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GST w.e.f. 01-04-2010

GST w.e.f. 01-04-2010. by-CA, Virander Chauhan New Delhi akvk2003@yahoo.com M: 98101-37128. WHAT IS GST. -Tax on Goods & Services. -ITC set-off from producer to retailer. -Tax on Value Addition at each stage. -Consumption/Destination based tax. -Final Burden on Consumer.

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GST w.e.f. 01-04-2010

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  1. GST w.e.f. 01-04-2010 by-CA, Virander Chauhan New Delhi akvk2003@yahoo.com M: 98101-37128

  2. WHAT IS GST • -Tax on Goods & Services. • -ITC set-off from producer to retailer. • -Tax on Value Addition at each stage. • -Consumption/Destination based tax. • -Final Burden on Consumer. • -Transaction Tax.

  3. BENEFITS OF GST • Self enforcing mechanism • No cascading on prices • Simple law • Revenue buoyant • Low rates of tax • Low compliance cost • Easy to administer • FDI/ Exports friendly

  4. EXAMPLE[A] Producer to Wholeseller

  5. EXAMPLE[B] Wholeseller to Retailer

  6. EXAMPLE[C] Retailer to Consumer

  7. FM (P Mukherjee) said on 10-11-09 • -Multiplicity of taxes • -Narrow Base • -Overlapping of Taxes • -ITC not allowed fully • -Variety of Exemptions • -High Rate of Tax • -Structure prone to litigation • -State Autonomy not at stake • -State Fiscal Policy much wider • -IT Base solutions

  8. DISCUSSION PAPERreleased on 10-Nov-09 • -Founded in 2006 • -EC Constituted • -EC-Set up JWG • -To set roadmap for GST

  9. Asim Das Gupta, Chairman, EC ET-10-Nov-09 “There are some differences among States. Each State has its own local problem. We have to recognize these problems. We are trying to understand each others position.”

  10. FM-Pranab Mukherjee10-11-2009 “These are the views of the Empowered Committee of State Finance Ministers. We will also look into it.”

  11. Virander Chauhanstated on 11-11-09 • “The Discussion Paper conceals more and reveals less”. • “It is like a mini-skirt which cover-up the essentials but gives us an idea.”

  12. Discussion PaperTax Structure • -CGST • -SGST • -IGST • -Common in all statutes • Taxable Base • Chargeability of tax • Taxable Event • Taxable Person • Valuation Methods • Classification of goods and Services • Returns • Payments • ITC Mechanism • TIN-PAN Based

  13. Multiple State Laws “This dual GST model would be implemented through multiple statutes (one for CGST and SGST statute for every State). However, the basic features of law such as chargeability, definition of taxable event and taxable person, measure of levy including valuation provisions, basis of classification etc. would be uniform across these statutes as far as practicable.”-Para 3.2 (i)

  14. GOODS OUTSIDE GST NET • -Below Threshold • -Exempted List • -Petroleum Products • -Tobacco-partly • -Alcoholic Beverages

  15. SET-OFF OF ITC • -CGST & SGST (Intra-chain) • -Inter-chain ITC not allowed • -IGST (All CGST, SGST and IGST allowed)

  16. THRESHOLD LIMITS • -SGST-Rs. 10.00 Lakhs • -CGST-Rs. 1.50 Crore • -SGST for Services-(Higher Limit Expected) • -Composition-(Rs. 50 Lakh/.50% Tax)

  17. TAXES TO BE SUBSUMED (Taxes Related to goods and services are to be subsumed) [A] CENTRAL TAXES: • Central Excise Duty • Additional Excise Duties (AED) • The Excise Duty-(Medicinal and Toiletries Preparation Act) • Service Tax • Additional Customs Duty (CVD) • Special Additional Duty of Customs (SAD) • Surcharges • Cesses

  18. TAXES TO BE SUBSUMED [B] STATE TAXES: • VAT/Sales Tax • Entertainment Tax-(Except by local bodies) • Luxury Tax • Taxes on lottery, betting and gambling • State cesses and surcharges • Entry Tax-(not in lieu of Octroi)

  19. What GST will not subsume? • Basic Custom Duty-? • Purchase Tax-? • Property Tax • Stamp Duty • Toll Tax • Road Tax • Passenger Tax • Electricity Tax

  20. RATES OF TAX • -Standard Items-(14 to 16% expected) • -Necesities-(6 to 8% expected) • -Precious Metals-(1% expected) • -Exempted Items-(0%-without ITC) • -Zero Rated-(0% with ITC) • -Services-Standard Rate

