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Gst and its implications

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Gst and its implications

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VARIOUS FORMS OF INCOME TAX ,BASIC KNOWLEDGE OF GST PPT WHICH REQUIRED FOR A STUDENT TO UNDERSTAND DIRECT AND INDIRECT TAXATION.
STUDENTS STUDYING B.COM AND M.COM WILL BE BENEFITED .

VARIOUS FORMS OF INCOME TAX ,BASIC KNOWLEDGE OF GST PPT WHICH REQUIRED FOR A STUDENT TO UNDERSTAND DIRECT AND INDIRECT TAXATION.
STUDENTS STUDYING B.COM AND M.COM WILL BE BENEFITED .

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Gst and its implications

  1. 1. Dr.(CA) Subrahmanya Bhat.K.M CharteredAccountant Associate Professor Shree Damodar College of Commerce & Economics Margao- Goa GST and Its Implications Sunday, April 8, 2018
  2. 2. What is GST? ONE NATION: ONE TAX
  3. 3. What is GST? ‘G’ – Goods ‘S’ – Services ‘T’ – Tax “Goods and Service Tax (GST) is a comprehensive tax levy on manufacture, sale and consumption of goods and service at a national level. GST is a tax on goods and services with value addition at each stage having comprehensive and continuous chain of set-of benefits from the producer’s/ service provider’s point up to the retailer’s level where only the final consumer should bear the tax.” Sunday, April 8, 2018
  4. 4. ROAD TO GST –ROAD TO GST – MILESTONESMILESTONES 4
  5. 5. Road to GST- Milestones  2006, announcement of the intent to introduce GST by 01.04.2010  November 2009 – First Discussion Paper (FDP) released by EC on which Comments were provided by Government of India.  June 2010- Three sub-working Groups constituted by Government of India on:  Business Process related issues.  Drafting of Central GST and model State GST legislations.  Basic design of IT systems required for GST in general and IGST in particular.
  6. 6. Road TO GST- Milestones contd.  March 2011 - Constitution (115th Amendment) Bill introduced in Parliament  November 2012 – Committee on GST Design constituted by EC  February 2013 - Three Committees constituted by EC o Dual Control, Thresholds and Exemptions in GST regime o RNRs for SGST & CGST and Place of Supply Rules o IGST and GST on Imports  March 2013- GSTN Incorporated as Section 25 Company
  7. 7. Road To GST- Milestones contd.  June 2013- Committee constituted by EC to draft model GST Law  August 2013- Standing Committee on Finance submitted Report  April 2014- Committee constituted by EC to examine business processes under GST  December 2014- 122nd Constitutional Amendment bill introduced in Parliament.  .1st July2017 GST Implemented.
  8. 8.  GST is a tax on goods and services with comprehensive and continuous chain of setoff benefits from the Producer’s point and Service provider’s point up to the retailer level.  GST is expected be levied only at the destination point, and not at various points (from manufacturing to retail outlets). It is essentially a tax only on value addition at each stage and a supplier at each stage is permitted to setoff through a tax credit mechanism which would eliminate the burden of all cascading effects, including the burden of CENVAT and service tax.  Under GST structure, all different stages of production and distribution can be interpreted as a mere tax pass through and the tax essentially sticks on final consumption within the taxing jurisdiction.  Earlier a manufacturer needs to pay tax when a finished product moves out from the factory, and it is again taxed at the retail outlet when sold. The taxes are levied at the multiple stages such as CENVAT, Central sales tax, State Sales Tax, Octroi, etc. will be replaced by GST to be introduced at Central and State level. Continued……. Concept of GST
  9. 9.  All goods and services, barring a few exceptions, will be brought into the GST base. There will be no distinction between goods and services.  Under GST, the taxation burden will be divided equitably between manufacturing and services, through a lower tax rate by increasing the tax base and minimizing exemptions.  However, the basic features of law such as chargeability, definition of taxable event and taxable person, measure of levy including valuation provisions, basis of classification etc. would be uniform across these statutes as far as practicable.  The existing CST will be discontinued. Instead, a new statute known as IGST will come into place on the inter-state transfer of the Goods and Services.  By removing the cascading effect of taxes (CST, additional customs duty, surcharges, luxury Tax, Entertainment Tax, etc. ),CGST & SGST will be charged on same price . Concept of GST
