A PRESENTATION ONSALIENT FEATURES OF GOODS & SERVICE TAX (GST)

ByCA. Niraj Kumar SinghACA, B.COM (A&F)Mob - +91 9891 837 735E-mail – nirajkumarsingh.ca@gmail.com

SALIENT FEATURES OF GOODS & SERVICE TAX (GST)

This Presentation Covers :•GST - Introduction•GST - Journey so far•GST – Advantage and Disadvantage•GST- Worldwide Rate •GST – What goes??•GST- How it works ?

GST - INTRODUCTION

• It has been long pending issue to streamline all the different types of indirect taxes and implement a “single taxation” system. This system is called as GST ( GST is the abbreviated form of Goods & Services Tax). The main expectation from this system is to abolish all indirect taxes and only GST would be levied. As the name suggests, the GST will be levied both on Goods and Services. It is destination based tax.

• GS is one indirect tax for the whole nation, which will make India one unified common market.

• GST is a single tax on the supply of goods and services, right from the manufacturer to the consumer. Credits of input taxes paid at each stage will be available in the subsequent stage of value addition, which makes GST essentially a tax only on value addition at each stage. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set off benefits at all the previous stages.

• GST is a tax that we need to pay on supply of goods & services. Any person, who is providing or supplying goods and services is liable to charge GST.

GST - JOURNEY SO FAR2000

• In 2000, the Vajpayee Government started discussion on GST by setting up an empowered committee. The Committee was headed by Asim Dasgupta (Finance Minister – Government of West Bengal).

2002-2004

• The Kelkar Task Force on the implementation of Fiscal Responsibility and Budget Management (FRBM) Act, 2003 and suggested a comprehensive Goods and Service Tax (GST).

2006• A proposal to introduce a national level Goods and Service Tax (GST) by April 1, 2010 was first

mooted in the budget Speech for the financial year 2006-2007.

2007• May 2007 – Empowered Committee of State Finance Ministers, on this request, started

worked on GST roadmap.• November 2007 – The joint working group, submitted its report to the Empowered

Committee on 19 November 2007.

2008 • April 2008 – Empowered Committee finalized views over GST and submitted report titled “A model and roadmap for Goods and Services Tax (GST) in India.

2009 • November 2009 – First discussion paper released by Empowered Committee.

GST - JOURNEY SO FAR

2010• February 2010 – Mentioned in the speech of then Finance Minister Pranab Mukherjee – GST to be

introduced in April 2011

2011• March 2011- The Constitution 115th amendment bill introduced in Lok Sabha for levy of GST on all

Goods or services except for the specified goods.

2013

• August 2013 – Standing Committee submitted its report on GST.• November 2013 – Empowered Committee rejected Government’s proposal to include petroleum

products.

2014• December 2014 – The Constitution 122nd amendment bill passed in Lok Sabha for levy of GST which

enables the introduction of GST probably by April 2016 on 17th December 2014.

2016• August 2016 – The Constitution 122nd amendment bill passed by Rajyasabha on 3rd August 2016.

GOODS AND SERVICES TAX – ADVANTAGES AND DISADVANTAGES

• GST is a transparent Tax and also reduce numbers of indirect taxes. With GST implemented a business premises can show the tax applied in the sales invoice. Customer will know exactly how much tax they are paying on the product they bought or services they consumed.

• GST will not be a cost to registered retailers therefore there will be no hidden taxes and the cost of doing business will be lower. This in turn will help Export being more competitive. GST can also help to diversification of income sources for Government other than income tax and petroleum tax.

• Under Goods and Services Tax, the tax burden will be divided equally between Manufacturing and services. This can be done through lower tax rate by increase Tax base and reducing exemptions.

• In GST System both Central GST and State GST will be charged on manufacturing cost and will be collected on point of sale. This will benefit people as prices will come down which in turn will help companies as consumption will increase.

• Biggest benefit will be that multiple taxes like octroi, central sales tax, state sales tax, entry tax, license fees, turnover tax etc. will no longer be present and all that will be brought under the GST. Doing Business now will be easier and more comfortable as various hidden taxation will not be present.

