Goods and Service Tax (GST) – PPT by Indirect Committee of ICAI

Goods and Service Tax (GST) – PPT by Indirect Committee of ICAI
GST
Dated:- 17-1-2015

Constitution Amendment Bill in the Lok Sabha today with respect to Goods and Services Tax (GST)
 
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Document 1
Goods and Service Tax
(GST)
Globally Known As VAT
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Standardised PPT by
Indirect Taxes Committee
Institute of Chartered Accountants of India
Indirect Taxes Committee of ICAI
Major Initiative in 2014-15
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Organized More than 100 Program in One Council Year.
E Learning Course on Excise, Custom, Service tax and CST Launched- to learn any
where, any time.
12 Web Cast with recorded Lecture for free download.
More than 6 Research based Publication launched, 9 more into release by end of
January 2015.
Organized more than 25 program for CBEC officials for capacity building in
Department.
Pursuing Service Tax Audit in line with 44AB Audit in Income Tax to give bird eye view
on complianc

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No. 83,
List I, Schedule
VII
Entry No. 52
&62 List II,
Schedule VII
Taxable Event is
Sale
Taxable Event is
Import & Export
Taxable Event is
Entertainment
& Entry of
Goods
Proposed Indirect Tax Structure
Intra State
Taxable
Supply
Inter State
Taxable
Supply
Import From
Outside
India
Excise and
Service Tax will
be known as
CGST
CST will be
known as
Integrated GST
(IGST)
Custom Duty
Local VAT &
Other taxes will
be known as
SGST
Approx. Sum
Total of CGST
and SGST
In Place of CVD
and SAD, IGST
will be charged
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LO
•
Benefits to Assessee
Reduction in multiplicity of taxes.
Mitigation of cascading/ double taxation.
More efficient neutralization of taxes especially for exports.
Development of common national market.
Simpler tax regime –
。 Fewer rates and exemptions.
。 Conceptual clarity (Goods vs. Services).
•
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CO
Benefits to Exchequer/Govt.
Simpler Tax system.
Br

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Expectations from GST
Automation of process by way of e-registrations, e-returns, e-payment
â–  No requirement of verifications during inter state movement of Goods
Zero rating of supplies to exporters
Administrative efficiency in case of assessment and adjudication
Ease of compliance
Self-policing
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10
FEATURES OF PROPOSED GST
MODEL
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11
Features of Proposed GST
Destination based Taxation
Apply to all stages of the value chain
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 – common list for CGST & SGST
Goods or services outside the purview of GST
Transactions below threshold limits
Dual GST having two concurrent components-
。 Central GST levied and collected by the Centre
。 State GST levied and collected by the States
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Features of Proposed GST contd.

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duties of exci se
â–  Excise duty levied under â–ª
Medicinal & Toiletries
Preparation Act
â–  Additional
duties
Service Tax
â–  Surcharges & Cess
customs (CVD & SAD)
Purchase Tax
Entertainment
(not
levied by the local bodies)
â– 
Luxury Tax
of â–ª
Entry Tax (All forms)
â–  Taxes on lottery, betting &
gambling
Surcharges & Cess
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Features of Proposed GST contd.
GST Rates-to be based on RNR- Four rates
。 Merit rate for essential goods and services
。 Standard rate for goods and services in general
。 Special rate for precious metals
。 NIL rate
Floor rate with a small band of rates for standard rated goods or services for SGST
o This is similar to mandatory guidelines which will be issued by GST Council in line with
European Directive 12/2006
Optional Threshold exemption in both components of GST.
Optional Compounding scheme for taxpayers having taxable turnover up to a certain

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= 12.10
(Rs. 10 + 1 + 1.10)
Dealer
Consumer
CGST = * 12.10
ITC = (11)
1.10
Central Tax = 12.10
(10+1+1.10)
Tax Invoice (A)
Tax Invoice (B)
Tax Invoice (C)
Cost
=
100
Cost
=
110
Value
=
100
Value
=
110
Value
=
121
CGST
SGST
=
10
CGST
=
11
CGST
=
12.10
=
10
SGST
=
11
SGST
=
12.10
120
132
145.20
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State Tax (X) = Rs. 11
Present Scenario (Inter-State Trade of Goods)
VAT = 11
CST = 2.42
ITC = (2.42)
Entry Tax
3
=
VAT 13.31
ITC = (12.10)
0
1.21
Input Manufacturer
Excise = 10
Output Manufacturer
Excise = 11
ITC = (10)
1
State Tax (Y) = 16.91
(Rs. 13.91 + Rs. 3)
Dealer
Consumer
Tax Invoice (B)
Tax Invoice (A)
Tax Invoice (C)
Cost
=
100
Value
=
100
Cost
=
126.42
Value
=
110
Excise
VAT
=
10
Value
=
139.06
Excise
=
11
=
11
VAT
=
13.91
CST
=
2.42
121
152.97
123.42
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Central Tax = 11
(10+1)
20
20
GST Scenario (Inter-State Trade of Goods)

