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• GST is single indirect tax for the whole nation.
• Any tax on supply of goods and services except some.
• Goods and Services Tax (GST) is a proposed system of indirect taxation in India merging most of the existing taxes into single system of taxation.
• First country to introduce GST was France in 1954.• Currently almost 160 countries have implemented GST with some countries
having Dual-GST ( e.g. Brazil, Canada etc.) model.• It was presented as a bill and now it is The constitution (one hundred and
First amendment) Act 2016. • The GST is administered & governed by GST Council and its Chairman
is Union Finance Minister of India Arun Jaitley
GST
• Petroleum(but may be included within GST subsequently, basic recommendation by GST council)
• Alcohol for human consumption• Lottery & betting• Electricity duty and taxes• Entry tax levied by municipalities or panchayats• Stamp duties on immovable properties• Taxes on vehicles.
EXCLUSIONS OF GOODS & SERVICE TAX.
CURRENT STATUS OF GOODS & SERVICE TAX
The bill was approved in Lok Sabha but did not pass muster in Rajya Sabha. Then it has been referred to a select committee for scrutiny
Bill was introduced in the Lok Sabha by Finance Minister
Arun Jaitley on 19 December 2014.
The select committee is expected to report to the Rajya Sabha sometime in July. Then
the house approved the recommendations.
The bill has to finally be approved by the President of
India in 2016.
After both the houses of parliament pass the bill at
least 50% of India’s 29 states have to approve the
constitutional amendment.
Amendments are going on and yesterday, Lok Sbaha passed four GST bills.
Present Indirect Taxes system in India
Central Levy
Central Sales Tax
Basic Custom Duty
SAD*
CVD**
Excise Duty
Service tax
State Levy
VAT
Octroi***
Purchase Tax
Entry Tax
5
Article 246 of the Indian Constitution gives power to parliament to make
SAD* = Special Additional Duty levied to counter balance the sales tax /Vat ,local tax
**CVD is equivalent to the amount of excise
*** tax collected on various articles brought into a district for consumption
Why there is a need for GST?
Complex Tax Structure Tax Cascading Changing business
environment
Inefficiency in Tax Administration Barriers to trade
7
CURRENT WORKING OF TAX
Manufacturer
Wholesaler
Retailer
CustomerSupplier of Raw
Materials Material worth Rs. 100 inclusive of Rs. 10 in tax
Produces a good and adds Rs. 50 value.Price before tax=Rs. 150.Tax= 15 @ 10%.Total Price for WS=150+15=165
Adds Rs. 30 to the value.Price before tax= 195Tax= 19.5Total Price for Retailer=214.5
Adds Rs. 20 value.Price before Tax=234.5Tax=23.45Price to the Customer= 257.85
Analysis of Tax Paid
Total Value added in the process: 90+50+30+20=190. Total Tax Paid= 10+15+19.5+23.45=67.8. So out of the total 257.8 paid by the customer he ends up paying 67.8 in taxes.
One interesting thing to notice: The amount of tax in each subsequent level only increases despite of a lesser increase in value addition.
Notice: WS to Retailer & Retailer to Customer. This happens because:
There is cascading impact of ‘Tax On Tax’ i.e. after adding tax in the current level we do not offset it with tax already paid and again tax it (at 10%) in the subsequent level.
Also, greater the value added in the previous step the more tax gets accumulated in the subsequent level due to the cascading effect.
HOW GST solves THIS!?HOW WE WILL SOLVE THIS!?
Manufacturer
Wholesaler
Retailer
CustomerSupplier of Raw
Materials Material worth Rs. 100 inclusive of Rs. 10 in tax
Produces a good and adds Rs. 50 value.Price before tax=Rs. 150.Tax= 15 @ 10%.Tax already paid= 10Net Tax= 15-10=5Total Price for WS=150+5=155
Adds Rs. 30 to the value.Price before tax= 185 (155+30)Tax= 18.5 @ 10%Tax Already paid: 15Net Tax: 18.5-15=3.5Total Price for Retailer=188.5
Adds Rs. 20 value.Price before Tax=208.5Tax=20.85 @ 10%Tax Already Paid: 18.5Net Tax=20.85-18.5=2.35Price to the Customer= 210.85
Analysis:
Total Value added: 90+50+30+20=190 Total Tax paid= 10+5+3.5+2.35= 20.85 Compare this to tax paid in Non-GST regime of 67.8. Rs. 47 decrease in taxes for good worth Rs. 190. Result: Goods become cheaper by the amount of decrease in tax!!
Why does this happen?
By offsetting tax in each level with the tax already paid in the previous level we avoid ‘tax on tax’.
Now the additional tax comes from value added in each stage.
This results in a lesser tax burden on the final customer.
Features of Proposed GST 17
Destination based Taxation
GST Rates – to be based on RNR
Dual model
Centre will manage IGST
Features of Proposed GST18
Nil Rate on necessary items
Merit rate for essential goods and services
Standard rate for goods and services in general
GST RATE STRUCTUREZERO RATED 0% On nearly 50% of the consumer inflation basket,
including food grains, the GST will be at 0 per cent
LOWER RATE 5% Items of common consumptionSTANDARD RATE 1 12% Two standard rates of 12 per cent and 18 per cent,
which would fall on the bulk of the goods and services. This includes fast-moving consumer goodsSTANDARD RATE 2 18%
HIGHER RATE 28% White goods, like washing machines, air conditioners, refrigerators, shampoo, shaving stuff and soap. The current levy varies between nil tax to 30-31 percent. Demerit goods or sin goods such as luxury cars, pan masala, aerated drinks, and tobacco and tobacco products, will invite a tax of 28 percent plus the cess.
20
Transparency in taxation system
AdvantagesOf GST
Low price goods
Simple structure
Zero Rated Exports
Not helpful for manufacturing states
Service becomes costlier
Disadvantages Of GST
India essentially lacks IT infrastructure at grass-root
levels.
THANK YOUQuestions and queries are most
welcome….
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