Tax Structure

Direct Tax Indirect Tax

Taxes Levied by

Central Govt.

Taxes Levied by

State Govt.Income Tax

Excise Duty

Customs

Service Tax Entry Tax, Luxury Tax etc.

VAT/CST

Existing Tax Structure in India

No change in proposed tax structure under GST

Will be replaced by GST

This law applies to persons involved in production or manufacture of excisable goods. It is an indirect tax paid by the manufacturer, who passes on its incidence to the customers.

This law applies to the person providing taxable services for a consideration excluding services covered in negative list.

This Act is applicable to every dealer who carries on the business of sale and purchase of goods within the state.

This Act is applicable to every dealer who carries on the business of sale and purchase of goods from one state to another state.

Entry Tax is levied on the entry of goods brought into the state from beyond its borders for the purpose of sale as well as consumption

A luxury tax is a tax placed on products or services that are deemed to be unnecessary or non-essential.

Luxury Tax Excise Duty Service Tax VAT CST Entry Tax

Brief write up on Existing Taxes replaced under GST

Central Excise Duty

Additional Duties of Excise

Excise Duty Levied under Medicinal and Toiletries Preparation Act

Additional Duties of Customs (CVD and SAD)

Service Tax

Surcharges and Cess

State VAT/ Sales Tax

Central Sales Tax

Purchase Tax

Entertainment Tax (not levied by local bodies)

Entry Tax , Octroi

Taxes on lottery, betting & gambling

Luxury Tax

Surcharge and Cess

Central Taxes State Taxes

Existing Laws that will get impacted under GST

Workflow under Existing Tax Structure

Steel Plant (Gujarat) Car Manufacturing Plant (Gujarat)

Import procurement (Engine)

Tyres Plant (Outside Gujarat)

Custom Port

Distributor (Gujarat) to Consumer (Gujarat)

A. Manufacturer (Gujarat) to Distributor (Gujarat)

Basic Price = 160.91

(Steel 30 + Tyres 20.45 + Imported goods 110 + ET on Tyres 0.46 )

Value Addition + Profit Margin = 30

Excise Duty @ 12.5% = 23.86

VAT @ 14% = 30.07

Total Sale Price to Distributor = 244.84

B. Manufacturer (Gujarat) to Distributor (Madhya Pradesh)

Basic Price = 160.91

Value Addition + Profit Margin = 30

Excise Duty @ 12.5% = 23.86

CST @ 2% = 4.30

Total Sale Price to Distributor = 219.07

Total Cost to Distributor = 223.45 ( 219.07+ 4.38 (ET)

Basic Price = 214.77

Value Addition + Profit Margin = 20

VAT @14% = 32.87

Total Sale Price to Consumer in Gujarat = 267.64

Assumption : Excise Duty – 12.5%, VAT – 14%, CST – 2%, Entry Tax – 2%, Basic Custom Duty – 10%, CVD – 12.5%

Particulars Consumer ( Gujarat)

Consumer(MP)

Cost of Goods 200.00 200.00

Total taxes paid by Consumer

67.64 77.53

Effective Tax rate 34% 39%

Distributor (MP) to Consumer (MP)

Basic Price = 223.45

Value Addition + Profit Margin = 20

VAT @14% = 34.08

Total Sale Price to Consumer in MP = 277.53

Cost= 30.00Excise duty@12.5 %= 3.75VAT @ 14%= 4.73 Billing amount = 38.48

Cost = 20.00Excise duty@12.5%= 2.5CST@2%= 0.45Billing amount = 22.95 Entry Tax to be paid by Car Manufacturer = 0.46

Import value = 100Basic Custom Duty = 10CVD = 13.75SAD = 4.95Total Purchase Price= 128.70

Figure in lakh

Note : Entry Tax needs to be paid directly by the Purchaser to the Government and accordingly Manufacturer in Gujarat and Distributor in MP has borne the Entry Tax.

Taxes proposed to be excluded under GST

Basic Customs Duty

Stamp Duty

Tax levied by Local bodies

Tax on Alcoholic liquor for human consumption

Tax on Tobacco products

Tax on Petroleum products

Proposed Indirect Tax Structure in India

Indirect Tax Structure

GST

Intra State (within the

same state)

Inter state (From one state

to other)

SGST(State)

IGST(Central)

CGST(Central)

GST is proposed to be levied and collected on

Supply of Goods and Services in India

Import of Goods into India

Import of Services

Intra-State Supplies (Within the same

state)

Inter-State Supplies (From one state

to another)Basic Customs Duty

(+) IGST

CGST and SGST (levied and collected on the value of supply)

