The document provides an overview of the Goods and Services Tax (GST) that is proposed to be implemented in India. It discusses the history and concept of GST in India, the constitutional framework for indirect taxation, key aspects of the proposed GST model including the taxes that would be subsumed, rate structure, and mechanism for claiming input tax credits. The presentation notes benefits of GST such as reducing cascading taxes, challenges in implementing GST such as standardizing systems across states, and compares India's proposed GST structure and rates with other countries where GST is implemented.

1. Ketan Jog | 25.Dec.14
GST in India

2. GST| Part 2 | 24.Jun.13| slide 2
GST?
‘G’ – Goods
‘S’ – Services
‘T’ – Tax

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Contents
 History of GST concept in India.
 Constitutional Setup for levy of Indirect Taxes.
 Advent of GST in India and Taxes Subsumed.
 Basic Concept.
 Modus Operandi.
 Benefits.
 Impact on certain categories of Goods & Services.
 Challenges Ahead.
 Global Scenario.
 Latest Updates.

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History of GST concept in India
 In 2003, Finance Minister of India in his budget speech Introduced Fiscal
Responsibility and Budget Management (FRBM) Bill to attain a ZERO Fiscal
deficit.
 Task Force formed under Shri Vijay Kelkar recommended a single GST (Goods
and Services Tax) – replacing numerous taxes in existence.
 In due course, an empowered committee (EC) of state finance ministers was
formed to take steps to implement Kelkar Committee recommendations.
 Its been 12 Years of negotiations between Centre and States!!!
 Single GST concept was rejected in favor of a DUAL GST – One for the Centre
(CGST) and other for State (SGST).
 It has now become CGST, SGST and IGST!!!. IGST is Integrated GST on Inter
State Transactions.

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Constitutional Setup for levy of Indirect Taxes
 Taxes levied by Central Government and State Government(s)
 Authority to levy a tax is derived from the Constitution of India
 Which allocates power to levy various taxes between the Centre and State
 Article 265 of the Constitution which states that "No tax shall be levied or collected except
by the authority of law”
 Article 246 of the Indian Constitution, distributes legislative powers including
taxation, between the Parliament of India and the State Legislature
 Schedule VII enumerates use of three lists;
 List - I Where the parliament is competent to make laws
 List - II Where only the state legislature can make laws
 List - III Where both the Parliament and the State Legislature can make laws upon
concurrently

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Constitutional Setup : Current
Union List State List Concurrent List
• Income Tax
• Custom Duty
• Excise Duty
• Service tax
• Central Sales Tax
• Stamp duty in respect of
bills of exchange,
cheques, promissory
notes, etc
• Taxes on lands and
buildings
• Excise duty on alcoholic
liquor etc
• Entry tax (Levied by
State)
• Sales Tax
• Road Tax
• Luxury Tax
• Stamp duty in respect of
documents other than
those specified in the
provisions of List I
• Stamp duties other than
duties or fees collected
by means of judicial
stamps, but not
including rates of stamp
duty
Taxes levied under authority of the Constitution

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Constitutional Amendment Bill (CAB)
 Changes to constitution are to be approved by 2/3rd Majority in Both Houses.
 Finance Minister, Shri Arun Jaitley presented the Constitution Amendment Bill
(CAB) in the Loksabha on 19.Dec.14
 Proposed Constitutional structure for Tax Levy
 “Both” Parliament and States may make laws with respect to Goods & Services Tax.
 Only Parliament can make laws with respect to Goods & Service Tax in course of
Interstate Trade or Commerce.
 Concept of “Declared Goods” or Goods of Special Importance is proposed to be
removed
 Additional 1% Tax for 2 years on Interstate Trade, 5 Years compensation to
states for Loss of Revenue on account of CST.
 Voting power between Centre and States defined :
 Centre has 33.33% of voting Power
 Remaining 66.67% with States. Votes of state to be calculated as per formula :
– Votes of all States / No. of States Present & Voting * No. of States in Favor
 GST Council comprising Union and State Finance Ministers to find a way forward

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GST in India – Taxes Subsumed
Dual GST
Central
Central
Excise
Duty
Addnl.
Excise
Duties
Excise
Duty
(Others)
Service
Tax
CVD
SAD
CST
All
Surcharges
& Cesses
StateOctroi, Entry,
Purchase Tax
Cesses and
surcharges on
goods and
services
Taxes on
lotteries,
betting,
gambling
Luxury Tax
Entertainment
Tax (except
levied by local
bodies)
VAT/Sales Tax

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Constitutional Setup : as per Proposed CAB
By Union By States
By Both Union &
States
• Income Tax
• Custom Duty
• Excise Duty
• Service tax
• Central Sales Tax
• Stamp duty in respect of
bills of exchange,
cheques, promissory
notes, etc
• Interstate sale of Goods
& Services (IGST)
• Excise on Petrol, Crude,
Diesel, ATF, Tobacco
products.( ? Notified
Date ?)
• Taxes on lands and
buildings
• Excise duty on alcoholic
liquor etc
• Entry tax (Levied by
State)
• Sales Tax
• Road Tax
• Luxury Tax
• Stamp duty in respect of
documents other than
those specified in the
provisions of List I
• On all Goods & Services
except Alcoholic Liquor
(CGST and SGST)
• Stamp duties other than
duties or fees collected
by means of judicial
stamps, but not
including rates of stamp
duty
Taxes levied under authority of the Constitution

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Definitions
 Goods & Services Tax : Article 366A (Clause 12A) of the Constitution of
India :
means any tax on supply of goods or services or both except taxes on the
supply of the alcoholic liquor for human consumption.
 Services : Article 366A Clause (26A) of Constitution says “Services”
means anything other than goods.
 Goods : means every kind of movable property other than actionable
claims and money; and includes stock and shares, growing crops, grass,
and things attached to or forming part of the land which are agreed to be
severed before sale or under the contract of sale.

