Insights into proposed GSTN or the IT Structure

1. Ketan Jog | 16.Jun.15
GST in India

2. GST| Part 3 |16.Jun.15| slide 2

3. GST| Part 3 |16.Jun.15| slide 3
Contents
 Quick Re-cap
 What has changed since… December 2014
 Way Forward
 Implementation Matrix
 GST Network

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Recap : Constitutional Authority to levy Taxes
Union List State List Concurrent List
• Income Tax
• Custom Duty
• Excise Duty
• Service tax
• Central Sales Tax
• Stamp duty in respect of
bills of exchange,
cheques, promissory
notes, etc
• Taxes on lands and
buildings
• Excise duty on alcoholic
liquor etc
• Entry tax (Levied by
State)
• Sales Tax
• Road Tax
• Luxury Tax
• Stamp duty in respect of
documents other than
those specified in the
provisions of List I
• Stamp duties other than
duties or fees collected
by means of judicial
stamps, but not
including rates of stamp
duty
Taxes levied under Current authority of the Constitution

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Re-cap : Course of Events
 Existing Tax system was sought to be replaced by a Single Tax called GST as
recommended by Kelkar Committee in 2003.
 But…Single GST concept was rejected in favor of a DUAL GST – One for the
Centre (CGST) and other for State (SGST).
 It has now become CGST, SGST and IGST & Addl IGST!!!. IGST is Integrated
GST on Inter State Transactions. Addl IGST is @ 1% for upto 2 Years.
 Finance Minister, Shri Arun Jaitley presented the Constitution Amendment Bill
(CAB) in the Loksabha on 19.Dec.14, which now provides for “Concurrent
jurisdiction for levy & collection of GST by the Centre & the States”.
 CAB was passed by Lok Sabha in Budget session on 6.May.15, but Rajya Sabha
referred it to Select Committee, which is due to comment on the bill in Monsoon
Session.

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Re-cap : Constitutional Setup : as per Proposed CAB
By Union By States
By Both Union &
States
• Income Tax
• Custom Duty
• Excise Duty
• Service tax
• Central Sales Tax
• Stamp duty in respect of
bills of exchange,
cheques, promissory
notes, etc
• Interstate sale of Goods
& Services (IGST)
• Excise on Petrol, Crude,
Diesel, ATF, Tobacco
products.( ? Notified
Date ?)
• Taxes on lands and
buildings
• Excise duty on alcoholic
liquor etc
• Entry tax (Levied by
State)
• Sales Tax
• Road Tax
• Luxury Tax
• Stamp duty in respect of
documents other than
those specified in the
provisions of List I
• On all Goods & Services
except Alcoholic Liquor
(CGST and SGST)
• Stamp duties other than
duties or fees collected
by means of judicial
stamps, but not
including rates of stamp
duty
Taxes that will be levied under authority of the Constitution

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Re-cap : Definitions
 Goods & Services Tax : Article 366A (Clause 12A) of the Constitution of
India :
means any tax on supply of goods or services or both except taxes on the
supply of the alcoholic liquor for human consumption.
On the following, GST will be levied wef date rec
 Services : Article 366A Clause (26A) of Constitution says “Services”
means anything other than goods.
 Goods : means every kind of movable property other than actionable
claims and money; and includes stock and shares, growing crops, grass,
and things attached to or forming part of the land which are agreed to be
severed before sale or under the contract of sale.

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Re-cap : Basic Concepts
 Tax on domestic consumption.
 No differentiation between Goods and Services.
 Tax leviable at each point of sale or provision of service.
 Input Tax Credit is available at every stage.
 Treats whole country as a single jurisdiction.
 Uniform Tax rates across the whole jurisdiction.
 No distinction in Tax rates on Imported or Domestic Goods.
 Single Tax jurisdiction allows ease of allowing Input Tax Credit.
 Destination based tax for interstate transactions (IGST)- ultimate tax will be
collected by the state in which goods are finally consumed.

