GST (Goods and Service Tax) in India - PowerPoint PPT Presentation

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GST (Goods and Service Tax) in India

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An Overview. of GST to be implemented in India – PowerPoint PPT presentation

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Updated: 8 January 2015
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Title: GST (Goods and Service Tax) in India


1
GST (Goods Service Tax)
  • An Overview

2
Table of Contents
  • Following Questions to be addressed
  • What
  • Why
  • How
  • Implications
  • When
  • How much

3
What is GST
  • GST stands for Goods and Service Tax and is a
    comprehensive Indirect Tax levy on manufacture ,
    sale and consumption of Goods and Services at the
    national level.
  • The above statement implies that unlike the
    current tax structure wherein on production
    excise is levied, on sale VAT is levied and on
    service element Service Tax is levied under GST
    only GST as an indirect tax will be levied and
    all other taxes will rule out

4
Need for GST
  • Currently various taxes have been levied on
    activities like sale, manufacture
  • However inter-tax credit of these taxes is
    allowed only to a certain extent
  • Hence the party adds these taxes to the cost of
    production
  • This leads to cascading effect i.e. taxes on
    taxes and thereby adds to the cost of production
  • This burden is then shifted to the consumer
    leading to inflation

5
Analysis of Current System

  VAT VAT GST GST
Manufacturer to Wholeseller        
Cost of Production 90000   90000  
Add Profit Margin 10000   10000  
Sales 100000   100000  
Add Excise Duty _at_ 12 12000      
  112000   100000  
VAT   14000    
GST       20000
         
Cost to Wholeseller 112000   100000  
Add Profit Margin 10000   10000  
Sales 122000   110000  
VAT   15250    
GST       22000
Liability   1250   2000
         
Cost to retailer 122000   110000  
Add Profit 10000   10000  
Sales 132000   120000  
VAT   16500    
GST       24000
Liability   1250   2000
         
Cost to Consumer   148500   144000
6
Applicability of GST
  • A national convention for CA students was held on
    2nd and 3rd January, 2015 whereby the President
    of ICAI urged upon the applicability of GST at
    its earliest
  • As per the President of ICAI, GST might be
    applicable from 1st of April, 2015, however, this
    depends on the Budget

7
Taxes that may be subsumed
  • State and Central Excise Duty
  • Service Tax
  • Central Sales Tax
  • Value Added Tax
  • Luxury Tax
  • Octroi
  • Entry Tax
  • Special Additional Duty,CVD

8
Taxes that may not be subsumed
  • Basic Customs Duty
  • Excise Duty on Tobacco Products
  • Central Cess like Education Cess, Oil Cess
  • Toll Tax
  • Road Tax
  • Property Tax
  • Environment Tax
  • Tax on Liquor

9
Functioning
  • BIN (Business Identification Number) is an
    extension of PAN
  • GST Council to be setup to redress issues
  • Payment of Tax only through Net Banking
  • One common tax return for Centre and State
  • Threshold limit for levy of GST will be approx 10
    to 20 lacs
  • GST paid on inputs to be allowed as set off.

10
Models of GST
11
Explanations
  • 1. Central GST/State GST
  • Tax administered and controlled by respective
    Government i.e. if Central GST is adopted then
    central government will have the right to collect
    and levy GST
  • Revenue sharing arrangements to be made i.e. if
    Central GST is adopted then some portion of
    revenue will be allocated to the states
  • 2. Dual GST
  • Under Concurrent GST Centre and State will levy
    GST concurrently. It is proposed that Concurrent
    model will be followed in India
  • Under Non-Concurrent GST on goods will be levied
    by state and on Services will be levied by centre
    i.e. existing system of VAT to state government
    and Service Tax to Central Government may be
    followed

12
Revenue Neutral Rate (RNR)
  • RNR is the rate which will be adopted so that the
    tax revenue despite the change in taxes remains
    the same.
  • Since there will be loss to the state government
    the revenue department has been advised to pay
    the state governments a compensation of Rs.500
    crores
  • Rates in India are expected to be 12 to 20 for
    the 1st year, 12 to 18 for the 2nd year and 16
    from the 3rd year onwards.

13
Rates of GST around the Globe
14
Expected GST Rates
Goods/Services Levy Rate in 1st Year Rate in 2nd Year Rate in 3rd Year
Goods Lower Rate CGST 6 6 8
Goods Lower Rate SGST 6 6 8
Goods Standard Rate CGST 10 9 8
Goods Standard Rate SGST 10 9 8
Services CSGT 8 8 8
Services SGST 8 8 8
15
Features of GST
  • Emphasis on voluntary compliance
  • Minimum number of floor rates (Approx 2 rates)
  • Common law throughout the country
  • GST Council to manage functioning
  • Destination based tax
  • Input Tax Credit or Subtraction method of VAT to
    be followed for GST
  • Business friendly approach
  • MIS amongst different Government departments

16
Advantages of GST
  • Computerization of process
  • Removal of Cascading Effect
  • Lower cost of production
  • Reduced sale price
  • Increase in Domestic and Export market -Increase
    In profit
  • Reduction in administration costs since only one
    department
  • Interpretational issues sorted out
  • Single Authority to deal with

17
GST Collection and Inputs Criteria
Type of Sale GST collection on Output GST Input eligibility
Taxable Yes Yes
GST Free (Commonly known as Zero rated Sales in VAT) No Yes
Exempt No No
18
Thank you
  • This presentation is for private Circulation only
  • Source Background Material on GST (popularly
    known as VAT globally)
  • Prepared by Aditya Shah , Articled Assistant, R
    Devarajan Co.
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