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Reduce barriers of inter-state trade and create an Indian Common Market Redress the imbalance in taxation between manufacturing industry and the service.

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Presentation on theme: "Reduce barriers of inter-state trade and create an Indian Common Market Redress the imbalance in taxation between manufacturing industry and the service."— Presentation transcript:


2 Reduce barriers of inter-state trade and create an Indian Common Market Redress the imbalance in taxation between manufacturing industry and the service sector Private Investment choices should be influenced by economic considerations and not by tax rates or tax exemptions Reduce multiplicity of taxes and ensure transparency Reduce the incidence of taxation by expanding the taxable base 2

3 Dual GST - Central GST - State GST - Integrated GST Destination based tax Taxation on a common base Common taxable event - Supply of goods or services for a consideration CGST credit to be used for paying CGST SGST credit to be used for paying SGST (confined to intra-state trade) Tax on imports (equivalent to IGST rate) to be collected by the Centre 3

4 Constitutional amendment to enable the Centre to levy CGST beyond the manufacturing stage Constitutional amendment to enable States to levy and collect duty on Services Model legislation for CGST and SGST Rules to be drafted for determining place of supply of goods or services Rules to be drafted for laying down procedures for the administration of CGST, SGST & IGST, specific measures to be made for dispute resolution, settlement of cases & advance ruling 4

5 Central Excise Duty (CENVAT) Additional Excise Duty Excise Duty levied under the Medicinal & Toiletries Preparation Act. Service Tax. Additional Customs Duty, commonly known as Countervailing Duty (CVD) Special Additional Duty of Customs (SAD) @ 4% Surcharges & Cesses Proposed exclusions from GST - Alcohol & Real Estate 5

6 VAT / Sales Tax Entertainment tax (not levied by the local bodies) Luxury Tax Taxes on lottery, betting and gambling Taxes on Advertisements State Cesses and Surcharges, in so far as they relate to supply of goods or services Entry tax (not levied by the local bodies) Purchase Tax 6

7 Four-tier rate structure for goods in State and Central GST Three-tier rate structure for services Common threshold limits of exemption for both goods & services – common for both CGST and SGST (a limit of Rs. 25 Lakhs for a legal entity taken as a whole) Compounding limits beyond threshold of Rs. 25 Lakhs to simplify procedures for small taxpayers having turnover upto Rs. 75 Lakhs – simplified quarterly returns instead of monthly returns Existing area based exemptions to be converted into post-clearance refunds – No final decision yet Current exemptions with sunset clause to continue until the terminal date – No final decision yet No fresh exemptions Zero rating of exports 7

8 Levy of IGST (CGST rate + SGST rate) on inter-state movement of goods or services IGST to be collected by Centre IGST to be used for payment of IGST, CGST & SGST in that order Taxpayers making inter-state clearance to submit common returns giving details of quantum of SGST credits used for paying IGST and quantum of IGST credits used for paying SGST SGST credits used for paying IGST to be transferred to the Centre and IGST credit used for paying SGST to be transferred to the States Adjustments to be made between Centre and the State through the clearing-house mechanism – GSTN to act as a clearing house Taxpayers can take credit seamlessly 8

9 PAN based Registration (15 digit code) HSN based classification of goods WTO based classification of services Common returns for both CGST, SGST & IGST 9

10 Suggestions :-  Creation of an empowered committee of State Chief Secretaries and the Principal Chief Commissioners headed by the Finance Secretary to the GoI, Secretary(Revenue), Chairman(CBEC) & Member(GST).  The empowered committee would be registered under the Societies Act and can utilize the existing Secretariat of the Empowered Committee of the State Finance Ministers.  Creation of state-level registered Co-ordination Committee, consisting of the State Chief Secretary and the Principal Chief Commissioner with a group of co-opted officers and a permanent administrative Secretariat.  These institutional arrangements can appropriately resolve various implementation issues that would arise from time to time. 10 New Administrative structures for implementation

11 A Robust Dispute Resolution system in the GST could be built around the following principles :-  The Dispute Resolution system must make a clear distinction between appealable cases (issue based) and those that are non-appealable cases (technical) so that the system is not unduly burdened ;  Convergence between Centre and State on important assessment related issues with recurring implications must be reached quickly so that the tax payer does not have to contend with uncertainty in tax policy ;  The present system of Advance Ruling in CBEC must be available for both CGST cases and SGST cases involving assessment issues ;  The system of speedy administrative settlement of disputes before the stage of adjudication, needs to be retained, so that disputes are settled quickly. 11 Contours of a Dispute Resolution Machinery

12 Four -fold catergorisation of disputes :-  Dispute of procedural matters that may emerge during online scrutiny of returns which may involve imposition of penalty – may be treated as no- appeal cases (may be decided at the Supdt./AC level) ;  Disputes when liability is admitted, voluntary payment made & there is no suppression of fact – issue of notice may be waived and kept outside the dispute domain – Procedures under Section 11 A (2 B) of the Central Excise Act and Section 73(3) of the Service Tax Rules may be adopted ;  Disputes of a non-technical nature involving revenue but non- assessment in nature – these would broadly come under offences and confirmed/un-confirmed refunds/rebates – may be decided at the JC/ADC level and convergence could be reached at the second appeal stage at the State GST Tribunal ;  Disputes relating to assessment issues may be decided at Commissioner level and convergence can be reached at the first appeal stage at the State GST Tribunal. 12 Dispute Resolution (Contd…)

13 Procurement  Inter-state procurement of goods & services – credit eligibility.  Inter-state vs. Intra-state GST – may impact the sourcing decision. Costing :- cost of input /service may change due to rate change and full creditability and/or withdrawal of exemptions. Distribution :- warehousing may need relook. Pricing :- overall pricing of the goods & services – factoring of GST credits. Tax Controversies :- Place of supply rules; Transition stock; Negative list; saving clauses, etc. 13 Operational

14 Working Capital / Cash Flow  Higher tax outgo on procurement of goods & services.  Shift in taxable event from manufacture to supply.  Shift in point of tax collection.  Replacement of exemption by refund schemes.  Taxability of branch transfers/inter office supplies/captive consumption ? Input credits  Availability of accumulated credits on transition to GST.  Loss of credits beyond one year ?  Continuity of ISD concept.  Amplified credit availability.  Credits for taxable and exempt output ? 14 Financial

15 Re-design IT systems  Accounting.  Change in formats of invoices, reports, returns.  Redefining the logic & updating the masters. Training / Communication  Staff training on compliance requirement.  Realigning with procurement & distribution partners.  Regular communication with stake holders. Compliance requirements  Registration.  Tax payments.  Statutory declarations and Returns. 15 Infrastructural

16 GST would lead to a centralisation of the indirect tax function. Focus on strategy, processes and technology to manage indirect taxes. Greater stake in accurate reporting due to significant input tax credits as compared to the present scenario. Tax administration to use IT enabled platform & processes, e.g. tax data warehouse, online tracking of inter-state movements, information exchange, etc. Need to re-design and re-engineer the function. 16 Tax Management

17 Treatment of procurement of goods & services for exports. Treatment of royalty/licence fee in valuation of imported goods under GST regime. Valuation in case of stock transfers. Treatment of deemed sale (i.e. lease, works-contract, etc.) Classification of goods & services (the HSN may be used). Manner of exemptions for backward areas. Dispute resolution mechanism 17


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