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Non-Vatable Tax borne by
11.00
0.00
25.00
1.10
Business
8.
Total Tax paid by Consumer
13.31
24.20
13.91
24.44
9.
Final value paid by Consumer
146.41
145.20
152.97
146.65
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222
Present Scenario (Intra-State Trade of Service)
Input Service Provider
Output Service Provider
Consumer
Service Tax = 11
Service Tax = 10
ITC
= (10)
1
Tax Invoice (B)
Tax Invoice (A)
Cost
= 100
Value
= 100
Value
= 110
Service Tax
= 10
Service Tax
110
=Rs. 11
121
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Central Tax = 11
(10+1)
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GST Scenario (Intra-State Trade of Service)
SGST = 10
SGST
ITC
= 11
= (10)
1
=
State Tax Rs. 11
(10+1)
Input Service Provider
Output Service Provider
Consumer
CGST = * 10
CGST
= Rs. 11
ITC
= (10)
Rs.1
Tax Invoice (B)
Tax Invoice (A)
Cost
= 100
Value
= 100
Value
= 110
CGST
= 10
CGST
= 11
SGST
=
10
SGST
= 11
120
132
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Central Tax = 11
(10+ 1)
24
24
Present Scenari

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22
SGST
=
12.10
120
132
145.20
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Central Tax = 12.10
(10+2+10* – *9.90**)
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Comparison (Trade of Service)
Sr. No.
Particular
Intra-State
Inter-State
Present
GST
Present
GST
1.
Initial Value
* 110.00
120.00
110.00
120.00
2.
Centre's Tax
11.00
11.00
12.10
12.10
3.
State (X)'s Tax
Rs.0.00
11.00
Rs.0.00
0.00
4.
State (Y)'s Tax
* 0.00
12.10
5.
State's Total
0.00
11.00
* 0.00
12.10
6.
Total Tax paid to Govt.
11.00
22.00
12.10
24.20
7.
Non-Vatable Tax borne by
0.00
0.00
0.00
0.00
Business
8.
Total Tax paid by Consumer
11.00
22.00
12.10
24.20
9.
Final value paid by Consumer
121.00
132.00
133.10
145.20
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PART II
28
ROAD TO GST.
–
MILESTONES
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Road to GST- Milestones
2006, announcement of the intent to introduce GST by 01.04.2010
November 2009 – First Discussion Paper (FDP) released by EC on which Commen

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C to examine business processes under GST
December 2014-122nd Constitutional Amendment bill introduced in Parliament
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FEATURES OF CONSTITUTION
AMENDMENT BILL
सत्यमà¥â€¡Ã Â¤Âµ à¤Å“यतà¥â€¡
CONSTITUTION OF INDIA
Preunble
WE THE PEOPLE OF INDIA, having
solemny resolved to constitute India into a
Sovereign Socialist Secular Democratic Repablo
and to soute to all its citizens
JUSTICE
Social, economics and political
HERTY
of thought, expression, brief, far and worship
CQUALITY
of states and of oppertunity, and to
proncle artorg than all
FRATERNITY
assuring the dignity of the individual and
the ane and integrity of the Nation
IN OUR CONSTITUENT ASSEMBLY
this twenty-sixth day of November, 1949, do
HEREBY ADOPT, ENACT AND GIVE TO
CURSELVES THUS CONSTITUTION
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Features of Constitutional Amendment Bill
122 nd Amendment Bill introduced in LSon 19.12.2014
•
Key Feat