IGST

CGST stands for Central Goods and Service Tax. This is levied by Central GovernmentSGST stands for State Goods and Service Tax. This is levied by State GovernmentIGST stands for Integrated Goods and Services Tax which would roughly be equal to CGST plus SGST

IGST

Taxability under GST

Note - GST will not be levied on export of goods and services because export is a zero rated supply

GST is proposed to be levied and collected on

Supply of Goods and Services in India

Import of Goods into India Import of Services

Intra-State Supplies (Within the same

state)

Inter-State Supplies (From one state to

another)

Basic Customs Duty (+) IGST

CGST and SGST (levied and collected on

the value of supply)IGST

CGST stands for Central Goods and Service Tax. This is levied by Central GovernmentSGST stands for State Goods and Service Tax. This is levied by State GovernmentIGST stands for Integrated Goods and Services Tax which would roughly be equal to CGST plus SGST

IGST

Taxability under GST

Note - GST will not be levied on export of goods and services because export is a zero rated supply

GST is a tax on goods and services with comprehensive and continuous chain of set-off benefits from the producer's point and service provider's point up to the retailer's level.

GST will have two components: one levied by the Centre (hereinafter referred to as Central GST), and the other levied by the States (hereinafter referred to as State GST). This dual GST model would be implemented through multiple statutes (one for CGST and SGST statute for every State).

The Central GST and the State GST would be levied simultaneously on all transactions of goods and services within the state except the exempted goods and services, goods which are outside the purview of GST and the transactions which are below the prescribed threshold limits.

In case of Inter-State transactions, the Centre would levy and collect the Integrated Goods and Services Tax (IGST) on all inter-State supplies of goods and services. The IGST would roughly be equal to CGST plus SGST. The IGST mechanism has been designed to ensure seamless flow of input tax credit from one State to another. Stage of Supply Chain (A)

Purchase Price (B)

Value Addition + Profit Margin (C )

Sale Price (D)

Rate ofGST (E )

GST on Purchase Price (G=B*E)

GST payable to Government (H)

Manufacturer

Whole Seller

Retailer

Consumer

100 30 130 18% 23.4 18.0 5.4 (23.4-18)

130 20 150 18% 27.0 23.4 3.6 (27.0-23.4)

150 10 160 18% 28.8 27.0 1.8 (28.8-27.0)

160 18% 28.8 28.8

Figures in Lakh

GST on Sale Price (F)

GST & Its Components

GST Rate Levied on

Manufacturer claims back GST paid on purchases of Goods/Services

Wholesaler claims back GST paid on purchases of Goods/Services

Retailer claims back GST paid on purchase of Goods/Services

Consumer will pay GST on purchase of Goods/Services

Manufacturer

Wholesaler

Retailer

Consumer

GST Mechanism

IGST IGST

IGST

IGST

CGST

CGST

CGST

SGST SGST

SGST

GST- INPUT TAX CREDIT- MANNER OF SET OFF

Particulars Current Indirect Tax System Dual GST System

Nature of Tax Origination Based Consumption based destination tax

Taxable Event Manufacture, Sale or provision of Services Supply of Goods/Services (includes stock transfers as well)

Taxes to be subsumed (Central)

Central Excise Service Tax Additional duty of Customs

Central GST

Taxes to be subsumed (State)

VAT Central Sales Tax (CST) Purchase Tax, Entertainment Tax, Luxury Tax, Lottery Tax, Entry

Tax/ Octroi

State GST

Taxes to apply on Import of Goods

Basic Custom Duty Additional duty of Customs Special Additional duty of Customs

Integrated GST Basic Customs Duty

Taxes to apply on Export of Goods

Basic Custom Duty Additional duty of Customs Special Additional duty of Customs

Zero rated supply

Intra-State Supply of Goods/Services

Excise Duty (on Manufacture of goods) State VAT on sale on goods Service Tax (on supply of services)

Central GST State GST

Inter-State Supply of Goods/Services

Excise Duty (on Manufacture of goods) CST on sale of goods Service Tax (on supply of services)

Integrated GST

Inter-State Stock Transfer of Goods

Excise Duty (on Manufacture of goods) No State VAT/ CST on Stock transfer

Integrated GST

Snapshot of Present tax structure Vs Proposed tax structure under GST

Passage of Constitutional Amendment bill from Parliament

Ratification by more than 50% states

Presidential Assent of Constitution Amendment and notification in official gazette

Cabinet Approval for Formation of GST Council

RECENT PROGRESS Recommendation of

model GST laws by GST council

Cabinet Approval for CGST and IGST laws by the Centre and SGST laws by All States

Passage of CGST and IGST laws in the Centre and SGST laws in all states

Notification of GST Rules

Preparation of IT infrastructure

WAY FORWARD

GST implementation

potentially by April, 2017

Recent Progress on GST and Way Forward

ParticularsPRESENT TAX REGIME GST REGIME

Basic Price (includes Excise Duty, CST, Entry Tax)

