Download - Goods & services tax(gst)
Goods & Services Tax(GST)
• Indicated roll-out date is April 1, 2011
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The Gist of Proposed GST: Taxes to be subsumed
State Levies Central Levies • Value added tax • Excise duty • Entertainment tax • Additional excise duties • Luxury tax • Excise duty under Medicinal and
Toiletries Preparation Act • Tax on lottery, betting & gambling
• Service tax • Entry tax • Additional and special additional • Surcharges and cesses customs duties
• Surcharges and cesses
Central GST State GST
What prompted the GST?
• Several indirect taxes at Central and State level
• Tax on tax in current Central Excise and State VAT mechanism
• No harmony in rates of VAT on similar commodities from one State to another
• CENVAT credit & VAT input tax set-off not comprehensive due to restrictive provisions
• Break in credit chain in inter-State transactions
• Multiple taxes leading to complexity in compliance
The Gist of GST: Uniformity in structure • 1st Discussion paper on GST released by the Empowered
Committee on 10th Nov’2009• As far as practicable there will be uniform procedures across
various statutes concerning: - Chargeability
- Taxable event- Taxable person - Valuation
- Classification
• Rules for taking and utilisation of credit for CGST and SGST would be aligned, but no cross utilisation of credit between these two taxes
The Gist of GST: Scope and coverage
• CGST and SGST would be applicable on all transactions of goods and except:
- Exempted goods and services -Transactions which are below the prescribed threshold - Goods outside the purview of GST:
Goods Treatment under GST
Products containing Outside the purview of GST, State Government to alcohol levy taxes as at present
Central Government to levy excise duty on tobacco Tobacco Products
products over and above GST
Outside the purview of GST, will be subject to sales Petroleum Products tax / value added tax Levied by State Governemnt
and to cess, excise duty by Central Government
The Gist of GST: Rates and thresholds
• Two-tier rate structure for both CGST and SGST - Standard rate for most goods and services - Lower rate for essential commodities and precious metals
• Threshold limits:
Threshold limits for :
Tax Goods Services CGST Rs. 150 Lakh Yet to be decided SGST Rs. 10 Lakh Rs. 10 Lakh
• Composition scheme with floor rate of 0.5% to be available for taxpayers having annual turnover below
Rs. 50 Lakh
The Gist of GST: Input tax credit Mechanism
• Input Tax Credits (ITC)
CGST
CGST
IGST
SGST
SGST
IGST
IGST
IGST
CGST
SGST
against
against
against
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The Gist of GST: Inter-State transactions
• Inter-State sale of goods and services will be taxed under the innovative Integrated GST (IGST) model
• IGST model would work as follows:
- The Central Government would levy IGST at the rate of CGST + SGST on all inter-State sale transactions
- To pay this IGST, the inter-State seller may use credit of CGST, SGST and IGST on his inputs
- The inter-State purchaser may use the credit of the IGST paid on his purchases to discharge the output tax liability on his taxable supply of goods or services
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GST: Real Estate Sector
• GST Applicable for all constructed property instead of stamp duty
• Credit available for all inputs including taxes paid on land.
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• GST would be applicable on rental income from immovable property. No Credit available for all tax paid on construction / acquisition of property. However set off available for GST paid on maintenance related inputs.
The Gist of GST: Exports and imports
• Exports would be zero-rated
• Exports to processing zones of SEZ will also be zero rated
- No benefit would be allowed for the sales from SEZ to Domestic Tariff Area
• Imports of goods and services would be subject to CGST and SGST based on destination principle:
- SGST revenue will accrue to the State where the imported goods and services are consumed
- Both CGST and SGST paid on import of goods and services will be available as credit
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Impact on businesses: Decision matrices
• Product Pricing needs to reflect GST efficiency
• Stock level to be maintained as on transition date
• Timing of acquisition of assets
• Review impact on existing contracts
• Focus on core activities vs. backward / forward integration
• Ascertain change in documentation and processes
• Identify changes to ERP system to be GST compliant
• Assess need to re-engineer tax management function
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New dual GST: Transition matters
• Treatment of unutilised tax credit balance as on transition date
• Tax credit on capital goods where only partial tax credit taken in pre-GST regime
• Treatment of tax already paid on goods lying in stock as on the transition date
• Sales return of goods sold in pre-GST period
• Taxation of contracts and services spread over pre-GST & post-
GST period
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‘Change-in-law’ provisions in existing and new contracts 12