  10. 10. Need for GST Introduction of a GST to replace the existing multiple tax structures of Centre and State taxes is not only desirable but imperative in the emerging economic environment. Increasingly, services are used or consumed in production and distribution of goods and vice versa. Separate taxation of goods and services often requires splitting of transaction values into value of goods and services for taxation, which leads to greater complexities, administration and compliances costs. Integration of various taxes into a GST system would make it possible to give full credit for inputs taxes collected. GST, being a destination- based consumption tax based on VAT principle, would also greatly help in removing economic distortions and will help in development of a common national market. Sunday, April 8, 2018
  11. 11. Limitations of old Tax regime Credit of Excise not allowed Credit of CST Not Available (This should relate to interstate supply. An arrow can be shown from wholesaler in KARNATAKA MADHYA PRADESH 1. Cascading Effect of Tax
  12. 12. 2. Multiple Registrations Limitations of current Tax regime : Central Excise
  13. 13. No Entry Tax Entry Tax Value Added Tax @ 4% @ NIL % 3.Lack of Uniformity Limitations of current Tax regime :
  14. 14. Tax structure before GST in India
  15. 15. Tax Structure under GST in India
  16. 16. Subsuming of Existing Taxes
  17. 17. GST Set off Chain
  18. 18.  SGST and CGST for intrastate transaction : In the GST system, both Central and State taxes will be collected at the point of sale. Both components (the Central and State GST) will be charged on the manufacturing cost. This will benefit individuals as prices are likely to come down. Lower prices will lead to more consumption, thereby helping companies.  IGST for Interstate transaction: ‘IGST Model’ will be in place for taxation of inter State transaction of Goods and Services. The scope of IGST Model is that center would levy IGST which would be CGST plus SGST on all inter State transactions of taxable goods and services with appropriate provision for consignment or stock transfer of goods and services.  The GST paid on the purchase of goods and services, to be paid on the supply of goods and services.  There should be no distinction between raw materials and capital goods in allowing input tax credit. The tax base should comprehensively extend over all goods and services up to final consumption point on value addition.  Assessable value for all the taxes will be same. Model of GST
  19. 19. Set off Heads
  20. 20. Salient features of GST... Destination based consumption tax The tax would accrue to the State which has jurisdiction over the place of consumption which is also termed as place of supply. Levied at all stages right from manufacture up to final consumption with credit of taxes paid at previous stages available as setoff.   In a nutshell, only value addition will be taxed and burden of tax is to be borne by the final consumer. Exports would be tax-free and imports taxed at the same rate as integrated tax (IGST) levied on inter-State supply of like domestic products 20
  21. 21. Salient features of GST... (contd.) Tax payers with an aggregate turnover in a financial year up to Rs.20 lakhs would be exempt from tax. For special category states specified in Article 279A, the threshold exemption shall be Rs. 10 lakhs.  Tax payers making inter-State supplies or paying tax on reverse charge basis shall not be eligible for threshold exemption. Small taxpayers with an aggregate turnover in a financial year up to Rs. 150 lakhs shall be eligible for composition levy. 21
  22. 22. Each taxpayer would be allotted a PAN linked taxpayer identification number with a total of 13/15 digits. This would bring the GST PAN-linked system in line with the prevailing PAN-based system for Income tax facilitating data exchange and taxpayer compliance.  The exact design would be worked out in consultation with the Income-Tax Department. Registration under GST
  23. 23. Mandatory Registration (irrespective of threshold)  Persons making inter-State taxable supply  Persons required to pay tax under reverse charge  Casual and non-resident taxable persons  E-Commerce operator /Those required to collect TDS  Persons supplying goods through e-commerce operator  Persons making supplies on behalf of a registered taxable person  Input Service Distributer  Every person supplying online information and data base access or retrieval services from a place outside India to a person in India, other than a registered person
