GST – The Framework NIRC of ICAI August 22, 2016 Discussion by: CA Gaurav Gupta FCA, LLB, DISA Author – GST – Law & Practise - Service Tax – Law & Practise

Our Revenue Practical Aspects of GST Gaurav Gupta 2CA Gaurav Gupta (RE) (Rs. in Crores) (BE) (Rs. in Crores) Corporation Tax Taxes on income Customs Excise Service Tax State Taxes ( ) ( ) Note: State Taxes include all levies by state Source: Union Budget for Central Levies and RBI for State Tax Revenue

GST – The Origin

Practical Aspects of GST Gaurav Gupta GST Announcement First Discussion Paper 2011 – First Amendment Bill Second Amendment Bill May Bill Passed by Loksabha Aug 2015 – Select Committee Report August 2016 – Bill passed by Rajya Sabha GST Consitutional Amendment Bill passed by Assan, Bihar and Jharkhand CA Gaurav Gupta 4

The Stakeholders Practical Aspects of GST Gaurav Gupta 5 GST Central Government State Government GST Council GSTNCommitees CA Gaurav Gupta 5

The Committees Practical Aspects of GST Gaurav Gupta 6 Committee on the Problem of Dual Control, Threshold and Exemptions in GST Regime Committee on Revenue Neutral Rates for State GST & Central GST and Place of Supply Rules (A Sub-Committee has been constituted to examine issues relating to the Place of Supply Rules) Committee on IGST & GST on Imports (A Sub- Committee has been set up to examine issues pertaining to IGST model Committee to draft model GST Law (Three Sub-Committees have been constituted to draft various aspects of the model law Committee to examine Business Processes under GST Regime (Three Sub-Committees have been constituted to examine issues pertaining to Registration & Returns, Refunds and Payments) CA Gaurav Gupta 6

GST – Need?

Current Indirect Tax Regime in India Practical Aspects of GST Gaurav Gupta 8 Indirect Tax Levies in India Central Levy Service Tax Provision of Service Rate – 15% Customs Duty +CVD +BCD Imports 10% (varies) Excise Duty + Excise duty on Medicinal Manufactu re 12.5% (varies) Central Sales Tax Inter state Sale of Goods 5%/12.5% (varies) State Levy Sales Tax / VAT Intra State Sale of Goods 5%/12.5% (varies) Entertainm ent Tax / Luxury Tax Entertain ment / Luxuries 10%-50% (varies) Entry Tax Entry of goods in state Generally around 5%. (varies) Taxes on Betting/ Gambling Betting / Gambling Varies CA Gaurav Gupta 8

Current Indirect Tax Regime in India Rohtak Delhi Excise + CST Panipat Excise + VAT Manufacturer Intra state Sale Inter state Sale Rohtak No taxes Paris Exports London BCD + CVD + SAD Delhi Imports CA Gaurav Gupta 9

Current Indirect Tax Regime in India Rohtak Delhi CST Panipat VAT Trader Intra state Sale Inter state Sale Rohtak No taxes Paris Exports London BCD+CVD+SAD Delhi Imports CA Gaurav Gupta 10

Current Indirect Tax Regime in India Rohtak Delhi Service Tax Panipat Service Tax Services Intra state Sale Inter state Sale Rohtak No taxes Paris Exports London Service Tax – reverse charge Delhi Imports CA Gaurav Gupta 11

Need for GST Problems in the present structure: Complex Cascading effects of taxes Multiple tax rates Multiple Compliances GST – an answer to present problems: “It should establish a tax system that is economically efficient and neutral in its application, distributionally attractive and simple to administer.” - Working Paper No.1/2009 – DEA on GST Reforms and Intergovernmental Considerations in India Practical Aspects of GST Gaurav Gupta 12CA Gaurav Gupta 12

Features of GST Features of proposed Model: Destination based taxation Dual Administration Consolidation of taxes State wise determination of taxable person – no more centralized registration Seamless credit amongst goods and services Practical Aspects of GST Gaurav Gupta 13CA Gaurav Gupta 13

GST – The Framework Excise duty on Medicinal and Toiletries Preparation Central Levies Central Excise Duty Central Sales Tax Service Tax Tax on lottery, betting and Gambling State Levies Entertainment Tax State VAT/ Purchase tax Entry Tax Luxury Tax Practical Aspects of GST Gaurav Gupta 14 Additional duty of Excise on Textile and Textile Products CVD and SAD (on import of goods) Cesses and surcharges insofar as far as they relate to supply of goods or services State cesses and surcharges insofar as far as they relate to supply of goods or services Taxes on Advertisement CA Gaurav Gupta 14 CGST SGST

GST – The Framework Practical Aspects of GST Gaurav Gupta 15CA Gaurav Gupta 15 CGST SGSTIGST 1 Act Acts1 Act

GST – The Framework Practical Aspects of GST Gaurav Gupta 16CA Gaurav Gupta 16 GST ModelCountries following Independent VAT in Centre and State Brazil, Argentina, Russia VAT levied and administered at Centre Australia, Germany, Austria, Switzerland, etc. Dual VATCanada and India today

