GST_Manual.pptx

© Oxford University Press 2016. All rights reserved.
GETTING READY FOR
GOODS AND SERVICES TAX

1. To understand the basic system of GST
2. To comprehend the salient features of GST
3. To identify and know the provisions of GST to
be implemented by a manager
4. To follow the administration and adjudication
process of the GST law.
OBJECTIVES
Note:
(1) This Act may be called the Central / State Goods and
Services Tax Act, 2016.
(2) It extends to the whole of India / State’s name (e.g.,
Assam).

PART I: UNDERSTANDING GST
1. Appreciate the historical background
2. Logic of Goods and Services Tax (GST)
3. Legal Requirements to enact GST in India
PART II: MODEL GST
4. Basic Definitions
5. Salient Features of GST
6. Merits and Demerits of GST
PART III: MANAGER’S GUIDE TO THE PROVISIONS OF GST
PART IV: ADMINISTRATION AND ADJUDICATION
PART V: IMPACT AND CASES
OVERVIEW

PART I: UNDERSTANDING GST
TAXATION
Levy by authority
(government) for the
expenses of governance
of common good
DIRECT
Levy on the earned
income of individuals
INDIRECT
Levy on the consumers
of goods and services
GST is an indirect
tax upon
consumption of
goods & services

KINDS OF TAX
Taxes are sources of revenue for the government.
# Direct tax is income tax, very clear and distinct: E.g.,
income, inheritance, corporation, property and gift
Implementing agency: Central Bureau of Direct Taxes
(CBDT)
# Indirect tax is consumption tax on goods and services.
Eg. Customs duty, central excise,, service tax, sales tax,
value added tax, securities transaction tax.
Implementing agencies: Numerous central and state
agencies .
All agencies of indirect tax collection will be subsumed
under GST

# Direct tax is levied on individuals under certain
conditions; e.g., those pay income tax who earn above a
definite limit in accordance with law established.
# Indirect tax is not on earners of income but on
spenders of income, i.e., consumers of goods and
services.
Indirect taxes are numerous and enforced by numerous
central and state agencies.
GST is a leveler – One nation, one tax.
INDIRECT TAX IS FOR ALL

INDIRECT TAX AS TURNOVER,
VAT, SERVICE AND GST
Turnover tax: A tax on manufactured goods rather than
when it is sold calculated as the percentage on the value
of goods. (There is no credit given for the tax paid for the
input.)
Value added tax (VAT): It is a turnover tax when the credit
for the input tax is permitted
Service tax: A tax levied for the services by the service
provider and paid by the service receiver.
Goods and Services Tax (GST): It is a Value added tax
levied both on goods and services

• Maurice Lauré (1917 – 2001), French,
created the system of Value Added Tax
(VAT) and was implemented in 1954.
• Eventually, other European and African
countries, too, adopted.
• India implemented in 2005, gradually;
initially many states did not adopt it
immediately.
GST-HISTORICAL
PERSPECTIVE

LOGIC OF GOODS AND
SERVICE TAX
The taxation of goods and services in India has, hitherto, been
characterised as a cascading and distortionary tax on production resulting
in miss-allocation of resources and lower productivity and economic
growth. It also inhibits voluntary compliance. Therefore, it is necessary to
replace the existing indirect tax system by a new regime which would
foster the achievement of the following objectives:
(a) The incidence of tax falls only on domestic consumption;
(b) The efficiency and equity of the system is optimized;
(c) There should be no export of taxes across taxing jurisdictions;
(d) The Indian market should be integrated into a single common market;
(e) It enhances the cause of cooperative federalism
(Para 2.1. Report of the Taskforce on GST)

1. Amendment to the Constitution of India.
It is necessary to empower both the Centre and State to
tax. So far the Centre had powers to tax goods and services
only up to the production stage;
the States had powers only to tax the sales.
GST is a comprehensive system of taxation where both the
Centre and States have to function harmoniously. The
amendment required is, thus, officially known as, The
Constitution, hundred and twenty second amendment .
2. The amendment has been passed by the parliament in
August, 2016.
3. Majority of the States need to ratify the amendment; of the 29
States, 22 States have completed the process by September,
2016.
4. The President of India has already assented to the amendment
bill.
LEGAL REQUIREMENTS TO
ENACT GST

