Goods & Service Tax
Discussion on Challenges & Synergies
August, 2010
Contents

Present taxation system of India

What is Goods and Service Tax (“GST”) – An Introduction

Silent features on “First Discussion Paper on GST”

Broad propositions – Not covered and clear

Broad propositions - Reasonable clear

Challenges before Industry/Service Sector

Proactive actions – Requirement

Areas - Tax Synergy
By CA. Vinay Bhushan
Present Taxation System in India
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Multistage taxation on manufacture and distribution channels
Sectors specific taxes like Entertainment Tax, Luxury Tax, Textile Cess etc.
Difference types of Cesses like Education Cess, Secondary & Higher
Education Cess etc.
Tax on value additions i.e. Value Added Tax
Tax on Inter State transaction i.e. Central Sales Tax
By CA. Vinay Bhushan
Manufacture Sector - Multiple Taxes
Central Excise
Duty {8%}
Value Added
Tax { 0%, 4%, 12.5%}
Central Sales
Tax {2%}
Manufacturing
Sector
Educations Cesses
{3%}
R & D Cess
{5%}
Other local taxes like Entry Tax, Octroi, State Cesses etc. are also applicable
By CA. Vinay Bhushan
Service Sector - Multiple Taxes
Education Cess {2%}
Service
Sector
Service Tax {10%}
Secondary & Higher
Education Cess {1%}
By CA. Vinay Bhushan
Silent features of the Discussion Paper on GST

GST shall have two components
(1)
levied by Central Government (Central GST)
(2)
levied by State Government (State GST)

GST Will be governed by multiple statutes

Cross utilization of Input Tax Credit (ITC) between Central GST & State
GST would not be allowed

Periodical returns need to be filed with Central and State authorities
separately, tax will be deposited through separate account heads

PAN- linked taxpayer identification number will be issued
By CA. Vinay Bhushan
Silent features of the Discussion Paper on GST

Threshold Limit:State GST for Goods & Services
 Central GST for Goods
 Central GST for Services


INR 1.00 Million
INR 15.00 Million
Not provided (however it is conveyed
that it will be appropriately high)
Compounding / Composition Limit:
Composition/compounding limit
INR 5.00 Million with tax at the
rate of 0.5 %
By CA. Vinay Bhushan
CENVAT CREDIT MECHANISM UNDER PRESENT TAXATION
AND PROPOSED GST
Present Taxation Scheme
-
Cross credit of good and service tax
is allowed since September 10, 2004;
But limited to Central Excise &
Services Tax
-
Cross credit among VAT and
Service Tax, Central Excise is not
allowed
-
Credit on inter- State transactions is
not allowed;
-
Cross Credit of VAT with CST
liability is allowed
Proposed GST
-
Cross credit of good and Services
would be allowed
-
Cross credit with respect to Central
GST and State GST transaction
would not be allowed
By CA. Vinay Bhushan
TAXES WHICH WOULD BE SUBSUMED UNDER THE PROPOSED
GST
State Taxes
Central Taxes
-
-
Central Excise Duty
Additional Excise Duty
Service Tax
Additional Customs Duty (CVD)
Special Additional Duty of
Customs (SAD)
Surcharges and Cesses
-
VAT /Sales Tax
Entertainment Tax
Luxury Tax
Tax on Lottery, betting &
Gambling
State Cesses and Surcharges
Entry Tax
GST
CGST
IGST
By CA. Vinay Bhushan
SGST
Broad Propositions- Not Covered and not Clear
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GST rates are not disclosed
Valuation mechanism of Goods and Services
Place of provision of Services or place of receipt in case of services are not
clear
Taxable event- whether on receipt basis or on receivable basis
No discussion on Stamp duty on Immovable property
By CA. Vinay Bhushan
Broad propositions - Reasonable clear
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Cross Credit among the CGST & SGST- Not allowed
Three type of taxes- CGST, SGT & IGST
No change for Liquor, Petroleum Industry
By CA. Vinay Bhushan
Challenges & Proactive Actions before Industry/Service
Sector
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Business Restructuring:

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Phasing out of CST
Change in tax rates of goods and services
Logistics, Transaction model etc.
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Location Based Exemptions
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Export Obligations
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Change in ERP Systems
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Training of Middle Management Team
By CA. Vinay Bhushan
Areas - Tax Synergy
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Analysis of Tax rates Vs. Pricing Policy, Business Cycle
Warehouse/logistic Vs. Direct Supply
Stock Planning
Backward & Forward integration of business if there is change in tax rates of
Inputs or output
By CA. Vinay Bhushan
How Tax Managers/Consultants can add value
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Mapping of current transactions
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Mapping of flow of good and services
Ascertain current tax cost
Impact Analysis and what if analysis
Assessment of impact of GST on draft legislation
 Key structuring/changes in business operations
 Identify possible alternative business model
 Potential actions to mitigate adverse GST effect (if any)
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Final Impact Analysis
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Implementation Assistance
By CA. Vinay Bhushan
How Tax Managers/Consultants can add value

Implementation Assistance
Transition Stock Planning
 Registration under new legislation/s
 Maintenance of records as per new formats
 Manner of computation of Credit and tax liability
 Invoice Formats
 Changes in ERP/accounting system
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By CA. Vinay Bhushan
THANK YOU
By CA. Vinay Bhushan