Introduction to
Goods and Service Tax
(122nd Constitution Amendment Bill)
December 27, 2014
CA Swadesh Gupta
Co-ordinator VAT Research Group of NIRC of ICAI
Agenda
Introduction
GST overview
IT-infrastructure under GST
Glossary
2
Introduction
3
What is GST ?
GST is a destination based consumption tax.
GST is a value added tax to be levied on both goods and services,
(except the exempted goods and services).
As per Article 366(12A) of the constitution:
GST means any tax on supply of goods, or services or both except
taxes on the supply of the alcoholic liquor for human consumption.
Under GST revenue will be ultimately received by the state in which
goods are finally consumed.
4
Background
-
-
-
-
GST is a progressive step in the direction of tax
reforms. Introduction of the GST to replace the
existing tax structure with multiplicity of Central
and State taxes is being considered imperative in
the emerging economic environment.
France was First Country to adopt GST in 1954.
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.
Currently, there are 160 countries in the world that
have implement VAT/GST. Number of country
based on region are as stated aside.
Out of 160 countries, eight countries are not
United Nation (UN) Member States.
Highest rates are in Hungry (27%) and Gambia
(40%).
Malaysia has proposed 6% and expected to
introduce on April 01, 2015.
No.
Region
No. of Country
1
ASEAN
7
2
Asia
19
3
Europe
53
4
Oceania
7
5
Africa
44
6
South America
11
7
Caribbean, Central &
North America
19
Source: "Countries implementing VAT or GST"
5
http://gst.customs.gov.my/en//gst/pages/gst ci.aspx
GST Journey in India
2000
Vajpayee Government started discussion on GST by setting up an empowered committee headed by Sri Asim Dasgupta.
2002-04
The Kelkar Task Force on the implementation of Fiscal Responsibility and Budget Management (FRBM) Act, 2003 and
suggested a comprehensive Goods and Services Tax (GST)
2007
April 2007 - CST phase out started
May 2007 - Joint working committee
formed by SC
Nov 2007 - Joint working committee
submitted report
2008
Feb 2008 - FM announced
introduction of GST from 01/04/10
April 2008 - Empowered committee finalized views over GST and submitted
report titled “A model and roadmap for Goods and Services Tax (GST) in India.
2009
July 2009 - FM announced commitment to
introduce GST from 01/04/10.
Nov 2009 - First discussion paper
released by EC
Dec 2009 Task force constituted by
FC released its report
Contd…
6
GST Journey in India
2010
Feb 2010 - Mentioned in the speech of then FM - GST to be introduced in April 2011
2011
March 2011 - The Constitution 115th amendment bill introduced in Loksabha for levy of GST on all goods or services
except for the specified goods.
2012
March 2012 - drafting of model legislation for Centre and State GST in concert with States under progress.
2013
Four Committees have been constituted by the Empowered Committee of State Finance Ministers (EC) to deal with the
various aspects of work relating to the introduction of GST
2014
Dec 2014 - The Constitution 122th amendment bill passed in Lok Sabha for levy of GST which enables the introduction of
GST probably by April 2016 on 17th December,2014.
7
GST overview
8
Taxes subsumed under GST
Central Taxes
• Central Excise Duty
• Additional Excise Duties
• The Excise Duty levied under the Medicinal and Toilet preparations (Excise Duties) Act,
1995
• Service Tax
• Countervailing Duty (CVD)
• Special Additional Duty of Customs - 4% (SAD)
• Surcharges, and Cesses
State Taxes
• VAT/Sales Tax
• Entertainment Tax (Other than tax levied by the local bodies)
• CST (Levied by the Centre and collected by the States)
• Luxury tax
• Taxes on lottery, betting and gambling
• Purchase tax, Octroi & Entry tax
• State Cesses and Surcharges
Note:
1) Beverages/items containing alcohol are kept out of the purview of GST.
2) Petroleum products - The goods and service tax council shall recommend the date.
3) No decision has been taken on Stamp Duty, Vehicle tax, electricity tax etc.
9
Proposed GST model
IGST
SGST
CCGT
10
Salient features of GST
Taxable person:
- All types of persons carrying on business activities, i.e. manufacturers, job- workers,
traders, importers, exporters, all types of service providers, etc.
-
If a company is having four branches in four different States, all the four branches
will be considered as taxable entities under each of the jurisdictions of State
Governments concerned.
Leviable:
CGST and the SGST: Levied on all supply of goods and services except
- Exempted goods and services
- Goods which are outside the purview of GST
- The transactions which are below the prescribed threshold limits.
IGST: Levied for inter state consignment or stock transfer of goods and services.
