1. GST- GOODS AND SERVICE
TAX
Constitution (122nd
Amendment) Bill, 2014
2. INTENDS TO CREATE A
HARMONISED SYSTEM OF
TAXATION.
• Significant step; broadening the tax
base
• Mitigate cascading of taxes
• Improving compliance & Reduction in
tax burden
• Spurs economic growth, transparent ,
easier to administer.
3. WHAT IS GST?
• New Form of Indirect Tax
• A tax credit mechanism levied by the central government on supply
of goods and services.
• Will replace all other taxes like service tax, sales tax, octroi, central
and state sales tax imposed under the current multi-tax system.
• All taxes will be unified under a single tax.
WHO BEARS THIS
TAX?
End consumer
WILL THIS BE AN EXTRA
TAX?
It will not be an additional
tax.
4. What is the cascading impact of taxes on landed
costs?
There are multiple incidences on taxes and cascading impact
on the cost of finished goods.
1. Custom duty + Counter Veiling duty + Cess Paid on
imported Goods, Excise duty is further paid on the cost of
manufactured goods.
2. Service Tax on Transportation Sales Tax (CST or Vat) on the
sales of finished goods cost, which also includes the excise
duty elements, sales tax paid on raw materials and service
tax paid on transportation, practically, the sales tax at this
stage gets levied on all the taxes paid in the previous steps.
5. HOW IS THIS TAX REFORM
IMPORTANT?
• Simpler tax structure
• Increased tax revenues
• Competitive Pricing
• Boost to exports
GST is likely to improve tax collections and boost India’s
economic development by breaking tax barriers between
states and integrating India through a uniform tax rate.
6. BENEFICIARIES
Industry, Trade & Agriculture:
More comprehensive and wider coverage of input tax set-off & Service tax
set-off.
Subsuming of several Taxes
Phasing out of CST
Widening of tax base and better tax compliance.
Exporters:
Reduce the cost of locally manufactured goods and services.
Increase the competitiveness in international market.
Reducing the compliance cost.
Consumers
Cascading effects of CENVAT and service tax will be removed with retailer’s
point. Burden of tax on goods would, in general, fall under GST and that would
benefit the consumers.
7. FEATURES OF THE BILL
• Applicable on supply of goods or services
• Dual GST with the Centre and the States simultaneously levying it
on a common base. Central GST (CGST) & State GST (SGST).
• An Integrated GST (IGST) levied on inter-State supply (including
stock transfers) of goods or services. This would be collected by
the Centre so that the credit chain is not disrupted. 1% (2years).
Import of goods or services would be treated as inter-State
supplies.
• All key decisions are in hands of GST Council
• Compensation for(100%) 5 years. 75%-50% for Last 2.
8. • CGST, SGST & IGST levied mutually under the aegis of the GST
Council.
• Paid to separate accounts. The Committee on the Problem of Dual
Control, Threshold and Exemptions in GST Regime, report is still
unclear on this matter.
• The taxpayer would need to submit periodical returns to both the
Central GST & State GST Authority.
• A common threshold exemption would apply to both CGST and
SGST. Taxpayers with a turnover below(to be decided) it would be
exempt from GST. A compounding option (i.e.to pay tax at a flat
rate without credits) would be available to small taxpayers below
a certain threshold. The threshold exemption and compounding
scheme would be optional.
• Credit of CGST paid on inputs may be used only for paying CGST
on the output and the credit of SGST paid on inputs may be used
Continued…
9. THRESHOLD
Common for both CGST & SGST except North
eastern states. Same for both Goods and Services.
Inter-State supply- Zero threshold
Threshold calculated on Gross turnover basis of
Supply of goods and services.
It will be All India common threshold and will not
be state wise.
10. Central Taxes Subsumed:
i. Central Excise Duty
ii. Service Tax
iii. Additional Excise Duties
iv. The Excise Duty levied under the
Medicinal and Toiletries
Preparation Active.
v. Additional Customs Duty,
commonly known as Countervailing
Duty (CVD)
vi. Special Additional Duty of
Customs - 4% (SAD)
vii.Surcharges, and
viii. Cesses.
State taxes subsumed:
i. VAT / Sales tax
ii. Entertainment tax (unless it is
levied by the local bodies).
iii. Luxury tax
iv. Taxes on lottery, betting and
gambling.
v. State Cesses and Surcharges in
so far as they relate to supply
of goods and services.
vi. Entry tax not in lieu of Octroi
11. EXEMPTIONS
• Alcohol for human consumption
• Tobacco (excise applicable)
• Petroleum products:- (Date of
recommendation)
High speed diesel
Petrol
Natural gas
Aviation Turbine Fuel
• Electricity
• Real Estate
13. WHICH COUNTRIES ARE WORKING
TOWARDS VAT/GST SYSTEM?
AFGHANISTAN, BAHAMAS, BHUTAN,
KIRIBATI, MARSHALL ISLANDS,
MICRONESIA, PALAU, SAO TOME AND
PRINCIPE, SYRIA.
GULF COOPERATION COUNCIL
(BAHRAIN, KUWAIT, QATAR, SAUDI
ARABIA, OMAN AND UNITED ARAB
EMIRATES).