Proposed Indirect Tax Regime in India Rohtak Delhi IGST Panipat CGST + SGST Supply of Goods/ Services Intra state Sale Inter state Sale Rohtak No taxes Paris Exports CA Gaurav Gupta 17

Proposed Indirect Tax Regime in India Paris London IGST Delhi Panipat BCD + IGST Import of Goods/ Services Goods Services CA Gaurav Gupta 18

122 nd Constitutional Amendment

Constitutional amendments proposed by 122 nd Bill Article 246A Concurrent jurisdiction for levy of GST by the Centre and the States Parliament has exclusive power to make laws with respect to goods and services tax where the supply takes place in the course of inter-State trade or commerce Article 269A Authority for Centre to levy & collection of IGST on supplies in the course of inter-State trade or commerce including imports Import of goods or provision of services from outside India will be treated as Inter-State supplies ‘Place of supply’ of goods & services to be determined as per Rules formulated by Centre Article 366(12A) GST defined as any tax on supply of goods or services or both other than on alcohol for human consumption Practical Aspects of GST Gaurav Gupta 20CA Gaurav Gupta 20

GST Council Practical Aspects of GST Gaurav Gupta 21 1.Constituted under Constitution by President of India under Article 279A 2.The GST Council shall consist of the following members: i.The Union Finance Minister:- Chairperson; ii.The Union Minister of State in charge of Revenue or Finance – Member iii.The Minister in charge of Finance or Taxation or any other Minister nominated by each State Government Members. 3.Quorum – 50% of total members 4.Every decision of the GST Council shall be taken at a meeting, by a majority of not less than three-fourths of the weighted votes of the members present and voting, in accordance with the following principles, namely: Central Government Vote - shall have a weightage of 1/3, and All the State Governments - weightage of 2/3 of the total votes cast CA Gaurav Gupta 21

GST Council Practical Aspects of GST Gaurav Gupta 22 The GST Council shall make recommendations to the Union and the States on— The taxes, cesses and surcharges levied by the Union, the States and the local bodies which may be subsumed in the GS Tax The goods and services that may be subjected to, or exempted from the goods and services tax; Model Goods and Services Tax Laws, principles of levy, apportionment of IGST and the principles that govern the place of supply; The threshold limit of turnover below which goods and services may be exempted from goods and services tax; The rates including floor rates with bands of goods and services tax; Any special rate or rates for a specified period, to raise additional resources during any natural calamity or disaster; Special provision with respect to the States of Arunachal Pradesh, Assam, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand; Any other matter relating to the goods and services tax, as the Council may decide. CA Gaurav Gupta 22

Proposed GST Framework

GST - Levy Who shall pay On what GST shall be paid When GST shall be paid Where shall GST be paid To whom shall it be paid How to Pay Taxable Person – Sch III Supply of Goods and services – Section 7 Point of Supply Place of Supply Respective Government Practical Aspects of GST Gaurav Gupta 24 Cash / Credit CA Gaurav Gupta 24

Country Rate of VAT/GST Australia10% Canada 5% Goods and Services Tax, plus Provincial Sales Tax China17% France19.60% Germany19% Hong Kong0% Russia18% Singapore7% GST United Kingdom15% United States No national VAT / GST. State tax vary from 5 – 10.25% Rate of VAT / GST around the world at present, some of which are enumerated as under: GST Rates General Rate– 18% Low rate – 8-10% Luxury Goods – 40% Exemption Precious Metal – 2- 4% India

Input SGST Input CGST Input IGST Output SGST Output CGST Output IGST Payment by Credit CA Gaurav Gupta 26

Registration under Taxes CA Gaurav Gupta 27 Government 2 States + UTs Business Verticals N Number of Registrations CA Gaurav Gupta 27

Features of Registration Process PAN based Registration: PAN will be mandatory Unified application to both tax authorities To be filed within 30 days State-wise registration for entities having presence in more than one State; Need not apply separately for each State Deemed approval within three days Within a PAN, separate registration for separate business verticals within a State possible Practical Aspects of GST Gaurav Gupta 28 GSTIN - Features XXXXXXXXXXXXXX State Code PAN Business Vertical X BlankChecksum CA Gaurav Gupta 28

GST - Interface Draft Model GST Law CA Gaurav Gupta 29 Taxable Person 1 GSTN Taxable Person 2 Central Government State Government Features: IT based compliances Dual review Real time updates Lesser interaction with authorities CA Gaurav Gupta 29

GST - Interface Draft Model GST Law CA Gaurav Gupta 30 Taxable Person 1 GSTN Taxable Person 2 Central Government State Government Services provided Registration Payment of tax Return Refunds CA Gaurav Gupta 30

Disclaimer This presentation has been prepared for internal use of ICAI and its members. The contents of this document are solely for informational purpose. It does not constitute professional advice or a formal recommendation. The presentation is made with utmost professional caution but in no manner guarantees the content for use by any person. It is suggested to go through original statute / notification / circular / pronouncements before relying on the matter given. The presentation is meant for general guidance and no responsibility for loss arising to any person acting or refraining from acting as a result of any material contained in this presentation will be accepted by us. Professional advice recommended to be sought before any action or refrainment. Thank you CA Gaurav Gupta Partner MGS & Co. LD- 65, Pitampura, Delhi – , DLF City Court, Gurgaon