  24. 24. Justification of GST Despite the success of VAT, there are still certain shortcomings in the structure of VAT, both at the Centre and at the State level. A. Justification at the Central Level i. Excise duty paid on the raw material consumed is being allowed as input credit only. For other taxes and duties paid for post-manufacturing expenses, there is no mechanism for input credit under the Central Excise Duty Act. Contd…. Sunday, April 8, 2018
  25. 25. i. adfl ii. Credit for service tax paid is being allowed manufacturer/ service provider to a limited extent. In order to give the credit of service tax paid in respect of services consumed, it is necessary that there should be a comprehensive system under which both the goods and services are covered. iii. The service tax is levied on restricted items only. Many other large number of services could not be taxed. It is to reduce the effect of cascading of taxes, which means levying tax on taxes. Contd… Sunday, April 8, 2018
  26. 26. B. Justification at the State Level i. A major defect under the State VAT is that the State is charging VAT on the excise duty paid to the Central Government, which goes against the principle of not levying tax on taxes. ii. In the present State level VAT scheme, Cenvat allowed on the goods remains included in the value of goods to be taxed which is a cascading effect on account of Cenvat element. iii.Many of the States were continuing with various types of indirect taxes, such as luxury tax, entertainment tax, etc. iv.As tax is being levied on inter-state transfer of goods, there was no provision for taking input credit on CST leading to additional burden on the dealers. Sunday, April 8, 2018
  27. 27. GST Rates Rates: 0%( on essential items, rice/wheat) 5%: ( on items of mass consumption ) 12%/18%:(standard rates covering most manufactured items and Services) 28% : ( on Consumer Durable Goods, Pan masala, tobacco and aerated drinks etc) Basic philosophy behind these rates are that, to the extent possible, the current combined rate of tax levied on individual goods by the Central and the State Governments should be maintained in GST Uniform GST rate not possible at this stage as luxury goods and goods consumed by poorer sections of society cannot be taxed at the same rate  Rates will be notified by Government on
  28. 28. Implications of GST – A Study 1. To study the need of Goods and Service Tax (GST) in India. 2. To study the advantages of Goods and Service Tax (GST) to the Manufactures, traders and society. 3. To study the outcomes of GST in India. 4. To Study on Implications on Implementation of GST in India. Sunday, April 8, 2018
  29. 29. Salient features of GST The GST would be applicable on the supply of goods or services. It would be a single GST on any item out of which 50% will go to Central Govt and 50% will go to State Govt / Union Territory. Central tax (CGST) and State tax (SGST) / Union territory tax (UTGST). The GST would apply on all goods or services or both other than alcoholic liquor for human consumption and five petroleum products. 29
  30. 30. Research Methodology The Researchers used an exploratory research technique based on past literature from respective journals, annual reports, newspapers and magazines covering wide collection of academic literature on Goods and Service Tax. According to the objectives of the study, the research design is of descriptive in nature. Available secondary data was extensively used for the study. Sunday, April 8, 2018
  31. 31. NEED FOR GST IN INDIA Under VAT system, an input tax set-off is given for purchases made only within the State. For example under Goa VAT Act, the dealer can claim the Input Tax Credits towards Out Put tax if the goods are purchased only from the state. If the goods purchased from outside state the dealer cannot claim the Input Tax Credit. Under the State level VAT scheme, CENVAT load on goods has not been removed and cascading effect of that part of tax burden still remains. Further the burden of CST on purchase of inter-state goods which has been reduced from four percent to two percent has not been fully phased out. Sunday, April 8, 2018
