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Goods & Service Tax. Discussion on Challenges & Synergies August, 2010. Contents. Present taxation system of India What is Goods and Service Tax (“GST”) – An Introduction Silent features on “First Discussion Paper on GST” Broad propositions – Not covered and clear

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goods service tax

Goods & Service Tax

Discussion on Challenges & Synergies

August, 2010

contents
Contents
  • Present taxation system of India
  • What is Goods and Service Tax (“GST”) – An Introduction
  • Silent features on “First Discussion Paper on GST”
  • Broad propositions – Not covered and clear
  • Broad propositions - Reasonable clear
  • Challenges before Industry/Service Sector
  • Proactive actions – Requirement
  • Areas - Tax Synergy

By CA. Vinay Bhushan

present taxation system in india
Present Taxation System in India
  • Multistage taxation on manufacture and distribution channels
  • Sectors specific taxes like Entertainment Tax, Luxury Tax, Textile Cess etc.
  • Difference types of Cesses like Education Cess, Secondary & Higher Education Cess etc.
  • Tax on value additions i.e. Value Added Tax
  • Tax on Inter State transaction i.e. Central Sales Tax

By CA. Vinay Bhushan

manufacture sector multiple taxes
Manufacture Sector - Multiple Taxes

Central Excise

Duty {8%}

Value Added

Tax { 0%, 4%, 12.5%}

Central Sales

Tax {2%}

Manufacturing

Sector

Educations Cesses

{3%}

R & D Cess

{5%}

Other local taxes like Entry Tax, Octroi, State Cesses etc. are also applicable

By CA. Vinay Bhushan

service sector multiple taxes
Service Sector - Multiple Taxes

Education Cess {2%}

Service Tax {10%}

Service

Sector

Secondary & Higher

Education Cess {1%}

By CA. Vinay Bhushan

silent features of the discussion paper on gst
Silent features of the Discussion Paper on GST
  • GST shall have two components

(1) levied by Central Government (Central GST)

(2) levied by State Government (State GST)

  • GST Will be governed by multiple statutes
  • Cross utilization of Input Tax Credit (ITC) between Central GST & State GST would not be allowed
  • Periodical returns need to be filed with Central and State authorities separately, tax will be deposited through separate account heads
  • PAN- linked taxpayer identification number will be issued

By CA. Vinay Bhushan

silent features of the discussion paper on gst1
Silent features of the Discussion Paper on GST
  • Threshold Limit:-
    • State GST for Goods & Services INR 1.00 Million
    • Central GST for Goods INR 15.00 Million
    • Central GST for Services Not provided (however it is conveyed that it will be appropriately high)
  • Compounding / Composition Limit:-
    • Composition/compounding limit INR 5.00 Million with tax at the rate of 0.5 %

By CA. Vinay Bhushan

cenvat credit mechanism under present taxation and proposed gst
Present Taxation Scheme

Cross credit of good and service tax is allowed since September 10, 2004; But limited to Central Excise & Services Tax

Cross credit among VAT and Service Tax, Central Excise is not allowed

Credit on inter- State transactions is not allowed;

Cross Credit of VAT with CST liability is allowed

Proposed GST

Cross credit of good and Services would be allowed

Cross credit with respect to Central GST and State GST transaction would not be allowed

CENVAT CREDIT MECHANISM UNDER PRESENT TAXATION AND PROPOSED GST

By CA. Vinay Bhushan

taxes which would be subsumed under the proposed gst
Central Taxes

Central Excise Duty

Additional Excise Duty

Service Tax

Additional Customs Duty (CVD)

Special Additional Duty of Customs (SAD)

Surcharges and Cesses

State Taxes

VAT /Sales Tax

Entertainment Tax

Luxury Tax

Tax on Lottery, betting & Gambling

State Cesses and Surcharges

Entry Tax

TAXES WHICH WOULD BE SUBSUMED UNDER THE PROPOSED GST

GST

CGST

IGST

SGST

By CA. Vinay Bhushan

broad propositions not covered and not clear
Broad Propositions- Not Covered and not Clear
  • GST rates are not disclosed
  • Valuation mechanism of Goods and Services
  • Place of provision of Services or place of receipt in case of services are not clear
  • Taxable event- whether on receipt basis or on receivable basis
  • No discussion on Stamp duty on Immovable property

By CA. Vinay Bhushan

broad propositions reasonable clear
Broad propositions - Reasonable clear
  • Cross Credit among the CGST & SGST- Not allowed
  • Three type of taxes- CGST, SGT & IGST
  • No change for Liquor, Petroleum Industry

By CA. Vinay Bhushan

challenges proactive actions before industry service sector
Challenges & Proactive Actions before Industry/Service Sector
  • Business Restructuring:
    • Phasing out of CST
    • Change in tax rates of goods and services
    • Logistics, Transaction model etc.
  • Location Based Exemptions
  • Export Obligations
  • Change in ERP Systems
  • Training of Middle Management Team

By CA. Vinay Bhushan

areas tax synergy
Areas - Tax Synergy
  • Analysis of Tax rates Vs. Pricing Policy, Business Cycle
  • Warehouse/logistic Vs. Direct Supply
  • Stock Planning
  • Backward & Forward integration of business if there is change in tax rates of Inputs or output

By CA. Vinay Bhushan

how tax managers consultants can add value
How Tax Managers/Consultants can add value
  • Mapping of current transactions
    • Mapping of flow of good and services
    • Ascertain current tax cost
  • Impact Analysis and what if analysis
    • Assessment of impact of GST on draft legislation
    • Key structuring/changes in business operations
    • Identify possible alternative business model
    • Potential actions to mitigate adverse GST effect (if any)
  • Final Impact Analysis
  • Implementation Assistance

By CA. Vinay Bhushan

how tax managers consultants can add value1
How Tax Managers/Consultants can add value
  • Implementation Assistance
    • Transition Stock Planning
    • Registration under new legislation/s
    • Maintenance of records as per new formats
    • Manner of computation of Credit and tax liability
    • Invoice Formats
    • Changes in ERP/accounting system

By CA. Vinay Bhushan

slide16
THANK YOU

By CA. Vinay Bhushan