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CII GST Session - Delhi

Goods and Services Tax (GST) – Session 1

GST Update

4 August 2016



Agenda

• Brief Update on GST

• GST Developments

• GST Tax Structure

• GST Key Features

• GST Key Benefits

• Questions


Brief Update on GST


2000

2004

2006

2007

2008

2009

2010 2011

2013

2014

2015

2016

2017

GST Update: Time is ticking!

Setting up of Empowered

Committee (EC) to

streamline GST model

GST based on VAT principle

Proposal to introduce GST

w.e.f 1 April, 2010

EC of State Finance

Ministers constituted

Joint Working Group

and submitted its report

to EC

Phasing of CST rate

from 4% to 3%

EC finalises its views on

broad GST Structure

and design

Phasing of CST rate

from 3% to 2%

EC released First Discussion paper on

GST for debate and discussion PM revises

timeline for GST to

1 April, 2011

Constitution 115th

Amendment bill was

introduced in Lok

Sabha

Standing Committee submitted its

report to Parliament

Constitution (122nd Amendment)

Bill introduced in December

New Government, came to

power in May

Constitution (122nd Amendment)

Bill passed in the Lok sabha

Draft Model GST law released

for discussion on

14 June 2016

Proposed GST

Introduction

1 April 2017???

Rajya Sabha approves the

GST Bill in Monsoon session

of parliament


GST Developments

GST Developments: Where we are

Story so far

• Four Official Documents issued outlining broad GST structure

• Constitutional Amendment Bill passed by both houses of parliament

• As next step, 50% of States Governments will have to ratify the Bill

• Post such ratification, Bill will be sent for President approval

• Post President approval, Bill will be enacted leading to formation of GST Council

• GST Council, comprising State & Union representatives will decide on rates, schedules

etc

Other key developments

• Consensus among most States on issues concerning compensation and fiscal autonomy

• Significant progress on IT infrastructure

Model GST Law (14 June 2016)

• Goods and Services Tax Act, 2016

• Integrated Goods and Services Tax Act, 2016

• GST Valuation (Determination of the Value of supply of Goods and Services) Rules, 2016


Challenges under Present

law Promises from GST Promise delivered

Cascading effect of taxation Elimination of tax cascading Substantially yes; though still

restrictions exist on tax credits

Multiple level Indirect taxes,

multiple taxable events

Single uniform tax Substantially yes; Dual GST &

Supply

Evolving laws – Frequent

changes

Consistency & certainty in

law

No; draft law will go through

various changes due to

industry representations

Compliances and

documentation

Simplified compliances and

documentation

Partly yes; recognition to e-

records but huge volume of

data to be reported

Constitutional limitation on

taxation by Centre & State

Government(s)

Collective power to tax goods

& services to ensure

seamless credit ; reduction in

valuation/ coverage(dual

levy) disputes

Substantially yes; liquor,

tobacco kept out of GST,

petroleum to be covered from

later date

Multiple registrations Single CGST registration No; State based CGST

registration to be obtained

Classification / rate disputes Uniform law and single rate

to reduce disputes

Not yet known; rates yet to be

notified


GST: Why GST Vs What we received


GST Tax Structure

Proposed Tax Structure

Indirect Tax

Income Tax Inter State

Direct Tax

Intra State

State GST

(SGST)

Integrated GST

(IGST) Central GST

(CGST)

State Centre

Goods and Service Tax

Dual GST

Status Taxes Subsumed

At Central

Level

• Additional customs duties

(CVD and SAD)

• Central Excise Duty

• Service Tax

• Special Excise duty

(on medical and toiletries

preparation)

• Various auxiliary cess &

levies

At State

Level

• State-VAT

• Central Sales Tax

• Entry Tax

• Luxury Tax

• Entertainment Tax

• Purchase Tax

GST: Proposed Dual Tax Structure

Key Features

Goods and Services Tax Act, 2016

• Dual GST law comprising CGST & SGST on all intra-state supplies of goods and / or

services; except

– alcohol for human consumption; State Excise duty & VAT levy to continue

– petroleum to be covered under GST from a specified future date

• Integrated GST (IGST) sum of CGST & SGST on all inter-state supplies

• Single taxable event of Supply; stock transfer also covered

• Single taxable base transaction value; no MRP or hybrid structure

• Nature of supply dependent upon location of supplier and place of supply

• Two rates of GST expected:

– Lower rate (about 12%) for goods presently exempt/ concessional rate under either Central

Excise or VAT and standard rate (about 18%)

– Exemption expected on about 99 products presently exempt under both Central Excise & VAT

• Credit of tax charged on goods / services for business use, irrespective of place of supply

– Mismatch / non-deposit by supplier, liability to fall on person claiming credit

– Cross adjustment of CGST with SGST and vice-versa not permissible

• Fate of area based exemption / SEZs / state incentives etc. not yet known

• Reduced compliances


Model GST: Key Features


GST Key Benefits

• Reduction in non-creditable cost due to abolition of CST

• Significantly higher quantum of GST credits expected

• Inter-state supplies truly recognised (no requirements for in-transit sales; high seas

sales, etc)

• Free flow of credits between Divisions & Corporate, reducing divisional inefficiencies

• Revisit distribution network to build operational efficiency

• Single taxable base and mode of charging GST; no MRP or hybrid model

• Standardised classification to reduce litigations on classification issue


GST: Key Benefits


Questions???


Thank you

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