5. A GST Council has to be formed to prepare the related
GST bills. These are:
a) Central GST bill
b) States GST bill
c) Integrated GST bill
The Council also sets up Dispute Redressal System
6. The States in turn have to introduce their own GST bill. It
is expected that the rate of taxation of Central GST and
State GST to be identical.
7. GST is expected to be implemented from the new
financial year, 1 April 2016
LEGAL REQUIREMENTS TO
ENACT GST

Aggregate turnover: Total value of all taxable & non-taxable goods & services
computed on all India basis.
Appellate tribunal: National Goods and Services Tax Appellate Tribunal
Assessment: Determination of tax liability under GST
Business: Any trade, commerce, manufacture, profession, vocation or any other
similar activity.
CGST: Tax levied under the Central Goods and Services Tax Act, 2016.
Commissioner: Commissioner of Central/State Goods and Services Tax
Common portal: GST electronic portal approved by Centre/State Governments
Consideration: Any payment made or to be made for goods and services
Goods: Every kind of goods
IGST: Integrated Goods and Services Tax Act.
Input: goods, used or intended to be used by a supplier for business
Input service: Service used or intended to be used by a supplier for business.
Input tax: Tax (GST/SGST/IGST) charged on any supply of goods and services
used or intended to be used in the course of the business
Input tax credit: Credit of input tax.
PART II: MODEL GST

Output tax: Tax chargeable under the Act on taxable supply of
goods and services and excludes tax payable by him on
reverse charge basis.
Outward supply: Supply of goods and services – sale, transfer,
barter, exchange, license, rental, lease or disposal made or
agreed to be made in the course of business except in case
of such supplies where the tax is payable on reverse charge.
Reverse charge: Liability to pay tax by the person receiving
goods and services instead of the person supplying the
goods and services as may be specified by the authorities.
Services: Anything other than goods.
Zero-rated supply: Supply of any goods and services on which no
tax is payable but credit of the input tax related to that supply
is admissible.
MANAGERS GLOSSARY

1. Dual GST system: Central and State:
a) The supply of goods and services is taxable simultaneously by
Centre and State with identical rates
b) Single return document for filing of taxes
2. Subsuming Principle: Numerous Centre and State taxes are all
brought under single goods and services tax, thus simplifying and
universalizing the model of one nation one tax system.
3.Exports of goods and services are zero-rated; but credit of related
input tax credit is admissible.
4. Exemption to GST: Some goods such as alcohol for human
consumption, petroleum and its products, stamp duty,
entertainment, and electricity.
5 IGST: The proposal in the model GST of 1% tax in Integrated Goods
and Services Tax has been cancelled. The rates will be as
per CGST and SGST only.
SALIENT FEATURES OF
GST (General)

1. Input credit across the value chain
2. Cease cascading effect
3. Simplification of tax for better compliance
and to increase the tax base
4. Efficiency in administration
5. Avoidance of unhealthy competition
between states
SALIENT FEATURES
(Objective)

CASCADING EFFECT OF OLD INDIRECT (SALES TAX)
VALUE ADDED TAX (VAT) (As solution)
Since multiple sales points caused multiple tax, the VAT system a seller gets credit of the tax paid
at earlier stage of purchase;
thus, the purchaser/seller, the second person in the above diagram, deducts Rs 10 paid earlier.
3. VAT was also extended as solution to Central Excise Duty and Service Tax (CENVAT)
4. VAT creates problems with CENVAT; e.g., the credit of VAT is not available against excise and vice
versa; VAT is computed on a value which includes excise duty, thus causing cascading effect.
Seller
• Goods `100 + Tax 10%
• = `110
Purchaser/
Seller
• Goods `110 + Tax 10%
• = `121
Purchaser/
Seller
• Goods `121 + Tax 10%
• = `121
SALIENT FEATURES (Old and New)
SALIENT FEATURE
(Old and New)

