1. gst an overview 2. path journey of gst law 2 ... scheme for sgst - for goods ... single rate for...
TRANSCRIPT
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1. GST an overview 2. Path journey of GST Law 2. Constitutional amendment Bill 2. Preparation for forth coming
GST Law
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JOURNEY TO GST LAW
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BASICS
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What is GST? - tax on Goods and Services
Taxable Event - supply of goods
- supply of services
- Import of goods or services
Taxable: When supply is made for
consideration
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Remove cascading effect of Taxes
Creation of a national market with free
movement of goods and services
Rationalise the structure of indirect taxation
Comprehensive and wider coverage of input
tax set-off and service tax set-off
Continuous chain of set-off till the consumer
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Dual GST - Central GST
- State(s) GST
(also agreed by Task Force and Department of Revenue (DoR))
Tax is on ‘supply of goods and services’ for
consideration
Destination based consumption tax
Concurrent jurisdiction of Centre and State over
entire value chain
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Amount (in Rs.)
Basic value charged for supply of goods or services
10,000
Add: CGST @ 8% 800
Add: SGST @ 8% 800
Total price charged for Local supply of goods or services
11,600
Local Supply
Note: In the above illustration, the rate of CGST and SGST is assumed to be 8% each
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Amount (in Rs.)
Basic value charged for supply of goods or services
10,000
Add: IGST @ 16% 1600
Total price charged for Interstate supply of goods or services
11,600
Interstate Supply
Note: In the above illustration, the rate of IGST is assumed to be 16% each
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Amount (in Rs.)
Basic value charged for supply of goods or services
10,000
Add: GST @ 0% 0
Total price charged for Local supply of goods or services
10,000
Exports
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Multiple Statutes - one CGST Statute - separate SGST statutes for individual States - IGST statute
Uniformity in basic features - chargeability - definition of taxable event and taxable
person - measure of levy including valuation and
basis of classification - collection procedure
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Both CGST and SGST on same base Input Tax Credit
- CGST against CGST - SGST against SGST - no Cross utilization between CGST and
SGST exception: IGST
- rules for taking and utilization of credit for CGST and SGST to be aligned
- separate records to be maintained
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Recommendation of task force for input tax credit - No distinction between inputs and capital goods - Full input credit on capital goods in the year of
purchase itself
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Component Goods Services
CGST 1.5 Crores Above 10 Lacs
SGST 10 Lacs 10 Lacs
No mention about threshold for IGST
Compounding Scheme for SGST
- for Goods
- upto Rs 50 lacs
- floor Rate 0.5%
- optional
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Common threshold for goods and
services
Same threshold for CGST and SGST
No threshold for IGST dealers
Compounding scheme for CGST also
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For Goods - SGST
Two-rate structure - Lower Rate: for necessary items and goods of basic importance
- Standard Rate: for general goods
Special Rate for precious metals
Exempted goods (including goods of local
importance)
CGST may follow two-rate structure
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For Services
Single Rate for both CGST and SGST
Exempted services
Issue of categorizing a supply: Goods or
Services?
- different rates of tax
- Different threshold
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Recommendation by Task Force
Single Rate for both goods and services
CGST @ 5% and SGST 7%
No classification between goods and
services
Issue of classifying goods or services for
place of supply?
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Recommendation by DoR Single Rate for both goods and services under
SGST No two rate structure for goods Around 99 items to remain exempt under GST Common list of exemptions for both CGST and
SGST to be agreed Individual States will have no scope to expand
the exemption even for goods of local importance
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GST on import of goods and services
- both CGST and SGST
- SGST to accrue to consuming State
- full set-off available
Zero rating
- of exports
- supplies to SEZ (processing zone)
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13/15 digits PAN-linked taxpayer identification number to be allotted
Separate CGST return and SGST returns - Common format as far as possible
CGST and SGST to be paid to the accounts of Central Government and State Government separately - identification of the State to whom the tax is to be
credited
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Separate authorities for administration, assessment, enforcement, scrutiny and audit for CGST & SGST
- Task force - recommended uniform compliance and enforcement procedure
- Uniform registration system and harmonised dispute resolution, advance rulings, scrutiny, audit etc.