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)
✓ 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
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Features of Constitutional Amendment Bill contd.
Key Features contd.
✓ Council to make recommendations on
Taxes, etc. to be subsumed in GST
Exemptions & thresholds
GST rates
Band of GST rates
Model GST Law & procedures
âÅ“° Special provisions for special category States
Date from which GST would be levied on petroleum products
✓ Council to determine the procedure in performance of its functions
✓ Council to decide modalities for dispute resolution arising out of its recommendations
。 Changes in entries in List -1 & ||
。 Compensation for loss of revenue to States for five years
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PART III
37
Integrated Good

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tively.
IGST credit can be utilized for payment of IGST, CGST and SGST in sequence by Importing
dealer for supplies made by him.
IGST Model envisages that the Centre will levy tax at a rate approximately equal to
CGST + SGST rate on inter-State supply of goods & services.
It would basically meet the objective of providing seamless credit chain to taxpayer
located across States.
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Integrated Goods and Service Tax (IGST) contd.
â—‰
IGST model obviates the need for refunds to exporting dealers as well as the need for
every State to settle account with every other State
The Exporting State will transfer to the Centre the credit of SGST used for payment of IGST
The Centre will transfer to the importing State the credit of IGST used for payment of SGST
Thus Central Government will act as a clearing house and transfer the funds across the
States
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Illustration for IGST Model
Mr. A (based in Maharashtra) supplied Good

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f Goods (9% from central Government
and 1% paid as cash by Mr. B)
Central Government will get 9% IGST on inter-state supply of goods to Gujarat (8% from
Maharashtra Government and 1% paid as Cash by Mr. A)
Important to note is that while Central Government got 9% as tax, at the same time Mr. B
(based in Gujarat) has been allowed full credit of IGST paid by Mr. A (based in
Maharashtra)
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443
Key Enablers for IGST
Uniform e-Registration
Common e-Return for CGST, SGST & IGST
Common periodicity of Returns for a class of dealers
Uniform cut-off date for filing of Returns
â–  System based validations/consistency checks on the ITC availed, tax refunds
Effective fund settlement mechanism between the Centre and the States
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Role of Dealers in GST Framework
Every dealer has to submit one single GST return consisting information about all
his purchases/sales at Invoice level along with line item.
Accordingly necessary r

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dispute resolution mechanism for issues relating to levy of GST.
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PART IV
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Salient features of Proposed Place of Supply Rules
Place of Supply Rules should be framed keeping in view the following principles:
。 Rules for B2B Supplies and B2C supplies should be different.
。 Place of supply for B2B supplies should normally be the location of recipient of goods or
services and not where services is actually performed.
o This is required to maintain smooth flow of credit. To illustrate, Mr. A (located in
Rajasthan) participates in exhibition organized by Mr. B (located in Delhi).
Normally place of supply will be Delhi and Mr. A located in Rajasthan will not be
eligible for input tax credit.
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Salient features of Proposed Place of Supply Rules contd.
Rules for B2B supplies should be such so that input tax credit should be available to
recipient.
Place of Supply Rules should be

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on 25 Company formed to design automation of GST in
line with TINXYS/ NSDL
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Key Questions before introduction of GST
Key Design issues under Discussion –
â– 
Extent of Dual Control
Rate structure (based on RNR)
Exempted Goods or Services
Exemption threshold
Composition threshold
Exclusion Vs. Zero rating of certain goods in GST regime
Role of Centre/ States in inter-State Trade
Place of Supply Rules for Goods and Services
â–  Mechanics of IGST model
Account settlement between the Centre and the States under IGST model
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529
Key Questions before introduction of GST
Key Business processes under Discussion –
Multiple registration within one State
Dispute settlement over taxable and enforcement jurisdiction
â–  Audit, enforcement, recovery etc.
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Revenue Neutral Rates (RNR)
â–  Rate which will give at-least the same level of revenue, which the Centre and
States ar

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te the cost
of production/services. Buyer of these products/services while paying this additional
cost could not claim any benefit of taxes so paid and hidden in the cost. To illustrate
Electricity company while paying 5% excise duty on coal has no option but to add the
same into cost of generation while claiming electricity charges from a builder who in
turn may have claimed credit if such duty is charged as input taxes from him.
Zero rated good on the other hand enable the producer/service provider to claim the
refund of input taxes paid from department, hence will not form part of cost of
production/services.
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International Perspective in GST
Rates and Policy issues of VAT
Emerging Issues
。 Bit Coins/ Coupons
。 B2C
。 Online Supply of Services
o E Commerce Transactions
o Dispute Settlement between States
。 Exclusions
o RNR
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GST PLANNING
21 ЬГÃ

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