Impact of GST on various sectors and TRANSITIONAL PROVISIONS

Impact of GST on various sectors and TRANSITIONAL PROVISIONS
April 29,2017

GST GST for Industry Greatly Simplified Transaction Tax
GST for Legislature Goods & Services Tax GST for Common Man Go & Simply Tolerate Tax

Why GST? Multiplicity of taxes Narrow tax base
Higher cost of compliance Lack of credit mechanism across Central and State levies Distorted market Persisting litigation due to differential tax treatment for goods and services – litigation on intangibles

SUPPLY (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; (b) import of services for a consideration whether or not in the course or furtherance of business (c) the activities specified in Schedule I, made or agreed to be made without a consideration - inter alia covers supply of goods or services between related persons or distinct persons, when made in the course or furtherance of business (d) the activities to be treated as supply of goods or supply of services as referred to in Schedule II - Construction of a complex, building, civil structure or a part thereof and Works contract to be treated as ‘Supply of Services’ DEFINITION OF SUPPLY

Impact on TRADER

Procurement of Services
Impact of GST– Trader Procurement of goods Intra-State Goods/ Services VAT CGST Intra-State SGST C Excise CGST Inter-State Goods/ Services VAT SGST CST IGST Inter-State Exports of Goods/ Services TRADER C Excise IGST Zero Rated Zero Rated CST Stock transfer No tax (VAT Retention) IGST Import Procurement of Services BCD BCD CVD Intra-State Inter-State Import IGST SAD S Tax CGST S Tax IGST S Tax IGST Cess SBC/KKC SGST SBC/KKC SBC/KKC

SNAPSHOT OF CURRENT REGIME VS. GST REGIME
- VAT is creditable - Credit of Service Tax and Excise Duty not available - Excise credits passed on under ‘dealer invoice’ - Inter-state and intra-state sales not at par as CST is a cost - Reversal of credit in case of stock transfer GST REGIME - No blockage of credits - Service Tax, Excise and VAT subsumed under GST - No need for issuance of dealer invoice to pass on credits - no difference between intra-state and inter-state supplies as CST is abolished - Inter-state stock transfer to attract IGST MANUFACTURERS AND TRADERS TO BE TREATED AT PAR INTRA-STATE, INTER-STATE AND IMPORT (EXCEPT FOR BCD) WILL BE TAX NEUTRAL

KEY ASPECTS Multiple sale/ purchase of the same goods will not have tax disadvantage Concept/ model of in-transit sale (E-1 Sales) will not continue under GST as each leg of supply will be liable to GST Concept/ model of High Sea Sales will be relevant only for the purpose of claiming exemption from BCD (user based exemption)

Impact on MANUFACTURER

IMPACT OF GST – MANUFACTURER
Procurement of goods Intra-State Goods C Excise CGST Intra-State VAT SGST C Excise CGST VAT SGST Inter-State Goods CST IGST Inter-State C Excise IGST Exports of Goods CST Zero Rated Zero Rated Stock transfer Import Procurement of Services No tax (VAT Retention) IGST BCD BCD CVD Intra-State Inter-State Import IGST SAD S Tax CGST S Tax S Tax Cess IGST IGST SBC/KKC SGST SBC/KKC SBC/KKC

NO MRP BASED VALUATION No provision / mechanism for MRP based assessment under model GST law The assessable value of the products will be the transaction value If valuation not as per transaction value – Assessable value to be computed as per the method prescribed under GST Valuation Rules Need to re-work the price considering the change in taxation laws and the credits that would be available across distribution channel

VALUATION OF GOODS SOLD THROUGH DEALERS
PRESENT REGIME Dealers pays following taxes on procurement Excise duty 12.5% - Cost VAT – 12.5% CST -2%- Cost Value of the goods increases GST REGIME Dealer would pay CGST / SGST / IGST on the procurement Available as Input tax Credit Prices of the goods can be reduced as there will not be any cascading effect of duties

NEED TO RELOOK INTO LOGISTICS
GST REGIME Commercial and logistics convenience to decide need for depots rather than tax costs Interstate supply to depot or customer may not attract different tax treatment PRESENT REGIME Tax costs plays role in determining need for depots 2% (non creditable) on inter State sale ITC burnout in case of stock transfer

Impact on real estate

SNAPSHOT CURRENT REGIME VS. GST REGIME
DEVELOPER Sale of Residential / Commercial Complex Activity Leasing of Residential / Commercial Complex VAT – 1% Service tax - 4.5% (Credit of VAT and ED not available) Current Regime Service tax - 15% (Credit of VAT and ED not available) GST on Sale Price less – Value of Land (Credit of GST on material used for construction available) GST Regime GST on supply value (Credit of GST on material used for construction not available)

