INDIRECT TAXATION PRESENTATION FOR BCOM.ppt

PRESENTATION BY : MS.SARANYA S
ASST.PROF
GST and Its Implications
PATRICIAN COLLEGE OF ARTS & SCIENCE
DEPARTMENT OF COMMERCE, SHIFT-II

What is GST?
One Tax
For
Manufacturing
Trading
Services
ONE NATION: ONE TAX

What is GST?
‘G’ – Goods
‘S’ – Services
‘T’ – Tax
“Goods and Service Tax (GST) is a comprehensive
tax levy on manufacture, sale and consumption of
goods and service at a national level.
GST is a tax on goods and services with value
addition at each stage having comprehensive and
continuous chain of set-of benefits from the
producer’s/ service provider’s point up to the
retailer’s level where only the final consumer should
bear the tax.”

Road to GST-
Milestones
 2006, announcement of the intent to introduce GST by
01.04.2010
 November 2009 – First Discussion Paper (FDP) released by
EC on which Comments were provided by Government of
India.
 June 2010- Three sub-working Groups constituted by
Government of India on:
 Business Process related issues.
 Drafting of Central GST and model State GST legislations.
 Basic design of IT systems required for GST in general and
IGST in particular.

Road TO GST- Milestones
contd.
 March 2011 - Constitution (115th Amendment) Bill
introduced in Parliament
 November 2012 – Committee on GST Design constituted by
EC
 February 2013 - Three Committees constituted by EC
o Dual Control, Thresholds and Exemptions in GST regime
o RNRs for SGST & CGST and Place of Supply Rules
o IGST and GST on Imports
 March 2013- GSTN Incorporated as Section 25 Company

Road To GST- Milestones contd.
 June 2013- Committee constituted by EC to draft model GST
Law
 August 2013- Standing Committee on Finance submitted
Report
 April 2014- Committee constituted by EC to examine
business processes under GST
 December 2014- 122nd Constitutional Amendment bill
introduced in Parliament.
 .1st July2017 GST Implemented.

 GST is a tax on goods and services with comprehensive and continuous chain of
setoff benefits from the Producer’s point and Service provider’s point up to the
retailer level.
 GST is expected be levied only at the destination point, and not at various points
(from manufacturing to retail outlets). It is essentially a tax only on value addition at
each stage and a supplier at each stage is permitted to setoff through a tax credit
mechanism which would eliminate the burden of all cascading effects, including the
burden of CENVAT and service tax.
 Under GST structure, all different stages of production and distribution can be
interpreted as a mere tax pass through and the tax essentially sticks on final
consumption within the taxing jurisdiction.
 Earlier a manufacturer needs to pay tax when a finished product moves out from the
factory, and it is again taxed at the retail outlet when sold. The taxes are levied at
the multiple stages such as CENVAT, Central sales tax, State Sales Tax, Octroi, etc.
will be replaced by GST to be introduced at Central and State level.
Continued…….
Concept of GST

 All goods and services, barring a few exceptions, will be brought into the GST
base. There will be no distinction between goods and services.
 Under GST, the taxation burden will be divided equitably between
manufacturing and services, through a lower tax rate by increasing the tax base
and minimizing exemptions.
 However, the basic features of law such as chargeability, definition of taxable
event and taxable person, measure of levy including valuation provisions, basis
of classification etc. would be uniform across these statutes as far as
practicable.
 The existing CST will be discontinued. Instead, a new statute known as IGST
will come into place on the inter-state transfer of the Goods and Services.
 By removing the cascading effect of taxes (CST, additional customs duty,
surcharges, luxury Tax, Entertainment Tax, etc. ),CGST & SGST will be
charged on same price .
Concept of GST

Need for GST
Introduction of a GST to replace the existing multiple tax
structures of Centre and State taxes is not only desirable
but imperative in the emerging economic environment.
Increasingly, services are used or consumed in
production and distribution of goods and vice versa.
Separate taxation of goods and services often requires
splitting of transaction values into value of goods and
services for taxation, which leads to greater complexities,
administration and compliances costs. Integration of
various taxes into a GST system would make it possible
to give full credit for inputs taxes collected. GST, being a
destination-based consumption tax based on VAT
principle, would also greatly help in removing economic
distortions and will help in development of a common

Limitations of old Tax regime
Credit of Excise not
allowed
Credit of CST Not Available (This
should relate to interstate
supply. An arrow can be shown
from wholesaler in Maharashtra
to retailer in Madhya Pradesh
and show that credit of CST paid
in Mah. not available to Retailer
in MP)
KARNATAKA
MADHYA
PRADESH
1. Cascading Effect of Tax

