RAJASTHAN STATE CONFERENCE

RAJASTHAN STATE CONFERENCE

Theme
New Era of Opportunities for Company Secretaries

Presentation on

Goods and Services Tax

By
Saturday , 23rd July , 2016 Dr. Sanjiv Agarwal
@Jaipur FCA, FCS,ACIS
(UK)

© Dr. Sanjiv Agarwal

1
 GOODS AND SERVICE TAX

This Presentation covers :

• Indian Economy – An Overview
• Taxation in India- Power to Tax
• Current Tax System/ Structure
• GST – Need, Objectives and Basics
• Models and Features of Constitution Amendment Bill
• New concepts of CGST, SGST & IGST
• Credit chain under GST-Input Tax credit
• GST- Proposed Legal Framework
• Salient features of Model GST Law
• Concept of Revenue Neutral Rate (RNR)
• Advantages / Disadvantages of GST
• Challenges in Implementation of GST
• Professional Opportunities in GST

2
 INDIAN ECONOMY – AN OVERVIEW

• India’s economy is the 7th largest economy in the world and fastest
growing even in today’s global recession.

• Growth rate @ 7.6% in 2015-16; growth expected > 7.6% in 2016-17

• May grow > 7 percent in Financial Year 2017

 7.3% as per IMF
 7.5% as per Moody’s
 7.4% as per OECD

• Global economy had a slower growth @ 3.1% in 2015

• Service sector growth @ 9%

• Tax – GDP ratio at 10.7% in 2016 and pegged at 10.8% in 2017 ;

almost flat in last 5 years

3
 TAX-GDP RATIO AT A GLANCE

4
 GDP GROWTH RATES AT A GLANCE

5
 INDIAN ECONOMY – AN OVERVIEW

• Growth driven by domestic demand

• Disposable incomes, food, lifestyle – growth triggers

• Central Excise(40%), Customs(30%) and Service tax(30%) are major

contributors of Indirect Taxes

• Tax revenue growth in 2016 @17percent, pegged at 11.7% in Financial

Year 2017

• Agriculture, services and industry are 3 major sectors

• Services play a major role in GDP with manufacturing sector still at 17%
despite Make in India

• Sectors where growth is faster than the economy itself – financial

services, communication, hospitality, professional services etc.

6
 SHARE OF SERVICES IN GDP

7
 TAXATION IN INDIA - POWER TO TAX

• Taxation governed by Schedule VII of Constitution of India

• India has a three- tier federal structure to levy and collect taxes

 the Union Government,

 the State Governments including urban/rural local
bodies
 Concurrent List

• Presently goods are liable to VAT/ Excise / Customs duty while

taxable services attract service tax.
• Certain transactions subject to both - VAT and Service tax
• Efforts being made to revamp the direct tax structure - (Wealth
Tax Act, 1957 scrapped, Committee working on the same)
• Efforts to bring in a single indirect tax – GST proposed

8
 TAXONOMY OF INDIAN TAXATION
TAXATION POWERS OF UNION
• Income Tax (1961)
• Excise Duty (1944)
• Custom Duty (1962)
• Service Tax(1994)
• Central Sales Tax(1956)
• Stamp Duty
• Specified Cesses
9
– on income, except agricultural
income
– on goods manufactured
– on imports
– on specified services
– on inter-state sale of goods
– on 10 specified instruments
- on specified items
 TAXONOMY OF INDIAN TAXATION

TAXATION POWERS OF STATES

VAT / Sales Tax - on sale of goods, other than newspapers

Stamp Duty - on other than 10 specified instruments
Tax - on agricultural income
Toll Tax - on utilities
Specified Cesses - on specified items
Other Taxes - on
– Land and buildings
– Entry of goods in local Area (Entry Tax or
Octroi)
– Consumption or sale of electricity, Vehicles
– Luxuries including taxes on entertainment,
Betting and gambling, Alcoholic Liquor,
Narcotic Drugs and Opium

10
 PRESENT INDIRECT TAX STRUCTURE
IN INDIA

11
 Indirect Taxes : Budget Estimates
(Rs. in crores)
2015-16 (RE) 2016-17 (RE)

Excise Duty 284142 318670

Service Tax 210000 231000

Customs Duty 209500 230000

SBC 3750 10000

KKC - 5000

Clean Energy Cess - 26148

Infrastructure Cess - 3000

13 Cesses yielding < Rs. 50 crore scrapped (EC, SHEC, Salt, Mica, Iron, Mangeese,
Chrome Ore, Lime Stone & dolomite, Cine workers, Textiles etc).

