Tax structure in

india

Before 1st July

After 1st July 2017
2017

Number of Only one

Direct taxes indirect Direct taxes indirect tax:
taxes GST
Old Regime: Indirect Taxes

Excise duty VAT at the

at the time of sales
manufacturing within the
stage. same state.
Service tax
on the
provision of
Import/Export taxable services
CST at the Duty at the in india
time of sales time of imports
from one state into or exports
to another state from India.
Working of Old Regime Of Indirect Taxes
 Working of VAT
(Old Regime Of Indirect Tax)
 Foundation of GST is VAT:
GST is VAT based
VAT as is known as Value Added Tax is a kind
of indirect tax, that is levied on Intra State
sales done at different stages of movement of
goods from the manufacturer to the ultimate
consumers.
Stages of Movement of Goods and System of
Taxing :

First Input for 2nd Input for

Manufacturer manufacturer final product

Finished
Wholesaler Retailer
product

Consumer
VAT : Multi Point Taxing System

 Taxable event in VAT

 Liability of tax
 Incidence of tax
 Impact of tax
 Input Tax Credit
 Benefits of VAT
 Eliminates deficiencies of Sales Tax
 Self Assessment under VAT
 Fall in price
 Simple calculations
 Transparency
 Fairness in the taxation system
 Higher Revenue Growth
 Less chances of tax invasion
 A roadmap to central level VAT
 Self policing mechanism
 Less declaration forms
 Limitations of VAT

 Heavy compliance cost

 Bogus Invoices
 Disadvantageous for lower income group
 No ITC for inter-state purchases
 Acquisition fraud
 Meaning of GST
GST is a well designed value added tax that covers
both goods and services.
Under the GST regime, tax would be levied on the
value addition done at each stage of production and
distribution.
GST is a comprehensive indirect tax which is levied
on supply of goods or services or both which
includes manufacturing, sale and consumption of
both goods and services throughout India.
 GST is a
Consumption/Destination
based Tax
 GST covers all the intermediaries involved in the supply
chain. At every stage beginning from the production to
distribution and ultimately till the goods or services reach
the final consumer, GST would be levied.
 But this does not lead to double taxation, as when one
intermediary pays GST on his output supply, he is allowed
to claim the credit of GST paid by him on his input
supply.
 GST being a destination based tax is levied on
consumption basis i.e. the tax is levied when goods or
services are consumed and the income of tax revenues
accrue to the place where goods or services are consumed.
 Justification or Purpose of GST
1. To reform and overhaul the indirect tax regime.
2. To provide set offs (Input Tax Credit).
3. To provide a dual indirect tax structure.
4. To integrate the Indian market into a single common
market as GST would remove the inter-state barriers by
abolishing CST.
5. To remove the major flaw of cascading effect of indirect
taxes.
6. To replace myriad central and state level indirect taxes.
7. To boost economic growth and also cure black money
problem
8. To reduce compliance cost for the assessee.
9. To ensure seamless flow of credit.
10. To promote transparency.
11. To make Indian goods and services more competitive at
the international level.
12. GST would result in chain of transactions from
manufacturer to consumer which would bring all the
buyers and sellers in the tax chain and thereby result in the
increase in tax base for the government.
13. To reduce the administration cost for the government.
14. To enable state governments to levy taxes on services, as
under GST dual GST would be levied, where both central
and state governments can levy tax.
 GST Integrated Value Added Tax Regime
Value Total value Combined SP Tax paid
Input price/ added GST @10%
Cost price
Added on (3) = (4)
(3) + (4) = to Govt.
(1)+(2)=(3)
1 2 (5) (6)

A
Stage I
Supplier _ 100 100 10 110 10

B 110 OT 15
Stage II (100+10 150 Less: ITC 10
-------
Supplier Input Tax) 50 (100+50) 15 165 NTP = 05

C 165 OT 19
Stage III (150+15 190 Less: ITC 15
-------
Supplier Input Tax) 40 (100+50+40) 19 209 NTP = 04

D 209 220 OT 22
Retailer/ (190+19 (100+50+ Less: ITC 19
-------
Stage IV Input Tax) 30 40+30) 22 242 NTP = 03
Supplier
Net tax payable = Output Tax – Input Tax Credit

Net tax liability for all suppliers

A B C D
Output Tax 10 15 19 22

Less: ITC Nil 10 15 19

Net Tax
Payable 10 05 04 03
Dual GST Structure in India
Shortcomings and Advantages at the Centre Level and State
Level on the Introduction of GST

Changes on
account of Excise Changes on
Duty , service tax account of CST
and VAT

Changes on
Changes on
account of
account of
CENVAT load in
purchase tax
VAT

Changes on
Independence of
account of
the states in
uniform state GST
Federal Structure
threshold limit
 Compensation to the States

The Goods and Services Tax (Compensation to

States) Act. 2017 deals with payment of compensation
to the states for any loss of revenue on account of
implementation of the GST for a period of five years,
in accordance with the provisions of Section 18 of the
Constitution Act, 2016.