An Overview of GST

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AN OVERVIEW OF GST

National Convention of CA Students

July 9, 2010

Vijayawada

By,

Srihari VK



EXISTING INDIRECT TAXES ININDIA



EXISTING INDIRECT TAXES IN INDIA

Legislations Activity Taxes

C

E

N

T

R

A

L

Customs Act, 1962 Import and Export Basic Customs Duty (BCD)

Customs Tariff Act, 1975 Import and export

Counterveiling Duty (CVD)

Special Additional Duty (SAD)

Central Excuse Act, 1944

Manufacture /

Production Excise Duty

Finance Act, 1994 Services Service Tax

Central Sales Tax Act,

1956 Interstate Sales Central Sales Tax

S

T

A

T

E

State VAT Laws Sales and purchases VAT

State Electricity Tax Sale of electricity Electricity Cess

Entry Tax Acts

Import of goods to

specified area Entry Tax

Stamp Acts Sale of asset Stamp duty




Show Room

Maruti

Suziki Japan OutsideIndia

India

Customs Duty:

BCD, CVD,SAD

Manufacturing: Excise

Duty

Sales: VAT/CST

Sales: VAT/CST

Service: Service TaxCustomer

Service provider




y Currently the average rate of tax for a product which is manufacturedand sold will be 15% to 24%

y If you levy the GST on a comprehensive basis on all goods and services,

the tax rate can be reduced to 16%-18%

y

There are almost 32 VAT acts in addition to which there is a CentralSales Tax Act, so there are 33 sales tax laws

y VAT is levied on an amount which includes Excise duty and Customs

duty, which results in cascading effect of tax

y Excise duty has not yet been extended to include chain of value addition

in the distributive trade below the stage of production

y Cenvat credit has also not included several Central taxes, such as

Additional Excise Duties, Additional Customs Duty, Surcharges etc. and

thus restrict the benefits of comprehensive input tax and service tax

set-off to the manufacturers (of exempted goods)/ dealers

(unregistered)



GST OVERVIEW ANDEXPECTED MODEL IN INDIA



WHAT IS GST?

Goods and Services Tax (GST) - a comprehensive value added tax ongoods and services

In a GST regime, goods and services are not differentiated as they move

through the supply chain

Free flow of tax

credits

Tax on goods and

services

Subsume all taxes

and levies

Results in free flow of tax credits without limit or barriers of state

boundaries till it reaches the ultimate consumer

Covers levies on a transaction which commences with import/ domestic

procurement/ manufacture/ production of goods or provision of

services at one end and consumption of goods and services at the otherend

Levied on the value added at each stage of sale and purchase

GST will subsume all transaction taxes and levies that are

± primarily in the nature of indirect taxes and

± levied on supply of goods or on provision of services

In a GST environment, different stages of production and distributionare interpreted as a mere pass through

Incidence of tax is borne by the ultimate consumer

Tax to be borne by

consumer

Tax on each

transactions



EXPECTED BENEFITS OF GSTGST offers benefits similar to that offered by VAT and much more, such as:

Eliminate cascading effect of taxes across the supply chain therebyreducing cost of doing business and making the economy competitive

Business to be free of taxes instead taxes to be borne entirely by customer

Eliminate multiplicity of taxes, rates, exemptions and exceptions

Eliminate dual taxation of the same transaction (eg VAT & Service tax on ITSoftware, lease transactions)

Reduce cost of production

Achieve uniformity of taxes across the Indian territory

Provide greater certainty and transparency of taxes

Ensure tax compliance across the economy

Augments and creates buoyancy in the economy



WHAT WOULD GST REPLACE?

Central excise duty

Service tax

Countervailing duty (on imports in lieu of

excise duty) (CVD)

Additional duty of Customs (on imports inlieu of VAT/CST) (ACD)

Central Sales Tax (CST) (to be abolished)

Cesses and surcharges levied by Union

Government

Centrallevies to

be

subsumed




VAT/ Sales tax

Entry tax (not in lieu of octroi)

Entertainment tax (unless it is levied by localbodies)

Luxury tax

Taxes on lottery, betting and gambling

Cesses and surcharges levied by States

Statelevies to

be

subsumed




Purchase tax In discussion

Tax on items containing Alcohol OutsideGST

Tobacco products Outside GST

Petroleum Products Outside GST

Natural Gas Final view to be taken

Specific

Items



KEY FEATURES OF PROPOSED GST

Central GST State GST

To be administered by Central

Government through a

Central GST legislation

Revenue to be credited to

Central government

To be administered by State

Governments through a

State GST legislation

Revenue to be credited to

State government

However, broadly uniform provisions across Central and all State

GST laws

DualGST

Model




All transactions of goods or services (local and

interstate) above a prescribed threshold to be

concurrently liable to Central GST as well as State

GST

Thrush hold limit is likely to be same for SGSTand CGST

Optional composition/ compounding scheme

proposed for tax payers with annual turnover of

upto INR 1 Crore

Threshold

forGST

levy






All transactions of goods and services made for a

consideration to attract Central GST and State

GST except:

± Exempted goods and services

± Goods and services that do not fall within the purviewof GST

± Transactions below the prescribed threshold

Clarity is awaited with regard to the appropriate

taxable event

Taxable

event/

Point of

levy




Integrated GST or IGST levy proposed on

interstate transactions

IGST rate likely to be CGST+ SGST

with appropriate provisions to be made for stock

transfer of goods:

Interstate

Transactions




Imports to be subject to Central and State GST in

addition to Basic Customs duty

State GST on imports to accrue to the State

where the imported goods and services are

consumed

Exports to be zero rated with adjustment/ refund

of input GST credits

Exports

and

imports

Exemptions currently available under excise, VATand service tax laws are likely to be eliminated /

minimized under GSTExemptions



GST TAX STRUCTURE

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India

Customs Duty: BCD, CGST

imports, SGST imports

Manufacturing & Sales:

CGST & SGST or IGST

Sales: CGST &

SGST or IGST Service: CGST &

SGST or IGSTCustomer

Service provider



Documents

An Overview of GST