Tax & Law Practitioners - ICSI -GST-CA Bimal Jain 070815.pdfTax & Law Practitioners Bimal Jain FCA, FCS, ... Constitutional Structure of Indirect Tax In India ... Indirect Taxes In

A2Z TAXCORP LLPTax & Law PractitionersTax & Law Practitioners

Bimal JainFCA, FCS, LLB, B.Com (Hons)

Chairman of IDT Committee of PHD Chamber of CommerceChairman of Corporate Advisory Committee of IPEM Institutions

Member of IDT Committee of FICCI/ AssochamMember of Service Tax & GST Committee of ICAI/ ICSI

9/28/2015A2Z Taxcorp LLP1

Member of Indirect Tax faculties of ICAI/ICSI/ICMA

Present Constitutional StructuredIndirect Taxes


Constitutional Structure of Indirect Tax In India

Constitutional Structure of Indirect Tax In India

Constitution

Union List State List Concurrent List

Sales/ Purchase of

Goods

EntertainmentTax62

Excise Duty

84

Service Tax97

Octroi Duty

52

Excise Duty on Liquor

51

Stamp Duty

63


54 6297 5251 63

Indirect Taxes In India - An Overview

Import of GoodsOutside India

Manufacturing Service Tax

Service

Entry tax / OctroiTo be paid on entry of goods into state/ local jurisdiction

Customs DutyTo be paid on import of goods

With in India

Manufacturing Goods To be paid on

provision of services

Service Providers

Excise DutyTo be paid on

manufacture of goods and manufacture of goods and removal from factory

CST Sale of Goods

VATCST to be paid on

inter state sale

to be paid on sale of Goods with in the

state

4 A2Z Taxcorp LLP 9/28/2015

Inter state sale Local Sale

Multiple Taxes ‐ CENTRALMultiple Taxes ‐ CENTRAL

Customs Duty:Basic Customs DutyyCountervailing DutyCustoms Cess

i l ddi i l ( )Special Additional Duty (SAD)Excise Duty: Basic Excise Duty, Additional Excise Duty,Service TaxService TaxProduct Specific Cess like Automobile CessEducation CessSecondary and Higher Education CessResearch and Development Cess


Multiple Taxes ‐ STATEMultiple Taxes ‐ STATE

Value Added Tax (VAT)Central Sales Tax (CST) charged by Originating State( ) g y g gEntry TaxOctroi charged by Municipality

l d ( h h )Local Body Tax (Maharashtra)Entertainment TaxLuxury TaxLuxury TaxStamp Duty & Registration Fees


IIssuesCustoms Excise Service TaxCustoms, Excise, Service Tax,

VAT, CST


Excise Duty ‐ IssuesTaxable Event – Manufacture/ Deemed ManufactureDifferent Rates – 2% or 6% or 12.5% or 24% or 27% or 30%Different Valuation Mechanism – Production Capacity/ TransactionValue/ MRPMovable and MarketableMovable and MarketableDifferent Exemption – Absolute/ ConditionalExcise Exemption Zone: Uttaranchal/ Himachal Pradesh / J&K/ N&EpClassification – Tariff Heading under CETA, 1985


Service Tax ‐ IssuesTaxable Event: Rendering of ServicesPositive List Regime Vs. Negative List Regimeg g gService and Exclusion from ServiceNegative List of Services

i i f iMega Exemption List of ServicesTransaction involving both Goods and ServicesValuation & Abatement IssuesValuation & Abatement IssuesDouble TaxationFastest Growing Revenue collection for Central GovtStates demanding to levy Service Tax


VAT ‐ IssuesTaxable Event: Transfer of Property in Goods/ Deemed SaleLack of Uniformity in VAT Rates/ ClassificationMultiple Threshold Exemption LimitDifferent Form and Procedure:

RegistrationRegistrationDue date paymentDue date of return filinggDue date of annual returnAssessment procedureA ll dAppellate procedureEntry FormsITC and Reversal of ITC on CST saleITC and Reversal of ITC on CST saleRefund mechanism


