Understanding Goods & Services Tax (GST), India

GOODS AND SERVICES TAX, INDIA

PREPARED BY:ANKITA MAHAJAN

PRESENT TAXATION SYSTEM

LIMITATIONS OF PRESENT SYSTEM

PROPOSED GST TAXATION SYSTEM

CURRENT STATUS

CONCLUSION

INTRODUCTION

AGENDA

ADVANTAGES AND DISADVANTAGES

HOW GST SOLVES PRESENT PROBLEMS

• DIRECT V/S INDIRECT TAXES• DEFINITION• SUBSUMED TAXES• GOALS• EXCLUSIONS AND ZERO-RATED

Tax

Indirect

A tax levied on the price of a good or

service

Central – Service tax, Excise, CST

State – VAT, Entry tax

Town/Municipal -

Octroi

Direct

A tax levied directly on personal or corporate

income

Income Tax

EXCLUSIONS• ALCOHOL FOR HUMAN CONSUMPTION –

STATE VAT PLUS EXCISE WOULD LEVY• ELECTRICITY – ELECTRICITY DUTY WOULD

LEVY• REAL ESTATE – STAMP DUTY PLUS

PROPERTY TAX• PETROLEUM PRODUCTS – WOULD BE

APPLICABLE FROM A DATE IN FUTUREZERO-RATED• EXPORTED GOODS AND SERVICESCONCESSIONAL THRESHOLD• TAXPAYERS WITH A TURNOVER BELOW A

COMMON THRESHOLD, (RS 5 LAC FOR NORTH-EAST AND RS 10 LAC FOR OTHERS), WOULD BE EXEMPTED FROM GST

• Empowered Committee of State Finance Ministers (EC) was requested to design road-map and structure of GST

• GST was first mooted in Budget of 2006-07• First Discussion Paper (FDP) on GST

was released in November, 2009• Objectives:

Elimination of cascading effect of taxes

Simplification of tax-compliance

INTRODUCTIONGoods and Services Tax (GST) is a nationwide comprehensive, value-added, indirect tax that will be levied on sale, manufacturing and consumption of goods and services, from April 2016. It will subsume the following:

PRESENT TAXATION SYSTEM

TAX STRUCTURE

DIRECT TAX

INCOME TAX

INDIRECT TAX

CENTRAL TAX

EXCISE

SERVICE TAX

CUSTOM

STATE TAX

VAT/SALES/CST

ENTRY TAX, LUXURY TAX, LOTTERY TAX,

ETC.

PRESENT TAXATION SYSTEM• CASCADING EFFECT OF TAXES• INTRODUCTION OF VAT: TO REDUCE CASCADING• SET-OFF OR TAX-CREDIT: “OUTPUT-MINUS-INPUT”

VAT-TO-VAT CST-TO-CST EXCISE/SERVICE-TO-EXCISE/SERVICE

• SELLER A ADDS SALES TAX AT 10% AND SELLS GOODS WORTH RS 100 TO B AT RS 110 (100+10).

• B ADDS SALES TAX ON PURCHASE PLUS PROFIT, AND RE-SELLS TO C AT RS 132 (100+10+10+12).

• TAX-LIABILITY OF A IS RS 10 AND B IS RS 12

CASCADING EFFECT(Tax-on-tax)

Tax-Paid-to-A

TAX-LIABILITY OF A IS RS 10 AND B IS RS 2

LIMITATIONS OF PRESENT TAX SYSTEM

CROSS-UTILIZATION OF CREDITS BETWEEN

STATE AND CENTRAL TAXES

NO TAX CREDIT FOR INTER-STATE TRADE

DEPOSIT TAX, IRRESPECTIVE OF

PAYMENT

COMPLIANCE COST AND ADMINISTRATION

DIFFICULTIES

FILE MULTIPLE RETURNS

LACK OF IT INFRASTRUCTURE

HOW GST SOLVES PRESENT PROBLEMS

UNIFIED AND

COMPREHENSIVE

SIMPLIFY TAX STRUCTURE

CROSS-UTILIZATION

ADMINISTRATIVE

CONVENIENCEREDUCE

COMPLIANCE COST

FILE A SINGLE RETURN

VALUE-ADDED

CHARGEABLE AT EACH

TRANSACTION

DIRECT SALES

STOCK TRANSFER

DESTINATION-BASED,

CONSUMPTION TAX

TAXABLE EVENT IS “SUPPLY”NOT SALES,

MANUFACTURE OR RENDER

GST

PROPOSED GST TAXATION SYSTEM

TAX STRUCTURE

DIRECT TAX

INCOME TAX

INDIRECT TAX = GST (EXCEPT

CUSTOMS)

INTRA-STATE

CGST (CENTRAL)

SGST (STATE)

INTER-STATE

IGST (CENTRAL)

PROPOSED GST TAXATION SYSTEMSALE IN ONE STATE, RE-SALE IN THE SAME STATE

PROPOSED GST TAXATION SYSTEMSALE IN ONE STATE, RE-SALE IN ANOTHER STATE

PROPOSED GST TAXATION SYSTEMSALE OUTSIDE THE STATE, RE-SALE IN THAT STATE

ADVANTAGES OF GST

GST

CROSS UTILIZATION

LESS MFT COST

IMPORT & EXPORT

INDUSTRIAL GROWTH

MONITORING

TAX COMPLIANC

E

LESS PRICES

MORE REVENUE

CHALLENGES

CHALLENGES

ADMINSTRATIVE

STATE RESISTANCE

POLITICALIT

INFRASTRUCTU-RE

EXEMPTIONS

CURRENT STATUS & WAY FORWARD

THE GST 122ND CONSTITUTION AMENDMENT BILL PASSED BY LOK SABHA

PROPOSED STANDARD GST RATE 27%

CURRENTLY TABLED IN RAJYA SABHA

GST COUNCIL (GSTC) TO BE CONSTITUTED

GST NETWORK TO BE GIVEN AUTONOMY

CONCULSION

INVESTMENT & EMPLOYMENTSIMPLIFICATION OF TAXESINDUSTRIAL GROWTHINCREASE IN TAX BASE

GDP GROWTH

QUESTIONS

THANK YOU