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

2. PRESENTATION PLAN 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

3. WHY GST? PERCEIVED BENEFITS

4. Why GST : Perceived Benefits
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

5. ROAD TO GST - MILESTONES

6. ROAD TO GST- MILESTONES
Budget : 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
o Registration, return, payment, refund, audit & dispute resolution mechanism related issues
o Drafting of Central GST & model State GST legislations
o Basic design of IT systems required for GST in general & IGST in particular

7. ROAD TO GST- MILESTONES contd.
July, 2010: Empowered Group on IT Infrastructure set-up
March, 2011: Constitution (115th 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. ROAD TO GST- MILESTONES contd.
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 (122nd Amendment) Bill introduced in LS

9. Stakeholders . 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

10. EXISTING INDIRECT TAX STRUCTURE

11. Existing Indirect Tax Structure
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

12. FEATURES OF CONSTITUTION AMENDMENT BILL

13. FEATURES OF CONSTITUTIONAL AMENDMENT BILL
122nd Amendment Bill introduced in LS on
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. FEATURES OF CONSTITUTIONAL AMENDMENT BILL CONTD.
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
1/3rd weighted votes of Centre & 2/3rd of all States together

15. FEATURES OF CONSTITUTIONAL AMENDMENT BILL CONTD.
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

16. FEATURES OF PROPOSED GST MODEL

17. GST - FEATURES 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. GST – FEATURES contd.
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. GST – FEATURES contd.
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. GST - FEATURES contd.
TAXES PROPOSED TO BE SUBSUMED
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
Taxes (Centre, State or local levies – in the nature of indirect taxes on supply of goods or services) to be subsumed within GST:

21. GST – FEATURES contd. 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. GST – FEATURES contd.
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. GST – FEATURES contd.
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

24. CURRENT STATUS

25. CURRENT STATUS 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 2/3rd 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. CURRENT STATUS contd. 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. CURRENT STATUS contd. 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. CURRENT STATUS contd. 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. CURRENT STATUS contd. 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. CURRENT STATUS contd. Key Business processes under Discussion –
Single / Multiple registration within one State
Dispute settlement
Audit
Enforcement
Recovery & Refund, etc.

31. GST NETWORK (GSTN)

32. GSTN - Features
GSTN incorporated on 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 %
EC and all States together %
Financial Institutions – 51%

33. GSTN - Functions 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. GSTN - Services
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. Way Forward 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. Way Forward contd. 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. Impact Areas for Businesses
Pricing, Costing, Margins
Supply-chain management
Change in IT systems
Treatment of tax incentives
Treatment of excluded sectors
Transaction issues
Tax compliance

40. ROLE OF PROFESSIONALS Tracking GST development
Review of draft legislation and impact analysis
Industry advocacy
Review of final legislation and impact analysis
Implementation assistance
Post implementation support

41. Thank you !