Class :- III Semester MBA By Dr.Shenbagavalli Associate - - PowerPoint PPT Presentation

By Dr.Shenbagavalli Associate Professor Koshys Institute of Management Studies Bangalore

Topic :- A Study On Restrictions And Power Of Transition With Special Reference To Gst Subject :- Corporate Tax Planning & Management Class :- III Semester MBA

INTRODUCTION

 GST is the spiral procedure of 17 indirect taxes and 22 types of

cess into one single tax. GST is a simple tax but its implementation has been complex as it has a five layered taxation slab for various commodities. Luxury goods become costlier, items of mass consumption is cheaper. It is nothing new most of the countries in the world are already implementing GST to make their goods internationally competitive. Expect that at the highest layer of 28% on luxury goods. 28% tax is the highest percentage of tax in the world when compared to the highest 17% of tax. There are many areas, which have to be addressed as a part of transition to GST. This study concentrate about registration, carry forward of credits, change in tax, analysis between indirect tax and GST and goods in transit to achieve the power of transition. GST is a second major surgical strike on tax evaders, brings most of the traders in to the tax net.

 Key words: GST, Input tax credit (ITC), Transition, Tax evaders,

Goods in transit, value added tax (VAT).

CENTRAL AL TAX Central ral Excise se Duties s of Excise se Ad Additi tiona nal Duties es of Excise se Ad Additi tiona nal Duties( es( Textiles es & t texti tile e product duct) Ad Additi tional nal Duties es of custom

• ms(C

s(CVD) D) Special al Ad Additi tional

• nal Duties

s of customs(SA ms(SAD) D) Services ces Tax Centra ral l surcha charges rges & c cesses ses so fa far as they relate e to supply y of G &S

DIFFER FFEREN ENT T TAX AXES ES IN CEN ENTRA TRAL L BEF EFORE RE GST

DIFFER FFEREN ENT TAXE XES IN STATE E LEVEL EL BEFORE RE GST

STATE TE TAX State VAT Central ral Sales s Tax Luxury y Tax Entry Tax (all forms) s)

Enter ertai tainmen ent t & Amusem emen ent t Tax (expec ect t when levied ied by the local al bodies ies)

Taxes s on adverti tisem semen ents ts Purcha hase se Tax Taxes s on Lot

• tteries

ries, , Bet etting ng &Gambling

State e surc rcharges harges &cesses es so fa far as they relat ate e to to supply of goods ds & servic vices es

GST T TAXA XATIO TION N SYSTE STEM

VAT CON ONCEPT CEPT AND ITS S APPLICA ICATION ION IN GST

VAT in core concept in GST Concept of Vat (Value Added Tax) Was first proposed in 1918 by German Industrialist Dr. Wilhelm Von Siemens France was the first country to introduced VAT on 10th April 1954 European countries introduced VAT on goods and services European Union decided to adopt VAT w.e.f 1978(after1977) (@ Rate between 19% to 25%) China introduced VAT in 1984 & full fledged Vat was implemented in china in 1994 (@ 17%) In Japan, there is ‘Consumption Tax’ of 5% {4% national levy and 1% regional levy} About 160 countries have introduced VAT except USA ( major revenue central level based on income tax and there is retail tax @ state level) Concept of VAT was developed

• To
• avoi
• id

d casc scading ding effec ect t of taxes. es.

• Transparent tax collection system
• Reduces the tax evasion
• Ensure better tax compliance and increase tax revenue.

In India this system was named as Modvat was introduced in 1986 (Modified value added tax). Modvat was renamed as Cenvat w.e.f. 1/4/2000 at central level – benefit (Credit) to the manuf. those who are paying CVD on imported

• goods. This system of tax was introduced in service tax in India w.e.f. 2002 . The credit of excise duty and service

tax was made inter changeable .Where as Cenvat not extended to sales tax because it is coming under the jurisdiction of state. However the state government have introduced sales tax VAT after 2005.

INDIRECT IRECT TAX X (CA CASC SCADIN ADING )VS VS GST T (EXA XAMPL PLES ES IN RS RS.)