12
 INDIRECT TAX REVENUE – AT A
GLANCE

13
 DRAWBACKS OF CURRENT TAXATION
SYSTEM

• Confusion / lack of clarity / interpretational issues

• Lack of trust between assessee and revenue – Valuation/
Classification/ Exemption
• Complexity and lack of consistency in provisions
• Hidden tax on exports, no state tax on imports
• Cascading effect
• Narrow assessee base
• High transaction costs
• High compliance costs
• Too much of litigation and disputes
• Lack of harmony and varying inter - state practices :
Turnover/Exemption
• Corruption

14
 RECENT IMPROVEMENTS IN TAX
STRUCTURE

• Replacement of the single-point State sales taxes by the VAT in all

of the States and Union Territories.

• Gradual reduction in the Central Sales Tax rate (will be scrapped

in GST regime)

• Introduction of service tax by the Centre and substantial

expansion of its base over the years.

• Rationalization of the Cenvat credit system

• Electronic platform

• Self regulatory tax regime-Self Assessment

• Dispute resolution measures (VCES,2013; IDRS,2016)

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 What is Goods

‘Goods’ as defined in clause (25) of the section 65B of Finance Act,

1994 means –

• every kind of movable property other than actionable claim and

money;

• and includes securities, growing crops, grass, and things attached to

or forming part of the land

• which are agreed to be severed before sale or under the contract of

sale

(Defined differently for GST)

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 What is Service

Prior to 01.07.2012

• The term ‘Service’ was not defined in erstwhile law (upto 30.6.2012)

• The term ‘taxable service’ was defined under Section 65(105)

• Each taxable service and definitions related to meaning of service

were defined [Clause (a) to (zzzzw)]

• Around 120 definitions were in place

• W.e.f. 1.7.2012, ‘service’ has been defined in Section 65B(44)

17
 What is Service

W.e.f 01.07.2012

‘Service’ defined in clause (44) of the section 65B of Finance Act,

1994 and means –

• any activity

• For a consideration

• carried out by a person for another and

• includes a declared service (66E)

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 Concept of Taxability of Service

SERVICE FOR A CONSIDERATION

10 DECLARED SERVICES
E: Employee
M: Money
A: Actionable claim E - MAGIC TEST
G: Goods
I: Immovable property
C: Court Fee
1. Non -
Taxable 2. Negative
territory list (15)
(POPS)
3. Exemptions
(63)

Taxable
19
 What is GST ?

A common tax

on

Goods Services

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 What is GST ?

‘G’ – Goods
‘S’ – Services
‘T’ – Tax
•Goods and Service Tax (GST) is a comprehensive tax.
•GST is an indirect tax in lieu of tax on goods (excise) and tax on service
(service tax).
•GST is just like State level VAT which is levied as tax on sale of goods.
•GST will be a national level value added tax applicable on goods and
services.
• GST is a tax on goods and services with value addition at each stage
having comprehensive and continuous chain of set-of benefits from the
producer’s/ service provider’s point up to the retailer’s level where only
the final consumer should bear the tax.”

21
 WHY DOES INDIA NEED GST

• No free Inter- state trade & commerce

• Suffers from discriminatory taxes , undue preferences , trade and

non - trade barriers , entry tax , octroi and check posts .

• A complex tax structure with multiple rates of taxes - Multiple taxes

across the supply chain

• As a developing country, India needs a transparent & unambiguous

tax policy / tax structure-to take reforms forward

• Fewer and lower taxes would actually yield more revenue rather than
having stiff taxes coupled with tax evasion

• GST will operate on a negative list i.e. all goods and services will be
subject to GST unless specifically exempted

22
 WHY DOES INDIA NEED GST

• Increased tax collections due to wider tax base and better compliance

• GST encourages an unbiased tax structure that is neutral to business

processes, business models, organization structure, product substitutes
and geographical locations

• High transaction cost in the hands of the tax payers/ businesses

• Improvement in international cost competitiveness of indigenous goods

and services.

