Goods and Services Tax

‘A destination based consumption tax’

 Types of Taxes

 Direct Tax: When the tax is directly imposed and collected from the
one who is liable to pay
E.g.: Income tax, Corporate tax, Gift tax, Wealth tax
Direct taxes are progressive in nature
 Indirect Tax: The person on whom the tax is imposed and the person
who pays the tax is different.
E.g.: Excise, Customs, Service Tax (by Centre)
VAT/Sales Tax, CST, Luxury Tax etc. (by State)
Indirect taxes are regressive in nature
 Direct and Indirect Taxes
Context Direct Tax Indirect Tax
1. Imposed on Income and All the goods and services
profits

2. Who pays Individuals and End-consumers

businesses

3. How much Depends on Same for everyone

income and
profits

4. Transferability Not transferable Transferable

5. Tax Evasion Possible Not possible
6. Nature Progressive Regressive
7. Collections Complex Convenient
8. Common examples Income tax and GST, excise duty, and VAT
securities
transaction tax
Some Facts

• It has been 17 years since GST was first conceptualised in India

• About 160 countries in the world have the GST
• France was the first country to have introduced GST
• The Constitution of India has been amended
• 33 GST Acts will be passed
• Alcoholic liquor for human consumption has been kept outside the
scope of GST
Article 246 of Constitution
Earlier Indirect Tax Classification
 Please note that any tax by local bodies not subsumed under
GST
Indirect Taxes

Indirect Taxes Subsumed under GST Indirect Taxes not Subsumed under GST

Taxes by the Centre Taxes by the States Taxes by the Centre Taxes by the States
t t

Central Excise Duty Stat VAT/Sales Tax Basic Custom Duty Stamp Duty

Additional Excise Duty Luxury Tax Export Duties Property Tax

Additional Customs Duty Entry Tax Clean Energy Cess Tax on Liquor and
Petroleum Products
Special Additional Duty of Entertainment and Amusement Tax Customs Cess
Customs
Taxes on Advertisements
Service Tax
Purchase Tax
Excise Duty under
Medicinal and Toilet Taxes on Lotteries, Betting and Gambling
Preparations
States Surcharges and Cesses
Central Surcharges and Cesses College of Agricultural Banking, RBI,
PUNE
 Why GST? An Example
 Prior to GST, a training institute offering coaching classes for Rs 1,00,000 used
to charge 15% service tax of Rs 15,000. Say, it bought office stationery for Rs.
30,000 by paying 5% VAT of Rs 1,500 (Rs. 30,000 × 5%).

 The institute had to pay output service tax of Rs 15,000 without getting any
deduction of Rs.1,500 VAT paid on office supplies. As a result, its total tax
payment was Rs.16,500. Thus, payment of double taxes led to cascading effect.

 Under GST regime, say, GST is levied at 18% on coaching services and 12%
on office stationery. Hence, after deducting the tax paid on its input, the
training institute pays only a tax of Rs 14,400 (Rs 18% of Rs. 1,00,000 – 12%
of Rs. 30,000). As a whole, its tax liability came down by Rs. 2,100 (Rs.
16,500 – Rs.14,400).

 Thus, GST would reduce cascading effects of double taxation, as it allows the
set-off of tax paid on input at the time of payment of output tax.
 Physical interface between the tax payer and tax authorities is negligible under
GST, as all activities starting from registration, filing returns, tax payment,
refunds etc. are made online. It helps in achieving improved transparency &
tax compliances and seamless flow of credit.
 Limitations of the earlier tax structure

• Cascading effect
• Lack of uniformity in concessions and exemptions
• Lack of transparency
• Multiple points of taxation
• Goods versus Services dilemma
• Complicated online procedures for registration and filing of returns
• Inefficiency in logistics movements
 Advantages of GST

• GST eliminates the cascading effect of tax

• Higher threshold for registration
• Composition scheme for small businesses
• Simple and easy online procedure, hence improvement in transparency
• The number of compliances is lesser
• Defined treatment for E-commerce operators
• Improved efficiency of logistics
• Unorganized sector is regulated under GST
Features of GST

