MODELS OF GST

BY :
ABHILASH G.S. (03)
ABHISHEK SINHA (64)
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RAJASHREE BHUYAN (39)

Three Prime Models Of GST

Central GST

Levied by the Centre

Eg: Tax on import of goods.

State GST

Levied by the State.

Eg: Tax on sale of goods involving
movement of goods within the state can
be imposed by State Governments only.

Dual GST

Levied by the State and Centre

concurrently.
Eg: Tax levied upon inter state supply of
goods and services.

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Central GST
Central will collect most of the countries total tax revenue leaving very little for state
Governments.
The 2 levels of Government would combine there levies to form a single national GST.
With appropriate revenue sharing arrangements among them.
Eg: Australia

Pros
If levied on a comprehensive base at a single rate. It would reduce economic distortions and
classification disputes.
Compliance cost will reduce if one GST replaces 36 Taxing statutes.
Hence, This free up resources can be put for more productive pursuits.
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 A common market for India with no check-post, internal tax

frontiers or other barriers to trade.
Ideal structure from business perspective- greater stability and
facilitation of decision making.
Businesses will have to deal with only one tax authority and
comply with only one tax
Consumers will know how much is the indirect tax resulting in
more transparency.
Increase competitiveness as there will be no cascading effect.
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Cons:
Drastic modification required in constitution of India along
with huge change in the present taxation infrastructure
States may mot agree to give up the power of taxation and
depend on the union for resources.

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State GST
Only the states levy GST and the centre withdraws from the field of GST
Or VAT completely.
This will significantly enhance the revenue capacity of the states and
reduce there dependence on the Centre.
Eg: USA
A complete withdrawal of the Centre from the taxation of inter-state
supplies of goods and services could undermine the states ability to
levy their own taxes.
Pros
Reduction of cascading effect of taxes , as there will not be tax at two
levels.
Revenue capacity of states enhanced and reduced the dependence on
the
Centre.
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Cons
Centre access to revenue for future needs reduced.
Major amendments to the constitution of India will be required.
The option may not be revenue netural for individual states, would
benefit the higher income states, while a reduction in fiscal transfers
would impact disproportionately the lower income states.
Tax laws for each state- will lack uniformity, harmony, decision
making and business stability.
It would be impractical to bring inter-state services within the ambit
of the state GST without a significant coordinating support from the
Centre
Governments, both States and Unions will not find it workable as it
require complete change in its finances and allocation of resources.
Redistribution of taxes will become an issue.
There may be unhealthy competition among the states using local
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tax
structure as a tool to attract industry within the states. Leading
to

Dual GST
NON-Concurrent Dual
GST
As suggested in the Poddar-Ahmed working paper, GST on
goods can be levied by the states only and on services by
the centre only.
VAT on services, Centre would essentially play the
coordinating role. Revenues collected from the taxation of
services could be transferred back to the states.
Cascading could be completely eliminated.
Constitutional amendment would still be required in this
model
since the states are not presently empowerd to levy
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sales tax on goods.

Concurrent Dual GST

The GST will be levied by both tiers of governments concurrently.
There will be central GST administered by the central government(as
excise duty on service tax,) and state GST- administered by state
Governments(VAT, octroi, entry taxes etc...).
Pros
This model is achievable in the short term and no significant changer are
required.
It removes cascading effect of taxes significantly.
Good balance between fiscal autonomy of the centre and states.
Improves the competitive environment for company working globally.
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Cons
Compliance costs may not reduce significantly.
There will always be uncertainty since states might depart
from the principles of uniformity.
Sharing of revenue amongst the state will be a challenge.
And services provided nationwide will pose challenge at
state level.

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Expected Model of GST In India

Dual GST is expected to be implemented in India along with
certain constitutional amendment's.

In the Budget Speech for the year 2009-10,

Finance Minister Shri Pranab Mukherjee
informed the House :
The board contour of the GST Model is
that it will be a dual GST comprising of a
Central GST and a State GST
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INDIAN MODEL DUAL GSTDUAL GST

As per the recommendations of Joint Working Group
(JWG), it will be a quadruple tax structure having 4
components :
1. Central tax on goods extending upto the retail level
2. A Central service tax
3. State VAT on goods.

# In this system, the tax payer may be required to calculate tax

liability separately for different rates of taxes.
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FEATURES :
1. Central GST to be administered by the Central
Government and there will be a state GST to be
administered by State Government.
2. Central GST will replace CENVAT and service tax.
3. State GST will replace state VAT.
4. Taxable event in case of goods would be sale
instead of manufacture.
5. Taxes collected by Local Bodies would not get
subsumed in the proposed GST system.
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6. Central GST may subsume :

a)CENVAT
b)Those levied under Additional Duties of Excise Act ,1957.
c)Additional customs duties like CVD, SAD.
d)Cesses levied by the union . (Cess on rubber, coffee,etc.)
e)Service Tax.
f) Central Sales Tax
g)Surcharges levied by the union.

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7. State GST may subsume :

a) VAT
b) Purchase Tax.
c) State Excise Duty.
d) Entertainment Tax.
e) Luxury Tax.
f) Octroi
g) Entry tax in lieu of Octroi.
h) Taxes on Lottery, Betting and Gambling

Railways and Construction Sector might also be

included in GST.
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Pay in time and be tension free..

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