India gst 25 dec14

Ketan Jog | 25.Dec.14

GST in India

GST| Part 2 | 24.Jun.13| slide 2

GST?‘G’ – Goods

‘S’ – Services‘T’ – Tax


Contents

History of GST concept in India.

Constitutional Setup for levy of Indirect Taxes.

Advent of GST in India and Taxes Subsumed.

Basic Concept.

Modus Operandi.

Benefits.

Impact on certain categories of Goods & Services.

Challenges Ahead.

Global Scenario.

Latest Updates.


History of GST concept in India

In 2003, Finance Minister of India in his budget speech Introduced Fiscal

Responsibility and Budget Management (FRBM) Bill to attain a ZERO Fiscal

deficit.

Task Force formed under Shri Vijay Kelkar recommended a single GST (Goods

and Services Tax) – replacing numerous taxes in existence.

In due course, an empowered committee (EC) of state finance ministers was

formed to take steps to implement Kelkar Committee recommendations.

Its been 12 Years of negotiations between Centre and States!!!

Single GST concept was rejected in favor of a DUAL GST – One for the Centre

(CGST) and other for State (SGST).

It has now become CGST, SGST and IGST!!!. IGST is Integrated GST on Inter

State Transactions.


Constitutional Setup for levy of Indirect Taxes Taxes levied by Central Government and State Government(s) Authority to levy a tax is derived from the Constitution of India

Which allocates power to levy various taxes between the Centre and State Article 265 of the Constitution which states that "No tax shall be levied or collected except

by the authority of law”

Article 246 of the Indian Constitution, distributes legislative powers including taxation, between the Parliament of India and the State Legislature

Schedule VII enumerates use of three lists; List - I Where the parliament is competent to make laws List - II Where only the state legislature can make laws List - III Where both the Parliament and the State Legislature can make laws upon

concurrently


Constitutional Setup : Current

Union List State List Concurrent List• Income Tax• Custom Duty• Excise Duty• Service tax• Central Sales Tax• Stamp duty in respect of

bills of exchange, cheques, promissory notes, etc

• Taxes on lands and buildings

• Excise duty on alcoholic liquor etc

• Entry tax (Levied by State)

• Sales Tax• Road Tax• Luxury Tax• Stamp duty in respect of

documents other than those specified in the provisions of List I

• Stamp duties other than duties or fees collected by means of judicial stamps, but not including rates of stamp duty

Taxes levied under authority of the Constitution


Constitutional Amendment Bill (CAB) Changes to constitution are to be approved by 2/3rd Majority in Both Houses. Finance Minister, Shri Arun Jaitley presented the Constitution Amendment Bill

(CAB) in the Loksabha on 19.Dec.14 Proposed Constitutional structure for Tax Levy

“Both” Parliament and States may make laws with respect to Goods & Services Tax. Only Parliament can make laws with respect to Goods & Service Tax in course of

Interstate Trade or Commerce.

Concept of “Declared Goods” or Goods of Special Importance is proposed to be removed

Additional 1% Tax for 2 years on Interstate Trade, 5 Years compensation to states for Loss of Revenue on account of CST.

Voting power between Centre and States defined : Centre has 33.33% of voting Power Remaining 66.67% with States. Votes of state to be calculated as per formula :

– Votes of all States / No. of States Present & Voting * No. of States in Favor

GST Council comprising Union and State Finance Ministers to find a way forward


GST in India – Taxes Subsumed

Dual GST

Central

Central Excise Duty

Addnl. Excise Duties

Excise Duty (Others)

Service TaxCVDSAD

CSTAll

Surcharges & Cesses State

Octroi, Entry, Purchase Tax

Cesses and surcharges on

goods and services

Taxes on lotteries, betting,

gambling

Luxury Tax

Entertainment Tax (except

levied by local bodies)VAT/Sales Tax


Constitutional Setup : as per Proposed CAB

By Union By States By Both Union & States

• Income Tax• Custom Duty• Excise Duty• Service tax• Central Sales Tax• Stamp duty in respect of

bills of exchange, cheques, promissory notes, etc

• Interstate sale of Goods & Services (IGST)

• Excise on Petrol, Crude, Diesel, ATF, Tobacco products.( ? Notified Date ?)

• Taxes on lands and buildings

• Excise duty on alcoholic liquor etc

• Entry tax (Levied by State)

• Sales Tax• Road Tax• Luxury Tax• Stamp duty in respect of

documents other than those specified in the provisions of List I

• On all Goods & Services except Alcoholic Liquor (CGST and SGST)

• Stamp duties other than duties or fees collected by means of judicial stamps, but not including rates of stamp duty

Taxes levied under authority of the Constitution


Definitions Goods & Services Tax : Article 366A (Clause 12A) of the Constitution of

India :

means any tax on supply of goods or services or both except taxes on the supply of the alcoholic liquor for human consumption. Services : Article 366A Clause (26A) of Constitution says “Services”

means anything other than goods. Goods : means every kind of movable property other than actionable

claims and money; and includes stock and shares, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale.


