BEGI NNERS BEGI NNERS COURSE ON COURSE ON GST GST Basic Concepts of GST, Enabling Constitutional Basic Concepts of GST, Enabling Constitutional Am endm ents, GST Council and its Am endm ents, GST Council and its Role, RNR, Relevant Role, RNR, Relevant definitions etc. definitions etc. By By A. R. Krishnan A. R. Krishnan Septem ber 2 1 ,2 0 1 6 Septem ber 2 1 ,2 0 1 6 W estern Regional Council of I ndia W estern Regional Council of I ndia I nstitute of Chartered Accountants of I ndia I nstitute of Chartered Accountants of I ndia Purpose of Course Purpose of Course Understand the Understand the GST GST Structure Structure and and Mechanism Mechanism Insight Insight into into the the metamorphosis metamorphosis in in indirect indirect taxation taxation Legal Framework Legal Framework – Constitutional Constitutional Amendment Amendment Act Act Legal Legal Framework Framework – Model Model GST GST Law Law Procedural Procedural Compliance Compliance – Registration, Registration, input input credit, credit, etc etc Bottom Bottom line line implications implications – post post announcement announcement of of rates rates etc etc NB NB: The The first first three three points points seem seem to to be be clear clear. But But next next 3 3 points points may may undergo a change undergo change No substitute for self No substitute for self-learning and reading learning and reading 21st September, 2016 2 A. R. Krishnan 2 1
W hat is GST GST is one indirect tax for the whole nation – make India one unified common market (FAQ on GST, Press Information Bureau dated 03.08.2016) Single tax on supply of goods and services, right from the Single tax on supply of goods and services, right from the manufacturer to the consumer. manufacturer to the consumer. Essentially Essentially a a tax tax only only on on value value addition addition at at each each stage stage with with set set – off off benefits benefits– seamless seamless credit credit – consumer consumer not not burdened burdened with with cascading cascading of of taxes taxes. 21st September, 2016 3 A. R. Krishnan Areas Covered [ in this Session] Basic Basic Concepts Concepts - Dual Model Dual Model of of GST, GST, taxes taxes subsumed subsumed and and not not subsumed, subsumed, Revenue Revenue Neutral Neutral Rate Rate (RNR) (RNR) Enabling Enabling constitutional constitutional amendments amendments GST GST council council and and its its role role Taxable Taxable event event- Existing Existing Regime Regime v. GST GST Regime Regime . . Relevant Relevant Important Important definitions definitions 21st September, 2016 4 A. R. Krishnan 2 2
Relied Upon Docum ents ( RUD) ! Constitution Constitution (One (One Hundred Hundred and and First First Amendment) Amendment) Act, Act, 2016 2016 [ CAA] [ CAA] 2016] m ost m ost im portant im portant FAQs FAQs [ dated [ dated 3.8.2016 First First Discussion Discussion Paper Paper [ dated [ dated 10 10.11 11.2009 2009] ] Select Select Committee Committee Report Report presented presented to to Rajya Rajya Sabha Sabha [ on [ on 22 22.7.2015 2015] Report Report of of Committee Committee on on Revenue Revenue Neutral Neutral Rate Rate First First Shome Shome Committee Committee Report Report on on Tax Tax Admn Admn. . Reforms Reforms [ 30 30.5.14 14] 21st September, 2016 5 A. R. Krishnan BASI C CONCEPTS OF GOODS & SERVI CES TAX [ ‘GST’] [ N.B.: W hile explaining Basic Concepts only significant taxes subsum ed is taken but list of taxes subsum ed and not subsum ed is enum erated at a later slide] 21st September, 2016 6 A. R. Krishnan 2 3
EXI STI NG SI GNI FI CANT TAXES Central Taxes Excise Duty Service Tax State Taxes VAT 1 CST Luxury tax Entry Tax 1 Revenue assigned by Union to States 21st September, 2016 7 A. R. Krishnan Dow nsides in Existing Tax Structure Multiple Taxes / Levies Multiple Taxes / Levies Lack of uniformity in rates and structure Lack of uniformity in rates and structure Cascading Effect – VAT on Excise Duty/ CVD Cascading Effect VAT on Excise Duty/ CVD– Tax on Tax Tax on Tax Lack of seamless credit Lack of seamless credit – Trader does not get credit of service tax/ Excise duty/ CVD Trader does not get credit of service tax/ Excise duty/ CVD • CST CST – No credit for manufacturer/ trader/ service provider No credit for manufacturer/ trader/ service provider • Stock Transfers Cumbersome & Costs Stock Transfers Cumbersome & Costs Entry Tax Entry Tax – barriers barriers to free movement of goods to free movement of goods 21st September, 2016 8 A. R. Krishnan 2 4
