Impact of Goods and Services Tax

(GST)

Presentation By,

M.Pavithra., B.Com(R).,

FROM,
Sri Kaliswari College
(Autonomous)
Sivakasi-626130
 Goods and Services Tax (GST)
ABSTRACT:

Goods and Services Tax (GST) is an indirect tax applicable throughout India
which replaced multiple cascading taxes levied by the central and state governments. It was
introduced as The Constitution (One Hundred and First Amendment) Act 2017[1][2], following
the passage of Constitution 122nd Amendment Bill. The GST is governed by a GST Council
and its Chairman is the Finance Minister of India. Under GST, goods and services is taxed at
the following rates, 0%, 5%, 12%, 18%, 28%[2]. There is a special rate of 0.25% on rough
precious and semi-precious stones and 3% on gold.[3]

INTRODUCTION:

The Goods and Services Tax (GST), India's biggest tax reform in 70 years of independence,
was launched on the midnight of 30 June 2017[2] by the Prime Minister of India Narendra
Modi. The launch was marked by a historic midnight (June 30-July 1, 2017) session of both
the houses of parliament convened at the Central Hall of the Parliament.[4]

President Mukherjee & Prime Minister Narendra Modi launching India's most definitive
tax reform since independence, the Goods & Services Tax (GST) at Parliament's Central Hall
on the midnight of 30 June 2017 in a special session.

Prime Minister Narendra Modi delivering a speech on the GST in a midnight session
convened at the Parliament's Central Hall.
History
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and removed. (June 2017)

 The reform process in India's indirect tax regime was started in 1986 by Vishwanath
Pratap Singh with the introduction of the Modified Value Added Tax (MODVAT).[6]
 The Asim Dasgupta committee was also tasked with putting in place the backend
technology and logistics (later came to be known as GSTN in 2017) for rolling out a
uniform taxation regime in the country.
 In 2003, the Vajpayee government formed a task force under Vijay Kelkar to
recommend tax reforms. In 2005, the Kelkar committee recommended rolling out
GST as suggested by the 12th Finance Commission.
 After the fall of the BJP led NDA government in 2004, and the election of a Congress
led UPA government, the new Finance Minister P Chidambaram in February 2006
first mooted for a GST rollout by 1 April 2010. However in 2010, with the Trinamool
Congress routing CPI(M) out of power in West Bengal, Asim Dasgupta resigned as
the head of the GST committee. Dasgupta admitted in an interview that 80% of the
task had been done.

Tax replaced
A single GST replaced several existing taxes and levies which include: central excise duty,
services tax, additional customs duty, surcharges, state-level value added tax and Octroi.[14]

The following taxes will be replaced by the GST:

 Central Excise Duty

 Commercial Tax
 Value Added Tax (VAT)
 Food Tax
 Central Sales Tax (CST)
 Introit
 Octroi
 Entertainment Tax
 Entry Tax
 Purchase Tax
 Luxury Tax
 Advertisement tax
 Service Tax
 Customs Duty
 Surcharges
Effects
The Central Government has proposed to insulate the revenues of the States from
the impact of GST, with the expectation that in due course, GST will be levied on petroleum
and petroleum products. The central government has assured states of compensation for any
revenue loss incurred by them from the date of GST for a period of five years.[19]

BENEFITS OF GST:
To Trade
 Reduction in multiplicity of taxes
 Mitigation of cascading/ double taxation
 More efficient neutralization of taxes especially for exports
 Development of common national market
 Simpler tax regime
 Fewer rates and exemptions
 Distinction between Goods & Services no longer required

To Consumers
 Simpler Tax system
 Reduction in prices of goods & services due to elimination of cascading
 Uniform prices throughout the country
 Transparency in taxation system
 Increase in employment opportunities

IMPACT OF GST:
What will be the impact of GST on high seas sales?