• APPICABILITY
• DESTINATION BASED CONSUMPTION TAX
• DUAL NATURE OF GST
• Integrated GST
• Import of goods
• Import of services
Rationale for GST

• Benefits for Consumers

• Single and Transparent Tax
• Relief in overall tax burden
• Reduction in prices of goods and services due to
elimination of cascading effect
• Benefits to business and industry
• Easy Compliance
• Uniformity of tax rates and structures
• Removal of cascading
• Improved competitiveness
• Gain to manufacturers and exporters
• Benefits to Government
• Simple and easy to administer
• Better control on leakage
• Higher revenues
 Types of GST

GST

Intra-state Supplies Inter-state Supplies

SGST/UTGST CGST IGST

 Intra-State Supply of Goods or Services
 When the location of the supplier and the place of supply are in the same state,
it is intra-state supply.
 Intra-state supplies attract Central GST (CGST) and State GST (SGST) or
UTGST in case of Union Territories.
 It means in this case, supplier collects both CGST and SGST (UTGST) from the
recipient and deposits CGST with Central Government and SGST (UTGST) with
State Government/UT.
Example
A furniture dealer in Hyderabad (Telangana) supplies furniture worth Rs 100,000
to a customer in Warangal (Telangana). GST rate applicable on furniture is 12%.
Since the supply is intra-state within Telangana, GST in the invoice is shown as
follows:
Taxable value of supply Rs 1,00,000
Add: CGST @ 6% Rs 6,000
SGST @ 6% Rs 6,000
Total amount Rs 1,12,000
If the furniture dealer does not have input tax credit, he will deposit Rs 6,000 with the Central
Government and Rs 6,000 with the Telangana Government through internet banking using the same
challan.
 Inter-State Supply of Goods or Services
 When the location of the supplier and the place of supply are in different states, it is
inter-state supply.
 Inter-state supplies attract Integrated GST (IGST) and the supplier collects the same
from the receiver and deposits with Central Government.
 Subsequently, revenue from IGST will be distributed among Union and States (UTs) on
the basis of recommendation of GST council.
Example
A furniture seller in Hyderabad supplies furniture worth Rs 1,00,000 to a customer in
Bangalore. Since, it is an inter-state supply between Telangana and Karnataka, it attracts
IGST. If applicable GST rate on such supplies is 12%, invoice in this transaction reflects
GST as follows:

Taxable value of supply Rs 1,00,000

Add: IGST @ 12% Rs 12,000
Total amount Rs 1,12,000

In this case, assuming that furniture seller does not have any input tax credit, he deposits the entire tax
amount of Rs 12,000 with the Centre.
Example
If a furniture dealer in Chandigarh supplies furniture to a customer in
Lakshadweep, invoice reflects GST as follows:

Taxable value of supply Rs 1,00,000

Add: IGST @ 12% Rs 12,000
Total amount Rs 1,12,000
In this case, furniture dealer deposits Rs 12,000 with Central government.
This is because, supply between two Union Territories is considered as inter-
state supplies. Similarly, supply between a state and a UT is also an inter-
state supply.

Supply from Supply to Type of Supply

Mumbai Pune
Intrastate Supply
Chandigarh Chandigarh
Mumbai Bangalore
Mumbai Chandigarh Interstate Supply
Chandigarh Lakshadweep
GST Acts

IGST Act and CGST Act

The Goods and Services Tax is based on two Acts – the IGST (Integrated Goods and
Services Tax) Act and the CGST (Central Goods and Services Tax) Act. These two Acts were
passed in the House of Parliament in April 2017.

SGST Act
To levy SGST on the supply of goods and services within a state, each state has passed its
own State GST Act, which is primarily a copy of CGST Act.

UTGST Act
The act has been passed for Union Territories (UTs) which do not have legislature. These
UTs are Andaman and Nicobar Islands, Lakshadweep, Dadra and Nagar Haveli, Daman and
Diu and Chandigarh. As Delhi and Puducherry have their own legislatures, they have passed
SGST Acts. In case of newly introduced UTs, even J&K has SGST and Ladhak hasUTGST.
Delhi, Puducherry and J&K : SGST
Remaining six UTs: UTGST
GST Compensation Cess
In addition to CGST, SGST, UTGST and IGST, GST compensation
cess is levied on specified products i.e. tobacco products, pan masala,
coal, motor cars, aerated waters etc. to compensate the revenue loss
for the states for the next 5 years from the implementation of GST,
due to the abolition of Central Sales Tax (CST).