  32. 32. Model of GST The dual GST model proposed by the Empowered Committee and accepted by the Centre will have dual system for imposing the tax. GST shall have two components i.e. (i) Central GST (ii) State GST Central Excise duty, additional excise duty, services tax and additional duty of customs (equivalent to excise), state VAT entertainment tax, taxes on lotteries, betting and gambling and entry tax (not levied by local bodies)would be subsumed within GST Sunday, April 8, 2018
  33. 33. GST - Salient Features  It would be applicable to all transactions of goods and service.  It to be paid to the accounts of the Centre and the States separately.  The rules for taking and utilization of credit for the Central GST and the State GST would be aligned.  Cross utilization of ITC between the Central GST and the State GST would not be allowed except in the case of inter-State supply of goods.  The Centre and the States would have concurrent jurisdiction for the entire value chain and for all taxpayers on the basis of thresholds for goods and services prescribed for the States and the Centre.  The taxpayer would need to submit common format for periodical returns, to both the Central and to the concerned State GST authorities.  Each taxpayer would be allotted a PAN-linked taxpayer identification number with a total of 13/15 digits. Sunday, April 8, 2018
  34. 34. Chargeability of Tax under GST It will be replacement of ED and other taxes. There will be two parallel Statutes – one at the Centre and other under the respective State GST Act – governing the tax liability of the same transaction. All the items of goods and services are proposed to be covered and exemptions will be granted to few selected items. After introduction of GST, all the traders will be paying both the types of taxes i.e. CGST and SGST. Sunday, April 8, 2018
  35. 35. Taxable Event Following questions arises: At what point of time, the tax will be levied? Will TE covers both i.e. supply of goods and rendering of services? What will be the nature of TE? Will it not involve new language and terminology? What impact the change in TE can have? GST is proposed to be levied by both the CG and SGs. How will it be defined under CGST and SGST? Sunday, April 8, 2018
  36. 36. Taxable Person It will cover all types of person carrying on business activities, i.e. manufacturer, job-worker, trader, importer, exporter, all types of service providers, etc. If a company is having four branches in four different states, all the four branches will be considered as TP under each jurisdiction of SGs. All the dealers/ business entities will have to pay both the types of taxes on all the transactions. A dealer must get registered under CGST as it will make him entitle to claim ITC of CGST thereby attracting buyers under B2B transactions. Importers have to register under both CGST and SGST as well. Sunday, April 8, 2018
  37. 37. Subsumed of IndirectTaxes The sub-sumation should result in free flow of tax credit in intra and inter-State levels so that unrelated taxes, levies and fees are not be subsumed under GST. Sl. No. Subsumed under CGST Subsumed under SGST 1 Central Excise Duty VAT / Sales tax 2 Additional Excise Duties Entertainment tax (unless it is levied by the local bodies). 3 Excise Duty-Medicinal and Toiletries Preparation Act Luxury tax 4 Service Tax Taxes on lottery, betting and gambling. 5 Additional CVD State Cesses and Surcharges (supply of goods and services) 6 Special Additional Duty of Customs - 4% (SAD) Entry tax not in lieu of Octroi 7 Surcharges 8 Ceses Sunday, April 8, 2018
  38. 38. Alcohol, tobacco, petroleum products are likely to be out of the GST regime. Tax on items containing Alcohol: Alcoholic beverages would be kept out of the purview of GST. Sales Tax/VAT could be continued to be levied on alcoholic beverages as per the existing practice. In case it has been made VA table by some States, there is no objection to that. Excise Duty, which is presently levied by the States may not also be affected. Tax on Petroleum Products: Petroleum and petroleum products have also been constitutionally brought under the GST. However, it has also been provided that petroleum and petroleum products shall not be subject to the levy of GST till notified at a future date on the recommendation of the GST Council. Tax on Tobacco products: Tobacco products would be subjected to GST with ITC. Centre may be allowed to levy excise duty on tobacco products over and above GST with ITC. Taxation of Services: As indicated earlier, both the Centre and the States will have concurrent power to levy tax on goods and services. In the case of States, the principle for taxation of intra-State and inter46 State has already been formulated by the Working Group of Principal Secretaries /Secretaries of Finance / Taxation and Commissioners of Trade Taxes with senior representatives of Department of Revenue, Government of India. For inter-State transactions an innovative model of Integrated GST will be adopted by appropriately aligning and integrating CGST and IGST. Exemption of Goods and Services
