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<ul><li>1.A Presentation on SALIENT FEATURES OF GOODS &amp; SERVICE TAX (GST)AtByResidential Refresher CourseDr. Sanjiv AgarwalOrganized by ICAI CMI FCA, FCS,Hosted by Goa Branch of WIRC JaipurJune, 2012</li></ul><p>2. SALIENT FEATURES OF GOODS &amp; SERVICE TAX (GST)This Presentation Covers : Indian Economy- An overview Taxonomy of Indian taxation Present tax system suffer from Need for GST GST- Journey so far What is GST and its key features GST- Global perspective GST- How it works ? GST - Issues yet to be decided 3. Indian Economy An overview Indias economy is the 11th largest economy in the worldand the third largest by purchasing power parity (PPP) G-20 major economies and a member of BRICS World is presently facing recession-II but Indianeconomy is still better than comparable economies. Agriculture, services and industry are the major sector ofIndia an economy. Contribution of different sectors inMarch, 2012 was : Agriculture19% Services59% Industry22%to be contd. 4. Indian Economy An overviewAgricult ure 19% Service Sector Industry 59% 22% GDP C O MPO SITIO N IN MARC H, 2012 5. Growth in Tax GDP Ratio Slow but Steady YearsTax GDP ratio2003-04 9.2%2007-08 11.9%2009-109.7%2010-1110.3%2011-1210.1% 6. Power to Tax in India Central Government and the State Governments under Part XI of IndianConstitution have power to levy taxes. Legislative power v Administrative power Legislative power has three lists:- Union list, States list and Concurrent list Administrative power CBDT, CBEC Union list consists of 100 items -Parliament has exclusive power to levy Tax. State list consists of 66 items -Individual states have exclusive authority tolevy Tax. Concurrent list consists of 47 items - both governments can levy be contd.. 7. Power to Tax in India India has a two tier federal power to collect tax the Union Government, the State Governments including urban/rural localbodies Presently goods are liable to Vat / Excise / Customs dutywhile taxable services attract service tax. Certain transactions subject to both - Vat and Service tax Efforts to revamp the direct tax structure - New direct taxcode (Income Tax Act, 1961 &amp; Wealth Tax Act, 1957would be scrapped) proposed Efforts to bring on a single indirect tax GST proposed 8. Taxonomy of Indian TaxationTAXATION POWERS OF UNION Income Taxon income, exceptagricultural income Excise Duty on goods manufactured Custom Duty on imports Service Tax on specified services Central Sales Tax on inter-state sale of goods Stamp Duty on 10 specified instruments To be contd.. 9. Taxonomy of Indian TaxationTAXATION POWERS OF STATE VAT / Sales Tax - on sale of goods, other thannewspapersStamp Duty - on other than 10 specified instruments Tax - on agricultural income Toll tax- on utilities Other taxes-on Land and buildings Entry of goods in local Area (Entry Tax or Octroi) Consumption or sale of electricity Vehicles Luxuries including taxes on entertainment, Betting and gambling Alcoholic Liquor, Narcotic Drugs and Opium 10. Present tax system suffer from Confusion and Mistrust Complex and lacking in stability Hidden tax on exports, no state tax on imports High transaction costs Narrow base High compliance cost To much litigations Lack of harmony and inter state practices Highly corruption 11. Goods &amp; Service Tax (GST)A Common Tax onGoods Services 12. Pre-requisites for migrating to aGST regime Setting up of empowered committee for GST (like VAT) which can steerthe road map into action - done Broaden the tax base for excise duty (presently 40% comes frompetroleum products) being done Finishing area based and product based exemptions being done Rationalization of concessions and exemptions including that on exports being done Expanding service tax to almost all services now proposed Common/unified tax rate for goods and services which may be ideally,revenue neutral (a suitable GST rate) dual tax proposed Avoiding or minimizing differential tax rates under discussions Abolition of other small taxes - under discussions Abolition of CST in a phased manner - being done Power to levy service tax on select/agreed services to States - underdiscussions Issue of inter-State services and goods movement vis--vis levy of dutyor tax to be sorted out - under discussions Revenue sharing mechanism to be rationalized - under discussions 13. GST - Journey so far Feb, 2006 : First time introduced concept of GST and announced the date of itsimplementation in 2010 Jan. 2007: First GST study by ASSOCHAM released by Dr. Shome Feb. 2007: F.M. Announced introduction of GST from 1 April 2010 in Budget April 2007 : CST phase out started - CST reduced to 3%, currently 1% May 2007: Joint Working Group formed by EC Nov. 2007: Joint Working Group submits report April 2008 : Empowered Committee (EC) finalizes views on GST Structure July 2009: FM announces commitment to bring GST from April 2010 Consultation on interstate services in progress to be contd 14. GST - Journey so farBudget 2010 to achieve