TRANSACTION
• Sale within the
state.
• Sale outside the
state
GST
• Both SGST and
CGST
• IGST
OPERATION
• Identical pair of
taxes: SGST is
state revenue
and CGST is
central revenue
• Single tax,
IGST; it is
central revenue.
SALIENT FEATURE
(GST Mechanism)

SALE AND RESALE IN ONE AND THE SAME STATE: UTTAR PRADESH
There is no interstate transaction involved; the input tax and the output tax goes to the same
government hence no instance of credit transfer between governments.
Allahabad
Varanasi Sale Value - ` 200
SGST @ 10 =
20 –
Input GST 10 Input CGST 10
CGST @ 10 =
20
Total -` 240
Lucknow Sale Value `100
SGST @10% CGST @ 10 Total - `120
SALIENT FEATURE
(Scenario 1)

BIHAR
SGST - CGST
W.BENGAL
SGST - CGST
UNION OF INDIA
GOODS AND SERVICES
TRANSACTIONS
I
G
S
T
I
G
S
T
SALIENT FEATURE
(Scenario 2)

20
LUCKNOW
(UP)
PATNA
(BIHAR)
GAYA
(BIHAR)
UNION OF INDIA
SGST + CGST
I
G
S
T
Union receives
CGST from
Bihar
Union transfers
tax credit to UP
SALIENT FEATURE
(Scenario 3)

STAKEHOLDERS IN BENEFITS
OF GOODS AND SERVICES TAX
Central and
State
Governments
Industry and
Business
Consumers
SALIENT FEATURES MERITS

A NEW SYSTEM THAT WORKS FOR THE GOVERNMENT
1. Ease of Administration: All indirect taxes are subsumed in a single tax
regime.
It makes management and supervision simple.
The use of Information Technology takes away all the bureaucratic
hassles and inefficiency.
2. Tax Compliance: It is a perennial Indian problem. The mechanism of
input tax credit at each stage in the chain of value addition not only
motivates better compliance but makes it dependable since all the
computation is done through an agency called Goods and Services
Tax Network, the IT infrastructure.
3. Higher Revenue Returns: The above system saves enormous
bureaucratic costs both in time and money.
Benefits to Central & State Govt

GST USHERS POSITIVE INDUSTRIAL AND BUSINESS ENVIRONMENT
1. Efficiency in Compliance: Industries and businesses often used suffer from
the uncertainty of compliance rates, rules and regulations of multiple taxes.
With GST system such uncertainties do not exist.
Further, online filing saves time and also money.
2. Tax neutrality: In the past industries and businesses used to hunt for states
and regions for tax advantages over the rest.
GST brings tax neutrality irrespective of the states and regions because
of uniformity of tax rates and their structure.
Such a system will help uniform and wholesome growth of the country.
3. Remove hidden costs: Cascading tax effects are eliminated with the GST.
As a result no chance of any hidden costs; remove transaction costs.
.Result: Efficiency and competitiveness.
4. Boost to manufacturing and exports sectors: The above advantages give an
edge to Indian goods and services in the international markets.
Benefits to Industry & Business

CONSUMER KING!
1. Informed consumer: : Due to multiplicity of taxes the consumer often
gets a raw deal, for it is impossible for him to know the real
value of the goods and services he purchases.
GST by its very nature is transparent and proportionate.
Consumer will have the satisfaction of knowing the real value of
his purchase and also his contribution as tax to the government.
2. Value for money: Since the GST system will have clear rates of
taxes and the burden of multiple taxes is eliminated, it is
expected goods and services would be of reasonable rates thus
saving money for the consumers.
3. The ultimate payer: No matter whatever the system of taxation, the
burden is borne by the consumer. However, the sheer knowledge
and the value of his purchases makes him a wise and a smart
consumer.
Benefits to the Consumer

