A Knowledge Workshop-Presentation i dated 14th July,2012

11

Corporate Knowledge Corporate Knowledge FoundationFoundation

PresentsPresentsA Knowledge WorkshopA Knowledge Workshop

OnOn““New Regime of Service Taxation in India”New Regime of Service Taxation in India”

Conducted byConducted byDr. Sanjiv AgarwalDr. Sanjiv Agarwal

FCA, FCSFCA, FCS

Saturday,Saturday,1414thth July,2012 July,2012New Delhi © Dr. Sanjiv New Delhi © Dr. Sanjiv

AgarwalAgarwal

22


SESSION - ISESSION - I

PARADIGM SHIFT IN TAXATION OF PARADIGM SHIFT IN TAXATION OF

SERVICES IN INDIA – AN OVERVIEW SERVICES IN INDIA – AN OVERVIEW

&&

MAJOR CHANGES IN SERVICE TAX LAW BY MAJOR CHANGES IN SERVICE TAX LAW BY

The FINANCE ACT, 2012 - AT A GLANCE The FINANCE ACT, 2012 - AT A GLANCE

33


This Presentation CoversThis Presentation Covers• Overview of Taxation of Services in India Overview of Taxation of Services in India • Selective Approach (Positive) Selective Approach (Positive) • Shift to Comprehensive approach Shift to Comprehensive approach

(Negative)(Negative)• The future approach (Proposed GST) The future approach (Proposed GST)

44

Indian Economy – An Indian Economy – An overviewoverview

India’s economy is the 11India’s economy is the 11thth largest economy in the world largest economy in the world and the second fastest growing even in today’s recessionand the second fastest growing even in today’s recession

World is presently facing recession-II but Indian economy World is presently facing recession-II but Indian economy is still better than comparable economies. is still better than comparable economies.

Agriculture, services and industry are the major sector of Agriculture, services and industry are the major sector of India an economy. Contribution of different sectors in India an economy. Contribution of different sectors in March, 2012 was :March, 2012 was :

Agriculture 19%Agriculture 19% Services 59%Services 59% Industry 22%Industry 22%

to be contdto be contd…….…….

55

GDP CO MPO SITIO N IN MARCH, 2012

Agriculture19%

Industry22%

Service Sector59%

Brief Overview of Services / Brief Overview of Services / Service Tax Share of Service Tax Share of

Services in GDPServices in GDP

66

Share of services in GDP Share of services in GDP trackedtracked

Year Year % of GDP % of GDP 19501950 1515 19701970 3333 19801980 3636 19941994 4040 19951995 4141 20002000 4747 20052005 5353 20102010 5757 20122012 5959

In 2011-12, services have grown by 9.6 % which is In 2011-12, services have grown by 9.6 % which is more more

than GDP growth ratethan GDP growth rate

77

Growth in Tax GDP Ratio – Growth in Tax GDP Ratio – Slow but SteadySlow but Steady

Years Tax GDP ratio Years Tax GDP ratio

2003-04 2003-04 9.2% 9.2%

2007-08 11.9% 2007-08 11.9%

2009-10 9.7% 2009-10 9.7%

2010-11 2010-11 10.3% 10.3%

2011-12 2011-12 10.1% 10.1%

88

Power to Tax in IndiaPower to Tax in India

Central Government and the State Governments under Part Central Government and the State Governments under Part XI of Indian Constitution have power to levy taxes.XI of Indian Constitution have power to levy taxes.

Legislative power v Administrative power Legislative power v Administrative power Legislative power has three lists:-Legislative power has three lists:-

Union list,Union list, States list and States list and Concurrent listConcurrent list

Administrative power – CBDT, CBECAdministrative power – CBDT, CBEC Union list consists of 100 items -Parliament has exclusive Union list consists of 100 items -Parliament has exclusive

power to levy Tax.power to levy Tax. State list consists of 66 items -Individual states have exclusive State list consists of 66 items -Individual states have exclusive

authority to levy Tax. authority to levy Tax. Concurrent list consists of 47 items - both Governments can Concurrent list consists of 47 items - both Governments can

levy tax. levy tax.

to be to be contd……..contd……..

