Goods & Services Tax

(GST)Presenters-

Abhilash Shah 001

Anup Palarapwar 008

Gaurav Korgaonkar 017

Aditya Kondejkar 101

Gautam Bandigare 111

Group 4

“

”

What is GST?

GST is one indirect tax for whole nation, which will make

India one unified common market.

Why do we want GST?

▸ GST will greatly increase the revenues available at the states’ and Centre's disposal by expanding the tax base

▸ GST will facilitate ‘Make in India’ by converting the geographical landscape of the country into a single market.

▸ GST would improve tax governance in two ways a) It is a self-collecting and self-enforcing tax.  b) It is difficult to evade tax

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Objectives of GST

▸ One Country – One Tax▸ Consumption based

tax instead of Manufacturing

▸ Uniform registration, payment and Input Credit

▸ To eliminate the cascading effect of Indirect taxes on single transaction

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▸ Subsume all indirect taxes at Centre and State Level under

▸ Reduce tax evasion and corruption

▸ Increase Compliance▸ Reducing economic

distortions

Tax being subsumed into GST5

Center Level

• Central Excise Duty• Additional Excise Duty• Service Tax• Additional Excise Duty• Special Additional Duty of

Customs

State Level

• State VAT/Sales Tax • Entertainment Tax• Octroi & Entry Tax• Purchase Tax• Luxury Tax• Tax on Lottery & Gambling

GST Timeline6

2000 – GST discussions begin – Mr. Asim Dasgupta

Feb 2006 – GST Announcement

Nov 2009 - GST discussion paper is

published

Feb 2010 - Project launched to computerize

commercial taxes

Mar 2011 - Congress

introduces the GST bill in Lok Sabha

Nov 2012 – FM set deadline to resolve problems related to

the transition to GST

Aug 2013 - Standing committee suggests amendments to the

bill

Dec 2014 - The GST bill was

reintroduced to the Lok Sabha

May 2015 - Lok Sabha passes the

GST bill

GST Timeline7

Aug 2015 - The GST bill is

introduced in Rajya Sabha

Aug 2016 - The GST Bill is passed

in Rajya Sabha

Sept 2016 - 16 States ratify the

GST bill

Sept 2016 - The GST bill gets the

presidential assent

Sept 2016 - First meeting of GST

Council held

Oct 2016 - Madhya Pradesh to serve as the country's supply

hub

Nov 2016 - Four Tier GST Tax

Structure Finalized

Nov 2016 - GST portal has become

live

Jan 2017 – Eights Meeting of GST

Council Held

GST Structure in India8

SGST CGST IGST

Dua

l GS

T S

truct

ure 1) State – State Goods & Service Tax (SGST)

2) Central – a) Center Goods & Service Tax (CGST)b) Integrated Goods and Service Tax (IGST) 5% 12%

18% 28%

GST Rate in India

GST Structure in India9

Worldwide GST10

Country Rate of GST

France (First Country – 1954) 19.6%

Canada (Dual GST System) 5%

Brazil (Dual GST System) 17%

Australia 10%

Germany 19%

Japan 5%

Singapore 7%

New Zealand 15%

150+ Countries

How GST Works Within State11

How GST Works in Inter-State Transfer12

States Concern over GST

▸ Worry of manufacturing states -Tamil Nadu, Maharashtra and Gujarat

▸ Destination-based tax (Benefit to state with more consumption)

▸ Losses of revenues on movement of goods made to states

▸ Compensation for losses suffered in the first five years whereas states want it for 10 years

▸ First three years 100 %, forth year 75 % , fifth year 50 %

▸ Additional tax of up 1 % on inter-state trade of goods for two years or longer period

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Overall Impact of GST14

GST will lower effective taxes

Organized sector to gain

Logistics costs to fall

Heralding transparency,

reducing cascading effects

Services will become more

expensive

Sectoral Impact - Automobiles

▸ Small Cars (Sub 4 Meter Segment) - No Positive Impact on Car Prices with 28% GST Cess. Infact, Small Cars would likely be expensive by 1% to 2%

▸ Mid Sedan, Mid SUV Range (> 4 Meter, But Engine < 1.5 Litre) - Prices would likely Increase by 2% to 3% as is expected that GST + Additional Luxury Cess will make up for 40% Tax

▸ Luxury High End Cars (Engine > 1.5 Litre) - Prices would go up as GST+ Addl. Cess will be imposed o these items

▸ In all - There would not be any benefit post GST - to the passenger car Sector. It was earlier anticipated for 20% Cess - but with 28% GST on Cars - it will likely be detrimental for Automobile sector - which was eagerly awaiting for GST and buyers who deferred purchase call for 2017

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Sectoral Impact - Automobiles16

Sectoral Impact – Media & Entertainment and Cement

17M

edia

& E

nter

tain

men

t In the media & entertainment sector, current blended indirect tax is in the range of 27-40%.