2. Multiple Registrations
Limitations of current Tax regime :
Central
Excise

No Entry Tax
Entry
Tax
Value Added
Tax
@
4%
@ NIL
%
3.Lack of Uniformity
Limitations of current Tax regime :

Tax structure before GST in India
Tax Structure
Direct Tax
Income Tax Wealth Tax
Indirect Tax
Central Tax
Excise Service Tax Custome
State Tax
VAT
Entry Tax, luxury
tax, Lottery Tax,
etc.

Tax Structure
Direct Tax
Income Tax
Wealth Tax
Indirect Tax =
GST (Except
customs)
Intra- state
CGST
(Central)
SGST (State)
Inter State
IGST
(Central)
Tax Structure under GST in India

• Central Excise
• Additional duties of Custom (CVD)
• Service Tax
• Surcharges and all cesses
CGST
• VAT/sales tax
• Entertainment Tax
• Luxury Tax
• Lottery Tax
• Entry Tax
• Purchase Tax
• Goods and passenger Tax
• Tax on vehicle
• Electricity, banking, Real state
SGST
• CST
IGST
Subsuming of Existing Taxes

• Input Credit of Goods+ services
• After taking set off of Input credit, pay the Output Liability on value addition
• Input Credit of Goods+ services from manufacturer
• Input Credit of Goods+ services from wholesaler
• Ultimate Output Liability recovered from consumer
GST Set off Chain

 SGST and CGST for intrastate transaction : In the GST system, both Central and
State taxes will be collected at the point of sale. Both components (the Central and
State GST) will be charged on the manufacturing cost. This will benefit individuals
as prices are likely to come down. Lower prices will lead to more consumption,
thereby helping companies.
 IGST for Interstate transaction: ‘IGST Model’ will be in place for taxation of inter
State transaction of Goods and Services. The scope of IGST Model is that center
would levy IGST which would be CGST plus SGST on all inter State transactions of
taxable goods and services with appropriate provision for consignment or stock
transfer of goods and services.
 The GST paid on the purchase of goods and services, to be paid on the supply of
goods and services.
 There should be no distinction between raw materials and capital goods in allowing
input tax credit. The tax base should comprehensively extend over all goods and
services up to final consumption point on value addition.
 Assessable value for all the taxes will be same.
Model of GST

Set off Heads
IGST
Input
IGST
Output
CGST
Output
CGST
Input
IGST
Output
CGST
Output
SGST
Input
IGST
Output
CGST
Output

Salient features of GST...
 Destination based consumption tax
The tax would accrue to the State which has
jurisdiction over the place of consumption which is
also termed as place of supply.
Levied at all stages right from manufacture up to
final consumption with credit of taxes paid at
previous stages available as setoff.
In a nutshell, only value addition will be taxed and
burden of tax is to be borne by the final consumer.
Exports would be tax-free and imports taxed at the
same rate as integrated tax (IGST) levied on inter-
State supply of like domestic products
20

Salient features of GST... (contd.)
 Tax payers with an aggregate turnover in a financial year
up to Rs.20 lakhs would be exempt from tax.
For special category states specified in Article 279A,
the threshold exemption shall be Rs. 10 lakhs.
Tax payers making inter-State supplies or paying tax
on reverse charge basis shall not be eligible for
threshold exemption.
 Small taxpayers with an aggregate turnover in a financial
year up to Rs. 150 lakhs shall be eligible for
composition levy.
21

 Each taxpayer would be allotted a PAN linked taxpayer
identification number with a total of 13/15 digits.
 This would bring the GST PAN-linked system in line with
the prevailing PAN-based system for Income tax
facilitating data exchange and taxpayer compliance.
 The exact design would be worked out in consultation with
the Income-Tax Department.
Registration under GST

Mandatory Registration
(irrespective of threshold)
 Persons making inter-State taxable supply
 Persons required to pay tax under reverse charge
 Casual and non-resident taxable persons
 E-Commerce operator /Those required to collect TDS
 Persons supplying goods through e-commerce operator
 Persons making supplies on behalf of a registered taxable
person
 Input Service Distributer
 Every person supplying online information and data base
access or retrieval services from a place outside India to a
person in India, other than a registered person