  39. 39. Taxes that may or may not be subsumed There are few other indirect taxes that may or may not be subsumed under the GST regime as there is no consensus among States and Centre & States – Purchase tax Stamp Duty Vehicle Tax Electricity Duty Other Entry taxes and Octroi Sunday, April 8, 2018
  40. 40. ADVANTAGES OF GST: Under GST there will be input credit set-off at every stage and this can be used to payment of service tax. CST will be abolished and in the absence of it there is no need to collect it. Many Central and State indirect taxes will be subsumed in GST. There will be uniformity of tax rates in all the states. It may ensure better compliance due to aggregate tax rate reduction. By reducing the tax burden the competitiveness of Indian products in international market is expected to increase. Sunday, April 8, 2018
  41. 41. Rate of Tax  There with be a two-rate structure –a lower rate for necessary items and items of basic importance and a standard rate for goods in general. There will also be a special rate for precious metals and a list of exempted items.  For CGST relating to goods, the States considered that the Government of India might also have a two-rate structure, with conformity in the levels of rate with the SGST. For taxation of services, there may be a single rate for both CGST and SGST.  It will be total of the rate as applicable under CGST & SGST.  It is understood that the Government is considering pegging the revenue neutral rate of GST at a rate between 18% to 22%. This represents the aggregate of CGST and SGST payable on the transaction. However, it may be noted that at this stage, the Government is yet to indicate whether the revenue neutral rate of tax on goods and services would be the same. Sunday, April 8, 2018
  42. 42. What will be out of GST?  Levies on petroleum products  Levies on alcoholic products  Taxes on lottery and betting  Basic customs duty and safeguard duties on import of goods into India  Entry taxes levied by municipalities or panchayats  Entertainment and Luxury taxes  Electricity duties/ taxes  Stamp duties on immovable properties  Taxes on vehicles Sunday, April 8, 2018
  43. 43. Inter-State Transactions of Goods & Services  The existing CST will be discontinued. Instead, a new statute known as IGST will come into place. It will empower the GC to levy and collect the tax on the inter- state transfer of the GS.  The scope of IGST Model is that Centre would levy IGST which would be CGST plus SGST on all inter-State transactions of taxable goods and services with appropriate provision for consignment or stock transfer of goods and services. Contd… Sunday, April 8, 2018
  44. 44. Inter-State Transactions of Goods & Services  The inter-State seller will pay IGST on value addition after adjusting available credit of IGST, CGST, and SGST on his purchases. The Exporting State will transfer to the Centre the credit of SGST used in payment of IGST. The Importing dealer will claim credit of IGST while discharging his output tax liability in his own State. The Centre will transfer to the importing State the credit of IGST used in payment of SGST. The relevant information will also be submitted to the Central Agency which will act as a clearing house mechanism, verify the claims and inform the respective governments to transfer the funds. Sunday, April 8, 2018
  45. 45. OUTCOME OF GST The taxes Centre and State level are being subsumed into GST Keeping in mind the federal structure of India, there will be two components of GST – Central GST (CGST) and State GST (SGST). Both Centre and States will simultaneously levy GST across the value chain. Tax will be levied on every supply of goods and services. Centre would levy and collect Central Goods and Services Tax (CGST), and States would levy and collect the State Goods and Services Tax (SGST) on all transactions within a State. The input tax credit of CGST would be available for discharging the CGST liability on the output at each stage. Similarly, the credit of SGST paid on inputs would be allowed for paying the SGST on output. Sunday, April 8, 2018