GST implementation will bring down effective indirect tax although the exact rate of GST on Media and entertainment is not yet finalized C

emen

t

Cement industry currently suffers from high taxation structure along with multiple taxes

It is expected that cement industry may be kept at a standard rate of 18%

A lower rate along with the elimination of cess and increase in credits should have an overall positive impact on the industry

Sectoral Impact – Retailing and Restaurants & QSRs

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Ret

ailin

gCurrently Service Tax as well as VAT are imposed without any set-off

Introduction of GST will:a) Reduction of Indirect costsb) Will bring unorganized and organized players on the same page thus reducing the price gap R

esta

uran

ts &

QS

Rs GST rate will be higher than

current service tax rate and hence prices will go up

With 18% GST, the impact will be negative

Also as aerated drinks are kept under luxury goods category the GST for the same is 28% plus addl. Cess which will further increase the negative impact.

Sectoral Impact - Renewable Energy & Steel

19R

enew

able

Ene

rgy Implementation of GST,

assuming 18% rate, will increase solar power project cost by 13-15%

However, given strong government thrust to promote renewable energy, the GST Council could exclude / provide a concessional rate renewable energy from the regime. S

teel

The overall tax incidence on the sector to potentially remain same

Currently, indirect taxes in the sector are close to 15-18% depending upon whether the sales are within or outside the state

If the GST is levied at 18% the effective tax rate will remain at similar levels and there will be no visible impact on the steel sector

Sectoral Impact - Oil & Gas and Hotels20

Oil

& G

as

Crude, natural gas, ATF, diesel and petrol are excluded from the coverage of GST for the initial years

Remaining petroleum products (for eg kerosene, naphtha, LPG, etc) are covered within the coverage of GST. But impact will be known once the rate for these products is finalized H

otel

s

Hotel rooms currently attract Service tax and Luxury tax

Currently Service tax stands at 8.7% and luxury tax varies between 5-12.5%

Thus the impact of GST on hotels will be negative or positive depending on the rate as well as the state in which the property is located

Sectoral Impact – Real Estate

▸ If the current service tax + VAT outgo is higher than the effective GST rate, it will provide some relief to the consumer

▸ Leasing of residential properties does not attract service tax and so will have no impact of the implementation of GST

▸ Leasing of commercial properties attracts service tax and will be impacted by GST. Again, the impact will depend on the effective rate of GST

▸ From the developer’s point of view, implementation of GST will results in lower construction costs. However, it needs to be seen if these benefits shall be passed on to the customers

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Sectoral Impact – Coal

▸ End-users of coal are expected to witness an increase in fuel costs with implementation of GST

▸ Excise duty on coal is levied at 6%, whereas VAT is levied at 5%. Assuming a GST rate of 18%, delivered cost of coal is likely to increase by 5-6% per tonne of coal

▸ The increase in fuel costs are not expected to have any impact on the profitability of power generation companies

▸ The impact of the increase in power purchase costs on retail tariffs will vary on a state-to-state basis, depending upon existing tariff structure and subsidy levels

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Expert Opinion - Vijay Kelkar, Satya Poddar & V. Bhaskar

Former finance secretary and tax expert Vijay Kelkar had termed the four-tier structure as “disappointing”. According to him it “robs the GST of its efficiency enhancing potential”

"One rate is a crucial part of the structure. It would enable the levy of a single low rate on a very broad and comprehensive base, eliminating litigation and rent-seeking on classification disputes, promoting voluntary compliance and ensuring simple and effective implementation,"

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Expert Opinion - Abhishek Jain & Mr. Deshpande

"This was a specific task of the oil & gas industry as this would have enabled availability of inputs GST credits in relation to these products.”

"In the earlier GST Council meetings there were some indication that services which have abatement today may fall under the 12 percent bracket; however no further clarity emerged on that post the GST Council meeting on Thursday,”

"Uncertainty rates for gold is not warranted as gold is a key determinant of the rate structure," Deshpande of Deloitte says

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Positive Impact of GST on GDP25

▸ According to research by NCAER, GST could increase the GDP by 0.9 to 1.7 percent.

▸ Exports which grew at 13 per cent CAGR during 2010 and 2013 is expected to increase at around 6-8 per cent due to implementation of GST thereby further adding to GDP.

▸ In long run, GST will be positive for the economy over the longer term as it simplifies the tax structure, increasing compliance, reduces tax evasion, expands tax base and significantly improves the functioning of the logistics network.

▸ Currently, companies sourcing capital goods for capacity expansion cannot claim tax credit on capital goods purchased; this will change with the GST regime. Because of GST, capital goods prices would become effectively 12-14 per cent cheaper as companies avail tax credit. This is likely to increase investments and could lead to incremental GDP of 0.5 per cent.

Negative Impact of GST on GDP26

▸ As the proposed GST rate is 18% which is higher than current service tax rate i.e. 15% (including cess), so the services will become costlier and it will lead to inflation for a short period.

▸ GST will impact the Real Estate business negatively as it will add up the additional 8 to 10 percent to the cost and reduce the demand about 12 percent.

▸ According to the government's estimates, excise tax exemptions result in foregone revenues of Rs. 1.8 lakh crore. The comparable figure for the states is about Rs. 1.5 lakh crore. Together, India loses about 2.7 per cent of GDP because of exemptions.

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THANKS!Any questions?