99

Power to Tax in IndiaPower to Tax in India

India has a two tier federal power to collect tax –India has a two tier federal power to collect tax – the Union Government, the Union Government, the State Governments the State Governments includingincluding urban/rural urban/rural

local bodieslocal bodies Presently goods are liable to Vat / Excise / Customs Presently goods are liable to Vat / Excise / Customs

duty while taxable services attract service tax. duty while taxable services attract service tax. Certain transactions subject to both - Vat and Certain transactions subject to both - Vat and

Service taxService tax Efforts to revamp the direct tax structure - New Efforts to revamp the direct tax structure - New

direct tax code (Income Tax Act, 1961 & Wealth Tax direct tax code (Income Tax Act, 1961 & Wealth Tax Act, 1957 would be scrapped) proposedAct, 1957 would be scrapped) proposed

Efforts to bring on a single indirect tax – GST Efforts to bring on a single indirect tax – GST proposedproposed

1010

Taxonomy of Indian Taxonomy of Indian taxationtaxation

TAXATION POWERS OF UNIONTAXATION POWERS OF UNION Income Tax – Income Tax – on income, except on income, except

agricultural incomeagricultural income Excise Duty – on goods manufacturedExcise Duty – on goods manufactured Custom Duty – on importsCustom Duty – on imports Service Tax – Service Tax – on specified serviceson specified services Central Sales Tax – Central Sales Tax – on inter-state sale of goodson inter-state sale of goods Stamp Duty Stamp Duty –– on 10 specified instruments on 10 specified instruments

tto be o be contd…..contd…..

1111

Service Tax in India (The Service Tax in India (The Past)Past)

Introduced in India in 1994 as a simple, modest tax Introduced in India in 1994 as a simple, modest tax with just three services. with just three services.

Service tax – an indirect tax.Service tax – an indirect tax. Approach to Service Tax – Selective as against Approach to Service Tax – Selective as against

comprehensive one .comprehensive one . Desirable from revenue, equity and economic view Desirable from revenue, equity and economic view

point.point. Governed by Finance Act, 1994 and a dozen of Governed by Finance Act, 1994 and a dozen of

rules. rules. Legislative dependence on other laws.Legislative dependence on other laws. Scattered and heterogeneous large mass of service Scattered and heterogeneous large mass of service

providers as well as wide spectrum of services. providers as well as wide spectrum of services. Jurisdictional application.Jurisdictional application.

1212

Growth of Service TaxGrowth of Service Tax

Year No of new services Total No of services

Total collection (Rs. in crore)

1994 3 3 407

2001 - 26 2612

2005* 13 72 14199

2008 7 103 51301

2010 3 112 58000

2012 0 120 95000

2013 - All 126000 (BE)

1313

Service Tax in India (The Service Tax in India (The Past)Past)

Selective Approach to Service TaxSelective Approach to Service Tax

Selective v. Comprehensive approach Selective v. Comprehensive approach Taxation by choice Taxation by choice Service not defined but taxable service defined.Service not defined but taxable service defined. > 120 taxable services [section 65(105)]> 120 taxable services [section 65(105)] Resulted in distortions / prejudice Resulted in distortions / prejudice Untapped tax potential Untapped tax potential Economically unjustified Economically unjustified

1414

Service Tax in India (The Past)Service Tax in India (The Past)

Selective Approach : Some IssuesSelective Approach : Some Issues

Classification of service – disputes Classification of service – disputes Illogical definitions Illogical definitions Problem defining each taxable service Problem defining each taxable service Inefficient tax administration Inefficient tax administration Constitutional Challenges Constitutional Challenges Services / deemed Services Services / deemed Services Valuation / abatement / reverse chargeValuation / abatement / reverse charge

