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GST Overview
Understanding How Indirect Taxes Worked in Old Regime
Indirect Taxes in India•	India launched VAT or Value Added Tax system way back in
2005.
•	However several local taxes and levies continued to exist.
•	VAT is state level multi point tax levied on value addition on
goods & is collected at different stages of SALE .
•	CST is levied on inter state movement of goods.
•	Excise Duty is levied on manufacturing.
•	Services are subject to Service Tax.
•	Movie tickets are subject to Entertainment Tax, besides Service
Tax.
•	Excise Duty
•	Service Tax
•	CST / State VAT
•	Entertainment Tax
•	Entry Tax/ Octroi
•	Luxury Tax
•	Countervailing Duty
(CVD)
GST Overview
Understanding How VAT Worked (Example: Buying Toothpaste)
VAT on final product Rs 25. VAT paid on
PURCHASES can be claimed as credit = Rs
10+5+2 = Rs 17. So net VAT
payable by the manufacturer of toothpaste is =
Rs 25-17=Rs 8. This mechanism is called INPUT
CREDIT.
* Under the old regime, the input credit of CST
(Central Sales Tax) levied on inter-state supplies
could not be availed. The net VAT payable would have
to be calculated accordingly.
GST Overview
Problems with the Previous Indirect Tax Regime
•	 While input credit was available on VAT, no input credit was available on CST, Octroi and several other local
levies.
•	 These taxes were added to the cost of goods.
•	 A trader cannot claim the ITC of service tax in input services or excise duty in inputs. Similarly a service
provider cannot claim ITC of vat in inputs.
•	 Many laws meant many compliances. Returns under VAT, Excise etc had to be submitted. One had to maintain
separate records for each of these and comply with separate state laws.
•	 There was no way for the government to make sure, your supplier has deposited VAT he collected from you.
And there was rampant VAT ‘chori’. Disputes on how much credit should be allowed. Leading to corruption at
various levels in VAT administration.
•	 Several new businesses emerged like e-commerce, aggregators, bundled services. There wasn’t enough clarity
on how these should be taxed. States took undue advantage of this and slapped notices on many startups.
States prepared new laws of levy on e-commerce companies were prepared and contested in courts.
GST Overview
The GST (Goods and Service Tax) Structure
GST Overview
Simple Basics of GST
•	GST is a tax on both Goods and Services except for some of the goods like alcohol for human
consumption)
•	 GST is levied at the time of ‘supply’
•	 GST will make sure input credit is available for taxes paid on all purchases & input services.
•	 Input credit shall only be allowed when your supplier has deposited the GST he collected from you.
•	 There shall be a common law, return procedures and governance for all.
GST Overview
How to Utilize Input Credit Under GST Will GST Increase Tax Collection?
•	 Total tax collection in India (direct & indirect),
currently stands at Rs 14.6 lakh crore, of
which almost 34 per cent comprises indirect
taxes, with Rs 2.8 lakh crore coming from
excise and Rs 2.1 lakh crore from service tax
•	 After GST, the percentage of indirect tax is
expected to increase in India. In developing
countries, indirect taxes comprise a higher
share of total taxes;
For example in Australia, indirect tax
contributes just 13 per cent of total tax
collection.
GST Overview
Key Business Impacts? Not Just Change in Tax Regime, But Business Transformation
Sourcing
Distribution
Pricing and
profitability?
•	 Inter-State procurement could prove viable
•	 Opportunities to consolidate suppliers/vendors
•	 Changes in both procurement and distribution arrangements
•	 Current arrangements for distribution of finished goods may no longer be optimal with the
removal of the concept of excise duty on manufacturing
•	 Current network structure and product flows may need review and possible alteration
•	 Changes in both procurement and distribution arrangements
•	 Current arrangements for distribution of finished goods may no longer be optimal with the
removal of the concept of excise duty on manufacturing
•	 Current network structure and product flows may need review and possible alteration
GST Overview
Cash flow
Impact?
System
changes and
transaction
management
•	Removal of the concept of excise duty on manufacturing can result in improvement in cash
flow and inventory costs as GST would now be paid at the time of sale/supply rather than at
the time or removal of goods from the factory.
•	 Potential changes to accounting and IT systems in areas of master data, supply chain
transactions, system design
•	 Existing open transactions and balances as on the cut-off date need to be migrated out to
ensure smooth transition to GST
•	 Changes to supply chain reports (e.g., purchase register, sales register, services register),
other tax reports and forms (e.g., invoices, purchase orders) need review
•	 Training of employees, compliance under GST, customer education, and tracking of inventory
credit are needed to ensure smooth transition to the GST regime
GST Overview
Tax Compliance Obligations Earlier, a service provider with operations, say in 20 states, can
obtain a single centralized service tax registration, whereas
under GST, separate registrations may have to be obtained in
each of the 20 states. A service provider who would currently
be filing only 2 service tax returns a year would have to file
three or four returns per state per month, which amounts to
about 60 to 80 returns per month, after the transition to GST.
