Gst primer oct_13

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A Primer on GST based on a recent lecture I gave at Lal Bahadur Sastry Institute at Mussoorie

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<p>GST Implementation I T Challenges and Strategies</p> <p>GST-PrimerT Koshy Partner, EY</p> <p>1What I CoverTax BasicsConcept of GSTIdeal GST Solution DesignCurrent Implementation ModelChallengesTax BasicsThe Alphabets3Types of TaxDirect Tax - IncomeTax on IncomeTax Deposit by the entity earning income</p> <p>Indirect Tax ExpenditureTax at every SaleTax Paid by Spending EntityTax Collected and Deposited to Govt Account by Selling Entity</p> <p>Indirect Tax - EvolutionNon-Integrated ManufacturingIntegrated ManufacturingVA =100 SP=110VA =100SP= 231VA =100SP= 364ORESTEELUTENSILTax 10%Tax 10%Tax 10% VA =300SP= 330ORESTEELUTENSILTax = 0Tax = 0Tax 10%Indirect Tax Evolution to VATTAX only Value AddedImplementation of VATInput Tax CreditVAT Enablement.VA =100 SP=110VA =100SP= 220VA =100SP= 330ORESTEELUTENSILTax 10%Tax 10%Tax 10%Input Tax Credit =10Input Tax Credit = 20ChallengesChallenges to any Tax AdministrationCompliance PainlessNon-Compliance Painful Equity and Efficiency in Administration8Ideal ModelOne Rate for all Products Across CountrySingle Enforcement AuthorityIntegrated ICT Solution Totally hands freeProcessing Risk Management</p> <p>9Meeting Multiple ObjectivesFair and Affordable TaxDifferent Rate for Different ProductsInfluencing Economic ActivitiesInfluence Export &amp; ImportInfluence Geographical LocationInfluence ConsumptionLuxury Goods, Sin Goods etcFederal Structure of Government Manufacturing Stage Tax and Service Tax by Central Government Trading Stage Tax By State Government </p> <p>10Multiple Objectives At What PriceComplexity in Compliance Different tax collecting banks across statesDifferent tax rates across different statesDifferent returns submission across statesDiverse Enforcement mechanismBorder clearance at each state</p> <p>11Multiple Objectives At What PriceComplexity and dilution in enforcement Mis-Classification of productsHawala tradeTax Evasion </p> <p>12The Solution Goods &amp; Service Tax (GST)Stakeholder ExpectationThe foundation for design14Wish List - TaxpayerStandard Rate across statesStandard Processes across CountryRegistration Number, Amount, Account HeadDeposit at any Authorized Bank BranchMultiple Payment ModesOffline, Online, ATM, Debit/Credit Card, MobileTax Credit TrackingRefund to Bank BranchSingle entity for enforcement </p> <p>15Wish List - BanksStandard Processes across CountryWho paid, How much, Which Challan, To WhomRole based on their Core StrengthsDeposit at any Authorized Bank BranchMultiple Payment ModesOffline, Online, ATM, Debit/Credit Card, MobileQuick Feedback on ErrorStandard Process for Error RectificationRefund to Bank Branch</p> <p>16Wish List - Tax AdministrationQuick Credit to Government Account Prevent Fraud ClaimsEnable focus on Core StrengthsMapping of Tax Claim to Tax DepositTimely Digital Data InputEasy and Quick Verification of Tax ClaimsMapping of Collection to Corresponding Enforcing Unit</p> <p>17Wish List - Accounts &amp; AuditsQuick Credit to Government AccountEnsure that due Processes are FollowedPrevent LeakageEnable Focus on Core StrengthsTimely Digital Data InputAnalytics for Audit</p> <p>18Ground RealityDifferent States Use Different Sets of BanksTaxpayer Mapped to Bank/BranchPayment Modes LimitedMultiple Flows for Funds and Data No Online Information of Tax Collection to DCT OfficesOnly AG gets Consolidated Collection DetailsThat too with Time Delay.DCT Office does not get in time the Challan Details of Tax Deposit at Treasuries in digital formChallan Matching with Return almost ImpossibleEven in DCT Offices the Challan Data is digitised and with Delay19The GST Solution 20GST Foundation Dual GSTDestination BasedPAN Based User Identification Number IGST Model for Inter-state SettlementCommon Portal (GSTN) for Common FunctionsGSTN should enable Functional Control and Flexibility for State and Central Tax Administration 21StatusEmpowered Committee of Finance Ministers building consensusConstitution Amendment Bill Comprehensive Goods &amp; Service Tax for Centre and State CGST &amp; SGST (intra state) CGST &amp; IGST (inter state)Some Questions yet decided upnUniform SGST rate across all states ??CGST enforcement by Centre and SGST by state</p> <p>22Status ICT Enablement ICT Enablement IT is EssentialIT Takes TimeIT work can start even with current level of policy uncertaintyDecision on Common Integrated Portal GSTNGSTN SPV under Establishment POC under implementation by NSDL</p> <p>23Scope -GSTNUniform taxpayer interfaceRegistration of userTax DepositFiling of Return