GOODS AND SERVICE TAX (INDIA) B ASICS AND R ECOMMENDATION OF J OINT C OMMITTEE ON B USINESS P ROCESS OF GST 1 CA Jayesh Rawal Mob:

W HAT IS GST? G=GOODS S=SERVICE T=TAX It is a Tax-on Goods and services and it is proposed to be a comprehensive indirect tax levy on manufacture, sale and consumption of goods as well as services at the national level 2

O BJECTIVE OF GST To consolidates all indirect tax levies into a single tax Replacing multiple tax levies Overcoming the limitations of existing indirect tax structure To creating efficiencies in the administration 3

FETURES OF GST This tax will be collected on value-added goods and services at each stage of sale or purchase in this supply chain. The system allows the set-off GST paid in the procurement of goods and services against the GST which is payable on the supply of goods or services. 4

D EFINITION OF GST The term 'GST' is defined in article 366 (12A) of the Constitution of India to mean “any tax on supply of goods or services or both except taxes on supply of the alcoholic liquor for human consumption”. Article 366 (26A) of the Constitution of India provides that “services means anything other than goods”. Therefore, all services will be covered under the scope of GST unless “negative list of services” are separately notified 5

C OMPONENTS OF GST CGST - Charged on Local Sales Central Goods and Service Tax. Input Credit of CGST can be taken only against CGST. SGST – Charged on Local Sales Sate Goods and Service Tax. Input Credit of SGST can be taken only against SGST. IGST – Charged on Interstate Sales Integrated Goods and Service Tax. Input Credit of IGST can be taken against both SGST and CGST. 6

CGST WILL REPLACE FOLLOWING CENTRAL TAXES Central Excise duty Duties of Excise (medicinal and Toilet preparations ) Additional Duties of Excise (Goods of Special Importance ) Additional Duties of excise (textiles and textile Products) Additional Duties of Customs (commonly known as CVD) Special Additional Duty of Customs (SAD) Service Tax Cesses and surcharges insofar as far as they relate to supply of goods or services. 7

SGST WILL REPLACE FOLLOWING STATE TAXES State VAT Central Sales Tax Purchase Tax Luxury Tax Entry Tax (All Forms) Entertainment Tax -not levied by the local bodies Taxes on advertisements Taxes on lotteries, betting and gambling State cesses and surcharges insofar as far as they relate to supply of goods or services 8

W HY THE D UAL GST MODEL ? Types of GST model Single (Central) GST model Single (State) GST model Dual GST model 9

S INGLE ( CENTRAL ) GST MODEL Centre levies and collects the GST for both Centre and the States. Then distributes the share of the individual States in accordance with its consumption pattern determined on the basis of prior survey. In the country like Australia, New Zealand, Germany, there is Single (Central) GST model 10

S INGLE (S TATE ) GST MODEL The situation is reverse of that in the Single (Central) GST model. The individual States collect GST for both Centre and their respective States, and then pass on the Centre's share to the Centre. Very few countries have adopted this model In the Quebec Province of Canada the Single (State) GST model is applicable 11

D UAL GST MODEL Both Centre and the States levy and collect their share of GST concurrently and simultaneously in their separate streams of Central GST (CGST) and States GST (SGST) The GST with respect to interstate movement of goods and services is the most critical part of this model After considering twelve models for this purpose, INDIA has decided to adopt the Integrated GST (IGST) model 12

THE I NTEGRATED GST (IGST) MODEL The IGST comprises of CGST and SGST will be levied and collected by the Centre. The Centre will retain the CGST share. Despatches the SGST shares to the respective destination States. The entire mechanism will be computerised. 13

Q UESTION WAS “W HY THE D UAL GST MODEL ?” The absence of complications involved in determining the GST share of the destination States with respect to interstate movement of Goods and Services, the Central GST model would have been the easiest option. But given the federal structure of our Constitution and fiscal autonomy for the States enshrined in it, India could not have opted for this model. On the other hand, the Indian constitution gives supremacy to Centre over the States in three important areas i.e. Defence, External Affairs and Finance. Therefore, the Centre cannot be made to outsource the collection of centre's portion of GST to the States. Thus, the best option for India was to adopt the Dual GST model. 14

THANKS AND REGARDS CA J AYESH R AWAL M OB : E MAIL : GMAIL. COM 15