GST: A Comprehensive Overview of India's Taxation Revolution

2. GST – FIRST CUT

3. VAT in INDIA… • 1986 – modvat for inputs • 1994 – modvat for capital goods • 2002 & 2003 – service tax credit • 2004 – cross-sectoral credit • 2005 – VAT • 2010 (?) – GST

4. GST JACKPOT… • Centre : - Tax till “retail” • State : - Tax “services” • Trade :- No “Tax on Tax” • Consultants :- Eternal Business

5. TODAY … • C.Ex duty is part of the price for VAT • CST is part of the cost as there is no VAT credit • VAT has a cascading effect, since sale price includes C.Ex duty / CVD

6. TODAY in C.EX… • Sec 2 (f) (i), (ii) & (iii) • Sec 3 & 3A • Sec 4, 4A & Valuation Rules

7. TODAY in VAT… • Multiple rates • Different rates in different states • Different definitions • Border controls

8. TODAY in CST… • No credit on CST purchases leading to cascading effect • Complex law on stock transfer and transit sales

9. TODAY in ST… • Selective services under tax net • Inclusive definitions • Cenvat credit disputes • Freak valuation • Reverse charge

10. SALE vs SERVICE… • Software • Works contract

11. GST - Made in India ! • Dual GST structure proposed • Centre & State to have concurrent jurisdiction • Power of Centre & State to tax widened • Win – win model for both Centre and State

12. Central GST (CGST) • To be levied by the Centre through a separate statute on all transactions of goods and services made for a consideration • To cover end – 2 end transactions across value chain • Exempted goods and services, non - GST goods and transactions within threshold limits are to be out of CGST

13. CGST … • Central Excise Duty     • Additional Excise Duties • The Excise Duty (M & TP Act) • Service Tax • CVD • SAD • Surcharges & • Cesses

14. State GST (SGST) • To be levied by the State through a separate statute on all transactions of goods and services made for a consideration • To cover end 2 end transactions across value chain • Exempted goods and services (uniform across all States!), non - GST goods and transactions within threshold limits are to be out of SGST

15. SGST … • Each State to have a separate statute • Uniformity on basic features. • Would be paid to the accounts of respective States

16. SGST … • VAT / Sales Tax    • Entertainment Tax • Luxury Tax • Lottery Tax • Betting Tax • Gambling Tax • State Cesses & Surcharges • Entry Tax ( not in lieu of Octroi)

17. GST exclusions … • Petroleum products i.e. crude, motor spirit, ATF, HSD / Alcohol / Tobacco • Centre / States could also continue its levies • Tobacco would be subjected to GST with ITC • Centre to be allowed to levy extra levy on tobacco without ITC • Purchase tax ???

18. Integrated GST (IGST) • For inter-state transactions • Centre to levy IGST which would be CGST + SGST • Appropriate provision for consignment sale/stock transfer • Inter-state dealer will pay IGST after adjusting IGST, CGST and SGST credit on purchase

19. IGST … • The seller in State X will pay the IGST to the Centre • While paying IGST, seller will adjust his lying IGST/CGST/SGST credit • State X will have to transfer the credit of SGST used by the seller for payment of IGST to the Centre

20. IGST … • Buyer in State Y can avail credit of IGST • Buyer in State Y can use the IGST to discharge his output tax liability • Centre has to transfer credit of IGST used for payment of SGST to State Y • A clearing house has to be formed for facilitating IGST

21. Set - off … • CGST against CGST • SGST against SGST • No Cross sectoral set-off between CGST & SGST • IGST for CGST/SGST & vice versa

22. @ … • Lower rate for necessary items and goods of basic importance • Standard rates for goods in general • Special rates for precious metals • Exports/clearnces to SEZ would be zero rated • No benefits to sales from SEZ to DTA

23. Tax free schemes … • Tax exemption would be converted into cash refund scheme after initial payment • Schemes to continue up to notified expiry • No new exemption in future

24. GST on Imports… • Both CGST and SGST would be levied on import of goods and services • Tax would be based on destination principle • Tax revenue of SGST would accrue to the State where the imported goods / services are consumed • Full set-off of GST on imports available

25. Compounding … • Interest of small traders and SSI to be protected • Upper ceiling on gross annual turnover and a floor tax rate to be prescribed • Compounding cut off at Rs. 50 lakhs with a floor rate of 0.5% across the States

26. Threshold exemptions… • 10 lakhs limit for goods and services across all States / UT for SGST • 1.5 crore for SSI manufacturers on CGST • CGST exemption limit on services to be increased (presently at 10 lakhs)

27. Illustration …

28. Constitutional Amendments… • Entry 84 of Union List to amend to empower Centre to levy tax on SALE of goods. • Entry 54 of State List to amend to empower State to levy tax on SERVICES. • Entry 92A of Union List to amend to empower Centre to levy tax on inter – state SERVICES. • Article 286 to amend to empower State to levy tax on imports. • 3/4th majority in Parliament & 50% collegium of State Assembly ratification.

29. Bottlenecks… • Transitional credit • High sea sales • Stock transfers • FOC clearances • Additional considerations

30. THANKS