KEY CONCERNS Deduction of land from assessable value – Reckoner Price or Fixed Percentage Applicable Rate of Tax - 5% / 12% / 18% Stamp duty shall continue in GST Clarity awaited on special scheme for Low Housing Projects Transitional provisions for ‘under construction’ projects INPUT TAX CREDIT – NEGATIVE LIST: (c) works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service; (d) goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account INCLUDING WHEN SUCH GOODS OR SERVICES OR BOTH ARE USED IN THE COURSE OR FURTHERANCE OF BUSINESS.

Details of Construction Cost
ASSUMPTIONS SR. NO. PARTICULARS AMOUNT A. Agreement Value 1 Crore B. VAT rate in the State of Maharashtra 8.5% (average) on goods 1% - composition scheme for builders C. Excise duty rate 12.5% D. Service tax rate 4.5% (after considering 70% abatement) E. GST rate 12% F. Land deduction 30% of the Agreement Value Details of Construction Cost PARTICULARS COST TO THE DEVELOPER Land 40,00,000 Material 20,00,000 Service 15,00,000

Tax neutral = 15-20% of construction cost
IMPACT – COMPARISON Sr. No. Particulars Current Regime GST Regime A. VAT Collected 1,00,000 [1,00,00,000*1%] - B. Service Tax Collected 4,50,000 [1,00,00,000*4.5%] C. GST to be collected 8,40,000 [1,00,00,000*70%*12%] D. Tax cost to Customer 5,50,000 E. Increase in tax cost 2,90,000 Sr. No. Particulars Current Regime GST Regime A. Excise duty Cost 2,50,000 [20,00,000*12.5%] - B. VAT Cost 1,70,000 [20,00,000*8.5%] C. Tax cost to developer 4,20,000 D. Saving to the developer Effective reduction in tax under GST – 1,30,000 Tax neutral = 15-20% of construction cost

Taxes under Present Regime
IMPACT OF GST ON JDA Sr. No. Transaction Taxes under Present Regime Tax under GST Regime JDA with Area Share 1 Providing earmarked area to the landowner No VAT - Barter Service tax paid - Based on value of TDR / value of comparable units (CENVAT credit eligible on IPS and CG) Liable to GST Valuation – no special mechanism prescribed 2 Sale of area by developer Liable to VAT and Service tax (CENVAT credit eligible on IPS and CG) 3 Sale of earmarked developed area by landowner Liable to VAT and Service tax – CENVAT credit of Service tax charged by developer eligible JDA with Revenue Share 4 Sale of 100% developed area by the developer by entering into tri-partite agreement Developer liable to discharge VAT and Service tax (CENVAT credit eligible on IPS and CG) 5 Transfer of revenue share from developer to landowner No VAT / Service tax – Transaction in immovable property (sale of land) No GST – Transaction in immovable property (sale of land)

Impact on Contractors

CONTRACT Engineering, Procurement and Construction (EPC) Contracts are in the nature of turn-key projects , having a combined scope of work involving services and goods Engineering Preparation of designs, plans, & technical specifications of equipments Documenting delivery schedules of equipments, instructions for erection, etc EPC Contract Construction Erection, commissioning, testing and completion of the facility Correction of defects Procurement Procurement or renting Equipments Procurement of goods from third parties

VALUATION ISSUES- CURRENT REGIME
Valuation Options under the existing regime Sr. No. VAT Service Tax (by default) 1 Payment of VAT at actual Payment of Service tax at actual 2 Payment of VAT under composition scheme (concessional rate of VAT on entire contract value) standard deduction (deduction from contract value towards services) Payment of Service tax by opting prescribed standard deduction 60% standard deduction in case of ORIGINAL WORKS ? and 30% standard deduction in other works contract 3 Disputes qua Intra vs. Inter state sale Results in payment of tax on more than 100% value

CREDIT ISSUES - CURRENT REGIME
Service Tax No CENVAT credit of Excise duty / CVD and SAD paid on inputs VAT No Input tax credit / partial input tax credit in case of composition scheme Interstate Works Contract Loss of credit of VAT paid on procurements in the state of project execution