Value Addition + Profit Margin

Excise Duty (ED) Total VAT/CST/

Entry Tax Total Billing Basic Price Value Addition + Profit Margin GST Total Billing

Manufacturer (Gujarat) to Wholeseller (Gujarat) 30.00 30.00 7.50 67.50 9.45 76.95 30.00 30.00 10.80 70.80

Wholeseller (Gujarat) to Retailer (Madhya Pradesh)

67.50 (includes 7.50 Excise Duty ) 20.00 - 87.50 1.75 89.25 60.00 20.00 14.40 94.40

Retailer (Madhya Pradesh) to Customer (Madhya Pradesh)

91.04 (includes 1.75 CST, 1.79 Entry Tax) 2.00 - 93.04 13.02 106.06 80.00 2.00 14.76 96.76

Total Price paid by Consumer 106.06 96.76Cost of Goods 82.00 82.00

Total taxes paid by Consumer 24.06 14.76

Effective Tax rate (in %) 29% 18%

Particulars Type of transaction Present Regime GST regime

Excise duty paid by Whole seller to Manufacturer

Within the same state 7.50 -

CST paid by Retailer to Wholeseller From one state to another 1.75 -

Entry Tax paid by Retailer directly to Govt. From one state to another 1.79 -

VAT paid by Consumer Within the same state 13.02 -

GST paid by Consumer Irrespective of same state or from one state to another 14.76TOTAL 24.06 14.76

Assumptions for rate of tax:Excise Duty – 12.50%VAT – 14%CST – 2%Entry Tax – 2%GST – 18%

Note - GST includes both Central GST and State GST. IGST (Inter State GST) will be levied in case of sale of goods from Gujarat to Madhya Pradesh for which input GST (CGST & SGST) paid on purchase of goods can be taken.

Impact on Consumer of Goods (Present tax regime Vs GST)

Detailed break up of Taxes paid by Consumer

Figure in Lakh

For Existing Taxpayers

Do all Assessees/dealers who are already registered under existing central excise/service tax/VAT laws will have to obtain fresh registration?

No, every person registered under any of the

earlier laws shall be issued a certificate of registration on a provisional basis in such

form and manner as may be prescribed.

The certificate of registration shall be valid for

a period of six months from the date of its issue: provided that the said validity period may be extended for such further period as the Central/State Government may, on the recommendation of the Council, notify.

Every person to whom a certificate of registration has been issued shall furnish

such information as may be prescribed with the specified period

The service tax assessee having centralized registration will have to apply afresh in the respective states wherever they have their businesses.

Particulars Provision

Turnover based Registration Every supplier shall be liable to be registered under this Act in the State from where he makes a taxable supply of goods and/or services if his aggregate turnover in a financial year exceeds Rs.9 lakh. (Rs.4 lakh for North Eastern states including Sikkim)

Mandatory Registration irrespective of the Turnover

The categories of persons who will be required to be registered under this Act mandatorily irrespective of the Turnover includes:o Persons making any inter-state taxable supplyo Casual taxable personso Persons who are required to pay tax under Reverse Chargeo Non-resident taxable personso Input service distributor

Time limit for Registration Within 30 days from the date on which he became liable for registration

Registration Process Single application to be filed online for registration under Goods & Services Tax (GST)

The registration number will be PAN based and will serve the purpose for Centre and State

Each dealer to be given unique id GSTIN Registration to be granted within 3 days

For New Taxpayers

Registration under GST

Every registered dealer is required to file return for the prescribed tax period

Fling of Returns through Online mode only

Common e-return for SGST, CGST and IGST

There would be no revision of Returns. Changes to be done in subsequent Returns only

Eight different types of Returns are prescribed viz. GSTR 1 to GSTR 8;

Requirement for Filing Return

Features of GST Return

Types of GST ReturnsType of GST Return For To be filed by

GSTR-1 Outward supplies made by taxpayer (other than compounding taxpayer and ISD) 10th of the next month

GSTR-2 Inward supplies received by a taxpayer (other than a compounding taxpayer and ISD)

15th of the next month

GSTR-3 Monthly return (other than compounding taxpayer and ISD) 20th of the next month

GSTR-4 Quarterly return for Compounding Taxpayer 18th of the month next to quarterGSTR-5 Periodic return by Non-Resident Foreign Taxpayer 20th of the next month & within 7 days

after expiry of registrationGSTR-6 Return for Input Service Distributor (ISD) 15th of the next monthGSTR-7 Return for Tax Deducted at Source 10th of the next monthGSTR-8 Annual Return By 31st December of next Financial Year

Returns under GST

A separate reconciliation statement, duly certified by a Chartered Accountant, will have to be filed by those taxpayers required to get their accounts audited under section 44AB of Income Tax Act 1961.

