Highlights Of Model Goods And Service Tax Law GST PRESENTED BY CMA S.K.Bhatt-CHAIRMAN NIRC of ICAI-CMA, New-Delhi Telefax : , Web Site : skbhatt.com WELCOME DELEGATES

Introduction It would mitigate cascading or double Taxation in major way & pave the way for common national market. For customer point of view, the biggest advantage is reduction is overall burden on goods, which is currently estimated at 25%-30%. GST will make Indian products competitive in the domestic & international markets. Studies show that this would instantly super economic growth. Being transparent in character, would be easier to administer.

P. Chimdabran in his budget , to be introduced in April The Empowered Committee of state FMs was created to See- - Exemptions & threshold - Taxation of Services -Taxation of inter State Supplies EC released first discussion paper (FDP) on the GST in Nov It tells features of the proposed GST and has formed the Basis of discussion between Centre & States so far.

Salient Features of GST GST would be applicable on supply of goods or services as against the present concept of tax on the manufacture of goods or on sale of goods or on provision of services. GST would be a destination based tax as against the present concept of origin based tax. It would be a dual GST with the Centre and the States simultaneously levying it on a common base. The GST to be levied by the Centre would be called Central GST (CGST) and that to be levied by the States would be called State GST (SGST). An Integrated GST (IGST) would be levied on inter-State supply (including stock transfers) of goods or services. This would be collected by the Centre so that the credit chain is not disrupted. Import of goods or services would be treated as inter-State supplies and would be subject to IGST in addition to the applicable customs duties.

Taxes currently levied and collected by the Centre Taxes currently levied and collected by the Centre Taxes currently levied and collected by the States Taxes currently levied and collected by the States Central Excise duty Duties of Excise (Medicinal and Toilet Preparations) Service Tax Additional Duties of Customs (commonly known as CVD) Additional Duties of Excise (Goods of Special Importance) Special Additional Duty of Customs (SAD) Additional Duties of Excise (Textiles and Textile Products) State VAT Luxury Tax Purchase Tax Central Sales Tax Taxes on lotteries, betting and gambling Taxes on advertisements Entertainment Tax (not levied by the local bodies) Entry Tax (All forms)

GST not applicable on Alcohol for human consumption, Electricity & Real Estate. GST on petroleum products is applicable for the date as recommended by GSTC ( Goods & Service Tax Council). For an initial period of 2 years or as further extended on the recommendation of GSTC, a not Vatable addl. Tax not exceeding 1% on inter state supply of goods would be levied & collected by the centre and assigned to the original state. This is applicable when Supply is made for consideration. Integrated GST ( IGST ) would be levied on inter state supply ( Including Stock transfers ) of goods or services.it would be collected by the centre so that credit chain is not disturbed. Tobacco & tobacco products would be subject to GST. In addition to that Centre would continue to levy central excise duty.

A common threshold Exemption would apply to both CGST & SGST. Taxpayer below it would be exempt from GST. A compounding option ( to pay tax flat rate without credits) would be available to small taxpayers below a certain threshold. Export would be Zero rated Input Tax Credit ( ITC ) ITC on CGST allowed for payment of CGST ITC on SGST allowed for Payment of SGST ITC On CGST allowed for CGST & IGST in that order ITC on SGST allowed for SGST & IGST in that order ITC on IGST allowed for IGST, CGST & SGST ITC on additional tax not allowed

Constitution (One Hundred and Twenty Second) Amendment Bill, 2014 To address all these issues, the Constitution 115 th amendment bill was introduced in Lok Sabha in March 2011.The bill lapsed with the dissolution of 15 th Lok Sabha. The constitution (122nd amendment ) bill had been introduced is 16 th Lok Sabha on The bill provide for levy of CGST, SGST and IGST an inter state sale trade or commerce (including imports) in Goods or services. The Central Govt. Shall have power to levy excise duty in addition to GST on tobacco and tobacco products. The Constitution amendment bill needs to be passed by parliament and subsequent satisfaction by at least half o the sate legislatures. The bill is passed by lok sabha on The bill was referred to the select committee has submitted its report on The bill awaits passage in Rajya Sabha.

