GOODS AND SERVICE TAX (GST) CONCEPT, MODEL AND PRESENT STATUS December, 2015 By Sushil Solanki...

GST by Sushil Solanki 1

GOODS AND SERVICE TAX (GST)

CONCEPT, MODEL AND PRESENT STATUS

December, 2015

BySushil Solanki

Principal Commissioner of Service Tax


PRESENT LAWS AND DISTORTIONS

Multiplicity of Indirect TaxesCascading taxationVarying VAT rates in different StatesCredit of CST not available to buyersService Tax credit not available to tradersUneconomic activities like opening of branches

to save CST, Purchase from within StateNo set off ---no invoice – parallel economyPlethora of forms required for movement of

goods within States, Inter States, through State


GST : PERCEIVED BENEFITS To Trade

Development of common national market.Reduction of Procurement cost.Efficient use of Resources & Economy of scale.Reduction in multiplicity of taxes.Mitigation of cascading/double taxation.More efficient neutralization of taxes especially for

exports.Simpler tax regime

Fewer rates and exemptions Conceptual clarity (Goods vs. Services)

GST : PERCEIVED BENEFITS

To Government Enhanced GDP growth by increase in economic

activities and efficient use of resources. Simpler Tax systemBroadening of Tax baseImproved compliance & revenue collections

To ConsumerTransparency as total taxes paid available in

invoice.Total Tax burden to reduce.



Features of GST……(1)Destination-based Taxation Applies to all stages of value chain – primary, secondary &

tertiary including retail Applies to all supplies of goods / services (as against

manufacture, sale or provision of service) made for a consideration except – Exempted goods / services – common list for CGST &

SGST Goods / services outside the purview of GST Transactions below threshold limits

Dual GST having two concurrent components Central GST levied & collected by Centre State GST levied & collected by States


Features of GST ……(2)IGST (CGST + SGST) applicable to

Inter-State supplies of goods / services in India Inter-state stock transfers of goods Import of goods / services

IGST levied & collected by the Centre Additional Tax not exceeding 1% on inter-state supply of goods – to be levied & collected by the Centre but assigned to originating State

Export of goods / services – Zero rated


Products under GST

All goods or services likely to be covered under GST except: Alcohol for human consumption - State Excise + VAT Electricity - Electricity Duty Real Estate - Stamp Duty + Property Taxes

Petroleum Products – to be brought under GST from a later date on recommendation of GSTC

Tobacco Products – under GST + Central Excise


TAXES TO BE SUBSUMED INTO GST

CENTRAL TAXESCentral Excise duty (CENVAT) Additional duties of excise Excise duty levied under

Medicinal & Toiletries Preparation Act

Additional duties of customs (CVD & SAD)

Service Tax Surcharges & Cesses

STATE TAXESState VAT / Sales Tax Central Sales Tax Purchase Tax Entertainment Tax (not levied

by local bodies) Luxury Tax Entry Tax (All forms) Taxes on lottery, betting &

gambling Surcharges & Cesses


GST Rates

GST Rates – Merit Rate/Standard Rate/Precious MetalFloor rate with a small band of rates for standard

rated goods / services for CGST & SGST Common Threshold exemption for CGST and

SGST. Compounding scheme for taxpayers having

taxable turnover up to a certain threshold above the exemption


Other Features of GST Existing area based tax exemption likely to be

made into Refund mechanism.C/F/H forms likely to be abolishedMultiple statutes – one for Centre & one for every

State Place of Supply Rules

to determine Place of Supply of goods or services to determine whether the supplies are intra-State or

inter-State HSN Code to be used for classification of goodsPresent system of classification of services to be

used


Integrated GST (IGST)To be levied on interstate supply of goods and services GST being destination based tax, tax paid in exporting

State needs to reach the importing State.Tax paid in the exporting state would be available as input

tax credit in the importing State.IGST can be paid by using credit of IGST, CGST or SGST.In the returns, invoice wise supply details and importing

state wise details required to be mentioned for settlement of tax credit amongst the States.

On import of goods, IGST would be levied in lieu of CVD and SAD.