INDIRECT SYSTEM BEFORE GST TAX PERCENTAGE-10% THE MANUFACTURER PAYS INR 100 TO BUY RAW MATERIALS(NO PROFIT & LOSS) STAGE -1(MANUFACTURER) (100+10=110) STAGE-2 (WS) (110+40=150+15=165) STAGE-3 (RET) (165+30= 195+19.5=214.5 GST SYSTEM PERCENTAGE-10% THE MANUFACTURER PAYS INR 100 TO BUY RAW MATERIALS(NO PROFIT & LOSS) STAGE -1(MANUFACTURER) (100+10=110) STAGE-2 (WS) (100+40=140+14=154) STAGE-3 (RET) (140+30= 170+17=187)

Action cost 10% Tax Total Buys Raw Material 100 10 110 Wholesaler 150 15 165 Retailer 195 19.5 214.5 total 170 44.5 214.5 Action cost 10% Tax Actual liability Total Buys Raw Material 100 10 10 110 Whole lesale saler 140 14 4 154 Retailer 170 17 3 187 total 170 17 187

REGISTRATION

Requirement of registration



Relief to very small taxable person(less than 20 lakhs) A) GST payable once registered if turnover in a financial year exceeds 20 lakhs ( Aggregate turnover 20 lakhs)

• Persons requiring registration without threshold limit of 20/10 lakhs.

i) persons making any inter state taxable supply ii) casual taxable persons making taxable supply iii) Persons who are required to pay tax under reverse charge iv) Persons who are required to pay tax under section 9(5) {urban club} v) Non resident taxable persons making taxable supply. vi) persons who are supply G&S or both on behalf of other taxable persons whether as an agent or otherwise. B) Special category states are exempted from this limit( Article 279A(4)(g)of Constitution of India &sec22 Ex iii of CGST Act. ( Aggregate turnover less than 10 lakhs)



Any person engaged exclusively in the business of supply G&S or both that are not liable for tax or wholly exempt from tax



An agriculturist to the extent of supply of produce out of cultivation of land.

CA CASUAL AL TAXAB XABLE E PERSON SON



Casual taxable person as a person who occasionally undertakes transactions involving supply

• f goods or services or both. casual taxable person has no fixed place of business. Hence,

persons running temporary businesses in fairs or exhibitions or seasonal businesses .



All persons who are classified as casual taxable persons are mandatorily required to obtain GST registration, irrespective of the annual aggregate turnover. Further, the application for GST registration for a casual taxable person must be made at least 5 days prior to the commencement of business. GST registration application for casual taxable persons can be made using FORM GST REG-01.



Unlike regular taxpayers, casual taxable persons are required to deposit tax in advance for GST registration. The amount of tax to be deposited would be equal to the expected tax liability during the validity period of GST registration. Hence on applying for GST registration, a temporary reference number is generated for payment of GST deposit. On paying the GST deposit, the electronic cash ledger of the taxpayer is credited and GST registration certificate is released



The validity of GST registration for a casual taxable persons is the validity period specified in the GST registration application or 90 days from the date of registration, whichever is earlier.



In case a casual taxable person needs extension of the validity period mentioned in the GST registration certificate, then FORM GST REG-11 must be submitted. Along with the request for extension of validity period, advance GST deposit must also be made by the taxpayer based

• n the expected tax liability. If the officer verifying the application is satisfied and advance

GST deposit is made, the GST registration can be extended by up to another 90 days.

COMPOS POSITION ITION SCHEM EME UNDER ER GST

 Eligibility: Turnover must be below RS. 75 lakhs (50 lakhs for North

eastern state)

 Tax Rate: Fixed tax rate on the total sales turnover(not more than 1%for

manufacturers, 2.5% for restaurant sectors and 0.5% for other supplies

• f turnover)Reverse tax will not cover.

 Input tax credit : Not eligible for ITC  Place of supply: Applies only to the Intra state supplies  Return: No monthly filing , only Quarterly return filing  Billing: Issues only bill of supply and not tax invoice  Applicability: Only goods can opt for composition scheme whereas

service providers have been kept outside except service of restaurant.

