beginners guide to goods & service tax in india

R V e n k a t a k r i s h n a n & A s s o c i a t e s

Chartered AccountantsOffices at

Chennai Bangalore Hyderabad Salem

Devanahalli

www.rvkassociates.com

Goods & Service Tax (GST)

Existing Tax Structure

• The union cabinet approved on 17th Dec’14, the proposalfor introduction of a Bill in the Parliament for amending the Constitution of India to facilitate the introduction of Goods and Service Tax (GST) in the country.

• The Union Finance Minister Shri Arun Jaitley introduced the said bill in the Lok Sabha on 19th Dec’14.

• The proposed amendment in the Constitution will confer powers both to the Parliament and State legislatures for levying GST on the supply of goods and rendering of services in the same transaction.

• A new Article 279A is proposed for the creation of a Goods &

Services Tax Council which will be a joint forum of the Centre and the States.

• The Council will make recommendations to the Union and the States on important issues like tax rates, exemptions, threshold limits, dispute resolution modalities etc.

• Centre will compensate States for loss of revenue arising on account of implementation of the GST for a period up to five years.

• A provision in this regard has been made in the Amendment

Bill (The compensation will be on a tapering basis, i.e., 100% for first three years, 75% in the fourth year and 50% in the fifth year).

Legislative Update …. Cont’d

• GST is also a destinationbased consumptionlevy

• GST is proposed to be

in implemented by 1st April 2016 • GST is a tax on supply of goods or rendering

of services. Accordingly, any person supplying goods or rendering services will be required to charge GST

Salient Features of GST

Constituents of GST

Taxes Subsumed under CGST

Taxes Subsumed under SGST

Note: Alcohol products are kept out of the purview of GST wherein the power to levy is still with State Government

For Sales made/service rendered within the state, GST will be levied by both the Central Government (CGST) and State Government (SGST) on the same transaction, making GST a dual transaction tax structure.

To Illustrate: Transactions value of Goods Sold or Services Rendered within the State is Rs. 5,000

On the above transaction, CGST will be levied at 5% i.e., 250 and SGST will be levied at 5% i.e., 250

How Does GST Work?

• Under IGST, tax will be collected by Centre.

• Centre will remit the share of the state to the respective state.

• As it is a consumption based tax, state share of tax will go to the state were service/goods are consumed/sold and not to the state from where the service/goods is rendered/sold.

To Illustrate: Transactions value of Goods Sold or Services Rendered from Bangalore to Mumbai is Rs. 5,000

On this transaction, IGST will be levied at 10% i.e., Rs. 500. This tax will be initially collected by Centre and then it will be appropriated to Maharashtra (consumption state) at an agreed ratio

How does IGST Works???

• For Goods Purchased within India – Applicable taxes are CGST, SGST and IGST

• For Goods Imported into India – Applicable taxes are Basic Custom Duty, CGST & SGST

Taxes Applicable…

• Under GST, it is expected that Goods and Services will have same rate of tax

Rate of Tax under GST

• It is proposed that credit of CGST paid will not be allowed for set-off against SGST payable and vice versa

CENVAT Credit Provisions

Scheme for Exporters under GST

As compared to the existing mechanism, there is no change in tax provision

for exporters wherein

the same principal of

“Zero Tax on

Exports” will

be applicable.

Note: Similar Benefits may be given to Special Economic Zones (SEZ)

• Proposed threshold Limit for getting covered under GST – Rs.25L

• Each taxpayer could be allotted a PAN linked taxpayer identification number with a total of either 13 or 15 digits

• The assessee is required to account for CGST, SGST and IGST separately (for both output tax and input tax)

• Common Return formats for CGST & SGST

Accounting & Returns

• Administration of the Central GST would be with the Centre and for State GST with the States

• Full computerisation of the compliance and administrative systems

Administration

Contactpankaj.r@rvkassociates.com

Bangalore

+91 98440 00207

+91 80 23418753

Chennai

+91 44 24618778 / 24618740

Hyderabad

+91 40 66620039 / 27611565

http://www.rvkassociates.com