1515

Service Tax - TodayService Tax - Today

Shift to Comprehensive approach

W.e.f. 1 July 2012W.e.f. 1 July 2012 Finance Act, 2012 – A land mark Act to shift from Finance Act, 2012 – A land mark Act to shift from

positive to negative approach.positive to negative approach. It took 18 years to shift from selective approach to It took 18 years to shift from selective approach to

positive approach to tax servicespositive approach to tax services Section 65 (Definition of Taxable Service), 65A (Classification of Section 65 (Definition of Taxable Service), 65A (Classification of

Taxable service), 66 (Charge of Section Tax) and 66A (Charge of Taxable service), 66 (Charge of Section Tax) and 66A (Charge of Service Tax on Services received from outside India) have no Service Tax on Services received from outside India) have no application w.e.f. 01.07.2012.application w.e.f. 01.07.2012.

1616

All Services(including declared Services

(-)

Specific Exclusions

(-)

Negative List Services

Exemptions

Taxable Services

(-)

Taxation of Services by Finance Act, 2012

(=)

1717

Service Tax - TodayService Tax - Today

New system of taxation of servicesNew system of taxation of services All services to be taxed other than services All services to be taxed other than services

specified in the negative list and exempted specified in the negative list and exempted services – Section 66B.services – Section 66B.

Negative list (17 in number) specified through Negative list (17 in number) specified through statutory provisions – Section 66D.statutory provisions – Section 66D.

‘‘Service’ defined for the first time.Service’ defined for the first time. ‘‘Negative List’ and ‘declared services’ also Negative List’ and ‘declared services’ also

defined.defined.

1818

Service Tax provisions no longer Service Tax provisions no longer applicable (w.e.f. 1.7.2012)applicable (w.e.f. 1.7.2012)

Section 65 Section 65 Old definitions of Services / Taxable Old definitions of Services / Taxable Services Services

Section 65A Section 65A Classification of Services Classification of Services Section 66Section 66 Charge of Service Tax Charge of Service Tax Section 66A Section 66A Charge of Service Tax on Charge of Service Tax on

Services Services received from outside received from outside India.India.

Import of Service Rules, 2006Import of Service Rules, 2006 Export of Service Rules, 2005Export of Service Rules, 2005

1919

New Provisions in Service New Provisions in Service TaxTax

Section 66 BSection 66 B deals with charge of service tax deals with charge of service tax on the after Finance Act, 2012on the after Finance Act, 2012

Section 66 CSection 66 C provides for determination of provides for determination of place of provision of service.place of provision of service.

Section 66 DSection 66 D comprises of negative list of comprises of negative list of services services

Section 66 ESection 66 E comprises of the services comprises of the services which which constitute declared servicesconstitute declared services

Section 66 FSection 66 F provide principles of provide principles of interpretation interpretation of specified description of of specified description of services services or bundled servicesor bundled services

2020

The New Taxability ConceptThe New Taxability Concept

SERVICE FOR A CONSIDERATION

E - MAGIC TEST

E: EmployeeM: MoneyA: Actionable claimG: GoodsI: Immovable propertyC: Court Fee

9 DE

CL

AR

ED

SE

RV

ICE

S

2121

Taxable of Services Taxable of Services w.e.f. 1.7.2012w.e.f. 1.7.2012

All services All services Taxable Taxable

[section 65B (44)][section 65B (44)] Declared services Declared services Taxable Taxable (section 66E) (section 66E) Services covered under Services covered under Not Taxable Not Taxable

negative list of services negative list of services (section 66D) (section 66D) Services exempt under Mega Services exempt under Mega Exempted Exempted Notification No. 25/2012-ST Notification No. 25/2012-ST dated 20.6.2012dated 20.6.2012 Other specified ExemptionsOther specified Exemptions Exempted Exempted

2222

Taxation of Services Post Finance Act, 2012

2323

What is ServiceWhat is Service

‘‘Service' has been defined in clause (44) of the new Service' has been defined in clause (44) of the new section 65B and means –section 65B and means –

any activityany activity

for considerationfor consideration

carried out by a person for anothercarried out by a person for another

and includes a declared service (66E)and includes a declared service (66E)

