Gst primer oct_13
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This document provides an overview of GST in India. It discusses the current indirect tax system and its challenges. An ideal GST model is proposed with a single rate across states, a common portal, and integrated ICT solution. The current GST implementation involves a dual GST with CGST and SGST for intra-state and CGST and IGST for inter-state transactions. Significant ICT development is underway including the GSTN portal for registration, returns, and settlement between states. Several policy and technical aspects still need to be decided for full implementation.
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Gst primer oct_13
- 2. What I Cover Tax Basics Concept of GST Ideal GST Solution Design Current Implementation Model Challenges
- 4. Types of Tax Direct Tax - Income Tax on Income Tax Deposit by the entity earning income Indirect Tax – Expenditure Tax at every Sale Tax Paid by Spending Entity Tax Collected and Deposited to Govt Account by Selling Entity
- 5. Indirect Tax - Evolution Non-Integrated Manufacturing ORE Tax 10% VA =100 SP=110 ORE Tax = 0 VA =100 SP= 231 STEEL Integrated Manufacturing Tax 10% UTENSI L Tax = 0 VA =100 SP= 364 Tax 10% VA =300 SP= 330 STEEL UTENSI L Tax 10%
- 6. Indirect Tax – Evolution to VAT TAX only Value Added Implementation of VAT Input Tax Credit
- 7. VAT – Enablement . ORE Tax 10% VA =100 SP=110 VA =100 SP= 220 STEEL Input Tax Credit =10 Tax 10% UTENSI L VA =100 SP= 330 Tax 10% Input Tax Credit = 20
- 8. Challenges Challenges to any Tax Administration Compliance Painless Non-Compliance Painful Equity and Efficiency in Administration
- 9. Ideal Model One Rate for all Products Across Country Single Enforcement Authority Integrated ICT Solution Totally hands free Processing Risk Management
- 10. Meeting Multiple Objectives Fair and Affordable Tax Different Rate for Different Products Influencing Economic Activities Influence Export & Import Influence Geographical Location Influence Consumption Luxury Goods, Sin Goods etc Federal Structure of Government Manufacturing Stage Tax and Service Tax by Central Government Trading Stage Tax By State Government
- 11. Multiple Objectives – At What Price Complexity in Compliance Different tax collecting banks across states Different tax rates across different states Different returns submission across states Diverse Enforcement mechanism Border clearance at each state
- 12. Multiple Objectives – At What Price Complexity and dilution in enforcement Mis-Classification Hawala Tax trade Evasion of products
- 13. The Solution Goods & Service Tax (GST)
- 14. Stakeholder Expectation The foundation for design
- 15. Wish List - Taxpayer Standard Rate across states Standard Processes across Country Registration Number, Amount, Account Head Deposit at any Authorized Bank Branch Multiple Payment Modes Offline, Online, ATM, Debit/Credit Card, Mobile Tax Credit Tracking Refund to Bank Branch Single entity for enforcement
- 16. Wish List - Banks Standard Processes across Country Who paid, How much, Which Challan, To Whom Role based on their Core Strengths Deposit at any Authorized Bank Branch Multiple Payment Modes Offline, Online, ATM, Debit/Credit Card, Mobile Quick Feedback on Error Standard Process for Error Rectification Refund to Bank Branch
- 17. Wish List - Tax Administration Quick Credit to Government Account Prevent Fraud Claims Enable focus on Core Strengths Mapping of Tax Claim to Tax Deposit Timely Digital Data Input Easy and Quick Verification of Tax Claims Mapping of Collection to Corresponding Enforcing Unit
- 18. Wish List - Accounts & Audits Quick Credit to Government Account Ensure that due Processes are Followed Prevent Leakage Enable Focus on Core Strengths Timely Digital Data Input Analytics for Audit
- 19. Ground Reality Different States Use Different Sets of Banks Taxpayer Mapped to Bank/Branch Payment Modes Limited Multiple Flows for Funds and Data No Online Information of Tax Collection to DCT Offices Only AG gets Consolidated Collection Details That too with Time Delay…. DCT Office does not get in time the Challan Details of Tax Deposit at Treasuries in digital form Challan Matching with Return almost Impossible Even in DCT Offices the Challan Data is digitised and with Delay
- 20. The GST Solution
- 21. GST Foundation Dual GST Destination Based PAN Based User Identification Number IGST Model for Inter-state Settlement Common Portal (GSTN) for Common Functions GSTN should enable Functional Control and Flexibility for State and Central Tax Administration
- 22. Status Empowered Committee of Finance Ministers building consensus Constitution Amendment Bill Comprehensive Goods & Service Tax for Centre and State CGST & SGST (intra state) CGST & IGST (inter state) Some Questions yet decided upn Uniform SGST rate across all states ?? CGST enforcement by Centre and SGST by state
- 23. Status ICT Enablement ICT Enablement IT Takes Time IT is Essential IT work can start even with current level of policy uncertainty Decision on Common Integrated Portal – GSTN GSTN SPV under Establishment POC under implementation by NSDL
- 24. Scope -GSTN Uniform taxpayer interface Registration of user Tax Deposit Filing of Return Computation for IGST Settlement Generation of Tax Ledger Data Extract for States MIS and Data Warehouse Support to Stake holders Feedback to Tax Payers A Cafeteria model of IT support for states with no/ limited IT infrastructure 24