NOTHING IS WITHOUT ITS DARKER SIDE.
1. What is the rate?: That is the fundamental question.
Thus far it is merely speculation where people – industry, business and consumers
– quoting bare minimum.
2. Federal India: Staunch federalists argue that one nation one tax is going to demolish
the federal nature of India which is essential for its unity and integrity.
3. GSTN: There is a very strong opposition to Goods and Services Tax Network, a
corporation to manage IT where the government holds minority shares; many fear
that this will undermine not only national security but also privacy of the tax
persons - institutions and individuals.
4. Threshold limit: Small businesses are worried due to the uncertainty of what is the
threshold limit of business turnover to comply to GST.
5. Worries of Service Sector: Thus far service sector enjoyed lower taxes; but now it is
almost certain tax rates will hike the price.
6. Worries of the consumers: The biggest concern of the customers is that the
manufacturers and service providers will raise their profit margin, hence no
benefits will be transferred to the consumers.
7. Human Nature: No one wants to part with his money easily. The expected compliance
may never be a reality.
DEMERITS OF GST

The following guide is on the lines of the provisions made in the Model
GST law; the numbers in the brackets are sections or subsections
as the case may be.
1. TAXABLE PERSON
Taxable person means a person who carries on any business at any
place in India/State of – and who is registered or required to be
registered…(9 (1))
In other words, taxable person implies any business entity such as
natural persons or corporate persons.
Agriculturist is not a taxable person.
2. REGISTRATION OF TAXABLE PERSON
A taxable person must be registered with the tax authorities
wherever situated in any part/state of India, with address and other
details – from where the taxable goods and services are supplied.
PART III:
MANAGER’S GUIDE TO THE
PROVISIONS OF GST

3. THRESHOLD LIMIT FOR TAX PAYMENT
The taxable person is required to register and pay tax under a
certain limit.
Presently the provision is not exceeding Rs10 lakhs.
For North Eastern States limit is not exceeding Rs 5 lakhs.
4. TIME – WHEN TO PAY TAX:
Liability to pay CGST/SGST is at the time of supply as on date of:
a) Removal of goods
b) Made available to the recipient
c) Issuance of invoice
d) Receipt of payment by supplier
In case of reverse charge:
a) Receipt of service ; b) Payment is made; c) Receipt of invoice; d)
debit in the books of accounts
MANAGER’S GUIDE

5. VALUE OF TAXABLE SUPPLY
Not according to the MRP value
It is done on transaction value; these include reimbursable expenditure incurred
by the supplier and charged in relation the supply, royalties, license fees,
subsidies, etc.
6. TAX DEDUCTION AT SOURCE
Governments both at the Centre and State may order 1% TDS or credited to the
supplier of taxable goods where the total value of supply exceeds `10 lakhs
7. TAX COLLECTION AT SOURCE
Online or Electronic commerce operator supplying goods and services must
collect tax at source, that is, at the time of credit of such amount or at the time of
payment whichever is earlier.
8. UTILIZATION OF CREDIT
IGST is the priority payment, the remaining amount to be utilized for CGST and
SGST
No cross credit utilization between CGST and SGST.
MANAGER’S GUIDE

9. INPUT TAX CREDIT (ITC)
Depends upon inputs used or intended to be used by a supplier for
making an outward supply. Exceptions are those used for personal
or employees or construction of immovable property.
Input tax distribution of credit by Input Service Distributor is restricted
to tax on input services only and not in respect of goods.
10 RETURNS
Monthly Returns: Taxable person shall electronically file a monthly
return for inward and outward supplies of goods and services,
availed input tax credit, tax payable, tax paid and other particularly
as may be prescribed, within 20 days after the end of such month.
Annual Return: Taxable person shall furnish annual return for every
financially year on or before 31 December.
11. REFUNDS
Refunds may be sought on prescribed form to be made before the
expiry of 2 years.
MANAGER’S GUIDE