A manufacturer with two factories and operations in 20 states
would have 23 registrations currently (two excise, 20 value-
added tax, or VAT, and one service tax) whereas under GST
the number of registrations would go down to 20 (1 for each of
the 20 states). But the number of returns would increase from
22 on a monthly basis (two excise returns and 20 VAT returns)
and a service tax return on a half-yearly basis to about 60 to
80 returns per month after the switch to GST (three to four
returns per month per registration).
GST Overview
Will GST Cause Inflation? How ClearTax Can Help
Under GST, effective tax rate on goods
(comprising around 70-75 per cent of the
CPI basket) will decline. Why? Because
In the GST system, each business in the
supply chain can claim an input tax credit by
showing evidence of a prior tax paid in the
value chain.
At present, service-oriented components
constitute 30-25 per cent of the CPI basket
•	We simplify the preparation and filing of GST returns
through our cloud-based software. We also have a FREE
Bill Book which can be used to create GST-compliant
invoices and bills online.
•	Become a knowledge centre on GST law.
•	If upward and downward chain of suppliers and customers
file with us – we help make sure your input credit has been
duly deposited.
•	We provide easy means to maintain & view records of
input credit balances – IGST, SGST, CGST
•	We help our registered Freelancers & small businesses
check whether they need to register for GST and help them
prepare and file returns.
GST Overview
How GSTN handles IT support
GST Overview
Monthly GST Return Filing Process (Simplified)
GST Overview
Considerations & Implications
•	 Every invoice raised will be in a standard format, contain some unique identifications
•	 Every invoice details needs to be uploaded to GST network except for interstate supply to unregistered
dealer having invoice value less than or equal to Rs.2,50,000 or Nil rated or Non GST supply. In the later cases,
consolidated invoice is allowed.
•	 Mandatory to provide address of consumer for high value transactions
•	 Fully paper-less process, everything will be API-enabled
For more details on GST, please visit cleartax.com/gst
Simplify Your GST Filing & Invoicing
Get Trained & Try Cleartax GST Software for FREE
Start Free GST Software Trial & Training

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GST Overview - Know about Goods and Service Tax in India

  • 1.
  • 2. GST Overview Understanding How Indirect Taxes Worked in Old Regime Indirect Taxes in India• India launched VAT or Value Added Tax system way back in 2005. • However several local taxes and levies continued to exist. • VAT is state level multi point tax levied on value addition on goods & is collected at different stages of SALE . • CST is levied on inter state movement of goods. • Excise Duty is levied on manufacturing. • Services are subject to Service Tax. • Movie tickets are subject to Entertainment Tax, besides Service Tax. • Excise Duty • Service Tax • CST / State VAT • Entertainment Tax • Entry Tax/ Octroi • Luxury Tax • Countervailing Duty (CVD)
  • 3. GST Overview Understanding How VAT Worked (Example: Buying Toothpaste) VAT on final product Rs 25. VAT paid on PURCHASES can be claimed as credit = Rs 10+5+2 = Rs 17. So net VAT payable by the manufacturer of toothpaste is = Rs 25-17=Rs 8. This mechanism is called INPUT CREDIT. * Under the old regime, the input credit of CST (Central Sales Tax) levied on inter-state supplies could not be availed. The net VAT payable would have to be calculated accordingly.
  • 4. GST Overview Problems with the Previous Indirect Tax Regime • While input credit was available on VAT, no input credit was available on CST, Octroi and several other local levies. • These taxes were added to the cost of goods. • A trader cannot claim the ITC of service tax in input services or excise duty in inputs. Similarly a service provider cannot claim ITC of vat in inputs. • Many laws meant many compliances. Returns under VAT, Excise etc had to be submitted. One had to maintain separate records for each of these and comply with separate state laws. • There was no way for the government to make sure, your supplier has deposited VAT he collected from you. And there was rampant VAT ‘chori’. Disputes on how much credit should be allowed. Leading to corruption at various levels in VAT administration. • Several new businesses emerged like e-commerce, aggregators, bundled services. There wasn’t enough clarity on how these should be taxed. States took undue advantage of this and slapped notices on many startups. States prepared new laws of levy on e-commerce companies were prepared and contested in courts.
