GST in India

Ketan Jog | 18.Jun.15

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Monthly Finance Meet - GST| 18.Jun.15| slide 2

Contents

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Quick Re-cap
What has changed since December 2014
Way Forward
Implementation Matrix
GST Council
GST Network

Objectives

Workflow

Data Capturing Structures

Tax Boosters

Interactive

Monthly Finance Meet - GST| 18.Jun.15| slide 3

Re-cap : Constitutional Authority to levy Taxes

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Taxes levied under Current authority of the Constitution

Union List

Income Tax
Custom Duty
Excise Duty
Service tax
Central Sales Tax
Stamp duty in respect of
bills of exchange,
cheques, promissory
notes, etc

State List
Taxes on lands and

buildings
Excise duty on alcoholic
liquor etc
Entry tax (Levied by
State)
Sales Tax
Road Tax
Luxury Tax
Stamp duty in respect of
documents other than
those specified in the
provisions of List I

Concurrent List
Stamp duties other than

duties or fees collected

by means of judicial
stamps, but not
including rates of stamp
duty

Monthly Finance Meet - GST| 18.Jun.15| slide 4

Re-cap : Course of Events

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Existing Tax system was sought to be replaced by a Single Tax called GST as
recommended by Kelkar Committee in 2003.
ButSingle GST concept was rejected in favor of a DUAL GST One for the
Centre (CGST) and other for State (SGST).
It has now become CGST, SGST and IGST & Addl IGST!!!. IGST is Integrated
GST on Inter State Transactions. Addl IGST is @ 1% for upto 2 Years.
Finance Minister, Shri Arun Jaitley presented the Constitution Amendment Bill
(CAB) in the Loksabha on 19.Dec.14, which now provides for Concurrent
jurisdiction for levy & collection of GST by the Centre & the States.
CAB was passed by Lok Sabha in Budget session on 6.May.15, but Rajya Sabha
referred it to Select Committee, which is due to comment on the bill in Monsoon
Session.
Monthly Finance Meet - GST| 18.Jun.15| slide 5

Re-cap : Constitutional Setup : as per Proposed CAB

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Taxes that will be levied under authority of the Constitution

By Union
Income Tax
Custom Duty
Excise Duty
Service tax
Central Sales Tax
Stamp duty in respect of
bills of exchange,
cheques, promissory
notes, etc
Interstate sale of Goods
& Services (IGST)
Excise on Petrol, Crude,
Diesel, ATF, Tobacco
products.( ? Notified
Date ?)

By States
Taxes on lands and

buildings
Excise duty on alcoholic
liquor etc
Entry tax (Levied by
State)
Sales Tax
Road Tax
Luxury Tax
Stamp duty in respect of
documents other than
those specified in the
provisions of List I

By Both Union &

States
On all Goods & Services

except Alcoholic Liquor

(CGST and SGST)
Stamp duties other than
duties or fees collected
by means of judicial
stamps, but not
including rates of stamp
duty

Monthly Finance Meet - GST| 18.Jun.15| slide 6

Re-cap : Definitions

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Goods & Services Tax : Article 366A (Clause 12A) of the Constitution of
India :
means any tax on supply of goods or services or both except taxes on the
supply of the alcoholic liquor for human consumption.
On the following, GST will be levied wef date rec
Services : Article 366A Clause (26A) of Constitution says Services
means anything other than goods.
Goods : means every kind of movable property other than actionable
claims and money; and includes stock and shares, growing crops, grass,
and things attached to or forming part of the land which are agreed to be
severed before sale or under the contract of sale.

Monthly Finance Meet - GST| 18.Jun.15| slide 7

Re-cap : Basic Concepts

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Tax on domestic consumption.

No differentiation between Goods and Services.
Tax leviable at each point of sale or provision of service.
Input Tax Credit is available at every stage.
Treats whole country as a single jurisdiction.
Uniform Tax rates across the whole jurisdiction.
No distinction in Tax rates on Imported or Domestic Goods.
Single Tax jurisdiction allows ease of allowing Input Tax Credit.
Destination based tax for interstate transactions (IGST)- ultimate tax will be
collected by the state in which goods are finally consumed.

Monthly Finance Meet - GST| 18.Jun.15| slide 8

Re-cap : How will the Tax look on an Invoice

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Supply within State:

Basic value charged for supply of goods or services

10,000

Add: CGST @ 10%

1,000

Add: SGST @ 10%

1,000

Total price charged for local supply of goods or services

12,000

Supply from One State to Another

Basic value charged for supply of goods or services
Add: IGST @ 20%
Add: Additional IGST @ 1%

Total price charged for interstate supply of goods or services

10,000
2,000
100

12,100

Exports
Basic value charged for supply of goods or services
Add: CGST \ SGST \ IGST NIL
Total price charged for export of goods or services

10,000
Nil
10,000

The Base for both CGST and SGST is same no tax on tax
Tax Rate is assumed 10%
Revenue Neutral Rate as worked out earlier : 12% (2005)
Monthly Finance Meet - GST| 18.Jun.15| slide 9

Re-cap : Set Off or Input Tax Credit

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Nature of Input Tax

Can be utilized for payment of

CGST

CGST

(Amount goes to CBEC)

IGST

SGST

SGST

(Amount goes to State)

IGST

IGST

CGST

(Amount goes to CBEC)

SGST
IGST

Central Government to act as a Clearing House & transfer the funds across States

Monthly Finance Meet - GST| 18.Jun.15| slide 10

Re-cap : Benefits

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Reduction in the number of taxes at the Central and State level.