THE GOVERNMEMNT INSTITUTES BUREUCRATIC MACHINARY UNDER
OFFICERS APPOINTED BY IT TO HEAD VARIOUS DESIGNATED
DEPARTMENTS BOTH AT THE CENTRE AS WELL AS AT THE STATES.
CENTRAL (CGST) STATE (SGST)
Principal Chief Commissioners
Principal Director Generals
Commissioner
Chief Commissioners
Principal Directors General
Special Commissioner
Chief Commissioner
Directors General
Additional Commissioners
Commissioners of GST
Additional Directors General
Joint Commissioners
First Appellate Authority Deputy Commissioners
Additional Commissioners
Additional Directors….etc.
Assistant commissioners
Any other officer the government may appoint Any other officer the government may appoint
PART IV
ADMINISTRATION & ADJUNCTION

Disputes may be distinguished as
- Dispute of assessment of taxes: Correct or Incorrect assessment
These may be redressed or remedied before one goes to the
Tribunal and then to the court
- Dispute of offence: Breaking of the law: tax evasion, and other related
offences
- This may be redressed or remedied by seeking relief in Tribunal or
the court.
1. Chapter XII of Model GST Law deals with Assessment.
- The legislator honors the self-assessment done by the assessee
- The dispute may arise where upon scrutiny the officer finds reason
to the contrary.
2. Chapter XIII considers Audit; where financial scrutiny takes place.
3. Chapter XIV: Demands and Recovery:
Mistakes and errors may creep in while paying tax or at refunding –
measures for correction between the taxpayer and the tax
department and vice versa.
ADJUNCTION
DISPUTES AND REDRESSALS
:

4.Chapter XV: Deals with procedures against the offence of the law.
Having established a prima facie case the officers are empowered to inspect, search, seize
and conduct arrest.
5. Chapters XVI , XVII , XVIII IX and XX are then concerned with further procedures:
a) Offences and penalties: levy of penalty, confiscation of goods, etc.
b) Prosecution and compounding of offences: Cognizance of offences and relevancy of
statements, etc.
c) Appeals: Starting from First Appellate Authority , High Court to Supreme Court
d) Advance Ruling: Procedures to Appellate Authority.
d) Settlement of Cases.
Legal experts are of the view that the procedures and processes, penalties and
punishments and the entire legal mechanism of adjudication being cumbersome,
time consuming and above all very harsh.
Solution: Compliance makes both legal as well as ethical sense.
ADJUNCTION
CRIME AND PUNISHMENT

In the pre-GST era of multiple central and state taxes a product would generally
taxed between 25% to 40% of the price. GST is expected to be between
18% to 20% across the country. The macro impact on the economy is
expected to be generally positive. The Positive Sectors are:
1. Automobiles: It has suffered under the old tax regime; it is looking forward for
lower rates and a boost in the demand; as a result the manufacturing of
automobiles and its spare parts is assured of growth.
2. Multiplexes: These have been victims of higher tax in the past. GST regime is
definitely going to benefit these and also the ancillary sectors in F&B.
3. FMCG: This, one of the high growth oriented markets will enjoy a big positive;
also other areas such as warehousing, too, shall share in the growth.
4. Logistics: It is a high growth sector. Since inter state barriers will vanish,
transport, warehousing, container service, etc., will look forward for
increased business.
5. Cement: One of the most important elements in the burgeoning infrastructure
sector will have positive opportunity.
© Oxford University Press 2016. All rights
reserved.
PART V
IMPACT ON ECONOMY

GST NEGATIVES
Those sectors paying higher taxes so far may look forward to GST
implementation. Those who enjoyed lower taxes will be worried about
GST. The biggest negative is being faced by the Services sector.
1. Telecom: These would face higher taxes; however, if the tax rates are lower
than most predict, they could offset their costs and expect a marginal negative
impact.
2. Consumer Staples: Thus far staple consumables such as oils, dairy products,
bakery and processed food attracted less tax. This is going to be changed
negatively for business in this sector.
3. Real Estate: The GST logic should actually favour real estate, since many of
the construction material industry such as cement is going to be positive.
The big hurdle is that the stamp duty is outside the purview of GST. It is a
state tax, and it is expected to be raised, to offset the SGST losses in
revenue.
4.Information Technology: IT has always enjoyed tax advantage. GST may end
the dream run.
5.Media: It is a service industry which enjoyed lower taxes than the proposed
ones in GST.
IMPACT