CST ‐ IssuesOrigin based Tax – Manufacturing State Vs. Consuming StateC Form and other statutory declarationNo Credit on CST purchases – leading to cascadingComplex Law on Stock transfer and transit sale E‐I/ E‐IICST Vs VAT Issues Check Post ControlCST Vs. VAT Issues – Check Post Control


Double TaxationCascading


Double TaxationExcise Vs. Service TaxDrawings and Designsg gCommissioning and installationsSoftware

Service Tax Vs. VATRestaurant ServicesW k C t tWorks ContractRight to use of Movable goodsSoftwareSoftwareIPRAnnual Maintenance Contract


Cascading Issues

Basic Customs Duty/ Excise duty forms part of the price in the supply/chain for the chargeability of VAT/ CST

No Cenvat credit of Excise Duty to VAT DealerNo Cenvat credit of Excise Duty to VAT Dealer

CST purchases form part of cost as there is no VAT credit


Important Events in theImportant Events in the Evolution of

Goods and Services Tax(GST)(GST)


Important Events In the Evolution of GST

Goods and Services Tax

1986MODVAT Introduced

1994Service tax Introduced

2004CENVATIntroduced

2003-08VAT Implemented

Important Events In the Evolution of GST

Introduced Introduced Introducedacross India

July 2009 10-11-2009July 2009FM announces GST from 1 April 2010

10 11 2009FDP released on GST

15-12-200913th FC released GST report

2010Comments by RD on FDP & FM Indicates GST ratesGST rates

February 2011IT strategy for

March 2011115 CAB i t d d i

Budget 2012 Negative list of S i

July 2013 PSC reportIT strategy for

GST releasedintroduced in parliament

Services introduced

PSC report tabled

May 12 2015


April 2014115 CAB lapsed

Dec 19 2014122 CAB introduced

May 6 2015LS pass 122 CAB

RS sent 122 CAB to SP

Basic OverviewGoods and Services TaxGoods and Services Tax

(GST)(GST)


Goods and Services Tax

Destination based – Consumption Tax

Comprehensive Value added Tax on Goods and ServicesComprehensive Value added Tax on Goods and Services

Collected on each stage of the Supply Chain

Seamless ITC throughout the Supply chaing pp y

No differentiation between Goods and Services as GST

Uniformity in the basic features of law –yTaxable EventTaxable personMeasure of levy including valuation provisionsMeasure of levy including valuation provisions,Basis of classification etc. HSNForms and Procedure

GST is borne by the final consumer18 A2Z Taxcorp LLP 9/28/2015

Various ModelsGoods and Services TaxGoods and Services Tax

(GST)(GST)


GST Models - World• Tax levied by Centre with provisions for revenue

sharing with Provinces/ States• Australia/ China

National GST

• Tax levied by Provinces/ States• USAState GST

• GST on Goods levied by State & on Services levied by Centre

Non-concurrent Dual GST yDual GST

• Tax levied by Centre & State on both Goods & Services Concurrent

Dual GST • Brazil & Canada – “India”Dual GST

• Separate legislation for Federal/ Provinces – Tax Quebec Model Provinces

p gcollection, Admn, Enforcements, etc., by Provinces

Quebec Model


Decoding the 122 Constitutional Amendment Bill 2014Amendment Bill, 2014

9/28/201521 A2Z Taxcorp LLP

GST Legislation – Article 366

DEFINING GOODS AND SERVICES TAX

‘GST’ is defined in article 366(12A)

‘Any tax on supply of Goods or Services or both except taxes on supply

of alcoholic liquor for human consumption’

Erstwhile taxable events such as ‘manufacture’, ‘sale’, ‘provision of

services’, etc. will loose their relevance

‘Supply’ is not defined or elaborated or qualifiedpp y q



Defining Service‘Service’ is defined in article 366 (26A)Service is defined in article 366 (26A)Services means anything other than goods122nd Constitutional amendment bill did not provide for d fi i i f ‘S i ’definition of ‘Service’