Exports and Imports:
- Export: GST on exports will be zero-rated;
- Importer: Both CGST and SGST will be levied on import of goods and services into the
country and shall be collected by the Central Government.
Importers: have to register under both CGST and SGST as well.
11
Salient features of GST
Special Economic Zones (SEZ):
- Tax benefits would be given to the SEZ;
- No benefits with regard to the sales from an SEZ to DTA
Registration:
-
Each taxpayer would be allotted a PAN-linked taxpayer identification number.
The exact design would be worked out in consultation with the Income-Tax
Department.
Rate Structure:
For goods: (Three rate structure)
1)
Lower rate for necessary items and items of basic importance,
2)
Standard rate for goods in general.
3)
Special rate for precious metals and a list of exempted items.
For taxation of services: A single rate for both CGST and SGST.
Additional tax on supply of goods:
An additional tax on supply of goods, not exceeding one percent, in the course of
inter-state trade or commerce shall be levied and collected by the Government of
India for a period of two years or such other period as the goods and service tax
council may recommend, and such tax shall be assigned to the states.
12
Salient features of GST
Tax Invoice:
-
Dealer registered under GST can issue a tax invoice;
On the basis of this invoice, the ITC could be claimed;
Normally, a tax invoice must bear the name of the supplying dealer, his tax
identification nos., address and tax invoice nos. coupled with the name
and address of the purchasing dealer, his tax identification nos., address
and description of goods sold or service provided.
Input Tax Credit:
The Central GST and the State GST are to be paid to the accounts of the
Centre and the States separately and Cross utilisation of ITC between the
CGST and the SGST not be allowed except IGST.
Return: The taxpayer would need to submit periodical returns to both the
Central GST authority and to the concerned State GST authorities.
Assessment, enforcement, scrutiny and audit: Would be undertaken by
the authority which is collecting the tax.
13
Additional features of GST
Compensation to states for loss of revenue for GST:
Parliament may, by law, on the recommendation of the goods and service tax council, provide for
compensation to the States for loss of revenue arising on account of implementation of the goods and
service tax for such period which may extend to five years. A provision in this regard has been made in
the Amendment Bill (The compensation will be on a tapering basis, i.e., 100% for first three years, 75%
in the fourth year and 50% in the fifth year).
Transition Provision:
Notwithstanding anything in this Act, any provision of any law relating to tax on goods and services or
on both in force in any state immediately before the commencement of this Act, which is inconsistent
with the provisions of the constitution as amended by this Act shall continue to be inforce until
amended or repealed by a competent legislative or other competent authority or until expiration of one
year of from such commencement , whichever is earlier
Power of president to remove difficulties:
If any difficulties arises in giving effect to the provisions of the constitution as amended by this Act, the
president may, by order, make such provisions, including and adaptation or modification of any
provision of the constitution as amended by this Act or law, as appear to the president to be necessary
or expedient for the purpose of removing the difficulties. Provided that no such order shall be made
after the expiry of three years form the date of such assent.
14
IT-infrastructure under GST
15
Formation of GSTN-SPV
Goods and Service Tax Network - Special Purpose Vehicle
(GSTN—SPV) has been set up to provide a robust ITinfrastructure and service backbone to capture, process and
exchange the information amongst the stakeholders
(including tax payers, States and Central Government,
Banks and RBI).
GSTN-SPV was incorporated as a non-Government, not for
profit, private limited Company registered under the
Companies Act, 1956 on 28 March 2013, with 49% equity
held by the Government and 51% held by the nonGovernment institutions.
Given the sensitivity of the role of GSTN-SPV and the
information that would be available with it, the strategic
control over GSTN-SPV has been ensured with the
Government.
16
Roles & Responsibilities of GSTN-SPV
The GSTN-SPV would render the following services:—
(i) provide common registration, return filing and e-payment services for the tax payers;
(ii) ensure integration of the common GST Portal with the existing tax administration systems of the
Central/State Governments and other stake holders;
(iii) facilitate, implement and set standards for providing services to the tax payers through common GST
portal;
(iv) build efficient and convenient interfaces with tax payers to increase tax compliance;
(v) assist tax authorities in plugging tax evasion and improving the transparency of the tax administration
system;
(vi) carry out research, study best practices and provide training to the stakeholders; and
(vii) deliver any other service of relevance to the Government and other stakeholders.
17
Glossary
GST – Goods and Service Tax
CVD – Countervailing Duty
SAD – Special Additional Duty
CST – Central Sales Tax
SGST – State Goods and Service Tax
CGST – Central Goods and Service Tax
IGST - Integrated Goods and Service Tax
ITC - Input Tax Credit
GST Council – Goods and Service Tax Council
GSTN-SPV - Goods and Service Tax Network – Special Purpose Vehicle
18