  • 5. GST Overview The GST (Goods and Service Tax) Structure
  • 6. GST Overview Simple Basics of GST • GST is a tax on both Goods and Services except for some of the goods like alcohol for human consumption) • GST is levied at the time of ‘supply’ • GST will make sure input credit is available for taxes paid on all purchases & input services. • Input credit shall only be allowed when your supplier has deposited the GST he collected from you. • There shall be a common law, return procedures and governance for all.
  • 7. GST Overview How to Utilize Input Credit Under GST Will GST Increase Tax Collection? • Total tax collection in India (direct & indirect), currently stands at Rs 14.6 lakh crore, of which almost 34 per cent comprises indirect taxes, with Rs 2.8 lakh crore coming from excise and Rs 2.1 lakh crore from service tax • After GST, the percentage of indirect tax is expected to increase in India. In developing countries, indirect taxes comprise a higher share of total taxes; For example in Australia, indirect tax contributes just 13 per cent of total tax collection.
  • 8. GST Overview Key Business Impacts? Not Just Change in Tax Regime, But Business Transformation Sourcing Distribution Pricing and profitability? • Inter-State procurement could prove viable • Opportunities to consolidate suppliers/vendors • Changes in both procurement and distribution arrangements • Current arrangements for distribution of finished goods may no longer be optimal with the removal of the concept of excise duty on manufacturing • Current network structure and product flows may need review and possible alteration • Changes in both procurement and distribution arrangements • Current arrangements for distribution of finished goods may no longer be optimal with the removal of the concept of excise duty on manufacturing • Current network structure and product flows may need review and possible alteration
  • 9. GST Overview Cash flow Impact? System changes and transaction management • Removal of the concept of excise duty on manufacturing can result in improvement in cash flow and inventory costs as GST would now be paid at the time of sale/supply rather than at the time or removal of goods from the factory. • Potential changes to accounting and IT systems in areas of master data, supply chain transactions, system design • Existing open transactions and balances as on the cut-off date need to be migrated out to ensure smooth transition to GST • Changes to supply chain reports (e.g., purchase register, sales register, services register), other tax reports and forms (e.g., invoices, purchase orders) need review • Training of employees, compliance under GST, customer education, and tracking of inventory credit are needed to ensure smooth transition to the GST regime
  • 10. GST Overview Tax Compliance Obligations Earlier, a service provider with operations, say in 20 states, can obtain a single centralized service tax registration, whereas under GST, separate registrations may have to be obtained in each of the 20 states. A service provider who would currently be filing only 2 service tax returns a year would have to file three or four returns per state per month, which amounts to about 60 to 80 returns per month, after the transition to GST. A manufacturer with two factories and operations in 20 states would have 23 registrations currently (two excise, 20 value- added tax, or VAT, and one service tax) whereas under GST the number of registrations would go down to 20 (1 for each of the 20 states). But the number of returns would increase from 22 on a monthly basis (two excise returns and 20 VAT returns) and a service tax return on a half-yearly basis to about 60 to 80 returns per month after the switch to GST (three to four returns per month per registration).
  • 11. GST Overview Will GST Cause Inflation? How ClearTax Can Help Under GST, effective tax rate on goods (comprising around 70-75 per cent of the CPI basket) will decline. Why? Because In the GST system, each business in the supply chain can claim an input tax credit by showing evidence of a prior tax paid in the value chain. At present, service-oriented components constitute 30-25 per cent of the CPI basket • We simplify the preparation and filing of GST returns through our cloud-based software. We also have a FREE Bill Book which can be used to create GST-compliant invoices and bills online. • Become a knowledge centre on GST law. • If upward and downward chain of suppliers and customers file with us – we help make sure your input credit has been duly deposited. • We provide easy means to maintain & view records of input credit balances – IGST, SGST, CGST • We help our registered Freelancers & small businesses check whether they need to register for GST and help them prepare and file returns.
  • 12. GST Overview How GSTN handles IT support
  • 13. GST Overview Monthly GST Return Filing Process (Simplified)
  • 14. GST Overview Considerations & Implications • Every invoice raised will be in a standard format, contain some unique identifications • Every invoice details needs to be uploaded to GST network except for interstate supply to unregistered dealer having invoice value less than or equal to Rs.2,50,000 or Nil rated or Non GST supply. In the later cases, consolidated invoice is allowed. • Mandatory to provide address of consumer for high value transactions • Fully paper-less process, everything will be API-enabled
  • 15. For more details on GST, please visit cleartax.com/gst Simplify Your GST Filing & Invoicing Get Trained & Try Cleartax GST Software for FREE Start Free GST Software Trial & Training