1. RAJASTHAN STATE CONFERENCE Theme New Era of Opportunities for Company Secretaries Presentation on Goods and Services Tax By Saturday, 23 rd July, 2016 Dr. Sanjiv Agarwal @Jaipur FCA, FCS,ACIS (UK) © Dr. Sanjiv Agarwal RAJASTHAN STATE CONFERENCE 1

2. GOODS AND SERVICE TAX This Presentation covers : Indian Economy – An Overview Taxation in India- Power to Tax Current Tax System/ Structure GST – Need, Objectives and Basics Models and Features of Constitution Amendment Bill New concepts of CGST, SGST & IGST Credit chain under GST-Input Tax credit GST- Proposed Legal Framework Salient features of Model GST Law Concept of Revenue Neutral Rate (RNR) Advantages / Disadvantages of GST Challenges in Implementation of GST Professional Opportunities in GST 2

3. INDIAN ECONOMY – AN OVERVIEW India’s economy is the 7th largest economy in the world and fastest growing even in today’s global recession. Growth rate @ 7.6% in 2015-16; growth expected > 7.6% in 2016-17 May grow > 7 percent in Financial Year 2017  7.3% as per IMF  7.5% as per Moody’s  7.4% as per OECD Global economy had a slower growth @ 3.1% in 2015 Service sector growth @ 9% Tax – GDP ratio at 10.7% in 2016 and pegged at 10.8% in 2017 ; almost flat in last 5 years 3

4. 4 TAX-GDP RATIO AT A GLANCE

5. GDP GROWTH RATES AT A GLANCE 5

6. Growth driven by domestic demand Disposable incomes, food, lifestyle – growth triggers Central Excise(40%), Customs(30%) and Service tax(30%) are major contributors of Indirect Taxes Tax revenue growth in 2016 @17percent, pegged at 11.7% in Financial Year 2017 Agriculture, services and industry are 3 major sectors Services play a major role in GDP with manufacturing sector still at 17% despite Make in India Sectors where growth is faster than the economy itself – financial services, communication, hospitality, professional services etc. INDIAN ECONOMY – AN OVERVIEW 6

7. SHARE OF SERVICES IN GDP 7

8. TAXATION IN INDIA - POWER TO TAX Taxation governed by Schedule VII of Constitution of India India has a three- tier federal structure to levy and collect taxes the Union Government, the State Governments including urban/rural local bodies Concurrent List Presently goods are liable to VAT/ Excise / Customs duty while taxable services attract service tax. Certain transactions subject to both - VAT and Service tax Efforts being made to revamp the direct tax structure - (Wealth Tax Act, 1957 scrapped, Committee working on the same) Efforts to bring in a single indirect tax – GST proposed 8

9. TAXONOMY OF INDIAN TAXATION TAXATION POWERS OF UNION Income Tax (1961) – on income, except agricultural income Excise Duty (1944) – on goods manufactured Custom Duty (1962) – on imports Service Tax(1994) – on specified services Central Sales Tax(1956) – on inter-state sale of goods Stamp Duty – on 10 specified instruments Specified Cesses - on specified items 9

10. TAXONOMY OF INDIAN TAXATION TAXATION POWERS OF STATES VAT / Sales Tax - on sale of goods, other than newspapers Stamp Duty - on other than 10 specified instruments Tax - on agricultural income Toll Tax - on utilities Specified Cesses - on specified items Other Taxes - on – Land and buildings – Entry of goods in local Area (Entry Tax or Octroi) – Consumption or sale of electricity, Vehicles – Luxuries including taxes on entertainment, Betting and gambling, Alcoholic Liquor, Narcotic Drugs and Opium 10

11. PRESENT INDIRECT TAX STRUCTURE IN INDIA 11

12. Indirect Taxes : Budget Estimates (Rs. in crores) Indirect Taxes : Budget Estimates (Rs. in crores) 13 Cesses yielding < Rs. 50 crore scrapped (EC, SHEC, Salt, Mica, Iron, Mangeese, Chrome Ore, Lime Stone & dolomite, Cine workers, Textiles etc). 2015-16 (RE)2016-17 (RE) Excise Duty284142318670 Service Tax210000231000 Customs Duty209500230000 SBC375010000 KKC-5000 Clean Energy Cess-26148 Infrastructure Cess-3000 12

