GOODS &
SERVICES TAX
(GST)
1
PRESENTATION PLAN
v WHY GST : PERCEIVED BENEFITS
v EXISTING INDIRECT TAX STRUCTURE
v FEATURES OF CONSTITUTION AMENDMENT BILL
v FEATURES OF PROPOSED GST MODEL
v FEATURES OF DRAFT GST LAW
v GSTN
v ROLE OF CBEC
v WAY FORWARD
2
WHY GST?
PERCEIVED
BENEFITS
3
WHY GST : PERCEIVED BENEFITS
v To Trade v To Consumers
q Reduction in multiplicity of q Simpler Tax system
taxes q Reduction in prices of
q Mitigation of cascading/ goods & services due
double taxation
to elimination of
q M o r e e f f i c i e n t
neutralization of taxes cascading of taxes
especially for exports q Uniform prices
q Development of common throughout the country
national market q Transparency in
q Simpler tax regime taxation system
§ Fewer rates and q I n c r e a s e i n
exemptions
e m p l o y m e n t
§ Distinction between Goods
& Services no loner opportunities
required 4
EXISTING INDIRECT
TAX STRUCTURE
5
EXISTING INDIRECT TAX STRUCTURE
Entry Tax & Octroi
Customs Excise
Duty Duty Entertainment Tax
Electricity Duty
Central
Luxury Tax
Levies
Central VAT
Cess Service
Sales Tax
Tax
State
Levies
6
FEATURES OF
CONSTITUTION
AMENDMENT BILL
(CAB)
7
FEATURES OF CAB….
v CAB passed by Rajya Sabha on 03.08.2016 & Lok Sabha on
08.08.2016
v Key Features:
q Concurrent jurisdiction for levy & collection of GST by the
Centre & the States – Article 246A
q Centre to levy & collect IGST on supplies in the course of
inter-State trade or commerce including imports – Article 269A
§ to be apportioned between Union & States on
recommendations of the GST Council (GSTC)
§ Parliament to have powers to formulate principles for
determining when a supply takes place in course of inter-
state trade or commerce
8
….FEATURES OF CAB….
v Key Features contd.
q Compensation for loss of revenue to States for five years on
recommendation of GSTC – Clause 19
q GST defined as any tax on supply of goods or services or both
other than on alcohol for human consumption – Article 366
(12A)
q Goods includes all materials, commodities & articles – Article
366 (12)
q Services means anything other than goods – Article 366 (26A)
q GST on petroleum crude, high speed diesel, motor spirit
(commonly known as petrol), natural gas & aviation turbine
fuel to be levied from a later date on recommendations of
GSTC
9
….FEATURES OF CAB….
v Key Features contd.
q GSTC - Article 279A
§ To be constituted by the President within 60 days from the
coming into force of the Constitution Amendment
§ Consists of Union FM & Union MOS (Rev)
§ Consists of Ministers in charge of Finance / Taxation of
each State
§ Chairperson – Union FM
§ Vice Chairperson - to be chosen amongst the Ministers of
State Government
§ Quorum is 50% of total members
§ Decisions by majority of 75% of weighted votes of members
present & voting
10
….FEATURES OF CAB
v Key Features contd.
q GSTC - proposed Article 279A
§ Weightage of votes:
o Centre – 1/3rd of total votes cast
o States (all taken together) – 2/3rd of total votes cast
§ Council to be guided by need for
o a harmonized structure of GST; and
o a harmonized national market for goods & services
§ Council to make recommendations on
o Taxes, etc. to be subsumed in GST
o Exemptions & thresholds
o GST rates
o Band of GST rates
o Model GST Law & procedures 11
FEATURES OF
PROPOSED GST
MODEL
12
GST – FEATURES….
v Destination-based Consumption Taxation
v Applies to all supplies of goods / services (as against
manufacture, sale or provision of service) made for a
consideration except –
q Exempted goods / services – common list for CGST & SGST
q Goods / services outside the purview of GST
q Transactions below threshold limits
v Dual GST having two concurrent components
q Central GST (CGST) levied & collected by Centre
q State GST (SGST) levied & collected by States
v CGST & SGST on intra-State supplies of goods / services
in India
13
….GST – FEATURES….
v IGST levied & collected by the Centre applicable to
q Inter-State supplies of goods / services in India
q Inter-state stock transfers of goods
q Import of goods / services
q Export of goods / services (if made on payment of GST under
claim of rebate)
v Export of goods / services – Zero rated
v All goods or services likely to be covered under GST except:
q Alcohol for human consumption - State Excise + VAT
q Electricity - Electricity Duty
q Sale / purchase of Real Estate - Stamp Duty + Property Taxes
v Five specified petroleum Products – to be brought under GST
from a later date on recommendation of GSTC
v Tobacco Products – under GST + Central Excise 14
….GST – FEATURES….
