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GST 2016
 A fee charged ("levied") by
a government on a product, income,
or activity.
 If tax is levied directly on personal or
corporate income , then it is direct tax.
 If tax is levied on the price of a good or
service, then it is called an indirect tax.
 The purpose of taxation is
to finance government expenditure.
 One of the most important uses of taxes is to
finance public goods and services, such as
street lighting and street cleaning.
 Under sales tax, tax is levied on every sale made.
 For example if a dealer (say A) sold goods to another
dealer (say B) he collects local sales tax from such
dealer which is normally included in his sale price . If
dealer B again sells goods to another dealer (say C)
he again collects tax on sales made by him . The tax
levied by dealer B shall be on his sale price i.e (his
purchase price + profit ). As his purchase price
already includes tax paid by him , sales tax includes
tax on tax already paid i.e. it is repetitive in nature. 
 Sales tax is retail only
 Under VAT (value added tax) the tax is on
sales made by any dealer levied only on
value added at each selling point . so it is
not repetitive in nature.
 Value-Added tax is a tax at every step of
the inventory process
 Taxed at every step from manufacturer to
distributor to warehouse to retailer to
customer.
 VAT is uniform; whereas sales tax differs from
state to state.
 ‘G’ – Goods
 ‘S’ – Services
 ‘T’ – Tax
 Goods and service tax is single tax rate
levied on manufacture , sale and
consumption of goods and service at
national level
 The Goods and Service Tax (GST) is a Value
Added Tax (VAT) to be implemented
in India, from April 2016.
 GST is comprehensive tax mechanism where in
all major indirect taxes are clubbed into one,
whether they are levied on services(service
tax) or goods(excise and vat).
 Government had promised that GST will
reduce the compliance burdens at present.
 One of the aims of introducing GST is to reduce
the cascading effects of taxes which is the
primary focus of VAT but vat system is not
comprehensive enough to do so.
 VAT is value added tax (on products).
GST is Goods and Services Tax is like VAT
but applies to Services also (apart from
products). 
 In India, we have VAT and Service Tax.
Whereas in many countries you have
only GST that applies to both products
and services.
 In 2000, the Vajpayee Government started discussion
on GST by setting up an empowered committee.
 An announcementwas made by Palaniappan
Chidambaram, the Union Finance Minister, during
the central budget of 2007–2008 that it would be
introduced from April 1, 2010.
 After this announcement, the Empowered
Committee of State Finance Ministers decided to set
up a Joint Working Group on May 10, 2007, with the
Adviser to the Union Finance Minister and the
Member-Secretary of Empowered Committee as co-
convenors and the concerned Joint Secretaries of
the Department of Revenue of Union Finance Ministry
and all Finance Secretaries of the states as its
members.
 Introduction of a GST to replace the
existing multiple tax structures of Centre and
State taxes is not only desirable but
imperative in the emerging economic
environment.
Separate taxation of goods and services
often requires splitting of transaction values
into value of goods and services for taxation,
which leads to greater complexities,
administration and compliances costs.
 Integration of various taxes into a GST
system would make it possible to give full
credit for inputs taxes collected.
 GST, being a destination-based
consumption tax based on VAT principle,
would also greatly help in removing
economic distortions and will help in
development of a common national
market.
 The dual GST model proposed by the Empowered
Committee and accepted by the Centre will
have dual system for imposing the tax. GST shall
have two components i.e.
(i) Central GST
(ii) State GST
 Central Excise duty, additional excise duty,
services tax and additional duty of customs
(equivalent to excise), state VAT entertainment
tax, taxes on lotteries, betting and gambling
and entry tax (not levied by local bodies)would
be subsumed within GST
 It would be applicable to all transactions of goods and
service.
 It to be paid to the accounts of the Centre and the States
separately.
 The rules for taking and utilization of credit for the Central GST
and the State GST would be aligned.
 Cross utilization of ITC between the Central
GST and the State GST would not be allowed except in the
case of inter-State supply of goods.
 The taxpayer would need to submit common format for
periodical returns, to both the Central and to the concerned
State GST authorities.
 Each taxpayer would be allotted a PAN-linked taxpayer
identification number with a total of 13/15 digits.
 It will cover all types of person carrying on business
activities, i.e. manufacturer, job-worker, trader, importer,
exporter, all types of service providers, etc.
 If a company is having four branches in four different
states, all the four branches will be considered as TP
under each jurisdiction of SGs.
 All the dealers/ business entities will have to pay both
the types of taxes on all the transactions.
 A dealer must get registered under CGST as it will make
him entitle to claim ITC of CGST thereby attracting
buyers under B2B transactions.
 Importers have to register under both CGST and SGST as
well.
