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Goods & Service Tax

Timir Baran Chatterjee, Sr.


Executive Vice President &
Company Secretary
DIC India Limited
12- Oct- 2009
Reforms in the
offering
GST - Meaning
GOODS AND SERVICE TAX(GST) is a
comprehensive value added tax on Goods
and Services. It is collected on value added
at each stage of sales and purchase in the
supply chain without state boundaries. It
would integrate all taxes currently levied in
India by central and state governments on
goods and services like excise duty, service
tax, state VAT/Sales tax, entry tax/octroi, state
excise duty, countervailing custom duty,
luxury tax, tax on consumption/sale of
electricity, entertainment tax etc.

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Present Tax Structure
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Union State Municipal
VAT
Luxury Tax
Entertainment Tax
Motor Vehicles Tax
Electricity Duty
State Excise
R&D Cess
Service Tax
Central Excise
Customs Duty
Toll Tax
Passenger Tax
Octroi/ Entry Tax
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Federal GST; Option I
GOODS &
SERVICE TAX
FEDERAL Merits Demerits
Union Administered
Unified Tax Rate
Common market
Replaces all taxes
Free from cascading
Industry favoured
Union dependency
Politically unviable
Damage to basic
structure
Seizure of State
autonomy
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Dual GST; Option II- PROPOSED
GOODS &
SERVICE TAX
Federal & State Central GST to cover State GST to cover
1. Excise Duty
2. Service tax
3. Additional
Custom duty
1. VAT
2. Entertainment tax
3. State excise
4. Luxury tax
5. Entry tax
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Dual GST- Certain Positive Features (Expected)
State GST to subsume all state related taxes ( VAT, Entertainment Tax, State
Excise Duty, Electricity Duty, Entry Tax etc)- Single Legislation for State GST
Central GST to subsume all Central Taxes ( Central Excise Duty, CVD, Special
Additional Duty, Service Taxes, Cess etc)- Single Legislation to cover all
Central Taxes.
Central Sales Taxes to be phased out
Input Tax Credit available on inter state supplies- Both Central and State GST
Concept of C Form and other Central Forms are expected to be phased out;
Single Return to cover both Central and State GST
At present certain items are subjected to both VAT, Excise and Service Tax-
Such anomalies are expected to be non-existent;
No concept of Works Contract Tax under GST system
No reversal of Input Tax Credit for Branch Transfer


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GST; likely model
RNR to be between 16% to 18%
Dual GST; administered & monitored by Centre & State
4 rate structure; zero rates for goods of special importance , special rates for
gold & sliver (say 1%) , Merit rates (8% - 10%), Demerit rates(16% - 18%)
Single rate of GST for services
Invoice to carry one GST, split into CGST & SGST
Interstate sales to be taxed
Taxed by originating State but revenue accrues to destination State
Destination State to give input credit to CGST & SGST
Taxable event supply of goods & services
State to levy tax on services; only after introduction of GST
Place of supply Rules; to be framed by Centre & be applied uniformly
Differential rates & exemptions would be gradually phased out
GST; Challenges & Issues
The ideal model for Indian scene
Constitutional changes
The optimum RNR
Shifting from originating to destination
based / Consumption based tax model
Revenue deficit of poor states/producing
states with low consumption-
Place of supply/ Service Rules
Place of Supply Rules for telecom ,
broadcasting , IT , BPO, Transport services
etc

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GST; Challenges
Conducive common market
Exemption/ exclusion list
Compensate states for revenue loss:
Tax credit on exempted goods
GST Housing & Construction sector
GST Rail sector
GST Valuation Branch & depot
transport
GST on Food items
GST non profit sectors & Public bodies
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GST Expectations
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(a) Withdrawal of Check Post
(b) Limited number of rates of taxes
(c) Abolition of Works Contract Tax
(d) Input Tax credit may be available on Invoice system like Cenvat and VAT
(e) Adjustment of Input tax credit on Central GST against output tax of State
GST and Vice versa
(f) Cross utilization of credits between Goods and Services
(g) Carry forward of accumulated Input Tax Credit (VAT) and Cenvat Credit
under GST system on the day of introduction of GST
(h) Exporters may be allowed to procure materials without payment of GST-
Abolition of Refund System.
(i) Existing exemptions be continued;

GST Expectations (Contd)
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j) The tax benefits already enjoying by the EOU, SEZ, Soft ware Technology Park
would continue to be available in the GST regime as well.
k) All area based exemptions schemes already in force may be converted into post-
tax cash refund schemes.
l) Introduction of self assessment system under dual GST;
m) Single Return system to cover both Central and State GST.
n) Simple legislation for both State GST and Central GST-. Uniform legislation for
State GST
o) Special Additional Duty (SAD) on imports may be replaced by State GST and
Central GST
p) Dispute Resolution: The disputes with regard to questions of facts at the first stage
may be undertaken by the respective authority. Further stages of appeal and issues
relating to questions of law may be dealt with by a joint entitry comprising the
Centre and states. This would ensure uniformity and fairness in decision making.


GST Expectations (Contd..)
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q) Units in Special Economic Zones may be relieved of the burden of all embedded
taxes, whether central or states. Supplies made to SEZ units may also be kept outside
the purview of GST.
r) There should be a common and uniform threshold limit of exemption for small tax
payers applicable to all states.
s) There should be a common and uniform threshold limit of exemption for availing
composition scheme amongst all states.
t) The authority to amend the common exempted list and the common composition
scheme, uniform threshold limit may be rest with a joint authority of Central and
State Governments to ensure that no single State or Central Government amends
either to these unilaterally.
u) There should be a common and uniform list of exempted goods;
v) Octroi and Entry tax should be brought within the ambit of GST


GST Expectations (Contd.)
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w) Taxes on Tobacco products should be subjected to GST with Input Tax Credit
facility;
x) Alcoholic beverages should be brought under GST with ITC benefits;
y) Petroleum products should be subjected to GST with ITC benefits. If there is specific
administrative problem, all products excepting Crude, Motor spirit and HSD, all
petroleum products including ATF should be brought within the limit of GST.


Thank You
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Every reform is like a mask
made to unfold, the existing
and
breeding to get unfolded
by another