Shri Narendra Modi took the reins of government in May 2014. His main plank:
Development for all and with all. Concrete scheme: Make in India.
Legal arm: GST – a game changer for industry and business.
GST is both for goods and services
Make in India thrust is for manufacturing
Products create wealth – services distribute it
Uniform, seamless and relatively less tax compared to the old tax regime will
spur production and growth.
Growing and expanding industry will create very large job opportunities to the
young population
Startups: A corollary to Make in India is the motivation for startups
This will give rise to manufacturing and industrial hubs across the country.
Industry does not have to look for a tax friendly state for setting up their
business, because of GST the entire country is tax friendly.
GST is the biggest economic reform and Make in India is its biggest outcome.
CASE: MAKE IN INDIA

‘Chai pe charcha’, - chit chat at tea – has become an iconic event due to the
humble beginnings of Prime Minister Modi, symbolizing tenacious spirit to
succeed.
With GST however the tea industry is not so sure of success. Cyrus Mistry,
the chairman of the Tata Global Beverages expressed concern: GST will
have inflationary impact leading to increase in tea prices. Tea is a
representative of all the staple consumables and beverages. Some experts
believe it may be a short term phenomenon. Many others fear the food
prices will rise both due to inflation and increased tax.
GST is going to be a big concern for the food and beverages industry,
particularly die to the increased services tax.
Representations: India Tea Association (ITA), based in Kolkata and
Association of Southern Inda (Upasi) have recommended:
Tea is a mass consumption phenomenon in India. Needs to have a special
rate under GST
Presently: Tea is auctioned at a very low VAT in Assam and West Bengal.
Problem: GST does not have the flexibility to fix a different rate.
CASE: TEA AND GST

It signals the Government’s resolve to put in place a significant structural change
which will benefit all segments of the economy. (Chanda Kochahar,
MD&CEO, ICICI Bank)
Apprehensions prevail on the administrative requirements that could potentially
render internet enabled businesses uncompetitive….. Will work closely with
Revenue officials towards enabling a simple and enabling GST regime for
all. (Sanjeev Bikhchandani, Chairman, NASSCOM)
The draft GST Model law provides for “tax collection at source” on payments
made to vendors selling on online market place. This will lead to working
capital issues for small vendors and needs to be re-examined. (Kunal
Bahl, Co-founder & CEO Snapdeal)
GST is going to be a game changer for most industries and especially for E-
commerce. (Ashish Goel, CEO & co-founder, Urban Ladder)
A simplified tax structure will also help lower tax and logistics costs by curbing
delays due to checkpost and small border tax and increase productivity
gains which will contribute significantly to the overall growth of
companies.(Sunil Dhingra, Co-founder, Jazzmyride)
Two key aspects of the GST for the telecom sector that government needs to
carefully scrutinize are the accrual of tax credits and distinct place-of-
supply rules. (Rakesh Deshmukh, CEO and co-founder, Indus OS)
QUOTES BY BUSINESS
LEADERS ON GST

Links: http://www.gstindia.com/links/
For most comprehensive coverage of government and its ministries and
other agencies
Books: Jayaram Hiregange and Deepak Rao, India GST for Beginners,
( 2016.Tax Associates)
V.S. Datey, All About GST – A Complete Guide to Model GST Law
(3rd edition),Taxmann, 2016
Sanjiv Agarwal, Guide to Goods and Services (GST), Snow White)
2016
Youtube: For visual presentation:
a) www.google.co.in/webhp?sourceid=chrome-
instant&ion=1&espv=2&ie=UTF-8#q=gst%20youtube
b) https://www.google.co.in/webhp?sourceid=chrome-
instant&ion=1&espv=2&ie=UTF-8#q=gst%20youtube
GST STUDY & RESEARCH
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