ObjectivesThe incidence of tax falls only on domestic consumption; The efficiency and equity of the system is optimized;There should be no export of taxes across taxing

jurisdictions; The Indian market should be integrated into a single

common market; It enhances the cause of cooperative federalism.


Basic Concepts

Like a National level VAT on Goods and Services.

Tax on domestic consumption.

No differentiation between Goods and Services.

Tax leviable at each point of sale or provision of service.

Input Tax Credit is available at every stage.

Treats whole country as a single jurisdiction.

Uniform Tax rates across the whole jurisdiction.

No distinction in Tax rates on Imported or Domestic Goods.

Single Tax jurisdiction allows ease of allowing Input Tax Credit.

Destination based tax for interstate transactions (IGST)- ultimate tax will be

collected by the state in which goods are finally consumed.


Modus Operandi Single PAN based Tax Registration Number. Three additional digits would be

added to the current PAN to identify registration for the Centre and State GSTs.

A registered dealer is to charge GST on Sale (Output) and pay GST on claim

credit of GST on Purchases (Inputs). Difference in OUTPUT GST and INPUT

GST has to paid to the tax authorities.

Centre and States will legislate, levy & administer CGST & SGST respectively.

A Constitutional mechanism will be introduced to ensure uniformity in rates and

other relevant parameters between Centre & States. The rates can thereafter not

be changed by the Centre or any of the States, without approval of the same

mechanism.

Centre will give Input Tax Credit (ITC) only for CGST & IGST and the State only

for SGST IGST. Cross utilization of ITC between CGST & SGST not allowed.

Uniform procedures – one common tax return for both taxes, with one copy given

to the Central authority and the other to the relevant State authority.


How will the Tax look on an Invoice

■ Supply within State:

■ Supply from One State to Another

■ Exports

– The Base for both CGST and SGST is same – no tax on tax

– Tax Rate is assumed 10%

– Revenue Neutral Rate as worked out earlier : 12%

Basic value charged for supply of goods or services 10,000Add: CGST @ 10% 1,000Add: SGST @ 10% 1,000Total price charged for local supply of goods or services 12,000

Basic value charged for supply of goods or services 10,000Add: IGST @ 20% 2,000Add: Additional IGST @ 1% 100

Total price charged for interstate supply of goods or services 12,100

Basic value charged for supply of goods or services 10,000Add: CGST \ SGST \ IGST NIL NilTotal price charged for export of goods or services 10,000


Set Off or Input Tax Credit

Nature of tax paid on purchase

Can be utilized for payment of

CGST CGSTIGST

SGST

SGSTIGST

IGST CGSTSGSTIGST


Benefits

• Reduction in the number of taxes at the Central and State level

• Decrease in effective tax rate for many goods

• Removal of the current cascading effect of taxes

• Reduction of transaction costs of the taxpayers through simplified tax compliance

• Increased tax collections due to wider tax base and better compliance


Some Peculiar Cases

• Threshold Limit for registration of GST dealers(25 Lakhs / 1 Crore … or?)

• Separate Rate for Small Scale Dealers : ?1%

• Area Based Tax Exemptions

• Supplies to EOUs / SEZs / Backward Areas

• Import of Services

• Stock Transfers

• Supplies for Exports to Dealers


Treatment of Certain Goods & Services

• Immovable Property

• Transport

• Health Services

• Capital Goods

• Precious Metals


Challenges ………

■ Passage of CAB in the Parliament

■ Draft GST Law preparation and approval by Central and State elected bodies.

■ Standardization of systems and procedures all over India

■ Training/ Equipping Tax administration

■ States not willing to give Veto to Union

■ Compensation disbursal doubts

■ Additional IGST at 1% may be extended beyond 2 Years.


Globally More than 140 countries around the world have a GST regime.

Standard GST rate is between 10-20%.

SINGLE GST rate.

Full Tax Credits allowed for Inputs.

Few Countries allow very few exemptions from GST for specific cases.

Dual GST model in Brazil and Canada.

In US, no such “National” General Sales Tax exists.


China 17%

Indonesia 10%

Philippines 10%

UK 17.5%

Australia 10%

France 19.6%

Germany 16%

Denmark 25%

India ? ? ?

Global Tax Rates

Principal Characteristic – Single Tax Rate


QUESTIONS & COMMENTS?

Interactive


THANK YOU!!

India gst 25 dec14

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Transcript of India gst 25 dec14