The Reform Process of India's Indirect Tax Regime: Basics of GST discussed. With Insightful Examples.

1. GOODS & SERVICES TAX – Key
Features
[The Reform Process of India’s
Indirect Tax Regime]
Presented by:
Dr. Sandeep Solanki
Vice Principal & Senior Lecturer (Commerce & Mngt. Studies)
SDS Badamia Colleges of Professional Studies
Varkana, Distt. Pali

2. GST – CONTENT OF DISCUSSION
Business Model and Tax Structure prior GST(on
White Board)
Genesis & Implementation Committee:
Key Features: CGST, SGST, IGST
Input Tax Credit Benefit:
Composition Scheme:
Impact on various goods & services:

3. GST – BUSINESS MODEL & CURRENT TAX STRUCTURE
1) On White Board you may have an idea of a Business Model
and the Tax Structure prior to implementation of GST.
2) Fiscal powers between the Centre and the States were
clearly demarcated in the Constitution with almost no
overlap between the respective domains. The Centre had the
power to levy tax on the manufacture of goods while the
States have the powers to levy tax on sale of goods. In case
of inter-state sales, the Centre had the power to levy a tax
(the Central Sales Tax)but, it was collected as well as
retained by the originating States only.
3) As for Services, it was the Centre alone that was
empowered to levy Service Tax. Also in case of levy of taxes
on Imports & Exports was rest with the Centre, commonly
known as Customs Duty and Special Additional Duty.

4. GST – GENESIS & IMPLEMENTATION COMMITTEE
1) Introduction: of GST would require amendments in the
Constitution so as to concurrently empower the Centre and
the States to levy and collect the GST.
2) Constitution (101st )Amendment Act,2016:To address all
these issues, the Constitution (122nd Amendment) Bill was
introduced in the 16th Lok Sabha on 19.12.2014. The tax shall
be levied as Dual GST separately but concurrently by the
Union (CGST) and the States (SGST). The Parliament would
have exclusive power to levy IGST on inter-state trade or
commerce (including imports) in goods or services.
3) A GST Council: would be constituted comprising the Union
Finance Minister, the Minister of State (Revenue) and the
State Finance Ministers to recommend on the GST rate,
exemption and thresholds, taxes to be subsumed and other
features. Decision of GSTC would be taken by a majority of
not less than 3/4th of weighted votes cast. Centre and
minimum of 20 States would be required for majority because
Centre would have 1/3rd of weightage of the total votes cast
and all the States taken together would have 2/3rd of
weightage of the total votes cast.
Contd…………

5. GST – GENESIS & IMPLEMENTATION COMMITTEE
4) The Constitution Amendment Bill was passed by the Lok
Sabha in May 2015. The was referred to the Select Committee
of Rajya Sabha on 12.05.2015. The Select Committee had
submitted its Report on the Bill on 22.07.2015. The Bill
with certain amendments was finally passed in the Rajya
Sabha and thereafter by Lok Sabha in August, 2016.
5) Further the Bill had been ratified by required number of
States and received assent of the President on 8th September
2016. Since been enacted as Constitution (101st
Amendment)Act, 2016 w.e.f. 16th September 2016.
6) Implementation Committee:
a) Centre Members: Sh. Mahendra Singh (GST), Sh. B.N.
Sharma (Addl. Secretary - Revenue), Sh. Vivek Johri (Chief
Commissioner) and Sh. P.K. Dash (DG, NACEN)
b) State Members: Sh. C. Chandramouli (TN), Sh.
Sanjeev Kaushal (Haryana), Sh. P.D. Vaghela (Gujarat), Ms.
Samaraki Mahapatra (W. Bengal)
c) Members GST Council: Sh. Arun Goyal (GST Council)

6. GST – KEY FEATURES
1) The five laws namely CGST Law, UTGST Law, SGST Law and GST
Compensation Law have been recommended.
2) There would be four tax rates namely 5%, 12%, 18% and 28%.
Besides some goods and services would be under the list of
exempt items.
3) GST will be applicable on ‘supply’ of goods & services,
following the ‘destination principle’ instead of ‘origin
based taxation’.
4) This ‘Supply of goods & services’ will include sale,
purchase, barter, transfer, lease and imports or exports.
5) GST would replace all taxes currently levied and collected
by the Centre. And would subsume all taxes levied by the
State. Amalgamating various taxes into a single tax.
6) Uniformity in Tax Rates & Processes: Because each state
has different tax structure. So GST and the GST Network
will make a Common National Market. Help conformity of
sales price of a commodity throughout the nation.
7) Harmonized System of Nomenclature of Items in GST Network
8) Zero Taxation for supply to SEZ and Exports.

