GOODS AND SERVICES TAX (GST)
CONCEPT, MODEL & PRESENT STATUS
January, 2015
PRESENTATION PLAN
Why GST : Perceived Benefits
Road to GST – Milestones
Stakeholders
Existing Indirect Tax Structure
Features of Constitution Amendment Bill
Features of Proposed GST Model
Current Status
GSTN
Way Forward
GST Planning
WHY GST?
PERCEIVED BENEFITS
WHY GST : PERCEIVED BENEFITS
To Trade Reduction in multiplicity of
taxes Mitigation of cascading/
double taxation More efficient
neutralization of taxes especially for exports
Development of common national market
Simpler tax regime with fewer rates and exemptions
To Government Simpler Tax system Broadening of Tax base Improved compliance
& revenue collections (tax booster)
Efficient use of resources
ROAD TO GST - MILESTONES
ROAD TO GST- MILESTONES
Budget 2006-07: announcement of intent to introduce GST by 2010
May, 2007 to September, 2009: Discussions on roadmap & design between Empowered Committee of State Finance Ministers (EC) & GOI
November, 2009: First Discussion Paper (FDP) released by EC
January, 2010: Comments on FDP by GOI
June, 2010 : Three sub-working Groups constituted by GOI
o Registration, return, payment, refund, audit & dispute resolution mechanism related issues
o Drafting of Central GST & model State GST legislations
o Basic design of IT systems required for GST in general & IGST in particular
ROAD TO GST- MILESTONES CONTD.
July, 2010: Empowered Group on IT Infrastructure set-up
March, 2011: Constitution (115th Amendment) Bill introduced in LS – Since lapsed with dissolution of LS
November, 2012: Committee on GST Design set-up by EC
January, 2013: Report submitted by Committee on GST Design
February, 2013: Three Committees constituted by EC -
Dual Control, Thresholds and Exemptions
RNRs for SGST & CGST and Place of Supply Rules
IGST and GST on Imports
March, 2013 – GSTN incorporated as a Section 25 Company
ROAD TO GST- MILESTONES CONTD.
June, 2013: Committee to draft model GST Law
July, 2013: Report submitted by Sub-Group-I on Business Processes
April, 2014: Committee to examine Report of the sub-Group-I on Business Processes constituted by EC
June, 2014: Report submitted by Committee on IGST and GST on Imports
June, 2014: Report submitted by Committee on Dual Control, Thresholds & Exemptions
October, 2014: Report submitted by Committee on RNRs & Place of Supply Rules
December, 2014: Constitution (122nd Amendment) Bill introduced in LS
STAKEHOLDERS .
Two major players: Centre & States Empowered Committee of State Finance Ministers
(EC) - Finance Ministers of all State Governments. Assisted by State Finance Secretaries/
Commissioners of Commercial Taxes
Government of India - Department of Revenue CBEC
Other Stakeholders – not directly involved in discussions
EXISTING INDIRECT TAX STRUCTURE
EXISTING INDIRECT TAX STRUCTURE
Present Tax Structure
[4 Important
Constituents]
Excise Duty
Entry No. 84, List I,
Schedule VII
Taxable Event is
Manufacture
Service Tax
Residuary Entry No. 97,
List I, Schedule VII
Taxable Event is Provision of
Service
Sales Tax / VAT
Entry No. 54 of List II (VAT)
and 92A of List I (CST)
Taxable Event is Sale
Customs Duty
Entry No. 83, List I,
Schedule VII
Taxable Event is Import &
Export11
FEATURES OF CONSTITUTION
AMENDMENT BILL
FEATURES OF CONSTITUTIONAL AMENDMENT BILL
122nd Amendment Bill introduced in LS on 19.12.2014
Key Features Concurrent jurisdiction for levy of GST by the
Centre and the States –proposed Article 246A Authority for Centre to levy & collection of IGST on
supplies in the course of inter-State trade or commerce including imports – proposed Article 269A
Authority for Centre to levy non-vatable Additional Tax – to be retained by originating State
GST defined as any tax on supply of goods or services or both other than on alcohol for human consumption – proposed Article 366(12A)
FEATURES OF CONSTITUTIONAL AMENDMENT BILL CONTD.
Key Features contd.
