1 Roadmap to Goods & Service Tax - By CA Raghav Bajaj © Copyright Raghav Bajaj

2 2 things bound to happen in a humans life DeathTaxes Doesnt get worse every year!!! The hardest thing in the world to understand is the income tax. © Copyright Raghav Bajaj

3 Objectives of The paper GST-What & Why?? The GST modelConclusion Cascading Effect of taxes Multiple levels of taxation Treating goods & services on the same footing Ensuring that the credit chain doesnt break Reduction in inflation Rate Structure Inter State Transactions Minimal exemptions The Indian Constitution Extinction of CST © Copyright Raghav Bajaj

4 GST-What & Why?? Cascading Effect of taxes Multiple levels of taxation Treating goods & services on the same footing Ensuring that the credit chain doesnt break Reduction in inflation © Copyright Raghav Bajaj

5 Cascading Effect Centre cannot levy tax beyond point of manufacturing. Centre cannot levy tax beyond point of manufacturing. States cannot levy tax on services. States cannot levy tax on services. Unfriendly input tax credit rules. Unfriendly input tax credit rules. © Copyright Raghav Bajaj

6 Cascading Effect ( contd. ) – Illustration Rajasthan Chattisgarh Goods manufactured in Rajasthan Add: - Excise 10% Total Cost Add: - 2% on 110 (inter state sales) 2.20 Purchase price in Chattisgarh Add: - Value Added by buyer in Chattisgarh Total Cost Add :- VAT 10% on Total CST levied on excise also VAT levied on prior taxes also Goods sold © Copyright Raghav Bajaj

7 Cascading Effect ( contd. ) – Illustration Who bears the Ultimate Burden ??? Final Consumer!! No credit of excise in CST No credit of excise & CST in VAT © Copyright Raghav Bajaj

8 Harmonization & Simplification of Indirect Taxation Subsumes various central and state statues Subsumes various central and state statues Central Statues State Statues The Excise Law State VAT Additional duties of customs Entry Taxes not in lieu of Octroi The Service Tax Taxes on lottery etc. CST Entertainment taxes Purchase tax, Octroi might not be subsumed Basic Custom duties will remain outside the GST regime © Copyright Raghav Bajaj

9 Objectives of The paper GST-What & Why?? The GST modelConclusion Cascading Effect of taxes Multiple levels of taxation Treating goods & services on the same footing Ensuring that the credit chain doesnt break Reduction in inflation Rate Structure Inter State Transactions Minimal exemptions The Indian Constitution Extinction of CST © Copyright Raghav Bajaj

10 The GST model Rate Structure Inter State Transactions - IGST Minimal exemptions The Indian Constitution Extinction of CST © Copyright Raghav Bajaj

11 Rate For GST CGST – Central GSTSGST – State GST © Copyright Raghav Bajaj

12 Expected GST Rate 16%-18% © Copyright Raghav Bajaj

13 Inter state GST - IGST Central Govt. Chattisgarh Rajasthan © Copyright Raghav Bajaj

14 The GST model Rate Structure Inter State Transactions Minimal exemptions The Indian Constitution Extinction of CST © Copyright Raghav Bajaj

15 Minimal exemptions in GST More exemptions = More problems Mr.A Cotton Cloth (Dutiable) (Exempted) Mr.B Cloth Shirt (Exempted) (Dutiable) © Copyright Raghav Bajaj

16 The GST model Rate Structure Inter State Transactions Minimal exemptions The Indian Constitution Extinction of CST © Copyright Raghav Bajaj

17 Constitutional Amendment Bill (CAB) Presently, the centre can impose taxes on manufactured goods and services; While states can only tax sales of goods. At present, the States do not have the power to levy taxes on services. The CAB was tabled before the Parliament of India on 22 March 2011 by the Finance Minister of India. The CAB needs to be passed by a 2/3rd majority in both Houses of Parliament. Subsequently it needs to be ratified by at least 50% of the state legislative assemblies before it can legally amend the present provisions of the Constitution. After ratification of the CAB, the center and state assemblies will have to pass the GST legislation. © Copyright Raghav Bajaj

18 GST and the Constitution of India The amendments have 3 components: 1. Grant of new powers to the Centre and the states to levy GST, 2. Deletion of powers to levy taxes that are to be subsumed by the GST, and 3. Empowering the finance ministries to collectively determine the design of GST 18© Copyright Raghav Bajaj

19 The GST model Rate Structure Inter State Transactions Minimal exemptions The Indian Constitution Extinction of CST © Copyright Raghav Bajaj

Changes to the Finance Bill for introducing GST IT infrastructure Number of exceptions to excise duty have been reduced Negative list of services (27 services proposed under 9 broad categories) [Source: Definition of service 20© Copyright Raghav Bajaj

21 Expectations from GST Cost of production Rise in demand Competitiveness Govt. revenues © Copyright Raghav Bajaj

22 Yes to GST but when???? The introduction of a new GST has been long-awaited in India. But the burning question is what is the expected time line for its implementation? The government has expressed its intention to introduce a national-level GST by 1 April However, the implementation has been delayed in the past and this may not be a firm date. 22© Copyright Raghav Bajaj

23 Conclusion Reduction in compliance costs Reduction in inflation Opportunity for CAs Globally fruitful results © Copyright Raghav Bajaj

GST – a weapon against corruption Reduction in the cash component of the economy Heavy reliance on technology PAN based GST registration Shifting from origin to destination based taxation 24© Copyright Raghav Bajaj

25 Id Thanks!! © Copyright Raghav Bajaj