Goods and Service Tax (GST) BY BINOD KUMAR COMMISSIONER, CT, WB - PowerPoint PPT Presentation

Goods and Service Tax (GST) BY BINOD KUMAR COMMISSIONER, CT, WB

Contents Present Indirect Tax Structure in India Constitutional Provisions for Indirect Taxation What is GST & Why GST Benefits of GST Taxes to be subsumed in GST Proposed Indirect Tax Structure in GST Features of the proposed GST Model IGST Model with illustrations Constitutional Amendment Bill Road to GST- Milestones Issues relating to Services Current Status

Present Indirect Tax Structure of India 7 Important constituents Tax administered by Tax administered by Union Government State Government v Sales Tax /VAT- Taxable event is sale of goods including deemed v Customs Duty sales. Taxable event is Import/Export v CST - Taxable event is inter- v Excise Duty state sale of goods including deemed sales. Taxable event is Manufacture v Entry Tax – Taxable event is v Service Tax entry of goods into local area for sale, Taxable event is provision of consumption or use therein service v Entertainment Tax – Taxable event is entertainment

Important Constituents Customs Duty - Entry No. 83 of List I. Constitutional Excise Duty - Entry No. 84 of List I. Provisions of Indirect Taxation Service Tax - Residuary Entry No. 97 of List I. in India CST - Entry No. 92A of List I. Sales Tax /VAT- Entry No. 54 of List II. Entry Tax - Entry No. 52 of List II. Entertainment Tax - Entry No. 62 of List II. 4

Seventh Schedule of the Indian Constitution Union list consists of 100 items ( though last item is numbered 97 ) - Parliament has exclusive power to levy tax. State list consists of 66 items - Individual States have exclusive authority to levy tax. Concurrent list consists of 47 items – both the Governments can levy tax. Presently goods are liable to India has a two tier federal Excise duty / Vat or Sales tax / power to collect tax – the Union Entry tax / Customs duty, while Government, the State taxable services attract service Governments including tax. urban/rural local bodies .

WHAT IS GST? GST is a comprehensive value added tax on goods and services. It is collected on value added at each stage of sale or purchase in the supply chain. No differentiation between Goods and Services as GST is levied at each stage in the supply chain. Seamless input tax credit throughout the supply chain. At all stages of production and distribution, taxes are a pass through and tax is borne by the final consumer.

WHAT IS GST? (..continuation) Typically it is a single rate VAT in most countries but two - three rate VAT systems are also prevalent Canada and Brazil alone have a dual VAT. Standard GST rate in most countries range between 15-20 percent. GST exists in over 140 countries . IN SHORT GST IS NOTHING BUT VAT THAT REQUIRES TAX-PAYERS TO PAY TAX ONLY ON THE VALUE THEY ADD TO THE GOODS OR SERVICE, IN PLACE OF THE CURRENT SYSTEM IN WHICH THE CENTRE AND STATE IMPOSTS CASCADE ON THE PRICEOF THE PRODUCT.

With the challenge to minimize the following Non Harmonization of Tax rates. Why Multiple Registration GST? Different rate of tax on same item in different States. Cascading effect, Double taxation, confusion between sales & service. Complicated tax structure. High expenditure for different revenue administration. Lack of Cross Verifications with other tax administrations. 8 High overhead expenses increases goods price.

Benefits Benefits to Assessees Benefits to Exchequer/Govt. • Reduction in multiplicity of taxes. • Simpler Tax system. • Broadening of Tax base. • Mitigation of cascading/ double taxation. • Improved compliance & revenue • More efficient neutralization of collections (tax booster) with lower taxes especially for exports. expenditure. • Development of common • Less chances of evasion. national market. • Creating more attractive Indian • Simpler tax regime - market. Fewer rates and exemptions. Conceptual clarity (Goods vs. Services).

TAXES TO BE SUBSUMED IN GST CENTRAL TAXES STATE TAXES CENTRAL EXCISE DUTY VAT / SALES TAX including ( excluding petroleum, natural gas, ATF, Purchase Tax tobacco, etc) ADDITIONAL EXCISE Central Sales Tax DUTIES ( administered by the State ) SERVICE TAX LUXURY TAX ADDITIONAL CUSTOMS ENTERTAINMENT TAX DUTY (CVD) (unless levied by local bodies) SPECIAL ADD. DUTY OF SURCHARGES & CESSESS CUSTOMS (SAD) SURCHARGES & CESSES ENTRY TAX TAXES ON LOTTERY, BETTING EXCISE DUTY UNDER M.T.P. AND GAMBLING ACT.

FEATURES OF THE PROPOSED GST MODEL Ø Destination based Taxation. Ø Apply to all stages of the value chain. Ø Apply to all taxable supplies of goods or services ( as against manufacture, sale or provision of service ) made for a consideration except- § Exempted goods or services § Goods or services outside the purview of GST § Transactions below threshold limits. Ø Dual GST having two concurrent components – Central GST levied and collected by the Centre • • State GST levied and collected by the States.