13. INDIRECT TAX REVENUE – AT A GLANCE 13

14. DRAWBACKS OF CURRENT TAXATION SYSTEM Confusion / lack of clarity / interpretational issues Lack of trust between assessee and revenue – Valuation/ Classification/ Exemption Complexity and lack of consistency in provisions Hidden tax on exports, no state tax on imports Cascading effect Narrow assessee base High transaction costs High compliance costs Too much of litigation and disputes Lack of harmony and varying inter - state practices : Turnover/Exemption Corruption 14

15. RECENT IMPROVEMENTS IN TAX STRUCTURE Replacement of the single-point State sales taxes by the VAT in all of the States and Union Territories. Gradual reduction in the Central Sales Tax rate (will be scrapped in GST regime) Introduction of service tax by the Centre and substantial expansion of its base over the years. Rationalization of the Cenvat credit system Electronic platform Self regulatory tax regime-Self Assessment Dispute resolution measures (VCES,2013; IDRS,2016 ) 15

16. ‘ Goods’ as defined in clause (25) of the section 65B of Finance Act, 1994 means – every kind of movable property other than actionable claim and money; and includes securities, 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 (Defined differently for GST) What is Goods 16

17. Prior to 01.07.2012 The term ‘Service’ was not defined in erstwhile law (upto 30.6.2012) The term ‘taxable service’ was defined under Section 65(105) Each taxable service and definitions related to meaning of service were defined [Clause (a) to (zzzzw)] Around 120 definitions were in place W.e.f. 1.7.2012, ‘service’ has been defined in Section 65B(44) What is Service 17

18. What is Service W.e.f 01.07.2012 ‘Service’ defined in clause (44) of the section 65B of Finance Act, 1994 and means – any activity For a consideration carried out by a person for another and includes a declared service (66E) 18

19. Concept of Taxability of Service E: Employee M: Money A: Actionable claim G: Goods I: Immovable property C: Court Fee SERVICE FOR A CONSIDERATION 10 DECLARED SERVICES Taxable 3. Exemptions (63) 1. Non - Taxable territory (POPS) 2. Negative list (15) E - MAGIC TEST 19

20. A common tax on Goods Services What is GST ? 20

21. What is GST ? ‘G’ – Goods ‘S’ – Services ‘T’ – Tax Goods and Service Tax (GST) is a comprehensive tax. GST is an indirect tax in lieu of tax on goods (excise) and tax on service (service tax). GST is just like State level VAT which is levied as tax on sale of goods. GST will be a national level value added tax applicable on goods and services. GST is a tax on goods and services with value addition at each stage having comprehensive and continuous chain of set-of benefits from the producer’s/ service provider’s point up to the retailer’s level where only the final consumer should bear the tax.” 21

22. WHY DOES INDIA NEED GST No free Inter- state trade & commerce Suffers from discriminatory taxes, undue preferences, trade and non - trade barriers, entry tax, octroi and check posts. A complex tax structure with multiple rates of taxes - Multiple taxes across the supply chain As a developing country, India needs a transparent & unambiguous tax policy / tax structure-to take reforms forward Fewer and lower taxes would actually yield more revenue rather than having stiff taxes coupled with tax evasion GST will operate on a negative list i.e. all goods and services will be subject to GST unless specifically exempted 22

23. WHY DOES INDIA NEED GST Increased tax collections due to wider tax base and better compliance GST encourages an unbiased tax structure that is neutral to business processes, business models, organization structure, product substitutes and geographical locations High transaction cost in the hands of the tax payers/ businesses Improvement in international cost competitiveness of indigenous goods and services. Enhancement in efficiency in manufacture and distribution due to economies of scale To be used as a weapon against corruption contd... 23

24. WHY DOES INDIA NEED GST Nature of complexities i.e. classification to valuation, taxability, place of supply etc exist in the present structure. Some of such burning issues are:  Excise on MRP  Excise, VAT and Service Tax on IT Software,  VAT & Service tax on: Works Contracts Right to Use Composite Contracts such as AMC transactions Restaurant Services IPR Services Export of Services Issues in Cenvat Credit contd... 24

25. WHY DOES INDIA NEED GST Cascading Effect Multiple taxes No inter-tax set off Even no set-off in some taxes Tax on Tax Increased cost of products / services Higher compliance costs In GST, many taxes will get subsumed and tax cascading will be eliminated on credit of inward taxes across the board 25

