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Gearing Up for GST
C A Madhukar N Hiregange
Status as on June 2015
Todays Covergae
Why GST?Milestones reached- Status TodayFeatures in BriefImpact AnalysisLink to IDTTransitional IssuesOpportunities
Why is GST Necessary for India?• GDP Growth Go Up by 1%* • International Competitiveness by 5%*• Increased FDI- Already seen• Common Market- Tax distorted locations – No• All those who gain to be part of tax payment• Lower transaction cost – reduced corruption• Increased IDT + Direct Tax Revenue
* NCAER Report
122nd Constitution Bill passed in Lok Sabha on 06.05.15
73rd Report of Standing Committee on Finance
August 2013
115th Constitutional Amendment Bill - March 2011
FDP - November 2009
Budget Speech (2006-07)
1978 – Jha + Chelliah
Milestones - GST
Where We Stand?
• Bill referred to select committee on 12.05.15• Committee to give report on last of first week of
Monsoon session• Passing of Bill in 15 States • GST council Put In place – Draft law for Centre +
Model for States • Information Technology Infrastructure in all States• Change management for Revenue Officers
Where We Stand?
• Public Awareness and Training• Debate and amendment for removing rough edges +
gaps in Transition Period plugged : Trade Bodies, Professional Bodies; Acamedicians
• Earliest appears to be April 2017 as it cannot be bought in the middle of the year.
• Hopefully by March 2016 law in full would be open. By that time we need to have decided whether we are in or Out.
Taxes likely to be subsumed in GST Central Taxes
Central Excise Duty
Additional Duties of Excise
Excise Duty under Medicinal & Toiletries Preparation Act
Additional Duties of Customs
Service Tax
Surcharges & Cesses
State Taxes State VAT / Sales Tax / CST
Purchase Tax
Entertainment Tax
Luxury Tax
Entry Tax (not levied by local bodies)
Taxes on Lottery, Betting & Gambling
Surcharges & Cesses
GST – Present Tax
Origin to Destination based consumption tax
Apply to all stages of the value chain
Apply to all supplies of goods or services made for a consideration except:
Exempted goods or services – common list for CGST & SGST [Small ]
Goods or Services outside the purview of GST
Transactions below threshold limits- 25 Lakhs
CGST & SGST on intra-State supplies of goods or services in India. SGST rate bit higher rate.
GST - Features
Goods not Covered• Alcohol for human consumption - State Excise.
• Electricity.
• Real Estate - Stamp Duty plus Property Taxes payable.
• Petroleum Products – some products to continue sales tax - Others under GST
• Tobacco products – under GST as well as Central Excise
GST - Features
GST Rates –based on Revenue Neutral Rates (RNR) – [ VAT Principal followed] Four rates:
Merit rate for necessary goods- 10-15%
Standard rate for goods or services in general- 22 -27%
Nil rate for exempted goods or services
Special rate for precious metals -1%
Optional Exemption & Composition scheme – 25l – 75L
SGST - Floor rate with a small band of rates for standard rated goods or services [ 1-3%]
GST - Features
Type of Tax Paid Tax can be adjusted against
SGST Adjusted against SGST
CGST or IGST Adjusted against CGST or IGST interchangeably
- no cross utilization b/n SGST & CGST
IGST for IGST, CGST & SGST in that order
CGST for CGST & IGST in that order
SGST for SGST & IGST in that order
GST – Features – Set-off / Credit
Impact of GST1. On traders:• Limited to the value addition• Tax payable small – compliance cost effective than
evasion• Cost of products reduce• Can grow into large entities
Impact of GST2. On manufacturers:• Reduce COGS• Exports cheaper – taxes refunded• Difference b/w large & small mfrer will reduce• Harassments & bribe reduces• Transaction cost of compliance reduce (over
proactive law goes away)
Impact of GST3. On service providers:• Rate of ST (14% w.e.f 01.06.2015) – high in GST• Unviable for those with low margins• Net tax payment – substantial• Goods used in providing service – credit available• Refunds – prompt• Taxed at place of consumption• States also empowered to tax services• Taxes received by consuming state
Knowledge of present IDT - importance
1. Excise duty - Cenvat credit, - dispute resolution, - removal & valuation on intrinsic value - may find a place in GST - Self assessing principle would hopefully be adopted.
2. Import Duties- BCD-continue- Addn duty of customs-CVS & SAD- subsumed by GST- IGST. - Classification- harmonised System of Nomenclature in GST.
Knowledge of present IDT-importance• Value Added Tax (VAT)- Supplies of goods & imp services -now available to States as SGST. - Also get apportioned part of the IGST.
• CST:- Principles of inter state sales, sales in the course of export/ import- with
changes for supplies-part of GST- Valuation aspects in some parts.
• Service Tax- Place of Supply Rules –[ draft available- akin to POPS]
To determine Place of Supply of goods or services
To determine whether supplies are intra-State or inter-State
- POT is also viable option
Transitional Issues
• Anteriority – 1 year period – Understand, amend, train officers, tax payer and professionals
• Analysis of Impact on Business• C/f of credit• Unclaimed Credit – Earlier ( missed – not
eligible); VAT for SP, CED/ ADC for Trader• Stock Declaration
Transitional Issues
• Overlapping Contract• TDS/ Tax Holiday• Pre GST Tax Compliance• Pre GST Audits• Preparing for post GST Audits• Initial Disclosure• Change in Method of doing business
Production and Distribution - Optimising
ERP systems – changes mandatory
Analysis of impact- in house/ outsourced
Credits in hand?
System design- SOP
Consultancy/ trouble shooting
Dispute resolutions
Transition issues ? – VAT, ST, CE, Customs?
Career / Practice Opportunities
How to Start Practice in GST?• Start practice in VAT, Central Excise or Service Tax now• Use online resources – google gst, caclubindia, yahoo
CA groups, taxindiaonline, • Form a small group for GST in your area• Start IDT Course with focus on GST.