High Seas Sale Transactions (HSS) are exempted u/s. 5(2) of the CST Act, 1956. Under the
GST Regime, the exemption on high seas sale transaction is likely to be available with some
planning. However all the HSS which are at present exempt may not enjoy the exemption
under GST. Especially tax is likely to be attracted either under IGST or CGST/SGST as per
the draft model law for the supplies made from the custom port, custom bond and custom
area considering the location of supplier and place of supply provisions of draft GST model
law.
Explanation I to section 2(c) of the model law speaks that all imports are deemed to be
supplies of goods and/or services made in the course of Interstate trade or commerce. Hence,
the buyer has to bear two taxes i.e. Basic custom duty and IGST (or CGST+SGST) in case of
importation of goods. If importer has imported the goods and the goods while they are lying
in the bonded warehouse are supplied to the contractor then the transaction would attract
IGST if the place of supply is in a different state and a combination of CGST + SGST if the
place of supply is in the same state .
What will be the impact of GST on sale in‐transit?

Sales in transit transactions (SIT) currently enjoy exemption u/s. 6(2) of the CST Act,
1956. The said transactions are commonly known as LR/RR sales transactions. Under the
GST regime such supplies would attract tax either under IGSTor even under CGST/SGST
depending on the location of the supplier and the place of supply, whether in same or in
different states. It is therefore very important to determine the location of the supplier and the
place of supply.

What will be the impact of GST on sale in course of import?

Sale in the course of import is exempted u/s. 5(2) of the CST Act, 1956. As discussed
above, in reply to the first question of this chapter, if supply of goods is completed prior to
their reaching the Indian Territorial waters, the same is exempted under the IGST Law. But
the relief of bringing the goods for specific Indian customer from outside India and claiming
exemption for the subsequent sale as “sale in the course of import” would not be available in
the upcoming era of GST. Therefore the contractor or the contractee will have to consider
additional tax implications in such cases.
Further we expect the final law to define the location of supplier of goods which would
resolve some of the confusions.

What will be the impact of GST on sale in course of inter‐state trade or commerce ?

Under the CST Act, 1956 the key criteria to determine whether the sale of goods is in
the course of inter‐state trade or commerce is the movement from one state to another. If
there is no movement, CST provisions do not come into picture at all irrespective of all other
factors. Further service tax being a central subject does not carry any concept of supply of
service in the course of inter‐state trade or commerce in its present form as irrespective of the
state of consumption, right over the revenue collection remains with the centre.
One big difference under GST is that movement is no more the criteria to determine the
taxability under IGST Act levying GST on inter‐state supplies of goods and/or services.
There are deeming provisions incorporated under the IGST Act which supersede the
requirement of movement of goods.
The key factors under GST to determine the place of supply of goods and of services are
location of supplier and place of supply.

What will be the impact of GST on stock transfer transactions made within state and
outside the state?

The benefit of making stock transfer against form F to another branch within India without
paying any tax may now no more be available under GST regime. The scope of supply
prescribed in section 3 of the draft model law specifically covers transfer by a taxable person
to a taxable or a non‐taxable person without consideration in the course of business as
required to be treated as supply and liable to GST. Therefore, stock transfer made between
two branches of different states would be liable to tax under the GST era. However, supplies
made to a branch within the state without having separate registration number as a business
vertical does not attract GST. The liability to pay GST on stock transfers would negatively
impact the working capital requirement of construction projects which have a long working
capital rotation cycle.