2424


Activity must be for a considerationActivity must be for a consideration Activity – includes both activity as well as non-Activity – includes both activity as well as non-

activity activity Consideration – includes both monetary and non Consideration – includes both monetary and non

monetary consideration.monetary consideration. Two persons are involved –Two persons are involved –

Service provider Service provider Service receiver Service receiver

Only services provided by one person to another Only services provided by one person to another are taxable are taxable

Person – natural as well as artificial Person – natural as well as artificial

2525


ActivityActivity Not defined in the ActNot defined in the Act In common understanding, activity includes –In common understanding, activity includes –

An act doneAn act done A work doneA work done A deed doneA deed done An operation carried outAn operation carried out Execution of an actExecution of an act Provision of a facility etc.Provision of a facility etc.

Activity could be active or passive and forbearance to actActivity could be active or passive and forbearance to act Agreeing to an obligation to refrain from an act or to tolerate an

act or a situation - listed as a declared service u/s 66E

2626


Activity for a ConsiderationActivity for a Consideration Activity should be carried out by a person for Activity should be carried out by a person for

a considerationa consideration Activity without consideration like-Activity without consideration like-

DonationDonation GiftsGifts Free charitiesFree charitiesoutsideoutside the ambit of servicethe ambit of service

Charity for consideration would be service Charity for consideration would be service and taxable unless otherwise exemptedand taxable unless otherwise exempted

2727


ConsiderationConsideration Means everything received or recoverable in return Means everything received or recoverable in return

for a provision of service which includesfor a provision of service which includes - - Monetary paymentMonetary payment Non-monetary paymentNon-monetary payment Deferred considerationDeferred consideration

Under Indian Contract Act, 1872, Consideration Under Indian Contract Act, 1872, Consideration means -means -

“When, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise”

2828


ConsiderationConsideration Monetary consideration means any Monetary consideration means any

consideration in form of Money.consideration in form of Money. Includes not only cash but also cheques, Includes not only cash but also cheques,

promissory note, bill of exchange, letter of promissory note, bill of exchange, letter of credit, draft, pay order, traveler’scredit, draft, pay order, traveler’s cheques, money order, postal or electronic remittance or any such similar instrument

Non- monetary consideration- money equivalent

2929


Money- 65B (33)

"money" means legal tender, cheques, promissory note, bill of exchange, letter of credit, draft, pay order, traveller cheques, money order, postal or electronic remittance or any similar instrument but shall not include any currency that is held for its numismatic value

Actionable Claim –Section 3 of Transfer of Property Act, 1882

• Claim to unsecured debts• Claim to beneficial interest in movable property not in

possession of claimant• Right to insurance claim• Arrears of rent

3030


Tax on Money RemittanceTax on Money Remittance No service tax on foreign currency remitted to No service tax on foreign currency remitted to

India from overseas (Circular No.163 dated India from overseas (Circular No.163 dated 10.7.2012)10.7.2012)

Amount of remittance comprises moneyAmount of remittance comprises money Service excludes money transactionsService excludes money transactions Even fee for remittance is not taxable (POPS) Even fee for remittance is not taxable (POPS) Sender of money outside India bank / company Sender of money outside India bank / company

remitting located outside Indiaremitting located outside India Fee charged by Indian bank - remitter located Fee charged by Indian bank - remitter located

outside India (not taxable as per POPS)outside India (not taxable as per POPS)

3131


Person-65B(37)Person-65B(37)"person" includes,––

• an individual,• a Hindu undivided family,• a company,• a society,• a limited liability partnership,• a firm,• an association of persons or body of individuals, whether

incorporated or not,• Government,• a local authority, or• every artificial juridical person, not falling within any of the

above

3232


Government – Not definedGovernment – Not defined Section 3 (22) of General Clause Act, Section 3 (22) of General Clause Act,

18971897 Includes Central/State Government/ Includes Central/State Government/

Union TerritoryUnion Territory Actions taken in the name of Actions taken in the name of

