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Dr. Varadraj Bapat
CA., CWA., M.Com., DISA, PhD.
School of Management
Indian Institute of Technology, Mumbai
Teaching Interests: Financial Accounting,
Management Accounting, Indian Economy
Research Interests: Financial Accounting,
Financial Inclusion, Corporate Finance
Others: Yoga, Spirituality, Sanskrut, Bharatiya
Sanskriti, ABVP
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CONTENTS
S. No Topics
I Introduction /Concepts of GST
II Existing & Proposed Tax Structure in India
III Model/Components of GST
IV Benefits under GST
V Applicability & Rate in GST Regime
VI Impact of GST
VII GST Set off Chain & its methodology
VIII Functioning of GST
IX Others Areas of GST
X Key Amendments in Bill
XI Sector Wise Impacts
XII Flaws of the GST Model
XIII Conclusion
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It is a tax on Goods & Services with
comprehensive & continuous Chain of Set off
benefit from producers to retailer point.
In other words, GST is an Indirect tax which is levy
on manufacture, sale & consumption of all goods
& services.
It substitute most of the indirect taxes like excise,
VAT, Service Tax, Entertainment Tax, Luxury Tax,
CVD as well as SAD.
It is based on the VAT principles .
Introduction/Concept of GST

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It is likely be implemented w.e.f 1St April 2017.
It is expected to be levied only at a destination
level/Real Consumption Place not at a various
points.
Taxation power lies with both in the hands of CG as
well as SG also.
There will be no distinction between goods &
services.
After Introduction of GST, all the traders including
manufacturer will be paying both the type of taxes
(CGST & SGST). (Administered by one authority)

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GST leads to immense scope, Opportunities as
well as some challenges also.
Centre is empowered to levy GST on Goods &
Services upon the Production stage, while State
have the power to tax on sale of goods.
 India is proposing to implement dual GST.
GST law would emphasize on voluntary
compliance .
It is a comprehensive levy and envisages tax
collection on both goods and services at the same
rate.
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It subsumes a large no. of central & state taxes
into a single tax.
It is also expected that GST will mitigate the
cascading effect of taxes.
In the mean time, it also helps in terms of
uniformity like in case of chargeability, definition of
taxable services or person, measure of levy, basis
of classification etc.

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Existing Tax structure in India
Existing
Tax Structure
Direct Tax
Income
Tax
Wealth
Tax
Indirect
Tax
Central
Tax
Excise
Service
Tax
Custom
State Tax
VAT
Entry Tax,
luxury tax,
Lottery
Tax, etc.

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Proposed Tax structure in India
Proposed
Tax Structure
Direct Tax
Income
Tax
Wealth Tax
Indirect Tax
= GST
(Except
customs)
Intra- state
CGST
(Central)
SGST
(State)
Inter State
IGST
(Central)

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Model/Components of GST
CGST
(Central GST)
• Replace central Excise
Duty & service Tax.
• Cover Sale transaction
• Administered by CG
• Further it is expected
that the duty and tax
paid on closing stock
would be available as
credit.
• Levied on all intra-state
sale/supplies of goods
or services.
SGST
(State GST)
• Replace State Vat, Entry
Tax, Entertainment Tax,
& Luxury Tax.
• Cover taxing of Services
• Administered by SG
• Rate can be a bit higher
than CGST rate .
• It is expected that the
duty and tax paid on
closing stock would be
available as credit.
• Levied on all intra-state
sale/supplies of goods
or services.
IGST
(Inter-State
GST)
• Levied on all inter –
state supplies of goods
or services which are
sold or transferred.
• Applicable to imports of
goods or services.
• Expected to be equal to
CGST as well as SGST.
• It is expected that the
duty and tax paid on
closing stock would be
available as credit.

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Benefit under GST
Single taxation point.
Uniform tax rate
Common market.
Reduces Transaction cost.
Eliminates the cascading effect of taxes.
Reduces corruption.
Transparency.
Increasing the tax base & raising
compliance.

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Simplified tax laws.
Increase in exports & employments.
GDP Growth -HSBC estimates an 80 basis
point rise in GDP growth over 3-5 years.
NCAER pegs this at 0.9-1
International competitiveness Go Up by about
5%.
Increased FDI
Growth in overall Revenues.
Prevention of unhealthy competition among
states.
Reduction in purchase price.

