51 Gst Seminar Final

8/6/2019 51 Gst Seminar Final

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Current System

Trading community cannot take input tax

credit of CST, CVD paid on importedgoods, excise duty on domesticallymanufactured goods, service tax on inputservicesService providers cannot take credit of

VAT or CST paid on domesticallyprocured goods; and SAD paid onimported goodsService providers are paying one single

uniform tax for providing services.

At the state level, there are multipletaxesThe threshold limits for attracting liability

to state VAT varies from state to state

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Wha t is Goods & Services T ax?G ST is a broad based and a singlecomprehensive tax levied on goodsand services consumed in aneconomy.

G ST paid on the procurement of goods and services can be set off against that payable on the supply of goods or services. But being the last

person in the supply chain, the endconsumer has to bear this tax and so,in many respects, G ST is like a last-point retail tax.

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GST Glob a l Scen a rio

M ore than 140 countries have already introduced G ST/National VAT.France was the first country to introduce G ST system in 1954.

M ost countries have a single G ST rate.

Typically it is a single rate system but two/three rate systems are alsoprevalent depending upon the requirement of the implementing nation.

Standard G ST rate in most countries ranges between 15-20%

All sectors are taxed with very few exceptions/ exemptions

Full tax credits on inputs 100% set off Canada and Brazil alone have a dual VAT.

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B a ckground in Indi aThe effort to introduce the new taxregime was reflected, for the first time, in2006-2007 Union Budget Speech.The then Finance M inister M r. P.Chidambaram remarked that there is alarge consensus that the country must

move towards a national levelG

ST thatmust be shared between the centre andthe states.He proposed 1 April, 2010 as the date

for introducing G ST. After successfulintroduction of Value Added Tax (VAT) inalmost all the states and continuousincrease in number of services under theservice tax net.Finance M inister Pranab M ukherjee whilepresenting the Budget on July 6, 2009,said that G ST would come into effectfrom April 2010

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C onstitution of t h e JointW orking Group(J W G)

E mpowered Committee of State Finance M inisters has been workingwith the Central G overnment to prepare a roadmap for introducing anational level G ST with effect from 1 April 2010.

In M ay 2007, E mpowered Committee ( E C) of State Finance M inistersin consultation with the Central G overnment, constituted a JointWorking G roup (JW G ), to recommend the G ST model.

The JW G had been entrusted with the task of studying global G STmodels and identify alternate models for introduction in India.

Within 7 months of its constitution that is in November 2007, JW G presented its report on the G ST to the E C. The E C has accepted thereport on G ST submitted by the JW G .

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Continued

Based on a study of the alternate models vis--visIndias federal structure, the JW G had suggested thebest model for introduction of G ST in India.

Dual G ST recommended by Joint Working G roup of the E C.

E C has accepted the recommendations andsubmitted its report to the G overnment.

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B a sic Structure of GST

Central G ST andState G ST to operate

in a parallel fashion.Both Central and StateG ST to be further bifurcated into GoodsTax and Services Tax.

The proposed rate of G ST in India is between12% -16%.

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T ax es proposed to be

subsumed by GSTValue Added TaxService Tax

Central E xciseE ntertainment TaxLuxury TaxOctroi

Lottery Tax

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R ecommend a tions of J W G

The committee has suggested that G ST, when it rolls will have twocomponents Central tax and a single uniform state tax across thecountry.

The JW G report had suggested that states must tax intra-state serviceswhile inter-state services must remain with the Centre.

Petroleum products, including crude, high-speed diesel and petrol, mayremain outside the ambit of G ST.

Central cess like education and oil cess may be kept outside the dualG ST structure to be introduced.

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R ecommend a tions

Besides central cess, the E Cof State Finance M inistershas also recommended tokeep purchase tax andoctroi, which are collected atstate and local levels,outside the G ST framework.

The report has alsorecommended keeping

stamp duty, which is a goodsource of revenue for states,out of the purview of theG ST. Stamp duty is leviedon transfer of assets likehouses and land.

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H ow will t h e du a l structure

work ?

Central G ST and State G ST would be levied on differentservices.

State G ST would be levied on services of local nature.

Single periodical return would be filed under the dual structure.

E xport of goods and services would be zero rated, meaning

exporters of goods and services need not pay G ST on their exports. G ST paid by them on the procurement of goods andservices will be refunded.

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Continued.

Any economic activity which is not supply of goods issupply of services.

All services to be taxed with few exceptions.

Central G ST on services relatively easy to collect.

StateG

ST on services will be far more complex particularly on cross border services.

Cross border Services

Taxed at the place of consumption of services 13


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Continued

G ST paid on imports (goods as well as services) would be available ascredit.

Input tax Credits ( ITC)

full credits under the Central and the State G ST that will operate inparallelcross utilization of credits between Central G ST and State G ST notpermittedrefund of unutilized accumulated ITC.

Inter-State transactionsgoods to be taxed in the destination/importing Stateservices to be taxed in the State of consumptionzero rating in the originating State

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L ikely Fe a tures of GSTCredit of tax paid on purchaseswould be allowed across the supplychain

Credit of State G ST may not be

allowed against CentralG

ST or vice

versa.

State G ST paid in one State wouldbe creditable against State G STliability of another State.

Requirement of C forms and Fforms would be abolished.

Certain specified goods may besubject to a lower State G ST rate or be exempted.

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Continued

M anufacturers, traders and service providers havingturnover more than the threshold limit to register under Central and State G ST.