• Enhancement in efficiency in manufacture and distribution due to

economies of scale

• To be used as a weapon against corruption

contd. . .

23
 WHY DOES INDIA NEED GST

• Nature of complexities i.e. classification to valuation , taxability, place of supply

etc exist in the present structure.
Some of such burning issues are:
 Excise on MRP
 Excise, VAT and Service Tax on IT Software,
 VAT & Service tax on:
Works Contracts
Right to Use
Composite Contracts such as AMC transactions
Restaurant Services
IPR Services
• Export of Services
• Issues in Cenvat Credit

contd. . .
24
 WHY DOES INDIA NEED GST

Cascading Effect
• Multiple taxes
• No inter-tax set off
• Even no set-off in some taxes
• Tax on Tax
• Increased cost of products / services
• Higher compliance costs
• In GST, many taxes will get subsumed and tax cascading will
be eliminated on credit of inward taxes across the board

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 WHY DOES INDIA NEED GST

Cascading Effect

• Central Sales Tax (CST) on inter-state sales, collected by the origin

state for which no credit is allowed by any level of government –
being phased out now

• Real estate transactions kept outside the scope of both VAT and
CENVAT

• Exempt sectors are not allowed to claim any credit for the CENVAT
or the service tax paid on their inputs

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 MOVING TOWARDS GST

27
28
 THE CONSTITUTIONAL AMENDMENT BILL,
2014
(Pending in Rajya Sabha)

• Enables introduction of GST

• GST defined
• Service defined
• Integrated GST
• Inter-state sale of goods to attract additional tax
• Import of goods / services
• Alcohol for human consumption
• Petroleum products and tobacco
• Role of GST Council
• Compensation to States

29
 KEY FEATURES OF CONSTITUTIONAL
AMENDMENT BILL

122nd Amendment Bill introduced in LS on 19.12.2014

– Concurrent jurisdiction for levy of GST by the Centre and the

States –proposed Article 246A

– Authority for Centre to levy & collection of IGST on supplies in

the course of inter-State trade or commerce including imports –
proposed Article 269A

– Authority for Centre to levy non-vatable Additional Tax – to be

retained by originating State

30
 GST AS PROPOSED

NEW DEFINITIONS

• “Goods and services tax” means any tax on supply of goods, or

services or both except taxes on the supply of the alcoholic liquor for
human consumption. [Proposed Article 366(12A)]
• To be extended to crude, diesel, petrol, natural gas and ATF from a
date to be notified on recommendation of the GST Council
• “Goods” includes all materials, commodities, and articles. [Existing
Article 366(12)]….inclusive definition
(Concept of ‘excisable goods’ to go )
• “Services” means anything other than goods. [Proposed Article
366(26A)]…depends upon definition of goods
• Supply defined in Section 3 of Model GST Law

31
 Objectives of GST

• Main objective of Goods & Service Tax(GST) would be to eliminate the

cascading effect of taxes on production and distribution cost of goods
and services.

• The exclusion of cascading effect i.e. tax on tax will significantly

improve the competitiveness of original goods and services in market
which leads to beneficial impact to the GDP growth of the country.

• It is felt that GST would serve a superior reason to achieve the

objective of streamlining indirect tax regime in India which can remove
cascading effect in supply chain till the level of final consumers.

