1. GOODS AND SERVICE TAX (GST) CONCEPT, MODEL AND PRESENT STATUS December, 2015 By Sushil Solanki Principal Commissioner of Service Tax GST by Sushil Solanki1

2. PRESENT LAWS AND DISTORTIONS  Multiplicity of Indirect Taxes  Cascading taxation  Varying VAT rates in different States  Credit of CST not available to buyers  Service Tax credit not available to traders  Uneconomic activities like opening of branches to save CST, Purchase from within State  No set off ---no invoice – parallel economy  Plethora of forms required for movement of goods within States, Inter States, through State GST by Sushil Solanki2

3. GST : PERCEIVED BENEFITS To Trade  Development of common national market.  Reduction of Procurement cost.  Efficient use of Resources & Economy of scale.  Reduction in multiplicity of taxes.  Mitigation of cascading/double taxation.  More efficient neutralization of taxes especially for exports.  Simpler tax regime  Fewer rates and exemptions  Conceptual clarity (Goods vs. Services) GST by Sushil Solanki3

4. GST : PERCEIVED BENEFITS  To Government  Enhanced GDP growth by increase in economic activities and efficient use of resources.  Simpler Tax system  Broadening of Tax base  Improved compliance & revenue collections  To Consumer  Transparency as total taxes paid available in invoice.  Total Tax burden to reduce. GST by Sushil Solanki4

5. Features of GST……(1)  Destination-based Taxation  Applies to all stages of value chain – primary, secondary & tertiary including retail  Applies to all supplies of goods / services (as against manufacture, sale or provision of service) made for a consideration except –  Exempted goods / services – common list for CGST & SGST  Goods / services outside the purview of GST  Transactions below threshold limits  Dual GST having two concurrent components  Central GST levied & collected by Centre  State GST levied & collected by States GST by Sushil Solanki5

6. Features of GST ……(2)  IGST (CGST + SGST) applicable to  Inter-State supplies of goods / services in India  Inter-state stock transfers of goods  Import of goods / services  IGST levied & collected by the Centre  Additional Tax not exceeding 1% on inter-state supply of goods – to be levied & collected by the Centre but assigned to originating State  Export of goods / services – Zero rated GST by Sushil Solanki6

7. Products under GST  All goods or services likely to be covered under GST except:  Alcohol for human consumption - State Excise + VAT  Electricity - Electricity Duty  Real Estate - Stamp Duty + Property Taxes  Petroleum Products – to be brought under GST from a later date on recommendation of GSTC  Tobacco Products – under GST + Central Excise GST by Sushil Solanki7

8. TAXES TO BE SUBSUMED INTO GST CENTRAL TAXES  Central Excise duty (CENVAT)  Additional duties of excise  Excise duty levied under Medicinal & Toiletries Preparation Act  Additional duties of customs (CVD & SAD)  Service Tax  Surcharges & Cesses STATE TAXES  State VAT / Sales Tax  Central Sales Tax  Purchase Tax  Entertainment Tax (not levied by local bodies)  Luxury Tax  Entry Tax (All forms)  Taxes on lottery, betting & gambling  Surcharges & Cesses GST by Sushil Solanki8

9. GST Rates  GST Rates – Merit Rate/Standard Rate/Precious Metal  Floor rate with a small band of rates for standard rated goods / services for CGST & SGST  Common Threshold exemption for CGST and SGST.  Compounding scheme for taxpayers having taxable turnover up to a certain threshold above the exemption GST by Sushil Solanki9

10. Other Features of GST  Existing area based tax exemption likely to be made into Refund mechanism.  C/F/H forms likely to be abolished  Multiple statutes – one for Centre & one for every State  Place of Supply Rules  to determine Place of Supply of goods or services  to determine whether the supplies are intra-State or inter-State  HSN Code to be used for classification of goods  Present system of classification of services to be used GST by Sushil Solanki10

11. Integrated GST (IGST)  To be levied on interstate supply of goods and services  GST being destination based tax, tax paid in exporting State needs to reach the importing State.  Tax paid in the exporting state would be available as input tax credit in the importing State.  IGST can be paid by using credit of IGST, CGST or SGST.  In the returns, invoice wise supply details and importing state wise details required to be mentioned for settlement of tax credit amongst the States.  On import of goods, IGST would be levied in lieu of CVD and SAD. GST by Sushil Solanki11

