GST PPTS Final One

8/2/2019 GST PPTS Final One

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Presented By:

Khushveer Singh

Sahil AggarwalSahil Chhabra

Sahil Kapoor

Sahil Khosla

Saloni Sood


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Taxation

The word tax is derived from Latin wordtaxare meaning to estimate.

Taxation has four main purposes; Revenue,

Redistribution, Repricing, & Representation.


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Goods & Services Tax

Goods and Service Tax is a tax on goods and

services.

It is leviable at each point of sale or provision of

service.

At the time of sale of goods or providing theservices the seller or service provider can claim

the input credit of tax which he has paid while

purchasing the goods or procuring the service

In this system the emphasis is not only ongoods but also on services.

The rate of tax on goods and services are

generally the same.


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GST: A UNIFICATION OF TAXES

A GST classically entails unification of all levies ongoods and services. In the Indian context, this would

mean merging the following:

Tax on manufacture of goods (excise duty levied by theCentre).

Tax on sale of goods (CST / VAT levied by both Centre

and states).

Tax on services (levied by Centre and to some extent by

states such as Entertainment tax, electricity cess, etc).


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Features of GST

Dual GST

Rate of tax

Threshold limit

Taxation on certain goods Taxpayer Identification Number

Documentation & Compliance


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FEATURES

Implication of GST on Import & Export: Importswould be subject to GST. Both CGST and SGST will belevied on import of goods and services into the country.The incidence of tax will follow the destination principleand the tax revenue in case of SGST will accrue to theState where the imported goods and services areconsumed. Full and complete set-off will be available onthe GST paid on import on goods and services.

Exports, however, will be zero-rated, meaning exporters

of goods and services need not pay GST on theirexports. GST paid by them on the procurement of goodsand services will be refunded subject to certainconditions, limitations and procedures.


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Why we need GST?

Abolition of taxes such as Octroi,

Central Sales Tax,

State-level sales tax, Entry tax,

Stamp duty,

Telecom license fees, turnover tax, tax onconsumption or sale of electricity, taxes on

transportation of goods and services, thus

avoiding multiple layers of taxation that

currently exist in India.


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GST WORLD WIDE

In most countries of the world, a single VATexist which covers both goods and services

All sectors are taxed with very few exceptions/

exemptions.

Full tax credits on inputs100% set off

France was the first country to introduceGST system in 1954.

India also likely to adopt dual GST Model basedon GST model of Canada w.e.f. 1st April 2010.


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GST- RATES WORLD WIDE

China - 17%

Indonesia - 10%

Philippines -10%

Taiwan (Chinese Taipei) - 5% UK -17.5%

Australia -10%

France -19.6%

Germany -16%

Denmark -25%


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GST In INDIAA Reality

The stage looks all set for the introductionof unified Goods and Services Tax (GST)from 2010.

The Empowered Committee of StateFinance Ministers has proposed a dualGSTboth at Central and State level.


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TAXES Proposed TO BE

SUBSUMED IN GST Central Taxes Excise Duty

Additional Excise duty

Service Tax

CVD, SAD

Surcharge

State Taxes

VAT

Entertainment tax levied by states Luxury Tax

Tax on Lottery

Entry tax other than for local bodies


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TAXES NOT BE INCLUDED

IN GST Central Taxes

Specific Cess

Excise duty on tobacco products

State Taxes

Items containing alcohol

Entertainment tax (Local Bodies)

Entry tax for local bodies

Electricity duty


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How it works in INDIA?

The dealers registered under GST (Manufacturers,Wholesalers and retailers and service providers) will

charge GST on the price of goods and services from

their customers.

They will claim credits for the GST included in the price

of their own purchases of goods and services used by

them.

The sellers or service providers collect the tax from their

customer, who may or may not be the ultimate customer,

and before depositing the same to the exchequer, they

deduct the tax they have already paid.


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How it works?

If a business is registered for GST it mustinclude GST in the price of goods, services andother things they sell to others in the course ofbusiness. These are called taxablesales.

There are other types of sales where GST is notincluded in the price.

These are either inputtaxed sales or GST-free

sales.


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How it works?

GST may be included in the price of purchases(including importations) made by a business,and its a good idea to allow for it when settingprices.

When a business is registered for GST, they cangenerally claim a credit for any GST included inthe price they pay for things purchased bythe business. This is called a GST credit.


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Tax Cascading

Manufacturer 1 Manufacturer 2

Raw materials 50 Raw materials 125

Labour 30 Labour 45

Others 10 Others 15

Profit 10 Profit 15

Total ex-factory 100 Total ex-factory 200

Central Excise@12% 12 Central Excise @12% 24

Sale Price 112 Sale Price 224

Sales Tax @12% 13 Sales Tax @12% 27

Total paid by M2 125 Total sale price 251

Total tax paid 12+13+24+27=76

Sale price excl. tax : 25176=175

Effective tax rate : 76 / 175 = 43%


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Value Added TaxTax payable only on the value addition at each stage

Centre

CX @12%

State

VAT@12%

Manufacturer-1 Basic Cost 70 Centre

Value Addition 30

Total 100 12 13.4

Manufacturer-2 ValueAddn.+ Taxes 50 6

Total 150 18

Sales Dealer 1 Basic Cost 150 18-13.4=4.6

ValueAddn.+ Taxes 40 4.8

Total 190

Sales Dealer 2 ValueAddn.+ Taxes 60 7.2

Total 250 30

Service

Provider

Basic Cost 250

ValueAddn.+ Taxes 50

Total 300 36-18=18

(66/234 = 28%) 66 36 30


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GSTBasic Features

(3) All transactions will be taxedmanufacture, sales, service etc. ITC will be given at

each stage.