‘Goods’ is defined in article 366(12)Goods is defined in article 366(12)Goods include all materials, commodities and articles

D fi iti f ‘S i ’ it b dDefinition of ‘Service’ quite broadCan have wide ramificationsImplication on intangibles, actionable claims and transaction in


Implication on intangibles, actionable claims and transaction in money

GST Legislation – Article 246A

(1) Notwithstanding anything contained in articles 246 and 254,Parliament, and, subject to clause (2), the Legislature of everyParliament, and, subject to clause (2), the Legislature of everyState, have power to make laws with respect to goods andservices tax imposed by the Union or by such State.

(2) Parliament has exclusive power to make laws with respect togoods and services tax where the supply of goods, or ofservices or both takes place in the course of inter-State tradeservices, or both takes place in the course of inter-State tradeor commerce.

Will b CGST l d SGST l f h (i l diWill be a CGST law and one SGST law for each state (includingunion territories)??Harmonizing the multiple GST legislations across States would


g p gbe a challenge


Amendment – [Taxes levied and collected by Union butassigned to the States] interstate transactions

Except as provided in Article 269ATaxes levied and collected by the Union but assigned toh Sthe States.

Taxes on sales or purchases of inter state trade orcommerce.

i k l i h f iTaxes on consignment takes place in the course of inter –state trade or commerce.

[New article 269A to Levy and collection of goods andservices tax in course of inter- State trade or commerce


– on supplies of goods and/ or services ]


New Article : [Levy and collection of goods and services tax in course of inter-state trade or commerce]

Article 269A(1) Goods and services tax on supplies in the course of inter-State trade or

commerce shall be levied and collected by the Government of India and suchcommerce shall be levied and collected by the Government of India and suchtax shall be apportioned between the Union and the States in the manner asmay be provided by Parliament by law on the recommendations of the Goodsand Services Tax Council.

Explanation.—For the purposes of this clause, supply of goods, or of services, orboth in the course of import into the territory of India shall be deemed to besupply of goods, or of services, or both in the course of inter-State trade orsupply of goods, or of services, or both in the course of inter State trade orcommerce.

(2) Parliament may, by law, formulate the principles for determining the place ofl d h l f d f i b th t k l i th


supply, and when a supply of goods, or of services, or both takes place in thecourse of inter-State trade or commerce.


1. Within 60 days from date of the commencement of the Constitution (One Hundredand Twenty-second Amendment) Act, 2014, by order, constitute a Council to becalled the Goods and Services Tax Council.called the Goods and Services Tax Council.

2. The Council shall function under the Chairmanship of the Union Finance Ministerand will have the Union Minister of State in charge of Revenue or Finance asmember along with the Minister in-charge of Finance or Taxation or any othermember, along with the Minister in-charge of Finance or Taxation or any otherMinister nominated by each State Government as members.

3. Every decision of the Council shall be taken by a majority of not less than 3/4th ofth i ht d t f th b t d ti [50% f t t lthe weighted votes of the members present and voting [50% of totalmembers shall be quorum] in accordance with the following principles:—(A) the vote of the Central Government shall have a weightage of 1/3rd of the totalvotes cast, and(B) the votes of all the State Governments taken together shall have a weightage of2/3rd of the total votes cast in that meeting.

4. Council may decide about the modalities to resolve disputes arising out of its


y p grecommendation.


5. While discharging the functions conferred by this article,the GST Council shall be guided by the need for aharmonized structure of Goods and Services tax and forthe development of a harmonized national market forgoods and services.goods and services.

