Heartiest welcome

to all
bachelor of commerce
students,
Scottish church college,
Kolkata.
From: CMA Abhijit Khasnobis
Practicing Cost Accountant
A tax research department - initiative
  Concept of Tax – Direct & Indirect Tax.
 Difference between Direct & Indirect Tax.
 What is GST. Need for GST. Deficiencies
DAY : of VAT & Improvement under GST.
 Taxable Event.
10th  GST Frame work
DECEMBER,  Benefits of GST
2021.  Constitutional Provisions
 Some important definitions:
TIME :
6:30 PM – 8:30 PM
What is a
Tax ?
 Tax is the “pecuniary
burden” laid upon
individuals & property
owners to support the
Government.
 It is not a voluntary
payment or donation but
an enforced contribution
by legislative authority.
 Simply speaking, tax is
the money that people
have to pay to the
Government which is used
to provide public services.
 Direct – vs – Indirect Tax

Direct Tax Indirect tax

 The person  The person paying the
paying the tax to tax to the Government
the Government collects the same from
directly bears the the ultimate consumer.
incidence of the Thus, incidence of the
tax. tax is shifted to the
 Progressive in other person.
nature – high rate  Regressive in nature –
of taxes for all the consumers
people having equally bear the
higher ability to burden , irrespective
pay. of their ability to pay.
 VALUE ADDED TAX: GST is a value added tax levied on
supply i.e. manufacture or sale of goods and provision of
services.

CONTINUOUS CHAIN OF TAX CREDITS: From the

producer’s point / service provider’s point upto the retailer’s
GST
level / consumer’s level thereby taxing only the value added
at each stage of supply chain.

BURDEN BORNE BY FINAL CONSUMER: As the supplier

at each stage is permitted to avail credit of GST paid on the
purchase of goods and /or services and can set-off this credit
against the GST payable.

NO CASCADING OF TAX: Since only the value-added is

taxed at each stage under GST, there is no tax on tax or
cascading of taxes under GST System.
 Deficiencies in the VAT System

1. Certain transactions are subject to
double taxation and were taxed both as
goods and services as distinction
between goods are services are often
blurred.
2. Cenvat did not include chain of value-
addition in the distributive trade after
the stage of production. Similarly in the
State-level VAT CENVAT load on the
goods was not removed. This lead to the
cascading of tax.
Eg: Under earlier tax regime, software was subject to
both service tax and VAT. This was so because both sale
of goods and provision of services were involved and
therefore taxable event under both the Statutes i.e.
respective VAT law and Service tax law got triggered.
However, this aspect has been taken care of under GST
law.
Eg. Under earlier tax regime if goods were
manufactured for ₹1000 & excise duty was payable
12.5% & VAT was payable @ 14.5% , the billing was
being done as under –
Assessable value of goods under excise law - ₹1000
Excise duty @ 12.5% - ₹125
Taxable value for VAT -₹1125
VAT @ 14.5% [ 14.5% on 1125] - ₹163.13
Total Invoice Value - ₹1288.13

3. Though CENVAT & State- Level VAT are essentially value added taxes, set off of one against the
credit of another was not possible as CENVAT was a Central levy and State-Level VAT was a
State levy.
 Deficiencies in the VAT System

4. Central Sales Tax (CST) was another Eg: under earlier tax regime if a dealer in Kolkata
source of distortion in terms of its purchases goods from a manufacturer in Mumbai for
cascading nature since it was non- ₹1000 + ₹20 ( 2% CST) = ₹1020 and sell such goods
VATABLE. Being an origin-based tax, within Kolkata for ₹1200. The tax rate on sale is 12.5%
CST was also against one of the basic and hence output tax liability is ₹150. Credit of ₹20 is
principles of consumption taxes that not allowed while making payment of ₹150 and hence
tax should accrue to the jurisdiction the dealer has to pay ₹150 as VAT.
where consumption takes place.
5. There were several taxes in the States, such as Luxury tax, Entertainment tax etc. which were
not subsumed in the VAT. Hence for a single transaction multiple taxes in multiple forms were
required to be paid.
6. VAT on goods was not integrated with tax on services , at the State level to remove the cascading
effect of service tax. With service sector being the fastest growing sector in the economy, the
exclusion of services from the tax base of the States potentially eroded their tax - buoyancy.
 Remedies to the GST Deficiencies of VAT System

