The Value Added Tax has been introduced in all States now. It is considered to be major tax reform.

It was a challenging exercise in a Federal Country like India where each state is empowered for the levy and collection of taxes as per the Constitutional provisions.

In partial modification of the guidelines on the above subject dated 01.09.2009, the revised guidelines for the Internship Programme of Department of Revenue are issued as under:-

Department of Revenue has mandate to carry out tax reforms in the country. The Department is actively pursuing the work related to the introduction of Goods and Services Tax in the country. The proposed Goods and Services tax is expected to subsume large number of Central taxes like Central Excise Duty, Service Tax, Countervailing duty etc. and the State Taxes and levies like VAT/ Sales tax, Entry tax and Entertainment tax etc.

In view of preparatory work associated with the introduction of Goods and Services Tax, a need for internship programme in the Department has been felt so that the officers of the Department particularly in the State Taxes Division are able to interact with young scholars with brilliant academic backgrounds from the reputed academic institutions. The programme is expected to enable the Department to critically analyze various aspects of the Goods and Services tax on the basis of refreshing ideas from the field of academics and a simultaneously expected to help the interns to familiarize themselves with the process of development of this important tax reform at the national level.

Inspite of the success of VAT at large there are still some shortcomings both in the Central and State Level. There are still short comings in CENVAT introduced by the Govt. of India on selected number of commodities in terms of MODVAT w.e.f. 1-3-1986 under the Central Excise act. There are some taxes that are not included in the frame work of CENVAT such as Additional Custom Duty, Surcharge, etc.

Now the introduction of GST at Central level will not only include more Indirect Taxes and integrate Goods and Service Tax for the purpose of set off relief. It may also lead to revenue game for the Central through widening of dealer.

The GST shall have two components: one levied by the Centre and other levied by the State. The Central GST and the State GST would be applicable to all the transactions of goods and service made for a consideration except the exempted goods and services, goods which are outside the purview of GST and the transactions which are below the prescribed threshold limits. The GST threshold across States is desirable and, therefore, it is considered that a threshold across the Central and the State GST are to be paid to the accounts of the Centre and the State separately. The Central and the State GST are to be treated separately; taxes paid against the Central GST shall be allowed to be taken as input tax credit for the Central GST and could be utilized only against the payment of Central GST. The same principle will be applicable for the State GST. A taxpayer or exporter would have to maintain separate details in books of account for utilization or refund of credit. Cross utilization of ITC between the Central GST and State GST would not be allowed. The administration of the Central GST to the Centre and the State GST to the State would be given.

That the following Central Taxes should be, to began with, subsumed under the Goods and Services Tax:

a) Central Excise Duty

b) Additional Excise Duties

c) The Excise Duty levied under the Medicinal and Toiletries Preparation Act.

d) Service Tax

e) Additional Customs Duty,

f) Special Additional Duty of Customs (SAD)

g) Surcharge,

h) Cesses.

Following State Taxes and Levies would be, to begin with, subsumed under GST:

a) Sales tax/VAT,

b) Entertainment tax

c) Luxury tax,

d) Entry tax,

e) State Cesses, Additional tax/ Surcharges

f) Taxes on lottery, betting and gambling.

g) State Cesses and Surcharges in so far as they relate to supply of goods and services.

Empowered Committee of State Finance Minister’s opined that SGST as well CGST for goods should have two –rate tax structure:

a) Lower rate – for necessary items and goods of basic importance;

b) Standard rate—for other goods in general.

c) One rate—for Services.

There will also be a special rate for precious metals. They further advised to have only one rate for SGST and CGST for services. However they remained silent on specified rate.

GST would be levied on value of goods and services transacted. Valuation provision would be common for both CGST as well as SGST. There is no specific information on this issue in any reports except that provisions would be simpler and more transparent.

Under the GST Model of GST taxation, Centre would levy IGST which would be CGST plus SGST on all inter-State transactions of taxable goods and services. The inter-State seller will pay IGST on value addition after adjusting available credit of IGST, CGST and SGST on his purchase.

Credit would be admissible in respect of both the components of GST i.e. CGST and SGST are to be treated separately for the both purchase and input tax credits would be allowed be as follows:-

a) Taxes paid against CGST shall be allowed to be taken as input tax credit for the CGST and could be utilized only against the payment of CGST.

b) Taxes paid against SGST shall be allowed to be taken as input tax credit for the SGST and could be utilized only against the payment of SGST.

Cross utilization of input tax credit between the CGST and SGST would not be allowed except under the IGST model.

Centre would levy IGST (CGST plus SGST) on all inter-State transactions of taxable goods and services. The inter- State seller will pay IGST on value addition after adjusting available credit of IGST, CGST, and SGST on his purchases. The Exporting State will transfer to the Centre the credit of SGST used in payment of IGST. The Importing dealer will claim credit of IGST while discharging his output tax liability in his own State. The Centre will transfer to the importing State the credit of IGST used in payment of SGST.

Empowered Committee of State Finance opined uniformed SGST threshold with a threshold limit of gross annual turnover of Rs. 10 lakhs both for goods and services for all the States and Union Territories.

Threshold for CGST for goods may be kept at Rs. 1.5 crore and the threshold for CGST for services may also be appropriately high (no specified amount is recommended yet).

The taxation of goods and services in India has, hitherto, been characterised as a cascading and distortionary tax on production resulting in mis-allocation of resources and lower productivity and economic growth. It also inhibits voluntary compliance. It is well recognised that this problem can be effectively addressed by shifting the tax burden from production and trade to final consumption. A well designed destination-based value added tax on consumption. Under this structure, all different stages of production and distribution can be interpreted as a mere tax pass-through, and the tax essentially ‘sticks’ on final consumption within the taxing jurisdiction.