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Power to Centre to tax goods
Power to States - to tax services
- to tax import of goods and services
A binding mechanism on both Centre and the
States for harmonious rate structure
(expected)
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Central taxes to be subsumed
- Central Excise Duty
- Additional Excise Duty
- Excise duty levied under Medical and
Toiletries Preparation Act
- Service Tax
- Countervailing Duty
- Special Additional Duty
- Surcharge
- Cess
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State taxes to be subsumed
- VAT / Sales tax
- Entertainment tax (not levied by local
bodies)
- Luxury tax
- Taxes on lottery, betting and gambling
- State Cesses and Surcharges
- Entry tax not in lieu of octroi
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Tax on Alcoholic Beverages - outside the purview of GST - States to continue to levy State Excise and VAT
- DoR – to be subsumed in GST
Tax on Tobacco Products - subjected to GST - Centre may levy excise duty over and above
GST
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Tax on Petroleum Products - outside the purview of GST - Centre levies to continue - State levies to continue
Natural Gas – yet to be decided?
DoR – Petroleum product including natural gas should be included under GST
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Emissions fuels, tobacco products and
alcohol
- Subject to dual levy of GST and Excise
- No input credit for excise
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Industrial incentives - cash refund schemes after collection of tax
Special Industrial Area Schemes
- to continue up to legitimate expiry time - Centre and State could provide reimbursement after
collecting GST
Any new exemption, remission scheme will not be allowed
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Recommendation by Task Force
Area based exemption to discontinue
Direct investment linked cash subsidy for
balanced regional development (if necessary)
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Proposed GST is a destination-based
consumption tax
IGST – a new model designed to collect tax
and regulate inter-state transactions
Task Force - Modified Bank Model
recommended over IGST
DoR – Agreed with IGST but recommended
common threshold for better working
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Centre will levy Integrated Goods and Service Tax (IGST) on all inter-State transactions
Selling dealer in the exporting state would charge IGST
IGST rate - aggregate of CGST rate and SGST rate
- need to identify the SGST component?
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(Task Force)
Seller in the exporting/originating state - to charge and collect CGST and SGST from the
buyer
Seller to pay - SGST - to the credit of Destination State
Government
- CGST – to Central Government
Buyer avail credit of the SGST and CGST
Consignment sales and branch transfers
across states - To be treated as inter-state transaction between two
independent dealers
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Co. X (Delhi)
Co. Y (Punjab)
Central
Agency Output liability of Co. X
IGST @ 12% = Rs 12 cr
Inter-State sale
State Border
Assuming consideration = Rs.100 cr
Input Tax Credit of Co. X
CGST = Rs 8 cr
SGST = Rs 10 cr
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Co X (Delhi)
Co Y (Punjab)
Central
Agency
Payment of Tax by Co X
IGST Liability = Rs 12 Cr
Credit of Co X:
CGST = (Rs 8 Cr)
SGST = NIL
Net IGST Payable Rs 4 Cr – paid to Central Government
Option I
Take Credit of
CGST
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Co X (Delhi)
Co Y (Punjab)
Central
Agency
Payment of Tax by Co X IGST Liability = Rs 12 Cr
Credit of Co X:
CGST = (Rs 8 Cr)
SGST = (Rs 4 Cr)#
Net IGST Payable NIL
Option II
Take Credit of
SGST
# Delhi Government will remit Rs 4 Cr to Central Agency
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Co X (Delhi)
Co Y (Punjab)
Central
Agency
Inter-state sale Co Z
(Punjab)
Local Sale
Rs 150 Cr
Local Sale by Co Y-
CGST(6%) SGST(4%)
Output Liability Rs 9 Cr Rs 6 Cr
Less: IGST Credit Rs 9 Cr# - .
NIL Rs 6 Cr – paid to State
# No remittance by Central Agency to Punjab
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Seller (Delhi)
Invoice Buyer (Head Office) (Delhi)
Buyer (Factory) (Haryana)
- Whether transaction be subject to
IGST or SGST?