Justification of GST
Despite the success of VAT, there are still certain
shortcomings in the structure of VAT, both at the
Centre and at the State level.
A. Justification at the Central Level
i. Excise duty paid on the raw material
consumed is being allowed as input credit
only. For other taxes and duties paid for post-
manufacturing expenses, there is no
mechanism for input credit under the Central
Excise Duty Act.
Contd….

i. adfl
ii. Credit for service tax paid is being allowed
manufacturer/ service provider to a limited
extent. In order to give the credit of service
tax paid in respect of services consumed, it
is necessary that there should be a
comprehensive system under which both
the goods and services are covered.
iii. The service tax is levied on restricted items
only. Many other large number of services
could not be taxed. It is to reduce the effect
of cascading of taxes, which means levying
tax on taxes.
Contd…

B. Justification at the State Level
i. A major defect under the State VAT is that the State
is charging VAT on the excise duty paid to the
Central Government, which goes against the
principle of not levying tax on taxes.
ii. In the present State level VAT scheme, Cenvat
allowed on the goods remains included in the value
of goods to be taxed which is a cascading effect on
account of Cenvat element.
iii. Many of the States were continuing with various
types of indirect taxes, such as luxury tax,
entertainment tax, etc.
iv. As tax is being levied on inter-state transfer of
goods, there was no provision for taking input credit
on CST leading to additional burden on the dealers.

GST Rates
 Rates: 0%( on essential items, rice/wheat)
 5%: ( on items of mass consumption )
 12%/18%:(standard rates covering most
manufactured items and Services)
 28% : ( on Consumer Durable Goods, Pan masala,
tobacco and aerated drinks etc)
 Basic philosophy behind these rates are that, to the
extent possible, the current combined rate of tax
levied on individual goods by the Central and the
State Governments should be maintained in GST
 Uniform GST rate not possible at this stage as luxury
goods and goods consumed by poorer sections of
society cannot be taxed at the same rate
 Rates will be notified by Government on

Implications of GST – A Study
 1. To study the need of Goods and
Service Tax (GST) in India.
 2. To study the advantages of Goods
and Service Tax (GST) to the
Manufactures, traders and society.
 3. To study the outcomes of GST in
India.
 4. To Study on Implications on
Implementation of GST in India.

Salient features of GST
 The GST would be applicable on the supply of
goods or services.
 It would be a single GST on any item out of which
50% will go to Central Govt and 50% will go to State
Govt / Union Territory.
Central tax (CGST) and State tax (SGST) / Union territory
tax (UTGST).
 The GST would apply on all goods or services or
both other than alcoholic liquor for human
consumption and five petroleum products.

Research Methodology
 The Researchers used an exploratory
research technique based on past literature
from respective journals, annual reports,
newspapers and magazines covering wide
collection of academic literature on Goods
and Service Tax. According to the objectives
of the study, the research design is of
descriptive in nature. Available secondary
data was extensively used for the study.

NEED FOR GST IN INDIA
 Under VAT system, an input tax set-off is given for
purchases made only within the State. For
example under Goa VAT Act, the dealer can claim
the Input Tax Credits towards Out Put tax if the
goods are purchased only from the state. If the
goods purchased from outside state the dealer
cannot claim the Input Tax Credit. Under the State
level VAT scheme, CENVAT load on goods has
not been removed and cascading effect of that
part of tax burden still remains. Further the
burden of CST on purchase of inter-state goods
which has been reduced from four percent to two
percent has not been fully phased out.

Model of GST
 The dual GST model proposed by the Empowered
Committee and accepted by the Centre will have dual
system for imposing the tax. GST shall have two
components i.e.
(i) Central GST
(ii) State GST
 Central Excise duty, additional excise duty, services
tax and additional duty of customs (equivalent to
excise), state VAT entertainment tax, taxes on
lotteries, betting and gambling and entry tax (not
levied by local bodies)would be subsumed within
GST

GST - Salient Features
 It would be applicable to all transactions of goods and service.
 It to be paid to the accounts of the Centre and the States
separately.
 The rules for taking and utilization of credit for the Central GST and
the State GST would be aligned.
 Cross utilization of ITC between the Central
GST and the State GST would not be allowed except in the case of
inter-State supply of goods.
 The Centre and the States would have concurrent jurisdiction for
the entire value chain and for all taxpayers on the basis of
thresholds for goods and services prescribed for the States and
the Centre.
 The taxpayer would need to submit common format for periodical
returns, to both the Central and to the concerned State GST
authorities.