1. Goods and Services Tax (GST) has a comprehensive tax structure covering
both goods and services and hence double taxation on account of separate
levy on goods and services are removed.
2. Simultaneous introduction of GST at both Centre and State levels has
integrated taxes on goods and services for the purpose of set-off relief and
ensures that both the cascading effects of CENVAT and service tax are
removed and a continuous chain of set-off from the original producer’s point /
service provider’s point upto the retailer’s level / consumer’s level is
established.

3. In the GST regime, the major indirect taxes have been subsumed in the ambit
of GST.
4. The erstwhile concept of manufacture or sale of goods or rendering of
services are no longer applicable since the tax is now levied on “Supply of
Goods and / or Services” - The new Taxable Event for GST.
 Under Legacy System Under GST System

A ‘Taxable event’ is an event, the happening of which results in imposition of tax. In other words,
‘Taxable event’ is that event which on its occurrence activates tax liability. For instance, under excise
duty, taxable event is manufacturing of goods or under Income tax, taxable event is the earning of
income. Likewise ‘Supply of goods or services or both’ is the taxable event under GST.
 Legislative Framework

CGST ACT -2017 for levying CGST

Union Territories States & Union

without Legislatures [No Territories with their
assembly or elected own legislatures [ eg.
MLAs eg. A&N, Delhi, Jammu &
Lakshadweep, Ladakh, Kashmir and
Dadra& Nagar Haveli, Puducherry] have
Daman & Diu and their own GST
Chandigarh] are Legislation for
governed by UTGST levying SGST.
Act, 2017 for levying
UTGST.
Classifications of Goods & Services

HSN Code for Goods (8 Digit)

Harmonized System of
Nomenclature

SAC Code for Services (6 Digit)

Service Accounting Code
 Registration
Every Supplier of goods and/ or services is required to obtain registration in the State / UT
from where he makes the taxable supply if his aggregate turnover exceeds the threshold
limit during a Financial Year. The threshold limit prescribed for various States / UT s are
as follows
States with threshold limit of States with threshold limit of States with threshold limit of
₹ 10 lakh for supplier of ₹ 20 lakh for supplier of ₹ 20 lakh for supplier of
goods and / or services goods and / or services services and ₹ 40 lakh for
goods i.e. persons engaged
exclusively in supply of
goods

 Manipur  Arunachal Pradesh  Jammu & Kashmir

 Mizoram  Meghalaya  Assam
 Nagaland  Sikkim  Himachal Pradesh
 Tripura  Uttarakhand  All other States
 Puducherry
 Telangana
 Composition Scheme for small – scale businesses

1.50

restaurant services

Spl States – Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland,

Tripura, Sikkim, Uttarakhand
 Exemption

Apart from providing relief to small-scale

business, the law also contain provisions for
granting exemption from payment of tax on
essential goods and / or services.
 Seamless Flow of Credit

 GST is a destination based consumption tax so revenue of State GST

ordinarily accrues to the consuming States.
 The inter-State supplier in the exporting State is allowed to set-off the
available credit against the IGST payable on inter-State supply made
by him
 The buyer in the importing State is allowed to avail the credit of IGST
paid on inter-State purchases made by him.
 So unlike earlier scenario, under GST there is a seamless credit flow
in case of inter-state supplies.
 Order of Utilisation of Credit

 The Order for utilization of ITC has been changed along with introduction of new
Sections 49A & 49B under The CGST Act 2017, applicable from 01.02.2019.