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Applicability & Rate under GST Regime
 GST on Exports would be zero rated, but on the other hand in “import”
IGST will be levied.
 GST does not apply on Alcohol & petroleum products.
 But in the mean time tobacco products should be in the frame of GST.
 In fact, Gov. Can levy extra % of tax apart from GST .
 Basic threshold limit for Goods & Services shall be RS. 20 Lakh & for
North east Region (NER) Rs. 10.00 Lakh.
 Full exemption is applicable on basic necessities goods like Flour,
rice, pulses, textiles, buildings, education & healthcare etc.
 Gross Turnover of Goods up to Rs. 1.50 cr may be assigned
exclusively to the states.
 Gross Turnover of Services up to Rs. 1.50 cr may be assigned
exclusively to the center.
 Assesse can have an option to pay tax as per composition scheme
or may join the GST law whose turnover is up to Rs. 1.50 cr.
 But, those assesse whose turnover is and above Rs. 1.50 Cr will need
to be within the framework of GST.

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A four-tier structure for Goods and Services Tax (GST)
comprising a lower rate of 6 per cent, two standard rates
of 12 per cent and 18 per cent, and a higher rate of 26
per cent with an additional cess for luxury and demerit
goods were proposed
GST rate on Gold Bullion/Jewelry might be 4%
Around 70 per cent of the taxable base is proposed to be
taxed at either 18 per cent, 12 per cent or 6 per cent, with
more than 50 per cent of the items to be taxed at 12 per
cent or 18 per cent. Ultra-luxury items like high-end cars
and demerit goods like tobacco, cigarettes, pan masala
and aerated drinks, comprising about 25 per cent of the
taxable base, would attract an additional cess over and
above the higher rate of 26 per cent.

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Impact of GST
Tthe total impact of the proposed rate structure on
Consumer Price Index (CPI)-based inflation rate will be (-)
0.06 per cent.
Under the proposed GST rate structure, the inflation
impact on constituents of CPI such as health services, fuel
and lighting and clothing is estimated to be 0.56 per cent,
0.05 per cent and 0.23 per cent, respectively, while for
transport it is estimated at (-) 0.65 per cent, education at (-)
0.08 per cent and housing at (-) 0.09 per cent. Total
revenue collection under the proposed GST structure is
estimated at Rs 8.72 lakh crore (based on 2015-16
estimates).

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SGST
Input
SGST
Output
IGST
Output
IGST
Input
IGST
Output
CGST
Output
SGST
Output
CGST
Input
CGST
Output
IGST
Output
GST Set off chain & its methodology

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Functioning of GST

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Others Areas of GST
 As far as registration decision is concerned, a supplier of Goods & services
would be made when GST is payable.
 Then the supplier would have to necessarily register & he would have no
other option.
 The Place of supply would determine first as to whether the transaction is
in India or Outside India. If it is outside India it would not be liable to GST.
 The POT in GST is the Point of supply of Goods. In case of service , then it
is somehow based on the POT rules of Service tax.
 Under the GST structure , the tax would be collected by the states where
the goods or services are consumed .
 Hence there should be heavy losses for the producer states & so the
center would be required to compensate them for their revenue losses.
 Petroleum products, Alcohols/Liquor , Stamp/Custom duty, Consm.
& Sale of Electricity etc. are not covered under the GST purview.

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 If a company is having four branches in four different states, then all the
four branches will be considered as Taxable Person.
 Importer have to register under both CGST & SGST as well.
 Apart from Export rate, similar benefit may be given to Special Economy
Zone.
 GST paid by exporter on the procurement of Goods & services will be
refunded later on if paid.
 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 taxpayer would need to submit periodical returns to both the central
& state GST authorities.
 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.
 ITC credit can also be verified on the basis of the returns filed and
revenues reconciled against Challan data from banks.

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Key Amendments in GST Bill
Dropping 1% Additional on Inter-State Supply of
Goods.
Full Compensation to States upto 5 Years.
Apportionment of IGST i.e. ( States also shares IGST
amt along with centre)
 IGST term to be replaced with GST on supplies in
the course of inter-state trade or commerce.
Inclusion of CGST & IGST in tax devolution to
states.

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Sector wise impact of GST
After implementation of GST, it seems that there is going to
be a positive impact on various Industry.
Some Glimpse of GST Impact of various Industry :
Automobiles Industry
Rate of Tax is expected b/w 20-22% as compared to 30-
47% in current scenario.
Drive overall demand & reduce cost for end user by about
10%.
Transportation time & overall cost will be reduced.
Cost of Logistics will be curtailed by almost 30-40%.
Key beneficiaries : Maruti Suzuki, Hero MotoCorp, Bajaj
Auto, Eicher Motors, Ashok Leyland

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Consumer Durables
 Reduction of the Price gap between organized & unorganized sector.
 Warehouse/logistics costs will be curtailed.
 Improve the operational profitability by almost 300-400 bps.
Key beneficiaries: Havells, Voltas, Blue Star, Bajaj Electricals, Hitachi
Logistics
 Boost demand for high tonnage trucks.
 Overall reduction in transportation costs.
 Improving growth opportunities for the organized players.
 Facilitate seamless inter-state flow of Goods.
Key beneficiaries : VRL Logistics, GATI Ltd, Blue Dart, Snowman Logistics
Cement
 Tax rate expected to decline to 18-20% as compared to 27-32%.
 Able to save their logistics costs/transportation costs.
Key beneficiaries : ACC, Ultratech, JK Cement, Shree Cement

