GOODS AND SALES TAX

-- AN OVERVIEW
BY,
UMA SANTHOSH,
VINOD.
 WELCOME!

 One of the biggest taxation reforms in India -- the Goods and

Service Tax (GST) -- is all set to integrate State economies and
boost overall growth.
 GST will create a single, unified Indian market to make the
economy stronger.
 Before evaluating the cost advantages of shifiting to GST
lets find answer to below question.

 ‘ Just what is GST all about and how will it impact us?’
 What is GST?
 Goods and Services Tax -- GST -- is a comprehensive tax levy on manufacture, sale
and consumption of goods and services at a national level.

 GST is a consumer based tax and not origin based. Under this structure of GST,
the tax will be collected by the states where the goods or services actually consumed.

 The system allows the set-off of GST paid on the procurement of goods and services
against the GST which is payable on the supply of goods or services. However, the
end consumer bears this tax as he is the last person in the supply chain.

 Experts say that GST is likely to improve tax collections and boost India's economic
development by breaking tax barriers between States and integrating India through a
uniform tax rate.
 Are we late to implement?

 Finance Minister Pranab Mukherjee while presenting the Budget on July

6, 2009, said that GST would come into effect from April 2010.
 (Till now; the date of implementation has been pushed beyond from
01/04/2011 to may be 1st October 2011 or 1st April 2012.)
 The implementation of GST will lead to the abolition of other taxes such
as octroi, Central Sales Tax, State-level sales tax, entry tax, stamp duty,
telecom licence fees, turnover tax, tax on consumption or sale of
electricity, taxes on transportation of goods and services, et cetera, thus
avoiding multiple layers of taxation that currently exist in India.
 What are the benefits of GST?

 Under GST, the taxation burden will be divided equitably between

manufacturing and services, through a lower tax rate by
increasing the tax base and minimizing exemptions.
 It is expected to help build a transparent and corruption-free tax
administration. GST will be is levied only at the destination point,
and not at various points (from manufacturing to retail outlets).
 Currently, a manufacturer needs to pay tax when a finished
product moves out from a factory, and it is again taxed at the
retail outlet when sold.
 How will it benefit the Centre and the States?

 It is estimated that India will gain $15 billion a year by

implementing the Goods and Services Tax as it would promote
exports, raise employment and boost growth. It will divide the tax
burden equitably between manufacturing and services.

 What are the benefits of GST for individuals and companies?

 In the GST system, both Central and State taxes will be collected
at the point of sale. Both components (the Central and State GST)
will be charged on the manufacturing cost. This will benefit
individuals as prices are likely to come down. Lower prices will
lead to more consumption, thereby helping companies.
 What type of GST is proposed
for India?

 India is planning to implement a dual GST system.

Under dual GST, 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.
 All goods and services, barring a few exceptions, will
be brought into the GST base. There will be no
distinction between goods and services.
 Which other nations have a
similar tax structure?
  Almost 140 countries have already implemented the
GST. Most of the countries have a unified GST
system. Brazil and Canada follow a dual system where
GST is levied by both the Union and the State
governments.

 France was the first country to introduce GST system

in 1954.
 Who would be impacted by the implementation of GST?

 All Business whether engaged in the sales or supply of services would be

impacted by GST. If you are dealing Goods covered under GST or if you
are rendering any service you will be covered under GST.
 What type of GST is expected to be applied in India?
 In India, dual GST is expected to be proposed wherein Centre and State
will be levying on the transactions of the value of Goods or Service. In
India, due to federal structure, there is a proposal to introduce dual GST
system.
 What is dual GST?
 Under dual GST, it is levied by both the Central Goods and Service Tax
(CGST) and State Goods and Service tax (SGST) will be levied on the
taxable value of the transaction.
 What will be the expected rate of GST?
 The rate is expected to be in the range of 14 to 16%. Once the total GST is
determined, the central and states have to agree on Central GST and
State GST rates.
 Cost advantages of shifting.

 GST makes the price of a product unique throughout the country.

 The concept of warehouse changes when GST is introduced. In
the present tax system a ware house is required for each state. If
the dealer and the ware house are in different states, then the
dealer needs to pay a Central Sales Tax of about 2%.This
increases the price of the commodity. Thus companies use to
setup a warehouse in each state. In GST as the CST gets
eliminated, the number of warehouses can get reduced.
 Savings in paper work.

 This can also reduce much paperwork as

GST is not much complicated.

 The GST is a welcomed tax pattern as it can

reduce the price of the Goods increasing
the consumption and finally increases the
production.
 Savings in logistics..

 Logistics constitutes 12-13% of GDP and

saving of 5% in logistics cost can
unlock huge value for the economy.
 Any revenue loss on account of Removal
of Octroi taxes in the state of
Maharashtra, will be temporary, as it will
attract more investment in the state.
 What are the items on which GST may
not be applied?

 Alcohol, tobacco, petroleum products are

likely to be out of the GST regime.
 Why are some States against GST; will they
lose money?

 The governments of Madhya Pradesh, Chhattisgarh and Tamil Nadu

say that the information technology systems and the administrative
infrastructure will not be ready by April 2010 to implement GST. States
have sought assurances that their existing revenues will be protected.
 The central government has offered to compensate States in case of a
loss in revenues.
 Some States fear that if the uniform tax rate is lower than their existing
rates, it will hit their tax kitty. The government believes that dual GST
will lead to better revenue collection for States.
 However, backward and less-developed States could see a fall in
tax collections. GST could see better revenue collection for some
States as the consumption of goods and services will rise.
 A WRAP UP ON
ADVANTAGES.
 1)Speeds up economic union of India;

(2)Better compliance and revenue buoyancy;

(3)Replacing the cascading effect [tax on tax] created by

existing indirect taxes;

(4)Tax incidence for consumers may fall;

(5)Lower transaction cost for final consumers;

(6) By merging all levies on goods and services into one, GST acquires a very
simple and transparent character;

(7) Uniformity in tax regime with only one or two tax rates across the supply
chain as against multiple tax structure as of present;

(8) Efficiency in tax administration;

(9) May widen tax base;

(10) Increased tax collections due to wide coverage of goods and services; and

(11) Improvement in cost competitiveness of goods and services in the

international market.
THANK YOU