6. The GST Council shall recommend the date on which thegoods and services tax be levied on :goods and services tax be levied on :(i) petroleum crude, (ii) high speed diesel, (iii) t i it ( l k t l)(iii) motor spirit (commonly known as petrol), (iv) natural gas and (v) aviation turbine fuel



The Goods and Services Tax Council shall make recommendations to theUnion and the States on—

( ) th t d h l i d b th U i th St t d th l l(a) the taxes, cesses and surcharges levied by the Union, the States and the localbodies which may be subsumed in the goods and services tax;

(b) the goods and services that may be subjected to, or exempted from thegoods and services tax;g ;

(c) model of Goods and Services Tax Laws, principles of levy, apportionment ofIntegrated Goods and Services Tax and the principles that govern the place ofsupply;

(d) the threshold limit of turnover below which goods and services may be(d) the threshold limit of turnover below which goods and services may beexempted from goods and services tax;

(e) the rates including floor rates with bands of goods and services tax;(f) any special rate or rates for a specified period, to raise additional resources

during any natural calamity or disaster;(g) special provision with respect to the States of Arunachal Pradesh, Assam,

Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim,Tripura Himachal Pradesh and Uttarakhand; and


Tripura, Himachal Pradesh and Uttarakhand; and(h) any other matter relating to the goods and services tax, as the Council may

decide.

Additional Tax for 2 Years

(1) An additional tax on Inter-State supply of goods, not exceeding 1% inthe course of inter-State trade or commerce shall, [notwithstandinganything contained in clause (1) of article 269A], be levied andy g ( ) ],collected by the Government of India for a period of 2 years or suchother period as GST Council may recommend, and such tax shall beassigned to the States from where the supply originates.

(2) The Government of India may, where it considers necessary in thepublic interest, exempt such goods from the levy of said additional tax

(3) Parliament may, by law, formulate the principles for determining theplace of origin from where supply of goods take place in the course ofinter State trade or commerceinter-State trade or commerce.

However, as far as credit of additional tax is not creditable as theconstitutional amendment bill is silent on this aspect


constitutional amendment bill is silent on this aspect

Compensation to States

Constitutional amendment billprovides that on recommendations ofprovides that on recommendations ofthe GST Council, the Central willprovide the compensation to states:

For loss of revenue on account ofi t d ti f GSTintroduction of GST

For a such period which may extendFor a such period which may extendto 5 Years


122 Constitutional Amendment Bill

Road AheadLok Sabha and Rajya Sabha should pass the ConstitutionalLok Sabha and Rajya Sabha should pass the ConstitutionalAmendment Bill by at least 2/3 of majority:

On May 6, 2015, Lok Sabha passed CABOn May 12, 2015, CAB referred to Select Panel ofRajya Sabha

Not less than half of states should ratify the amendment

Presidential assent also requiredq


Taxes/Sectors Included/Not Included

Most of the Indirect Taxes levied by Central & State may get subsumed in GSTsubsumed in GST

Sectors Included/ not IncludedAlcoholic liquor for human consumption is kept out of GST GST to be levied on petroleum products from date to be

d d b GST C ilrecommended by GST CouncilElectricity duty??


GST Laws – Address Issues

GST Laws should address the issues of unnecessarylitigation and bring certainty in taxation laws to removelitigation and bring certainty in taxation laws to removeharassment to taxpayers;• Tax Assessment – No fair hearing, sham hearing, passing

mechanical orders etc.• Inquiry, Investigations, audit, summons search etc -

Multiple inquiry/investigation etcMultiple inquiry/investigation etc.• Too much and excessive delegated legislations and

frequent changes• Poor drafting of law


Proposed Dual GST Model - IndiaLevy on

Transactions

Intra-State Inter- State

State GST

Integrated GST

Central GST

Central goods and services tax(Central GST) (CGST)Levy by Central Government on Intra-State Supply of Goods and/ or Services

State goods and services tax(State GST) (SGST)Levy by State Government Intra State Supply of Goods and/ or Services

Integrated Goods and Service Tax (Integrated GST) (IGST)


Levy by Central Government on Inter-State Supply of Goods and/ or Services

Key Features – Dual GST

Dual GSTTransactions within the State Interstate Transactions

SGST CGST Interstate Transactions

Levied by State Levied by Centre Levied by Centre

Implemented through Implemented through Implemented throughmultiple Statues of Single Statue Single Statuemultiple Statues of Single Statue Single Statue

respective States

Paid to the account of Paid to the account of Paid to the account ofState Go t Central Go t Central Go tState Govt. Central Govt. Central Govt.

