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  1. 1. HABIBULLAH & CO. CHARTERED ACCOUNTANTS © Habibullah & Co. Chartered Accountants, India For Private Circulation Only OVERVIEW OF INDIAN GOODS AND SERVICE TAX Introduction of GST would be a very significant step in the field of indirect tax reforms in India. By amalgamating a large number of Central and State taxes into a single tax and allowing set-off of prior-stage taxes, it would mitigate the ill effects of cascading and pave the way for a common national market. While the process of amending the constitution to enable the introduction of GST has been slow, the other processes for introduction of GST have been proceeding at a reasonable pace. As a result, a few months back, the Government had released documents outlining four processes under GST regime, i.e. registration, payment of tax, returns and refunds, for giving industry an insight in the thinking of the Government towards GST. Taking a further step towards introduction of GST, the Government has released the draft model GST law for public comments. The model law provides a common draft of Central GST (CGST) Act and State GST (SGST) Act. The model law also includes the draft of Integrated GST (IGST) Act as well as draft GST Valuation Rules. For the consumers, the biggest gain would be in terms of a reduction in the overall tax burden on goods, which is currently estimated at 25%- 30%. Introduction of GST would also make Indian products competitive in the domestic and international markets. Studies show that this would instantly spur economic growth. With the 101st Constitution Amendment Act coming into force on 8th September, 2016 and notification of the GST Council on 15th September – the road to GST rollout is clear. Indian Government is keen on introducing GST the biggest indirect tax reform, with effect from 01 April 2017. UNDERSTANDING INDIAN GST GST is a value-added tax levied at all points in the supply chain with credit allowed for any tax paid on input acquired for use in making the supply. It would apply to both goods and services in a comprehensive manner, with exemptions restricted to a minimum. In keeping with the federal structure of India, it is proposed that GST will be levied concurrently by the Centre (CGST) and the states (SGST). It is expected that the base and other essential design features would be common between CGST and SGST across SGSTs for individual states. Both CGST and SGST would be levied on the basis of the destination principle. Thus, exports would be zero-rated, and imports would attract tax in the same manner as domestic goods and services. Inter-state supplies within India would attract an Integrated GST (aggregate of CGST and the SGST of the destination State). In addition to the IGST (Integrated GST), in respect of supply of goods, an additional tax of up to 1% has been proposed to be levied by the Centre. Revenue from this tax is to be assigned to origin states. This tax is proposed to be levied for the first two years or a longer period, as recommended by the GST Council. GST has been envisaged as an efficient tax system, neutral in its application and distribution attractive. The advantages of Indian GST are:  Wider tax base, necessary for lowering tax rates and eliminating classification disputes  Elimination of multiplicity of taxes and their cascading effects  Rationalization of tax structure and simplification of compliance procedures  Harmonization of center and state tax administrations, which would reduce duplication and compliance costs
  2. 2. HABIBULLAH & CO. CHARTERED ACCOUNTANTS © Habibullah & Co. Chartered Accountants, India For Private Circulation Only  Automation of compliance procedures to reduce errors and increase efficiency Destination principle The GST structure would follow the destination principle. Accordingly, imports would be subject to GST, while exports would be zero-rated. In the case of inter-state transactions within India, State tax would apply in the state of destination as opposed to that of origin. Taxes to be subsumed GST would replace most indirect taxes currently in place such as: (i) taxes currently levied and collected by the Centre: a. Central Excise duty b. Duties of Excise (Medicinal and Toilet Preparations) c. Additional Duties of Excise (Goods of Special Importance) d. Additional Duties of Excise (Textiles and Textile Products) e. Additional Duties of Customs (commonly known as CVD) f. Special Additional Duty of Customs (SAD) g. Service Tax h. Central Surcharges and Cesses so far as they relate to supply of goods and services (ii) State taxes that would be subsumed under the GST are: a. State VAT b. Central Sales Tax c. Luxury Tax d. Entry Tax (all forms) e. Entertainment and Amusement Tax (except when levied by the local bodies) f. Taxes on advertisements g. Purchase Tax h. Taxes on lotteries, betting and gambling i. State Surcharges and Cesses so far as they relate to supply of goods and services Taxation under Central GST (CGST) and State GST (SGST) The Central GST and the State GST would be levied simultaneously on every transaction of supply of goods and services except on exempted goods and services, goods which are outside the purview of GST and the transactions which are below the prescribed threshold limits. Further, both would be levied on the same price or value unlike State VAT which is levied on the value of the goods inclusive of Central Excise. How will IT be used for the implementation of GST? For the implementation of GST in the country, the Central and State Governments have jointly registered Goods and Services Tax Network (GSTN) as a not-for-profit, non-Government Company to provide shared IT infrastructure and services to Central and State Governments, tax payers and other stakeholders. The key objectives of GSTN are to provide a standard and uniform interface to the taxpayers, and shared infrastructure and services to Central and State/UT Governments. GSTN is working on developing a state-of-the-art comprehensive IT infrastructure including the common GST portal providing frontend services of registration, returns and payments to all taxpayers, as well as the backend IT modules for certain States that include processing of returns, registrations, audits, assessments, appeals, etc. All States, accounting authorities, RBI and banks, are also preparing their IT infrastructure for the administration of GST. There would no manual filing of returns. All taxes can also be paid online. All mis-matched returns would be auto-generated, and there would be no need for manual interventions. Most returns would be self-assessed.
  3. 3. HABIBULLAH & CO. CHARTERED ACCOUNTANTS © Habibullah & Co. Chartered Accountants, India For Private Circulation Only About Us Habibullah & Co. (HCO) is a professional services firm providing audit, assurance, tax, financial advisory and consulting services to a wide range of publicly traded and privately held companies, guided by core values including competence, honesty and integrity, professionalism, dedication, responsibility and accountability. At HCO, the interests of our clients are paramount. Our focus on the mid-market means we have a real understanding of the environment in which our clients operate and are ideally placed to help them grow and prosper. Who we are and what we stand for  Established 1962  9 Partners  100 + staff  6 offices across India  International Representation through “Antea- Alliance of Independent Firms”  Member Firm of The Institute of Chartered Accountants of India since 1962  Registered with all major Government Regulators in India Our Services  Accounting and Auditing  Business Setups in India  Tax Compliance, Planning and Management  Transfer Pricing Advisory  Business Advisory Let’s talk For a deeper discussion of how this issue might affect your business, please contact, Managing Partner for International Relations: CA. Vivek Agarwal E: vivek@hcoca.com T: +91-98391-19370 Office in India New Delhi Lucknow Gorakhpur Patna Ranchi Varanasi Mau Associates at Kolkata Mumbai Allahabad Agra Email info@hcoca.com Website www.hcoca.com Follow Us Unsubscribe Reply to this mail with subject “unsubscribe” Disclaimer This presentation is exclusively designed and prepared by Habibullah & Co. and no part of this can be reproduced without consent. While due care has been taken to draft this please obtain professional advice before taking any decision.

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