ISSUES ADDRESSED – GST REGIME
WORKS CONTRACT HAS BEEN DEFINED AS SERVICE – PROVIDING CLARITY ON TAXABILITY OF WORKS CONTRACT SERVICE Place of supply – Location of immovable property Rate of GST – As applicable to service Time of supply – Similar to the existing provision Deduction of tax at source Following implications as applicable to services Resolves the issue of tax being paid on more than 100% value

TRANSITIONAL PROVISIONS

MIGRATION OF EXISTING TAXPAYERS
Provisional registration certificate issued to - Person registered under current laws Holder of valid PAN Certification to be cancelled in the following two cases – Provisional certificate not replaced by final certificate Non-fulfilment of prescribed conditions Provisional Certificate of registration deemed to have not been issued if the registration is cancelled on an application by a person - Who is not a ‘person liable for registration’* Who is not required to obtain ‘compulsory registration in certain cases’** * Section 22 of the CGST Act, 2017, ** Section 24 of the CGST Act, 2017

TRANSITIONAL ARRANGEMENTS FOR ITC
Registered person* can take the amount of CENVAT credit carried forward in the last return** furnished under the existing law CREDIT NOT AVAILABLE IN FOLLOWING CASES – Credit not admissible as ITC under the CGST Act, 2017 Non-submission of all the returns required under the existing law for a period of 6 months immediately before the appointed date Credit relates to goods manufactured and cleared under exemption notifications *Not applicable to persons opting to pay under Composition levy **Return relating to the period ending with the day immediately preceding the appointed day

A registered person* is entitled to take credit of unavailed CENVAT** credit in respect of capital goods, subject to - Credit not carried forward in a return The Return is furnished under the existing law Return pertains to the period immediately before the appointed day CREDIT IN RESPECT OF CAPITAL GOODS Credit not available unless it was available under existing laws as ITC under GST Aggregate amount of CENVAT credit available Amount of credit already availed on CG **unavailed CENVAT credit = *Not applicable to persons opting to pay under Composition levy

A registered person, who is either of the following - Not required to register under the existing laws Manufacturer of exempted goods Provider of exempted services Providing works contract service + availing abatement FSD or SSD Registered importer Depot of manufacturer Entitled to take credit of - Inputs held in stock Inputs in semi-finished goods held in stock Inputs in finished goods held in stock Subject to following - Inputs are for making taxable supplies Person eligible for ITC on inputs under GST Basis invoice or similar document for such inputs Document to be issued in 12 months immediately before appointed day Abatement not exercised by service supplier A registered person (not manufacturer or supplier of services) will be allowed credit if benefit is passed on by reducing prices, basis an invoice/ other similar document

Registered person engaged in - Manufacture of taxable and exempted goods Provision of taxable and exempted services But are taxable under GST Entitled to take CENVAT credit of eligible duties - carried forward in a return furnished under existing law of inputs held in stock of inputs in finished and semi-finished goods on appointed day of such exempted goods or services

CREDIT AVAILABLE WHEN - EXISTING REGIME Tax and duty paid by supplier GST REGIME Receipt of inputs and input services SUBJECT TO - Invoice or any tax paying document being recorded in the books of accounts within a period of 30 days from the appointed day Period of 30 days may be extended by Commissioner, on sufficient cause being shown, by a period of 30 days Statement of availment of such credit to be submitted

CREDIT ELIGIBILITY WHEN TAX PAID AT FIXED RATE UNDER EXISTING LAW Credit of eligible duties available when Tax paid at fixed rate Subject to fixed amount paid as tax under existing law Such inputs are for taxable supplies Not opted for composition levy ITC is available in GST Invoice/ similar document to show duty is paid Invoice/ similar document issued in 12 months prior to appointed day

IN CASE OF SERVICES INPUT SERVICE DISTRIBUTOR (ISD) - Distribution of credit of services by an ISD received prior to the appointed day - Allowed even if services provided after appointed date CENTRALISED REGISTRATION (CR) - Availability of credit carried forward in the return – a. filed under existing law b. for prior period c. available to the holder of CR - Such credit is available subject to below conditions* CREDIT REVERSED DUE TO NON-PAYMENT - Reversed credit due to non-payment in 3 months can be reclaimed subject to – - Payment made in 3 months from appointed day *a. Original / revised return to be filed in 3 months of appointed date and credit must be reduced The credit amount must be admissible as ITC in GST regime Credit transferrable to a registered person having same PAN for which CR was obtained under existing laws

MISCELLANEOUS TRANSITIONAL PROVISIONS
REFUND OF DUTY WHEN PAID UNDER EXISTING LAWS - On goods, at the time of removal In 6 months before appointed date Returned to place of business on or after such date Returned by non-registered person to place of business In 6 months from the appointed date Are identifiable by the proper officer Transaction deemed to be a ‘supply’ if goods returned by a ‘registered person’