IGST = SGST + CGST

No Clarity for Stock Transfer


Rates ‐ RNRGoods and Services TaxGoods and Services Tax

(GST)(GST)


Proposed GST Rates for GST - India

GST 13th FC Deptt of Revenue SC -EC

CGST 5% 8% 12.77%SGST 7% 8% 13 91%

Year Categories CGST SGST Total Tax

SGST 7% 8% 13.91%TTL 12% 16% 26.68%

Year Categories CGST SGST Total Tax Liability

2011 April Goods at lower rate 6% 6% 12%

Goods at standard rate 10% 10% 20%Goods at standard rate 10% 10% 20%

Services 8% 8% 16%


Goods at standard rate 9% 9% 18%

Services 8% 8% 16%


Goods at standard rate 8% 8% 16%

Services 8% 8% 16%

TAXES TO BE SUBSUMED BY GST

Central Level State Level

Additional Customs

Duty

Central Excise

Service Tax

Central Sales Tax

Entertainment Tax

State Vat

Luxury Tax

Entry Taxy

Goods and Services TaxGoods and Services Tax

Central Goods and

State Goods and


Services Tax Services Tax

Intra‐State SupplyIntra State Supplyof

Goods or Services(GST)(GST)


Transactions within a State –Dual GST

Supply of Goods & Services carried within a State, then both

CGST d SGST l i bl bCGST and SGST leviable on common base

Pay CGST and SGST in separate revenue accounts

Input Tax Credit (ITC) is also allowed to be taken separately for

CGST and SGSTCGST and SGST

Credit of CGST to be utilized to pay CGST only and Credit of

SGST to be utilized to pay SGST only. Cross adjustment of tax

credit between CGST and SGST will not be allowed


Transactions within a State – Dual GST

ED VAT CGST SGST

Cenvat/VAT viz-a-viz GST

ParticularsS/ChainPre‐GST Post‐GST

ParticularsValue Value

Assessable Value 100.00 12.50 14.06 Assessable Value 100.00 12.50 12.50Excise Duty 12.50 Excise Duty 0.00Basic Price 112 50 Basic Price 100 00

MFG

Basic Price 112.50 Basic Price 100.00Value Addition 30.00 Value Addition 30.00Base Value for VAT 142.50 17.81 Base Value for VAT 130.00 16.25 16.25VAT 17 81 CGST & SGST 32 50RA

DIN

G

VAT 17.81 CGST & SGST 32.50Consumer Price 160.31 Consumer Price 162.50

Taxes Collected 30.31 Taxes Collected 32.50

TR

Central 12.50 Central 16.25State 17.81 State 16.25Present Excise Duty @ 12.5% and VAT @ 12.5% ‐ SAME for CGST @ 12.5% & SGST @ 12.5%


Cascading: VAT charged on ED CGST Levied beyond Manufacturing

Inter‐State SupplyInter‐State Supplyof

Goods or Services( )(GST)


Inter-State Supply of Goods or ServicesIGST = (CGST+SGST) + 1% New Additional Tax (Non–Creditable) on

Goods only

Credit of IGST paid allowed to Buying dealer

IGST b dj t d i t h bl f t IGST CGST dIGST can be adjusted interchangeably for payment IGST, CGST and