Computation for IGST SettlementGeneration of Tax LedgerData Extract for StatesMIS and Data WarehouseSupport to Stake holdersFeedback to Tax PayersA Cafeteria model of IT support for states with no/ limited IT infrastructure 24Customer InterfaceUser RegistrationReturns SubmissionTax DepositRecording of Inter-State Goods Movement Service DeliveryStatus TrackCommon Integrated PortalCommon E-Tax Portal for BanksAcceptance &amp; Consolidation of Return </p> <p>Computation for Interstate SettlementInterstate Goods Movement TrackingDashboard &amp; MISBack End EnablerMatching of Input Tax CreditProcess Automation of Enforcement AgenciesAssessment AuditCompliance MonitoringAppealsPolicy AdministrationState-1State-NCBECAssessment AuditCompliance MonitoringAppealsAssessment AuditCompliance MonitoringAppealsGST The Dream Model25TAX collection &amp; Inter-State SettlementCollecting Bank BranchCollecting Bank BranchCollecting Bank BranchCollecting Bank BranchCollecting Bank BranchCollecting Bank BranchBank IBank NRBIGSTNState IState NCenter</p> <p>FundsChallan dataReconciliation DataSettlementFundChallan dataGST e-TAX PortalTaxpayerReturn 26Enforcing AgenciesTax PayerOnlineFacilitation CentreGST ReturnReturn Acceptance</p> <p>Return ConsolidationMatching EngineCommon Integrated Portal (CIP)State - IState -NCBEC</p> <p>GST Return Acceptance 27Tax Collection and Settlement Tax Collection through a common set of authorized banks for CGST, SGST and IGSTTax Deposit through single challan with SGST, CGST and IGST separately accounted.Funds routed by banks to RBI: CGST to Center A/CSGST to State A/CIGST to IGST A/CChallan Details routed by banks to Common PortalTaxpayer files return to Common PortalSales dealer wiseITC - dealer wiseTax deposit challan wise28Tax Collection and Settlement contdCommon Portal computes fund transfer from State A/C to IGST A/C and from IGST A/C to State A/C</p> <p>SGST credit against IGST Fund from State to IGST IGST credit against SGST Fund from IGST to State</p> <p>Tax Ledgers by Common PortalMain ledger for each dealerSub Ledger for each vendor of the dealer to match ITC claim by dealer against ITC reported by the vendor</p> <p>29A simple Example Out flow from StatesSimpleReturn for Dealer ACSITaxLiability100ITC fromVendor BCS60IIGSTDeposit40Sub Ledger of A for VendorBITCReported by B(R)ITC claimed by A (C)6060IGST A/CVerify if R &gt;= CTransfer from State to Center if R &gt;= CIf R= CSub Ledger of A for VendorDITCReported by B(R)ITC claimed by A (C)101031A simple Example (inflow to state)SimpleReturn for Dealer ACSITaxLiability100ITC fromVendor BCSI40SGSTDeposit60Sub Ledger of A for VendorBITCReported by B(R)ITC claimed by A (C)4040IGST A/CVerify if R &gt;= CTransfer from Center to State irrespective of match of R &amp; CIf R Total IGST credit against SGST = Net outflow from stateTotal of SGST Credit against IGST for all dealers in a state &gt; Total IGST credit against SGST = Net inflow to state</p> <p>36Inter-linkage of GSTN &amp; Central/ state SystemTax AuthorityCommon PortalDealer</p> <p>State/ Center portalCommon PortalDatabaseTax IT SystemsState DatabaseMiddleware APIsFormat CustomizationCommon FormatState/ Center Format</p> <p>Scheduled Replication/ Sync JobsGST Application</p> <p>State/ CBEC Application</p> <p>TreasuriesEDI Inter-linkages</p> <p>Network of Banks37Policy Decisions Critical for ITUser Registration Form and ProcessUser Master Migration When can user registration commenceGST Common Challan FormCommon Set of tax collecting banksPayment Process Flow for Funds and DataReturn (Frequency &amp; Form)IGST = C+S IGST SettlementBusiness RulesFrequencyScope of temporary under-writing by center for smooth IGST settlement.Input from state on adaptation / integration with GSTN38</p> <p>RiskTimeCostBestPracticesRequirementsTechnology</p> <p>SecurityA Balancing Act</p> <p>39Part of the inhumanity of the computer systems is that, once it is competently programmed and working smoothly, it is completely honest. - Isaac Asimov</p> <p>Thank YouBroader Issues in e-Governance IT is only part of the storyProcess Design should be intuitive &amp; in synch with business practicesBe patientBut you have to tweakBe ready to hold handsSometimes you need to push41Broader Issues in e-Governance Learn to judge cribsGovernment users needs special treatmentBenchmark and measurePersistence is the keyRespect DataWho owns the project</p> <p>42Tax - BasicsParameterDirect TaxIndirect TaxWhatis taxedIncomeExpenditureWhenis taxedIncomeEarnedExpenditure IncurredComplianceIncome EarnerGoods/ Service ProviderPolicyMaking &amp; Enforcement AuthorityCentre - CBDTManufacturing Centre CBECTrade State - CTDStateShareFinancial Devolution(FD)Part Self Determined Part -FD</p>