President/ GovernorPresident/ Governor Most of services provided by Most of services provided by

government are in Negative List government are in Negative List

3333


Local AuthorityLocal Authority - Section 65B(31)- Section 65B(31) A Panchayat as referred to in clause (d) of article 243 of A Panchayat as referred to in clause (d) of article 243 of

the Constitutionthe Constitution A Municipality as referred to in clause (e) of article 243P A Municipality as referred to in clause (e) of article 243P

of the Constitutionof the Constitution A Municipal Committee and a District Board, legally A Municipal Committee and a District Board, legally

entitled to, or entrusted by the Government with, the entitled to, or entrusted by the Government with, the control or management of a municipal or local fundcontrol or management of a municipal or local fund

A Cantonment Board as defined in section 3 of the A Cantonment Board as defined in section 3 of the Cantonments Act, 2006Cantonments Act, 2006

A regional council or a district council constituted under A regional council or a district council constituted under the Sixth Schedule to the Constitutionthe Sixth Schedule to the Constitution

A development board constituted under article 371 of A development board constituted under article 371 of the Constitution, orthe Constitution, or

A regional council constituted under article 371A of the A regional council constituted under article 371A of the Constitution.Constitution.

3434


Governmental Authority (N. No. Governmental Authority (N. No. 25/2012-ST)25/2012-ST) board/ Authority / other body board/ Authority / other body established with > 90% participation established with > 90% participation of government control/ equityof government control/ equity set up by Act of Parliament or State set up by Act of Parliament or State

LegislatureLegislature to carry out any functions entrusted to to carry out any functions entrusted to

municipality u/s 243W of constitutionmunicipality u/s 243W of constitution

3535

What is Service : What is Service : ExclusionsExclusions

'Service' does not include -'Service' does not include - any activity that constitutes only a transfer in title of any activity that constitutes only a transfer in title of

goods or goods or immovable property by way of sale, gift or in any other mannerimmovable property by way of sale, gift or in any other mannera transfer, delivery or supply of goods which is deemed to be a sale of goods a transfer, delivery or supply of goods which is deemed to be a sale of goods within the meaning of clause (29A) of article 366 of the Constitutionwithin the meaning of clause (29A) of article 366 of the Constitution

a transaction only in money or actionable claima transaction only in money or actionable claim

a service provided by an employee to an employer in the course of the a service provided by an employee to an employer in the course of the employment.employment.

fees payable to a court or a tribunal set up under a law for the time being in fees payable to a court or a tribunal set up under a law for the time being in forceforce

3636


This scope shall not apply to –This scope shall not apply to –

a)a) functions performed by M.P., M.L.A., Members of functions performed by M.P., M.L.A., Members of Panchayats / Municipalities who receive any consideration Panchayats / Municipalities who receive any consideration in performing the functions of that office as such member; in performing the functions of that office as such member; oror

b)b) duties performed by any person who holds any post in duties performed by any person who holds any post in pursuance of the provisions of the Constitution in that pursuance of the provisions of the Constitution in that capacity; orcapacity; or

c)c) duties performed by any person as a Chairperson or a duties performed by any person as a Chairperson or a Member or a Director in a body established by the Central Member or a Director in a body established by the Central Government or State Government or local authority and Government or State Government or local authority and who is not deemed as an employee before the who is not deemed as an employee before the commencement of this section.commencement of this section.

3737


It may be noted that -It may be noted that -

(a) an unincorporated association or a AOP and a member (a) an unincorporated association or a AOP and a member

thereof shall be treated as distinct persons;thereof shall be treated as distinct persons;

(b) an establishment of a person in the taxable territory and any of his other (b) an establishment of a person in the taxable territory and any of his other

establishment in a non-taxable territory shall be treated as establishments of establishment in a non-taxable territory shall be treated as establishments of

distinct persons.distinct persons.