the roll out of GST by April 2011 Revamping of indirect tax administration at centre/ statesinternal work processes based on use of information technology- massive information technology (IT) platform project ACES- Automation of Central Excise and Service Taxrolled out rate of service tax retained at ten per cent states to revamp their internal work processes to be contd 15. GST - Journey so farBudget 2011 non-committal on timing and roll out but the Government keen to bring in Constitutional Amendment Bill overall amendments targeted towards moving close to harmonize with GST regime in future major highlights of budget discussions/proposals on GST DTC and GST to mark a water shed Decisions on GST to be taken in concert with the states Areas of divergence between centre and states narrowed Constitutional Amendment Bill likely to be introduced in current session Drafting of model legislation for central and state GST underway Establishment of IT infrastructure in process (GST network) NSDL selected as technology partner for GST Tax rates maintained at same level of 10% to stay on course towards ST Certain central excise rates changed to prepare the ground for transition to GST byreducing number of exemptions Nominal central excise duty of 1% imposed on 130 items, no Cenvat credit allowed onsuch items. In service tax, proposals aim to achieve a close fit between the present service taxregime and GST. 16. GST - Journey so farBudget 2012 No announcement on GST rollout date GST to be implemented in consultation with the States at the earliest GST network (GSTN) likely to be in place from August, 2012 GSTN will implement common PAN based registration, return filing andprocessing of payments for centre and all states on a shared platform. Bringing closer of Service Tax and Central Excise for transition to GST Drafting of modal legislation for CGST and SGST under progress.Common forms for Service Tax and Central Excise registration andreturn proposed. Place of Supply Rules, 2012 to trigger debate to assess issues that mayarise in taxation of inter state services for eventual launch of GST. 17. The Journey beginning of endPastNowFuturePast Now FutureNational GST Dual GST ??????? 18. GST today Need &amp; Advantages As a developing country, India needs a transparent &amp; unambiguous taxstructure A complex tax structure with multiple rates of taxes Multiple taxes across the supply chain High transaction cost in the hands of the tax payers Increased tax collections due to wider tax base and better compliance Improvement in international cost competitiveness of indigenous goodsand services. Enhancement in efficiency in manufacture and distribution due toeconomies of scale GST encourages an unbiased tax structure that is neutral to businessprocesses, business models, organization structure, product substitutesand geographical locations Helping as a weapon against corruption GST operates on a negative list i.e. all goods and services are subjectto GST unless specifically exempted 19. GST today Need &amp; Advantages Nature of complexities i.e. classification to valuationregarding taxability, exist in the present structure.Some of such burning issues are: Excise on MRP Excise, VAT and Service Tax on Software, VAT &amp; Service tax on: Works Contracts Right to Use Composite Contracts such as AMC transactionsto be contd.. 20. GST today Need &amp; Advantages Tax cascading effect Central Sales Tax (CST) on inter-state sales, collected by the origin state and for which no credit is allowed by any level of government being phased out now Real estate transactions are outside the scope of both VAT and CENVAT Exempt sectors are not allowed to claim any credit for the CENVAT or the service tax paid on their inputs 21. What is GST GST is a comprehensive value added tax on goods and services It is collected on value added at each stage of sale or purchase in the supply chain No differentiation between Goods and Services as GST is levied at each stage in thesupply chain Seamless input tax credit throughout the supply chain At all stages of production and distribution, taxes are a pass through and tax is borne bythe final consumer All sectors are taxed with very few exceptions / exemptions Full tax credits on inputs 100 % set off In most countries, a single VAT exists which covers both goods and services. Typically it is a single rate VAT but two - three rate VAT systems are also prevalent India will be following multi rate / multi tier tax Canada and Brazil alone have a dual VAT Standard GST rate in most countries range between 15-20 percent GST exists in over 140 countries . 22. GST : P roposed Key Features Dual GST : Central GST &amp; State GST Destination based State GST Common Base Uniform Classification Uniform Forms Returns, Challans ( in electronic mode) No cascading of Central and State taxes Cross credit between Centre and State not allowed Tax levied from production to consumptionto be contd.. 