Synergies between GST and Income Tax

Synergies between GST and Income Tax

Constitution of India

Article 265 – Taxes not to be imposed save by authority of law

246. Subject-matter of laws made by Parliament and by the Legislatures of States

• Schedule VII – Entry 82 – Taxes on income other than agricultural income

246A. Special provision with respect to goods and services tax

Levy of Taxes

Section 9 of CGST Act

Levy and collection.

9. (1) Subject to the provisions of sub-section (2), there shall be levied a tax called the central goods and services tax on all intrastate supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under section 15 and at such rates, not exceeding twenty per cent., … …….

Section 4 of the IT Act

Charge of income-tax.

4. (1) Where any Central Act enacts that income-tax shall be charged for any assessment year at any rate or rates, income-tax at that rate or those rates shall be charged for that year in accordance with, and subject to the provisions (including provisions for the levy of additional income-tax) of, this Act in respect of the total income of the previous year of every person :

Section 7 of CGST Act

Supply includes-

• all forms of supply of goods or services or both such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business;

• import of services for a consideration whether or not in the course or furtherance of business 1[and];

• the activities specified in Schedule I, made or agreed to be made without a consideration;

Section 5 IT Act

(1) Subject to the provisions of this Act, the total income of any previous year of a person who is a resident includes all income from whatever source derived which—

(a) is received or is deemed to be received in India in such year by or on behalf of such person; or

(b) accrues or arises or is deemed to accrue or arise to him in India during such year; or

(c) accrues or arises to him outside India during such year

Determining nature

GST

Section 8 of CGST Act:

(a) a composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply; and

(b) a mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax.

Income Tax

• Income would fall in any one of the 5 heads as per Section 14 of IT Act namely Salaries, Income from house property, Profits and gains of business or profession, Capital gains, Income from other sources

• Tax rates – Multiple – Capital gains could attract 20%

• Specific deductions/computation such as a 30% deduction for HP

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