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Re-cap : How will the Tax look on an Invoice
■ Supply within State:
■ Supply from One State to Another
■ Exports
– The Base for both CGST and SGST is same – no tax on tax
– Tax Rate is assumed 10%
– Revenue Neutral Rate as worked out earlier : 12% (2005)
Basic value charged for supply of goods or services 10,000
Add: CGST @ 10% 1,000
Add: SGST @ 10% 1,000
Total price charged for local supply of goods or services 12,000
Basic value charged for supply of goods or services 10,000
Add: IGST @ 20% 2,000
Add: Additional IGST @ 1% 100
Total price charged for interstate supply of goods or services 12,100
Basic value charged for supply of goods or services 10,000
Add: CGST SGST IGST NIL Nil
Total price charged for export of goods or services 10,000

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Re-cap : Set Off or Input Tax Credit
Nature of Input Tax Can be utilized for payment of
CGST
(Amount goes to CBEC)
CGST
IGST
SGST
(Amount goes to State)
SGST
IGST
IGST
(Amount goes to CBEC)
CGST
SGST
IGST
Central Government to act as a Clearing House & transfer the funds across States

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Re-cap : Benefits
• Reduction in the number of taxes at the Central and State level.
• Decrease in effective tax rate for many goods.
• Removal of the current cascading effect of taxes
• Reduction of transaction costs of the taxpayers through simplified tax
compliance
• Increased tax collections due to wider tax base and better compliance
Govt Expects Tax Collections to increase by 90K Crores

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What has changed since… December 2014
 Lok Sabha has passed the GST CAB
 Finance Minister has stated in LS the Tax Rate will be much lower than 25%.
 Rajya Sabha has referred it to “Select Committee”.
 Select Committee is expected to decide on
 Addl IGST – If it is really necessary
 Place of Supply Rules
 Revenue Neutral Rate (RNR) – effective GST Rate

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Way Forward
• Monsoon Session of Parliament to commence in July, in which Rajya
Sabha is expected to Approve the CAB.
• After CAB passage in Rajya Sabha, atleast 15 States have to ratify it
in their respective State Legislative Assemblies.
• Then, President shall give his assent for enactment.
• GST Council to be formed within 60 Days of Enactment of CAB.
• GST Law & Rules to be announced by Centre & States and to be
opened for Public Opinion.
• GST Network (IT Infrastructure) for handling GST to be introduced.

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Implementation Structure
Activity Responsibility
Registration,
File Returns,
Tax Payments
Tax Payer
Registration Acceptance,
Acceptance & Return Consolidation
Challan Reconciliations
Matching of Input Tax Credit
Preparing MIS for Govt & Public
Helpdesk and Facilitation Centres
GSTN
(IT Infrastructure
for facilitating
GST)
Assessment, Audits and Law Enforcement
Refunds
Dispute Resolution
Tax Authorities
Tax Payments & Reconciliations Banks & RBI
Tax Payer and Tax Authorities are expected to Interact only THRU GSTN

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GSTN : Objectives
■ Clear IT Migration Strategy to GST
■ Simplicity for Tax Payers
■ Respect Autonomy of the States
■ Uniformity of Policy Administration across the whole Country
■ Enable digitization of the whole chain
■ Reduce tax Leakages
■ Leverage current IT Investments made by States
■ Common File Formats
NSDL is the Implementing Agency selected by the Government
to roll out GSTN

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GSTN : Workflow
 Registration : Single PAN based registration number to be issued to all Tax
Payers. A registration number can be extended to “States” on request.
 Returns Filing : Accept Tax Returns and proceed with Preliminary Processing
 Returns filed will be forwarded to CBEC; If States desire (in cases they do not have
required Infrastructure), Returns will be forwarded to States as well.
 Harmonized System of Nomenclature to be implemented for Goods, in line with GATT.
 “Business Rules Engines” to refer to Tax Rates, Revenue Sharing Rules etc in Returns.
 Challan Matching with Tax Returns & Input Tax Credit Reports
 Tax paid under IGST by the selling dealer in the Exporting State will be available
as ITC to the Purchasing Dealer in the Importing State.
 Info uploaded by Tax Payer will flow to CBEC, States and later CBDT, MCA.

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GSTN Data Capturing Structure

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GSTN “Tax Boosters”
Type of Fraud In System Checks
Fraudulent Invoice Matching with Data uploaded
Improper Input Tax Credit Matching with Data uploaded
Fraudulent Use of “Exempt” Rules Business Rules Engine Validation
False Payment Proof Matching with E-Payments
Unrecorded Sales Data Mining
Misuse of Composition Data Mining
Wrongful Application of Lower Tax Rate Data Mining
Under-Invoicing declaration Data Mining
Non-Existent Dealers Data Mining
GSTN to have “Intelligent Deterrents” to check Frauds
Results of these Tax Boosters to be forwarded in due course
for Audits, Appeals, Refund Processing

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QUESTIONS & COMMENTS?
Interactive

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THANK YOU!!