ROLLER COASTER ROLLER COASTER OF GSTOF GST

Rishabh R. AdukiaCA Final Mumbai

Topics to be CoveredTopics to be CoveredIntroduction to GSTNeed for GSTGlobal Scenario of GSTKey Features of GST to IndiaLatest UpdatesConclusion

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DID YOU READ TODAYS NEWSPAPER ?

Yes….

DO YOU WANT TO READ TOMORROWS NEWSPAPER ?

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Introduction to GSTIntroduction to GST One of the biggest taxation reforms in India

-- the Goods and Service Tax (GST) -- is all set to integrate State economies and boost overall growth.

GST is a broad based and a single comprehensive tax levied on goods and services consumed in an economy.

GST will create a single, unified Indian market to make the economy stronger.

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INTEGRATIONINTEGRATION

NEED FOR GSTNEED FOR GST Abolition of taxes such as ◦ Octroi,◦ Central Sales Tax, ◦ State-level sales tax,◦ Entry tax, ◦ Stamp duty,◦ Telecom license fees, turnover tax, tax on

consumption or sale of electricity, taxes on transportation of goods and services, thus avoiding multiple layers of taxation that currently exist in India.

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GLOBAL SCENARIO OF GLOBAL SCENARIO OF GSTGSTFrance was the first country to introduce

GST system in 1954.Almost 150 countries have already

implemented the GST. (Around 194 countries in world as per UN)

Most of these have a unified GST system. Brazil and Canada follow a dual system where

GST is levied by both the Union and the State governments.

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GLOBAL SCENARIO RATES- AVG GLOBAL SCENARIO RATES- AVG 15-20%15-20%

European Union Rates %

United Kingdom 17.5

Germany 19

France 19.6

Belgium 21

Australia 10

New Zealand 12.5

China 17

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Key Features of GSTKey Features of GST Simple Tax Structure with Single Rate

Central GST and State GST is likely to operate in a parallel fashion

Alcohol, tobacco, petroleum products are likely to be out of the GST regime.

Also items below threshold limits to be excluded

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Indicative ExemptionsIndicative ExemptionsExempted Products: Food Grains, Bread, Salt, Milk,

Vegetables, Meat and FishGoods At Lower Rates: Tea, Milk Powder, Coffee Beans,

Toys, Beedis, BicyclesExempted Services: Govt. aided public health and

education

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Type of GST ModelsType of GST Models

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Likely Dual Structure for Likely Dual Structure for IndiaIndia

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Integrated GST (IGST)Integrated GST (IGST)For inter-state transactionsCentre to levy IGST which would be

CGST + SGSTInter-state dealer will pay IGST after

adjusting IGST, CGST and SGST credit on purchase

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Set - off …Set - off …CGST against CGST

SGST against SGST

No Cross sectoral set-off between CGST & SGST

IGST for CGST/SGST & vice versa

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IGST …IGST …The seller in State X will pay the IGST

to the CentreWhile paying IGST, seller will adjust his

lying IGST/CGST/SGST creditSuppose Seller adjusts the SGST

against IGST payable,State X will have to transfer the credit of SGST used by the seller for payment of IGST to the Centre

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RATE OF GSTRATE OF GSTRate is expected around 14-16 per cent.

After the total GST rate is arrived at, the States and the Centre will decide on the CGST and SGST rates.

Currently, services are taxed at 10 per cent and the combined charge indirect taxes on most goods is around 20 per cent.

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Some Figures to Wonder ?Some Figures to Wonder ?Balance Sheet Figure ?Kareena Kapoors Figure ?It is estimated that India will gain $15 billion a

year by implementing the Goods and Services Tax as it would promote exports, raise employment and boost growth. It will divide the tax burden equitably between manufacturing and services.Source: NCAER

Centre’s Tax-GDP Ratio has increased from 9.2% to 10.94%

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Why are some States against Why are some States against GST; will they lose money?GST; will they lose money?

The governments of Madhya Pradesh, Chhattisgarh and Tamil Nadu say that the information technology systems and the administrative infrastructure will not be ready to implement GST.

The central government has offered to compensate States in case of a loss in revenues.

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Why are some States against Why are some States against GST; will they lose money?GST; will they lose money?

Some States fear if the uniform tax rate is lower than their existing rates, it will hit their tax kitty. The government believes that dual GST will lead to better revenue collection for States.

However, backward and less-developed States could see a fall in tax collections.

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Issues In ImplementationIssues In ImplementationAgreement on GST rates among states

and CentreConstitutional amendments empowering

states to levy tax on services & empowering centre to levy tax on sales.

Compensation to be given by the Centre to States incurring revenue losses on implementation of GST.

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Issues In ImplementationIssues In ImplementationDrafting & implementation of Centre

GST and State GST laws are lagging behind.

Final approval and support of industry is a must.

Success of GST would depend upon implementation of IT resources in every nook and corner of the country.

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Recent News ItemsRecent News Items Hon’ble Finance Minister Pranab

Mukherjee December 15,2010 - Postponement of

likely dates to roll out GST along with DTC i.e.1.4.2012-13

December 14,2010 – GST will be introduced in phases to bring consensus among states in new regime while earlier stand was to come out in transitory manner

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SUMMING UPSUMMING UP

What is GST ?◦ G-Good◦ S- Simple◦ T- Transition

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