File

Report
GOODS AND SERVICES TAX
(GST)
CONCEPT, MODEL & PRESENT STATUS
January, 2015
PRESENTATION PLAN

Why GST : Perceived Benefits

Road to GST – Milestones

Stakeholders

Existing Indirect Tax Structure

Features of Constitution Amendment Bill

Features of Proposed GST Model

Current Status

GSTN

Way Forward

GST Planning
WHY GST?
PERCEIVED BENEFITS
WHY GST : PERCEIVED BENEFITS

To Trade





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 with fewer
rates and exemptions

To Government




Simpler Tax system
Broadening of Tax base
Improved compliance &
revenue collections (tax
booster)
Efficient use of resources
ROAD TO GST - MILESTONES
ROAD TO GST- MILESTONES


Budget 2006-07: announcement of intent to introduce GST by 2010
May, 2007 to September, 2009: Discussions on roadmap & design
between Empowered Committee of State Finance Ministers (EC) & GOI

November, 2009: First Discussion Paper (FDP) released by EC

January, 2010: Comments on FDP by GOI

June, 2010 : Three sub-working Groups constituted by GOI
o
Registration, return, payment, refund, audit & dispute
resolution mechanism related issues
o
Drafting of Central GST & model State GST legislations
o
Basic design of IT systems required for GST in general &
IGST in particular
ROAD TO GST- MILESTONES


CONTD.
July, 2010: Empowered Group on IT Infrastructure set-up
March, 2011: Constitution (115th Amendment) Bill introduced
in LS – Since lapsed with dissolution of LS

November, 2012: Committee on GST Design set-up by EC

January, 2013: Report submitted by Committee on GST Design

February, 2013: Three Committees constituted by EC -


Dual Control, Thresholds and Exemptions

RNRs for SGST & CGST and Place of Supply Rules

IGST and GST on Imports
March, 2013 – GSTN incorporated as a Section 25 Company
ROAD TO GST- MILESTONES
CONTD.

June, 2013: Committee to draft model GST Law

July, 2013: Report submitted by Sub-Group-I on Business Processes





April, 2014: Committee to examine Report of the sub-Group-I on
Business Processes constituted by EC
June, 2014: Report submitted by Committee on IGST and GST on
Imports
June, 2014: Report submitted by Committee on Dual Control,
Thresholds & Exemptions
October, 2014: Report submitted by Committee on RNRs & Place of
Supply Rules
December, 2014: Constitution (122nd Amendment) Bill introduced in
LS
STAKEHOLDERS .

Two major players: Centre & States
 Empowered Committee of State Finance Ministers (EC)  Finance Ministers of all State Governments.
 Assisted by State Finance Secretaries/ Commissioners of
Commercial Taxes


Government of India  Department of Revenue
 CBEC
Other Stakeholders – not directly involved in discussions
EXISTING INDIRECT TAX STRUCTURE
EXISTING INDIRECT TAX STRUCTURE
Present Tax
Structure
[4 Important
Constituents]
Excise Duty
Service Tax
Sales Tax / VAT
Customs Duty
Entry No. 84,
List I, Schedule
VII
Residuary Entry
No. 97, List I,
Schedule VII
Entry No. 54 of
List II (VAT) and
92A of List I
(CST)
Entry No. 83,
List I, Schedule
VII
Taxable Event is
Manufacture
Taxable Event is
Provision of
Service
Taxable Event is
Sale
Taxable Event is
Import & Export
11
FEATURES OF CONSTITUTION
AMENDMENT BILL
FEATURES OF CONSTITUTIONAL AMENDMENT BILL


122nd Amendment Bill introduced in LS on 19.12.2014
Key Features
 Concurrent jurisdiction for levy of GST by the Centre and
the States –proposed Article 246A
 Authority for Centre to levy & collection of IGST on
supplies in the course of inter-State trade or commerce
including imports – proposed Article 269A
 Authority for Centre to levy non-vatable Additional Tax –
to be retained by originating State
 GST defined as any tax on supply of goods or services or
both other than on alcohol for human consumption –
proposed Article 366(12A)
FEATURES OF CONSTITUTIONAL AMENDMENT BILL
CONTD.

Key Features contd.
 Goods includes all materials, commodities & articles –
Article 366 (12)
 Services means anything other than goods – proposed
Article 366 (26A)
 Goods and Services Tax Council (GSTC) - proposed Article
279A






To be constituted by the President within 60 days from the coming
into force of the Constitutional Amendments
Consists of Union FM & Union MOS (Rev)
Consists of all State Ministers of Finance
Quorum is 50% of total members
Decisions by majority of 75% of weighted votes of members
present & voting
1/3rd weighted votes of Centre & 2/3rd of all States together
FEATURES OF CONSTITUTIONAL AMENDMENT BILL
CONTD.