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Banking & Financial services
 Under GST , effective tax rate is expected to increase to 18-20% as 14% earlier.
 Moderate increase in the cost of financial services like loan processing fees,
debit/credit charges, insurance premium etc.
IT
 Tax Rate is expected to increase to 18-20%.
 Litigation around taxability of canned software will probably end under GST
Regime.
Textile /Garments
 May be negatively impacted in case the output tax rate is high.
 No clarity whether a lower rate will continue in the proposed Tax regime.
 No clarity about the duty drawback benefits.
Key Players : Arvind, Raymond, Page Industries
Media
 Tax rate of around 18-20% as compared to 20-21%.
 Post GST, we expect concessional rate in news & Print sector.
Key beneficiary : Dish TV

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Flaws of the GST Model
 Major flaws of this model is that the local dealers have to pay CGST
in addition to SGST.
 Because of no differentiation between “goods & services” , services
supply within the state would attract SGST at each stage in the
supply chain ,but in the mean time Assesse have to pay CGST also.
 The issue which still needs to be resolved are the revenue sharing
between States & center & a framework for exemption , threshold
limit as well as composition scheme.
 Introduction of GST model could affect negatively (than positively)
to few Industries/sectors.
 Under the GST Model , the state should face heavy losses in terms
of tax collection but they also get compensated on the other hand by
the states.
 Infact some states are of the view that there should not be any time –
frame for compensation scheme.

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• China - 17%
• Indonesia - 10%
• Philippines -10%
• Taiwan (Chinese Taipei) - 5%
• UK -17.5%
• Australia -10%
• France -19.6%
• Germany -16%
• Denmark -25%
• http://www.ey.com/gl/en/services/tax/worldwide-vat--gst-and-sales-tax-guide---rates
No. of Countries : 150 +
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Conclusion
 GST being a dynamic & comprehensive legislation which shall replace most
of the Indirect Taxes of our Country.
 Since it is a major indirect tax reform in India, there would be new legislation
and procedures.
 Most concerns expressed about the implementation of GST can be divided
into 3 categories :
i) Design Issues ii) Operational Issues iii) Infrastructure Issues
 For GST to be effective there should be identical GST laws /procedures
across states as well as the centre.
 Few state Govt. have recently indicated their opposition to the
implementation of GST at the present juncture.
 In the mean time ,those state who are not opposing against the
implementation of GST may want assurances that their existing revenues will
be protected.
 So, it is now universally acknowledged and recognized that the GST , in
whatever form should be introduced at the earliest as a fundamental fiscal
reform measure.
 Now, on June 14,2016, the CG has put the Draft Model GST law on Public
domain.

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 The long delayed GST Bill has finally got the nod of the Rajya Sabha as well as
in Lok Shabha in the 2nd week of August ,2016.
 The Rajya Sabha has unanimously passed the ambitious GST Bill with over 2/3
majority.
 All the Political Party had already given their consent provided their demand
had been considered except AIADMK party.
 The Draft GST model Law shall be referred as the Central/State GST Act, 2016.
 The availability of Draft Model GST Law enables the Trade & Industry to plan
the transition from the existing Indirect tax regime to the GST regime.
 The Government has already missed its pre decided deadline of 1st April 2016,
let’s hope that GST law will be effective from 1st April 2017.
 Further , the Chartered Accountants & the Allied Professionals are going to play
the leading role in helping the business houses as well as corporate also.
 GST will be the best example of cooperative federalism.
 Together we will take India to new heights of progress.
 In Nutshell , it is a biggest tax reform till date in our country.

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 http://www.investorwords.com/4879/tax.html#ixzz3UdtRRLpa
 http://goodsandservicetax.com/gst/showthread.php?79-Executive-Summary-
(Report-of-Task-Force-on-Implementation-of-GST)&goto=nextnewest
 https://www.facebook.com/permalink.php?story_fbid=1605027373065180&id
=1589267554641162
 https://www.facebook.com/permalink.php?story_fbid=1605572476344003&id
=1589267554641162
 http://gstindia.com/
 https://in.answers.yahoo.com/search/search_result?fr=uh3_answers_vert_g
s&type=2button&p=what%20is%20GST%20in%20india
 http://www.quora.com/What-is-the-difference-between-a-GST-and-a-VAT#
 https://www.google.com/webhp?sourceid=chrome-
instant&ion=1&espv=2&ie=UTF-
8#q=difference%20between%20vat%20and%20gst
CA Gaurav Mishra
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