GOODS AND SERVICE TAX(GST)

A SIGNIFICANT REFORM IN INDIRECT TAX LEGISLATION HISTORY OF INDIA

CONTENTS

1. INTRODUCTION2. TEN THINGS YOU SHOULD KNOW ABOUT GST3. ECONOMIC ANALYSIS OF

GST(PROPORTIONAL TAX)4. POLITICS ON GST5. CONSTITUTIONAL ASPECTS

Economic analysis of GST• FOR A DEVELOPING NATION LIKE INDIA, A

PROPORTIONAL TAX SYSTEM IN RECOVERY PERIOD IN GLOBAL ECONOMY ADDS FUEL TO THE ENGINE OF ECONOMIC GROWTH THERBY STABILISING THE COUNTRY ECONOMY.

• GST IS A CONSUMPTION BASED PROPORTIONAL TAX.• GST REMOVES THE HINDRANCES IN PREVIOUS TAXES.• A SIMPLIFIED PROCEDURAL ASPECTS ATTRACTS GST

IN NOT ONLY BUSINES HOUSES BUT ALSO COUNTRY AT A LARGE.

HINDRANCES IN PREVIOUS TAXES

HINDRANCES IN PREVIOUS TAXES• Reduction in multiplicity of taxes.• Mitigation of cascading/ double taxation.• More efficient neutralization of taxes especially for exports.• Development of common national market.• Simpler tax regime - Fewer rates and exemptions.• Broadening of Tax base.• Improved compliance & revenue collections (tax booster)

GST FEASIBILTY GRAPH STUDY

GST FEASIBILTY GRAPH STUDY

GST FEASIBILTY GRAPH STUDY

CONSTITUTIONAL ASPECTS• The Goods and Services Tax Bill or GST Bill, officially

known as The Constitution (One Hundred and Twenty-Second Amendment) Bill, 2014, proposes a national Value added Tax to be implemented in India from April 2016.

• Which sub includes amendments to :1. ARTICLE 248 8. ARTICLE 279

2. ARTICLE 249 9. ARTICLE 286

3. ARTICLE 250 10. ARTICLE 366

4. ARTICLE 268 11. ARTICLE 368

5. ARTICLE 268A

6. ARTICLE 269

7. ARTICLE 271

CONSTITIUTIONAL ASPECTS• UNION LIST - ENTRY 92 AND 92C SHALL BE OMITTED.• STATE LIST – ENTRY 52 AND 55 SHALL BE OMITTED.• STATE LIST – ENTRY 54 ANDAND 62 SHALL BE

SUBSTITUTED.• UNION LIST – ENTRY 84 SHALL BE SUBSTITUTED• Article 279(5) – Goods and Service Tax council shall

be established.

INTRODUCTION

• GST is a consumption based proportional tax.• It is world wide popularly known as VAT.• In principle, GST should not differentiate between

goods and services.• Internationally, GST was first introduced in France and

now more than 150 countries have introduced GST. • Most of the countries, depending on their own socio-

economic formation, have introduced National level GST or Dual GST.

INTRODUCTION - 2• A transaction in goods and services for a

consideration would attract CGST and SGST.• Also, the State Government now gets the power to

tax services and Central Government gets the power to levy tax at the distribution and retail level.

• GST may resolve, not all, but surely, most of the current issues such as the classification, valuation, double taxation disputes etc.

• The compliances are also expected to reduce drastically.

What will be out of GST?• Levies on petroleum products• Levies on alcoholic products• Taxes on lottery and betting• Basic customs duty and safeguard duties on import

of goods into India• Entry taxes levied by municipalities or panchayats• Entertainment and Luxury taxes• Electricity duties/ taxes• Stamp duties on immovable properties• Taxes on vehicles

Ten things you should know about GST

1. GST applicable on supply. 2. GST payable as per time of supply3. Determining Place of Supply could be the

key4. Valuation in GST5. Input tax credit in GST6. Inter-State supply of goods for consideration

to attract additional tax

Ten things you should know about GST

7. There would be 33 GST laws in India8. Rate of GST is not yet specified in the draft

GST law9. Time limit for show cause notices (SCN)10. Old provisions re-introducedLike composition scheme in VAT, reverse charge

in service tax fines and penalties, etc.

GST IN INDIA • India is proposing to implement dual GST. In dual GST

regime, all the transactions of goods and services made for a consideration would attract two levies i.e. CGST (Central GST) and SGST (State GST).

• Administration: CGST and IGST will be administered by Central Government‘ and SGST will administered by the respective State Governments.

• Law relating to GST: In GST regime, there will be one CGST law and 31 SGST law for each of the States including two Union Territories and one IGST law governing inter-State supplies of goods and services.

