“GST BILL” -THE CONSTITUTION
(122ND Amendment Bill),2014
19.12.2014
Goods & Service Tax
WEF : 1st April 2016
BY AJAY MODI
Bharuch, Gujarat
ajaymodi15@yahoo.in
World Bank report “The Doing business 2014”,
India’s Rank 134 among 189 country
140 country in a world has adopted the GST
MAKE IN INDIA
TAX IN INDIA
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Pre condition for GST implementation
 Constitution amendment Bill is required to be passed
with two-thirds majority in both Houses of Parliament
 Bill will have to be ratified by at least half of India's
states





Centre Govt. own GST Bill and model GST Bill
States will bring their own GST Bills
Model GST Rules
State GST Rules
Place of Supply of Goods and Services Rules
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Constitution amendment requirement



Lok Sabha 2/3 majority
Rajya Sabha 2/3 majority
out of 29 state 15 state should
ready for GST
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Parliament
House
LOK
SABHA
RAJYA
SABHA
Total
NDA Seat
336
59
395
Total seat
543
243
786
Require Seat for
majority
282
122
393
Simple
majority
In India, if a bill has been rejected by any house of the
parliament and more than six months have lapsed, the
President may summon a joint session for passing the bill.
The bill is passed by simple majority of a joint sitting.
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NDA Ruling state
Sr.
State
Party
1
Gujarat
BJP
2
Maharashtra
BJP+SHIV SENA
3
Goa
BJP
4
Rajasthan
BJP
5
Madhya Pradesh
BJP
6
Chhattisgarh
BJP
7
Punjab
Shiromani Akali Dal
8
Nagaland
Nagaland People's Front
9
Andhra Pradesh
Telugu Desam Party
10
Haryana
BJP
11
Jharkhand
BJP
12
Jammu & Kashmir
????
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Non-NDA Ruling state
Sr.
State
Party
1
Arunachal Pradesh
2
Assam
3
Bihar
4
Himachal Pradesh
5
Karnataka
6
Kerala
7
Manipur
8
Meghalaya
9
Mizoram
10
Orissa
11
Sikkim
12
Tamil Nadu
13
Telangana
14
Tripura
15
Uttar Pradesh
16
Uttarakhand
17
West Bengal
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What is GST




The term 'GST' is defined in Article 366 (12A) to
mean
"any tax on supply of goods or services or both
except taxes on supply of the alcoholic liquor for
human consumption'.
It may be noted that the term 'supply' is not defined
or elaborated or qualified (such as supply for a
consideration). Thus, it needs to be seen whether
even free supply will attract GST.
'manufacture', 'sale', 'provision of services‘, stock
transfer, works contract, lease, loan licensee, job
work, labour bill, Import, Depot, warehouse, C & F
Agent etc. will lose their relevance.
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Taxable Event







Tax on supply of goods or services
Any person, providing or supplying goods
services would be liable to charge GST
GST is a consumption based levy, Place
consumption rules
Dual GST signifies that GST would be levied
both, the Central Government and the State,
supply of goods or services
levy GST across the value chain
or
of
by
on
No C form, E-I, E-II, H form, I form, Road
permit, form 402, 403 form
No Check post role
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Types of GST & Administration
Sr.
Types
Admin by whom
1
CGST
Central Government - CBEC
2
SGST
State Government
3
IGST
Central Government – CBEC
(inter state transaction)
4
BCD+IGST
Central Government – CBEC
(Import transaction)
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Taxpayer Identification Number



Each taxpayer could be allotted a PAN linked
taxpayer identification number with a total of
13/15 digits.
This would bring the GST PAN-linked system in
line with the prevailing PAN-based system
for Income tax facilitating data exchange and
taxpayer compliance.
The exact design would be worked out in
consultation with the Income-Tax Department.
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Person based SGST Single entity

for the purpose of SGST ,all production units /
branches of a person located anywhere within
the state will be treated as a single taxable
entity eligible for SGST input credit across units/
branches in that state.
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PAN based CGST Single entity


The unit of taxation for the purpose of GST should
be persons as defined under the Income Tax
ACT.
For the purpose of CGST, all production units/
branches of a person located anywhere in the
country will be treated as a single taxable
entity eligible for CGST input credit across units
/branches.
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Assessment, Enforcement,
Scrutiny and Audit



would be undertaken by the authority which is
collecting the tax, with information sharing between
the Centre and the States
Both the State and Centre may also adjudicate
jointly to avoid conflicting decisions.
The assessee dealer would be required to pay GST
into the specified account of the State/ Centre and
file periodic returns separately with the State/
Central Government.
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Rates of GST
Sr.
Types
For
1
Zero rate
Export goods & service
2
Revenue-Neutral Rate
(RNR)
12% Industrial item
(5% CGST and 7% SGST)
3
Standard rate
20% for all other goods
4
concessional rate
10% Necessities and goods of
basic importance
5
Special rate
1% Bullion & jewellery
6
Exempted/ nil rated
0% for 91 items
7
1% IGST non vatable
A 1% origin based tax to offset
the CST loss would be collected
by the Union retained by the
States. This tax would not be
vattable.
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GST on services



