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A study on GST and the areas of its impact in banking & financial services

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A study on GST and the areas of its impact in banking & financial services

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A brief study on GST, sectoral impacts, winners and losers of GST, rates of GST, Taxes subsumed by GST, areas of impact in banking and financial services, advantages of GST, challenges of GSt

A brief study on GST, sectoral impacts, winners and losers of GST, rates of GST, Taxes subsumed by GST, areas of impact in banking and financial services, advantages of GST, challenges of GSt

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A study on GST and the areas of its impact in banking & financial services

  1. 1. A STUDY ON GST AND ITS IMPACT ON BANKING AND FINANCIAL SERVICES Prepared by: Swapna.M
  2. 2. TIMELINE OF GST
  3. 3. 2000 • Initiating discussions on GST • Appointment of Empowered committee 2004 • Recommendations for GST to replace existing Tax regime 28 Feb 2006 • Appearnce of GST in Budget speech • Preparation of road map for GST 28 Feb 2007 • Submission of GST road map model to Govt. 10 Nov 2008 • Empowered committee submits a discussion paper inviting debate.
  4. 4. Feb 2010 • Launching of computerisation of commercial taxes. 29 Mar 2011 • Bill referred to standing committee on finance Nov 2012 • Government resolve to introduce GST Feb 2013 • Lapse of bill Aug 2013 • Cabinet approval for the constitution amendment bill
  5. 5. 18 Dec 2014 • Amendment Bill in the Lok Sabha 19 Dec 2014 • Bill passed by Lok Sabha 6 May 2015 • Bill presented in Rajaya Sabha 3 Aug 2016 • President signed 8 Sep 2016 • GST council constituted 1 July 2017 • GST implemented
  6. 6. Winners • Cement • Media • Automobiles • E- Commerce • FMCG • Tech Losers • Airlines • Insurance • Telecom GST
  7. 7. PRESENT TAX STRUCTURE
  8. 8. GST FRAMEWORK IN INDIA • Dual GST: Central GST (CGST) and State GST (SGST) to operate concurrently on supply of goods and services • Inter-State transactions subject to Integrated GST (IGST) which will be aggregate of CGST and SGST • Taxable event of ‘supply’ as against manufacture (excise), sales (VAT) and service (service tax) • Existing industrial incentives to be continued by way of ‘refund’ mechanism • Cross utilization of CGST and SGST credit will not be permitted except under IGST • Exports and supplies to SEZ to be zero-rated • Imports would be subjected to IGST on destination principle; SGST component of IGST to be appropriated by State where supplies get consumed
  9. 9. GST-ONE DIRECT TAX FOR THE WHOLE NATION • comprehensive, multi-stage, destination-based tax that will be levied on every value addition.
  10. 10. BENEFITS OF GST 1. Easy compliance 2. Uniformity of tax rates and structures 3. Removal of cascading 4. Improved competitiveness 5. Gain to manufacturers and exporters 1. Simple and easy to administer 2. Better controls on leakage 3. Higher revenue efficiency 1. Single and transparent tax proportionate to value to goods and services 2. Relief in overall tax burden
  11. 11. TAXES SUBSUMED BY GST Note: 1) Alcoholic beverages for human consumption are proposed to be kept out of the purview of GST 2) GST on petroleum products would be levied from a notified date recommended by the GST Council 3) * Includes Excise duty levied under Medicinal & Toilet Preparations (Excise Duties) Act, 1955
  12. 12. TAXES THAT REMAIN
  13. 13. DUAL GST WITHIN STATE
  14. 14. IGST
  15. 15. What impact GST will have on pricing of products as compared to current scenario?
  16. 16. GST TERMS • Taxable person • GSTIN • Reverse Charge • Mixed supply and composite supply • Continuous supply • GST compliance rating • GST Suvidha provider (GSP)
  17. 17. GOODS AND SERVICE TAX NETWORK GSP as a term has been tossed by GSTN (Goods and Service Tax Network) which is a private company in which central and state government collectively holds 49.5% stake. GSTN has been set up with the sole objective of development and maintenance of IT infrastructure for Goods and Services Tax implementation in India. This is in-line with Digital India initiative for a paperless tax compliance regime and brings more ease in doing business.
  18. 18. GSP- GST SUVIDHA PROVIDER
  19. 19. GST RATES
  20. 20. GST IMPACT ON SERVICE SECTOR
  21. 21. GST IMPACT ON INFRASTRUCTURE SECTOR
  22. 22. TECHNOLOGY ALIGNMNET
  23. 23. CHALLENGES TO OVERCOME UNDER GST REGIME • Change in business software • GST compliance • Increase in operating cost • Policy change during the middle of the year • Online procedure • Higher tax burden for manufacturing SME’s • No clarity on tax holidays • Disruption to business
  24. 24. POSITIVE ASPECTS OF GST • The main reason to implement GST is to abolish the cascading effect on tax. • The GST is being introduced to create a common market across states, not only to avoid enfeebled effect of indirect tax but also to improve tax compliance. • GST will lead a more transparent and neutral manner to raise revenue. • Price reduction as credit of input tax is available against output tax. • Simplified and cost saving system as procedural cost reduces due to uniform accounting for all types of taxes. Only three accounts; CGST, SGST, IGST have to be maintained. • GST is structured to simplify the current indirect system. It is a long term strategy leading to a higher output, more employment opportunities, and economic boom. • GST is beneficial for both economy and corporations. The reduced tax burden on companies will reduce production cost making exporters more competitive.
  25. 25. NEGATIVE ASPECTS OF GST • GST is being referred as a single taxation system but in reality it is a dual tax in which state and centre both collects separate tax on a single transaction of sale and service. • At present the main Indirect tax system of central Government is central excise. All the goods and commodities are not covered by the central excise and further there is an exemption limit of Rs. 1.50 Crores in the central excise and further traders are not liable to pay central excise. The central excise is payable up to the stage of Manufacturing but now GST is payable up to the stage of sale. • Majority of dealers are not covered with the central excise but are only paying VAT in the state. Now all the Vat dealers will be required to pay “Central Goods and service tax”.
  26. 26. • The calculation of RNR (Revenue Neutral Rate) is very difficult and further Govt. wants to enhance its revenue hence rate of Tax will be a problem. As per the News reports the proposed rate for State GST is 12% and Central GST is 14% Plus Govt. wants to impose 1% CST at the initial stage of GST on the interstate sale of Goods and services. So the normal rate of overall tax will be 26%. This rate is very high comparing to the fact that small and medium Industries are at present not covered by the central excise and most of the Goods such as agricultural products are out of the preview of the Central Excise. • Improvement in the Manufacturing and distribution of Goods and service, increase in exports, various reforms, check on corruption, less Government control are some of the factors which are responsible for the economic growth of the country. A tax system can make a revolution in the economy of the country is “rarest of the rare” thing.
  27. 27. IMPACT OF GST ON BANKING AND FINANCIAL SERVICES
  28. 28. • Place of supply of financial service products • Intermediary services • Interest Income • Free supply of services • Sale of securities • Securitization transaction • Finance lease transactions • Sale of repossessed assets • Input Tax Credit
  29. 29. • Penal/ overdue Interest • Supply to one’s own branch • Centralized registration • Tax Invoice • Bill of Supply (Prepared based on comparison between existed tax regime and model GST law)

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