Chargeability of Tax under GST
 It will be replacement of ED and other taxes.
 There will be two parallel Statutes – one at the Centre and
other under the respective State GST Act – governing the tax
liability of the same transaction.
 All the items of goods and services are proposed to be
covered and exemptions will be granted to few selected
items.
 After introduction of GST, all the traders will be paying both
the types of taxes i.e. CGST and SGST.

Taxable Event
Following questions arises:
 At what point of time, the tax will be levied?
 Will TE covers both i.e. supply of goods and rendering of
services?
 What will be the nature of TE?
 Will it not involve new language and terminology?
 What impact the change in TE can have?
 GST is proposed to be levied by both the CG and SGs. How
will it be defined under CGST and SGST?

Taxable Person
 It will cover all types of person carrying on business activities,
i.e. manufacturer, job-worker, trader, importer, exporter, all
types of service providers, etc.
 If a company is having four branches in four different states,
all the four branches will be considered as TP under each
jurisdiction of SGs.
 All the dealers/ business entities will have to pay both the
types of taxes on all the transactions.
 A dealer must get registered under CGST as it will make him
entitle to claim ITC of CGST thereby attracting buyers under
B2B transactions.
 Importers have to register under both CGST and SGST as
well.

Subsumed of IndirectTaxes
The sub-sumation should result in free flow of tax
credit in intra and inter-State levels so that unrelated
taxes, levies and fees are not be subsumed under
GST.
Sl.
No.
Subsumed under CGST Subsumed under SGST
1 Central Excise Duty VAT / Sales tax
2 Additional Excise Duties Entertainment tax (unless it is levied by the local bodies).
3 Excise Duty-Medicinal and Toiletries Preparation Act Luxury tax
4 Service Tax Taxes on lottery, betting and gambling.
5 Additional CVD State Cesses and Surcharges (supply of goods and
services)
6 Special Additional Duty of Customs - 4% (SAD) Entry tax not in lieu of Octroi
7 Surcharges
8 Ceses

Alcohol, tobacco, petroleum products are likely to be out of the GST regime.
Tax on items containing Alcohol: Alcoholic beverages would be kept out of the purview
of GST. Sales Tax/VAT could be continued to be levied on alcoholic beverages as per the
existing practice. In case it has been made VA table by some States, there is no objection
to that. Excise Duty, which is presently levied by the States may not also be affected.
Tax on Petroleum Products: Petroleum and petroleum products have also been
constitutionally brought under the GST. However, it has also been provided that
petroleum and petroleum products shall not be subject to the levy of GST till notified at a
future date on the recommendation of the GST Council.
Tax on Tobacco products: Tobacco products would be subjected to GST with ITC.
Centre may be allowed to levy excise duty on tobacco products over and above GST with
ITC.
Taxation of Services: As indicated earlier, both the Centre and the States will have
concurrent power to levy tax on goods and services. In the case of States, the principle for
taxation of intra-State and inter46 State has already been formulated by the Working
Group of Principal Secretaries /Secretaries of Finance / Taxation and Commissioners of
Trade Taxes with senior representatives of Department of Revenue, Government of India.
For inter-State transactions an innovative model of Integrated GST will be adopted by
appropriately aligning and integrating CGST and IGST.
Exemption of Goods and
Services

Taxes that may or may not be
subsumed
There are few other indirect taxes that may or may
not be subsumed under the GST regime as there is
no consensus among States and Centre & States –
 Purchase tax
 Stamp Duty
 Vehicle Tax
 Electricity Duty
 Other Entry taxes and Octroi

ADVANTAGES OF GST:
 Under GST there will be input credit set-off at every
stage and this can be used to payment of service
tax.
 CST will be abolished and in the absence of it there
is no need to collect it.
 Many Central and State indirect taxes will be
subsumed in GST.
 There will be uniformity of tax rates in all the states.
 It may ensure better compliance due to aggregate
tax rate reduction.
 By reducing the tax burden the competitiveness of
Indian products in international market is expected to
increase.

Rate of Tax
 There with be a two-rate structure –a lower rate for necessary
items and items of basic importance and a standard rate for
goods in general. There will also be a special rate for precious
metals and a list of exempted items.
 For CGST relating to goods, the States considered that the
Government of India might also have a two-rate structure, with
conformity in the levels of rate with the SGST. For taxation of
services, there may be a single rate for both CGST and SGST.
 It will be total of the rate as applicable under CGST & SGST.
 It is understood that the Government is considering pegging
the revenue neutral rate of GST at a rate between 18% to 22%.
This represents the aggregate of CGST and SGST payable on
the transaction. However, it may be noted that at this stage, the
Government is yet to indicate whether the revenue neutral
rate of tax on goods and services would be the same.

