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Webinar on GST
[email protected] www.consultconstruction.com
• Organised by Consult Construction• Rendering specialised services to Construction
– Indirect Taxes– ERP– Management Audits– Corporate Training
• We also release monthly E-bulletin on Indirect Taxes
[email protected] www.consultconstruction.com
Present Indirect Tax Structure of India
Present Tax Structure
[ 4 Important Constituents]
Excise Duty
Entry No. 84, List I, Schedule
VII
Taxable Event isManufacture
Ser vice Tax
Residuary Entry No. 97, List I, Schedule VII
Taxable Event is Provision of
Service
Sales Tax/ VAT/ CST
Entry No. 54 of List II ( VAT) and
92A of List I( CST)
Taxable Event isSale
Customs Duty
Entry No. 83, List I, Schedule
VII
Taxable Event isImport & Export
Entry Tax/ Entertainment
Tax
Entry No. 52&62 List II ,Schedule
VII
Taxable Event is Entertainment
& Entry of Goods
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Custom Duty
In Place of CVD and SAD, IGST
will be charged
Proposed Indirect Tax Structure
Intra State
Taxable Supply
Excise and Service Tax will be known as CGST
Inter State
Taxable Supply
CST will be known as Integrated GST (IGST)
Approx. Sum Total of CGST and
SGST
Local VAT & Other taxes will be
known as SGST
Import From
Outside India
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Features of Proposed GST Destination based Taxation
Apply to all stages of the value chain Apply to all taxable supplies of goods or services made
for a consideration except –o Exempted goods or services – common list for CGST
& SGSTo Goods or services outside the purview of GSTo Transactions below threshold limits
Dual GST having two concurrent components –o Central GST levied and collected by the Centreo State GST levied and collected by the States
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Features of Proposed GST CGST and SGST on intra-State supplies of goods or
services in India. IGST ( Integrated GST) on inter-State supplies of goods or
services in India – levied and collected by the Centre.
IGST applicable too Import of goods and
serviceso Inter-state stock
transfers of goods and services
Export of goods and services – Zero rated.
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Central Taxes to be subsumed under GST are –
Central Excise duty (CENVAT)Additional duties of exciseExcise levied under Medical and
Toiletries Preparation ActAdditional duties of custom (CVD and SAD)Service taxSurcharge and cess
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State Taxes to be subsumed
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State Sales taxState VATPurchase taxCentral sales taxEntertainment tax (not levied by local bodies)Tax on lottery, batting and gamblingSurcharges and cess
oAlcohol for human consumptiono Electricity Dutyo Real Estate – Stamp Duty plus Property Taxeso Petroleum Products ( to be brought under GST
from date to be notified on from recommendation of GST Council)
o Tobacco Products under GST with Central Exciseduty
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Out of GST
Rates under GST Regime
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GST Rates to be based on RNR. Four rates are proposed -oMerit rate for essential goods and servicesoStandard rate for goods and services in generaloSpecial rate for precious metalsoNIL rate
Floor rate with a small band of rates for standard rated goods or services for SGST
(This is similar to mandatory guidelines which will be issued by GST Council in line with European Directive 12/ 2006)
Optional Threshold exemption in both components of GST.
Optional Compounding scheme for taxpayers having taxableturnover threshold above the exemption.
HSN Code likely to be used for classification of goods.
Present Accounting codes likely to be used for Services.
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Compounding and Classifications
Place of Supply Rules
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[email protected] www.consultconstruction.com
[email protected] www.consultconstruction.com
• Composite Supplies
• Discussion paper proposes government to clarify if a transaction –
a) Is to be treated as supply and not service of goods b)Is to be treated as supply of service and not goodsc) Is to be treated neither as supply of goods nor services
–Different Elements with Different Tax
Rates
– International Practice in developed countries– Remain Silent in Law Answers from Judicial Pronouncement
Identity - Composite Supplies
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[email protected] www.consultconstruction.com
Rationalization of Warehouses
Transitional complexities viz a viz contractual agreement variations
Issue - Liability in case of ongoing works/turnkey contracts and leases
Concern -
Whether govt. will provide a remedy to industry by restricting GST liability to the extent of tax payable under the existing system till the completion of such on-going contracts/ agreements at least for a specified duration of say 18-24 months ??
Will the client reimburse
Concern -
How govt. will deal with the exemption
provided on on-going contracts?
Issue – Blockage of Working capital
Concern -
How industry would meet the interest costof additional working capital ?
Issue - Transitional Tax cost
Concern –
How govt. is going to adjust to IT and Staff Trainingcost on transition ?
How govt. is going to compensate loss of profitfigures to high revenue generating states ?
On what basis compensatory allowances will be given to state ??
Issue - ERP Concern -
How industry is going to change inaccordance with the change in statue ??
Impact on some of the sectors
• D2H & Entertainment: May benefit indirectly once GST is implemented. Tax evasion in the cable industry will come down forcing operators to raise tariffs. Elimination of multiple taxes.
• Consumer Products: GST rate should be tax neutral for most FMCG players. However, FMCG firms will benefit from lower warehouse costs, more efficient supply-chain planning and inventory reduction.
• Auto sector would benefit from reduction in duties on large SUVs and cars as GST rate is likely to be lower than the present excise plus VAT rate. Tractors may be taxed at lower rate in GST.
Impact on some of the sectors• Plastic Industry: Unorganized players, which account for a major share of
the plastic industry, will come under tax net and may not be able to pay the high dealer margins they currently pay. This will help organised players.
• Transport: Demand for large warehouses will increase, which will benefit Transport sector. Truck utilization will also go up. Overall efficiency of the industry shall improve.
• Construction – Composite transactions may be treated as service
• IT Telecom: Increase in taxes under GST will be passed on to the consumers. End of dispute on sim cards and software
Global Experience• Only Brazil and Canada have opted for Dual GST• Canada has planned a single administration authority to simplify
the management• They had initially expected to combine into Single GST after some
time,but have not been able to do that 20 yrs down the line
• Australia implemented in 2000 – Single tax administered by centre –Less number of states – Population equivalent to Mumbai
• They had 21 months after release of the draft GST Law• Significant increase In number of tax disputes post implementation