26. WHY DOES INDIA NEED GST Cascading Effect Central Sales Tax (CST) on inter-state sales, collected by the origin state for which no credit is allowed by any level of government – being phased out now Real estate transactions kept outside the scope of both VAT and CENVAT Exempt sectors are not allowed to claim any credit for the CENVAT or the service tax paid on their inputs 26

27. MOVING TOWARDS GST 27

28. 28

29. Enables introduction of GST GST defined Service defined Integrated GST Inter-state sale of goods to attract additional tax Import of goods / services Alcohol for human consumption Petroleum products and tobacco Role of GST Council Compensation to States THE CONSTITUTIONAL AMENDMENT BILL, 2014 (Pending in Rajya Sabha) 29

30. KEY FEATURES OF CONSTITUTIONAL AMENDMENT BILL 122nd Amendment Bill introduced in LS on 19.12.2014 – 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 30

31. GST AS PROPOSED NEW DEFINITIONS “Goods and services tax” means any tax on supply of goods, or services or both except taxes on the supply of the alcoholic liquor for human consumption. [Proposed Article 366(12A)] To be extended to crude, diesel, petrol, natural gas and ATF from a date to be notified on recommendation of the GST Council “Goods” includes all materials, commodities, and articles. [Existing Article 366(12)]….inclusive definition (Concept of ‘excisable goods’ to go ) “Services” means anything other than goods. [Proposed Article 366(26A)]…depends upon definition of goods Supply defined in Section 3 of Model GST Law 31

32. Objectives of GST Main objective of Goods & Service Tax(GST) would be to eliminate the cascading effect of taxes on production and distribution cost of goods and services. The exclusion of cascading effect i.e. tax on tax will significantly improve the competitiveness of original goods and services in market which leads to beneficial impact to the GDP growth of the country. It is felt that GST would serve a superior reason to achieve the objective of streamlining indirect tax regime in India which can remove cascading effect in supply chain till the level of final consumers. 32

33. GST Tax on Goods Tax on Services Central GST (CGST) Inter State GST (IGST) State GST (SGST) THE GENESIS OF GST 33

34. FEATURES OF GST Dual GST will comprise –  The Central GST and the State GST  Central GST and State GST, in themselves, would comprise both the goods tax and the services tax  Both taxes to operate in parallel and to apply on every transaction  Supply of goods/services to be the taxable event (not on manufacture/sale/provision)  Rules for determining the place and time of supply of goods and services to be formulated Both Central GST and State GST leviable on intra-State supply of goods and services Integrated GST or IGST (an aggregate of Central GST and State GST) leviable on inter-State supply of goods and services and Imports 34

35. PROPOSED MODEL OF GST 35

36. FEATURES OF GST Exports to be zero rated, with benefit of refund of input taxes Integrated GST (IGST) mechanism proposed for cross border transactions (imports) Basic Customs Duty to continue in the existing form Counter-veiling Duty (CVD) and the Additional Duty of Customs (ACD) currently levied on imports as part of customs duties to be replaced by Integrated GST 36

37. FORM OF PROPOSED GST 37 Multiple Statutes  One for CGST at Centre  One in each State for SGST Intra State Supply  Dual GST: Centre (CGST) and the States (SGST) concurrently levying and collecting the tax Inter State Supply  Integrated GST i.e. IGST (CGST+SGST) on supplies in the course of inter- state trade or commerce to be levied and collected by the centre  1% additional tax by centre (for originating state for 2 years (extendable))  Imports deemed to be supply in the course of inter-state trade or commerce

38. ILLUSTRATION OF GST 38

39. INDIRECT TAXES PROPOSED TO BE SUBSUMED IN GST 39

40. TAXES WHICH MAY NOT BE SUBSUMED IN GST Central Taxes/LeviesState Taxes/Levies Basic Customs DutyTaxes on Liquors Excise Duty on Tobacco products Toll Tax/ Road Tax Export DutyEnvironment Tax Specific Central Cesses (eg, Oil Cess) Property Tax Taxes on petroleum productsTax on Consumption or Sale of Electricity - Not certain Stamp DutiesStamp Duty - Not certain Purchase tax on food grains Taxes on motor spirit & high speed diesel 40