23. GST : P roposed Key Features HSN to be applied for goods One Common return for both Central and State GST Uniform collection procedure for central and state GST 13 digit PAN based Common TIN registration TINXSYS ( Tax Information Exchange System) to track transactions States to collect CGST for SSI &lt; 150 L and transfer to Central Government Balance of Fiscal Autonomy to Center and States and need for Harmonization 24. Goods &amp; Service Tax - GST GST is expected to be more efficient system of taxation Boost to the revenues of the Centre and states Years ExciseService Tax2000-0168,282 2,6122010-11 1,37,427 70,3912011-121,50,600 95,0002012-13 (target) 1,94,350 1,24,000 25. Taxes proposed to be subsumed in GSTCentral Taxes Excise Duty Additional Excise duty Excise duty under medicinal and toilet preparation Act Service Tax Additional Custom duty commonly k nown as countervailing duty (CVD), special additionalduty( SAD) Surcharge CessState Taxes Value added tax (VAT) Entertainment tax levied by states Luxury Tax Tax on Lottery, betting and gambling Entry tax other than for local bodies State surcharge Cess /to be contd.. 26. Taxes proposed to be subsumed inGST State governments still not have consensus on following taxes to be subsumed in GST Purchase tax Octroi duty Tax on alcoholic beverages (country liquor / IMFL) Tax on petroleum products Tax on tobacco items 27. GST- WHAT ALL IT WILL INCLUDEA sale or supply includes a sale of goodsLease of premisesHire of equipmentGiving adviceExport of goods and supply of other things.A purchase includes an acquisition of goods or services such as trading stock a lease, consumables and other things. 28. GST : Global Perspective More than 140 countries have introduced GST. It has been a part of the tax landscape in Europe for the past 50years. It is fast becoming the preferred form of indirect tax in the Asia-Pacific region. It is interesting to note that there are over 40 models of GSTcurrently in force, each with its own peculiarities. While countries such as Singapore and New Zealand tax virtuallyeverything at a single rate, Indonesia has five positive rates, a zerorate and over 30 categories of exemptions. In China, GST applies only to goods and the provision of repairs,replacement and processing services. It is only recoverable on goods used in the production process, andGST on fixed assets is not recoverable. There is a separate business tax in the form of VAT. to be contd.. 29. GST- RATES WORLD WIDECountry GST RatesChina - 17%Indonesia-10%Philippines-10%Taiwan (Chinese Taipei)- 5%Australia -10%Germany-16%Denmark-25%Japan &amp; Singapore- 5%UK -17.5%France - 19.6%New Zealand-12.5%to be contd.. 30. GST : Global Perspective Goods and Services Tax in Canada GST is a multi-level value added tax introduced on January 1, 1991. The GST replaced a hidden 13.5% Manufacturers Sales Tax (MST). As of May 18th, 2010, the GST rate is 5% and some goods &amp; services are exempt from GST zero-rated goods &amp; services Model has helped the Canadas economy to be more efficient and competitive Goods and Services Tax in Japan In Japan, VAT or GST is known as Consumption Tax (CT) introduced in January 1989. It requires re-calculation and payments to the tax authorities at each transaction point in the onward sales chain. The Japanese Consumption Tax rate is currently 5% and out of which 4% is national levy and 1% regional levy. There is an annual threshold of YEN 10 million, based on the base year of two years prior to the tax year. to be contd.. 31. GST : Global PerspectiveGoods and Services Tax in Australia Consumption tax is called Value Added Tax. GST provisions are set out in a piece of Legislation called theANew Tax System (Goods and Service Tax) Act 1999 and the GSTwas implemented on 11th July, 2000. GST@10% will be charged on most goods and services consumedin Australia. All imported goods are assigned a tariff classification obtained fromthe Australian Customs Tariff which determines the rate of duty willpay for the product. GST is not intended to apply to goods and services which areexported from Australia and there are specific provisions in the GSTlaw designed to make exports be contd.. 32. GST : Global Perspective Goods and Services Tax in Brazil Brazil was the first country to adopt GST system. Brazil has adopted a dual GST where the tax is levied by both the central and the provincial governments. GST rate is 20 %. 33. GST- CAN WE ADOPT IT An information network allowing states to cross-check payment information(TINXSYS) has been put to trial and is expected to improve compliance andreduce evasion. What is needed is an IT system like the Tax Information Network (TIN),where the TDS or the VAT credit is recorded in a central database. Paper bills and fraud to be largely eliminated. Obligations to be fulfilled by IT System Registration Return Current status of the system Refund Tax Deposition GSTN to be operational by August, 2012 34. Features of Dual GST Model Dual levy by Centre &amp; States Various taxes that get...</p>


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