FEATURES OF THE PROPOSED GST MODEL Ø CGST and SGST on intra-State supplies of goods / services in India Ø IGST (CGST plus SGST) applicable to (i) Inter-State supplies of goods / services in India (ii) Inter-state stock transfers of goods (iii) Import of goods / services Ø IGST levied and collected by the Centre Ø Export of goods and services – Zero rated All goods / services to be covered under GST except: ü Alcohol for human consumption - State Excise plus VAT ü Electricity - Electricity Duty ü Real Estate - Stamp Duty plus Property Taxes ü Petroleum – T ill GST Council decides (A) will be out of the purview of GST; (B) sales tax / central levies will continue at the current rate Ø Tobacco products – under GST plus Central Excise

Input Tax Credit in GST Model Against SGST ITC on SGST Against IGST Against CGST ITC on CGST Against IGST Against IGST ITC on IGST Against CGST Against SGST ORDER TO BE MAINTAINED

MODEL FOR INTER-STATE TRANSACTIONS OF GOODS / SERVICES THE WORKING GROUP HAS RECOMMENDED THE IGST [ INTEGRATED GST ] MODEL FOR INTER-STATE SUPPLIES OF GOODS / SERVICES.

In- Out-put put IGST MODEL (100% LOCAL PURCHASE SALE) LOCAL PUR ASSUMPTION LOCAL SALE INVOICE INVOICE Basic price: 1000 Value addition : 10% Value: 1000 Value: 1100 IGST rate : 20% CGST: 100 CGST rate :10% CGST: 110 SGST : 100 SGST rate : 10% SGST : 110 Total:1200 Total:1220 NET AMOUNT PAYABLE- CGST=110 – 100 =10, & CGST:100 CGST:110 SGST=110 – 100 =10 SGST:100 SGST:110

In- Out-put put IGST MODEL (100% CENTRAL PURCHASE AND 100% LOCAL SALE) ASSUMPTION CENTRAL LOCAL SALE Basic price: 1000 PUR INVOICE INVOICE Value addition : 10% IGST rate : 20% Value: 1000 Value: 1111 CGST rate :10% IGST : 200 CGST: 111.10 SGST rate : 10% Addl. Tax:10 SGST : 111.10 Addl. Tax :1% Total:1210 Total:1333.20 AS THE DEALER HAS NO ITC ON LOCAL INPUTS, HE WILL FIRST ADJUST ITC ON IGST, WITH CGST & THEN THE BALANCE, IF ANY, WITH SGST. IGST:200 CGST:111.1 SGST:111.1 NET AMOUNT PAYABLE: CGST=111.1 – 111.1 =0, SGST=111.1 – (200-111.1)=22.2

ADVANTAGES OF IGST MODEL MANINTAINS UNINTERRUPTED ITC CHAIN IN INTER-STATE TRANSACTIONS; NO UPFRONT PAYMENT OF TAX, THUS NO BLOCKAGE OF FUNDS FOR INTER-STATE TRANSACTIONS; EVEN ALLOWS SET-OFF OF SGST WITH IGST & VICE VERSA; SELF MONITORING MODEL; LEVEL OF COMPUTERISATION IS LIMITED TO INTER-STATE TRANSACTIONS; ALLOWS INTER UNIT TRANSFER OF IGST-ITC; SUCCESSFULLY ADDRESSES B2C TRANSACTIONS.

Constitutional Amendment Bill

Features of Constitutional Amendment Bill 122nd Amendment Bill introduced in LS on 19.12.2014 Concurrent jurisdiction for levy of GST by the Centre and the States – proposed Article 246A Authority for Centre to levy & collection of IGST on supplies in the course of inter-State trade or commerce including imports – proposed Article 269A Authority for Centre to levy non-vatable Additional Tax – to be retained by originating State GST defined as any tax on supply of goods or services or both other than on alcohol for human consumption – proposed Article 366(12A) Goods includes all materials, commodities & articles – Article 366 (12) Services means anything other than goods – proposed Article 366 (26A)

Features of Constitutional Amendment Bill Goods and Services Tax Council (GSTC) – proposed Article 279A To be constituted by the President within 60 days from the coming into force of the Constitutional Amendments Consists of Union FM & Union MOS (Rev) Consists of all State Ministers of Finance Quorum is 50% of total members Decisions by majority of 75% of weighted votes of members present & voting 1/3rd weighted votes for Centre & 2/3rd for all States together

Features of Constitutional Amendment Bill Council to make recommendations on the following Ø Taxes, etc. to be subsumed in GST Ø Exemptions & thresholds Ø GST rates & Band of GST rates Model GST Law & procedures Ø Special provisions for special category States Ø Ø Date from which GST would be levied on petroleum products Ø Council to determine the procedure in performance of its functions Ø Council to decide modalities for dispute resolution arising out of its recommendations.