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GST – Why?
Legal Requirements for proposed GST
Features of GST Model
Procedural Aspects
Current State of Play
Issues under Discussions
Impact on Industry
Areas where Industry can contribute
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Reduce barriers of inter-state trade & create a
Common National Market
Redress the imbalance in taxation between
manufacturing & the service sector
Private Investment choices should be influenced by
economic considerations and not by tax rates or tax
exemptions
Reduce multiplicity of taxes and ensure transparency
Reduce the incidence of taxation by expanding the
taxable base
Mitigation of cascading / double taxation
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Constitutional amendment to enable
 the Centre to levy & collect CGST
manufacturing stage
 the States to levy & collect SGST on Services
Model legislation for CGST, IGST & SGST
Rules to be drafted for Place of Supply Rules
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to determine location of supply of goods or services
 to determine whether supply is intra-state or inter-state
Rules to be drafted for laying down procedures for the
administration of CGST, IGST & SGST
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specific measures to be made for Dispute Resolution &
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Advance Ruling
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Destination based taxation
Dual GST Model
 Central GST (CGST) & State GST (SGST) on intra-state supplies
 Integrated GST (IGST) on inter-state supplies
 Integrated GST (IGST) on imports
 Additional Tax not exceeding 1% on inter-state supplies of
goods alone
Taxation on a common base
Common taxable event - Supply of goods or services or both for
a consideration
Export of goods or services – Zero rated
Common list of exempted goods or services
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Optional Threshold exemption for both components of GST
Optional Compounding scheme for taxpayers having taxable
turnover up to a certain threshold above the exemption
All goods or services likely to be covered under GST except:
Alcohol for human consumption - State Excise plus VAT
 Electricity - Electricity Duty
 Real Estate - Stamp Duty plus Property Taxes
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Petroleum Products – to be brought under GST from a later
date on recommendation of GST Council
Tobacco products – under GST plus Central Excise
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Three tier GST Rate structure –
 Merit rate for essential goods
 Standard rate for goods and services in general
 Special rate for precious metals
Floor rate with a small band of rates for standard rated goods or
services for CGST & SGST
HSN based classification of goods
Service Tax Accounting based classification of services
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Centre’s Taxes proposed to be subsumed- in the nature of
indirect taxes on supply of goods or services
 Central Excise Duty
 Additional Excise Duty
 Excise Duty levied under the Medicinal & Toiletries
Preparation Act
 Service Tax
 Additional Customs Duty commonly known as
Countervailing Duty (CVD)
 Special Additional Duty of Customs (SAD)
 Surcharges & Cesses
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State Taxes proposed to be subsumed- in the nature of
indirect taxes on supply of goods or services
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State VAT / Sales Tax
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Central Sales Tax
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Purchase Tax
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Entertainment Tax (not levied by the local bodies)
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Luxury Tax
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Entry Tax (All forms)
 Taxes on lottery, betting & gambling
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Surcharges & Cesses
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Tax payments by supplying dealers in their own State
Availability of seamless credit to buying dealers
Utilization of Input Tax Credit by buying dealers
 CGST credit for paying CGST & IGST in that order
 SGST credit for paying SGST & IGST in that order
 IGST credit for paying IGST, CGST & SGST in that order
 No credit of Additional Tax
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Credit of SGST used for payment of IGST – to be
transferred by Exporting State to the Centre
Credit of IGST used for payment of SGST – to be
transferred by Centre to Importing State
Inter-Governmental Transfers to take place at the end
of Tax Period based on the Return filed by the taxpayer
 Fund settlement a matter between Centre & States
 No role of taxpayer in inter-governmental fund settlement
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Central Government to act as a clearing house and
transfer the funds across States
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Uniform State wise e-Registration
Common e-Return for CGST, SGST, IGST & Additional
Tax
Common periodicity of Returns for a class of dealers
Uniform cut-off date for filing of Returns
Mandatory reporting of supply & purchase invoice
details prior to or along with filing of e-Return
System based verification of returns on monthly basis
System based validations of ITC availed, utilized & Tax
payments
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Single challan for all four type of tax payments
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Constitution Amendment Bill passed in Lok Sabha
