Gst the framework

GST – The Framework

NIRC of ICAI

August 22, 2016

Discussion by:

CA Gaurav Gupta

FCA, LLB, DISA

Author

– GST – Law & Practise

- Service Tax – Law & Practise

Our Revenue

Practical Aspects of GST Gaurav Gupta 2 CA Gaurav Gupta 2

2015-16

(RE)

(Rs. in Crores)

2016-2017

(BE)

(Rs. in Crores)

Corporation Tax 452969.68 493923.55

Taxes on income 299051.24 353173.68

Customs 209500.00 230000.00

Excise 284142.34 318669.50

Service Tax 210000.00 231000.00

State Taxes 846570 (2014-15) 969250 (2015-16)

Note:

State Taxes include all levies by state

Source: Union Budget for Central Levies and RBI for State Tax Revenue

GST – The Origin

GST – The Origin

Practical Aspects of GST Gaurav Gupta 4

2006- GST Announcement

2009- First Discussion

Paper

2011 – First Amendment Bill

2014 -

Second Amendment Bill

May 2015 - Bill Passed by Loksabha

Aug 2015 – Select

Committee Report

August 2016 – Bill passed by Rajya Sabha

GST Consitutional

Amendment Bill passed by

Assan, Bihar and Jharkhand

CA Gaurav Gupta 4

The Stakeholders


GST

Central Government

State Government

GST Council

GSTN

Commitees

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The Committees


Committee on the Problem of Dual Control, Threshold and Exemptions in GST Regime

Committee on Revenue Neutral Rates for State GST & Central GST and Place of Supply Rules (A Sub-Committee has been constituted to examine issues relating to the Place of Supply Rules)

Committee on IGST & GST on Imports (A Sub- Committee has been set up to examine issues pertaining to IGST model

Committee to draft model GST Law (Three Sub-Committees have been constituted to draft various aspects of the model law

Committee to examine Business Processes under GST Regime (Three Sub-Committees have been constituted to examine issues pertaining to Registration & Returns, Refunds and Payments)

CA Gaurav Gupta 6

GST – Need?

Current Indirect Tax

Regime in India


Indirect Tax Levies

in India

Central Levy

Service Tax

Provision of Service

Rate – 15%

Customs Duty

+CVD +BCD

Imports

10% (varies)

Excise Duty + Excise duty on

Medicinal

Manufacture

12.5% (varies)

Central Sales Tax

Inter state Sale of Goods

5%/12.5% (varies)

State Levy

Sales Tax / VAT

Intra State Sale of Goods

5%/12.5% (varies)

Entertainment Tax /

Luxury Tax

Entertainment /

Luxuries

10%-50%

(varies)

Entry Tax

Entry of goods in

state

Generally around

5%. (varies)

Taxes on Betting/

Gambling

Betting / Gambling

Varies

CA Gaurav Gupta 8


Regime in India

Rohtak

Delhi Excise + CST

Panipat

Panipat

Excise + VAT

Manufacturer

Intra state Sale

Inter state Sale

Rohtak No taxes

Paris Exports

London BCD + CVD + SAD

Delhi Imports

CA Gaurav Gupta 9


Regime in India

Rohtak

Delhi CST

Panipat

Panipat

VAT

Trader

Intra state Sale

Inter state Sale

Rohtak No taxes

Paris Exports

London BCD+CVD+SAD

Delhi Imports

CA Gaurav Gupta 10


Regime in India

Rohtak

Delhi Service Tax

Panipat

Panipat

Service Tax

Services

Intra state Sale

Inter state Sale

Rohtak No taxes

Paris Exports

London Service Tax – reverse charge

Delhi Imports

CA Gaurav Gupta 11

Need for GST

Problems in the present structure:

• Complex

• Cascading effects of taxes

• Multiple tax rates

• Multiple Compliances

GST – an answer to present problems:

“It should establish a tax system that is economically efficient and neutral in its application, distributionally attractive and simple to administer.”

- Working Paper No.1/2009 – DEA on GST Reforms and Intergovernmental Considerations in India


Features of GST

Features of proposed Model:

• Destination based taxation

• Dual Administration

• Consolidation of taxes

• State wise determination of taxable person – no more centralized registration

• Seamless credit amongst goods and services



Excise duty on Medicinal and

Toiletries Preparation

Central Levies

Central Excise Duty

Central Sales Tax

Service Tax

Tax on lottery, betting and

Gambling

State Levies

Entertainment Tax

State VAT/ Purchase tax

Entry Tax

Luxury Tax


Additional duty of Excise on

Textile and Textile Products

CVD and SAD (on import of

goods)

Cesses and surcharges insofar

as far as they relate to supply

of goods or services

State cesses and

surcharges insofar as far as

they relate to supply of

goods or services

Taxes on Advertisement

CA Gaurav Gupta 14

CGST

SGST



CGST SGST IGST

1 Act 29 + 7 Acts 1 Act



GST Model Countries following

Independent VAT in Centre and

State

Brazil, Argentina, Russia

VAT levied and administered at

Centre

Australia, Germany, Austria,

Switzerland, etc.

