GST

2. GST – FIRST CUT

3. VAT in INDIA…
 1986 – modvat for inputs
 1994 – modvat for capital goods
 2002 & 2003 – service tax credit
 2004 – cross-sectoral credit
 2005 – VAT
 2010 (?) – GST

4. GST JACKPOT…
 Centre : - Tax till “retail”
 State : - Tax “services”
 Trade :- No “Tax on Tax”
 Consultants :- Eternal Business

5. TODAY …
 C.Ex duty is part of the price for VAT
 CST is part of the cost as there is no VAT credit
 VAT has a cascading effect, since sale price
includes C.Ex duty / CVD

6. TODAY in C.EX…
 Sec 2 (f) (i), (ii) & (iii)
 Sec 3 & 3A
 Sec 4, 4A & Valuation Rules

7. TODAY in VAT…
 Multiple rates
 Different rates in different states
 Different definitions
 Border controls

8. TODAY in CST…
 No credit on CST purchases leading to cascading
effect
 Complex law on stock transfer and transit sales

9. TODAY in ST…
 Selective services under tax net
 Inclusive definitions
 Cenvat credit disputes
 Freak valuation
 Reverse charge

10. SALE vs SERVICE…
 Software
 Works contract

11. GST - Made in India !
 Dual GST structure proposed
 Centre & State to have concurrent jurisdiction
 Power of Centre & State to tax widened
 Win – win model for both Centre and State

12. Central GST (CGST)
 To be levied by the Centre through a separate
statute on all transactions of goods and services
made for a consideration
 To cover end – 2 end transactions across value
chain
 Exempted goods and services, non - GST goods
and transactions within threshold limits are to be
out of CGST

13. CGST …
 Central Excise Duty
 Additional Excise Duties
 The Excise Duty (M & TP Act)
 Service Tax
 CVD
 SAD
 Surcharges &
 Cesses

14. State GST (SGST)
 To be levied by the State through a separate
statute on all transactions of goods and services
made for a consideration
 To cover end 2 end transactions across value chain
 Exempted goods and services (uniform across all
States!), non - GST goods and transactions within
threshold limits are to be out of SGST

15. SGST …
 Each State to have a separate statute
 Uniformity on basic features.
 Would be paid to the accounts of respective States

16. SGST …
 VAT / Sales Tax
 Entertainment Tax
 Luxury Tax
 Lottery Tax
 Betting Tax
 Gambling Tax
 State Cesses & Surcharges
 Entry Tax ( not in lieu of Octroi)

17. GST exclusions …
 Petroleum products i.e. crude, motor spirit, ATF,
HSD / Alcohol / Tobacco
 Centre / States could also continue its levies
 Tobacco would be subjected to GST with ITC
 Centre to be allowed to levy extra levy on tobacco
without ITC
 Purchase tax ???

18. Integrated GST (IGST)
 For inter-state transactions
 Centre to levy IGST which would be CGST + SGST
 Appropriate provision for consignment sale/stock
transfer
 Inter-state dealer will pay IGST after adjusting IGST,
CGST and SGST credit on purchase

19. IGST …
 The seller in State X will pay the IGST to the
Centre
 While paying IGST, seller will adjust his lying
IGST/CGST/SGST credit
 State X will have to transfer the credit of SGST
used by the seller for payment of IGST to the
Centre

20. IGST …
 Buyer in State Y can avail credit of IGST
 Buyer in State Y can use the IGST to discharge
his output tax liability
 Centre has to transfer credit of IGST used for
payment of SGST to State Y
 A clearing house has to be formed for facilitating
IGST

21. Set - off …
 CGST against CGST
 SGST against SGST
 No Cross sectoral set-off between CGST & SGST
 IGST for CGST/SGST & vice versa

22. @ …
 Lower rate for necessary items and goods of basic
importance
 Standard rates for goods in general
 Special rates for precious metals
 Exports/clearnces to SEZ would be zero rated
 No benefits to sales from SEZ to DTA

23. Tax free schemes …
 Tax exemption would be converted into cash
refund scheme after initial payment
 Schemes to continue up to notified expiry
 No new exemption in future

24. GST on Imports…
 Both CGST and SGST would be levied on import
of goods and services
 Tax would be based on destination principle
 Tax revenue of SGST would accrue to the State
where the imported goods / services are
consumed
 Full set-off of GST on imports available

25. Compounding …
 Interest of small traders and SSI to be protected
 Upper ceiling on gross annual turnover and a floor
tax rate to be prescribed
 Compounding cut off at Rs. 50 lakhs with a floor
rate of 0.5% across the States

26. Threshold exemptions…
 10 lakhs limit for goods and services across all
States / UT for SGST
 1.5 crore for SSI manufacturers on CGST
 CGST exemption limit on services to be increased
(presently at 10 lakhs)

27. Illustration …
Stage of
Supply
chain
Pur.
value
of
input
Value
addn.
Value of
supply
of G & S
made to
next
stage
Rate
of
GST
GST
on
output
Input
tax
credit
Net
GST
Mfr 100 30 130 10% 13 10 3
Whlsr. 130 20 150 10% 15 13 2
Retlr. 150 10 160 10% 16 15 1
Total 6

28. Constitutional Amendments…
 Entry 84 of Union List to amend to empower
Centre to levy tax on SALE of goods.
 Entry 54 of State List to amend to empower State
to levy tax on SERVICES.
 Entry 92A of Union List to amend to empower
Centre to levy tax on inter – state SERVICES.
 Article 286 to amend to empower State to levy tax
on imports.
 3/4th majority in Parliament & 50% collegium of
State Assembly ratification.

29. Bottlenecks…
 Transitional credit
 High sea sales
 Stock transfers
 FOC clearances
 Additional considerations

30. THANKS