Destination Based Consumption Tax (DBCT)

If the goods manufactured in Ahmadabad are sold to a customer in
Bhopal, the tax revenue goes to Madhya Pradesh Government not to
Gujarat Government. Since GST is imposed at the point of
consumption, it is destination based consumption tax.
GST Council (http://gstcouncil.gov.in/gst-council)

GST council consists of representatives from the Centre and the States as
follows:

Chairperson: The Union Finance Minister, currently (Nirmala Sita Raman)

Member: The Union Minister of State in charge of Revenue or Finance
Members: The Minister in charge of Finance or Taxation or any other
Minister nominated by each State Government

GST Council will make recommendations on various important issues in

relation to GST like goods and services that may be subject to or exempted
from GST, principles of place of supply, GST rates etc.
GST Council

Chairperson – Union FM
Quorum: (Minimum of number of people to be present in a meeting)
: 50% of total members
Decision: by 75% majority
States: 2/3 weightage and Centre- 1/3 weightage
Council to make recommendations on everything related to GST including
laws, rules and rates etc.
 Tax slabs under GST

GST rates applicable to the supply of goods: GST rates on the supply of goods are
primarily 5%, 12%, 18% and 28%.
GST rates applicable to the supply of services: GST rates on the supply of services are
5%, 12%, 18% and 28%.
Under Inter-state supplies, the entire tax rate is considered under IGST, whereas in case
of intra-state supplies, the tax rate is divided into CGST and SGST (UTGST) equally.
 Goods outside the purview of GST

Petroleum crude
High-speed diesel
Motor spirit (commonly known as petrol)
Natural gas and
Aviation turbine fuel
In addition to the above, the following are also not under GST
Alcohol for human consumption
Electricity
Note:
Despite right to levy Central Excise duty on these products. Tobacco and
tobacco products are subject to GST and GST compensation cess, the central
government has a
 Categorization of States under GST

Special Category States (As defined in the beginning)

Arunachal Pradesh, Assam, Jammu & Kashmir, Manipur, Meghalaya,
Mizoram, Nagaland, Sikkim, Tripura and Himachal Pradesh and
Uttarakhand

General Category States: All other States

Union Territories: Andaman and Nicobar Islands, Lakshadweep, Dadra

and Nagar Haveli, Daman and Diu and Chandigarh, Ladhak
As Delhi, Puducherry & J&K have their own legislatures, they have
passed SGST Acts.
 Threshold Exemptions for Registration under GST

The GST Council, on considering the demands raised by MSME, increased the
threshold limits for GST registration.
The states have an option to opt for a higher limit or continue with the existing
limits.
Overview of earlier limits, new limits and the date of
applicability
Earlier Limits – For the sale of Goods/Providing Services
Exceeds Rs.20 lakh – For General Category States - Up to 31st March 2019
Exceeds Rs.10 lakh - For Special Category States - Up to 31st March 2019
New Limits – For Sale of Goods
Exceeds Rs.40 lakh - For General Category States - From 1st April 2019
Exceeds Rs.20 lakh - For Special Category States - From 1st April 2019
New Limits – For Providing Services
There has been no change in Threshold limits for Service Providers
States who opted for the new limit
The above mentioned changes were proposed in the 32nd GST Council Meeting
held on 10th January 2019. An option was provided to the states to opt for the new
limits or continue the earlier ones (status quo).

Normal Category States/UTs who opted for a new limit of Rs.40 lakhs
Kerala, Chhattisgarh, Jharkhand, Delhi, Bihar, Maharashtra, Andhra Pradesh,
Gujarat, Haryana, Goa, Punjab, Uttar Pradesh, Himachal Pradesh, Karnataka,
Madhya Pradesh, Odisha, Rajasthan, Tamil Nadu, West Bengal, Andaman and
Nicobar Islands, Lakshadweep, Dadra and Nagar Haveli, Daman and Diu and
Chandigarh.