A single Tax Identification Number (TIN) would beallotted for both Central and State G ST.

Both Central as well as State G ST would be levied at

every point of sale.

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Why GST

???

A simple tax structure with only one or tworates of taxes.

Uniform single tax across the supply chain.

Reduced transaction cost in the hands of the tax payers.

Increased tax collections due to wider taxbase and better compliance.

Improvement in international costcompetitiveness of indigenous goods andservices.

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Continued

E nhancement in efficiency in manufacture and distribution due toeconomies of scale.

G ST encourages an unbiased tax structure that is neutral to businessprocesses, business models, organization structure, product substitutesand geographical locations.

The prices of commodities are expected to come down in the long runas dealers pass on the benefits of reduced tax incidence to consumersby slashing the prices of goods.

replacing the cascading effect [tax on tax] created by existing indirecttaxes.

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H urdles in Implement a tionImplementation of G ST calls for effecting widespread amendments inthe Constitution and the variousconstitutional entries relating totaxation.Such amendments may virtuallytransform the Indian federation into aneconomic Union much along the linesof the E uropean Union.It is important to note that states willhave to be given constitutional powersto tax services. At present, states do

not enjoy the power to tax services.The various levies of the Union andthe states are also to be harmonized.In the current scenario it is difficult tovisualize constitutional amendmentsof such far reaching implications.


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ContinuedFate of various area based exemptions/concessions provided byCentral as well as State to be decided

Treatment of inter-state branch transfers under the G ST scenario to beidentified.

Whether unadjusted tax credits would be refunded by the State asapplicable under the present VAT system is yet to be decided.

Protecting and balancing the present and future revenues of the Centreand the States.

The Centre is expected to put in place a mechanism to compensatestates for any revenue loss due to G ST.

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A dministr a tiveM a c h inery

Standardization of systems andprocedures

Uniform dispute settlementmachinery

Training

Re-organization of

administrative machinery for G ST implementation.

Building information technologybackbone the single mostimportant initiative for G STimplementation

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E nsuring uniform

implement a tionUniform Implementation of G STshould be ensured across all

states(unlike staggeredimplementation of VAT).

M any issues might crop up incase of transactions betweenstates who comply with G ST &states who are not complyingwith G ST.

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Wa y forw a rd.The dual structure should besimple to understand andimplement.

Creating consumer and supplier awareness before introductionof the dual structure.

The cost of compliance shouldbe minimum i.e. reporting andcompliance procedures should

be identical across all theStates.

The format of periodical returnsshould be identical across allthe States.

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Wa y forw a rd.

Dispute settlement machinery should be uniformunder the State G ST.

Lower level tax authorities should have adequateunderstanding of the fundamentally different law.

States should have powers to increase/decrease therate of State G ST on certain specified goods within a

permissible limit.Introduce electronic State G ST and Central G STrefunds.

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FM ir r ll tt th r ith D

With the introduction of proposed G ST, missed the timeframe of Aprilone, 2011, the government today expressed desire to roll it out together with DTC from 2012-13.

Addressing a seminar on G oods and Services Tax ( G ST), FinanceM inister Pranab M ukherjee, however, admitted that there are someproblems in the way of implementing the new indirect tax system.

He said issues relating to constitution amendments required to roll outthe new indirect tax system remain to be sorted out with states.

M ukherjee said the Centre is willing to consider phased roll out of G STand hence suggested three-year time frame to ultimately roll out oneG ST rate for all goods and services..

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G ST is expected to replace state-level VAT and excise duty as well asservices tax on the Centre's front,

besides local taxes, cesses andsurcharges.

The roll out of G ST, however, hasalready missed the earlier deadlineof April one, 2010, while thegovernment's keenness toimplement it from April one, 2011 isalso missed.

The E mpowered Committee of state

finance ministers has not come outwith any consensus view on theCentre's proposal on constitutionamendment bill for roll out of G ST.

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Some states, mainly BJP-ruled and a few others,oppose the Centre'sproposal to have a G ST council which will be empowered to effectchanges in the indirect tax system.

The council is proposed to be headed by Union Finance M inister andall states are suggested to be its members.

The finance minister said in multi-party, multi-ethnic country like India,divergent views are bound to occur and hoped that consensus wouldbe found in E mpowered Committee over the issue.

The division was so much, that the last meeting of the committee heldearlier this month skipped the issue of constitution amendmentsaltogether.

Constitution amendments are required in G ST since the Centre cannotimpose tax beyond manufacturing, and states cannot levy service taxunder the present scheme of things....

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Imp a ct of GSTWould eliminate the non-creditable Central taxes, whichare today a cost to the tradingcommunity.Service providers will be able toclaim ITC of state taxes whichare currently not creditableIncreased output tax where thecombined rate of C G ST andS G ST is higher than the current

service tax rate of 10.3%Single tax at state level wouldsimplify tax payment,compliance and itsadministration.

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ConclusionTo conclude,

GST will not only impact thefinances, but would also affect several other

activities of companies, including human resourcemanagement. In order to ensure a smoothtransition to the new regime, organizations wouldneed to assess the overall impact of the new levyon all facets of business, and carry out therequisite changes in a timely manner. For asuccessful implementation, clearly theadministrative aspects of G ST would have to betaken care of by both the G overnment, as well as

taxpayers.

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Lets hop e GST i s

Great & Simplified Tax !!!

Thank you.

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51 Gst Seminar Final

Documents

Transcript of 51 Gst Seminar Final