7. GST – KEY FEATURES
8) Single Interface for Control of Tax Administration: 90%
of taxpayers having turnover below 1.5 Cr. Would vest with
State Tax administration and over 10% with Central Tax
administration. Further all administrative control over
taxpayers having turnover over 1.5 Cr. Shall be divided
equally in the ration of 50% for the Central and State.
9) A common threshold exemption would apply to both CGST and
SGST. Tax payers with an annual turnover of Rs. 20 lakh
would be exempt from GST.
10) A Composition Scheme is introduced for taxpayers having
turnover above Rs. 50 lakhs…….contd…… in upcoming slides.
11)Minimum Interface with CGST & SGST administering
officials. Everything online including submission invoices &
statement of sale & purchase, self-assessment of taxes,
refunds and payment through NEFT, Online Banking or RTGS.
12) Improvement of Liquidity for Cash Flow and Working
Capital for SMEs
13) Ease of Doing Business in India with a boost to the
initiative of MAKE IN INDIA.
14) List of Exempted Items will be common for application of
both CGST & SGST.

8. GST – INPUT TAX CREDIT MECHANISM BENEFIT
S
Which means if you are a manufacturer, supplier, agent, e-
commerce operator, aggregator or any of the person
registered under GST, your are eligible to claim INPUT
CREDIT for tax paid by you on your purchases.

9. GST – INPUT TAX CREDIT MECHANISM BENEFIT
Conditions: Supplier must have filed his GST returns, to be
reflected in the GST Network. You must have an invoice of
purchase and have received goods physically. But it cannot
be taken on purchase invoices later than a year.

10. GST – INPUT TAX CREDIT MECHANISM BENEFIT

11. GST – INPUT TAX CREDIT MECHANISM BENEFIT
COST OF GOODS WILL REDUCE:
In above example you can note that tax paid on sale within
state can be claimed against tax paid on sale outside state
in GST system, which was not in Prior GST Tax System.

12. GST – COMPOSITION SCHEME
A Composition Scheme is introduced for small taxpayers
having turnover above Rs. 50 lakhs:
Conditions:
1) It is optional on part of the registered taxpayer.
2) Cannot avail the benefit of Input Tax Credit Mechanism
3) Cannot collect this tax from the consumer
Benefits:
1) Only 1% GST of the turnover, applicable for manufacturer
in the state
2) Only 0.5% GST of the turnover, applicable for other
suppliers in the state
3) Only 2.5% GST of the turnover, applicable for restaurant
in the state
4) A normal taxpayer is required to submit a minimum of three
returns per month and one yearly consolidated return = 37
returns. But taxpayer availing Composition Scheme is
required to file one return in each quarter.

13. GST – IMPACT ON VARIOUS GOODS & SERVICES
Expensive after
GST
Cheaper after
GST
Tax Free items Same as before
Gold, Retailing,
Insurance,
Telecomm. Bank
Transactions,
Eating out in AC
Restaurant,
Luxury Cars,
Business Class
Air Travel,
Chewing Gum,
Chocolates,
Beauty Products,
Perfumes,
Ayurvedic
Products etc.
Movie Tickets,
Engineering &
Capital Goods,
Economy Class
Air Travel, Hair
Oil, Soap,
Toothpaste,
Smart Phones,
Cement etc.
Fresh Milk,
Cereals, Metro
Travel, Religious
Travels, Non-AC
Train Travel etc.
Sugar, Tea,
Coffee etc.

14. GST – THANKS
THANKS FOR YOUR
ATTENTION!!