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GOODS AND SERVICES TAX (GST) CONCEPT, MODEL & PRESENT STATUS January, 2015.

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Presentation on theme: "GOODS AND SERVICES TAX (GST) CONCEPT, MODEL & PRESENT STATUS January, 2015."— Presentation transcript:

1 GOODS AND SERVICES TAX (GST) CONCEPT, MODEL & PRESENT STATUS January, 2015

2  Why GST : Perceived Benefits  Road to GST – Milestones  Stakeholders  Existing Indirect Tax Structure  Features of Constitution Amendment Bill  Features of Proposed GST Model  Current Status  GSTN  Way Forward  GST Planning

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4  To Trade  Reduction in multiplicity of taxes  Mitigation of cascading/ double taxation  More efficient neutralization of taxes especially for exports  Development of common national market  Simpler tax regime with fewer rates and exemptions  To Government  Simpler Tax system  Broadening of Tax base  Improved compliance & revenue collections (tax booster)  Efficient use of resources

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6  Budget 2006-07: announcement of intent to introduce GST by 2010  May, 2007 to September, 2009: Discussions on roadmap & design between Empowered Committee of State Finance Ministers (EC) & GOI  November, 2009: First Discussion Paper (FDP) released by EC  January, 2010: Comments on FDP by GOI  June, 2010 : Three sub-working Groups constituted by GOI oRegistration, return, payment, refund, audit & dispute resolution mechanism related issues oDrafting of Central GST & model State GST legislations oBasic design of IT systems required for GST in general & IGST in particular

7  July, 2010: Empowered Group on IT Infrastructure set-up  March, 2011: Constitution (115 th Amendment) Bill introduced in LS – Since lapsed with dissolution of LS  November, 2012: Committee on GST Design set-up by EC  January, 2013: Report submitted by Committee on GST Design  February, 2013: Three Committees constituted by EC -  Dual Control, Thresholds and Exemptions  RNRs for SGST & CGST and Place of Supply Rules  IGST and GST on Imports  March, 2013 – GSTN incorporated as a Section 25 Company

8  June, 2013: Committee to draft model GST Law  July, 2013: Report submitted by Sub-Group-I on Business Processes  April, 2014: Committee to examine Report of the sub-Group-I on Business Processes constituted by EC  June, 2014: Report submitted by Committee on IGST and GST on Imports  June, 2014: Report submitted by Committee on Dual Control, Thresholds & Exemptions  October, 2014: Report submitted by Committee on RNRs & Place of Supply Rules  December, 2014: Constitution (122 nd Amendment) Bill introduced in LS

9  Two major players: Centre & States  Empowered Committee of State Finance Ministers (EC) -  Finance Ministers of all State Governments.  Assisted by State Finance Secretaries/ Commissioners of Commercial Taxes  Government of India -  Department of Revenue  CBEC  Other Stakeholders – not directly involved in discussions

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11 Present Tax Structure [4 Important Constituents] Excise Duty Entry No. 84, List I, Schedule VII Taxable Event is Manufacture Service Tax Residuary Entry No. 97, List I, Schedule VII Taxable Event is Provision of Service Sales Tax / VAT Entry No. 54 of List II (VAT) and 92A of List I (CST) Taxable Event is Sale Customs Duty Entry No. 83, List I, Schedule VII Taxable Event is Import & Export 11

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13  122 nd Amendment Bill introduced in LS on 19.12.2014  Key Features  Concurrent jurisdiction for levy of GST by the Centre and the States –proposed Article 246A  Authority for Centre to levy & collection of IGST on supplies in the course of inter-State trade or commerce including imports – proposed Article 269A  Authority for Centre to levy non-vatable Additional Tax – to be retained by originating State  GST defined as any tax on supply of goods or services or both other than on alcohol for human consumption – proposed Article 366(12A)