PRICE REVISION - Upward revision of price under GST - Contract entered in existing regime - Issuance of – a. debit note b. supplementary invoice - Downward revision of price under GST a. credit note Debit/ supplementary invoice/ credit note must – Contain prescribed particulars Be issued in 30 days of price revision The supplementary invoice/ debit/ credit note is issued in respect of a supply made in GST regime Reduction in tax liability basis credit note only if recipient reduces his ITC due to such reduction in tax liability

REFUND CLAIMS FILED ON OR AFTER APPOINTED DAY Refund of: CENVAT credit Duty Tax Interest Or other amount Refund of: any duty/ tax paid under existing law exported before or after such day Refund of: tax paid on services refund in cash subject to Section 11B(2) of Excise Act refund in cash subject to Section 11B(2) of Excise Act Claim lapses if fully or partially rejected Claim lapses if fully or partially rejected No refund if the balance amount is carried forward under GST regime No refund if the balance amount is carried forward under GST regime Claim will be disposed off in accordance with existing laws -

REFUND AND RECOVERY PURSUANT TO APPEAL, REVIEW OR REFERENCE CENVAT CREDIT - No refund in case rejected - Refund in cash subject to Section 11B(2) of Excise Act - Credit not admissible as ITC - Credit recovery as an arrear of tax OUTPUT DUTY OR TAX LIABILITY REFUND REFUND RECOVERY RECOVERY CONDITION – The Proceeding of appeal, review or reference must be initiated before on or after appointed day under existing law and shall be disposed off according to existing law

PURSUANT TO AN ASSESMENT OR ADJUDICATION PROCEEDING RECOVERY In case of recovery of any amount of tax, interest, fine or penalty Recovery of amount as an arrear of tax, unless recovered under existing law amount not admissible as ITC in GST regime REFUND In case of refund of any amount of tax, interest, fine or penalty Refund in cash as per Section 11B(2) of Excise Act amount not admissible as ITC in GST regime if claim rejected CONDITION – The above applies to all proceedings instituted whether before, on or after the appointed day, under the existing law

PURSUANT TO REVISION OF RETURNS IN GST REGIME RECOVERY Recovery of amount as arrear of tax when - - recovery / inadmissibility of CENVAT Amount not admissible as ITC under GST regime REFUND Refund in cash in when - - refund/ admissibility of CENVAT - In the time specified for revision under existing laws - Refund as per Section 11B(2) of Excise Act - Rejected amount not admissible as ITC under GST regime

LIABILITY UNDER NEW REGIME Following shall be liable to be tax as per GST regime – Goods or services supplied on or after the appointed day, and in pursuance of contract entered into prior to appointed day No GST payable when tax was leviable on goods or services under - VAT laws Service tax laws Credit available of taxes paid under the existing law when - supplies made in GST regime, and credit to be calculated as prescribed

GOODS SENT ON APPROVAL BASIS No tax payable - On goods sent on approval basis not earlier than 6 months before appointed date If such goods are returned in 6 months from such date CONDITION – 6 months can be extended by 2 months if sufficient cause shown Tax payable by person returning the goods after the specified period Tax payable by person sending the goods on approval basis and not returned after the specified period

NO DEDUCTION OF TAX AT SOURCE IN CASE (Section 51 of CGST Act, 2017) - Sale of goods on which tax required to be deducted at source Issuance of invoice before the appointed date But payment to supplier on or after appointed day

‘O’ – Opportunity absent in Yesterday, once in Today, thrice in Tomorrow

Disclaimer: The information provided in this presentation is intended for informational purposes only and does not constitute legal opinion or advice. Readers are requested to seek formal legal advice prior to acting upon any of the information provided herein. This presentation is not intended to address the circumstances of any particular individual or corporate body. There can be no assurance that the judicial/ quasi judicial authorities may not take a position contrary to the views mentioned herein.

Impact of GST on various sectors and TRANSITIONAL PROVISIONS

Similar presentations

Presentation on theme: "Impact of GST on various sectors and TRANSITIONAL PROVISIONS"— Presentation transcript:

Similar presentations

About project

Feedback

Log in

Auth with social network:

Impact of GST on various sectors and TRANSITIONAL PROVISIONS

Similar presentations

Presentation on theme: "Impact of GST on various sectors and TRANSITIONAL PROVISIONS"— Presentation transcript:

Similar presentations

About project

Feedback