For Business and Industry

Easy Compliance, Uniformity of tax rates and structure,

Removal of cascading effect, Improved competitiveness due to reduction in transaction cost

For Central and State Governments

Simple and easy to administer, Better controls on

leakage, Higher revenue efficiency

For the Consumer

Single and transparent tax proportionate to the value

of goods and services, Relief in overall tax

burden

Overall for the whole economy

Transparent and better compliance, Reduce

corruption, Unorganized sector will come under tax

regime, GST will boost “Make in India” program.

Advantages of GST to Various Stakeholders

Major Challenges under GST

Calculation of Revenue Base of Centre and States, along

with compensation requirements of Centre

GST Rates structure List of Exemptions

Forming of consensus on Model GST Bill Threshold limits Implementation

of GST Network

Extensive training to tax administration

staff

Key Term DefinitionAggregate Turnover

“aggregate turnover” means the aggregate value of all taxable and non-taxable supplies, exempt supplies and exports of goods and/or services of a person having the same PAN, to be computed on all India basis and excludes taxes, if any, charged under the CGST Act, SGST Act and the IGST Act, as the case may be. However, it does not include the value of supplies on which tax is levied on reverse charge basis and the value of inward supplies

Casual taxable person

“casual taxable person” means a person who occasionally undertakes transactions involving supply of goods and/or services in the course or furtherance of business whether as principal, agent or in any other capacity, in a taxable territory where he has no fixed place of business

Input Service Distributor

"Input Service Distributor" means an office of the supplier of goods and / or services which receives tax invoices towards receipt of input services and issues tax invoice or such other document as prescribed for the purposes of distributing the credit of CGST (SGST in State Acts) and / or IGST paid on the said services to a supplier of taxable goods and / or services having same PAN as that of the office referred to above

Non-resident taxable person

“non-resident taxable person” means a taxable person who occasionally undertakes transactions involving supply of goods and/or services whether as principal or agent or in any other capacity but who has no fixed place of business in India.

Revenue Neutral Rate

It is the tax rate that allows the government to receive the same amount of money despite of changes in tax laws. In the GST regime the revenue of the government would not be same in comparison with the present tax structure due to tax credit mechanism, removal of cascading effect, or otherwise. Therefore an adjusted rate is required to avoid reduction in revenue of government. This adjusted rate is termed as Revenue Neutral Rate. It is the rate at which tax revenue will remain same despite allowing input tax credit and other factor.

Supplier “supplier” in relation to any goods and/or services shall mean the person supplying the said goods and/or services and shall include an agent acting as such on behalf of such supplier in relation to the goods and/or services supplied

Key Terms and Definitions under GST

Key Term DefinitionZero-rated supply

“zero-rated supply” means a supply of any goods and/or services on which no tax is payable but credit of the input tax related to that supply is admissible

Supply Supply includes(a) all forms of supply of goods and/or services such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business,(b) importation of service, whether or not for a consideration and whether or not in the course or furtherance of business, and(c) a supply specified in Schedule I, made or agreed to be made without a consideration.(2) Schedule II, in respect of matters mentioned therein, shall apply for determining what is, or is to be treated as a supply of goods or a supply of services.(2A) Where a person acting as an agent who, for an agreed commission or brokerage, either supplies or receives any goods and/or services on behalf of any principal, the transaction between such principal and agent shall be deemed to be a supply.(3) Subject to sub-section (2), the Central or a State Government may, upon recommendation of the Council, specify, by notification, the transactions that are to be treated as—(i) a supply of goods and not as a supply of services; or(ii) a supply of services and not as a supply of goods; or(iii) neither a supply of goods nor a supply of services.(4) Notwithstanding anything contained in sub-section (1), the supply of any branded service by an aggregator, as defined in section 43B, under a brand name or trade name owned by him shall be deemed to be a supply of the said service by the said aggregator

Reverse charge “reverse charge’’, means the liability to pay tax by the person receiving goods and / or services instead of the person supplying the goods and / or services in respect of such categories of supplies as the Central or a State Government may, on the recommendation of the Council, by notification, specify

Key Terms and Definitions under GST

RESULT : B stops purchasing from A and look for more compliant vendor

Particulars Percentage

Complied within Due Date

66%

Not Complied within Due Date

20%

Compliances Not Yet Due 14%

A B Sold goods for Rs.100 , Charged GST @18% i.e. Rs.18

A does not file his returnwithin due date

B files return and claims credit Rs18.

B is not allowed credit of Rs18..Loss to B

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