framework under which profits are taxed where economic activity and value creation occur

Question 22

Angel Tax

Answer 22

Section 56(2) of Indian IT Act

Taxation: 30.6% of external capital raised in excess to the fair market value of the startup

Fair Market Value is determined by Tax authorities

New Rules:
1. Startups having a turnover of less than 100 crore and less than 10 years old are exempted

2. Investments from listed companies (250 Crore/100 Cr) and NRI’s are fully exempted
3. Startups Should be registered with DPIIT (Department for Promotion of Industry and Internal Trade)

Question 23

PoEM

Answer 23

“Place of effective management” has been defined to mean a place where key management and commercial decisions that are necessary for the conduct of the business of an entity as a whole are, in substance made.

Use of POEM is that companies have to pay taxes in India if they have India as their PoEM.

Earlier IT Act had a few obvious loopholes, hence the definition has been made more exhaustive through Finance Act 2015

Question 24

Service Tax

Answer 24

Service Tax was first imposed in 1994. It used to be levied on 119 services

A new service tax regime based on negative list came into effect from 2012.

Negative list concept: All but 38 items were put on the list. Service tax for all other services is 12%

Negative list: Metered taxi, auto, transport of goods and services, educational activities, services related to government scheme

Why shift to Negative list?
To align the present system with the proposed GST system

Current Status: Subsumed under GST

Question 25

Reasons for Taxing Services

Answer 25

1. Its share has increased to 60%
2. Important to raise tax-GDP ratio,
3. Horizontal equality across all three sectors. All should share the burden
4. To avoid distortion in consumer choices
5. Service expenditure has more share in expenditure of high income people=> taxing service sector is progressive.