State
Central VAT /
Excise Sales
duty Tax Entertainment
Surcharges
Tax (not levied
& Cesses
by local bodies)
Additional
Surcharge
duties of
& Cesses
excise
Central Purchase State Central
Sales
Taxes
Tax
Taxes Tax
Excise duty
levied under
Service Medicinal &
Taxes on
Tax Toiletries
Entry lottery,
Preparation
Tax betting &
Additional Act
gambling
duties of Luxury
customs Tax
(CVD &
SAD)
Central & State Taxes to be subsumed in GST 15
….GST – FEATURES….
v GST Rates – based on RNR : Four rates -
q Merit rate - essential goods or services
q Standard rate - goods or services in general
q Special rate - precious metals
q Nil rate - exempted goods or services
v Floor rate with a small band of rates for standard rated
goods / services for CGST & SGST
v Optional Threshold exemption in both components of GST
v Optional Compounding scheme for taxpayers having
taxable turnover up to a certain threshold above the
exemption
16
….GST – FEATURES….
Utilization of Input Tax Credit (ITC)
ITC
CGST SGST IGST
CGST IGST SGST IGST IGST CGST SGST
17
FEATURES OF
DRAFT GST LAW
(MGL)
18
FEATURES OF MGL….
v Tax on supply of goods or services rather than manufacture /
production of goods, provision of services or sale of goods
v Powers to declare certain supplies as supply of goods or of
services or of neither – Schedule II
v On Intra-State supplies of goods and/ or services - CGST & SGST
shall be levied by the Central and State Government respectively,
at the rate to be prescribed
v On Inter -State supplies of goods and/ or services - IGST shall be
levied by the Central Government, at the rate to be prescribed
v Elaborate Rules provided for determining the place of supply
q Intra-State supply of goods and/or services - where the location of
the supplier and the place of supply are in the same State
q Inter-State supply of goods and/or services - where the location of
the supplier and the place of supply are in different States
19
….FEATURES OF MGL….
v Liability to pay tax arises only when the taxable person
crosses the exemption threshold
v Taxable person is a person who is registered or
required to be registered under Schedule-III
v Provision for levy of fixed tax on aggregate turnover
upto a prescribed limit in a financial year (Composition
scheme) without participation in ITC chain
v Elaborate principles devised for determining the time of
supply of goods and services with following being
crucial determinants with certain exceptions:
q Date on which supplier issues invoice
q Date on which supplier receives the payment , whichever
is earlier
20
….FEATURES OF MGL….
v Tax is to be paid on Transaction value (TV) of supply
generally i.e. the price actually paid or payable for the supply
of goods and/or services
v ITC is available in respect of taxes paid on any supply of
goods and / or services used or intended to be used in the
course or furtherance of business (i.e. for business
purposes)
v Negative list approach for non-allowance of ITC
v ITC of tax paid on goods and / or services used for making
taxable supplies by a taxable person allowed subject to four
conditions:
q possession of invoice;
q receipt of goods or services;
q tax actually paid by supplier to government;
q furnishing of return
v Full ITC allowed on capital goods in one go
21
….FEATURES OF MGL….
v Proportionate credits allowed in case inputs, inputs services
and capital goods are used for business and non-business
purposes
v Proportionate credits allowed in case inputs, inputs services
and capital goods are used for taxable and non-taxable
supplies
v ITC cannot be availed on invoices more than one year old
v ITC available only on provisional basis for a period of two
months until payment of tax and filing of valid return by the
supplier
v Matching of supplier’s and recipient’s invoice details
q ITC to be confirmed only after matching of such information
q ITC to be reversed in case of mis-match
22
….FEATURES OF MGL….
v PAN based Registration
q required to be obtained for each State from where taxable
supplies are being made
v A person having multiple business verticals in a State may
obtain separate registration for each business vertical
v Liability to be registered:
q Every person who is registered or who holds a license under
an earlier law;
q Every person whose turnover in a year exceeds the
threshold
v A person, though not liable to be registered, may take
voluntary registration
v Certain suppliers liable for registration without threshold
23
….FEATURES OF MGL….
v Registration to be given by both Central and State Tax
Authorities on a common e-application
v Deemed registration after three common working days from
date of application unless objected to
v Self –serviced Amendments except for certain core fields
v Provision for surrender of registration and also for suo-moto
cancellation by the tax authorities
v Normal taxpayers, compositions taxpayers, Casual
taxpayers, non-resident taxpayers, TDS Deductors, Input
service Distributors (ISDs) to file separate electronic returns
with different cut-off dates
q Annual return to be filed by 31st December of the following
Financial Year along with a reconciliation statement
q Short-filed returns not to be treated as a valid return for
matching & allowing ITC and fund transfer between Centre
and States 24
….FEATURES OF MGL….