  21. Tax RatesInternational Scenario-1

  22. Tax RatesInternational Scenario-2

  23. Tax CollectionsIndirect Taxes • “The total indirect tax collection for April-October 2009 are only 47% of the total budgeted target for 2009-10.”-ET

  24. IMPORTS AND EXPORTS IMPORTS: - • -Both CGST and SGST • -Tax Credit on Destination Principle • -ITC will be allowed EXPORTS: - • -Zero Rated • -ITC-Cash refund

  25. SEZ • -Zero Rated • -ITC-Cash refunds • -No benefit for DTA • -No breakage of chain

  26. Inter-State Transactions-1 • Threshold not clear. • All transactions subject to IGST. • IGST = CGST + SGST. • Stock transfer/ Consignment may be out of IGST net. • Inter-State seller can set off IGST, CGST and SGST credit on his purchases.

  27. Inter-State Transactions-2 • Exporting State will transfer to the Centre the credit of SGST used in payment of IGST. • The importing dealer will claim credit of IGST paid. • The Centre will transfer to the importing State the credit of IGST used in payment of SGST. • Clearing House mechanism.

  28. ISS-Example[A] H P Dealer

  29. ISS-Example[B] H P Dealer

  30. ISS-Example[B] H P Dealer Action Points: (a) Deposit of Taxes [Rs. 30,000 (IGST)-Rs. 20,000/- = Rs. 10,000/-] (b) Transfer of SGST Rs. 10,000/- to the Centre’s Account.

  31. [B] Punjab Dealer

  32. [B] Punjab Dealer Action Points: (a) Deposit of Taxes [Rs. 40,000 -Rs. 30,000/- (IGST) = Rs. 10,000/-] (b) Centre to Transfer SGST Rs. 20,000/- to Punjab’s Account.

  33. [B] Punjab Dealer Finally: - (a) Centre will get Rs. 20,000/-. (b) Punjab will get Rs. 20,000/-

  34. CONSTITUTIONAL CHANGES • -States to levy tax on services • -States to levy tax on imports • -Centre to levy tax on goods

  35. Contentious issues-1 Satya Poddar-Tax Partner at Ernst & Young “The GST first discussion paper on GST is patchwork of political compromises which is neither good economics nor good politics. In spite of expensive deliberations over the past three years, it is silent on many important aspects of tax structure.

  36. Contentious issues-2M Govind Rao-Member, PM’s CEO Advisory Council “Dual GST rates are workable but it generally increase administrative complications. The most important issue to be discussed in detail is how interstate transactions would be dealt with.”

  37. Contentious issues-3Seshagiri Rao-Joint MD, JSW Steel “Once implemented, the goods and service tax would reduce the cascading impact of taxes and end-users will benefit by getting products at relatively lower prices.”

  38. Contentious issues-4 • States’ Autonomy • Reality Sector-out of net. • Drafting of New Laws • Fixation of RNR • Rural India a big threat • Organized Frauds • Administrative Issues • Robust Electronic System

  39. Contentious issues-5 • Threshold Limit • Definition of manufacture • Cross Chain ITC • IGST Cross Chain allowed • Basic Customs Duty is outside • VAT/Excise laws cannot be repealed • Single Statute for States? • Old Exemption Schemes to continue

  40. Contentious issues-6 • Effective Date • Effective Rate (10%+10% in FAQ Ex.) • Taxable Event • Stock Transfers/ Consignments • Works Contracts-Raheja Case • Check-Posts • Refunds-Exporters, Non Exporters, Area Bases Exemptions, from Two authorities.

  41. Contentious issues-7 • ITC crisis for consuming States. • Old Acts may not be repealed.

  42. Sectoral Impacts-Positive • Automobile-positive • Cement-positive • FMCG-positive • Metals-positive

  43. Sectoral Impacts-Negative • Telecom & Power-negative • Central purchases would be costlier • Pharma-negative • Taxes may go up • Exemptions may go • Real estate-negative • ITC not allowed • IT-negative • Taxes may go up • Exemptions may go • Oil & Gas-negative

  44. Sectoral Impacts-Neutral • Aviation-neutral • Media-neutral

  45. Authors’ Recommendations • Act must be simple • Act must be neutral • Competent machinery • All indirect taxes to subsume • Immune to political considerations • Minimum exemptions • Historical realities • Public debate

  46. THANKS CA, Virander Chauhan New Delhi akvk2003@yahoo.com M: 98101-37128

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