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 THE GENESIS OF GST

Tax on Tax on
Goods Services

GST

Central Inter State

GST State GST GST
(CGST) (IGST) (SGST)

33
 FEATURES OF GST

• Dual GST will comprise –

 The Central GST and the State GST
 Central GST and State GST, in themselves, would comprise
both the goods tax and the services tax
 Both taxes to operate in parallel and to apply on every
transaction
 Supply of goods/services to be the taxable event (not on
manufacture/sale/provision)
 Rules for determining the place and time of supply of goods and
services to be formulated
• Both Central GST and State GST leviable on intra-State supply of
goods and services
• Integrated GST or IGST (an aggregate of Central GST and State
GST) leviable on inter-State supply of goods and services and
Imports

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 PROPOSED MODEL OF GST

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 FEATURES OF GST

• Exports to be zero rated, with benefit of refund of input taxes

• Integrated GST (IGST) mechanism proposed for cross border

transactions (imports)

• Basic Customs Duty to continue in the existing form

• Counter-veiling Duty (CVD) and the Additional Duty of Customs

(ACD) currently levied on imports as part of customs duties to be
replaced by Integrated GST

36
 FORM OF PROPOSED GST

Multiple One for CGST at Centre

Statutes One in each State for SGST

Intra State  Dual GST: Centre (CGST) and the States (SGST) concurrently levying and
collecting the tax
Supply

 Integrated GST i.e. IGST (CGST+SGST) on supplies in the course of inter-

Inter State
state trade or commerce to be levied and collected by the centre
Supply
 1% additional tax by centre (for originating state for 2 years (extendable))
 Imports deemed to be supply in the course of inter-state trade or commerce

37
 ILLUSTRATION OF GST

38
 INDIRECT TAXES PROPOSED TO BE
SUBSUMED IN GST

39
 TAXES WHICH MAY NOT BE SUBSUMED IN
GST

Central Taxes/Levies State Taxes/Levies

Basic Customs Duty Taxes on Liquors

Excise Duty on Tobacco Toll Tax/ Road Tax

products
Export Duty Environment Tax

Specific Central Cesses (eg, Oil Property Tax

Cess)
Taxes on petroleum products Tax on Consumption or Sale of
Electricity - Not certain
Stamp Duties Stamp Duty - Not certain

Purchase tax on food grains

Taxes on motor spirit & high speed

diesel

40
 DESTINATION BASED CONSUMPTION TAX
- CONSEQUENCES

41
 Basics of GST

Proposed Indirect Tax Structure

Intra State Excise and Local VAT &

Service Tax other taxes
Taxable will be known will be known
Supply as CGST as SGST

Inter State CST will be

Approx. Sum
replaced by
Taxable Integrated
total of CGST
and SGST
Supply GST (IGST)

Import From In place of

CVD and SAD,
Outside Custom Duty
IGST will be
India charged

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 CENTRAL GST (CGST)

• CGST on both , goods and services

• To be levied , controlled and administered by Union .
• Levied by the Centre through a separate statute on all transactions of
goods and services made for a consideration.
• Exceptions would be exempted goods and services, goods kept out of
GST and transactions below prescribed threshold limits.
• CGST would be levied across the value chain.
• Rates for CGST would be prescribed appropriately reflecting revenue
considerations and acceptability.
• Two Governments will combine their various levies into single GST.
• Proceeds to be shared between Centre and States .

43
 STATE GST (SGST)

• Levied by the States through a statute on all intra-state

transactions of goods and services made for a consideration.

• State GST would be paid to the accounts of the respective State.

• Exceptions would be exempted goods and services, goods kept out

of GST and transactions below prescribed threshold limits.

• Basic features of law such as chargeability, taxable event, measure,

valuation, classification would be uniform across these Statutes /
States as far as practicable.

44
 Integrated GST ( IGST )

• On inter-state and cross border transactions

• Centre would levy and collect IGST in lieu of CGST and SGST.

• To be shared between Centre / States

• Single IGST rate

• IGST would be levied on all inter-State transactions of taxable

goods and services with appropriate provision for consignment or
stock transfer of goods and services.

• Inter-State dealer will pay IGST after adjusting available, input

IGST, CGST and SGST on purchases.

Contd….
45
 Integrated GST ( IGST )

• The seller in State - A will pay the IGST to the Centre.

• While paying IGST, the seller will adjust against available credit
of IGST, CGST and SGST.

• State Government - A will transfer the credit of SGST used by the

seller for payment of IGST to the Centre.

• Buyer in State - B can avail credit of the IGST charged.

• Buyer in State - B can use the IGST to discharge output tax

liability in his own State.