 Levies on petroleum products
 Levies on alcoholic products
 Taxes on lottery and betting
 Basic customs duty and safeguard duties on
import of goods into India
 Entry taxes levied by municipalities or panchayats
 Entertainment and Luxury taxes
 Electricity duties/ taxes
 Stamp duties on immovable properties
 Taxes on vehicles
 GST on export would be zero rated
 Both CGST and SGST will be levied on import of
goods and services into the country. The
incidence of tax will follow the destination
principle and the tax revenue in case of SGST
will accrue to the State where the imported
goods and services are consumed. Full and
complete set-off will be available on the GST
paid on import on goods and services.
 The existing CST will be discontinued.
Instead, a new statute known as IGST will
come into place. It will empower the GC to
levy and collect the tax on the inter-state
transfer of the GS.
 The scope of IGST Model is that Centre
would levy IGST which would be CGST plus
SGST on all inter-State transactions of
taxable goods and services with
appropriate provision for consignment or
stock transfer of goods and services.
 The inter-State seller will pay IGST on value
addition after adjusting available credit of
IGST, CGST, and SGST on his purchases. The
Exporting State will transfer to the Centre
the credit of SGST used in payment of IGST.
The Importing dealer will claim credit of IGST
while discharging his output tax liability in his
own State.
 The Centre will transfer to the importing
State the credit of IGST used in payment
of SGST. The relevant information will also
be submitted to the Central Agency
which will act as a clearing house
mechanism, verify the claims and inform
the respective governments to transfer
the funds.
 Under GST registration, it is likely to be linked
with the existing PAN.
 The new business identification number was
likely to be the 10-digit alphanumeric PAN,
in addition to two digits for state code and
one or two check numbers for disallowing
fake numbers. The total number of digits in
the new number was likely to be 13-14.
 In an invoice based VAT system, the issue
of invoices in the proper form is an essential
part of the procedure for imposing and
enforcing the VAT.
 An invoice is also required by the tax
authorities to audit the collection of VAT.
 What is required is –
› The law should require a supplier making a
taxable supply to another taxable person to
provide a VAT invoice with that supply or the
payment for it.
› The VAT invoice should be standardised
across all states so as to contain a minimum
of information about the supply being
invoiced.
 What preparations are required at the level of CG and SG
for implementing GST?
 Whether the Government machinery is in place for such a
mammoth change?
 Whether the tax-payers are ready for such a change?
 What impact it can have on the revenue of the
government?
 How can the burden of tax, in general, fall under the GST?
 In what respect, it will affect the manufacturers, traders and
ultimate consumers?
 How will GST benefit the small entrepreneurs and small
traders?
 Which type of administrative work will be involved in
complying with the GST requirements?
GST 2016
GST 2016

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GST 2016

  • 2.  A fee charged ("levied") by a government on a product, income, or activity.  If tax is levied directly on personal or corporate income , then it is direct tax.  If tax is levied on the price of a good or service, then it is called an indirect tax.  The purpose of taxation is to finance government expenditure.  One of the most important uses of taxes is to finance public goods and services, such as street lighting and street cleaning.
  • 3.  Under sales tax, tax is levied on every sale made.  For example if a dealer (say A) sold goods to another dealer (say B) he collects local sales tax from such dealer which is normally included in his sale price . If dealer B again sells goods to another dealer (say C) he again collects tax on sales made by him . The tax levied by dealer B shall be on his sale price i.e (his purchase price + profit ). As his purchase price already includes tax paid by him , sales tax includes tax on tax already paid i.e. it is repetitive in nature.   Sales tax is retail only
  • 4.  Under VAT (value added tax) the tax is on sales made by any dealer levied only on value added at each selling point . so it is not repetitive in nature.  Value-Added tax is a tax at every step of the inventory process  Taxed at every step from manufacturer to distributor to warehouse to retailer to customer.  VAT is uniform; whereas sales tax differs from state to state.
  • 5.  ‘G’ – Goods  ‘S’ – Services  ‘T’ – Tax  Goods and service tax is single tax rate levied on manufacture , sale and consumption of goods and service at national level
  • 6.  The Goods and Service Tax (GST) is a Value Added Tax (VAT) to be implemented in India, from April 2016.  GST is comprehensive tax mechanism where in all major indirect taxes are clubbed into one, whether they are levied on services(service tax) or goods(excise and vat).  Government had promised that GST will reduce the compliance burdens at present.  One of the aims of introducing GST is to reduce the cascading effects of taxes which is the primary focus of VAT but vat system is not comprehensive enough to do so.
  • 7.  VAT is value added tax (on products). GST is Goods and Services Tax is like VAT but applies to Services also (apart from products).   In India, we have VAT and Service Tax. Whereas in many countries you have only GST that applies to both products and services.
