1. GST (Goods & Service Tax)
An Overview

2. Table of Contents Following Questions to be addressed What Why How
Implications
When
How much

3. What is GST
GST stands for “Goods and Service Tax” and is a comprehensive Indirect Tax levy on manufacture , sale and consumption of Goods and Services at the national level.
The above statement implies that unlike the current tax structure wherein on production excise is levied, on sale VAT is levied and on service element Service Tax is levied under GST only GST as an indirect tax will be levied and all other taxes will rule out

4. Need for GST
Currently various taxes have been levied on activities like sale, manufacture
However inter-tax credit of these taxes is allowed only to a certain extent
Hence the party adds these taxes to the cost of production
This leads to cascading effect i.e. taxes on taxes and thereby adds to the cost of production
This burden is then shifted to the consumer leading to inflation

5. Analysis of Current System
VAT
GST
Manufacturer to Wholeseller
Cost of Production
90000
Add Profit Margin
10000
Sales
100000
Add Excise 12%
12000
112000
14000
20000
Cost to Wholeseller
122000
110000
15250
22000
Liability
1250
2000
Cost to retailer
Add Profit
132000
120000
16500
24000
Cost to Consumer
148500
144000

6. Applicability of GST
A national convention for CA students was held on 2nd and 3rd January, 2015 whereby the President of ICAI urged upon the applicability of GST at its earliest
As per the President of ICAI, GST might be applicable from 1st of April, 2015, however, this depends on the Budget

7. Taxes that may be subsumed
State and Central Excise Duty
Service Tax
Central Sales Tax
Value Added Tax
Luxury Tax
Octroi
Entry Tax
Special Additional Duty,CVD

8. Taxes that may not be subsumed
Basic Customs Duty
Excise Duty on Tobacco Products
Central Cess like Education Cess, Oil Cess
Toll Tax
Road Tax
Property Tax
Environment Tax
Tax on Liquor

9. Functioning
BIN (Business Identification Number) is an extension of PAN
GST Council to be setup to redress issues
Payment of Tax only through Net Banking
One common tax return for Centre and State
Threshold limit for levy of GST will be approx 10 to 20 lacs
GST paid on inputs to be allowed as set off.

10. Models of GST Prime Models Dual GST Concurrent GST Non-Concurrent GST
Central GST
State GST

11. Explanations 1. Central GST/State GST
Tax administered and controlled by respective Government i.e. if Central GST is adopted then central government will have the right to collect and levy GST
Revenue sharing arrangements to be made i.e. if Central GST is adopted then some portion of revenue will be allocated to the states
2. Dual GST
Under Concurrent GST Centre and State will levy GST concurrently. It is proposed that Concurrent model will be followed in India
Under Non-Concurrent GST on goods will be levied by state and on Services will be levied by centre i.e. existing system of VAT to state government and Service Tax to Central Government may be followed

12. Revenue Neutral Rate (RNR)
RNR is the rate which will be adopted so that the tax revenue despite the change in taxes remains the same.
Since there will be loss to the state government the revenue department has been advised to pay the state governments a compensation of Rs.500 crores
Rates in India are expected to be 12 to 20% for the 1st year, 12 to 18% for the 2nd year and 16% from the 3rd year onwards.

13. Rates of GST around the Globe

14. Expected GST Rates Goods/Services Levy Rate in 1st Year
Rate in 2nd Year
Rate in 3rd Year
Goods – Lower Rate
CGST 6% 8%
SGST
Goods – Standard Rate
10% 9%
Services
CSGT

15. Features of GST Emphasis on voluntary compliance
Minimum number of floor rates (Approx 2 rates)
Common law throughout the country
GST Council to manage functioning
Destination based tax
Input Tax Credit or Subtraction method of VAT to be followed for GST
Business friendly approach
MIS amongst different Government departments

16. Advantages of GST Computerization of process
Removal of Cascading Effect
Lower cost of production
Reduced sale price
Increase in Domestic and Export market -Increase In profit
Reduction in administration costs since only one department
Interpretational issues sorted out
Single Authority to deal with

17. GST Collection and Inputs Criteria
Type of Sale
GST collection on Output
GST Input eligibility
Taxable
Yes
GST Free (Commonly known as Zero rated Sales in VAT) No
Exempt

18. Thank you This presentation is for private Circulation only
Source: Background Material on GST (popularly known as VAT globally)
Prepared by Aditya Shah , Articled Assistant, R Devarajan & Co.