GST - GOODS AND SERVICE TAX

Sorab Gupta

The central and state governments are discussing
the GST system proposed to be implemented in India
from April 1, 2010.Representing the states in
the discussions is the empowered committee
of state finance ministers.



GST will replace present set of Union, state and local level levies with one single rate for both goods as well as services.
This rate will be inclusive of the share of the Union as well as state and local governments.

BIG TAX REFORM

# The step towards implementation of GST in India is one of the biggest tax reform in Indirect taxation.

# GST is preferred international standard as it has a capacity to raise revenue in the most transparent manner.

# Today, it has spread to over 150countries.

WHY CHANGES

# The main objective of implementation of this new tax reforms is to remove complexity and also to remove effect of tax cascading.

# The objective is also to subsum all those tax which currently levied on goods as well as on services by federal or state government.

WHAT IS GST

# The goods and services tax (GST) is a comprehensive value- added tax (VAT) on goods and services.

# France was the first country to introduce this system in 1954.

# Through a tax credit mechanism, GST is collected on value- added goods and services at each stage of sale or purchase in the supply chain.

# GST paid on the procurement of goods and services can be set off against that payable on the supply of goods or services. But being the last person in the supply chain, the end consumer has to bear this tax and so, in many respects, GST is like a last-point retail tax.

# Many countries have a unified GST system. However, countries like Brazil and Canada follow a dual system wherein GST is levied by both federal and state or provincial governments.

# In India, a dual GST is being proposed wherein a central goods and services tax (CGST) and a state goods and services tax (SGST) will be levied on the taxable value of a transaction.

# The central and state governments are discussing the GST system proposed to be implemented in India from April 1, 2010.Representing the states in the discussions is the empowered committee of state finance ministers


GST: KEY FEATURES

# Duel GST: Central GST & State GST
# Destination based State GST
# Common Base, Classification & Forms
# No cascading of Central and State taxes
# Cross credit not allowed
# Tax levied from production to consumption
# Export and SEZ (processing zone) zero rated (excluding
supply to DTA)


TAXES TO BE CLUBBED IN GST

Central Taxes
# Excise duty
# Additional Excise duty
# Service Tax
# CVD, SAD
# Surcharge
State Taxes
# VAT
# Entertainment tax levied by states
# Luxury tax
# Tax on Lottery
# Entry tax other than for local Government

TAXES NOT TO BE CLUBED IN GST

Central Taxes
# Specific Cess
# Excise duty on tobacco products (in addition to GST)

State Taxes
# Items containing alcohol
# Entertainment tax (local Bodies)
# Entry tax for local bodies
# Electricity duty

DUEL GST MODEL

In Duel GST model following tax will be applicable:

# Federal GST on Goods
# State GST on Goods
# Federal GST on Services
# State GST on Services


PROPOSED GST RATES
# 2 Rate structure: Lower and Standard Rate
# Precious metals and stones very low rate
# GST Exemption for some items (less than 100)
# Some Goods at lower rate (excludes Ind. inputs)
# 3 Petroleum products, liquor and narcotics excluded from GST regime
# Single tax rate for services

INDICATIVE GST RATES

Exempted products:
Food Grains, Bread, Salt, Milk, Vegetables, Meat, Fish,

Goods at lower rate:
Tea, Milk powder, Coffee beans, Toy, Beedi, Bicycles


GLOBAL AVERAGE GTC RATES
# Swedon & Denmark - 25%
# U.K. - 17.5 %
# China - 17%
# New Zealand - 12.5%
# Japan & Singapore - 5%

GST: KEY FEATURES
# HSN to be applied for goods
# Uniform return & collection procedure for central
and state GST
# 13 digit PAN based Common TIN registration
# Turnover >15 million: Registration under both GST
# TINXSYS to track transactions

FAVOURABLE IMPACT ON INDUSTRY
# Seamless credit to trade and industry throughout supply chain will improve competitiveness
# Common Tax Base will eliminate tax cascading
# CST phase-out will reduce supply chain cost
# Economy in production scale & efficiency in distribution
# Simplified structure to reduce transaction cost

COST INCREASE IN CERTAIN SECTORS
# Increased tax incidence on distributive trade and services (duel GST)
# Increased tax incidence on infrastructure due to non availability of tax credit
# Continuing electricity duty, entertainment tax & Cess will adversely affect some sectors due to double taxation
# Impact on certain products due to rate increase