• Centre will transfer credit of IGST used for payment of SGST to

State Government - B.
Contd…
46
 IGST – ILLUSTRATION

• Maharashtra seller selling to Karnataka buyer for Rs.1,00,000/-.

• IGST payable assuming an 8% rate is Rs.8,000/-.
• Rs.8,000/- can be paid by adjusting
– Inter-State purchases (IGST) Rs.3,000/-
– Local purchases (CGST) Rs.1,500/-
– Local purchases (SGST) Rs.1,500/-
– Cash payment of Rs. 2000/-
• Since dealer has used SGST of Maharashtra to the extent of
Rs.1,500/-, Centre has to transfer Rs.1,500/- to Maharashtra
Government.
• IGST of Rs.8,000/- is availed as credit by Karnataka buyer.
• Karnataka dealer sells the goods at Rs.2,00,000/- attracting CGST of
say Rs.16,000/- and SGST of Rs.16,000/-.
• If IGST of Rs.8,000/- is used to pay the SGST then Karnataka
Government has to transfer Rs.8,000/- to the Centre.

47
 CREDIT CHAIN UNDER GST –
INPUT TAX CREDIT (ITC)

48
 CREDIT CHAIN UNDER GST –
INPUT TAX CREDIT (ITC)

49
 CREDIT CHAIN UNDER GST

TO BE
OFFSET IN CENTRAL GST STATE GST INTEGRATED GST
SAME CREDIT CREDIT CREDIT
ORDER
1 Central GST Liability State GST Liability Integrated GST Liability

2 Integrated GST Liability Integrated GST Liability Central GST Liability

3 _ State GST Liability

Entities may need to maintain Separate IGST Credit Chain for each
State individually

Additional 1% tax is also not Cenvatable

50
 CENVAT CREDIT MATRIX

TAX TYPE TAX TYPE WHETHER RANKING

(INPUT) (OUTPUT) POSSIBLE
CGST CGST YES 1
CGST SGST NO N.A
CGST IGST YES 2
SGST CGST NO N.A
SGST SGST YES 1
SGST IGST YES 2
IGST IGST YES 1
IGST CGST YES 2
IGST SGST YES 3

51
 GST Draft Law – Things you must know

• GST applicable on ‘supply’

• GST payable as per time of supply

• Determining Place of Supply could be the key

• Valuation in GST

• Input tax credit in GST

• Inter-State supply of goods for consideration to attract additional

tax

• There would be 33 GST laws in India

• Rate of GST is not yet specified in the draft GST law

52
 GST DRAFT LAW-MEANING OF SUPPLY

Supply of goods or services shall include :

• lease or disposal, and
• Importation of services
• Supply as per Schedule-I (supply without consideration)
• In relation to 'supply' for the purpose of GST, following points may
be noted -
• supply shall be goods and / or services
• supply should be made or agreed to be made
• supply should be for a consideration
• supply should be made by person
• supply should be made in the course of or furtherance of business
• supply shall include importation of service, irrespective of whether
for consideration or not and whether in the course of or
furtherance of business or not.
• supply shall include supply as per Schedule-I made without a
consideration

53
 GST DRAFT LAW-MEANING OF SUPPLY

Matters to be treated as supply without consideration (Schedule I)

• Permanent transfer/disposal of business assets.
• Temporary application of business assets to a private or non-
business use.
• Services put to a private or non-business use.
• Self supply of goods and/or services.
• Assets retained after deregistration.
• Supply of goods / services by a taxable person to another
taxable or non-taxable person in the course or furtherance of
business.

54
 SALIENT FEATURES OF MODEL GST LAW

• The Model GST law consists of:

• 162 + sections divided into 25 Chapters along with 4 schedules

• Rules relating to Valuation under GST
• Draft Integrated GST Act (IGST) consisting of 33 sections divided
into 11 Chapters.
• Different dates may be appointed for different provisions of this
Act

55
 SALIENT FEATURES OF MODEL GST LAW

• All forms of 'supply' of goods and services such as sale, transfer,

barter, exchange, license, rental, lease and import of services of
goods and services made for a consideration within the state will
attract CGST (central levy) and SGST (state levy).

