What is GST Present structure of Indirect taxation Need for GST in India Example to explain GST regime and Non-GST Regime Features Of GST GST rate structure made by GST council Advantages and disadvantages of GST

2. • GST is single
indirect tax for
the whole
nation.
• Any tax on
supply of goods
and services
except some.
• Goods and Services Tax (GST) is a proposed system of indirect taxation in
India merging most of the existing taxes into single system of taxation.
• First country to introduce GST was France in 1954.
• Currently almost 160 countries have implemented GST with some countries
having Dual-GST ( e.g. Brazil, Canada etc.) model.
• It was presented as a bill and now it is The constitution (one hundred and
First amendment) Act 2016.
• The GST is administered & governed by GST Council and its Chairman
is Union Finance Minister of India Arun Jaitley
GS
T

3. • Petroleum(but may be included within GST subsequently, basic
recommendation by GST council)
• Alcohol for human consumption
• Lottery & betting
• Electricity duty and taxes
• Entry tax levied by municipalities or panchayats
• Stamp duties on immovable properties
• Taxes on vehicles.
EXCLUSIONS OF GOODS & SERVICE TAX.

4. CURRENT STATUS OF GOODS & SERVICE TAX
The bill was approved in Lok
Sabha but did not pass muster
in Rajya Sabha. Then it has
been referred to a select
committee for scrutiny
Bill was introduced in the Lok
Sabha by Finance Minister
Arun Jaitley on 19 December
2014.
The select committee is
expected to report to the Rajya
Sabha sometime in July. Then
the house approved the
recommendations.
The bill has to finally be
approved by the President of
India in 2016.
After both the houses of
parliament pass the bill at
least 50% of India’s 29 states
have to approve the
constitutional amendment.
Amendments are going on
and yesterday, Lok Sbaha
passed four GST bills.

5. Present Indirect Taxes system in India
Central
Levy
Central
Sales Tax
Basic
Custom
Duty
SAD*
CVD**
Excise
Duty
Service
tax
State Levy
VAT
Octroi***
Purchase
Tax
Entry Tax
5
Article 246 of the Indian Constitution gives power to parliament to make
SAD* = Special Additional
Duty levied to counter
balance the sales tax /Vat
,local tax
**CVD is equivalent to the amount of excise
*** tax collected
on various
articles brought
into a district for
consumption

7. Why there is a need for GST?
Complex Tax
Structure
Tax Cascading
Changing business
environment
Inefficiency in Tax
Administration
Barriers to trade
7

8. CURRENT WORKING OF TAX

9. Manufacturer
Wholesaler
Retailer
Customer
Supplier of
Raw
Materials Material
worth Rs.
100
inclusive of
Rs. 10 in tax
Produces a good and adds
Rs. 50 value.
Price before tax=Rs. 150.
Tax= 15 @ 10%.
Total Price for
WS=150+15=165 Adds Rs. 30 to the
value.
Price before tax=
195
Tax= 19.5
Total Price for
Retailer=214.5
Adds Rs. 20 value.
Price before Tax=234.5
Tax=23.45
Price to the Customer=
257.85

10. Analysis of Tax Paid
Total Value added in the process: 90+50+30+20=190.
Total Tax Paid= 10+15+19.5+23.45=67.8.
So out of the total 257.8 paid by the customer he ends up
paying 67.8 in taxes.

11. One interesting thing to notice: The amount of tax in each
subsequent level only increases despite of a lesser
increase in value addition.
Notice: WS to Retailer & Retailer to Customer.
This happens because:

12. There is cascading impact of ‘Tax On Tax’ i.e. after adding tax in the
current level we do not offset it with tax already paid and again tax it (at
10%) in the subsequent level.
Also, greater the value added in the previous step the more tax gets
accumulated in the subsequent level due to the cascading effect.

13. HOW GST solves THIS!?
HOW WE WILL SOLVE THIS!?

14. Manufacturer
Wholesaler
Retailer
Customer
Supplier of
Raw
Materials Material
worth Rs.
100
inclusive of
Rs. 10 in
tax
Produces a good and adds
Rs. 50 value.
Price before tax=Rs. 150.
Tax= 15 @ 10%.
Tax already paid= 10
Net Tax= 15-10=5
Total Price for
WS=150+5=155
Adds Rs. 30 to the value.
Price before tax= 185
(155+30)
Tax= 18.5 @ 10%
Tax Already paid: 15
Net Tax: 18.5-15=3.5
Total Price for
Retailer=188.5
Adds Rs. 20 value.
Price before Tax=208.5
Tax=20.85 @ 10%
Tax Already Paid: 18.5
Net Tax=20.85-18.5=2.35
Price to the Customer=
210.85

15. Analysis:
Total Value added: 90+50+30+20=190
Total Tax paid= 10+5+3.5+2.35= 20.85
Compare this to tax paid in Non-GST regime of 67.8.
 Rs. 47 decrease in taxes for good worth Rs. 190.
Result: Goods become cheaper by the amount of
decrease in tax!!

16. Why does this happen?
By offsetting tax in each level with the tax already paid in
the previous level we avoid ‘tax on tax’.
Now the additional tax comes from value added in each
stage.
This results in a lesser tax burden on the final customer.

17. Features of Proposed GST
17
Destination based Taxation
GST Rates – to be based on RNR
Dual model
Centre will manage IGST

18. Features of Proposed GST
18
Nil Rate on necessary items
Merit rate for essential goods and services
Standard rate for goods and services in general

20. GST RATE STRUCTURE
ZERO RATED 0% On nearly 50% of the consumer inflation basket, including
grains, the GST will be at 0 per cent
LOWER RATE 5% Items of common consumption
STANDARD RATE 1 12% Two standard rates of 12 per cent and 18 per cent, which
would fall on the bulk of the goods and services. This includes
fast-moving consumer goods
STANDARD RATE 2 18%
HIGHER RATE 28% White goods, like washing machines, air conditioners,
refrigerators, shampoo, shaving stuff and soap. The current
varies between nil tax to 30-31 percent.
Demerit goods or sin goods such as luxury cars, pan masala,
aerated drinks, and tobacco and tobacco products, will invite
tax of 28 percent plus the cess.
20

21. Transparency in taxation system
Advantages
Of GST
Low price goods
Simple structure
Zero Rated Exports

22. Not helpful for manufacturing states
Service becomes costlier
Disadvantages
Of GST
India essentially lacks IT
infrastructure at grass-root
levels.

23. THANK YOU
Questions and queries are most welcome….