Decrease in effective tax rate for many goods.

Removal of the current cascading effect of taxes

Reduction of transaction costs of the taxpayers through simplified tax

compliance

Increased tax collections due to wider tax base and better compliance
Govt Expects Tax Collections to increase by 90K Crores

Monthly Finance Meet - GST| 18.Jun.15| slide 11

What has changed since December 2014

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Lok Sabha has passed the GST CAB

Finance Minister has stated in LS the Tax Rate will be much lower than 25%.
Rajya Sabha has referred it to Select Committee.
Select Committee is expected to decide on

Addl IGST If it is really necessary

Place of Supply Rules

Revenue Neutral Rate (RNR) effective GST Rate

Monthly Finance Meet - GST| 18.Jun.15| slide 12

Way Forward

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Monsoon Session of Parliament to commence in July, in which Rajya

Sabha is expected to Approve the CAB.

After CAB passage in Rajya Sabha, atleast 15 States have to ratify it

in their respective State Legislative Assemblies.

Then, President shall give his assent for enactment.

GST Council to be formed within 60 Days of Enactment of CAB.

GST Law & Rules to be announced by Centre & States and to be

opened for Public Opinion.

GST Network (IT Infrastructure) for handling GST to be introduced.

Centre & States have agreed to share 50% of Costs of GSTN.

Monthly Finance Meet - GST| 18.Jun.15| slide 13

Implementation Structure

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Activity

Responsibility

Registration,
File Returns,
Tax Payments

Tax Payer

Registration Acceptance,
Acceptance & Return Consolidation
Challan Reconciliations
Matching of Input Tax Credit
Preparing MIS for Govt & Public
Helpdesk and Facilitation Centres

GSTN
(IT Infrastructure
for facilitating
GST)

Assessment, Audits and Law Enforcement

Refunds
Dispute Resolution

Tax Authorities

Policy Statements, Liasioning agency for Centre & States

GST Council

Tax Payments & Reconciliations

Banks & RBI

Tax Payer and Tax Authorities are expected to Interact only THRU GSTN
Monthly Finance Meet - GST| 18.Jun.15| slide 14

GST Council

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India is a country of 29 States & 7 Union Territories.

To Implement a Uniform GST all over India, a need for a Political Administrative
Body was felt, which will take over from the Empowered Committee of State
Finance Ministers after GST Implementation GST Council.
Principal Objective : Recommend Sharing of IGST between Centre and States.
Other areas of Operation
Framing Model Laws

Decide threshold limit of turnover.

Define Rates Bands / Floor rates GST

Define Special rates during any natural calamity

Frame & Oversee Special Provisions

for Special States

Resolution of Disputes regarding levy and

collection of taxes between States / Centre.

Set Principals for Addl IGST (1%)

Decide effective when Crude, Petrol, HSD, Natural

Gas, Aviation Fuel to be included in GST

GST Council will include Union FM, MoS and atleast 1 Minister
nominated by each State Govt.
Monthly Finance Meet - GST| 18.Jun.15| slide 15

GSTN : Objectives

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Clear IT Migration Strategy to GST

Simplicity for Tax Payers
Respect Autonomy of the States
Uniformity of Policy Administration across the whole Country
Enable digitization of the whole chain
Reduce tax Leakages
Leverage current IT Investments made by States
Common File Formats

NSDL is the Implementing Agency selected by the Government

to roll out GSTN

Monthly Finance Meet - GST| 18.Jun.15| slide 16

GSTN : Workflow

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Registration : Single PAN based registration number to be issued to all Tax

Payers. A registration number can be extended to States on request.
Returns Filing : Accept Tax Returns and proceed with Preliminary Processing

Returns filed will be forwarded to CBEC; If States desire (in cases they do not have
required Infrastructure), Returns will be forwarded to States as well.

Harmonized System of Nomenclature to be implemented for Goods, in line with GATT.

Business Rules Engines to refer to Tax Rates, Revenue Sharing Rules etc in Returns.

Challan Matching with Tax Returns & Input Tax Credit Reports
Tax paid under IGST by the selling dealer in the Exporting State will be available
as ITC to the Purchasing Dealer in the Importing State.
Info uploaded by Tax Payer will flow to CBEC, States and later CBDT, MCA.

Monthly Finance Meet - GST| 18.Jun.15| slide 17

GSTN : Data Capturing Structure

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Whole Entity

Branch / Location
Invoice / Document

HSN Nomenclature

Monthly Finance Meet - GST| 18.Jun.15| slide 18

GSTN : Tax Boosters

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GSTN to have Intelligent Deterrents to check Frauds

Type of Fraud

In System Checks

Fraudulent Invoice

Matching with Data uploaded

Improper Input Tax Credit

Matching with Data uploaded

Fraudulent Use of Exempt Rules

Business Rules Engine Validation

False Payment Proof

Matching with E-Payments

Unrecorded Sales

Data Mining

Misuse of Composition

Data Mining

Wrong Benefit of Lower Tax Rate

Data Mining

Under-Invoicing Declaration

Data Mining

Non-Existent Dealers

Data Mining

Results of these Tax Boosters to be forwarded in due course

for Audits, Appeals, Refund Processing
Monthly Finance Meet - GST| 18.Jun.15| slide 19

Interactive

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QUESTIONS & COMMENTS?

Monthly Finance Meet - GST| 18.Jun.15| slide 20

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THANK YOU!!

Monthly Finance Meet - GST| 18.Jun.15| slide 21