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Goods & Service Tax

Goods & Service Tax. Discussion on Challenges & Synergies November, 2009. Contents. Present taxation system of India What is Goods and Service Tax (“GST”) – An Introduction Silent features on “First Discussion Paper on GST” Broad propositions – Not covered and clear

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Goods & Service Tax

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  1. Goods & Service Tax Discussion on Challenges & Synergies November, 2009

  2. Contents • Present taxation system of India • What is Goods and Service Tax (“GST”) – An Introduction • Silent features on “First Discussion Paper on GST” • Broad propositions – Not covered and clear • Broad propositions - Reasonable clear • Challenges before Industry/Service Sector • Proactive actions – Requirement • Areas - Tax Synergy By CA. Vinay Bhushan

  3. Present Taxation System in India • Multistage taxation on manufacture and distribution channels • Sectors specific taxes like Entertainment Tax, Luxury Tax, Textile Cess etc. • Difference types of Cesses like Education Cess, Secondary & Higher Education Cess etc. • Tax on value additions i.e. Value Added Tax • Tax on Inter State transaction i.e. Central Sales Tax By CA. Vinay Bhushan

  4. Manufacture Sector - Multiple Taxes Central Excise Duty {8%} Value Added Tax { 0%, 4%, 12.5%} Central Sales Tax {2%} Manufacturing Sector Educations Cesses {3%} R & D Cess {5%} Other local taxes like Entry Tax, Octroi, State Cesses etc. are also applicable By CA. Vinay Bhushan

  5. Service Sector - Multiple Taxes Education Cess {2%} Service Tax {10%} Service Sector Secondary & Higher Education Cess {1%} By CA. Vinay Bhushan

  6. Silent features of the Discussion Paper on GST • GST shall have two components (1) levied by Central Government (Central GST) (2) levied by State Government (State GST) • GST Will be governed by multiple statutes • Cross utilization of Input Tax Credit (ITC) between Central GST & State GST would not be allowed • Periodical returns need to be filed with Central and State authorities separately, tax will be deposited through separate account heads • PAN- linked taxpayer identification number will be issued By CA. Vinay Bhushan

  7. Silent features of the Discussion Paper on GST • Threshold Limit:- • State GST for Goods & Services INR 1.00 Million • Central GST for Goods INR 15.00 Million • Central GST for Services Not provided (however it is conveyed that it will be appropriately high) • Compounding / Composition Limit:- • Composition/compounding limit INR 5.00 Million with tax at the rate of 0.5 % By CA. Vinay Bhushan

  8. Present Taxation Scheme Cross credit of good and service tax is allowed since September 10, 2004; But limited to Central Excise & Services Tax Cross credit among VAT and Service Tax, Central Excise is not allowed Credit on inter- State transactions is not allowed; Cross Credit of VAT with CST liability is allowed Proposed GST Cross credit of good and Services would be allowed Cross credit with respect to Central GST and State GST transaction would not be allowed CENVAT CREDIT MECHANISM UNDER PRESENT TAXATION AND PROPOSED GST By CA. Vinay Bhushan

  9. Central Taxes Central Excise Duty Additional Excise Duty Service Tax Additional Customs Duty (CVD) Special Additional Duty of Customs (SAD) Surcharges and Cesses State Taxes VAT /Sales Tax Entertainment Tax Luxury Tax Tax on Lottery, betting & Gambling State Cesses and Surcharges Entry Tax TAXES WHICH WOULD BE SUBSUMED UNDER THE PROPOSED GST GST CGST IGST SGST By CA. Vinay Bhushan

  10. Broad Propositions- Not Covered and not Clear • GST rates are not disclosed • Valuation mechanism of Goods and Services • Place of provision of Services or place of receipt in case of services are not clear • Taxable event- whether on receipt basis or on receivable basis • No discussion on Stamp duty on Immovable property By CA. Vinay Bhushan

  11. Broad propositions - Reasonable clear • Cross Credit among the CGST & SGST- Not allowed • Three type of taxes- CGST, SGT & IGST • No change for Liquor, Petroleum Industry By CA. Vinay Bhushan

  12. Challenges & Proactive Actions before Industry/Service Sector • Business Restructuring: • Phasing out of CST • Change in tax rates of goods and services • Logistics, Transaction model etc. • Location Based Exemptions • Export Obligations • Change in ERP Systems • Training of Middle Management Team By CA. Vinay Bhushan

  13. Areas - Tax Synergy • Analysis of Tax rates Vs. Pricing Policy, Business Cycle • Warehouse/logistic Vs. Direct Supply • Stock Planning • Backward & Forward integration of business if there is change in tax rates of Inputs or output By CA. Vinay Bhushan

  14. How Tax Managers/Consultants can add value • Mapping of current transactions • Mapping of flow of good and services • Ascertain current tax cost • Impact Analysis and what if analysis • Assessment of impact of GST on draft legislation • Key structuring/changes in business operations • Identify possible alternative business model • Potential actions to mitigate adverse GST effect (if any) • Final Impact Analysis • Implementation Assistance By CA. Vinay Bhushan

  15. How Tax Managers/Consultants can add value • Implementation Assistance • Transition Stock Planning • Registration under new legislation/s • Maintenance of records as per new formats • Manner of computation of Credit and tax liability • Invoice Formats • Changes in ERP/accounting system By CA. Vinay Bhushan

  16. THANK YOU By CA. Vinay Bhushan

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