CGST@9%

SGST@8%

Manufacturer-1 Basic Cost 70

Value Addition 30

Total 100 9.00 8.00

Manufacturer-2 Value Addition 50 4.50 4.00

Total 150

Sales Dealer 1 Value Addition 40 3.60 3.20

Total 190

Sales Dealer 2 Value Addition 60 5.40 4.80

Total 250

Service Providr Value Addition 50 4.50 4.00

Total 300 27 24

(9%) (8%)

Rates indicated are for demonstration only. Final rates have not even been discussed .


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Likely Dual Structure for IndiaDual GST,

Central Goods and Services Tax (CGST)

Administration and levy by CentralGovernment

State Goods and Services Tax (SGST)

Administration and levy by the respective StateGovernment

Integrated Goods & Service Tax(IGST)


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Integrated GST (IGST) For inter-state transactions

Centre to levy IGST which would be CGST +

SGST

Inter-state dealer will pay IGST after adjustingIGST, CGST and SGST credit on purchase

Rishabh R. Adukia 21


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IGST The seller in State X will pay the IGST to the

Centre

While paying IGST, seller will adjust his lying

IGST/CGST/SGST credit Suppose Seller adjusts the SGST against IGST

payable, State X will have to transfer the credit

of SGST used by the seller for payment of IGST

to the Centre


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Exempted Goods

Exempted Products:

Food Grains, Bread, Salt, Milk,

Vegetables, Meat and Fish

Goods At Lower Rates:Tea, Milk Powder, Coffee Beans, Toys,

Beedis, Bicycles

Exempted Services:

Govt. aided public health and education


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Impact on Various Sectors

Introduction of GST will greatly improve thequality of the indirect tax system & therefore

make it possible to have higher resources on a

sustainable basis.

India could gain as much as $15 billion annuallyonce GST is in place.


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Financial services

It is difficult to levy tax onfinancial services because charge

for services provided by financial

intermediaries like banks and

insurance companies is generallynot precise, i.e. the fee is taken as a

margin that is hidden in interest,

dividends, annuity payments.

In new GST the tax will be leviedas turnover tax with no tax credit

allowed on inputs.


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Housing & Construction Industry

When a real estate developerbuilds and sells a home, it is

subject to tax on the full selling

price, which would include the

cost of land, building materials,and construction services.

Commercial buildings and

factory sales are also taxable;

There are only two exceptions:

(1) resale of used homes and

private dwellings, and (2) rental

of dwellings.


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Retail

In India retail business need

FDI but FDI is not coming in

India because of complex

tax structure, multiple taxes.


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Information Technology

E-commerce and software ITtransactions are the toughest to

tax and need the highest

probability of tax planning.

The software is transferredthough electronic form, it should

be considered as Intellectual

Property and regarded as a

service. If the software is

transferred on media or any

other tangible property, then it

should be treated as goods and

subject to GST.


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Proposed GST Rates Rate is expected around 14-16 per cent. After

the total GST rate is arrived at, the States and

the Centre will decide on the CGST and SGST

rates.

Currently, services are taxed at 10 per cent and

the combined charge indirect taxes on most

goods is around 20 per cent.


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Some States Against GST

The governments of Madhya Pradesh,Chhattisgarh and Tamil Nadu say that the

information technology systems and the

administrative infrastructure will not be ready

to implement GST.

The central government has offered to

compensate States in case of a loss in revenues.


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Some States Against GST; Will

they lose money?

Some States fear if the uniform tax rate is lower

than their existing rates, it will hit their tax kitty.

The government believes that dual GST will

lead to better revenue collection for States.

However, backward and less-developed States

could see a fall in tax collections.


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Issues in Implementation

Agreement on GST rates among states andCentre

Constitutional amendments empowering statesto levy tax on services & empowering centre to

levy tax on sales.

Compensation to be given by the Centre to

States incurring revenue losses on

implementation of GST.


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Issues in Implementation

Drafting & implementation of Centre GSTand State GST laws are lagging behind.

Final approval and support of industry is amust.

Success of GST would depend uponimplementation of IT resources in every

nook and corner of the country.


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Recent News

Honble Finance Minister Pranab Mukherjee December 15,2010 - Postponement of likely

dates to roll out GST along with DTC

i.e.1.4.2012-13

December 14,2010GST will be introduced in

phases to bring consensus among states in new

regime while earlier stand was to come out in

transitory manner


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Summing Up

What is GST ?

G-Good

S- Simple

T- Transition


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Documents

GST PPTS Final One