1. DETAILS
Project

3. Contents GST-Global Scenario
Why is GST considered as the preferred tax structure ?
GST- Current State of Play
Present Structure
Features of Proposed GST Model
Rate of GST
Issues & Challenges

4. SOURCE
An overview on Goods and service tax information and relative data resources are:
Newspaper articles
Subject with regard to books.
Business magazines
Internet

5. More than 140 countries have already introduced GST/National VAT
Most countries have a single GST rate

6. Typically it is a single rate system but two/three rate systems are also prevalent depending upon the requirement of the implementing nation
Standard GST rate in most countries ranges between 15-20%
All sectors are taxed with very few exceptions/ exemptions
Full tax credits on inputs – 100% set off
US does not have a national level VAT

7. Why is GST considered as the preferred tax structure?
Uniform single tax across the supply chain
Reduced transaction cost in the hands of the tax payers
Increased tax collections due to wider tax base and better compliance
Improvement in international cost competitiveness of indigenous goods and services
Enhancement in efficiency in manufacture and distribution due to economies of scale

8. GST – Current State of Play
Empowered Committee (EC) has submitted its report to the FM on the recommended model
EC has suggested a dual GST
FM has requested the Finance Commission, headed by Dr. Kelkar, to study the report and make recommendations. Finance Commission has sought the views of various associations and chambers
The Commission envisages that its recommendations will be submitted to the FM by end 2008, in time for all subsequent work to commence and conclude by first quarter 2010
GST is on course for 1/4/2010 !

9. Credit set off possible
Present Structure
Federal Tax
*(I) CENVAT (Excise) + Service Tax
Excise and Service tax have been integrated
Can be set off against each other
State Tax
*(II) VAT
Input VAT can be set off against payment of output VAT/CST
(III) CST
No set off: Always a cost
*I & II are parallel levies and cannot be set off against each other
Credit set off possible
Set off not possible

11. Dual GST recommended by Joint Working Group of the EC
EC has accepted the recommendations and submitted its report to the Government
Present available details form the basis for subsequent slides
Basic Structure
Dual GST comprising Central GST and State GST
Central GST and State GST, in themselves, to comprise both the goods tax and the services tax
Central GST and State GST to operate throughout the supply / value chain

12. Features of proposed GST Model
Classification
HSN to form the basis of classification of goods under Central and State GST
classification of services based on global best practices and Indian realities
Rates
uniform rates for services
multiple rates for goods
Imports to be charged to both Central and State GST
Excise Free Zones could continue for their life spans

13. Features of proposed GST Model
Input tax Credits ( ITC)
full credits under the Central and the State GST that will operate in parallel
cross utilization of credits between Central GST and State GST not permitted
refund of unutilized accumulated ITC
Inter-State transactions
goods to be taxed in the destination/importing State
services to be taxed in the State of consumption
zero rating in the originating State

14. Features of proposed GST Model
Taxes proposed to be subsumed by GST
- Central excise
- Additional duties of customs
- Service tax
- VAT
- Central Sales tax
- Entertainment tax
- Luxury tax
- Octroi
- Lottery taxes
- Electricity duty
- State surcharges relating to supply of goods and services
- Purchase tax

15. Features of proposed GST Model
Taxation of crude & petroleum products
to be brought in GST with ITC
excise duties ( without ITC) to be levied over and above GST by both Centre & State Or
only crude, motor spirit & high speed diesel be out of the purview of the GST → remaining products as per above
Finance Commission will make recommendations in regard to petroleum products

16. Features of proposed GST Model
Treatment of services
Any economic activity which is not supply of goods is supply of services
All services to be taxed with few exceptions
Central GST on services relatively easy to collect
State GST on services will be far more complex – particularly on cross border services

17. Features of proposed GST model
Cross border Services
Taxed at the place of consumption of services
Difficult to determine the actual place of effective use/enjoyment of services
Rules for place of supply of services to be framed
Currently no uniform practice exists
Administrative convenience + convenience of the trade & industry to be factored to determine the place of collection of service tax

18. Features of proposed GST Model
Thresholds
uniform thresholds under Central & State GST
Exemptions
common lists for Centre and States with little flexibility for States to deviate
exemption schemes proposed to be converted to post-tax cash refund schemes

19. GST Rate in Select CountriesEU
UK – 17.5%
Germany – 19%
France – 19.6%
Belgium – 21%
Australia – 10%
New Zealand – 12.5%
China – 17%

20. GST Rate in India What would be the GST rate in India?
Clearly a huge debate and the rates which are typically being discussed are as follows:
20%
14%
12%
Any of the above, would still be less than the present cumulative rate of indirect taxes
The rate to be adopted would depend on the extent of coverage of GST and ability to prune exemptions

21. Issues & Challenges

22. Issues & Challenges Specific Issues & Challenges - Law Rates
integration of a large number of Central & State Taxes and obtaining of consensus amongst States to abolish multiple local taxes
multiplicity of taxes and tax rates
Thresholds
rationalization under Central & State GST
Taxation of Petroleum /Alcohol/Tobacco products
GST with ITC
excise duties ( without GST)

23. Issues & Challenges Specific Issues & Challenges - Law
Taxation of Inter-State Services
huge challenges due to its complexity
Operating a seamless input credit system
pure VAT/ no cascading
Integrating the origin based tax with the destination based GST
Uniformity across States
Proper transition from existing tax structures

24. Issues & Challenges Specific Issues & Challenges – Govt related
Standardization of systems and procedures
Uniform dispute settlement machinery
Training
Re-organization of administrative machinery for GST implementation is the key
Building information technology backbone – the single most important initiative for GST implementation
Specific Issues & Challenges – Govt related
Protecting and balancing the present and future revenues of the Centre and the States
commission on Centre-State Relations (CCSR)
views from Trade & Industry

25. Issues & Challenges Impact on backward States
safeguarding the interests of less developed States with lower revenue potential

26. Nishant Jain