Other Legislative Requirements A Goods and Service tax council (CGST) would be constituted comprising of union finance ministers. The ministers of state (Revenue)and the state finance Ministers to recommend on GST rate exemptions and thresholds, taxes to be subsumed and other feature. Quorum would be ½ of the total number of members. Decision in GSTC would be taken by a majority of not less than three-fourth of weighted vote cast. Centre would have one – third weighted of the total votes cast and all states taken together would have two-third of weight age of total votes cast.

After passage of bill in both house in parliament, ratification by state legislatures and receipt of assent by the President, the process of enactment would be complete. GSTC, Goods and services tax network is a act company constituted of 25 of the Govt. They appointed m/s Infosys as managed service provider at a total project cost of 1380 as for a period cost of 5 years.

Demands of Parties GST would be fully in electronic mode which would cause problems to small units. –AAP party Presently VAT cap in Delhi is Rs.20 lac By GST it would be Rs.10 lac only. Which will affect the business units – AAP party. GST rate should be capped at 18 % a proposed state levy scrapped and an independent mechanism to resolve and dispute on revenue sharing between states. No where in the world, the GST rate is mentioned is constitution. The FM says that current percent growth as “Impressive compared to the global growth and that can do much better. The max. Potential to growth in terms of sector is agriculture. We can do much better in manufacturing if we develop an expertise for low cost manufacturing considering the wage bill in china is going up.

Following demands of the States accepted:- To keep petroleum out of GST. To keep Alcohol out of GST. Constitutional Guarantee to compensate states. The bonus –The power to states of Levying additional 1% tax levy, for maximum 2 years, to help augment state revenues. To go back to manufacturing states on 1 % additional Tax.

Tax rate & Reforms. The Subramanian report has recommended a lower rate of 12%, a standard rate of 17-18% and a ‘sin tax’ of 40% for the demerit items like aerated drinks, Luxury car, tobacco…ect. The standard rate to apply to most goods & services. More than 140 countries have implemented GST. There are two reasons for the introduction of GST- 1- States currently tax sale of Goods & not Services. Centre Currently tax manufacture of goods & Services and inter state sale.

Benefits of GST GST Taxes only the final consumer. Hence, avoid cascading of taxes, thereby cutting production costs and making exports more competitive. According to FM it will add 2% to GDP. GST will convert the country to unified market, replacing most indirect taxes with one tax. Simplification of tax region, broadening of tax base, elimination of tax cascades, enhancing export competitiveness, ensuring in transparency.

Benefits of GST GST will replace the multiple layers of complex taxation in India. The procedure for GST registration would be centralizes & simplified similar to Service Tax registrations. No separate VAT registrations. It will create India m a single market. A seamless flow of credit is available through out the country. Hence evasion is minimised. Statutory forms like C form, F form shall be eliminated. Composite Contracts ( Goods +Service ) would become simpler.

Benefits of GST Being Destination based tax as against concept of origin based tax, tax is imposed at the point of consumption. Reduction of tax evasion.

Disadvantage of GST Taxes on services would go up from 15% ti 18%. Tax on retail would be almost double. Imported goods would be taxed at higher rate by around 6%. Double control on every business i.e central and State Govt. All credit will be available on from online connectivity with GST Network. Hence small businesses. May find it difficult to use the system.Service sector – They have to register in each state with Central & State Govt. So every business at all India level will have around 60 registrations while they are having just one today.

Disadvantage of GST Dual control can give harassment to business. Any supply ( Stock transfer, Job work) would be taxable (Although fully creditable) leading to cash flow being blocked. Input credit is subject to matching of invoice. A number of exemptions would be removed. NSDL- 15 digit common identification number which will be called GSTIN ( Goods & Service Tax Identification Number)

THANK YOU FOR YOUR TIME CMA S.K.BHATT CHAIRMAN NIRC OF ICAI-CMA Web: skbhatt.com