- Whether any tax be applicable on
transaction between Head Office and
Factory?
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Seller (Delhi)
Invoice Buyer (Head Office) (Punjab)
Buyer (Factory) (Haryana)
- Whether IGST credit can be taken in
Punjab or Haryana?
- Whether any tax be applicable on
transaction between Head Office and
Factory?
- How can IGST credit be utilized or transferred
by the Head Office?
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State A
Dealer 2 Dealer 1
Dealer 3
State B
Invoice
Goods
- Issues under the CST Act
- How IGST solves the issue?
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THE CONSTITUTIONAL (115th
AMENDMENT) BILL, 2011
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1. TO ENABLE AND TO FACILITATE INTRODUCTION OF GOODS AND
SERVICE TAX (GST) IN INDIA.
2. TO PROVIDE FOR CONCURRENT TAXING POWERS TO UNION AS
WELL AS STATES FOR LEVYING GST
3. TO ENABLE GST TO REPLACE OR SUBSUME INDIRECT TAXES
LEVY OF INTEGRATED GST (IGST)
4. DISTRIBUTION OF REVENUE
5. CREATION OF GST COUNCIL and GST DISPUTE SETTLEMENT
AUTHORITY
6. DISTRICT COUNCILS AND REGIONAL COUNCILS TO LEVY TAX ON
ENTERTAINMENT AND AMUSEMENT.
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8. ENABLING LEVY OF GST ON SALE OR PURCHASE OF NEWSPAPERS AND ADVERTISEMENTS PUBLISHED THEREIN
9. PERMITTING ONLY MUNICIPALITIES AND PANCHAYATS TO LEVY AND COLLECT TAX ON ENTRY OF GOODS IN A LOCAL AREA FOR CONSUMPTION, USE OR SALE THEREIN
10. ALLOWING STATES TO LEVY TAX ON INTRA-STATE SALE OF GOODS KEPT OUTSIDE THE PURVIEW OF GST, NAMELY, PETROLEUM CRUDE, HIGH SPEED DIESEL, NATURAL GAS, MOTOR SPIRIT (PETROL), AVIATION TURBINE FUEL AND ALCOHOLIC LIQUOR FOR HUMAN CONSUMPTION.
11. OTHER MISCELLANOUS PROVISIONS
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Central Taxes
• Excise duty
• Additional Excise duty
• Excise Duty levied under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955
• Countervailing duty
• Service Tax
• Special Additional Duty of Customs(SAD)
• Central Surcharges and Cesses
State Taxes
• State VAT/Sales Tax
• entertainment tax (unless it is levied by the local bodies)
• Luxury taxes
• Taxes on lottery, betting and gambling
• Tax on advertisements
• State Cesses and Surcharges
• State Cesses and Surcharges in so far as they relate to supply of goods and services
• Entry Tax, not levied by local bodies
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ARTICLE -245 Extent of laws made by Parliament and by the
Legislatures of States.—
(1) Subject to the provisions of this Constitution, Parliament may make laws
for the whole or any part of the territory of India, and the Legislature of a
State may make laws for the whole or any part of the State.
(2) No law made by Parliament shall be deemed to be invalid on the ground
that it would have extra-territorial operation.
ARTICLE 246. Subject-matter of laws made by Parliament and by the
Legislatures of States.—
(1) Notwithstanding anything in clauses (2) and (3), Parliament has
exclusive power to make laws with respect to any of the matters
enumerated in List I in the Seventh Schedule (in this Constitution referred
to as the “Union List”).
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(2) Notwithstanding anything in clause (3), Parliament,
and, subject to clause (1), the Legislature of any State
also, have power to make laws with respect to any of the
matters enumerated in List III in the Seventh Schedule (in
this Constitution referred to as the “Concurrent List”).
(3) Subject to clauses (1) and (2), the Legislature of any
State has exclusive power to make laws for such State or
any part thereof with respect to any of the matters
enumerated in List II in the Seventh Schedule (in this
Constitution referred to as the “State List”').