Normal Category States who choose status quo

Telangana
Special Category States/UT who opted for new limit of Rs. 40 lakh
J&K (SGST), Ladakh (UTGST) and Assam

Special Category States/UT who opted for new limit of Rs. 20 lakh
Puducherry, Meghalaya, Mizoram, Tripura, Manipur, Sikkim, Nagaland, Arunachal Pradesh
and Uttarakhand

Note 1:
Two hilly states J&K and Assam have also opted to raise the limit to Rs.40 lakh. These
two states had the option to remain under lower threshold limits as they fall under the
Special Category States. Even previously when these two states had the option to charge
GST only on aggregate turnover exceeding Rs.10 lakh, they had opted for a higher
threshold limit of Rs.20 lakh.
Note 2:
Kerala can now charge „calamity cess‟ up to 1% on all intra-state supply of goods and
services to cope up with natural calamities faced by the state last year.
 Aggregate Turnover

“Aggregate turnover” means:-

the aggregate value of all taxable supplies

exempted supplies
exports of goods or services or both
inter-state supplies
anything you sell to support your sales
All supplies made by the taxable person, whether on his own
account or made on behalf of all his principal
Notes:
1. All the above supplies
To be made by a person having the same PAN
To be computed on all India basis in a financial year
2. Aggregate turnover does not include
Value of supplies on which tax is levied on reverse charge basis
Value of inward supplies
Central Tax, State Tax, Union Territory Tax and Cess (GST)
Aggregate Turnover-Examples

Example 1
• Mr Agarwal has his business operations in 4 different states and his
aggregate turnover in those states is as follows:

Delhi Karnataka Madhya Tamilnadu

Pradesh
Taxable Supply 16,00,000 10,00,000
Exempted Supply 6,00,000
Supply on behalf of his 14,00,000
principal

What is his aggregate turnover? Is he required to register under GST? The

supplies shown above include CGST, SGST and IGST to the extent of Rs.
4,00,000.
• The aggregate turnover is in this case is 16,00,000 + 10,00,000 + 6,00,000+
14,00,000 – 4,00,000 = 42,00,000. He is required to register under GST.
Example 2
In a financial year, Mr. Sailesh, a resident of Tiruvantapuram has generated a
total turnover of Rs 30,00,000 through exports. Apart from this, his other
supplies include Rs 30,00,000 of exempted supplies and Rs 10,00,000 of
taxable supplies. What is his aggregate turnover? Is he required to register
under GST?
His aggregate turnover is Rs 70,00,000. He is required to register under
GST.

Example 3
Taxable supplies of Mr. Ramesh in Mumbai and Itanagar amount to Rs
8,00,000 and Rs 22,00,000 respectively. Is he required to register under GST
law?
Yes, his aggregate in Itanagar is Rs 22,00,000 which is more than Rs
20,00,000, he is required to get registered in Arunachala Pradesh. By virtue
of his registration in Arunachala Pradesh, he is also required to get registered
in Maharashtra, despite his aggregate turnover in Mumbai does not exceed
Rs 40,00,000.
Input Tax Credit (ITC)
Reverse Charge Mechanism (RCM)

Normally, the supplier of goods or services pays the tax on supply.