• In the amended Bill a cap Of 18% GST will be applicable on Goods and Services through the country. Because of this Prices of those Goods and services on which we used to pay taxes beyond 18% will be restricted to 18% only. For example taxes will be reduced on Mini SUV for which we are paying 30-40% Tax right now. After GST it will be reduced to 18%. Similarly Consumer goods like AC, Refrigerator and Transportation cost will also go down.

GOODS AND SERVICES TAX – ADVANTAGES AND DISADVANTAGES

• A robust and comprehensive IT system would be the foundation of the GST regime in India. Therefore, all tax payer services such as registrations, returns, payments, etc. would be available to the taxpayers online, which would make compliance easy and transparent.

• GST will ensure that indirect tax rates and structures are common across the country, thereby increasing certainty and ease of doing business. In other words, GST would make doing business in the country tax neutral, irrespective of the choice of place of doing business.

• The subsuming of major Central and State taxes in GST, complete and comprehensive set off of input goods and services and phasing out of Central Sales Tax (CST) would reduce the cost of locally manufactured goods and services. This will increase the competitiveness of Indian goods and services in the international market and give boost to Indian exports. The uniformity in tax rates and procedures across the country will also go a long way in reducing the compliance cost.

• GST is expected to decrease the cost of collection of tax revenues of the Government, and will therefore, lead to higher revenue efficiency.

GST RATE WORLDWIDECountry Rate of GSTDenmark 25%

Sweden 25%

France 19.60%

Germany 19%

India 18%Pakistan 18%

New Zealand 15%

Australia 10%

Singapore 7%

Malaysia 6%

Japan 5%

Canada 5%

GST – WHAT GOESCentral taxes that The GST will replace - Central Excise Duty - Duties of Excise (medicinal and toilet preparations) - Additional Duties of Excise (goods of special importance) - Additional Duties of Excise (textiles and textile products) - Additional Duties of Customs (commonly known as CVD) - Special Additional Duty of Customs (SAD) - Service Tax - Cesses and surcharges in so far as they relate to supply of goods or services

State taxes That The GST will Subsume - State VAT - Central Sales Tax - Purchase Tax - Luxury Tax - Entry Tax (all forms) - Entertainment Tax (not levied by local bodies) - Taxes on advertisements - Taxes on lotteries, betting and gambling - State cesses and surcharges

GST – HOW IT WORKS• The illustration shown in table indicates, in terms of a hypothetical example with a

manufacturer, one wholesaler and one retailer, how GST will work. Let us suppose that GST rate is 18%, with the manufacturer making value addition of Rs.30 on his purchases worth Rs.100 of input of goods and services used in the manufacturing process. The manufacturer will then pay net GST of Rs. 5.40 after setting-off Rs. 18 as GST paid on his inputs (i.e. Input Tax Credit) from gross GST of Rs. 23.40. The manufacturer sells the goods to the wholesaler. When the wholesaler sells the same goods after making value addition of (say), Rs. 20, he pays net GST of only Rs. 3.6, after setting-off of Input Tax Credit of Rs. 23.40 from the gross GST of Rs. 27 to the manufacturer. Similarly, when a retailer sells the same goods after a value addition of (say) Rs. 10, he pays net GST of only Re.1.80, after setting-off Rs.27 from his gross GST of Rs. 28.80 paid to wholesaler. Thus, the manufacturer, wholesaler and retailer have to pay only Rs. 10.80 (= Rs. 5.4+Rs. 3.6+Re. 1.8) as GST on the value addition along the entire value chain from the producer to the retailer, after setting-off GST paid at the earlier stages. The overall burden of GST on the goods is thus much less. This is shown in the table below. The same illustration will hold in the case of final service provider as well.

GST – HOW IT WORKS

Stage of supply chain

Purchase value of Input Value addition

Value at which supply of goods and services made to next stage

Rate of GST GST on output Input Tax credit

Net GST= GST on output - Input tax credit

Manufacturer 100 30 130 18% 23.4 18 23.40 - 18 = 5.40

Wholesaler 130 20 150 18% 27 23.4 27 - 23.40 = 3.60

Retailer 150 10 160 18% 28.8 27 28.80 - 27 = 1.80

Thank you!! ByCA. Niraj Kumar SinghACA, B.COM (A&F)Mob - +91 9891 837 735E-mail – nirajkumarsingh.ca@gmail.com