GST

1. Goods and Services Tax
(GST)
Thakur Institute of Management Studies and Research
(Saturday , 27 August, 2016)
Presented by Mr. Manish Tripathi ( I – 15-18-19)

2. What is GST?
• The Goods and Services Tax Bill or GST Bill,
proposes a national Value added Tax to be
implemented in India from 1 April 2017
• GST would be a comprehensive indirect tax on
manufacture, sale and consumption of goods and
services throughout India
• Goods and Services Tax would be levied and
collected at each stage of sale or purchase of
goods or services
• Taxable goods and services are not distinguished
from one another

3. History of GST
• In 2000, for the first time the idea
of initiating the GST was made by the then BJP
Government
• An empowered committee was formed
• In 2006, P. Chidambaram, the then Finance Minister,
announced the target date for implementation of GST
to be 1 April 2010 and formed another empowered
committee of State Finance Ministers
• In 2011, UPA Government introduced a Constitution
Amendment Bill to facilitate the introduction of the
GST in the Lok Sabha but it was rejected by many
States
• It has taken almost 16 years, from the inception of the
idea and formation of a task force, to a historic multi-
party consensus-building exercise that led to the
passage of the GST bill in Parliament

4. GST constitutional reform
• India is a federal republic
• The Goods and Services Tax Bill or GST Bill,
officially known as The Constitution (One Hundred
and Twenty-Second Amendment) Bill, 2014
• To be fully viable by law in all the States, the GST
Bill needs to be passed by a two-thirds majority in
both Houses of Parliament and by the legislatures
of half of the 29 States
• Passed by Rajya Sabha on: 3 August 2016
• Passed by Lok Sabha on: 8 August 2016
• So far ratification by 8 states

5. Is J & K included in GST?
• One of the special rights that the Jammu and Kashmir
state government enjoys is the exclusive right to tax
services in the state
• It is the only state in the India to be able to do so
• Under article 370, Indian government can not enforce
any law on J&K other then defence, external affairs
and communication
• The implementation of GST reforms will seriously
undermine the special autonomy that Jammu and
Kashmir enjoys by virtue of article 370
• Jammu and Kashmir unlikely to implement GST:
Haseeb Drabu, Finance Minister, May 20, 2015
• However, the present coalition government is more
likely to pass the GST bill

6. Why GST?
• The GST seeks to subsume following taxes into a
single one:
Taxes levied by Central Govt. : Central Exercise.
,Service Tax, Central Surcharges,Central Cesses.
Taxes levied by State Govt. : VAT/Sales Tax,
Entertainment Tax, Luxury Tax, State Taxes and Cesses
• Taxing lines between center and states have
blurred, leading to double taxation and litigation
• The present regime is origin-based as opposed to
destination-based which is prevent world over
• Disparity in tax rates levied by states

7. GST in Detail
• A dual GST system is planned to be implemented
in India as proposed by the Empowered
Committee under which the GST will be divided
into two parts:
State Goods and Services Tax (SGST)
Central Goods and Services Tax (CGST)
• The GST rate is expected to be around 14-16 per
cent. After the combined GST rate is fixed, the
States and the Centre will decide on the SGST and
CGST rates

8. GST in Detail
• In case of inter-state transactions, Inter-State
Goods and Service Tax (IGST) would be levied by
the Centre
• GST will be levied only at the final destination of
consumption based on VAT principle and not at
various points (from manufacturing to retail
outlets)
• States to be compensated for 5 years due to
revenue loss
• 100 per cent compensation for first three years, 75
per cent and 50 per cent for the next two years

9. GST Around the world
• More than 150 countries (including all OECD countries
except US) around the world follow this taxation
structure
• Only Canada that has the concept of dual GST
• Each of them faced Rise in Inflation for next 3-5 years
• Singapore saw a spike in inflation in 1994 when it
introduced the GST
• Malaysia, to an extent, was able to mitigate this
inflation risk due to price control steps
• Malaysian learning is that businesses need to start
early with the implementation process to be GST -
ready - 1.5 years given for GST preparedness

12. Benefits of GST?
• Reduce the cascading effect of taxes on the final price
of the product, eliminate tax-on-tax effect
• Moderate prices and increase consumption
• Uniform and Stable Tax Regime
• One-Country-One-Tax
• Simplify Tax Structure. Reduce the hassles of filing tax
forms by merchants
• An unfragmented National Market for Goods and
Services
• Increase GDP, tax-GDP ratio and revenue surplus
• Boost to Exports
• The number of assesses would increase by 5-6 times

13. Demerits of GST
• Doesn't include petroleum and alcohol products
leading to heavy loss to the exchequer
• Instead of blurring out the difference between
goods and services tax, it highlights them
• It requires strong IT (Information Technology)
infrastructure at grass-root levels which India
essentially lacks this
• Very high rates 16% compared to current 12.5 %
• Tax-sharing between states and the Centre is
another bottleneck