Key Features contd.
 Council to make recommendations on
 Taxes, etc. to be subsumed in GST
 Exemptions & thresholds
 GST rates
 Band of GST rates
 Model GST Law & procedures
 Special provisions for any special category States
 Date from which GST would be levied on petroleum products
 Council to determine the procedure in performance of its
functions
 Council to decide modalities for dispute resolution arising out of its
recommendations
 Changes in entries in List – I & II
 Compensation for loss of revenue to States for five years
FEATURES OF PROPOSED GST
MODEL
GST - FEATURES




Destination-based Taxation
Applies to all stages of value chain – primary, secondary &
tertiary including retail
Applies to all supplies of goods / services (as against
manufacture, sale or provision of service) made for a
consideration except :

Exempted goods / services – common list for CGST & SGST

Goods / services outside the purview of GST

Transactions below threshold limits
Dual GST having two concurrent components :
 Central GST levied & collected by Centre
 State GST levied & collected by States
GST – FEATURES





CONTD.
CGST and SGST on intra-State supplies of goods /
services in India
IGST (CGST + SGST) applicable to
 Inter-State supplies of goods / services in India
 Inter-state stock transfers of goods
 Import of goods and services
IGST levied & collected by the Centre
Additional Tax not exceeding 1% on inter-state
supply of goods – to be levied by the Centre but
retained by originating State
Export of goods and services – Zero rated
GST – FEATURES



CONTD.
All goods or services likely to be covered under GST
except:
 Alcohol for human consumption - State Excise + VAT
 Electricity - Electricity Duty
 Real Estate - Stamp Duty + Property Taxes
Petroleum Products – to be brought under GST from a
later date on recommendation of GSTC
Tobacco products – under GST + Central Excise
GST - FEATURES
CONTD.
TAXES PROPOSED TO BE SUBSUMED
Central Taxes
State Taxes
 Central Excise duty (CENVAT)  State VAT / Sales Tax
 Additional duties of excise
 Central Sales Tax
 Excise duty levied under  Purchase Tax
 Taxes (Centre, State or local levies – in the nature of
Medicinal
&
Toiletries  Entertainment Tax (not levied
indirect
taxes
services) to be
Preparation
Act on supply of goods
by localor
bodies)
subsumed
Additional within
duties GST:
of customs  Luxury Tax
(CVD & SAD)
 Entry Tax (not levied by local
 Service Tax
bodies)
 Surcharges & Cesses
 Entry Tax in lieu of Octroi
 Taxes on lottery, betting &
gambling
 Surcharges & Cesses
GST – FEATURES




CONTD.
GST Rates – based on RNR : Four rates  Merit rate - essential goods & services
 Standard rate - goods & services in general
 Special rate - precious metals
 Nil rate - exempted goods or services
Floor rate with a small band of rates for standard rated goods /
services for CGST & SGST
Optional Threshold exemption in both components of GST
Optional Compounding scheme for taxpayers having taxable
turnover up to a certain threshold above the exemption
GST – FEATURES





CONTD.
ITC of CGST for CGST & SGST for SGST - no cross
utilization
ITC of IGST allowed for payment of IGST, CGST & SGST in
that order
ITC of CGST allowed for payment of CGST & IGST in that
order
ITC of SGST allowed for payment of SGST & IGST in that
order
No ITC of Additional Tax
GST – FEATURES


Multiple statutes – one for Centre & one for every State
Model GST Law including Rules & procedures to be recommended by GST
Council 


CONTD.
Certain features to be common between the Centre & the States &
across the States
Certain other features may vary to allow flexibility to the Centre & the
States
Place of Supply Rules

to determine Place of Supply of goods or services

to determine whether the supplies are intra-State or inter-State

HSN Code likely to be used for classification of goods

Present system of classification of services likely to be used
CURRENT STATUS
CURRENT STATUS
I.




AMENDMENT BILL REINTRODUCED on 19.12.2014
Procedure for passage of Constitutional Amendment Bill
 May be referred to the Standing Committee on Finance (SCF)
 To be passed by 2/3rd majority in both Houses of Parliament
 To be ratified by at least 50% of the State Legislatures
 Assent by President of India
Thereafter, GSTC to be constituted
GSTC to recommend GST Law and procedure
GST Law to be introduced in Parliament/ State legislatures
CURRENT STATUS
CONTD.
DRAFTING OF LEGISLATION
II.