41. DESTINATION BASED CONSUMPTION TAX - CONSEQUENCES 41

42. Intra State Taxable Supply Excise and Service Tax will be known as CGST Local VAT & other taxes will be known as SGST Inter State Taxable Supply CST will be replaced by Integrated GST (IGST) Approx. Sum total of CGST and SGST Import From Outside India Custom Duty In place of CVD and SAD, IGST will be charged Basics of GST Proposed Indirect Tax Structure 42

43. CENTRAL GST (CGST) CGST on both, goods and services To be levied, controlled and administered by Union. Levied by the Centre through a separate statute on all transactions of goods and services made for a consideration. Exceptions would be exempted goods and services, goods kept out of GST and transactions below prescribed threshold limits. CGST would be levied across the value chain. Rates for CGST would be prescribed appropriately reflecting revenue considerations and acceptability. Two Governments will combine their various levies into single GST. Proceeds to be shared between Centre and States. 43

44. STATE GST (SGST) Levied by the States through a statute on all intra-state transactions of goods and services made for a consideration. State GST would be paid to the accounts of the respective State. Exceptions would be exempted goods and services, goods kept out of GST and transactions below prescribed threshold limits. Basic features of law such as chargeability, taxable event, measure, valuation, classification would be uniform across these Statutes / States as far as practicable. 44

45. Integrated GST ( IGST ) On inter-state and cross border transactions Centre would levy and collect IGST in lieu of CGST and SGST. To be shared between Centre / States Single IGST rate IGST would be levied on all inter-State transactions of taxable goods and services with appropriate provision for consignment or stock transfer of goods and services. Inter-State dealer will pay IGST after adjusting available, input IGST, CGST and SGST on purchases. Contd…. 45

46. Integrated GST ( IGST ) The seller in State - A will pay the IGST to the Centre. While paying IGST, the seller will adjust against available credit of IGST, CGST and SGST. State Government - A will transfer the credit of SGST used by the seller for payment of IGST to the Centre. Buyer in State - B can avail credit of the IGST charged. Buyer in State - B can use the IGST to discharge output tax liability in his own State. Centre will transfer credit of IGST used for payment of SGST to State Government - B. Contd… 46

47. IGST – ILLUSTRATION Maharashtra seller selling to Karnataka buyer for Rs.1,00,000/-. IGST payable assuming an 8% rate is Rs.8,000/-. Rs.8,000/- can be paid by adjusting – Inter-State purchases (IGST) Rs.3,000/- – Local purchases (CGST) Rs.1,500/- – Local purchases (SGST) Rs.1,500/- – Cash payment of Rs. 2000/- Since dealer has used SGST of Maharashtra to the extent of Rs.1,500/-, Centre has to transfer Rs.1,500/- to Maharashtra Government. IGST of Rs.8,000/- is availed as credit by Karnataka buyer. Karnataka dealer sells the goods at Rs.2,00,000/- attracting CGST of say Rs.16,000/- and SGST of Rs.16,000/-. If IGST of Rs.8,000/- is used to pay the SGST then Karnataka Government has to transfer Rs.8,000/- to the Centre. 47

48. CREDIT CHAIN UNDER GST – INPUT TAX CREDIT (ITC) 48

49. CREDIT CHAIN UNDER GST – INPUT TAX CREDIT (ITC) 49

50. CREDIT CHAIN UNDER GST TO BE OFFSET IN SAME ORDER CENTRAL GST CREDIT STATE GST CREDIT INTEGRATED GST CREDIT 1Central GST LiabilityState GST LiabilityIntegrated GST Liability 2 Central GST Liability 3 _ State GST Liability Entities may need to maintain Separate IGST Credit Chain for each State individually Additional 1% tax is also not Cenvatable 50

51. CENVAT CREDIT MATRIX TAX TYPE (INPUT) TAX TYPE (OUTPUT) WHETHER POSSIBLE RANKING CGST YES1 CGSTSGSTNON.A CGSTIGSTYES2 SGSTCGSTNON.A SGST YES1 SGSTIGSTYES2 IGST YES1 IGSTCGSTYES2 IGSTSGSTYES3 51

52. GST applicable on ‘supply’ GST payable as per time of supply Determining Place of Supply could be the key Valuation in GST Input tax credit in GST Inter-State supply of goods for consideration to attract additional tax There would be 33 GST laws in India Rate of GST is not yet specified in the draft GST law GST Draft Law – Things you must know 52

