Understanding India's Present Indirect Tax System and the Proposed GST Model
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This presentation gives a brief idea of the GST mechanism and the existing taxes it replaces.
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Understanding India's Present Indirect Tax System and the Proposed GST Model
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- 3. Indirect Taxation Central Taxes Manufacture (under Excise) Sale - CST (Central Sales tax Service Provision (under Service Tax) State Level Taxes Sale VAT (Value Added Tax) Entry Tax Others: Entertainm ent Tax,Luxury Tax Understanding Present Indirect taxation system 3
- 4. 4 GST GST is Good and Services Tax GST will replace current Indirect tax regime with a single tax It will be a value added tax to be levied on both goods and services at both central and state level It is also a destination based Consumption Tax (i.e. the place of consumption will decide the State that will collect tax)
- 5. 5 GST CGST To be levied by central government Location of supplier and recipient within country is immaterial SGST To be levied by state government Chargeable when supplier and recipient both are within the state IGST To be levied by the central government in place of CST IGST = CGST + SGST (Credit of IGST shall be available) Mechanism of GST Note: 1. More than 150 Countries having unified tax system 2. Items outside purview of GST - Alcohol, petroleum products
- 6. 6 Why the bill has not been passed in the RS- 3 issues Opposition Congress is insisting on 18% cap Scrapping of 1% interstate tax Setting up independent dispute settling tribunal Modi Government / Personal vew A uniform tax rate will defeat the purpose of GST which promotes “differentiated tax” in order to meet social objectives It is plain regressive and it should be scrapped Granting powers to retired judges will be resented by state governments Ecommerce View: 1. Want GST not to be levied as they are aggregators 2. Want GST to be levied as services on a consolidated basis on warehousing, cash collection etc.
- 7. A simple example of GST Supplier RetailerManufacturer Consumer Sells cloth at Rs.106 [Rs. 100 + Rs. 6 (6% GST) Rs.6 GST collected Sells shirt at Rs.212 [Rs. 200 + Rs. 12 (6% GST) 6 12 Claim for Input tax (Already paid to supplier) Rs .6 GST collected 12 18 GST collected Rs .6 Govt. collect Rs.18 Sells shirt at Rs.318 [Rs. 300 + Rs. 18 (6% GST) Claim for Input tax (Already paid to Manufacturer)
- 8. 8 Benefits of GST Simpler Tax structure The present indirect tax regime is complex and entails multiple taxes and duties. It will make the paperwork simpler and make manufacturing competitive (Push up GDP by 1%-2% Increased Tax revenues It will increase the tax revenues due to greater compliance and widening of tax net Competitive Pricing Tax paid by final consumer will come down and lower prices will boost consumption Boost to exports Boost to exports due to fall in cost of production