1. PRESENTATION BY ROHAN SHAH- ADVOCATE ICAI-GST Conference - 09.04.2017
basics oF GST
PRESENTATION BY ROHAN SHAH- ADVOCATE
ICAI-GST Conference

2. AGENDA CONSTITUTIONAL FRAMEWORK OF GST TAXES TO BE SUBSUMED UNDER GST
CONCEPT OF CGST AND SGST/ UTGST
RATES OF GST
GST COUNCIL

3. 01.07.2017 – PROPOSED DATE OF INTRODUCTION OF GST
GST – THE JOURNEY SO FAR
Idea of GST takes shape
Date of Presidential assent to 101st Constitutional Amendment Act
GST Council set up
Central GST Bills passed by Lok Sabha
Central GST Bills passed by Rajya Sabha
Lok Sabha passed Taxation Laws
(Amendment) Bill, 2017
2000
– PROPOSED DATE OF INTRODUCTION OF GST

4. CONSTITUTION (101st AMENDMENT) ACT, 2016 – KEY AMENDMENTS …
Article 246A
Parliament and State legislatures/Union Territories empowered to legislate on GST (CGST & SGST/UTGST respectively)
Centre exclusively empowered to levy GST on inter-state movement of goods and/ or services (IGST)
States for the first time empowered to levy tax on services/Union empowered to levy tax on intra-state supply (sale) of goods
Article 269 A
Parliament to levy GST on supplies in the course of inter-state trade or commerce
Supply of goods or services in the course of import into India- to be treated as supplies in the course of inter-state trade or commerce
Clause 18: Union to provide compensation to the States for loss of revenue arising on account of implementation of the GST for a period of five years [GST (Compensation to States) Bill, 2017 has been passed by both houses]

5. … CONSTITUTION (101st AMENDMENT) ACT, 2016 – KEY AMENDMENTS …
Article 279 A
GST Council to be constituted by the President within 60 days from the coming into force of the Constitution Amendment
GST Council constituted on
Article 366(12A)
"“goods and services tax” means any tax on supply of goods, or services or both except taxes on the supply of the alcoholic liquor for human consumption”
Article 286 prohibits States from taxing supply of goods/ and or services:
Outside the state
In the course of import into India
In the course or export out of India
Petroleum products, natural gas and aviation turbine fuel to be subsumed under GST from a later date (to be notified based on recommendation of the GST Council)

6. … CONSTITUTION (101st AMENDMENT) ACT, 2016 – KEY AMENDMENTS …
Prior to the 101st amendment
After the 101st amendment
Entry 84 [List 1]
“84. Duties of excise on tobacco and other goods manufactured or produced in India except— (a) alcoholic liquors for human consumption; (b) opium, Indian hemp and other narcotic drugs and narcotics, but including medicinal and toilet preparations containing alcohol or any substance included in sub-paragraph (b) of this entry”
“84. Duties of excise on the following goods manufactured or produced in India, namely:— (a) petroleum crude; (b) high speed diesel; (c) motor spirit (commonly known as petrol); (d) natural gas; (e) aviation turbine fuel; and (f) tobacco and tobacco products.”
Entry 83 [List 1]
“83.Duties of customs including export duties”
No change
Entry 92 [List 1]
“92. Taxes on the sale or purchase of newspapers and on advertisements published therein.”
Omitted

7. … CONSTITUTION (101st AMENDMENT) ACT, 2016 – KEY AMENDMENTS …
Prior to the 101st amendment
After the 101st amendment
Entry 92 C [List 1]
“92C. Taxes on services.”
Omitted
Entry 52 [List II]
“52. Taxes on the entry of goods into a local area for consumption, use or sale therein.”
Entry 54 [List II]
“54. Taxes on the sale or purchase of goods other than newspapers, subject to the provisions of entry 92A of List I.”
“54. Taxes on the sale of petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas, aviation turbine fuel and alcoholic liquor for human consumption, but not including sale in the course of inter-State trade or commerce or sale in the course of international trade or commerce of such goods.”

8. … CONSTITUTION (101st AMENDMENT) ACT, 2016 – KEY AMENDMENTS …
Prior to the Amendment
After the Amendment
Entry 55 [List 1I]
“55. Taxes on advertisements other than advertisements published in the newspapers [and advertisements broadcast by radio or television.”
Omitted
Entry 62 [List 1I]
“62. Taxes on luxuries, including taxes on entertainments, amusements, betting and gambling.”
“62. Taxes on entertainments and amusements to the extent levied and collected by a Panchayat or a Municipality or a Regional Council or a District Council.”

9. … CONSTITUTION (101st AMENDMENT) ACT, 2016 – KEY AMENDMENTS …
Constitution prior to 101st amendment
Constitution after the 101st amendment
Article 246 – Parliament had exclusive power to make laws including tax laws in respect of matters specified in List 1 of Schedule VII (‘Union List’).
Article 246 – State had exclusive power to make laws including tax laws in respect of matters specified in List 1I of Schedule VII (‘State List’).
Article 246A(1)- Both Parliament & State legislatures have the power to makes laws with respect to goods and services tax (‘GST’).
Sea change in legislative powers- power to levy tax no longer derived from List I or II of Schedule VII but directly from Article 246A.
Controversies regarding overlap/conflict in taxing powers between Central and State qua GST will not arise.

