gst kolkata nihal kothari

8/8/2019 GST Kolkata Nihal Kothari

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Privileged & Confidential 2

WHA T IS GST

GST is a comprehensive value added tax on goods andservices

GST is levied on value added at each stage of supplychain and provides seamless input tax credit throughout the supply chain

Tax is to be borne by ultimate consumer. Thus GST isa destination based consumption tax

There is no distinction between goods and service

There is no cascading effect of tax on cost under GSTand the tax incidence is fully transparent


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TAXE S PROPOS ED TO B E SUBSUM ED

CEN TR AL TAXE S:E xcise D uty, A dditional E xcise D utyService TaxCountervailing Customs D uty, Special A dditional Customs D uty

Various Cess and SurchargesE xcise D uty on products with alcohol (Taxed under M&TP A ct)

ST A TE TAXE S:Value A dded TaxE ntertainment Tax (levied by States)L uxury tax,Tax on L ottery, Batting and GamblingE ntry Tax (other than for local government)Cesses and Surcharges


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DE CISIO N YE T TO B E TA KEN

D ecision deferred on following taxes:

Purchase Tax

E lectricity D uty

Taxes On N atural Gas

Taxes / L evies on Textile and Sugar

Tax on vehicles and transport of goods &passengers


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TAXA BLE E VEN T IN GST

Taxable event for levy of tax under proposed GST regimewill be supply of goods or service for consideration

H ence the present taxable events such as Manufacture

in case of Central E xcise and Sale in case of V A T or CST will lose relevance

E laborate rules to determine the place and time of supplyof goods and services will be formulated

Branch transfer will be treated as supply of goodsthereby chargeable to GST


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KE Y F EA TUR E S OF I ND IAN GST STRUCTUR E

D ual GST comprising of Central GST and State GSTlevied on the same tax base

Comprehensive coverage of supply of goods andservices except few exempted goods and services

Similar tax treatment for goods and services

N egative definition' of taxable service proposed

Identical tax treatment for inter-state and intra-state

suppliesCommon classification by Center as well as all states


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KE Y F EA TUR E S OF GST STRUCTUR E

E xport & Supply to S EZ (Processing area ) zero rated

Same taxable value base for computing Central andState GST hence no cascading impact of tax

Similar compliance for Central & State GSTUniform returns and collection procedure for centraland State GST

Cross Credit not allowed between Central GST andState GST

Check post at state boundaries may continue but willbecome irrelevant in due course with IGST


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TAX SP A RIN G OF SM E S E CTOR

Threshold L imit Under Central GST:E C proposed Rs.1.5 Cr. annual turnover for goods anddifferent limit for services whereas the Finance Ministryintends to keep same threshold limit as states.

Threshold L imit Under State GST:

Gross annual turnover of Rs.10 lakhs for Goods and Services

Composition Scheme:

Gross annual turnover of Rs. 50 lakhs with a floor rate of 0.5%across all States (FCTF advised Rs. 40 lakhs)

Composition scheme will be optional.


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PROPOS ED GST R A TE STRUCTUR E

Few specified goods would be taxed at a lower rate and others at standard rate

Services would be taxed at one standard GST Rate

Precious metal and stones at a very low rate (1%)E xemption of few specified products/ services

3 Petroleum Products (Petrol, D iesel, A viation Fuel),L iquor and N arcotics will be outside GST

E C has not yet recommended rates. FinanceCommission TF recommended single rate of 5% for CGST and 7% for SGST but not accepted by states.


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TAX ON IN TE R-ST A TE SUPP L IE S..

D iscontinuation of CST

IGST on inter-state sale, branch transfers

and consignment transfers

Stock transfers from one state to another taxable as Sale (including consignmentsale)

D eemed sale concept may be introducedto achieve above objective


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ME CHAN ISM TO T AX IN TE RST A TE SUPP L IE SInter-State GST (IGST) Model

Centre to levy IGST on all interstate transactions, Ratesequal to Central GST plus State GST.