53. Supply of goods or services shall include : lease or disposal, and Importation of services Supply as per Schedule-I (supply without consideration) In relation to 'supply' for the purpose of GST, following points may be noted - supply shall be goods and / or services supply should be made or agreed to be made supply should be for a consideration supply should be made by person supply should be made in the course of or furtherance of business supply shall include importation of service, irrespective of whether for consideration or not and whether in the course of or furtherance of business or not. supply shall include supply as per Schedule-I made without a consideration GST DRAFT LAW-MEANING OF SUPPLY 53

54. Matters to be treated as supply without consideration (Schedule I) Permanent transfer/disposal of business assets. Temporary application of business assets to a private or non- business use. Services put to a private or non-business use. Self supply of goods and/or services. Assets retained after deregistration. Supply of goods / services by a taxable person to another taxable or non-taxable person in the course or furtherance of business. GST DRAFT LAW-MEANING OF SUPPLY 54

55. The Model GST law consists of: 162 + sections divided into 25 Chapters along with 4 schedules Rules relating to Valuation under GST Draft Integrated GST Act (IGST) consisting of 33 sections divided into 11 Chapters. Different dates may be appointed for different provisions of this Act SALIENT FEATURES OF MODEL GST LAW 55

56. All forms of 'supply' of goods and services such as sale, transfer, barter, exchange, license, rental, lease and import of services of goods and services made for a consideration within the state will attract CGST (central levy) and SGST (state levy). On inter-state supply of goods, IGST shall be applicable. GST would be applicable on 'supply' of goods and services. SALIENT FEATURES OF MODEL GST LAW 56

57. Key Features of the Model GST Eligibility to Register If the aggregate turnover of a dealer is over Rs. 9 lakh/annum, it is his/her duty to get registered under this law. The cap for dealers in the North-east is Rs. 4 lakh. Taxable Person The person registered under this law is only liable to pay tax if his aggregate turnover in a financial year is over Rs. 10 lakh. Such a cap for the North-east is Rs. 5 lakh. Place of registration The place of registration should be place from where the goods or services are supplied. This helps with virtual marketplaces, mainly e-commerce. Migration of existing taxpayers from GST Every person already registered under the extant law will be issued a provisional certificate of registration. This certificate shall be valid for a period of six months, giving time to make the changes in their model and furnish the required information, before the final certificate is provided. SALIENT FEATURES OF MODEL GST LAW 57

58. GST compliance rating score Every taxable person shall be assigned a GST compliance rating score. The GST compliance rating score shall be updated periodically and intimated to the taxable person. This will be a part of public domain. Taxable Event Supply activities such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for consideration are all taxable events. TDS When the total value of a contractual supply exceeds Rs. 10 lakh, the individual Departments may be required to deduct the taxes at source. TCS on online sales of goods & service All e-commerce establishments should collect tax at the time of credit/payment. The amount should be deposited to the respective state government, within ten days of the end of the month in which the product/service was supplied. SALIENT FEATURES OF MODEL GST LAW 58 Key Features of the Model GST

59. Valuation Rules Valuation Rules shall apply to the supply of goods and/or services under the IGST/CGST/SGST Bill Returns Dealers shall be required to furnish monthly / annually / final returns as the case may be. These returns are for different periods / or frequencies / at intervals. Refund A person can claim refund of any tax and interest by making an application in that regard to the prescribed officer of IGST/CGST/SGST within two years. Payment Any tax, interest, penalty, fee, etc., shall be paid via internet banking or by using credit/debit cards or NEFT or RTGS. This amount shall be credited to the electronic cash ledger of dealer. Transitional provisions These will ensure smooth migration to GST. SALIENT FEATURES OF MODEL GST LAW 59 Key Features of the Model GST

60. IT PLATFORM FOR GST Objectives of GSTN Integration of the common GST Portal with the existing tax administration systems of the Central/State governments and other stakeholders. Provide common PAN based registration, enable returns filing and payment processing for all states on a shared platform. Facilitation, implementation and set standards for providing services to the taxpayer through common GST portal State Governments and other stake holders; Build efficient and convenient interfaces between with tax payers to increase tax compliance; Carry out research, study best practices and provide training to the stakeholders. 60