Goods includes all materials, commodities & articles – Article 366 (12)
Services means anything other than goods – proposed Article 366 (26A)
Goods and Services Tax Council (GSTC) - proposed Article 279A To be constituted by the President within 60 days from
the coming into force of the Constitutional Amendments Consists of Union FM & Union MOS (Rev) Consists of all State Ministers of Finance Quorum is 50% of total members Decisions by majority of 75% of weighted votes of
members present & voting 1/3rd weighted votes of Centre & 2/3rd of all States
together
FEATURES OF CONSTITUTIONAL AMENDMENT BILL CONTD.
Key Features contd. Council to make recommendations on
Taxes, etc. to be subsumed in GST Exemptions & thresholds GST rates Band of GST rates Model GST Law & procedures Special provisions for any special category States Date from which GST would be levied on
petroleum products Council to determine the procedure in performance of
its functions Council to decide modalities for dispute resolution
arising out of its recommendations Changes in entries in List – I & II Compensation for loss of revenue to States for five years
FEATURES OF PROPOSED GST MODEL
GST - FEATURES
Destination-based Taxation Applies to all stages of value chain – primary,
secondary & tertiary including retail Applies to all supplies of goods / services (as
against manufacture, sale or provision of service) made for a consideration except :
Exempted goods / services – common list for CGST & SGST
Goods / services outside the purview of GST Transactions below threshold limits
Dual GST having two concurrent components : Central GST levied & collected by Centre State GST levied & collected by States
GST – FEATURES CONTD. CGST and SGST on intra-State supplies of
goods / services in India IGST (CGST + SGST) applicable to
Inter-State supplies of goods / services in India
Inter-state stock transfers of goods Import of goods and services
IGST levied & collected by the Centre Additional Tax not exceeding 1% on inter-
state supply of goods – to be levied by the Centre but retained by originating State
Export of goods and services – Zero rated
GST – FEATURES CONTD.
All goods or services likely to be covered under GST except:
Alcohol for human consumption - State Excise + VAT
Electricity - Electricity Duty Real Estate - Stamp Duty + Property Taxes
Petroleum Products – to be brought under GST from a later date on recommendation of GSTC
Tobacco products – under GST + Central Excise
GST - FEATURES CONTD.
Taxes (Centre, State or local levies – in the nature of indirect taxes on supply of goods or services) to be subsumed within GST:
Central Taxes
Central Excise duty (CENVAT)
Additional duties of excise
Excise duty levied under Medicinal & Toiletries Preparation Act
Additional duties of customs (CVD & SAD)
Service Tax Surcharges & Cesses
State Taxes
State VAT / Sales Tax Central Sales Tax Purchase Tax Entertainment Tax
(not levied by local bodies)
Luxury Tax Entry Tax (not levied
by local bodies) Entry Tax in lieu of
Octroi Taxes on lottery,
betting & gambling Surcharges & Cesses
TAXES PROPOSED TO BE SUBSUMED
GST – FEATURES CONTD. GST Rates – based on RNR : Four rates -
Merit rate - essential goods & services Standard rate - goods & services in general Special rate - precious metals Nil rate - exempted goods or services
Floor rate with a small band of rates for standard rated goods / services for CGST & SGST
Optional Threshold exemption in both components of GST
Optional Compounding scheme for taxpayers having
taxable turnover up to a certain threshold above the exemption
GST – FEATURES CONTD.
ITC of CGST for CGST & SGST for SGST - no cross utilization
ITC of IGST allowed for payment of IGST, CGST & SGST in that order
ITC of CGST allowed for payment of CGST & IGST in that order
ITC of SGST allowed for payment of SGST & IGST in that order
No ITC of Additional Tax
GST – FEATURES CONTD. Multiple statutes – one for Centre & one for every State
Model GST Law including Rules & procedures to be recommended by GST Council -
Certain features to be common between the Centre & the States & across the States
Certain other features may vary to allow flexibility to the Centre & the States
Place of Supply Rules
to determine Place of Supply of goods or services
to determine whether the supplies are intra-State or inter-State
HSN Code likely to be used for classification of goods
Present system of classification of services likely to be used
CURRENT STATUS
CURRENT STATUS
I. AMENDMENT BILL REINTRODUCED on 19.12.2014 Procedure for passage of Constitutional Amendment Bill
May be referred to the Standing Committee on Finance (SCF)
To be passed by 2/3rd majority in both Houses of Parliament
To be ratified by at least 50% of the State Legislatures
Assent by President of India Thereafter, GSTC to be constituted GSTC to recommend GST Law and procedure GST Law to be introduced in Parliament/ State
legislatures
CURRENT STATUS CONTD.
