Why GST

Why GST?

Ca. Jayesh Gogri

GSC Intime Services Pvt. Ltd.

EXISTING STRUCTURE OF INDIRECT TAXES IN INDIA

24-Jan-15 GSC Intime Services Pvt. Ltd. 2

Taxes in India

• Every Indian Citizen generally pays– Income tax

• Business man– Customs Duty– Excise Duty– VAT– LBT/Entry tax/Octroi

• Profession– Profession tax– Service tax

• At home– Stamp Duty– Electricity Duty– Wealth tax

• Travelling– Tolls, luxury tax, Service tax

• For movie– Entertainment tax


Major taxes in India

Tax

Direct tax

Income Tax

Capital Gain Tax

MATWealth Tax

STT

Indirect tax

Customs Duty

Excise DutyCentral

StateService tax

VAT/CST

Octroi/Entry Tax/LBT


Constitution of India

• Article 265: No tax shall be levied or collected except by the authority of law.

• No Concentration of Powers• Separation of Powers:

– Union List– State List


India has a Two tier Taxation System• Income tax• Service Tax• Customs duties• Central Excise• Sales Tax

Central government(Union List)

• Stamp Duty• State excise• Entertainment tax • Local Sales Tax• Land Revenue• Profession tax

State government(State List)

• Local Body Tax • Octroi• Cess• Entertainment tax • Profession tax

Local bodies(State List – Delegated to

Local Bodies)

Unique features of Indirect taxes


• Affects top line of any business

• Recoverable from end customer ultimately

• Transaction based tax

• Premise based tax

• Set off Provisions available

• Procedural Laws

• Frequent changes in legislature

• High penal consequences

ISSUES WITH EXISTING TAX SYSTEM


Issues with Tax System

• Multiple Taxable Events• Different Threshold Limits• Multiple Rate Structure• Litigation Issues• Different Valuation Provisions• Interpretation of Goods and Services• VAT vs service tax• Different kinds of Exemptions• Frequent Notifications• Multiple Composition Schemes


Taxable event

Customs Duty• Import into or export out of

India-• Crossing the customs

frontiers

Excise Duty• Manufacture of goods

Service tax• Provision of services

VAT/CST• Sale of goods

Profession tax• On carrying on profession,

trade

Entry tax• Import into the State for

sale, use or consumption

Stamp Duty• On execution of documents

LBT/Octroi• Import into local limits• for sale, use or consumption


Multiple Taxable Events


Tax law Taxable event

Central excise Manufacture of goods

Customs Import into or export out ofIndia

Service tax Provision of Service

VAT Sale of goods

Stamp duty On execution of Documents

Profession tax On carrying on profession/trade

Different threshold limits

24-Jan-15 12GSC Intime Services Pvt. Ltd.

Tax law Threshold limit

Customs NO*Baggage = General: 45000/-

Central Excise 1.5 Crores

Service tax 10 lakhs

VAT 10 lakhs (Varies from State to State)

LBT 5 lakhs

Multiple Rates

24-Jan-15 13

2.06%

1%12.36%

12.5%

5% 20%

12.36%

6.18%

7.5%+12.36%+7.5%+12.36%+4%

5%

2%

GSC Intime Services Pvt. Ltd.

Litigation Issues


Commissioner (Appeals)

Tribunal

High Court

Supreme Court

Taxable values…

Tax laws Taxable Value

Service Tax • Gross Amount Charged for the provision of Service• Intercontinental Consultants & technocrats Pvt. Ltd. vs. Union of

India 2013 (29) STR 9 (Del.) admitted in 2014 (35) STR J99 (SC)

Excise • Price actually paid or payable including any amount paid orpayable by reason of, or in connection with the sale except ED, VATand other taxes

• CCE, Mumbai vs. Fiat India Pvt. Ltd. 2012 (283) ELT 161 (SC)

Customs • price actually paid or payable when sold for export to India fordelivery at the time and place of importation or for export fromIndia for delivery at the time and place of exportation

• Any amount paid or payable for costs and services, includingcommissions and brokerage, engineering, design work, royaltiesand licence fees, costs of transportation to the place ofimportation, insurance, loading, unloading and handling charges…

• Ashok Traders vs. UOI 1987 (32) ELT 262 (Bom.)


…Taxable values

Tax laws Taxable Value

VAT Valuable consideration paid or payable including any sum charged foranything done by the seller in respect of the goods at the time of orbefore delivery thereof except cost of insurance or installation, ifcharged separatelyIncluding Central Excise/Custom Duty paid(Maharashtra State)

Stamp Duty • Market value or the transaction value whichever is higher• Sometimes flat rate of SD on the transaction


Goods vs Services


Infotech Software Dealers Association vs. Union of India 2010 (20) STR 289 (Mad.)AGS Entertainment Pvt. Ltd. vs. Union of India 2013 (32) STR 129 (Mad.)

VAT vs Service tax


Valley Hotel & Resorts 2014 (35) STR 28 (Uttarakhand)Hotel East Park 2014 (35) STR 422 (Chhattisgarh)

Exemptions, exclusions etc.


Service TaxMega

ExemptionNegative List

Service Provided

outside India

M-VAT

Schedule ‘A’

Central ExciseExemptions

for SSI

Other full/partial exemptions

Notifications


23/2014-ST

06/2015-Cus(NT) ???

Composition Schemes

• Numerous Composition Schemes– MVAT

• Developer – 1%• Restaurants - 8%/10%• Bakers – 4%/6% • Retailers – 1%/1.5%

– Central Excise• Compounded levy Scheme

– LBT• Basis of Turnover

– 1,00,000 to 2,00,000 : 4,000…– 9,00,000 to 10,00,000 : 20,000

• Valuation for Composition Schemes?• Tax on Tax?


TAX on TAX??

• Constitutional Issues– State List/Union List

• Objective of Revenue Collection

• VAT + Excise/Customs Duty– Cascading Effect

• VAT on Service Tax?– Article 366(29A) : Deemed Sales

• VAT on Service?– Freight Charges

• Anything done by the dealer?


Procedures…


RegistrationRegistration

PaymentsPayments

ReturnsReturns

RefundsRefunds

…Procedures

ACES

ICEGATEMAHAVAT

NMMCONLINE


Ca. Jayesh GogriDirector

2/22 Nityanand Nagar, Sahar Road, Andheri (East),Mumbai-400 069.

+91 22 2684 0208+91 9821 012 151

[email protected]@gscintime.com

Right advice at right time…


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