94 0 GST-Concepts

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8 April 2013 1

GOODS AND SERVICES TAX

(GST)

-CONCEPT, MODEL & EMERGING CONSENSUS -

VIVEK JOHRI

JOINT SECRETARY(TRU)


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8 April 2013 2

PRESENTATIONPLAN

BackgroundMilestones

Format of discussions

Economics of GST

Basic conceptsKey features (Tax base, taxes to be

subsumed, credit mechanism)

Why GSTPolitics of GSTConstitutional

provisions

Administrative structure


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8 April 2013 3

ROAD TO GST- MILESTONES

Budget 2006-07 announcement of the intent to

introduce GST by 1st April,2010

Preparation of roadmap and design- assigned to

the Empowered Committee of State Finance

MinistersApril 2008 EC submits its report to the Central

Government

October & December 2008- Central Governmentoffers its views/ comments

January 2009- Discussions on the revised report

resume


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8 April 2013 4

ROAD TO GST- contd.

Three Working Groups set up to examine

List of exemptions & threshold

Modalities for taxation of services

Inter-State movement of goods and services

Budget 2009-10 : FM reaffirms the Governmentsintent to launch GST by 1.4.2010

10th November, 2009 Empowered Committee

releases its First Discussion Paper on Goods andServices Tax in India

Likely to release the Second Discussion Paper bymid- December, 2009


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FORMAT OF DISCUSSIONS

Dramatis personaeEmpowered Committee of State FinanceMinisters

Finance Ministers of all State Governments

Chairperson- Dr. Asim K Dasgupta, FinanceMinister of West Bengal

Secretariat at New Delhi

Government of India

Department of Revenue

CBEC

Stakeholders

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BASIC CONCEPTS

Origin vs. Destination principleConsumption type VAT vs.Production or Income type

Invoice method vs. Subtractionmethod

Cash basis vs. accrual basis

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BASIC CONCEPTS contd.

Concept of supplyAny transaction involving exchange of

value?

Supply of goods transfer of the right todispose of tangible property as owner?

Supply of services -Any transaction thatdoes not constitute a supply of goods

Linked to consideration treatment ofconsignment sales, stock transfers, jobwork etc.

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8 April 2013 8

FEATURES OF PROPOSED GST

Dual GST having two concurrentcomponents

Central GST levied and collected by the Centre

State GST levied and collected by the States

CGST and SGST would be applicable tosupply of goods and services in India

Also applicable to import of goods andservices

Would apply to all stages of the valuechain primary, secondary and tertiaryincluding retail


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TAX TREATMENT BY ACTIVITY

VAT VAT Central

Excise +VAT/Sales tax

State taxes

+ ServiceTax

VAT + ST

+ Statetaxes

Service Tax

+ Propertytaxes

___

Agri-culture

Forestry,fisheriesand mining

Manufacturing

Construction,Electricity,gas & Water

supply

Trade,hotels,transport

&communication

Financialservices, realestate,

businessservices,Community &socialservices

Publicadmn

GOODS AND SERVICES TAX [except alcohol (State Excise +

sales tax), petroleum (Sales Tax + C Excise), electricity(electricity duty), real estate (stamp duty, property taxes)]

Tobacco (under GST + Central Excise)

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FEATURES OF GST contd.

Taxes to be subsumed within GST:

Barring few exemptions, the coverage would becomprehensive and it would apply to all goodsand services

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Central taxes Central Excise duty Additional duties of exciseAdditional duties of customs(CVD & spl. CVD) Service Tax Cesses & surcharges

State taxes State VAT Central Sales Tax M & T. P. excise duty Entertainment tax Luxury tax Entry taxTaxes on lottery, betting& gambling

Cesses & surcharges


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8 April 2013 11

FEATURES OF GST contd.For demerit goods such as tobacco there may bean excise duty over and above the GST by theCentre

Crude petroleum, petrol, diesel & ATF may bekept out

Threshold exemption in both components of GST

Compounding scheme for dealers having taxableturnover up to a certain threshold above theexemption.

Input tax credit (ITC) of CGST for CGST andSGST for SGST would be permissible withoutinter-mixing


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FEATURES OF GST contd.

Exports out of India to be zero-rated for bothgoods and services.

Tax on Inter-state supply of goods and servicesto be administered by the Centre

Harmonization of business processes between theCentre & the States e.g. registration, return filingaudit and anti-evasion with information sharing

Rate structure and exemptions

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8 April 2013 13

WHY GST- perceived benefits

To trade Reduction in multiplicity

of taxes

Mitigation of cascading/

double taxation Development of

common nationalmarket

Simpler tax regime

Fewer rates andexemptions

Conceptual clarity(goods vs. services?)

To Government Simpler tax system

Broadening of tax base

Improved compliance &revenue collections

Efficient use of resources


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8 April 2013 14

CONSTITUTIONAL PROVISIONS

Problem of overlapping jurisdiction ofthe Union and the States basicstructure

Placement of respective entries in theLists primacy of union laws

Constitutional mechanism to deal with

Deviations, future changes in policy,coverage etc.

Guaranteed compensation to States


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ADMINISTRATIVE ISSUES

Respective Role of States & CentreHarmonization of key business processes

Registration

Return filing

Dispute settlement

Audit, enforcement, recovery etc.

Issues around IGST

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Thank you

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Documents

94 0 GST-Concepts