(4) Parliament has power to make laws with respect to
any matter for any part of the territory of India not included
in a State notwithstanding that such matter is a matter
enumerated in the State List.
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NEW ARTICLE - 246A.
Notwithstanding anything contained in articles 246 and
254, Parliament and the legislature of every State,
have power to make laws with respect to goods and
services tax imposed by the Union or by that State
respectively:
Provided that Parliament has exclusive power to make
laws with respect to goods and services tax where the
supply of goods, or of services, or both takes place in the
course of inter-State trade or commerce.
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Composition Union Finance Minister – Chairperson
Union Minister of State in charge of revenue
Minister in charge of finance or taxation or other minister
by each State Govt.
Function To make recommendations to the Union and States
Taxes to be subsumed in GST
Taxable and exempted goods and services
Threshold limit of turnover
Rates of GST
Any other matter relating to GST
Decisions to be made with the consensus of all
members present
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Composition Chairperson and two members
Qualifications prescribed
Function To adjudicate disputes referred to by Union and State arising out
of deviation from recommendations of GST Council that result in
loss of revenue to Union or State or affects harmonized structure
of GST
Only Supreme Court to have jurisdiction over disputes
arising from the Authority
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Tax is on ‘supply of goods or services for consideration’
Scope of the term ‘supply’? -is it anything done for consideration?
Scope of the term ‘goods’? - will it cover immovable property?
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Tax is on ‘supply of goods or services for consideration’
Scope of the term ‘services’?
-need for enumeration of all services (positive list) or specifying negative list? -fate of common-man services such as medical facilities? -will it cover royalty, works contract, hire-purchase etc.?
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Scope of the term ‘consideration’?
- will it include non-monetary consideration?
- will Third Party consideration be included?
- will it include the following:-
compensation for early termination
penalty for breach of contract
security deposits and forfeiture of deposits
overpayments
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Whether the term ‘goods’ will be defined? -should it include only tangible goods?
-current disputes
Whether immovable property be included as
goods? -difference in ‘goods’ for tax purposes and ‘goods’ as
per Sale of Goods Act, 1930
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Basis for giving input tax?
Whether a separate definition of ‘input’ or ‘input
service’ required?
Credit should be available on anything used in or
in relation to business
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Identifying the Service Recipient -person making the payment?
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Services of conversion/processing provided by job-worker can be classified as supply of goods/service under GST regime.
The value of supply made by the job-worker shall be chargeable to both CGST and SGST.
Job worker would be entitled to take input tax credit of goods and services used in making the taxable supply.
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Single or Multiple Supply?
-different rates for goods and services
-combination of taxable supplies and exempt
supplies
Principles for classification
-principal or ancillary supply
-economically single / indivisible supply
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Task Force Report
One positive rate each for CGST and SGST on
all goods and services
One zero rate for all goods and service exported
out of India
No issue for single or multiple supply or supply of
goods or services
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How to avail credit on stock
transfer?
Issue of pre-determined sales? -No longer relevant as tax is
destination based
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Time period for refund of accumulated credit?
- no refund under CENVAT
- varied practices under State VAT Acts
White paper indicates - time bound manner
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Refund available for exports,
purchase of capital goods, input
tax at higher rate than output tax
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Supplies in relation to SEZ non-processing zones? - whether Doctrine of Promissory Estoppel apply?
Supplies made to special projects such as
International Competitive Bidding (ICB), etc?
Supplies made to EOU, STP, EHTP etc.?
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Treatment for opening credit in the books of accounts on the date of implementation of GST?
-VAT credit -CENVAT credit
Any credit not taken and accounted for as on the
date of implementation of GST -whether such credit will be allowed? -need to review whether all such credits have been duly accounted for
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• A sum of Rs. 9,000 crore towards the first
installment of the balance of CST
compensation provided in the budget.
* Work on draft GST Constitutional
amendment bill and GST law expected to
be taken forward.
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•Record Keeping
•Tax Planning
•Departmental Audit •External Audit of VAT Records •System Audit •Certifications •Assisting the Government