The principles of Place of Provision of
Services would be adapted from the place
of supply rules.
The States would be eligible for the SGST
part of services consumed within the State
which would be an additional revenue for
the State
The States are expected to enjoy at least
Rs.150,000/- Crores of revenue depending
on the intra state consumption of services.
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Credit



The person supplying the goods or services is
allowed to take credit for taxes paid on supply of
goods or services, consequent to which, GST
becomes a tax on the value added at the next
stage by the dealer
GST would be levied on supply of goods and services
and the supplier would be allowed credit for the
GST paid on purchases.
Exclusion of alcohol sector could mean that the
companies manufacturing alcohol may not be in a
position to avail credit of GST paid by them on their
procurements.
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Classification

The Classification under customs
which is based on the harmonised
System of Nomenclature would be
adopted under GST.
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Credit available
Type of purchase
GST incidence on
purchase (taxes
payable)
Credit entitled on
(with respect to
taxes paid)
Local
Interstate
Imported
CGST
SGST
IGST
BCD
IGST
CGST
SGST
IGST
IGST
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Credit Cross utilisation
Nature of tax paid on purchase
Can be utilized for payment of
CGST
CGST
IGST
SGST
IGST
SGST
IGST
CGST
SGST
IGST
 The credit would be seamless except that the credit
of CGST paid would not be allowed for set-off against
SGST payable and vice versa.
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GST Cr./Dr. Example
SEZ
GS
OGS
SEZ
GS
OGS
PARTICULARS
sales 50000000
10% 5000000
70% 35000000
20% 10000000
Purchase
GS
OGS
GST PAYMENT
0%
0
CGST
12% 4200000
SGST
12% 4200000
IGST
24% 2400000
10800000
CGST
SGST
70%
28000000
7000000
GST CREDIT
CGST
12% 3360000
SGST
12% 3360000
GS
OGS
CREDIT
35000000
80%
20%
IGST
IGST
24% 1680000
1%
70000
8470000
DEBIT
IGST
CGST
SGST
BALANCE
IGST
CGST
SGST
IGST
GS Purchase
3360000 3360000
3360000 3360000
OGS Purchase
1680000
1680000
GS sales
4200000 4200000
OGS sales
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2400000
-840000 -840000 -720000
Valuation

It is expected that GST would be
levied on the transaction value
i.e. price actually paid or payable
for supply of goods and services.
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GST Benefit
Common market for the entire country
2% increase in GDP (Gross Domestic Product)
Online procedure, simplification in tax compliance
Reduction in tax evasion, litigation
GST rates will be uniform across the country
One tax rate in one nation theory, 12-16% tax
No distinction between raw materials and capital goods
all the credit of taxes paid on purchase of inputs, input
services and capital goods
Advanced version of VAT
GST would be drawn form the best practices
internationally
End of "inspector raj" as well as "tax on tax
It will be single most tax reform after 1947
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Dis-advantages of GST
 Loss to Manufacturing state

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
Profit to consumer state
Market loss to un-organised sector 12-16% tax
States not willing to give Veto to Union
Adoption of huge capacity IT to improve efficiency
and credit states for input credit utilised as taxes
collected would be on account of destination state.
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CGST - 12%
Present Duty or Tax
Percentage
Central Excise Duty
12%
Education Cess
2% of ED
SHE cess
1% of ED
Service Tax
12%
Education Cess
2% of ST
SHE cess
1% of ST
Additional Customs Duty (CVD) (on
Import)
12%
Special Additional Duty of Customs (SAD) 4%
(on Import)
State Excise Duty
Central Surcharges and Cesses
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14%
SGST - 12%
Present Duty or Tax
Percentage (Gujarat)
VAT
5% On Industrial Item
15% on other item
CST
2% against C form
5 or 15% without C form
Entry Tax
12% Motor Vehicles, Marble or Granite
8% Cement, Light Diesel Oil
6% Kota Stones
16% Naphtha
21.6% High Speed Diesel Oil
Purchase Tax
4% for BT, Fuel use
Octroi, LBT
1 or 2%
Luxury Tax
Entertainment Tax
(other than the tax levied by the local bodies)
Stamp Duty
3.5 %
Electricity duty
Taxes on lottery, betting and
gambling, State cesses and
surcharges
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IGST – Integrated GST