14  Key Features contd.  Goods includes all materials, commodities & articles – Article 366 (12)  Services means anything other than goods – proposed Article 366 (26A)  Goods and Services Tax Council (GSTC) - proposed Article 279A To be constituted by the President within 60 days from the coming into force of the Constitutional Amendments Consists of Union FM & Union MOS (Rev) Consists of all State Ministers of Finance Quorum is 50% of total members Decisions by majority of 75% of weighted votes of members present & voting 1/3 rd weighted votes of Centre & 2/3 rd of all States together

15  Key Features contd. Council to make recommendations on  Taxes, etc. to be subsumed in GST  Exemptions & thresholds  GST rates  Band of GST rates  Model GST Law & procedures  Special provisions for any special category States  Date from which GST would be levied on petroleum products Council to determine the procedure in performance of its functions Council to decide modalities for dispute resolution arising out of its recommendations  Changes in entries in List – I & II  Compensation for loss of revenue to States for five years

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17  Destination-based Taxation  Applies to all stages of value chain – primary, secondary & tertiary including retail  Applies to all supplies of goods / services (as against manufacture, sale or provision of service) made for a consideration except :  Exempted goods / services – common list for CGST & SGST  Goods / services outside the purview of GST  Transactions below threshold limits  Dual GST having two concurrent components :  Central GST levied & collected by Centre  State GST levied & collected by States

18  CGST and SGST on intra-State supplies of goods / services in India  IGST (CGST + SGST) applicable to  Inter-State supplies of goods / services in India  Inter-state stock transfers of goods  Import of goods and services  IGST levied & collected by the Centre  Additional Tax not exceeding 1% on inter-state supply of goods – to be levied by the Centre but retained by originating State  Export of goods and services – Zero rated

19  All goods or services likely to be covered under GST except:  Alcohol for human consumption - State Excise + VAT  Electricity - Electricity Duty  Real Estate - Stamp Duty + Property Taxes  Petroleum Products – to be brought under GST from a later date on recommendation of GSTC  Tobacco products – under GST + Central Excise

20  Taxes (Centre, State or local levies – in the nature of indirect taxes on supply of goods or services) to be subsumed within GST: Central Taxes  Central Excise duty (CENVAT)  Additional duties of excise  Excise duty levied under Medicinal & Toiletries Preparation Act  Additional duties of customs (CVD & SAD)  Service Tax  Surcharges & Cesses State Taxes  State VAT / Sales Tax  Central Sales Tax  Purchase Tax  Entertainment Tax (not levied by local bodies)  Luxury Tax  Entry Tax (not levied by local bodies)  Entry Tax in lieu of Octroi  Taxes on lottery, betting & gambling  Surcharges & Cesses TAXES PROPOSED TO BE SUBSUMED

21  GST Rates – based on RNR : Four rates -  Merit rate - essential goods & services  Standard rate - goods & services in general  Special rate - precious metals  Nil rate - exempted goods or services  Floor rate with a small band of rates for standard rated goods / services for CGST & SGST  Optional Threshold exemption in both components of GST  Optional Compounding scheme for taxpayers having taxable turnover up to a certain threshold above the exemption

22  ITC of CGST for CGST & SGST for SGST - no cross utilization  ITC of IGST allowed for payment of IGST, CGST & SGST in that order  ITC of CGST allowed for payment of CGST & IGST in that order  ITC of SGST allowed for payment of SGST & IGST in that order  No ITC of Additional Tax

23  Multiple statutes – one for Centre & one for every State  Model GST Law including Rules & procedures to be recommended by GST Council -  Certain features to be common between the Centre & the States & across the States  Certain other features may vary to allow flexibility to the Centre & the States  Place of Supply Rules  to determine Place of Supply of goods or services  to determine whether the supplies are intra-State or inter-State  HSN Code likely to be used for classification of goods  Present system of classification of services likely to be used

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25  AMENDMENT BILL REINTRODUCED on 19.12.2014  Procedure for passage of Constitutional Amendment Bill  May be referred to the Standing Committee on Finance (SCF)  To be passed by 2/3 rd majority in both Houses of Parliament  To be ratified by at least 50% of the State Legislatures  Assent by President of India  Thereafter, GSTC to be constituted  GSTC to recommend GST Law and procedure  GST Law to be introduced in Parliament/ State legislatures