II. DRAFTING OF LEGISLATION Committee & three sub-committees of officials (Centre
& States) constituted to finalize model legislation (CGST, SGST and IGST)
GST Cell in CBEC
III. BUSINESS PROCESSES AND IT FRAMEWORK IT Infrastructure for GST to be put in place jointly by
the Centre & States Empowered Group headed by Dr. Nandan Nilekani
finalized the design and modalities of GSTN NSDL appointed the Technology partner GSTN established as a SPV & Section 25 company
CURRENT STATUS CONTD.
Business Processes - A common portal - GST Network (GSTN)
to handle registration of taxpayers, return filing and payments
To be linked to the CBEC IT system (ACES) & each of the States at the back end
Business processes & forms relating to Registration & Returns under approvals
Issues under Discussion Key Policy issues Key Business processes
CURRENT STATUS CONTD.
Five Committees constituted by EC
Committee on Dual Control, Thresholds & Exemptions
Committee on Revenue Neutral Rates for State GST & Central GST & Place of Supply Rules
Committee on IGST & GST on Imports
Committee for drafting Model GST Law
Committee for examination of Business Processes
CURRENT STATUS CONTD.
Key Policy Issues under Discussion – Extent of Dual Control Rate structure Exempted Goods / Services Exemption threshold Composition threshold Role of Centre / States in inter-State Trade Place of Supply Rules for Goods / Services Mechanics of IGST model Account settlement between Centre & States
under IGST model
CURRENT STATUS CONTD.
Key Business processes under Discussion –
Single / Multiple registration within one State
Dispute settlement
Audit
Enforcement
Recovery & Refund, etc.
GST NETWORK (GSTN)
GSTN - FEATURES GSTN incorporated on 28.03.2013 as Section 25
private limited company with authorized equity of Rs. 10 cr.
Strategic control to remain with Government A self-sustaining revenue model - to levy user
charges for availing services from - tax payers tax authorities
Exclusive national agency responsible for delivering integrated Tax related services involving multiple tax authorities
Equity Holders Central Government - 24.5% EC and all States together - 24.5% Financial Institutions – 51%
GSTN - FUNCTIONS
GST Common Portal to be set-up before GST roll out Common Portal to function as pass-through portal for
dealers to - submit registration application file returns make tax payments
Registration, return & payment information to be passed on to Central & concerned State tax authorities
GSTN to develop back-end modules like Assessment, Audit, Refunds, Appeal, Enforcement & tax payer profiling utility, etc. - as part of Cafeteria Services
Statutory functions like assessment, enforcement of tax laws, settlement of disputes etc. to be performed by the respective tax authorities only
GSTN to provide various services
GSTN - SERVICES
Common Registration, Return filing & e-Payment for tax payers
Integration of Common GST Portal with existing tax administration systems of Central / State Governments & other stake holders
Facilitate, implement and set standards for providing services to tax payers through common GST portal
Build efficient & convenient interfaces with tax payers to increase tax compliance
Assist tax authorities in plugging tax evasion & improving transparency of tax administration system
Carry out research, study best practices & provide training to the stakeholders
Deliver any other service of relevance to Government & other stakeholders
WAY FORWARD
WAY FORWARD
Passage of Constitution Amendment Bill
GSTC to be constituted after passing of Constitution Amendment Bill
GSTC to recommend GST Law & procedure
GST Law to be introduced in Parliament / State legislatures
Scale up existing IT Infrastructure
Linkage of GSTN portal with ACES at back end
WAY FORWARD CONTD.
Meeting implementation challenges :
Effective coordination between Centre & State tax administrations
Reorganization of field formations Augmentation of human resources Spreading Accounting Literacy Developing IT skills Reorganisation of Audit procedures Harmonization of processes & procedures
between CGST / IGST & SGST Law
GST PLANNING
Pricing, Costing, Margins Supply-chain management Change in IT systems Treatment of tax incentives Treatment of excluded sectors Transaction issues Tax compliance
IMPACT AREAS FOR BUSINESSES
Tracking GST development Review of draft legislation and
impact analysis Industry advocacy Review of final legislation and impact
analysis Implementation assistance Post implementation support
ROLE OF PROFESSIONALS
THANK YOU !