61. REVENUE NEUTRAL RATES (RNR) Recommendation of GST Rates Committee Revenue Neutral Rate (RNR) refers to that single rate, which preserves revenue at desired (current) levels. No revenue loss to exchequer It is a given single rate that gets converted into a whole rate structure. Committee has chosen to recommend a range for the RNR rather than a specific rate. 61 Contd…

62. REVENUE NEUTRAL RATES (RNR) Recommended the Revenue Neutral Rate (RNR) in the range of 15 percent to 15.5 percent (combined rates for centre and states) Rate which will give at-least the same level of revenue, which the Centre and States are presently earning from Indirect taxes. Committee recommends a two-rate structure –  Lower rates - around 12 per cent (Centre plus states)  Standard rates - between 17 and 18 per cent States want higher RNR but it may not be desirable 62 Recommendation of GST Rates Committee

63. LIKELY RATE OF GST 18%13 th Finance Commission 16%Revenue Neutral Rate (RNR) 27%Talked about (Suggested by NIPFP) 16%Ideal rate as per Industry 18%Rate suggested by Council ??Actual Rate to be decided by GST Council (Select Committee has recommended a band ) 63

64. REVENUE NEUTRAL RATES (RNR) Summary of Recommended Rate Options (in percent) RNR Rate on precious metals "Low" rate (goods) "Standard" rate (goods and services) "High/Demer it" rate or Non-GST excise (goods) Preferred1561216.940 417.3 217.7 Alternative 15.561218.040 418.4 218.9 64

65. ADVANTAGES OF IMPLEMENTATION OF GST IN INDIA GST is expected to drive consumption led growth with less tax burden on consumers. GST is expected to contribute to 'make in India' and 'ease of doing business in India' initiatives of the Government. GST addresses the issue of multiplicity of taxes. All the rates under to GST will be uniform and the place of supply rules will guide the GST India portal to apportion the tax. It will boost up economic unification of India; it will assist in better conformity and revenue resilience; it will evade the cascading effect in Indirect tax regime. Elimination of cascading effect. It will reduce the tax burden for consumers. In GST system, both Central and state taxes will be collected at the point of sale. Both components (the Central and state GST) will be charged on the manufacturing cost. Contd….. 65

66. ADVANTAGES OF IMPLEMENTATION OF GST IN INDIA It will result in a simple, transparent and easy tax structure. It will result in a good administration of tax structure; It may broaden the tax base; It will increase tax collections due to wide coverage of goods and services. It will result in cost competitiveness of goods and services in Global market. It will reduce transaction costs for taxpayers through simplified tax compliance. It will result in increased tax collections due to wider tax base and better conformity. 66

67. BENEFITS TO ASSESSEES 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 Fewer rates and exemptions Conceptual clarity (Goods Vs. Services) 67

68. BENEFITS TO EXCHEQUER/GOVT Simpler Tax System Broadening of tax base Improved compliance & revenue collections (tax booster) Efficient use of resources Curb on revenue leakage Because of tax credit, cash transactions will be less 68

69. How proposed GST will be better than existing Taxes? Dual model GST under federal structure i.e. CGST & SGST Elimination of cascading effects of the taxes CGST & SGST will be charged on same price Set-off relief fully captured Destination based tax structure Free movement of goods & service through out the country Applicable to all transactions of Goods & Services with some exceptions Contd….. 69

70. How proposed GST will be better than existing Taxes? Input tax credit (ITC) for the CGST/SGST could be utilized for payment of CGST/SGST, but cross utilization not allowed, except IGST Inter State GST (IGST) –New model for Inter-state transactions Refund for unutilized ITC will be discouraged Threshold limits may be on higher side Common Returns formats for CGST & SGST States will be empowered to Tax Services It will also improve the International cost competitiveness of native Goods and Services. 70

71. LIKELY DISADVANTAGES OF GST Total GST rate may be higher Vote weightage of States will be linked to population rather than any economic criteria. Census is done once in 10 years. Discrimination (1 percent additional tax) May not be efficient for sectors like banking, tourism, advertisement, business promotion etc. Education, tourism etc will also not benefit but contribute more to taxes Dispute resolution going to be tough with poor governance. Disputes in GSTC to be resolved by GSTC only Small states may remain aggrieved. 71