- 25. GST – The Dream Model Service Delivery Customer Interface Back End Enabler Common Integrated Portal Tax Deposit Returns Submission User Registration Common E-Tax Portal for Banks Computation for Interstate Settlement Recording of InterState Goods Movement Status Track Interstate Goods Movement Tracking Acceptance & Consolidation of Return Matching of Input Tax Credit Dashboard & MIS Policy Process Automation of Enforcement Agencies Administration Compliance Monitoring Assessment Compliance Monitoring Assessment Audit Appeals State-1 Compliance Monitoring Assessment Audit Appeals State-N Appeals CBEC Audit
- 26. TAX collection & Inter-State Settlement Taxpayer Collecting Bank Branch Collecting Bank Branch Collecting Bank Branch Collecting Bank Branch GST e-TAX Portal Collecting Bank Branch Collecting Bank Branch Bank I Bank N Funds Challan data Reconciliation Data Return GSTN RBI Settlement Fund Challan data Center State I State N
- 27. GST Return Acceptance Return Acceptance GST Return Online Facilitation Centre Tax Payer Common Integrated Portal (CIP) Return Consolidation State - I Matching Engine State -N CBEC Enforcing Agencies
- 28. Tax Collection and Settlement Tax Collection through a common set of authorized banks for CGST, SGST and IGST Tax Deposit through single challan with SGST, CGST and IGST separately accounted. Funds routed by banks to RBI: CGST to Center A/C SGST to State A/C IGST to IGST A/C Challan Details routed by banks to Common Portal Taxpayer files return to Common Portal Sales – dealer wise ITC - dealer wise Tax deposit – challan wise
- 29. Tax Collection and Settlement contd… Common Portal computes fund transfer from State A/C to IGST A/C and from IGST A/C to State A/C SGST credit against IGST Fund from State to IGST IGST credit against SGST Fund from IGST to State Tax Ledgers by Common Portal Main ledger for each dealer Sub Ledger for each vendor of the dealer to match ITC claim by dealer against ITC reported by the vendor
- 30. A simple Example Out flow from States IGST A/C Simple Return for Dealer A C Tax Liability S Sub Ledger of A for Vendor B I 100 ITC Reported by B (R) ITC claimed by A (C) 60 ITC from Vendor B C S 60 I IGST Deposit 40 Verify if R >= C Transfer from State to Center if R >= C If R<C transfer C & common portal will provide input for enforcement 60
- 31. A simple Example – 2 (out flow from states) IGST A/C ITC Reported by B (R) Simple Return for Dealer A C Tax Liability S Sub Ledger of A for Vendor B I 100 ITC claimed by A (C) 60 60 ITC from Vendor B C S 60 ITC Reported by B (R) I ITC from Vendor D-C S Sub Ledger of A for Vendor D 10 ITC claimed by A (C) 10 I IGST Deposit 30 Verify if R >= C 10
- 32. A simple Example (inflow to state) IGST A/C Simple Return for Dealer A C Tax Liability Sub Ledger of A for Vendor B S I 100 ITC Reported by B (R) ITC claimed by A (C) 40 ITC from Vendor B C S I 40 SGST Deposit 60 Verify if R >= C Transfer from Center to State irrespective of match of R & C If R<C provide input for enforcement 40
- 33. Tax Collection and Settlement contd… Common Portal Compute dealer wise amount to be transferred to/from IGST A/C Aggregate for all dealers in each State Net amount informed to be transferred intimated to RBI Computation System Driven and Automatic with no human intervention Daily transfer for efficient settlement Business Rule Approved by Competent Authority (CAG, CGA, RBI, EC & MOF) Process Audited Periodically by representatives of Competent Authority
- 34. Tax Collection and Settlement contd… E-Payment Phase 1 For value above threshold Phase 2 All Inter state settlement Phase 1 – Based in Dealer wise summery of Liability (& input tax credit) Phase 2 - Invoice vise Details of liability & tax credit
- 35. Returns GST Return to CIP Phase 1 Dealer wise Summery of Liability (& input Tax Credit) Matching Dealer wise Credit Dealer wise Ledger of ITC Phase 2 Invoice vise Details of Liability & Tax Credit Matching Invoice-wise Tax Credit Invoice-Dealer wise Ledger of ITC
- 36. Tax Collection and Settlement contd… Total of SGST Credit against IGST for all dealers in a state > Total IGST credit against SGST = Net outflow from state Total of SGST Credit against IGST for all dealers in a state > Total IGST credit against SGST = Net inflow to state
- 37. Tax Authority Tax IT Systems Middleware APIs State/ Center portal State/ Center Format State/ CBEC Application EDI Interlinkages State Database Common Portal Dealer Common Format Format Customization Common Portal Database GST Application Scheduled Replication/ Sync Jobs Network of Banks Treasuries
- 38. Policy Decisions Critical for IT User Registration Form and Process User Master Migration When can user registration commence GST Common Challan Form Common Set of tax collecting banks Payment Process Flow for Funds and Data Return (Frequency & Form) IGST = C+S IGST Settlement Business Rules Frequency Scope of temporary under-writing by center for smooth IGST settlement. Input from state on adaptation / integration with GSTN
- 41. Broader Issues in e-Governance IT is only part of the story Process Design should be intuitive & in synch with business practices Be patient But you have to tweak Be ready to hold hands Sometimes you need to push
- 42. Broader Issues in e-Governance Learn to judge cribs Government users needs special treatment Benchmark and measure Persistence is the key Respect Data Who owns the project
- 43. Tax - Basics Parameter Direct Tax Indirect Tax What is taxed Income Expenditure When is taxed Income Earned Expenditure Incurred Compliance Income Earner Goods/ Service Provider Policy Making & Enforcement Authority Centre - CBDT Manufacturing – Centre CBEC Trade – State - CTD State Share Financial Devolution (FD) Part Self Determined Part FD