SGST

Dealer (Delhi) selling Goods to Buyer (Haryana) IGST Payable

Selling Dealer (Delhi) can make payment of IGST by utilizing

IGST/CGST/SGST

Buying Dealer (Haryana) take Credit of IGST which can be utilized forBuying Dealer (Haryana) take Credit of IGST, which can be utilized for

payment of IGST/CGST/SGST44 A2Z Taxcorp LLP 9/28/2015

Inter-State Supply of Goods or ServicesProposed

CGST SGST IGST

RM & Services 100 12.50 12.50 0.00O/H & Value Additions 100Assessable Value 200

Supply Chain Particulars ValueProposed

ManufacturingAssessable Value 200

Input Credit A 0 12.50 12.50 0.00

Sub Total 80CGST & SGST 10.00 10.00 0.00

Sale within State @40%

Sub Total 40IGST 0.00 0.00 10.00

Sub Total 20IGST 0.00 0.00 5.00

Sub Total 40

Inter‐State Sale @20%

Inter‐State ‐ Stock Trf @10%

Sub Total 40IGST 0.00 0.00 0.00

Sub Total 20

IGST 0.00 0.00 5.00

Exports @20%

Inter‐ State Sale to Govt Org

@10%

Output Liability B 10.00 10.00 20.00

Balance Credit (A‐B) 2.50 2.50 0.00

Liability to be


paid 0.00 0.00 15.00

IGST liability paid by utilising CGST ‐ 2.5 & SGST ‐ 2.5 to be trf to Central

GST - Key ChallengesChallenges


Open Issues - DiscussionsHow the GST law would be?Which Taxes, surcharges, cesses, will be subsumed in GST?Which Goods and Services are subject to or exempt from GST?Place of Supply Rules for Inter-State Supply of ServicesWhat will be the rate of GST including the RNR (floor rates)?What will be the rate of GST including the RNR (floor rates)?What will be the threshold Exemption limit of GST?How to carry forward available tax credit of Cenvat/ VAT to GST Tax

i d i i i ?regime during transition?How to carry forward existing exemption granted under Excise or VATHow to deal with Exports and Deemed Export related benefits – Rebate, Refund, Drawback, etc.Industry - Preparedness


GST -ImpactImpact

GST - Impact


GST Impact across all business….

FiscalFiscal

Cash FlowsCash Flows Business ProcessesBusiness Processes

GSTProduct PricingProduct Pricing AccountingAccountingGSTg g

Supply chainSupply chain

MarketingMarketing

IT systemsIT systems


MarketingMarketing

Impact on IT Systems

IT System

Master Records Transaction Records

System output likely to be impacted by GST transition…

Master databases (vendor, customer, material tax rates)

Tax computation/ Costing modules

MIS Reportsmaterial, tax rates)

Documentation Statutory filings Tax records and h l d


templates (Invoice, Purchase order)

(Return/ Declaration forms)

other related modules

Before GSTStrategyStrategy

P t GSTPost GST Strategy

ImplementationImplementationStrategy


Before GST – Action Plan

• Comparison of current taxes structure oninitial GST design

Initial Ground Work

initial GST design• Identify source of procurement• Capturing of all tax costs in the present

systemWork system

T iti l• Identify areas for filling representations/

clarification for changes in model legislationTransitional Issues

clarification for changes in model legislation


Post Release of Draft Legislation

DevelopTransitionStrategy

To study the impact of GST modellegislationgy

Detailed StudyTo understand and identify the “As it”and “To be” situation in order to be GSTAnalysis and To be situation in order to be GSTcompliant

D i NDevise NewBusinessModels

For efficient shift to GST regime


Implementation – For effective transition to GSTGST

ImplementGST Model

Through out the company consideringchanges made in final legislationincluding effective communication pang p

Education &T i i

Train Company professionals forI l t ti f GSTTraining Implementation of GST

G id & E id & i iGuidance &supervision

Ensure proper guidance & supervisionof implementation of GST process


A2Z T LLPA2Z Taxcorp LLPFlat No. 34B, Ground Floor

Pocket –I, Mayur Vihar, Phase–I, Delhi – 110091 India

Desk tel:+91 11 22757595/ 42427056Desk tel:+91-11-22757595/ 42427056Mobile:+91 9810604563bimaljain@hotmail [email protected]

Documents

Tax & Law Practitioners - ICSI -GST-CA Bimal Jain 070815.pdfTax & Law Practitioners Bimal Jain FCA, FCS, ... Constitutional Structure of Indirect Tax In India ... Indirect Taxes In