26 II. DRAFTING OF LEGISLATION  Committee & three sub-committees of officials (Centre & States) constituted to finalize model legislation (CGST, SGST and IGST)  GST Cell in CBEC III.BUSINESS PROCESSES AND IT FRAMEWORK  IT Infrastructure for GST to be put in place jointly by the Centre & States  Empowered Group headed by Dr. Nandan Nilekani finalized the design and modalities of GSTN  NSDL appointed the Technology partner  GSTN established as a SPV & Section 25 company

27  Business Processes -  A common portal - GST Network (GSTN) to handle registration of taxpayers, return filing and payments  To be linked to the CBEC IT system (ACES) & each of the States at the back end  Business processes & forms relating to Registration & Returns under approvals  Issues under Discussion  Key Policy issues  Key Business processes

28  Five Committees constituted by EC  Committee on Dual Control, Thresholds & Exemptions  Committee on Revenue Neutral Rates for State GST & Central GST & Place of Supply Rules  Committee on IGST & GST on Imports  Committee for drafting Model GST Law  Committee for examination of Business Processes

29  Key Policy Issues under Discussion –  Extent of Dual Control  Rate structure  Exempted Goods / Services  Exemption threshold  Composition threshold  Role of Centre / States in inter-State Trade  Place of Supply Rules for Goods / Services  Mechanics of IGST model  Account settlement between Centre & States under IGST model

30  Key Business processes under Discussion –  Single / Multiple registration within one State  Dispute settlement  Audit  Enforcement  Recovery & Refund, etc.

31 GST NETWORK (GSTN)

32  GSTN incorporated on 28.03.2013 as Section 25 private limited company with authorized equity of Rs. 10 cr.  Strategic control to remain with Government  A self-sustaining revenue model - to levy user charges for availing services from -  tax payers  tax authorities  Exclusive national agency responsible for delivering integrated Tax related services involving multiple tax authorities  Equity Holders  Central Government - 24.5%  EC and all States together - 24.5%  Financial Institutions – 51%

33  GST Common Portal to be set-up before GST roll out  Common Portal to function as pass-through portal for dealers to -  submit registration application  file returns  make tax payments  Registration, return & payment information to be passed on to Central & concerned State tax authorities  GSTN to develop back-end modules like Assessment, Audit, Refunds, Appeal, Enforcement & tax payer profiling utility, etc. - as part of Cafeteria Services  Statutory functions like assessment, enforcement of tax laws, settlement of disputes etc. to be performed by the respective tax authorities only  GSTN to provide various services

34  Common Registration, Return filing & e-Payment for tax payers  Integration of Common GST Portal with existing tax administration systems of Central / State Governments & other stake holders  Facilitate, implement and set standards for providing services to tax payers through common GST portal  Build efficient & convenient interfaces with tax payers to increase tax compliance  Assist tax authorities in plugging tax evasion & improving transparency of tax administration system  Carry out research, study best practices & provide training to the stakeholders  Deliver any other service of relevance to Government & other stakeholders

35 WAY FORWARD

36  Passage of Constitution Amendment Bill  GSTC to be constituted after passing of Constitution Amendment Bill  GSTC to recommend GST Law & procedure  GST Law to be introduced in Parliament / State legislatures  Scale up existing IT Infrastructure  Linkage of GSTN portal with ACES at back end

37 Meeting implementation challenges :  Effective coordination between Centre & State tax administrations  Reorganization of field formations  Augmentation of human resources  Spreading Accounting Literacy  Developing IT skills  Reorganisation of Audit procedures  Harmonization of processes & procedures between CGST / IGST & SGST Law

38 GST PLANNING

39  Pricing, Costing, Margins  Supply-chain management  Change in IT systems  Treatment of tax incentives  Treatment of excluded sectors  Transaction issues  Tax compliance

40  Tracking GST development  Review of draft legislation and impact analysis  Industry advocacy  Review of final legislation and impact analysis  Implementation assistance  Post implementation support

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