In the case of Reverse Charge, the receiver becomes liable to pay the
tax, i.e., the chargeability gets reversed.
 When is Reverse Charge Applicable?
A. Supply from an Unregistered dealer to a Registered dealer
B. Services through an e-commerce operator
• If an e-commerce operator supplies services then reverse charge will be
applicable to the e-commerce operator. He will be liable to pay GST.
• For example, UrbanClap provides services of plumbers, electricians,
teachers, beauticians etc. Instead of the registered service providers,
UrbanClap collects GST from the customers and is liable to pay GST to
government.
C. Supply of certain goods and services specified by CBIC
Central Board of Indirect Taxes and Customs (CBIC) has issued a list of
goods and a list of services on which reverse charge is applicable.
E.g.: Supply by an Agriculturist to Registered Person
The registered dealer who has to pay GST under reverse charge has to do self-
invoicing for the purchases made.
 Composition Scheme
Composition Scheme is a simple and easy scheme under GST for taxpayers.
Small taxpayers can get rid of tedious GST formalities and pay GST at a
fixed rate of turnover.
The GST regime has brought in many changes along with the following:
Increase in the number of GST returns
Payment of tax on a monthly basis
Small and new taxpayers will find it difficult to comply with so many rules.
Scheme is optional.
Who can opt for Composition Scheme
A taxpayer making taxable supply of goods with the turnover below Rs 1.5
crores can opt in for Composition Scheme. In case of Special Category States
the limit is now Rs 75 lakhs
For services providers, the limit is up to Rs 50 lakhs
Note: Turnover of previous financial year is the basis to determine threshold
exemption
*A person under composition scheme is required to file a quarterly return GSTR-4
by 18th of the month after the end of the quarter. Also, an annual return GSTR-9A
has to be filed by 31st December of next financial year
 Composition Scheme
A composition dealer cannot issue a tax invoice. This is because a composition
dealer cannot charge tax from their customers. They need to pay tax out of their
own pocket.
Hence, the dealer has to issue a Bill of Supply.
The dealer should also mention “composition taxable person, not eligible to
collect tax on supplies” at the top of the Bill of Supply.

Type of Business CGST SGST Total

Manufacturers/Traders (Goods) 0.5% 0.5% 1.0%
Restaurants not serving alcohol 2.5% 2.5% 5.0%
Other service providers (Aggregate Turnover 3.0% 3.0% 6.0%
up to Rs 50 lakhs in the preceding FY)

The following people cannot opt for the scheme:-

1. Manufacturer of ice cream, pan masala, or tobacco

2. A person making inter-state supplies
3. A casual taxable person or a non-resident taxable person
4. Businesses which supply goods through an e-commerce operator
 Conditions for availing Composition Scheme

The following conditions must be satisfied in order to opt for composition

scheme:

No Input Tax Credit can be claimed by a dealer opting for composition
scheme
The dealer cannot supply GST exempted goods
The taxpayer has to pay tax at normal rates for transactions under the
Reverse Charge Mechanism
If a taxable person has different segments of businesses (such as textile,
electronic accessories, groceries, etc.) under the same PAN, they must
register all such businesses under the scheme collectively or opt out of the
scheme.
The taxpayer has to mention the words „composition taxable person‟ on
every notice or signboard displayed prominently at their place of business.
The taxpayer has to mention the words „composition taxable person‟ on
every bill of supply issued by him.
 Advantages and Disadvantages of Composition Scheme

Advantages of Composition Scheme

• Lesser compliance (returns, maintaining books of record, issuance of
invoices)
• Limited tax liability
• High liquidity as taxes are at a lower rate
Disadvantages of Composition Scheme
• A limited territory of business. The dealer is barred from carrying out inter-
state transactions
• No Input Tax Credit available to composition dealers
• The taxpayer will not be eligible to supply goods through an e-commerce
portal
 Harmonized System of Nomenclature (HSN) Code

The Harmonized System is an international nomenclature for the

classification of products.

It allows participating countries to classify traded goods on a

common basis for customs purposes.

At the international level, the Harmonized System (HS) for

classifying goods is a six-digit code system.

The HS comprises approximately 5,300 article/product

descriptions that appear as headings and subheadings, arranged in
99 chapters, grouped in 21 sections.
 Harmonized System of Nomenclature (HSN) Code

The six digits can be broken down into three parts.

The first two digits (HS-2) identify the chapter the goods are classified in, e.g. 09
= Coffee, Tea and Spices.
The next two digits (HS-4) identify groups (headings) within that chapter, e.g. 09.
02 = Tea, whether flavoured or not flavoured.
The next two digits (HS-6) are even more specific (sub-headings), e.g. 09.02.10
Green tea (not fermented)...
Up to the HS-6 digit level, all countries classify products in the same way
Number of digits of HSN as per GST in India as follows:- (Turnover for the
previous financial year will be considered as a basis to find out number of HSN
digits to be used. )
Turnover No. of digits of HSN

Up to 1.5 crore 0
1.5 crore- 5 crore 2
More than 5 crore 4
Exports and Imports 8
Thank You