Credit Utilization of CGST, SGST & IGST

ITC of CGST for CGST & SGST for SGST - no cross utilization

ITC of IGST allowed for payment of IGST, CGST & SGST in that order

ITC of CGST allowed for payment of CGST & IGST in that order

ITC of SGST allowed for payment of SGST & IGST in that order

No ITC of Additional Tax


Registration Return, Other Process

State wise registration Business Vertical-wise registration allowed LTU status Amendment in Registration details- Except 3-4 details, no

approval required Registration to be applied 30 days prior to specified date for

taking registration ITC allowed only after date of Registration applicationCommon GST Return for CGST, SGST, IGST, ADDL TAXCommon e-payment facilities for all taxesAnnual Return for comparison with Financial Records


Input Tax Credit Changes & ISD Provisions

ITC available on the basis of supplier uploading invoices and payment of taxes, like TDS credit in Income Tax

Seller/Supplier to upload invoice wise detail for all B-2-B sale and in other specified cases

Rating of Dealers and black listing of dealers ISD registration permitted for transfer to credit on

services only.ITC transfer allowed from one to other registration only

on supply/use of services. For goods transfer, normal branch transfer procedure

to follow.


Constitutional Amendment

•Concurrent jurisdiction for levy and collection of GST by the Centre and States.•Centre to levy and collect IGST and the tax to be

apportion between Centre and State.•Upto 1% additional tax to be collected by Centre but

to be assigned to originating tax.•Compensation to States for five years.•Power to impose surcharge by Parliament removed.•Concept of declared goods done away with.


Constitutional Provision - GST COUNCIL (GSTC)

Consist of Union FM, Union MOS (Revenue) and State Finance Ministers.

Union Finance Minister as Chairperson Vice Chairperson from States Weightage for votes provided.Decision by majority of 75% of weighted votes of members present and voting.


Functions of GST COUNCIL

Council to make recommendations on Taxes, etc. to be subsumed in GST Exemptions & thresholds GST rates Band of GST rates Model GST Law & procedures Special provisions for certain special category

States like North East, J &K, HP, Uttrakhand.Date from which GST would be levied on

petroleum & related products


GST NETWORK (GSTN)GSTN incorporated on 28th March, 2013 as Section 25

Private Limited Company.Central Government, State Government and Financial

Institution are equity holders.GSTN to develop and operate a common IT portal to :-

Submit registration applicationsFile returnsMake tax payments.

Registration, return and payment information to be passed on to Central and State Tax authorities.

GSTN to develop IT platform for verification of CENVAT credit availment.


Current Status & Way Forward

CAB introduced in parliament on 19th December, 2014

Passed by Lok Sabha and pending in Rajya Sabha

To be ratified by at least 50% of the State Legislatures

Assent of President of IndiaGST Council to be constituted


Current Status & Way Forward ---(2)

Report on Return, Registration and Refund placed in public domain

Drafting of GST legislation – Completed by Centre & State Govt representatives. Discussion for final draft underway

GSTC to recommend GST Law and Procedure.GST law to be introduced in Parliament / State

Legislature.GST Rates, Exemption to be decidedConsultation with Trade & IndustryTraining of Officers & Trade GSTN Portals to be made operational and to link with

existing portals of Centre and State Government


Preparation by Industry• Review of Procurement decisions• Review of Logistic Requirements like Warehousing, Storage,

Transport• Costing of Products for future orders for export, etc• Industry specific issues like Area based Exemption, MRP

based assessment requiring abatement % to be represented to the Govt• Exemption from Excise, Service Tax, VAT, to be taken up with

Govt• Decision for business vertical registration & Preparedness for

State level registration


Modification of IT systems

•Provision for CGST & SGST on Sales•Interstate Sale – IGST•Capture of registration no. of buyer•Sales Invoice to be uploaded •Comparison of ITC as per Company record & as per GST ledger of Govt•Tracking of ITC for invoices not uploaded by supplier•Tracking of blacklisted Suppliers


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GOODS AND SERVICE TAX (GST) CONCEPT, MODEL AND PRESENT STATUS December, 2015 By Sushil Solanki...

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