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GST(Goods and Service Tax)

  1. असर (ASR)
  2.  It is a tax on Goods & Services with comprehensive & continuous Chain of Set off benefit from producers to retailer point.  In other words, GST is an Indirect tax which is levy on manufacture, sale & consumption of all goods & services.  It substitute mostly all the indirect taxes like excise, VAT, Service Tax, Entertainment Tax, Luxury Tax, CVD as well as SAD.  It is based on the VAT principles .  It was implemented 1st April 2017.  It is expected to be levied only at a destination level/Real Consumption Place not at a various points.  Taxation power lies with both in the hands of CG as well as SG also.  There is no distinction between goods & services.  After Introduction of GST, all the traders including manufacturer are paying both the type of taxes (CGST & SGST). Introduction / Concept of GST
  3.  GST leads to immense scope, Opportunities as well as some challenges also.  Centre is empowered to levy GST on Goods & Services upon the Production stage, while State have the power to tax on sale of goods.  India implemented dual GST.  GST law emphasize on voluntary compliance .  It is a comprehensive levy and envisages tax collection on both goods and services at the same rate.  It subsumes a large no. of central & state taxes into a single tax.  GST also mitigate the cascading effect of taxes.  In the mean time, it also helps in terms of uniformity like in case of chargeability, definition of taxable services or person, measure of levy, basis of classification etc.
  4.  Problems of Sales Tax Cascading effect(Tax on tax)  Selling without bill- no tax liability  “Inspector Raj”- of officials  Not technology enables make revenue lickage. Problems of Sales Tax
  5. Why India needed GST  Purpose-GST was introduced majorly due to two reasons: 1. The old indirect tax structure was full of uncertainties due to multiple taxes and multiple rates. 2. Due to multiple rates, there were multiple forms and intern compliances. This improve Tax compliances.  Because of above transparency, Taxation increase and lead to reduced tax evasion.  It also reduce cascading effect(tax on tax) up to much extent.  GST = CGST + SGST  GST rates are like 5%, 12%, 18%, 28%
  6. Old Tax Structure in India
  7. New Tax Structure in India
  8. Following Central Taxes should be, to begin with, subsumed under the Goods and Services Tax:  Central Excise Duty (CENVAT)  Additional Excise Duties  The Excise Duty levied under the Medicinal and Toiletries Preparations (Excise Duties) Act 1955  Service Tax  Additional Customs Duty, commonly known as Countervailing Duty (CVD) CENTRAL TAXES SUBSUMED IN GST
  9. Following State taxes and levies would be, to begin with, subsumed under GST:  VAT / Sales tax Entertainment tax (unless it is levied by the local bodies)  Luxury tax Taxes on lottery, betting and gambling State Cesses and Surcharges in so far as they relate to supply of goods and services  Octroi and Entry Tax  Purchase Tax STATE TAXES SUBSUMED IN GST
  10. 1. Basic Customs Duty - BCD (These are protective duties levied at the time of Import of goods into India.) 2. Surcharge on Customs duty Surcharge at the rate of 10% of the Basic Customs Duty is levied on imported goods under Section 90 of the Finance Act, 2000 (unless exempted by a notification). 3. Customs Cess – 4. Safeguard duty under Section 8B of the Customs Tariff Act, 1975 5. Anti-dumping duty under Section 9A, Customs Tariff Act 1975 6. Stamp Duty 7. Property Tax levied by Local Bodies 8. Central Excise as respects goods included in entry 84 (Alcohol for human consumption) of the Union List of the Seventh Schedule to the Constitution 9. Profession Tax 10. Securities Transaction Tax (STT) TAXES WHICH ARE NOT SUBSUMED
  11. Model/Components of GST CGST (Central GST) • Replace central Excise Duty & service Tax. • Cover Sale transaction. • Administered by CG • Further it is expected that the duty and tax paid on closing stock would be available as credit. • Levied on all intra- state sale/supplies of goods or services. SGST (State GST) • Replace State Vat, Entry Tax, Entertainment Tax, & Luxury Tax. • Cover taxing of Services. • Administered by SG • Rate can be a bit higher than CGST rate. • It is expected that the duty and tax paid on closing stock would be available as credit. • Levied on all intra- state sale/supplies of goods or services. IGST (Inter-State GST) • Levied on all inter – state supplies of goods or services which are sold or transferred. • Applicable to imports of goods or services. • Expected to be equal to CGST as well as SGST. • It is expected that the duty and tax paid on closing stock would be available as credit.