72. GST - CHALLENGES GST : Game changer or name changer Everyone agrees that GST is necessary but cannot agree on scope form and content of GST No one tries to understand enormity of GST – from financial accounting to tax impact to supply chain to business models IT infra (ERP) etc. Should subsume all taxes, surcharges, cesses, levies and royalties Confusion on what taxes would continue alongside GST GST ought to apply to all goods and services with nil or very few exemption / exceptions Legislative challenges Political matrix 72

73. GST - CHALLENGES What happen to all check posts / entry barriers / staff ? Will these be dismantled / relocated ? IT Infrastructure - Is IT backbone fully ready and in place Treatment of accumulated fiscal benefits Additional tax of upto 1 percent for inter state trade for manufacturing states will create distortions Dispute resolution mechanism still fragile – Council to decide GST may create inflationary pressure in first few quarters as costs to be passed on to customers Rapid increase in assessee Place of supply to hold the key to success of GST Effective credit mechanism 73

74. INDUSTRY’S PERSPECTIVES & CONCERNS All declaration forms (Form F, C) should be abolished Monitoring through system based controls Full set-off of Input tax credit to the assessee / entity, based on principle of business cost and expenditure Immediate credit of stock transfers, without one-to-one co-relation. Refunds, if any, should be automatic through system based controls. Full set-off : a question mark Any change post implementation should be uniform by all states not piecemeal. Bar on increase in rates, imposition of new taxes by states Uniform legislation, forms, rules, rates, compliance requirements. Set-off should be on entity / concern basis. Building of IT backbone Multiple state jurisdictions. 74

75. TRADER’S PERSPECTIVES & CONCERNS Dialogue with Trade & Industry and all other stake holders Industrial inputs, Capital goods to be at lower rate List of exempted goods – specific/common across states Stock transfers should be exempted Monitoring through system based controls Lesser paper work/compliances 75

76. When GST will Come ??? The GST will come into force once the 122nd Constitutional Amendment Bill is passed by Parliament Enacted into an Act when 50 percent of the states ratify it. GST Act to be legislated by Union GST Act to be legislated by States IGST Act to be legislated by Union Rules to be framed GST to be implemented from a common notified date ?? 76

77. Professional Opportunities in GST Employment with Corporates- dealing with Indirect taxes Representation in Tribunals / Courts Advisory ServicesProfessional Opportunities in GST Client Retainerships for Compliances Knowledge Management & Training Professional Practice Areas(planning, compliances ) Advance Ruling Representation GST awareness 77

78. For Tax planning Audit of books of Accounts/ Compliance Audit Tracking GST development Review of draft legislation and impact analysis Industry Consultation for improvement in business process Interpretation of legal provisions and procedures Implementation assistance and Post implementation support Developing systems and procedures/MIS Advisory and consulting services Certification Works Procedural Compliances Record Keeping Return verification/filing of returns Negotiations with Suppliers Representations before Authorities Appellate Work Providing opinions / clarifications Due diligence on revenue leakages/ cenvat Role of Professionals 78

79. Role of Professionals 79

80. GST KNOWLEDGE – IN THE OFFING 80

81. GST-Background, Concepts and overview GST Models Across the world and GST model for India Brief Comments on First discussion Paper on GST and report of Thirteenth Finance Commission on GST Principles of GST law Procedural Aspect under GST Registration, Payment, Returns, Assessment, Revision etc. Transition to GST-Likely challenges and way forward Information Technology Infrastructure and GST GST Audit Impact of GST Decoding of 122 nd Constitutional Amendment Bill, 2014 Issues of compensation to States for Central Sales Tax (CST) phasing out GST KNOWLEDGE – IN THE OFFING 81

82. Background material / literature on GST Specialized course on Indirect Tax Series of webinars held in May / June 2016 Core group constituted on GST GST corner feature started in chartered secretary journal August issue of journal deducted to GST GST being emphasised in all major programmes Next series of webinars in the offing. ICSI INITIATIVES IN THE PAST 82

83. “Absorb what is useful, discard what is not, add what is uniquely your own.” -Bruce Lee 83

84. THANK YOU FOR YOUR PRECIOUS TIME AND ATTENTION Dr. Sanjiv Agarwal FCA, FCS, Jaipur asandco@gmail.com sanjivservicetax@gmail.com www.gstcounsellor.com 84