12. Credit Utilization of CGST, SGST & IGST  ITC of CGST for CGST & SGST for SGST - no cross utilization  ITC of IGST allowed for payment of IGST, CGST & SGST in that order  ITC of CGST allowed for payment of CGST & IGST in that order  ITC of SGST allowed for payment of SGST & IGST in that order  No ITC of Additional Tax GST by Sushil Solanki12

13. Registration Return, Other Process  State wise registration  Business Vertical-wise registration allowed  LTU status  Amendment in Registration details- Except 3-4 details, no approval required  Registration to be applied 30 days prior to specified date for taking registration  ITC allowed only after date of Registration application  Common GST Return for CGST, SGST, IGST, ADDL TAX  Common e-payment facilities for all taxes  Annual Return for comparison with Financial Records GST by Sushil Solanki13

14. Input Tax Credit Changes & ISD Provisions  ITC available on the basis of supplier uploading invoices and payment of taxes, like TDS credit in Income Tax  Seller/Supplier to upload invoice wise detail for all B-2-B sale and in other specified cases  Rating of Dealers and black listing of dealers  ISD registration permitted for transfer to credit on services only.  ITC transfer allowed from one to other registration only on supply/use of services.  For goods transfer, normal branch transfer procedure to follow. GST by Sushil Solanki14

15. Constitutional Amendment Concurrent jurisdiction for levy and collection of GST by the Centre and States. Centre to levy and collect IGST and the tax to be apportion between Centre and State. Upto 1% additional tax to be collected by Centre but to be assigned to originating tax. Compensation to States for five years. Power to impose surcharge by Parliament removed. Concept of declared goods done away with. GST by Sushil Solanki15

16. Constitutional Provision - GST COUNCIL (GSTC)  Consist of Union FM, Union MOS (Revenue) and State Finance Ministers.  Union Finance Minister as Chairperson  Vice Chairperson from States  Weightage for votes provided.  Decision by majority of 75% of weighted votes of members present and voting. GST by Sushil Solanki16

17. Functions of GST COUNCIL  Council to make recommendations on  Taxes, etc. to be subsumed in GST  Exemptions & thresholds  GST rates  Band of GST rates  Model GST Law & procedures  Special provisions for certain special category States like North East, J &K, HP, Uttrakhand.  Date from which GST would be levied on petroleum & related products GST by Sushil Solanki17

18. GST NETWORK (GSTN)  GSTN incorporated on 28 th March, 2013 as Section 25 Private Limited Company.  Central Government, State Government and Financial Institution are equity holders.  GSTN to develop and operate a common IT portal to :-  Submit registration applications  File returns  Make tax payments.  Registration, return and payment information to be passed on to Central and State Tax authorities.  GSTN to develop IT platform for verification of CENVAT credit availment. GST by Sushil Solanki18

19. Current Status & Way Forward  CAB introduced in parliament on 19 th December, 2014  Passed by Lok Sabha and pending in Rajya Sabha  To be ratified by at least 50% of the State Legislatures  Assent of President of India  GST Council to be constituted GST by Sushil Solanki19

20. Current Status & Way Forward ---(2)  Report on Return, Registration and Refund placed in public domain  Drafting of GST legislation – Completed by Centre & State Govt representatives. Discussion for final draft underway  GSTC to recommend GST Law and Procedure.  GST law to be introduced in Parliament / State Legislature.  GST Rates, Exemption to be decided  Consultation with Trade & Industry  Training of Officers & Trade  GSTN Portals to be made operational and to link with existing portals of Centre and State Government GST by Sushil Solanki20

21. Preparation by Industry Review of Procurement decisions Review of Logistic Requirements like Warehousing, Storage, Transport Costing of Products for future orders for export, etc Industry specific issues like Area based Exemption, MRP based assessment requiring abatement % to be represented to the Govt Exemption from Excise, Service Tax, VAT, to be taken up with Govt Decision for business vertical registration & Preparedness for State level registration GST by Sushil Solanki21

22. Modification of IT systems Provision for CGST & SGST on Sales Interstate Sale – IGST Capture of registration no. of buyer Sales Invoice to be uploaded Comparison of ITC as per Company record & as per GST ledger of Govt Tracking of ITC for invoices not uploaded by supplier Tracking of blacklisted Suppliers GST by Sushil Solanki22

23. Thanks GST by Sushil Solanki23