ROLE OF CBEC
 Prominent role as custodian of Centre’s fiscal destiny in relation to indirect taxes
 Role in Policy making: Drafting of GST Law, Rules & Procedures – CGST, UTGST
& IGST Law
 Assessment, Audit, Anti-evasion & enforcement under CGST & IGST Law
 Levy & collection of Central Excise duty on products outside GST – Five specified
Petroleum Products & Tobacco
 Levy & collection of Customs duties
 Developing linkages of CBEC - GST System with GSTN
 Training of officials of both Centre & States

EXISTING INDIRECT TAX STRUCTURE:

CUSTOMS
DUTY

CENTRAL CENTRAL EXCISE

TAX LEVIES DUTY

SERVICE
TAX
 ENTRY TAX
OCTROI

ENTERTAINMENT
TAX

ELECTRICITY
DUTY

LUXURY TAX

VAT

STATE
LEVIES

SCHEDULE OF GST RATES FOR SERVICE AS

APPROVED BY GST COUNCIL
The fitment of rates of services were discussed on 19 May 2017 during the 14 th GST
Council meeting held at Srinagar, Jammu and Kashmir. The council has broadly approved the
GST rates for services at Nil, 5%, 12%, 18% & 28% as listed below.

The information is being uploaded immedietly after the GST Council’s decision and it
will be subject to further vetting during which the list may undergo some changes. The
decisions of the GST Council are being communicated for general information and will be
given effect to through gazette notifications which shall have force of law.
TAX GOODS SERVICES
Fresh meat, Jute, Eggs, Milk, Lodges and Hotel with the tariff
Curd, Natural honey, below Rs.1000, Grandfathering
Vegetables, Flour, News serve that has exempted under
Papers, Printed books, Bangles, GST. Rough precious also
0%
bindi, Handlooms, Horn cores, semi-precious stones will attract
Bone meal, hoofmeal, Palmyra GST rate of 0.25%
jiggery, Drawing books and
Humab hair.
Packaged food items, Apparel Transport services like air and
below 1000 rupees, footwear railways, Small restaurants
below Rs.500, skimmed milk under the 5% category and their
powder, cream, branded panner, main input is petroleum which
5%
frozen vegetables, tea, pizza is outside of GST ambit.
bread, spices, insulin, bio gas,
kites, Agarbatti, revenue or
postage stamps.
Frozen meat products, butter, Non-AC hotels, business class
ghee, fruit juices, sausage, air ticket, State-run lotteries,
Bhutia, Ayurvedic Medicines, Fertilizers, Work Contracts will
12%
Playing cards, Chess board, fall below 12% GST tax slab.
Carom Board, Skimmers, Cake
servers, Spoons.
Sugar, Biscuits, Pasta, Pastries Telecom services, IT services,
and Cakes, Cornflakes, AC hotels that serve liquor,
Swimming pools and Padding branded garments also financial
18% pools, Bamboo Furniture, services will attract 18% tax
Preserved Vegetables, Sauces, under GST.
Instant food mixes, Tissues,
Curry paste.
Chewing gum, Molasses, Hotels with room tariffs above
Chocolate not containing cocoa, Rs.7500, race club betting,
Weighing machine, Pan masala, Private-run lotteries authorized
28% Water heater, Hair Shampoo, by the states, cinema will attract
Hair clippers, Personal use, dye, tax 28% tax slab under GST,
ceramic tiles, Vacuum tubes, 5-star hotels.
Shavers, Paint.
SUGGESTIONS
1. It should be ensured that all states have verbatim same provisions for rates, levy,
administration and procedures. Only negative list or exemptions may vary based on regional
issues.
2. A large number of compliances / returns / reconciliations are proposed. This will
only burden all stakeholders; will make GST inefficient and a regressive tax.

3. Smooth, transparent provision are needed rather than revenue centric provisions.
Traditional provisions should bear this objective.

4. Refund of any credit balance other than for exports is not allowed. This should be
allowed subject to safeguards / limitations.

CONCLUSION
This paper has examined the determination of the optimal threshold value for GST for
imported units arising from internet orders. At the optimal threshold, the marginal cost of
funds from GST is equated to the ratio of the marginal value of the public funds to their
marginal social values, reflecting the value judgements of a decision maker. The marginal
cost of funds allows both for compliance costs and the marginal excess burden of taxation.

REFERENCE
This essay about GST was taken from GST BOOK by, CA Sandesh Mundra.