  • 8.  In 2000, the Vajpayee Government started discussion on GST by setting up an empowered committee.  An announcementwas made by Palaniappan Chidambaram, the Union Finance Minister, during the central budget of 2007–2008 that it would be introduced from April 1, 2010.  After this announcement, the Empowered Committee of State Finance Ministers decided to set up a Joint Working Group on May 10, 2007, with the Adviser to the Union Finance Minister and the Member-Secretary of Empowered Committee as co- convenors and the concerned Joint Secretaries of the Department of Revenue of Union Finance Ministry and all Finance Secretaries of the states as its members.
  • 9.  Introduction of a GST to replace the existing multiple tax structures of Centre and State taxes is not only desirable but imperative in the emerging economic environment. Separate taxation of goods and services often requires splitting of transaction values into value of goods and services for taxation, which leads to greater complexities, administration and compliances costs.
  • 10.  Integration of various taxes into a GST system would make it possible to give full credit for inputs taxes collected.  GST, being a destination-based consumption tax based on VAT principle, would also greatly help in removing economic distortions and will help in development of a common national market.
  • 11.  The dual GST model proposed by the Empowered Committee and accepted by the Centre will have dual system for imposing the tax. GST shall have two components i.e. (i) Central GST (ii) State GST  Central Excise duty, additional excise duty, services tax and additional duty of customs (equivalent to excise), state VAT entertainment tax, taxes on lotteries, betting and gambling and entry tax (not levied by local bodies)would be subsumed within GST
  • 12.  It would be applicable to all transactions of goods and service.  It to be paid to the accounts of the Centre and the States separately.  The rules for taking and utilization of credit for the Central GST and the State GST would be aligned.  Cross utilization of ITC between the Central GST and the State GST would not be allowed except in the case of inter-State supply of goods.  The taxpayer would need to submit common format for periodical returns, to both the Central and to the concerned State GST authorities.  Each taxpayer would be allotted a PAN-linked taxpayer identification number with a total of 13/15 digits.
  • 13.  It will cover all types of person carrying on business activities, i.e. manufacturer, job-worker, trader, importer, exporter, all types of service providers, etc.  If a company is having four branches in four different states, all the four branches will be considered as TP under each jurisdiction of SGs.  All the dealers/ business entities will have to pay both the types of taxes on all the transactions.  A dealer must get registered under CGST as it will make him entitle to claim ITC of CGST thereby attracting buyers under B2B transactions.  Importers have to register under both CGST and SGST as well.
  • 14.  Levies on petroleum products  Levies on alcoholic products  Taxes on lottery and betting  Basic customs duty and safeguard duties on import of goods into India  Entry taxes levied by municipalities or panchayats  Entertainment and Luxury taxes  Electricity duties/ taxes  Stamp duties on immovable properties  Taxes on vehicles
  • 15.  GST on export would be zero rated  Both CGST and SGST will be levied on import of goods and services into the country. The incidence of tax will follow the destination principle and the tax revenue in case of SGST will accrue to the State where the imported goods and services are consumed. Full and complete set-off will be available on the GST paid on import on goods and services.
  • 16.  The existing CST will be discontinued. Instead, a new statute known as IGST will come into place. It will empower the GC to levy and collect the tax on the inter-state transfer of the GS.  The scope of IGST Model is that Centre would levy IGST which would be CGST plus SGST on all inter-State transactions of taxable goods and services with appropriate provision for consignment or stock transfer of goods and services.
  • 17.  The inter-State seller will pay IGST on value addition after adjusting available credit of IGST, CGST, and SGST on his purchases. The Exporting State will transfer to the Centre the credit of SGST used in payment of IGST. The Importing dealer will claim credit of IGST while discharging his output tax liability in his own State.
  • 18.  The Centre will transfer to the importing State the credit of IGST used in payment of SGST. The relevant information will also be submitted to the Central Agency which will act as a clearing house mechanism, verify the claims and inform the respective governments to transfer the funds.
  • 19.  Under GST registration, it is likely to be linked with the existing PAN.  The new business identification number was likely to be the 10-digit alphanumeric PAN, in addition to two digits for state code and one or two check numbers for disallowing fake numbers. The total number of digits in the new number was likely to be 13-14.
  • 20.  In an invoice based VAT system, the issue of invoices in the proper form is an essential part of the procedure for imposing and enforcing the VAT.  An invoice is also required by the tax authorities to audit the collection of VAT.
  • 21.  What is required is – › The law should require a supplier making a taxable supply to another taxable person to provide a VAT invoice with that supply or the payment for it. › The VAT invoice should be standardised across all states so as to contain a minimum of information about the supply being invoiced.
  • 22.  What preparations are required at the level of CG and SG for implementing GST?  Whether the Government machinery is in place for such a mammoth change?  Whether the tax-payers are ready for such a change?  What impact it can have on the revenue of the government?  How can the burden of tax, in general, fall under the GST?  In what respect, it will affect the manufacturers, traders and ultimate consumers?  How will GST benefit the small entrepreneurs and small traders?  Which type of administrative work will be involved in complying with the GST requirements?