v System of electronic cash ledger and electronic ITC ledger
v Tax can be deposited by internet banking, NEFT / RTGS,
debit/credit card and Over The Counter
v Date of credit to the Govt. account in the authorized bank is
the date of payment for credit in electronic cash ledger
v Payment of Tax is made by way of the debit in the electronic
cash or credit ledger
v Hierarchy for discharging payments of various tax liabilities
v Provision for TDS on certain entities
v E-Commerce Operators, facilitating supplies by other
suppliers, to collect Tax at source (TCS) out of payments to
be made to such suppliers
25
….FEATURES OF MGL….
v Time limit for refund of tax or interest is two years
v Refund of accumulated ITC allowed in case of exports or
where the credit accumulation is on account of inverted duty
structure
v Refund to be granted within 90 days from the date of receipt
of complete application
v Interest is payable if refund is not sanctioned within 90 days
v Refund claim along with documentary evidence is to be filed
online without any physical interface with tax authorities
v Immediate provisional sanction of 80% of refund claim on
account of exports
v Principle of “Unjust enrichment” to be satisfied
v Tax refund will be directly credited to the bank account of
applicant
v Refund can be withheld in specified circumstances even
without any stay from any higher appellate fora 26
….FEATURES OF MGL….
q Self –assessment of tax
q Provisions for assessment of non-filers, unregistered persons &
summary assessments in certain cases
q Provision made for provisional assessment on request of taxable
person – to be finalized in six months
q Audit can be conducted at the place of business of the taxable
person or at the office of the tax authorities, after prior intimation to
taxable person
q Audit to be completed within 3 months, extendable by a further
period of 6 months
q On conclusion of audit, the taxable person to be informed about
findings, his rights and obligations and reasons for the findings
q Adjudication order to be issued within 3/5 years of filing of annual
return in normal cases & fraud / suppression cases respectively
27
….FEATURES OF MGL
v No separate time lines for issue of SCN and adjudication order
v Taxable person can settle at any stage, right from audit/investigation to
the stage of passing of adjudication order and even thereafter
v Officers to have power of search & seizure with inbuilt safeguards
v Restricted power to arrest and for prosecution provided for
v Elaborate provisions made for appeals up to Supreme Court
v Alternate dispute resolution mechanism such as advance ruling,
Settlement Commission provided for
v Comprehensive transitional provisions for smooth transition to GST
v Provision for Job work provided
v System of GST Compliance rating provided
28
GST NETWORK
(GSTN)
29
GSTN
v Incorporated on 28.03.2013 as Section 25 private limited
company with authorized equity of Rs. 10 Crores
v Strategic control to remain with Government
v Equity Holders
q Central Government - 24.5%
q EC and all States together - 24.5%
q Financial Institutions – 51%
v To function as a Common Pass-through portal for
taxpayers-
q submit registration application
q file returns
q make tax payments
v Appointed Infosys as Managed Service Provider (MSP)
30
ROLE OF CBEC
31
ROLE OF CBEC
v Prominent role in relation to indirect taxes
v Role in Policy making: Drafting of GST Law, Rules &
Procedures – CGST & IGST Law
v Assessment, Audit, Anti-evasion & enforcement under
CGST & IGST Law
v Levy & collection of Central Excise duty on products
outside GST – Petroleum Products & Tobacco
v Levy & collection of Customs duties
v Evolving a joint Dispute resolution mechanism
v Developing linkages of CBEC-GST System with GSTN
v Training of officials of both Centre & States
32
WAY FORWARD
33
WAY FORWARD….
st
v Constitution (101 ) Amendment Act already notified on
08.09.2016
v GST Council already notified wef 12.09.2016
v Recommendation of Model GST laws by GST Council
v Cabinet Approval for the CGST and IGST laws by Centre
and for SGST laws by all states
v Passage of CGST and IGST laws by Parliament and
passage of SGST laws by all State legislatures
v Notification of GST Rules
v Establishment of IT framework
34
….WAY FORWARD
v Meeting implementation challenges
v Effective coordination between Centre & State tax
administrations
v Reorganization of field formations
v Training of Officials and Trade & Industry
v Augmentation of human resources
v Spreading Accounting Literacy
v Developing IT skills
v Reorganisation of Audit procedures
v Harmonization of processes & procedures between CGST /
IGST & SGST Law 35
36