Dual VAT Canada and India today

Proposed Indirect Tax

Regime in India

Rohtak

Delhi IGST

Panipat

Panipat

CGST + SGST

Supply of Goods/ Services

Intra state Sale

Inter state Sale

Rohtak No taxes

Paris Exports

CA Gaurav Gupta 17

Proposed Indirect Tax

Regime in India

Paris

London IGST

Delhi

Panipat

BCD + IGST

Import of Goods/ Services

Goods

Services

CA Gaurav Gupta 18

122nd Constitutional

Amendment

Constitutional amendments

proposed by 122nd Bill

Art

icle

24

6A

• Concurrent jurisdiction for levy of GST by the Centre and the States

• Parliament has exclusive power to make laws with respect to goods and services tax where the supply takes place in the course of inter-State trade or commerce

Art

icle

26

9A

• Authority for Centre to levy & collection of IGST on supplies in the course of inter-State trade or commerce including imports

• Import of goods or provision of services from outside India will be treated as Inter-State supplies

• ‘Place of supply’ of goods & services to be determined as per Rules formulated by Centre

Art

icle

36

6(1

2A

) • GST defined as any tax on supply of goods or services or both other than on alcohol for human consumption


GST Council


1. Constituted under Constitution by President of India under Article 279A

2. The GST Council shall consist of the following members:

i. The Union Finance Minister:- Chairperson;

ii. The Union Minister of State in charge of Revenue or Finance – Member

iii. The Minister in charge of Finance or Taxation or any other Minister

nominated by each State Government....................Members.

3. Quorum – 50% of total members

4. Every decision of the GST Council shall be taken at a meeting, by a majority of

not less than three-fourths of the weighted votes of the members present and

voting, in accordance with the following principles, namely:

• Central Government Vote - shall have a weightage of 1/3, and

• All the State Governments - weightage of 2/3 of the total votes cast

CA Gaurav Gupta 21

GST Council


The GST Council shall make recommendations to the Union and the States on—

• The taxes, cesses and surcharges levied by the Union, the States and the local bodies

which may be subsumed in the GS Tax

• The goods and services that may be subjected to, or exempted from the goods and

services tax;

• Model Goods and Services Tax Laws, principles of levy, apportionment of IGST and the

principles that govern the place of supply;

• The threshold limit of turnover below which goods and services may be exempted from

goods and services tax;

• The rates including floor rates with bands of goods and services tax;

• Any special rate or rates for a specified period, to raise additional resources during any

natural calamity or disaster;

• Special provision with respect to the States of Arunachal Pradesh, Assam, Jammu and

Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh

and Uttarakhand;

• Any other matter relating to the goods and services tax, as the Council may decide.

CA Gaurav Gupta 22

Proposed GST

Framework

GST - Levy

• Who shall pay

• On what GST shall be paid

• When GST shall be paid

• Where shall GST be paid

• To whom shall it be paid

• How to Pay

Taxable Person – Sch III

Supply of Goods and

services – Section 7

Point of Supply

Place of Supply

Respective Government


Cash / Credit

CA Gaurav Gupta 24

Country Rate of VAT/GST

Australia 10%

Canada 5% Goods and Services Tax, plus Provincial Sales

Tax

China 17%

France 19.60%

Germany 19%

Hong Kong 0%

Russia 18%

Singapore 7% GST

United Kingdom 15%

United States No national VAT / GST. State tax vary from 5 –

10.25%

Rate of VAT / GST around the world at present, some of which are enumerated as under:

GST Rates

General Rate– 18%

Low rate – 8-10%

Luxury Goods –

40%

Exemption

Precious Metal – 2-

4%

India

Input SGST

Input CGST

Input IGST

Output SGST

Output CGST

Output IGST

Levy Cenvatable against [Section 35(5)]

SGST SGST , IGST

CGST CGST, IGST

IGST IGST, CGST, SGST

Payment by Credit

CA Gaurav Gupta 26

Registration under Taxes

CA Gaurav Gupta 27

Government 2 States + UTs 29+

7 Business Verticals N Number of

Registrations

CA Gaurav Gupta 27

Features of

Registration Process

• PAN based Registration: PAN will be mandatory

• Unified application to both tax authorities

• To be filed within 30 days

• State-wise registration for entities having presence in more than one State; Need not

apply separately for each State

• Deemed approval within three days

• Within a PAN, separate registration for separate business verticals within a State possible


GSTIN - Features

X X X X X X X X X X X X X X

State

Code

PAN Business

Vertical

X

Blank Checksum

CA Gaurav Gupta 28

GST - Interface

Draft Model GST Law CA Gaurav Gupta 29

Taxable Person

1

GSTN

Taxable Person

2

Central

Government

State

Government

Features:

IT based compliances

Dual review

Real time updates

Lesser interaction with

authorities

CA Gaurav Gupta 29

GST - Interface

Draft Model GST Law CA Gaurav Gupta 30

Taxable Person

1

GSTN

Taxable Person

2

Central

Government

State

Government

Services provided

Registration

Payment of tax

Return

Refunds

CA Gaurav Gupta 30

Disclaimer

This presentation has been prepared for internal use of ICAI and its members. The contents of this document are

solely for informational purpose. It does not constitute professional advice or a formal recommendation. The

presentation is made with utmost professional caution but in no manner guarantees the content for use by any

person. It is suggested to go through original statute / notification / circular / pronouncements before relying on the

matter given. The presentation is meant for general guidance and no responsibility for loss arising to any person

acting or refraining from acting as a result of any material contained in this presentation will be accepted by us.

Professional advice recommended to be sought before any action or refrainment.

Thank you

CA Gaurav Gupta

Partner

MGS & Co.

LD- 65, Pitampura, Delhi – 110034

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