(c)(c) A person carrying on a business through a branch or agency or A person carrying on a business through a branch or agency or

representational office in any territory shall be treated as having an representational office in any territory shall be treated as having an

establishment in that territoryestablishment in that territory

3737

3838

Taxability of Services – Then & Now

Period Taxable Non Taxable

Prior to Finance Act, 2012(upto 30.6.2012) Taxable services

specified in section 65 (105)

Import of services under reverse charge

Exempt services Service not covered

under section 65 (105) Export of services

Post Finance Act, 2012(w.e.f. 1.7.2012) All services provided in

taxable territory Declared services

Services in Negative List Exempt services Services provided in non-

taxable territory (as per POPS Rules)

3939

MAJOR CHANGES IN SERVICE TAX MAJOR CHANGES IN SERVICE TAX LAW BY The FINANCE ACT, 2012 - AT LAW BY The FINANCE ACT, 2012 - AT

A GLANCEA GLANCE Objective to widen tax baseObjective to widen tax base Service Tax law to be shorter by about 40 percent Service Tax law to be shorter by about 40 percent Effective rate of Service Tax shall be 12.36 percent w.e.f. Effective rate of Service Tax shall be 12.36 percent w.e.f.

01.04.2012 including education cesses.01.04.2012 including education cesses. Definition of ‘service’ finds place in statutory provisions Definition of ‘service’ finds place in statutory provisions All services to be taxed including a set of services called All services to be taxed including a set of services called

‘declared services’‘declared services’ Negative list of services containing 17 broad service Negative list of services containing 17 broad service

categories to be out of Service Tax ambit.categories to be out of Service Tax ambit. Withdrawing of many existing exemptions / abetments or Withdrawing of many existing exemptions / abetments or

their rationalizationtheir rationalization

4040

MAJOR CHANGES IN SERVICE TAX MAJOR CHANGES IN SERVICE TAX LAW BY The FINANCE ACT, 2012 - LAW BY The FINANCE ACT, 2012 -

AT A GLANCEAT A GLANCE

Place of provision of supply rules will determine the location of service Place of provision of supply rules will determine the location of service and become be basis of taxation.and become be basis of taxation.

Withdrawal of export of service rules and import of service rules in view Withdrawal of export of service rules and import of service rules in view of place of supply of service rules coming into operation.of place of supply of service rules coming into operation.

Concept of taxable territory and non- taxable territory brought in Concept of taxable territory and non- taxable territory brought in Basis of charge of Service Tax shifted under new section 66B. Basis of charge of Service Tax shifted under new section 66B. Taxation of Service to be determined by provision of service in taxable Taxation of Service to be determined by provision of service in taxable

territory and non taxable territory.territory and non taxable territory. Classification of service criteria replaced by new section 66F on Classification of service criteria replaced by new section 66F on

interpretation principles of specified description of service or bundled interpretation principles of specified description of service or bundled services. services.

4141


A GLANCEA GLANCE

Consequent upon change in service tax rates, there is change of service Consequent upon change in service tax rates, there is change of service tax rate in composition scheme and specified rates w.e.f. 1.4.2012 tax rate in composition scheme and specified rates w.e.f. 1.4.2012 (Composition scheme withdrawn w.e.f 1.7.2012.(Composition scheme withdrawn w.e.f 1.7.2012.

Penalty wavier for arrears paid within specified time in respect of renting Penalty wavier for arrears paid within specified time in respect of renting of immovable property service.of immovable property service.

Retrospective exemption to road repairs and repairs etc of non Retrospective exemption to road repairs and repairs etc of non commercial government buildings.commercial government buildings.

Under new reverse charge mechanism, onus of paying Service Tax will be Under new reverse charge mechanism, onus of paying Service Tax will be shared by service provider and service receiver in case of specified shared by service provider and service receiver in case of specified services.services.

Service Tax on taxable services provided by service provider located in Service Tax on taxable services provided by service provider located in Jammu & Kashmir state liable under reverse charge.Jammu & Kashmir state liable under reverse charge.

to be to be contd….contd….