 Pending with Select Committee of Rajya Sabha
GST Council to be constituted after enactment of
Constitution Amendment Bill
Reports under approvals:
 Place of Supply Rules
 IGST Model
 Business processes relating to Registration,
Refunds, Return & Payments
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Model GST Law being drafted:
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Authorizing the Central & State Governments to levy
GST on intra-state supplies (CGST & SGST)
Authorizing the Central Government to levy GST on
inter-state supplies (IGST)
Levy of GST on imports
GSTN already incorporated as a Section 25 company in
March 2013
GSTN already received bids for establishing IT
framework
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Rates of CGST, IGST & SGST
Threshold limits of exemptions & compounding
List of exempted goods & services
Transitional provisions for treatment of accumulated CENVAT
credit
Dispute Resolution Mechanism
Centre-State mechanism for deciding on future changes in rates &
changes in the exemption list for goods and services
Distribution of responsibility between the Centre & State in
implementing the three pillars of the compliance verification system
– Return Scrutiny, Audit & Anti-evasion
Treatment of existing area based exemptions
Treatment of current exemptions
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Operational
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Procurement
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Inter-state procurement of goods & services – location no longer a
constraint due to credit eligibility
Inter-state vs. Intra-state GST – no longer impact the sourcing
decision
Manufacturing
 Multiple small size plants vs. mega plants
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Decision based on impact on logistics cost vs. manufacturing cost
Relocation of plants based on overall costs & service levels
Costing
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Impact on cost of input /service - rate change, full creditability and/or
withdrawal of exemptions
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Operational
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Distribution
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Warehouse need not be State specific
One warehouse can supply to more than one state & one state
market can actually be serviced by more than one warehouse
Location of warehouse may get decided by the center of gravity of
demand cutting across many states
Size of warehouse would be more determined by the market
opportunities proximate to the warehouse location
Distribution network to align with market demand & competitive
advantage
Warehousing may need relook
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Operational
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Pricing
 Impact on overall pricing of the goods & services – factoring
of GST credits
Supply Chain
 Impact on cost of operations
o Compression of the supply chain
o Disintermediation
o Unfettered credit throughout the supply chain
o Uniformity in Sourcing Decisions – Centralization
Tax Challenges
 Place of Supply Rules; Transition stock; Negative list; saving
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clauses, etc.
Financial
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Working Capital / Cash Flow – likely increase
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Higher tax outgo on procurement of goods & services
Shift in taxable event from manufacture to supply
Shift in point of tax collection
Replacement of exemption by refund schemes
Taxability of branch transfers/inter office supplies/captive consumption
Input credits
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Availability of accumulated credits on transition to GST
Continuity of ISD concept
Amplified credit availability
Credits for mixed supplies
Credits on goods from excluded sectors
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Infrastructural
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Redesign IT systems
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Training / Communication
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Accounting
Change in formats of invoices, reports, returns, etc.
Redefining the logic & updating the masters
Staff training on compliance requirement
Realigning with procurement & distribution partners
Regular communication with stake holders
Compliance requirement
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Registration
Tax payments
Statutory declarations and Returns
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Tax Management
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GST would lead to de-centralization of indirect tax function
Focus on strategy, processes & technology to manage
indirect taxes
Greater stake in accurate reporting due to significant input
tax credits as compared to the present scenario
Tax administration to use IT enabled platform & processes,
e.g. tax data warehouse, online tracking of inter-state
movements, information exchange etc.
Need to re-design & re-engineer the tax function
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Treatment of procurement of goods & services for exports
Treatment of royalty/license fee in valuation of imported
goods under GST regime
Valuation in case of stock transfers
Treatment of deemed sale (i.e. lease, works-contract, etc.)
Classification of goods & services
Manner of exemptions for backward areas
Place of Supply Rules
Transitional issues
Dispute resolution mechanism
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THANK YOU