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GST – FIRST CUTGST – FIRST CUT
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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
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GST JACKPOTGST JACKPOT……
Centre : - Tax till “retail”
State : - Tax “services”
Trade :- No “Tax on Tax”
Consultants :- Eternal Business
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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
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TODAY in C.EX…TODAY in C.EX…
Sec 2 (f) (i), (ii) & (iii)
Sec 3 & 3A
Sec 4, 4A & Valuation Rules
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TODAY in VAT…TODAY in VAT…
Multiple rates
Different rates in different states
Different definitions
Border controls
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TODAY in CST…TODAY in CST…
No credit on CST purchases leading to cascading effect
Complex law on stock transfer and transit sales
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TODAY in ST…TODAY in ST…
Selective services under tax net
Inclusive definitions
Cenvat credit disputes
Freak valuation
Reverse charge
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SALE vs SERVICE…SALE vs SERVICE…
Software
Works contract
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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
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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
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CGST …CGST …
Central Excise Duty Additional Excise Duties The Excise Duty (M & TP
Act) Service Tax CVD SAD Surcharges & Cesses
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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
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SGST …SGST …
Each State to have a separate statute
Uniformity on basic features.
Would be paid to the accounts of respective States
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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)
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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 ???
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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
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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
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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
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Set - off …Set - off … CGST against CGST
SGST against SGST
No Cross sectoral set-off between CGST & SGST
IGST for CGST/SGST & vice versa
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@ …@ … 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
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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
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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
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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
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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)
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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
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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.
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Bottlenecks…Bottlenecks… Transitional credit
High sea sales
Stock transfers
FOC clearances
Additional considerations
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THANKSTHANKS