10. PRESENT INDIRECT TAXES TO BE SUBSUMED INTO GST
CENTRAL
CENTRAL EXCISE DUTY
CVD
SURCHARGE
CESSES
Excise on M &TP
SAD
ADDITIONAL EXCISE DUTIES
SERVICE TAX
STATE
VAT/ CST
Cesses & Surcharges
Luxury Tax
Entry Tax
Entertainment Tax (except on local bodies)
Taxes on lotteries, bottling, gambling

11. DUAL GST…
ARTICLE 246A - Parliament and State legislatures/Union Territories empowered to legislate on GST (CGST & SGST/UTGST respectively)
Union and States/UT can simultaneously levy GST on the same transaction
Taxable event under GST is the supply of goods/services:
CGST + SGST/UTGST- on intra-state supply of goods/services
Where location of supplier is in territorial waters of India/place of supply is in the territorial waters – the ‘place of supply’ shall be deemed to be in the coastal state/UT where the nearest appropriate base line is located
IGST on inter-state supply of goods/services
Import of goods/services to be treated as inter-state supplies – IGST will be levied

12. …DUAL GST Exports will be zero-rated
Supplies to SEZ developers/SEZ units are also zero-rated
ITC credit/refund of ITC available in case of zero rated supplies

13. GST – TAX RATES
Rate structure for individual goods and/or services has not been finalized
Expected to be finalized by end May, after next meeting of GST Council
Proposals as regards rate of duty
Separate tax rate for precious metals
Cess over the peak rate of 28% on specified luxury and sin goods
Ceiling rates prescribed under various bills are as under:
CGST bill – 20%
IGST bill – 40%
Cess under GST (Compensation to States) Bill- rates as prescribed in the Schedule
The rate slabs which have been discussed are set out below:
Various goods/services will be fitted into these rate slabs based on the principle of ‘revenue equivalence’ 5%
12%
18%
28%

14. GST COUNCIL …
Empowerment to constitute GST Council under Article 279A of the Constitution
GST Council constituted on
GST Council shall make recommendations to the Union and States on:
Taxes, cesses and surcharges levied by the Union and States which to be subsumed into GST
Goods and services which may be subjected or exempted from GST
Principles of levy, apportionment of IGST and principles that govern the place of supply
Floor rates with bands of GST
Other issues
GST council is to be guided by the need for:
a harmonized structure of goods and services tax /development of harmonized national market

15. … GST COUNCIL …
Twelve meetings held so far – decisions by consensus arrived at on various issues like:
Threshold limit for exemption to be Rs. 20 lakh (Rs. 10 lakh for special category States)
Compounding threshold limit to be Rs. 50 lakh – not available to inter-State suppliers, service providers (except restaurant service) & specified category of manufacturers
Government may convert existing area based exemption schemes into reimbursement based scheme
Cess over the peak rate of 28% on specified luxury and sin goods
Rules on registration, payment, return, refund, invoice, composition levy, input tax credit, transitional provisions and valuation were recommended.

16. … GST COUNCIL …
To ensure single interface – all administrative control over
90% of taxpayers having turnover below Rs. 1.5 cr. vest with State tax administration
10% of taxpayers having turnover below of Rs. 1.5 cr. vest with Central tax administration
taxpayers having turnover above Rs. 1.5 cr. to be divided equally between Central and State tax administration
CGST, UTGST, IGST, SGST & GST Compensation Law recommended
Central laws have been passed by both houses of Parliament- Presidential assent awaited
Formula for calculating compensation finalized

17. … GST COUNCIL …
Whether recommendations of GST Council are binding on States?
Whether States can theoretically ignore recommendations of GST Council and formulate their own basis for GST related laws?
Inter-play between the GST Council and the powers of the Legislature has been discussed by the 73rd Finance Standing Committee – reference made to opinion of the Attorney General:
“This is an important point which has been raised and the short answer to it is that it is certainly open to Parliament to approve any recommendation. However, this does not mean that the GSTC recommendations will have no value. Having regarding to the nature of the Constitution of GSTC, the Council would have performed useful role in making recommendations but the ultimate authority whether to accept such recommendations can and must rest only in the Legislatures, namely, Parliament and the State Legislatures. In this view of the matter, the setting up of the GSTC does not strike at the root of the legislative powers over Finance. The powers of the legislature over Finance are sacrosanct and are not affected by the setting up of the GSTC. ...”

18. … GST COUNCIL … Whether States can opt out of the GST Structure?
Since many of the legislative entries like Entry 52, 54, 55 and 62 of List II have been omitted,/substantially amended the State’s power to taxation will not be under Article 246 read with the entries in List II but under Article 246A
Article 246A necessarily has to be read in conjunction with the other GST related amendments to the Constitution
Consequently the States will not have an option to opt out of the GST scheme
Will otherwise lose their taxing powers

19. … GST COUNCIL
Under Article 279(11)- GST Council to establish a mechanism to adjudicate any dispute:
Between the Government of India and one or more States; or
Between the Government of India and any State or States on one side and one or more States on the other side; or
Between two or more States, arising out of the recommendations of the Council or implementation thereof
Under the present Constitutional scheme, the Supreme Court under Article 131 to the exclusion of all other courts, has the original jurisdiction in any dispute.
Between States, between Centre and States, or involving Centre and one or more States on one side and one or more States on the other side
Such power is subject to other provisions of the Constitution
The dispute should involve a question on which the existence or extent of a legal right depends
The modalities of dispute resolution require to be adequately evolved for a successful GST

20. THANK YOU