• On inter-state supply of goods, IGST shall be applicable.

• GST would be applicable on 'supply' of goods and services.

56
 SALIENT FEATURES OF MODEL GST LAW

Key Features of the Model GST

• Eligibility to Register
If the aggregate turnover of a dealer is over Rs. 9 lakh/annum, it is his/her
duty to get registered under this law. The cap for dealers in the North-east is
Rs. 4 lakh.

• Taxable Person
The person registered under this law is only liable to pay tax if his aggregate
turnover in a financial year is over Rs. 10 lakh. Such a cap for the North-east
is Rs. 5 lakh.

• Place of registration
The place of registration should be place from where the goods or services
are supplied. This helps with virtual marketplaces, mainly e-commerce.

• Migration of existing taxpayers from GST

Every person already registered under the extant law will be issued a
provisional certificate of registration. This certificate shall be valid for a
period of six months, giving time to make the changes in their model and
furnish the required information, before the final certificate is provided.

57
 SALIENT FEATURES OF MODEL GST LAW

Key Features of the Model GST

• GST compliance rating score
Every taxable person shall be assigned a GST compliance rating score. The GST
compliance rating score shall be updated periodically and intimated to the taxable
person. This will be a part of public domain.

• Taxable Event
Supply activities such as sale, transfer, barter, exchange, license, rental, lease or
disposal made or agreed to be made for consideration are all taxable events.

• TDS
When the total value of a contractual supply exceeds Rs. 10 lakh, the individual
Departments may be required to deduct the taxes at source.

• TCS on online sales of goods & service

All e-commerce establishments should collect tax at the time of credit/payment.
The amount should be deposited to the respective state government, within ten
days of the end of the month in which the product/service was supplied.

58
 SALIENT FEATURES OF MODEL GST LAW

Key Features of the Model GST

• Valuation Rules
Valuation Rules shall apply to the supply of goods and/or services under the
IGST/CGST/SGST Bill

• Returns
Dealers shall be required to furnish monthly / annually / final returns as the case
may be. These returns are for different periods / or frequencies / at intervals.

• Refund
A person can claim refund of any tax and interest by making an application in
that regard to the prescribed officer of IGST/CGST/SGST within two years.

• Payment
Any tax, interest, penalty, fee, etc., shall be paid via internet banking or by using
credit/debit cards or NEFT or RTGS. This amount shall be credited to the
electronic cash ledger of dealer.

• Transitional provisions
These will ensure smooth migration to GST.
59
 IT PLATFORM FOR GST

Objectives of GSTN

• Integration of the common GST Portal with the existing tax

administration systems of the Central/State governments and other
stakeholders.
• Provide common PAN based registration, enable returns filing and
payment processing for all states on a shared platform.
• Facilitation, implementation and set standards for providing services to
the taxpayer through common GST portal State Governments and other
stake holders;
• Build efficient and convenient interfaces between with tax payers to
increase tax compliance;
• Carry out research, study best practices and provide training to the
stakeholders.

60
 REVENUE NEUTRAL RATES (RNR)

Recommendation of GST Rates Committee

• Revenue Neutral Rate (RNR) refers to that single rate, which

preserves revenue at desired (current) levels.

• No revenue loss to exchequer

• It is a given single rate that gets converted into a whole rate

structure.

• Committee has chosen to recommend a range for the RNR rather

than a specific rate.

Contd…
61
 REVENUE NEUTRAL RATES (RNR)

Recommendation of GST Rates Committee

• Recommended the Revenue Neutral Rate (RNR) in the range of 15
percent to 15.5 percent (combined rates for centre and states)

• Rate which will give at-least the same level of revenue, which the
Centre and States are presently earning from Indirect taxes.