  12. GST Registration  Northeaster and hill states ( Arunachal Pradesh, Assam, Meghalaya, Manipur, Mizoram, Nagaland and Tripura ) with an annual turnover of Rs.10 lakhs.  For all other entities in rest of India would be required to obtain GST registration, if annual turnover exceeds Rs.20 lakhs. (section 2 (6) of the MGL – Taxable & Non Taxable)  Every person who is liable to take a Registration, will have to get registered separately for each of the States where he has a business operation. Structure of GST Registration Number  GSTIN will be of 15 digits and various digits in GSTIN will denote the following as shown below: State Code PAN Entity Code “Z” by default Check Digit 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
  13. Some Areas of GST  As far as registration decision is concerned, a supplier of Goods & services are made when GST is payable.  Then the supplier have to necessarily register & he have no other option.  The Place of supply determine first as to whether the transaction is in India or Outside India. If it is outside India it would not be liable to GST.  The POT in GST is the Point of supply of Goods. In case of service , then it is somehow based on the POT rules of Service tax.  Under the GST structure , the tax are collected by the states where the goods or services are consumed .  Hence there are heavy losses for the producer states & so the center required to compensate them for their revenue losses.  Petroleum products, Alcohols/Liquor , Stamp/Custom duty, Consm. & Sale of Electricity etc. are not covered under the GST purview.
  14.  If a company is having four branches in four different states, then all the four branches will be considered as Taxable Person.  Importer have to register under both CGST & SGST as well.  Apart from Export rate, similar benefit may be given to Special Economy Zone.  GST paid by exporter on the procurement of Goods & services will be refunded later on if paid.  Each taxpayer are allotted a PAN linked taxpayer identification number with a total of 13/15 digits.  This brings the GST PAN-linked system in line with the prevailing PAN-based system for Income tax facilitating data exchange and taxpayer compliance.  The taxpayer need to submit periodical returns to both the central & state GST authority.  Common standardized return for all taxes (with different account heads for CGST, SGST, IGST) are come into picture.  Common standardized Challan for all taxes (with different account heads for CGST, SGST,IGST) are come into picture.  ITC credit are also be verified on the basis of the returns filed and revenues reconciled against Challan data from banks.
  15.  Reduces Transaction cost.  Eliminates the cascading effect of taxes.  Single taxation point.  Reduces corruption.  Uniform tax rate .  Cheaper exports.  Reduction in purchase price.  Transparency.  Increased collection of CGST & IGST.  Increased FDI(Already Seen)  Growth in overall Revenues.  Simplified tax laws.  Increase in exports & employments.  GDP Growth Go Up by about 1%.  International competitiveness Go Up by about 5%.  Common market.  Prevention of unhealthy competition among states.  Increasing the tax base & raising compliance. Benefits of GST
  16. Registration:- As per Model Law, banks having branches in multiple States and Union Territories (UTs) are now requires to register in each such State and UT. Effect of GST on Banking Sector Difficulties to Banking Industry:-  All the bank need to register for their all office location.  They have to maintain separate books of account to have a control for all input tax credit and utilized and unutilized credit.  Due to registration of all location Many banks and financial institutions may be in for a lot of trouble as they could just see the complexity in paying taxes increase under the GST.  Complying with the requirements of reverse charge and partial reverse charge mechanism would add to further compliance costs. • Moderate increase in the cost of financial services like loan processing fees, debit/credit charges, insurance premium etc.
  17.  Bank will be able to set off their GST liabilities against credit received on purchase of goods.  Under the existing CENVAT mechanism, banks are eligible to take partial credit of excise duty and service tax paid on procurement of qualifying goods and services which are used for provision of output service.  Banks did not get input tax credit of State VAT paid on any goods procured by them. As all these indirect taxes are subsumed in GST, banks are now able to take credit of GST paid on procurement of goods as well.  Input tax credit were not allowed as per CENVAT rules. But under GST regime input tax credit are allowed which can be used by a bank for making outward supply in the course of business.  GST will help to reduce tax evasion. Under GST doing business will be easy. The increase in business will lead to additional demand of funds. Addition demand of funds will lead to increase in a number of transactions in the bank as the business and current scenarios ask to go for digital transaction. Benefits to Banking industry:-
  18. GST we thought about Actual GST
  19.  GST is a dynamic & comprehensive legislation which replaced most of the Indirect Taxes of our Country.  Since it is a major indirect tax reform in India, there are new legislation and procedures.  For GST to be effective there are identical GST laws /procedures across states as well as the centre.  On June 14,2016, the CG had put the Draft Model GST law on Public domain. Conclusion