Tax payment by exporting dealer as IGST on value addition

after adjusting credit of IGST, Central GST, State GSTThe Importing dealer can claim credit of IGST whiledischarging his output tax liability in his own state

Information return to be submitted to Central agency

Central agency to act as a clearing house between Centreand State Government, verify claims and inform respectivegovernment to transfer the funds


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EX PORT, S EZ & A REA BA S ED EXE MPTIO N

E xports will be Z ero rated

Supplies to S EZ units in processing area will be

zero ratedL ocation based tax exemption to Industrial unitswould be protected up to eligibility period but willbe made GST compatible (e.g. cash refund)


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TAXA TION OF IMPORTS

Imports will taxable under CGST and SGST

Tax revenue will accrue to the state whereimported goods or service is consumed basedon destination principle.

A dministrative mechanism to collect SGST atthe ports to be determined.


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TAXA TION OF S E RVIC E S I N GST R E GIME

Comprehensive coverage of taxable service withN egative definition

Few exempted services like primary health and

formalE

ducation?Services would be taxed at standard rate under both CGST & SGST

Taxation of electronically transmitted inter-stateservices will be a major challengeE laborate rules and procedures required for determining place and time of supply of services


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TAXA TION OF S E RVIC E S I N GST R E GIME

E ssential to determine:

what is service?

Mechanism to tax inter-state supply of servicesunder State GST

Taxability in case of Import and E xport of services

Identification of exempted services

Person liable to pay tax under reverse chargemechanism

Taxability in case of services provided in the State of Jammu and Kashmir


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FINAN CE COMMISSIO N TF R E COMM ENDA TION S(O N ISSU E S N OT COV E RED BY E C)

Full input tax credit for capital goods in theyear of purchase

Common A dvance Ruling A uthoritySeparate administration for CGST andSGST at the initial stage

D ispute resolution mechanism suggested

User charge not to be discontinued


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OVE RALL BUSI NE SS IMP A CT OF GST

GST will create single Indian Common Marketleading to supply chain efficiency & scale economy

Reduction in compliance cost on simplification of taxstructure and uniform returns/ procedureE xport cost will reduce due to zero rating of CGST &SGST (A nnual saving estimated by N CEA R- 24000 to 48000Cr.)D uel GST on imports will change imports parity withindigenous goods

Services will bear tax incidence of D uel GST

D istributive trade will be impacted by D uel GST


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TR AN SITIO N ISSU E S TO B E ADD RE SS ED

Copyright Khaitan & Co.


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ISSU E S D URIN G TR AN SITIO N TO GST

Compliance with Transitional Provisions providedin the GST legislation- e.g. Registration, pendingadjudication etc.

Treatment of un-utilised tax credit carried forwardunder C EN VA T and State V A T

Computing impact of withdrawing existing productbased exemptions (where applicable)

Taxability of works contract and sub-contractorsTax impact of purchases from unregistered dealer


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ISSU E S D URIN G TR AN SITIO N TO GST

Tax treatment of goods sent for job work or for temporary servicing

Refund procedures in the case of E xports, Supply to

SEZ

and in the case of large capital investmentStandardisation of systems and procedures acrossstates and at national level

Issues related to compliance requirements

A lignment of A ccounting and IT System which canprovide required details to avail full input tax creditand avoid tax losses


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CHALLEN GE S AHEAD

Consensus among all states on the GST designand rates

Constitution amendment and GST legislation

Stability of GST regime- no unilateral deviation bya state

Integration of all taxes on goods & services likeelectricity duty, purchase tax, tax on natural gas.These affect competitiveness of certain industries

Implementation of uniform documentation andprocedures in all states and training of officers


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FURT HE R DE TA IL S O N GST DE VEL OPM EN TS

ContactA SSOC HA M Secretariat (Sumit Pande / A vinash Sharma)

Or

E mail: [email protected]


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THANKYOU

BAN GAL OR E KO L KATA MUMB A I NEW DELH I

gst kolkata nihal kothari

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