What will be out of GST?
 Levies on petroleum products
 Levies on alcoholic products
 Taxes on lottery and betting
 Basic customs duty and safeguard duties on
import of goods into India
 Entry taxes levied by municipalities or panchayats
 Entertainment and Luxury taxes
 Electricity duties/ taxes
 Stamp duties on immovable properties
 Taxes on vehicles

Inter-State Transactions of
Goods & Services
 The existing CST will be discontinued. Instead,
a new statute known as IGST will come into
place. It will empower the GC to levy and
collect the tax on the inter-state transfer of the
GS.
 The scope of IGST Model is that Centre would
levy IGST which would be CGST plus SGST on
all inter-State transactions of taxable goods and
services with appropriate provision for
consignment or stock transfer of goods and
services.

Inter-State Transactions of
Goods & Services
 The inter-State seller will pay IGST on value addition
after adjusting available credit of IGST, CGST, and
SGST on his purchases. The Exporting State will
transfer to the Centre the credit of SGST used in
payment of IGST. The Importing dealer will claim credit
of IGST while discharging his output tax liability in his
own State. The Centre will transfer to the importing
State the credit of IGST used in payment of SGST. The
relevant information will also be submitted to the
Central Agency which will act as a clearing house
mechanism, verify the claims and inform the respective
governments to transfer the funds.

OUTCOME OF GST
 The taxes Centre and State level are being
subsumed into GST Keeping in mind the federal
structure of India, there will be two components of
GST – Central GST (CGST) and State GST (SGST).
Both Centre and States will simultaneously levy GST
across the value chain. Tax will be levied on every
supply of goods and services. Centre would levy and
collect Central Goods and Services Tax (CGST), and
States would levy and collect the State Goods and
Services Tax (SGST) on all transactions within a
State. The input tax credit of CGST would be
available for discharging the CGST liability on the
output at each stage. Similarly, the credit of SGST
paid on inputs would be allowed for paying the

Old Practice
Excise Duty-Manufacturing,
Sales Tax/VAT- Sale of Goods
Service Tax- Realization of Service
GST
Taxable event is “Supply “ of Goods &
service
The location of the supplier and the recipient
within the country is immaterial for the
purpose of CGST.
SGST would be chargeable only when the
supplier and the recipient are both located
within the State.
Inter state Supply of goods and services will
attract IGST.
Taxable Event

ADMINISTRATION OF GST
 State Value Added Tax and GST
 Central Excise and GST:
IMPLICATIONS OF GST ON DEALERS

 The taxpayer would need to submit periodical returns to
both the Central GST authority and to the concerned State
GST authorities.
 ITC credit can also be verified on the basis of the returns
filed and revenues reconciled against Challan data from
banks.
 Common standardized return for all taxes (with different
account heads for CGST, SGST, IGST) can come into
picture.
 Common standardized Challan for all taxes (with different
account heads for CGST, SGST, IGST) can come into
picture.
Returns under GST

IMPLICATIONS OF GST ON DEALERS
 In the GST regime, any regular business has to
file three monthly returns and one annual return.
This amounts to 37 returns in a year.
 Types of GST Returns

Conclusion
 The taxation of goods and services in India has, hitherto, been
characterized as a cascading and distortionary tax on production
resulting in mis-allocation of resources and lower productivity and
economic growth. It also inhibits voluntary compliance. It is well
recognized that this problem can be effectively addressed by
shifting the tax burden from production and trade to final
consumption. A well designed destination-based value added tax
on all goods and services is the most elegant method of
eliminating distortions and taxing consumption. Under this
structure, all different stages of production and distribution can be
interpreted as a mere tax pass-through, and the tax essentially
‘sticks’ on final consumption within the taxing jurisdiction.
 A ‘flawless’ GST in the context of the federal structure which would
optimize efficiency, equity and effectiveness. The ‘flawless’ GST is
designed as a consumption type destination VAT based on
invoice-credit method.

INDIRECT TAXATION PRESENTATION FOR BCOM.ppt

More Related Content

Similar to INDIRECT TAXATION PRESENTATION FOR BCOM.ppt (20)

Recently uploaded (20)

INDIRECT TAXATION PRESENTATION FOR BCOM.ppt

Editor's Notes