 As per Section 49A, notwithstanding anything contained in section 49, the input tax
credit on account of central tax, State tax or Union territory tax shall be utilized
towards payment of integrated tax, central tax, State tax or Union territory tax, as the
case may be, only after the input tax credit available on account of integrated tax has
first been utilized fully towards such payment.”
GST Common Portal, GST Suvidha Provider & GST Compensation Cess

GST Common Portal: Common GST Electronic Portal –

www.gst.gov.in – a website managed by Goods & Services
Network ( GSTN). Set by the Government to establish a
uniform interface for the tax payer and a common and shared
IT infrastructure between the Centre and the States.

GST Suvidha Provider: GSTN has selected certain IT, IT

enabled Services & Financial Technology companies, to be
called GST Suvidha Providers (GSPs). GSPs have access to
GST System and have the capability to develop applications
to be used by taxpayers for interacting with the GSTN like
uploading invoice, filing return etc.
GST Compensation Cess: GST Compensation Cess has been
imposed on the specified luxury items or demerit goods like pan
masala, tobacco, aerated water, motor cars etc., computed on the
value of taxable supply. Compensation Cess is leviable to provide
for compensation to the States, for a period of 5 years, for the
loss of revenue arising on account of implementation of GST.
Constitutional Provisions
 Some Important Definitions under GST
1) Business
An organization where goods and services are exchanged for one another or for money is
called business. Businesses can be privately owned, not-for-profit or state-owned.

2)Aggregate Turnover
Aggregate Turnover” means the aggregate value of all taxable supplies (excluding the
value of inward supplies on which tax is payable by a person on reverse charge basis),
exempt supplies, exports of goods or services or both and inter-State supplies of persons
having the same Permanent Account Number, to be computed on all India basis but
excludes central tax, State tax, Union territory tax, Integrated tax and cess.
The term ‘AGGREGATE TURNOVER’ means –
• +Taxable Supply
• +Exempted Supply
• +Export Supply
• +Inter State Supply of Person having same PAN
• -Inward supply liable to RCM
• -CGST
• -SGST
• -UGST
• -IGST
• -Cess
 Some Important Definitions under GST
3) Capital Goods
Capital goods” means goods, the value of which is capitalised in the books of account of
the person claiming the input tax credit and which are used or intended to be used in the
course or furtherance of business

4) Casual taxable person

Casual taxable person means a person who supplies taxable goods or services occasionally
in a taxable Territory where he does not have a fixed place of business. The person can act
as a Principal or agent or in any other capacity supply goods or services for the furtherance
of business
 
5) Goods
Goods means every kind of movable property other than money and securities but includes
actionable claims (i.e. claim to any debt other than debt secured by mortgage or hypothecation),growing
crops, grass and things attached to or forming part of the land
which are agreed to be severed before supply or under a contract of supply.
 
6)Input
Any goods other than capital goods used or intended to be used by a supplier in the course
or furtherance of business is called Input.
 
 Some Important Definitions under GST
7) Person
A “person” under GST is defined as an individual, HUF, company, firm, government
organization, LLP, anyone incorporated under foreign laws, etc.
 
8) Place of Business
Principal Place of Business is the primary location where the business’s books of accounts
and records are kept and is often where the head of the firm or at least top management
is located. Additional Place of business is the place of business where taxpayer carries out business related activities, in
addition to the Principal Place of Business.

9) Registered Person
Registered person” means a person who is registered under section 25 but does not include
a person having a Unique Identity Number

10) Services
“Services” means anything other than goods, money and securities but includes activities
relating to the use of money or its conversion by cash or by any other mode, from one form,
currency or denomination, to another form, currency or denomination for which a separate
consideration is charged
11) Taxable Person
A ‘taxable person’ under GST, is a person who carries on any business at any place in India
and who is registered or required to be registered under the GST Act.
 THANKS
FOR
WATCHING