  46. 46. Taxable Event
  47. 47. ADMINISTRATION OF GST State Value Added Tax and GST Central Excise and GST: IMPLICATIONS OF GST ON DEALERS Sunday, April 8, 2018
  48. 48. The taxpayer would need to submit periodical returns to both the Central GST authority and to the concerned State GST authorities. ITC credit can also be verified on the basis of the returns filed and revenues reconciled against Challan data from banks. Common standardized return for all taxes (with different account heads for CGST, SGST, IGST) can come into picture. Common standardized Challan for all taxes (with different account heads for CGST, SGST, IGST) can come into picture. Returns under GST
  49. 49. IMPLICATIONS OF GST ON DEALERS In the GST regime, any regular business has to file three monthly returns and one annual return. This amounts to 37 returns in a year. Types of GST Returns Sunday, April 8, 2018
  50. 50. Conclusion  The taxation of goods and services in India has, hitherto, been characterized as a cascading and distortionary tax on production resulting in mis-allocation of resources and lower productivity and economic growth. It also inhibits voluntary compliance. It is well recognized that this problem can be effectively addressed by shifting the tax burden from production and trade to final consumption. A well designed destination-based value added tax on all goods and services is the most elegant method of eliminating distortions and taxing consumption. Under this structure, all different stages of production and distribution can be interpreted as a mere tax pass-through, and the tax essentially ‘sticks’ on final consumption within the taxing jurisdiction.  A ‘flawless’ GST in the context of the federal structure which would optimize efficiency, equity and effectiveness. The ‘flawless’ GST is designed as a consumption type destination VAT based on invoice-credit method. Sunday, April 8, 2018
  51. 51. 51

Hinweis der Redaktion

  • Whether you are manufacturer, trader, dealer, service supplier- all will be considered as same i.e taxpayer. Whether you supply within the same state or anywhere in the country, the rate of tax is same, thereby obviating any need for various forms and border check points which is prevalent today.
  • The Old tax regime is grossly inefficient with breakage of input tax chain at multiple stages resulting in tax being imposed on tax which is commonly termed as cascade of taxes. All this adds to the costs of a product and results in tendency to avoid paying taxes by using all possible means.
  • Multiple laws require multiple compliances and registrations with no interlinkages amongst them leading to silos being created. In many cases, these different governments- Centre, states are trying to tax same transactions.
  • Harmonisation in the different taxation laws of states appears to be missing many a times. Uniformity is lacking while levying VAT or entry taxes in many states. The companies try to take advantage of tax arbitrages leading to decisions being taken on the basis of tax structure rather than on the basis of pure economic reasons. All this leads to inefficiencies in the system.
  • This is a very important feature of GST and needs to be understood fully. The consumption tax is a much more efficient tax. The taxes would move with the goods/services along the supply chain to their place of consumption. At every state, only the value added part will be taxed. This will be achieved by way of multi-stage collection mechanism and simultaneously giving credit of taxes paid at the previous stage.
  • Small taxpayers need to be relieved as the compliance costs as well as compliance complexities in %age terms may be high for them. Therefore threshold limits for registration have been fixed. Besides, composition scheme has been prescribed for small taxpayers wherein they can pay a small fix % age of their turnover and they do not have to keep detailed compliance documents
  • GST Rate schedule shall be notified later.
  • Centre as well as State shall have concurrent powers to levy GST; Both shall levy GST on common set of registered persons; It will be levied on all goods or services except a very few specified transactions which will be out of the ambit of GST. Alcoholic liquor is out of GST by way of an exclusion in the constitution itself. Petroleum products have been kept out temporarily and will be included in GST at a later date to be decided by GST Council.

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