INPUT TAX CREDIT

 Review's

i) Royalty (Financial Accounting ): ii) Minimum Alternative Tax(MAT) U/S 115JB of the Income Tax Act:

• All the companies are liable to pay MAT at 18.5% (plus surcharge and cess

as applicable) progressively Increased form7.5% in the year 2000 to 18.5% in 2015.It is calculated based on book profit.

• Normal tax rate of tax is 30% on Taxable business income.

Example- Company ‘ABC ‘books a profit of 8,00, 0,000

• 000. After claiming all

applicable deductions, exemptions and depreciation, the gross taxable income comes out to be Rs. 4,00,000 MAT= 8,00,000* 18.5%= 1,48,000, Tax payable as per normal provision=4,00,000*30%=1,20,000(1,48000- 1,20,000=28000) This excess of Rs 28000 can be carried forward and set- off against regular tax payable in future.

Availability ITC ( INPUT TAX CREDIT)based on transaction

VALUE E OF OF SUPPL PPLY Y OF OF GOO OODS

 Value of taxable supply (Sec 15) of GST

• It should be a transaction value of supply of G&S or both
• Which is the price actually paid or payable for the supply

The value of supply include a) any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than this act b)any amount that the supplier is liable to pay in relation to such supply which has not incurred by the recipient of the supply not included the price c)incidental expenses , including commission and packing, charged by the supplier to the recipient of a supply and any amount charged for any thing done by the supplier in respect of supply before delivery of goods and services d) interest or late fee or penalty for delayed payment of any consideration for any supply and e) subsidies directly linked to the price (expect subsidies received from central & state government)

• The discount shall not be include( Before and After the date of supply)

REVERSE SE CHAR ARGE

SECT CTIO ION9 N9(3)O (3)OR9(4 R9(4) ) 0F CGST ST & SGST ST ACT AND 5(3) ) OR 5(4) ) OF IGST ST

Reverse charge means the liability to pay tax is directed to the recipient(Receiver) of the goods / services or both instead of the

• supplier. Reverse charge may be applicable

for both services as well as goods once GST is live Reverse charge cannot be paid by utilizing input tax credit. It cannot be paid by Electronic credit ledger Sec 49(4), it should be paid by cash I.e., through electronic cash ledger Sec2(82) of CGST Act.

Un registered dealer selling to a

registered dealer

Services through an e- commerce

• perator

CO COMPAR ARISON ISON BETWE WEEN EN CU CURRENT ENT SLAB AB AN AND GST RATE

 GST impact This section highlights the impact of GST on major industries as

well as on key stakeholders. Impact on major industries study has highlighted industry-specific impact based on the current tax slab, announced GST rate and likely shift in business practices in the medium term. Among these major sectors, few segments of automobile and FMCG would witness positive impact due to lower tax incidence compared to the total tax paid pre GST.

10 20 30 40 50 60 Two/ Three wheelers small cars Mid segment car Large cars(1500cc) Sports Utility vehicles Commercial vehicles % of VAT Pre GST % of VAT Post GST changes in %

• 5

5 10 15 20 25 30 % of VAT Pre GST % of VAT Post GST changes in %

White e goods

• ds

White goods

• 5

5 10 15 20 25 30 % of VAT Pre GST % of VAT Post GST changes in % Cement Steel

• 15
• 10
• 5

5 10 15 20 25 30 Soap Shampoos Pastries and cakes Waffles and wafers coated with chocolate Milk Ghee Butter Hair Oil % of VAT Pre GST % of VAT Post GST changes in %

FINDINGS

• The GST has been imposed on some 1200 items with

tax of 18% being the most common wide range of commodities in the basket 81% of commodities are said to be in this basket.

• The Union and State government collected 90,699

crores as GST in August ( it is 3.6% less when compared to the previous month)

• It is based on the principle of destination based

consumption taxation against the present principle

• rigin based taxation
• Import of services is treated inter- state supplies and

would be subject to IGST on reverse charge basis.

THA HANK K YOU OU