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Objectives
The incidence of tax falls only on domestic consumption;
 The efficiency and equity of the system is optimized;
There should be no export of taxes across taxing
jurisdictions;
The Indian market should be integrated into a single
common market;
It enhances the cause of cooperative federalism.

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Basic Concepts
 Like a National level VAT on Goods and Services.
 Tax on domestic consumption.
 No differentiation between Goods and Services.
 Tax leviable at each point of sale or provision of service.
 Input Tax Credit is available at every stage.
 Treats whole country as a single jurisdiction.
 Uniform Tax rates across the whole jurisdiction.
 No distinction in Tax rates on Imported or Domestic Goods.
 Single Tax jurisdiction allows ease of allowing Input Tax Credit.
 Destination based tax for interstate transactions (IGST)- ultimate tax will be
collected by the state in which goods are finally consumed.

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Modus Operandi
 Single PAN based Tax Registration Number. Three additional digits would be
added to the current PAN to identify registration for the Centre and State GSTs.
 A registered dealer is to charge GST on Sale (Output) and pay GST on claim
credit of GST on Purchases (Inputs). Difference in OUTPUT GST and INPUT
GST has to paid to the tax authorities.
 Centre and States will legislate, levy & administer CGST & SGST respectively.
 A Constitutional mechanism will be introduced to ensure uniformity in rates and
other relevant parameters between Centre & States. The rates can thereafter not
be changed by the Centre or any of the States, without approval of the same
mechanism.
 Centre will give Input Tax Credit (ITC) only for CGST & IGST and the State only
for SGST IGST. Cross utilization of ITC between CGST & SGST not allowed.
 Uniform procedures – one common tax return for both taxes, with one copy given
to the Central authority and the other to the relevant State authority.

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How will the Tax look on an Invoice
■ Supply within State:
■ Supply from One State to Another
■ Exports
– The Base for both CGST and SGST is same – no tax on tax
– Tax Rate is assumed 10%
– Revenue Neutral Rate as worked out earlier : 12%
Basic value charged for supply of goods or services 10,000
Add: CGST @ 10% 1,000
Add: SGST @ 10% 1,000
Total price charged for local supply of goods or services 12,000
Basic value charged for supply of goods or services 10,000
Add: IGST @ 20% 2,000
Add: Additional IGST @ 1% 100
Total price charged for interstate supply of goods or services 12,100
Basic value charged for supply of goods or services 10,000
Add: CGST SGST IGST NIL Nil
Total price charged for export of goods or services 10,000

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Set Off or Input Tax Credit
Nature of tax paid on
purchase
Can be utilized for payment of
CGST CGST
IGST
SGST SGST
IGST
IGST CGST
SGST
IGST

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Benefits
• Reduction in the number of taxes at the Central and State
level
• Decrease in effective tax rate for many goods
• Removal of the current cascading effect of taxes
• Reduction of transaction costs of the taxpayers through
simplified tax compliance
• Increased tax collections due to wider tax base and better
compliance

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Some Peculiar Cases
• Threshold Limit for registration of GST dealers
(25 Lakhs / 1 Crore … or?)
• Separate Rate for Small Scale Dealers : ?1%
• Area Based Tax Exemptions
• Supplies to EOUs / SEZs / Backward Areas
• Import of Services
• Stock Transfers
• Supplies for Exports to Dealers

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Treatment of Certain Goods & Services
• Immovable Property
• Transport
• Health Services
• Capital Goods
• Precious Metals

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Challenges ………
■ Passage of CAB in the Parliament
■ Draft GST Law preparation and approval by Central and State elected bodies.
■ Standardization of systems and procedures all over India
■ Training/ Equipping Tax administration
■ States not willing to give Veto to Union
■ Compensation disbursal doubts
■ Additional IGST at 1% may be extended beyond 2 Years.

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Globally
 More than 140 countries around the world have a GST regime.
 Standard GST rate is between 10-20%.
 SINGLE GST rate.
 Full Tax Credits allowed for Inputs.
 Few Countries allow very few exemptions from GST for specific cases.
 Dual GST model in Brazil and Canada.
 In US, no such “National” General Sales Tax exists.

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China 17%
Indonesia 10%
Philippines 10%
UK 17.5%
Australia 10%
France 19.6%
Germany 16%
Denmark 25%
India ? ? ?
Global Tax Rates
Principal Characteristic – Single Tax Rate

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QUESTIONS & COMMENTS?
Interactive

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THANK YOU!!