GST IN INDIA

Taxes that will be subsumed in GST:At Central level• Central Excise Duty (including Additional Duties of Excise)• Service Tax• CVD (levied on imports in lieu of Excise duty)• SACD (levied on imports in lieu of VAT)• Central Sales Tax• Excise Duty levied on Medicinal and Toiletries

preparations,• Surcharges and cesses

GST IN INDIAAt State level• VAT/Sales tax• Entertainment tax (local bodies)• Luxury Tax• Taxes on lottery, betting and gambling• Entry tax not in lieu of Octroi• Cesses and Surcharges

GST IN INDIA• However, certain items / sectors would be outside

the GST regime. • Products such as alcohol, petroleum products would

remain outside GST regime.• Further, Land and properties may remain outside

since they are neither goods nor services.

GST applicable on supply• In GST regime, all supply such as sale, transfer,

barter, lease, import of services etc of goods and/ or services made for a consideration will attract CGST (to be levied by Centre) and SGST (to be levied by State).

• Interestingly, even a barter of goods transaction which were hitherto un-taxed in VAT regime, will attract GST.

• Self supply of goods and services etc also attract GST.

GST payable as per time of supply• The liability to pay CGST / SGST will arise at the time

of supply as determined for goods and services.• GST at the earliest fora. Goods‘- Removal of goods or receipt of payment or

issuance of invoice or date on which buyer shows receipt of goods

b. Service‘s – Issuance of invoice or receipt of payment or date on which recipient shows receipt of services.

• GST rules could be a major challenge to meet such parameters in TIME concept.

Determining Place of Supply could be the key

• Separate provisions to determine the place of supply. Goods – place of delivery. Service – location of recipient.

• However, there are multiple scenarios such as supply of services in relation to immovable property etc wherein this generic principle will not be applicable and specific rule will determine the pace of supply.

• Thus, the business will have to scroll through all the place of supply provisions before determining the place of supply.

4. Valuation in GST• GST would be payable on the transaction value‘.• The law also provides for Valuation Rules to help

determine value in certain cases• The transaction value is also said to include all

expenses in relation to sale such as packing, commission etc. Even subsidies linked to supply will be includable.

• discounts/ incentives given before or at the time of supply will be permissible as deduction from transaction value.

5. Input tax credit in GST• On lines with the United kingdom VAT law.• CGST – INPUT TAX CREDIT• SGST – INPUT TAX CREDIT• IGST – CROSS UTILISATION OF TAX CREDIT BETWEEN

CGST SGST IN CASE OF INTER STATE SALE.• Composition scheme: There would be option

available to tax payers having turnover less than Rs. 50 lacs can opt for Composition scheme wherein they need to discharge tax at a floor rate of 1%.

6. Inter-State supply of goods • Draft GST law provides that an additional tax upto 1%

will be levied by Centre on inter-State supply of goods (and not on services) made for consideration.

• The credit of this additional levy will not be available as thus it will be a cost in the supply chain.

• This additional tax will be assigned to States from where the supply of goods originates.

• This additional tax will be applicable for a period of two years and could be extended further by GST Council.

7. There would be 33 GST laws in India• In GST regime, there will be one CGST law and 31

SGST law for each of the States including two Union Territories and one IGST law governing inter-State supplies of goods and services.

8. Rate of GST is not yet specified in the draft GST law

• The rate of GST is not specified in draft GST law. • However, various News reports suggest that the

Revenue Neutral Rate (RNR) as proposed by the ChieF Economic Advisor Shri. Arvind Subramanian could be 17%-18%.

• Further, there could be lower rate (of 12%-14%) for concessional goods and higher rate (upto 40%) for luxury goods (such as luxury cars, tobacco products etc).

9. Time limit for show cause notices (SCN)• Time limit for issuance of SCN is generic cases (i.e.

other than fraud, suppression etc) would be three years and in fraud, suppression etc cases it would be five years.

• Its pertinent to note that the time limit prescribed for issuance of SCN for generic cases is much more than the current time limit prescribe in excise law (i.e. 12 months) and service tax legislation (i.e. 18 months).

GST COUNCIL

• The Council shall function under the Chairmanship of the Union Finance Minister and will have the Union Minister of State in charge of Revenue or Finance as member.

• Along with the Minister in-charge of Finance or Taxation or any other Minister nominated by each State Government.

• Revenue loss cannot be estimated unless practical application of law is made.

Politics on GST

• history of GST• EXPERTS views on gst bill• Gst in this winter session• Credit goes to the modi government• Helps in increasing gdp by 2 % this year• Foreign investors are also keen on the move

for gst bill

Politics on GST

DR, ATAL BIHARI VAJPAYEE DR. P CHIDAMBARAM

Politics on GST

ARUN JAITLEY ARAVIND SUBRAMANIYAN

Politics on GST

DR. RAGHURAM RAJAN ROW IN PARLIAMENT