CGST + SGST = IGST
12
+ 12
= 24%
1% extra for 2 year
 IGST which would be CGST plus SGST on all inter-State
transactions of taxable goods and services.
 Inter-State seller would pay the IGST on value addition
after adjusting credit of IGST, CGST and SGST on purchases.
 The supplier state would transfer to the Centre the
credit of SGST used on payment of IGST.
The success of a good GST would depend heavily on
the success of the
IGST model.
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How GST works
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Transaction within state
Basic value charged for supply of goods or
services
Add: CGST @ 10%*
Add: SGST @ 10%*
Total price charged for local supply of goods or
services
10,000
1,000
1,000
12,000
Note: In the above illustration, the rate of CGST and SGST is
assumed to be 10% each
The GST for local supplies would be split into SGST and CGST.
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Supply from One State to Another
Basic value charged for supply of goods or
10,000
services
Add: IGST @ 20%*
2,000
Total price charged for interstate supply of goods
12,000
or services
Note: In the above example, the rate of IGST is assumed to be
20%
IGST revenue would get distributed to the States
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Export
Basic value charged for supply of goods or
10,000
services
Add: GST
Nil
Total price charged for export of goods or
10,000
services
 In case the supply of goods or services are exported
out of India i.e. the place of consumption rules provide
that regard the transaction as ‘exported’, then the
transaction would be zero rate
 The supplier would be allowed to export the goods or
services without charging any tax
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Import
Basic value charged for supply of goods or
10,000
services
Add: BCD @ 10%
1000
Add: IGST @ 24%
2400
Total price charged for import of goods or
13,400
services
 In case the supply of goods or services are exported
out of India i.e. the place of consumption rules provide
that regard the transaction as ‘exported’, then the
transaction would be zero rate
 The supplier would be allowed to export the goods or
services without charging any tax
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Out from GST

(a) petroleum crude;
(b) high speed diesel;
(c) motor spirit (commonly known as petrol);
(d) natural gas;
(e) aviation turbine fuel; and
(f) tobacco and tobacco products.";

Alcoholic liquor for human consumption






Petroleum goods will be part of the GST but they will be
levied at zero rate, implying that the states will continue
to levy VAT while Centre will levy excise duty in the initial
few years.
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Exemption Limit

Uniform State GST threshold of
INR 25 Lakhs for both goods and
services
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Composition scheme



Both the Centre and States are of the same view
that there should be a Compounding Scheme for the
purpose of GST with an upper ceiling on gross
annual turnover and a floor rate with respect to
gross annual turnover.
50 lakh of gross annual turnover
floor rate of 0.5% across the states.
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Definition of “Services”
“Services” defined by proposed new clause
(26A) to be inserted into Article 366
“Services” means anything other than
goods
The definition of services being other than
goods raises the concern of whether it
would also cover Immovable property
transactions.
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GST Council





All decisions in the Council will require 75 per cent
votes.
joint forum of the Centre and the States
Chairmanship of the Union Finance Minister
Ministers in charge of Finance/Taxation or Minister
nominated by each of the States & UTs with
Legislatures, as members
Council will make recommendations to the Union
and the States on important issues like tax rates,
exemptions, threshold limits, dispute resolution
modalities etc.
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Compensation to States




some States who are consumer like Kerala would
immensely benefit by GST
GST most well to do manufacturing States like
Gujarat, Maharashtra, Haryana, Tamil Nadu &
Karnataka
others would get a share of the services
consumed in the State which is a much bigger
proposition (service sector = 59% of GDP)
They would also get a share of the Rs125,000/- of
Additional Customs Duty as well as the Special
Additional Duty] on imports.
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Compensation agreement
Year
% of loss
1
100
2
100
3
100
4
75
5
50
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Comparison
Local sales : Industrial Item
Particulars
Present
Basic value
Excise duty @12.36%
VAT @ 5% / GST 12%
Total Bill
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GST
1000
1000
123.6
0
1123.6
1000
56.18
120
1179.78
1120
Comparison
Inter State Sales : Industrial Item
Particulars
Present
Basic value
Excise duty @12.36%
CST 2% / GST 12%
Total Bill
Credit
Net cost
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GST
1000
1000
123.6
0
1123.6
1000
22.5
120
1146.1
1120
123.6
120
1022.5
1000
Comparison
Local sales : Non Industrial Item
Particulars
Present
Basic value
Excise duty @12.36%
VAT @ 15% / GST 24%
Total Bill
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GST
1000
1000
123.6
0
1123.6
1000
168.54
240
1292.14
1240
Comparison : Import
Particulars
Present
Basic value
GST
1000
1000
100
100
1100
0
132
0
1232
0
6.96
0
1238.96
0
SAD 4%
49.56
0
Total Bill
1288.52
0
0.00
240
1288.52
1340.00
181.56
240
1106.96
1100.00
BCD @ 10%
CVD @ 12%
Ecess+SHE Cess
VAT / CST 0 % , IGST 24%
Total Bill
Credit of Tax
Net cost
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Comparison : Works contract
Particulars
Basic value
Labour 30%
Material 70%
ST on labour @ 12.36%
VAT on material @15%
GST @ 24%
Total Bill
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Present
100000
30000
70000
3708
10500
14208
114208
GST
100000
24000
124000
Comparison : Import service / inter state service
Particulars
Basic value
ST on labour @ 12.36%
IGST @ 24%
Total Bill
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Present
100000
12360
112360
GST
100000
24000
124000
Comparison : Service within state
Particulars
Basic value
ST on labour @ 12.36%
CGST @ 12%
SGST @ 12%
Total Bill
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Present
100000
12360
112360
GST
100000
12000
12000
124000
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