goods and services tax (gst) concept, model & present status january, 2015


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  • 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
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  • 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
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  • 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 oRegistration, return, payment, refund, audit & dispute resolution mechanism related issues oDrafting of Central GST & model State GST legislations oBasic design of IT systems required for GST in general & IGST in particular
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  • July, 2010: Empowered Group on IT Infrastructure set-up March, 2011: Constitution (115 th 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
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  • 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 (122 nd Amendment) Bill introduced in LS
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  • 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
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  • 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 & Export 11
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  • 122 nd 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)
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  • 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 1/3 rd weighted votes of Centre & 2/3 rd of all States together
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  • 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
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  • 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
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  • 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
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  • 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
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  • 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
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  • 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
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  • 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
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  • 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
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  • 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 2/3 rd 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
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  • 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 & Sectio