III.
Committee & three sub-committees of officials (Centre & States)
constituted to finalize model legislation (CGST, SGST and IGST)
GST Cell in CBEC
BUSINESS PROCESSES AND IT FRAMEWORK




IT Infrastructure for GST to be put in place jointly by the Centre &
States
Empowered Group headed by Dr. Nandan Nilekani finalized the
design and modalities of GSTN
NSDL appointed the Technology partner
GSTN established as a SPV & Section 25 company
CURRENT STATUS


CONTD.
Business Processes  A common portal - GST Network (GSTN) to
handle registration of taxpayers, return filing
and payments
 To be linked to the CBEC IT system (ACES) &
each of the States at the back end
 Business processes & forms relating to
Registration & Returns under approvals
Issues under Discussion
 Key Policy issues
 Key Business processes
CURRENT STATUS

CONTD.
Five Committees constituted by EC


Committee on Dual Control, Thresholds & Exemptions
Committee on Revenue Neutral Rates for State GST & Central GST &
Place of Supply Rules

Committee on IGST & GST on Imports

Committee for drafting Model GST Law

Committee for examination of Business Processes
CURRENT STATUS

CONTD.
Key Policy Issues under Discussion –
 Extent of Dual Control
 Rate structure
 Exempted Goods / Services
 Exemption threshold
 Composition threshold
 Role of Centre / States in inter-State Trade
 Place of Supply Rules for Goods / Services
 Mechanics of IGST model
 Account settlement between Centre & States under IGST
model
CURRENT STATUS

CONTD.
Key Business processes under Discussion –

Single / Multiple registration within one State

Dispute settlement

Audit

Enforcement

Recovery & Refund, etc.
GST NETWORK (GSTN)
GSTN - FEATURES





GSTN incorporated on 28.03.2013 as Section 25 private
limited company with authorized equity of Rs. 10 cr.
Strategic control to remain with Government
A self-sustaining revenue model - to levy user charges for
availing services from 
tax payers

tax authorities
Exclusive national agency responsible for delivering
integrated Tax related services involving multiple tax
authorities
Equity Holders

Central Government - 24.5%

EC and all States together - 24.5%

Financial Institutions – 51%
GSTN - FUNCTIONS





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GST Common Portal to be set-up before GST roll out
Common Portal to function as pass-through portal for dealers to 
submit registration application

file returns

make tax payments
Registration, return & payment information to be passed on to
Central & concerned State tax authorities
GSTN to develop back-end modules like Assessment, Audit,
Refunds, Appeal, Enforcement & tax payer profiling utility, etc. as part of Cafeteria Services
Statutory functions like assessment, enforcement of tax laws,
settlement of disputes etc. to be performed by the respective tax
authorities only
GSTN to provide various services
GSTN - SERVICES







Common Registration, Return filing & e-Payment for tax
payers
Integration of Common GST Portal with existing tax
administration systems of Central / State Governments &
other stake holders
Facilitate, implement and set standards for providing services
to tax payers through common GST portal
Build efficient & convenient interfaces with tax payers to
increase tax compliance
Assist tax authorities in plugging tax evasion & improving
transparency of tax administration system
Carry out research, study best practices & provide training to
the stakeholders
Deliver any other service of relevance to Government &
other stakeholders
WAY FORWARD
WAY FORWARD


Passage of Constitution Amendment Bill
GSTC to be constituted after passing of Constitution
Amendment Bill

GSTC to recommend GST Law & procedure

GST Law to be introduced in Parliament / State legislatures

Scale up existing IT Infrastructure

Linkage of GSTN portal with ACES at back end
WAY FORWARD
CONTD.
Meeting implementation challenges :






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Effective coordination between Centre & State tax
administrations
Reorganization of field formations
Augmentation of human resources
Spreading Accounting Literacy
Developing IT skills
Reorganisation of Audit procedures
Harmonization of processes & procedures between CGST
/ IGST & SGST Law
GST PLANNING
IMPACT AREAS FOR BUSINESSES
 Pricing,
Costing, Margins
 Supply-chain management
 Change in IT systems
 Treatment of tax incentives
 Treatment of excluded sectors
 Transaction issues
 Tax compliance
ROLE OF PROFESSIONALS
Tracking GST development
 Review of draft legislation and impact
analysis
 Industry advocacy
 Review of final legislation and impact
analysis
 Implementation assistance
 Post implementation support

THANK YOU !

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