Goods & Service Tax

Discussion on Challenges &

Synergies
August, 2010

Contents

Present taxation system of India

What is Goods and Service Tax (GST) An Introduction

Silent features on First Discussion Paper on GST

Broad propositions Not covered and clear

Broad propositions - Reasonable clear

Challenges before Industry/Service Sector

Proactive actions Requirement

Areas - Tax Synergy

By CA. Vinay Bhushan

Present Taxation System in India

Multistage taxation on manufacture and distribution

channels
Sectors specific taxes like Entertainment Tax, Luxury Tax,
Textile Cess etc.
Difference types of Cesses like Education Cess, Secondary
& Higher Education Cess etc.
Tax on value additions i.e. Value Added Tax
Tax on Inter State transaction i.e. Central Sales Tax

By CA. Vinay Bhushan

Manufacture Sector - Multiple

Taxes

Central Excise
Duty {8%}
Value Added
Tax { 0%, 4%, 12.5%}

Central Sales
Tax {2%}

Manufacturing
Sector

Educations Cesses
{3%}

R & D Cess
{5%}
Other local taxes like Entry Tax, Octroi, State Cesses etc. are also applicable
By CA. Vinay Bhushan

Service Sector - Multiple

Taxes

Education Cess {2%}

Service
Sector

Service Tax {10%}

Secondary & Higher

Education Cess {1%}

By CA. Vinay Bhushan

Silent features of the Discussion Paper on GST

GST shall have two components

(1) levied by Central Government (Central GST)
(2) levied by State Government (State GST)

GST Will be governed by multiple statutes

Cross utilization of Input Tax Credit (ITC) between Central

GST & State GST would not be allowed

Periodical returns need to be filed with Central and State

authorities separately, tax will be deposited through
separate account heads

PAN- linked taxpayer identification number will be issued

By CA. Vinay Bhushan

Silent features of the Discussion Paper on GST

Threshold Limit:State GST for Goods

& Services INR 1.00 Million
Central GST for Goods
INR 15.00 Million
Central GST for Services
Not provided (however it is
conveyed
that it will be appropriately high)

Compounding / Composition Limit:

Composition/compounding limit INR 5.00 Million with tax

at the
rate of 0.5 %

By CA. Vinay Bhushan

CENVAT CREDIT MECHANISM UNDER PRESENT

TAXATION AND PROPOSED GST
Present Taxation
Scheme

Cross credit of good and

service tax is allowed since
September 10, 2004; But
limited to Central Excise &
Services Tax
Cross credit among VAT
and Service Tax, Central
Excise is not allowed

Credit on inter- State

transactions is not allowed;

Cross Credit of VAT with

CST liability is allowed
By CA. Vinay Bhushan

Proposed GST

Cross credit of good and

Services would be allowed

Cross credit with respect to

Central GST and State GST
transaction would not be
allowed

TAXES WHICH WOULD BE SUBSUMED UNDER THE

PROPOSED GST
State Taxes

Central Taxes

Central Excise Duty

Additional Excise Duty
Service Tax
Additional Customs Duty
(CVD)
Special Additional Duty of
Customs (SAD)
Surcharges and Cesses

VAT /Sales Tax

Entertainment Tax
Luxury Tax
Tax
on
Lottery,
betting & Gambling
State
Cesses
and
Surcharges
Entry Tax

GST

CGST

IGST

By CA. Vinay Bhushan

SGST

Broad Propositions- Not Covered and not Clear

GST rates are not disclosed

Valuation mechanism of Goods and Services
Place of provision of Services or place of receipt in case of
services are not clear
Taxable event- whether on receipt basis or on receivable
basis
No discussion on Stamp duty on Immovable property

By CA. Vinay Bhushan

Broad propositions - Reasonable clear

Cross Credit among the CGST & SGST- Not allowed

Three type of taxes- CGST, SGT & IGST
No change for Liquor, Petroleum Industry

By CA. Vinay Bhushan

Challenges & Proactive Actions before

Industry/Service Sector

Business Restructuring:

Phasing out of CST

Change in tax rates of goods and services
Logistics, Transaction model etc.

Location Based Exemptions

Export Obligations

Change in ERP Systems

Training of Middle Management Team

By CA. Vinay Bhushan

Areas - Tax Synergy

Analysis of Tax rates Vs. Pricing Policy, Business Cycle

Warehouse/logistic Vs. Direct Supply
Stock Planning
Backward & Forward integration of business if there is
change in tax rates of Inputs or output

By CA. Vinay Bhushan

How Tax Managers/Consultants can add

value

Mapping of current transactions

Mapping of flow of good and services
Ascertain current tax cost

Impact Analysis and what if analysis

Assessment of impact of GST on draft legislation
Key structuring/changes in business operations
Identify possible alternative business model
Potential actions to mitigate adverse GST effect (if any)

Final Impact Analysis

Implementation Assistance
By CA. Vinay Bhushan

How Tax Managers/Consultants can add

value

Implementation Assistance

Transition Stock Planning

Registration under new legislation/s
Maintenance of records as per new formats
Manner of computation of Credit and tax liability
Invoice Formats
Changes in ERP/accounting system

By CA. Vinay Bhushan

THANK YOU

By CA. Vinay Bhushan