• Committee recommends a two-rate structure –

 Lower rates - around 12 per cent (Centre plus states)
 Standard rates - between 17 and 18 per cent

• States want higher RNR but it may not be desirable

62
 LIKELY RATE OF GST

18% 13th Finance Commission

16% Revenue Neutral Rate (RNR)
27% Talked about (Suggested by NIPFP)

16% Ideal rate as per Industry

18% Rate suggested by Council
?? Actual Rate to be decided by GST Council
(Select Committee has recommended a
band )

63
 REVENUE NEUTRAL RATES (RNR)

Summary of Recommended Rate Options (in percent)

RNR Rate on "Low" rate (goods) "Standard" "High/Demer
precious rate it" rate or
metals (goods and Non-GST
services) excise
(goods)
Preferred 15 6 12 16.9 40
4 17.3
2 17.7
Alternative 15.5 6 12 18.0 40

4 18.4
2 18.9

64
 ADVANTAGES OF IMPLEMENTATION OF
GST IN INDIA

• GST is expected to drive consumption led growth with less tax burden
on consumers.
• GST is expected to contribute to 'make in India' and 'ease of doing
business in India' initiatives of the Government.
• GST addresses the issue of multiplicity of taxes.
• All the rates under to GST will be uniform and the place of supply rules
will guide the GST India portal to apportion the tax.
• It will boost up economic unification of India; it will assist in better
conformity and revenue resilience; it will evade the cascading effect in
Indirect tax regime.
• Elimination of cascading effect.
• It will reduce the tax burden for consumers. In GST system, both
Central and state taxes will be collected at the point of sale. Both
components (the Central and state GST) will be charged on the
manufacturing cost.

Contd…..
65
 ADVANTAGES OF IMPLEMENTATION OF
GST IN INDIA

• It will result in a simple, transparent and easy tax structure.

• It will result in a good administration of tax structure;
• It may broaden the tax base;
• It will increase tax collections due to wide coverage of goods and
services.
• It will result in cost competitiveness of goods and services in Global
market.
• It will reduce transaction costs for taxpayers through simplified tax
compliance.
• It will result in increased tax collections due to wider tax base and
better conformity.

66
 BENEFITS TO ASSESSEES

• 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

• Conceptual clarity (Goods Vs. Services)

67
 BENEFITS TO EXCHEQUER/GOVT

• Simpler Tax System

• Broadening of tax base

• Improved compliance & revenue collections (tax booster)

• Efficient use of resources

• Curb on revenue leakage

• Because of tax credit , cash transactions will be less

68
 How proposed GST will be better than
existing Taxes?

• Dual model GST under federal structure i.e. CGST & SGST

• Elimination of cascading effects of the taxes

• CGST & SGST will be charged on same price

• Set-off relief fully captured

• Destination based tax structure

• Free movement of goods & service through out the country

• Applicable to all transactions of Goods & Services with some

exceptions

Contd…..
69
 How proposed GST will be better than
existing Taxes?

• Input tax credit (ITC) for the CGST/SGST could be utilized for
payment of CGST/SGST, but cross utilization not allowed, except
IGST
• Inter State GST (IGST) –New model for Inter-state transactions
• Refund for unutilized ITC will be discouraged
• Threshold limits may be on higher side
• Common Returns formats for CGST & SGST
• States will be empowered to Tax Services
• It will also improve the International cost competitiveness of native
Goods and Services.

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 LIKELY DISADVANTAGES OF GST

• Total GST rate may be higher

• Vote weightage of States will be linked to population rather than any

economic criteria. Census is done once in 10 years.

• Discrimination (1 percent additional tax)

• May not be efficient for sectors like banking, tourism, advertisement,

business promotion etc.

• Education, tourism etc will also not benefit but contribute more to
taxes

• Dispute resolution going to be tough with poor governance. Disputes

in GSTC to be resolved by GSTC only

• Small states may remain aggrieved.

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 GST - CHALLENGES

• GST : Game changer or name changer

• Everyone agrees that GST is necessary but cannot agree on scope form
and content of GST

• No one tries to understand enormity of GST – from financial accounting

to tax impact to supply chain to business models IT infra (ERP) etc.