4242


A GLANCEA GLANCE

Change in valuation rules in relation to works contracts and outdoor Change in valuation rules in relation to works contracts and outdoor catering / supply of food.catering / supply of food.

Provision introduced for date of determination of value of service, tax rate Provision introduced for date of determination of value of service, tax rate and rate of exchange.and rate of exchange.

Payment of Service Tax on receipt basis for all service providers being Payment of Service Tax on receipt basis for all service providers being individuals / firms / LLPs, if aggregate value of taxable services in previous individuals / firms / LLPs, if aggregate value of taxable services in previous year does not exceed Rs. 50 lakh.year does not exceed Rs. 50 lakh.

Criteria for Rs 10 lakh threshold exemption changed. Criteria for Rs 10 lakh threshold exemption changed. Time limit for appeal by assessees to Commissioner (Appeals) reduced Time limit for appeal by assessees to Commissioner (Appeals) reduced

from 3 months to 2 monthsfrom 3 months to 2 months Revision Application Authority and Settlement Commission provisions Revision Application Authority and Settlement Commission provisions

made applicable to service tax.made applicable to service tax. Special Audit of Service tax assesses by CAs /CWAs . Special Audit of Service tax assesses by CAs /CWAs .

4343

Goods & Service Tax Goods & Service Tax (The Future)(The Future)

GST: A Common TaxGST: A Common Tax

onon

Goods Services

4444

Pre-requisites for migrating to a Pre-requisites for migrating to a GST regimeGST regime

• Setting up of empowered committee for GST (like VAT) which can steer the Setting up of empowered committee for GST (like VAT) which can steer the road map into action - road map into action - donedone

• Broaden the tax base for excise duty (presently 40% comes from petroleum Broaden the tax base for excise duty (presently 40% comes from petroleum products) – products) – being donebeing done

• Finishing area based and product based exemptions – Finishing area based and product based exemptions – being donebeing done• Rationalization of concessions and exemptions including that on exports – Rationalization of concessions and exemptions including that on exports –

being donebeing done• Expanding service tax to almost all services – Expanding service tax to almost all services – now proposednow proposed• Common/unified tax rate for goods and services which may be ideally, Common/unified tax rate for goods and services which may be ideally,

revenue neutral (a suitable GST rate) – revenue neutral (a suitable GST rate) – dual tax proposeddual tax proposed• Avoiding or minimizing differential tax rates – Avoiding or minimizing differential tax rates – under discussionsunder discussions• Abolition of other small taxes - Abolition of other small taxes - under discussionsunder discussions• Abolition of CST in a phased manner - Abolition of CST in a phased manner - being donebeing done• Power to levy service tax on select/agreed services to States - Power to levy service tax on select/agreed services to States - under under

discussionsdiscussions• Issue of inter-State services and goods movement vis-à-vis levy of duty or Issue of inter-State services and goods movement vis-à-vis levy of duty or

tax to be sorted out - tax to be sorted out - under discussionsunder discussions• Revenue sharing mechanism to be rationalized - Revenue sharing mechanism to be rationalized - under discussionsunder discussions

4545

GST - Journey so farGST - Journey so far

Feb, 2006 : First time introduced concept of GST and announced the date of Feb, 2006 : First time introduced concept of GST and announced the date of its implementation in 2010its implementation in 2010

Jan. 2007: First GST study by ASSOCHAM released by Dr. Shome Jan. 2007: First GST study by ASSOCHAM released by Dr. Shome Feb. 2007: F.M. Announced introduction of GST from 1 April 2010 in BudgetFeb. 2007: F.M. Announced introduction of GST from 1 April 2010 in Budget April 2007 : CST phase out started - CST reduced to 3%, currently 1%April 2007 : CST phase out started - CST reduced to 3%, currently 1% May 2007: Joint Working Group formed by ECMay 2007: Joint Working Group formed by EC Nov. 2007: Joint Working Group submits report Nov. 2007: Joint Working Group submits report April 2008 : Empowered Committee (EC) finalizes views on GST Structure April 2008 : Empowered Committee (EC) finalizes views on GST Structure July 2009: FM announces commitment to bring GST from April 2010July 2009: FM announces commitment to bring GST from April 2010 Consultation on inter-state services in progressConsultation on inter-state services in progress

