gst – first cut vat in india… 1986 – modvat for inputs 1994 – modvat for capital goods ...

GST – FIRST CUTGST – FIRST CUT

VAT in INDIA…VAT in INDIA…

1986 – modvat for inputs

1994 – modvat for capital goods

2002 & 2003 – service tax credit

2004 – cross-sectoral credit

2005 – VAT

2010 (?) – GST

GST JACKPOTGST JACKPOT……

Centre : - Tax till “retail”

State : - Tax “services”

Trade :- No “Tax on Tax”

Consultants :- Eternal Business

TODAY …TODAY … C.Ex duty is part of the price for VAT

CST is part of the cost as there is no

VAT credit

VAT has a cascading effect, since sale

price includes C.Ex duty / CVD

TODAY in C.EX…TODAY in C.EX…

Sec 2 (f) (i), (ii) & (iii)

Sec 3 & 3A

Sec 4, 4A & Valuation Rules

TODAY in VAT…TODAY in VAT…

Multiple rates

Different rates in different states

Different definitions

Border controls

TODAY in CST…TODAY in CST…

No credit on CST purchases leading to cascading effect

Complex law on stock transfer and transit sales

TODAY in ST…TODAY in ST…

Selective services under tax net

Inclusive definitions

Cenvat credit disputes

Freak valuation

Reverse charge

SALE vs SERVICE…SALE vs SERVICE…

Software

Works contract

GST - Made in India !GST - Made in India !

Dual GST structure proposed

Centre & State to have concurrent jurisdiction

Power of Centre & State to tax widened

Win – win model for both Centre and State

Central GST (CGST)Central GST (CGST) To be levied by the Centre through a

separate statute on all transactions of goods and services made for a consideration

To cover end – 2 end transactions across value chain

Exempted goods and services, non - GST goods and transactions within threshold limits are to be out of CGST

CGST …CGST …

Central Excise Duty     Additional Excise Duties The Excise Duty (M & TP

Act) Service Tax CVD SAD Surcharges & Cesses

State GST (SGST)State GST (SGST) To be levied by the State through a separate

statute on all transactions of goods and services made for a consideration

To cover end 2 end transactions across value chain

Exempted goods and services (uniform across all States!), non - GST goods and transactions within threshold limits are to be out of SGST

SGST …SGST …

Each State to have a separate statute

Uniformity on basic features.

Would be paid to the accounts of respective States

SGST …SGST …

VAT / Sales Tax    Entertainment Tax Luxury Tax Lottery Tax Betting Tax Gambling Tax State Cesses & Surcharges Entry Tax ( not in lieu of

Octroi)

GST exclusions …GST exclusions … Petroleum products i.e. crude, motor spirit,

ATF, HSD / Alcohol / Tobacco

Centre / States could also continue its levies

Tobacco would be subjected to GST with ITC

Centre to be allowed to levy extra levy on

tobacco without ITC

Purchase tax ???

Integrated GST Integrated GST (IGST(IGST) For inter-state transactions

Centre to levy IGST which would be CGST + SGST

Appropriate provision for consignment sale/stock transfer

Inter-state dealer will pay IGST after adjusting IGST, CGST and SGST credit on purchase

IGST …IGST … The seller in State X will pay the IGST

to the Centre

While paying IGST, seller will adjust his lying IGST/CGST/SGST credit

State X will have to transfer the credit of SGST used by the seller for payment of IGST to the Centre

IGST IGST … Buyer in State Y can avail credit of

IGST

Buyer in State Y can use the IGST to discharge his output tax liability

Centre has to transfer credit of IGST used for payment of SGST to State Y

A clearing house has to be formed for facilitating IGST

Set - off …Set - off … CGST against CGST

SGST against SGST

No Cross sectoral set-off between CGST & SGST

IGST for CGST/SGST & vice versa

@ …@ … Lower rate for necessary items and goods

of basic importance

Standard rates for goods in general

Special rates for precious metals

Exports/clearnces to SEZ would be zero rated

No benefits to sales from SEZ to DTA

Tax free schemes …Tax free schemes …

Tax exemption would be converted into cash refund scheme after initial payment

Schemes to continue up to notified expiry

No new exemption in future

GST on Imports…GST on Imports… Both CGST and SGST would be levied on

import of goods and services

Tax would be based on destination principle

Tax revenue of SGST would accrue to the State where the imported goods / services are consumed

Full set-off of GST on imports available

Compounding …Compounding …

Interest of small traders and SSI to be protected

Upper ceiling on gross annual turnover and a floor tax rate to be prescribed

Compounding cut off at Rs. 50 lakhs with a floor rate of 0.5% across the States

Threshold Threshold exemptions…exemptions… 10 lakhs limit for goods and services

across all States / UT for SGST

1.5 crore for SSI manufacturers on CGST

CGST exemption limit on services to be increased (presently at 10 lakhs)

Illustration …Illustration …Stage of Supply chain

Pur. value of input

Value addn.

Value of supply of G & S made to next stage

Rate of GST

GST on output

Input tax credit

Net GST

Mfr 100 30 130 10% 13 10 3

Whlsr. 130 20 150 10% 15 13 2

Retlr. 150 10 160 10% 16 15 1

Total

6

Constitutional Constitutional Amendments…Amendments…

Entry 84 of Union List to amend to empower Centre to levy tax on SALE of goods.

Entry 54 of State List to amend to empower State to levy tax on SERVICES.

Entry 92A of Union List to amend to empower Centre to levy tax on inter – state SERVICES.

Article 286 to amend to empower State to levy tax on imports.

3/4th majority in Parliament & 50% collegium of State Assembly ratification.

Bottlenecks…Bottlenecks… Transitional credit

High sea sales

Stock transfers

FOC clearances

Additional considerations

THANKSTHANKS