• Should subsume all taxes, surcharges, cesses, levies and royalties

• Confusion on what taxes would continue alongside GST

• GST ought to apply to all goods and services with nil or very few
exemption / exceptions

• Legislative challenges

• Political matrix

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 GST - CHALLENGES

• What happen to all check posts / entry barriers / staff ? Will these be
dismantled / relocated ?
• IT Infrastructure - Is IT backbone fully ready and in place
• Treatment of accumulated fiscal benefits
• Additional tax of upto 1 percent for inter state trade for
manufacturing states will create distortions
• Dispute resolution mechanism still fragile – Council to decide
• GST may create inflationary pressure in first few quarters as costs to
be passed on to customers
• Rapid increase in assessee
• Place of supply to hold the key to success of GST
• Effective credit mechanism
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 INDUSTRY’S PERSPECTIVES & CONCERNS

• All declaration forms (Form F, C) should be abolished

• Monitoring through system based controls
• Full set-off of Input tax credit to the assessee / entity, based on principle of
business cost and expenditure
• Immediate credit of stock transfers, without one-to-one co-relation.
• Refunds, if any, should be automatic through system based controls. Full
set-off : a question mark
• Any change post implementation should be uniform by all states not
piecemeal.
• Bar on increase in rates, imposition of new taxes by states
• Uniform legislation, forms, rules, rates, compliance requirements.
• Set-off should be on entity / concern basis.
• Building of IT backbone
• Multiple state jurisdictions.

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 TRADER’S PERSPECTIVES & CONCERNS

• Dialogue with Trade & Industry and all other stake holders

• Industrial inputs, Capital goods to be at lower rate

• List of exempted goods – specific/common across states

• Stock transfers should be exempted

• Monitoring through system based controls

• Lesser paper work/compliances

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 When GST will Come ???

• The GST will come into force once the 122nd Constitutional
Amendment Bill is passed by Parliament
• Enacted into an Act when 50 percent of the states ratify it.
• GST Act to be legislated by Union
• GST Act to be legislated by States
• IGST Act to be legislated by Union
• Rules to be framed
• GST to be implemented from a common notified date ??

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 Professional Opportunities in GST

Professional Practice Advance Ruling Employment with

Areas(planning, Representation Corporates- dealing
compliances) with Indirect taxes

Advisory Services Professional Representation in

Opportunities in Tribunals / Courts
GST

Client Knowledge
Retainerships for GST awareness Management &
Compliances Training

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 Role of Professionals

• For Tax planning

• Audit of books of Accounts/Compliance Audit
• Tracking GST development
• Review of draft legislation and impact analysis
• Industry Consultation for improvement in business process
• Interpretation of legal provisions and procedures
• Implementation assistance and Post implementation support
• Developing systems and procedures/MIS
• Advisory and consulting services
• Certification Works
• Procedural Compliances
• Record Keeping
• Return verification/filing of returns
• Negotiations with Suppliers
• Representations before Authorities
• Appellate Work
• Providing opinions / clarifications
• Due diligence on revenue leakages/ cenvat

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 Role of Professionals

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 GST KNOWLEDGE – IN THE OFFING

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 GST KNOWLEDGE – IN THE OFFING

• GST-Background, Concepts and overview

• GST Models Across the world and GST model for India
• Brief Comments on First discussion Paper on GST and report of
Thirteenth Finance Commission on GST
• Principles of GST law
• Procedural Aspect under GST Registration, Payment, Returns,
Assessment, Revision etc.
• Transition to GST-Likely challenges and way forward
• Information Technology Infrastructure and GST
• GST Audit
• Impact of GST
• Decoding of 122nd Constitutional Amendment Bill, 2014
• Issues of compensation to States for Central Sales Tax (CST) phasing
out

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 ICSI INITIATIVES IN THE PAST

• Background material / literature on GST

• Specialized course on Indirect Tax
• Series of webinars held in May / June 2016
• Core group constituted on GST
• GST corner feature started in chartered secretary journal
• August issue of journal deducted to GST
• GST being emphasised in all major programmes
• Next series of webinars in the offing.

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 “Absorb what is useful ,
discard what is not ,
add what is uniquely your own .”
-Bruce Lee

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 THANK YOU
FOR
YOUR
PRECIOUS TIME
AND
ATTENTION
Dr. Sanjiv Agarwal
FCA, FCS, Jaipur
asandco@gmail.com
sanjivservicetax@gmail.com
www.gstcounsellor.com

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