GST Government’s answers to these problems One Nation One Tax One Nation One Tax Tax only on Value Addition Tax only on Value Addition Benefits of GST Benefits of GST 21st September, 2016 9 A. R. Krishnan Benefits of GST For Business & I ndustry Easy Compliance – A robust and Comprehensive IT system available to the tax payers online. Uniformity of tax rates and structures – No need for State shopping Removal of cascading – system of seamless tax- credits throughout the value chain and across States ensuring minimal cascading of taxes; reduce hidden cost of doing business 21st September, 2016 10 A. R. Krishnan 2 5
Benefits of GST Improved Competitiveness – Reduction in transaction cost of doing business Gain to manufacturers and exporters - Reduction in cost of manufacture – subsuming of major Centre and State taxes in GST - comprehensive set off of input goods and services. TAX ADMI NI STRATI ON 21st September, 2016 11 A. R. Krishnan Benefits of GST For the Consum ers Single Single & transparent transparent Tax Tax proportionate proportionate to to the the value value of of goods goods & services services Reduction Reduction in in prices prices of of goods goods & services services due due to to relief relief in in overall overall tax tax burden burden 21st September, 2016 12 A. R. Krishnan 2 6
For Centre & State Governm ents Simple & easy to administer Better control on revenue leakages – IT infrastructure and seamless credit will incentivize tax compliance Higher Revenue efficiency – Decrease in cost of collection Ultim ate Agenda - Check evasion and - boosts Revenue of Centre as w ell as States by expanding respective fiscal space 21st September, 2016 13 A. R. Krishnan GST I N I NDI A Philosophy Philosophy – One One GST GST rate rate on on goods goods and and services services collected collected by by one one agency agency across across India India India India – Always Always gives gives a different different flavour flavour to to everything – Chinese everything Chinese dishes, dishes, Italian Italian dishes dishes - Indian Indian spices spices – Indian Indian curry curry- world world famous famous Federal Federal structure structure – Union Union and and States States Dual Dual Structure Structure - Dual Dual Levy Levy - Dual Dual Control Control 21st September, 2016 14 A. R. Krishnan 2 7
Present I ndirect taxing pow ers Central State Govt. Govt. • Excise duty on • Tax on sale / purchase of goods; manufacturing; • Tax on entry of goods in local area; • Service tax • Taxes on luxuries, betting, gambling, etc Each tax a m ajor source of revenue for discharging Governm ent functions 21st September, 2016 15 A. R. Krishnan Dual structure of GST On every supply of goods and Services within a state Central GST State GST [ “CGST”] [ “SGST”] By State Govt. By Central Govt. Credit • Allowed between goods and services; • Allowed between CGST and CGST; • Allowed between SGST and SGST Not allowed between CGST and SGST 21st September, 2016 16 A. R. Krishnan 2 8
DUAL GST W I THI N STATE W orking Exam ple A B C Timber Furniture Furniture Final Maker Maker Retailer Consumer Tax I nvoice Tax I nvoice Tax I nvoice A B C Cost of Goods 100 200 300 SGST @10% 10 20 30 CGST @10% 10 20 30 TOTAL 120 240 360 B will get the credit of CGST and SGST paid by him to A. C will get the credit of CGST and SGST paid by him to the B 21st September, 2016 17 A. R. Krishnan I nter – State Transactions of goods and services Centre to collect IGST [ Integrated Goods & Services Tax] IGST = CGST + SGST [ SGST to be uniform across all states ! ] GST mechanism to provide for seamless credit mechanism Utilization matrix Credit in I GST CGST SGST 1 st 2 nd 3 rd I GST 2 nd 1 st CGST Not allowed 2 nd 1 st SGST Not allowed 21st September, 2016 18 A. R. Krishnan 2 9
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