to be contd……to be contd……

4646


Budget 2010Budget 2010 To achieve the roll out of GST by April 2011 To achieve the roll out of GST by April 2011 Revamping of indirect tax administration at centre/ Revamping of indirect tax administration at centre/

states internal work processes based on use of states internal work processes based on use of information technology - massive information information technology - massive information technology (IT) platform technology (IT) platform

Project ACES- ‘Automation of Central Excise and Service Project ACES- ‘Automation of Central Excise and Service Tax’ rolled out Tax’ rolled out

Rate of service tax retained at ten per cent Rate of service tax retained at ten per cent States to revamp their internal work processes States to revamp their internal work processes

to be contd…to be contd………

4747


Budget 2011 Budget 2011 non-committal on timing and roll out but the Government non-committal on timing and roll out but the Government

introduced Constitutional Amendment Bill, 2011 introduced Constitutional Amendment Bill, 2011 overall amendments targeted towards moving close to overall amendments targeted towards moving close to

harmonize with GST regime in future harmonize with GST regime in future major highlights of budget discussions/proposals on GST major highlights of budget discussions/proposals on GST

– – DTC and GST to mark a water shedDTC and GST to mark a water shed Decisions on GST to be taken in concert with the Decisions on GST to be taken in concert with the

statesstates Areas of divergence between centre and states Areas of divergence between centre and states

narrowednarrowed Drafting of model legislation for central and state Drafting of model legislation for central and state

GST underway GST underway to be contd……to be contd……

`̀

4848


Establishment of IT infrastructure in process (GST Establishment of IT infrastructure in process (GST network) network)

NSDL selected as technology partner for GSTNSDL selected as technology partner for GST Tax rates maintained at same level of 10% to stay Tax rates maintained at same level of 10% to stay

on course towards STon course towards ST Certain central excise rates changed to prepare Certain central excise rates changed to prepare

the ground for transition to GST by reducing the ground for transition to GST by reducing number of exemptionsnumber of exemptions

Nominal central excise duty of 1% imposed on 130 Nominal central excise duty of 1% imposed on 130 items, no Cenvat credit allowed on such items.items, no Cenvat credit allowed on such items.

In service tax, proposals aimed to achieve a close In service tax, proposals aimed to achieve a close fit between the present service tax regime and fit between the present service tax regime and GST.GST.

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Budget 2012Budget 2012 No announcement on GST rollout date No announcement on GST rollout date GST to be implemented in consultation with the States at the earliest GST to be implemented in consultation with the States at the earliest GST network (GSTN) likely to be in place from August, 2012GST network (GSTN) likely to be in place from August, 2012 GSTN to implement common PAN based registration, return filing and GSTN to implement common PAN based registration, return filing and

processing of payments for centre and all states on a shared platform.processing of payments for centre and all states on a shared platform. Bringing closer of Service Tax and Central Excise for transition to GST Bringing closer of Service Tax and Central Excise for transition to GST Drafting of model legislation for CGST and SGST under progress.Drafting of model legislation for CGST and SGST under progress. Common forms for Service Tax and Central Excise registration and Common forms for Service Tax and Central Excise registration and

return proposed.return proposed. Place of Supply Rules, 2012 to trigger debate to assess issues that may Place of Supply Rules, 2012 to trigger debate to assess issues that may

arise in taxation of inter state services for eventual launch of GST. arise in taxation of inter state services for eventual launch of GST.

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The Journey – The Journey – beginning of end…….beginning of end…….

Past Now Past Now FutureFuture

National GST Dual GST ???????

Past Now Future

…or end of beginning !!

A Knowledge Workshop-Presentation i dated 14th July,2012

Education

Transcript of A Knowledge Workshop-Presentation i dated 14th July,2012