A BRIEF ON GST BILL
Historical background
GST was first recommended by Kelkar Task Force on implementation of Fiscal
Reforms and Budget Management Act 2004 but the First Discussion Paper on
Goods and Services Tax in India was presented by the Empowered Committee of
State Finance Ministers dtd.10th Nov.10th, 2009.
In 2011, the Constitution (115th Amendment) Bill, 2011 was introduced in
Parliament to enable the levy of GST. However, the Bill lapsed with the dissolution
of the 15th Lok Sabha.
Subsequently, in December 2014, the Constitution (122nd Amendment) Bill, 2014
was introduced in Lok Sabha. The Bill was passed by Lok Sabha in May 2015 and
referred to a Select Committee of Rajya Sabha for examination.
Definition

“GST is a tax on goods and services with value
addition at each stage having comprehensive
and continuous chain of set of benefits from
the producer’s / service provider’s point up to
the retailers level where only the final
consumer should bear the tax.”
OBJECTIVE

One Country - One Tax

Consumption based tax instead of Manufacturing

Uniform registration, payment and Input Credit

To eliminate the cascading effect of Indirect taxes on single transaction

Subsume all indirect taxes at Centre and State Level under

Reduce tax evasion and corruption

Increase productivity

Increase Tax to GDP Ratio and revenue surplus

Increase Compliance

Reducing economic distortions
Regulatory Framework

A new set up by Government of India named as ‘GST Council’.

The GST Council consists of
(a)
the Union Finance Minister (as Chairman),
(b)
(b) the Union Minister of State in charge of Revenue or Finance, and
(c)
(c) the Minister in charge of Finance or Taxation or any other Minister,
nominated by each state government.
All decisions of the GST Council will be made by three fourth majority of the
votes cast; the centre shall have one-third of the votes cast, and the states
together shall have two-third of the votes cast.
Action Plan of GST Council

List number of Taxes, cesses, and surcharges to be subsumed under GST

Preparation of list of goods and services subject to, or exempt from GST

Determination of threshold limit of turnover for application of GST

Fixation of rates

Preparation of model GST Laws, principles of levy, apportionment of tax
benefits

Firming up Place of supply Rules

Recommend on Compensation to states losing on revenue post
implementation of GST, subject to maximum time limit of 5 years.
SCOPE OF GST

All goods and services are covered under GST Regime except Alcoholic liquor
for Human Consumption,

Tobacco Products subject to levy of GST and Centre may also levy excise duty

GST Council yet to decide the incidence and levy of GST on following;
a)
Crude Petroleum
b)
High Speed Diesel (HSD)
c)
Motor Spirit (Petrol)
d)
Natural Gas
e)
Aviation Turbine Fuel
Key changes between the current Tax Structure and
proposed GST Regime
SL.
Particulars
Current Scenario
GST Scenario
1)
Structural
Difference
a) Central Taxes:-Central
Excise/Custom Duty,
Central Sales Tax on
Goods and Service Tax
charged on Services,
Surcharge & Cess
b) State Taxes-State Vat,
Sales Tax Deducted at
Source, WCT, Luxury
Tax, Entertainment Tax,
Tax on Lottery,
Surcharge & Cess
A dual layered tax system
with both Central and State
GST levied on same base on
all the goods and services
except Petroleum ,High
Speed Diesel, Motor spirit
and Natural Gas to be
brought at a later date,
subject to recommendation
of GST Council.
2)
Basis of Levy
Taxable at the place of
a) Manufacture/Sale of
goods,
b) Rendering of services
Taxable at the place of
Consumption, a destination
based tax
SL.
Particulars
Current Scenario
GST Scenario
3)
Registration
Decentralised registration
under Central and State
Authorities
Uniform E-Registration
process based on PAN of
Entity
4)
Procedures for
Collection of
Tax and Filing
of Returns
Central Excise and Service
Tax-Uniform,
VAT-Varies from State to
State and
Uniform process and
common dates for
collection/deposit of tax and
filing of returns
5)
Validation and
of Challan/
Returns,
Input Credit
and Payment of
Tax
Part validation by system,
full verification subject to
assessments by relevant
Central/State authorities
System based validation and
consistency checks on Input
Credit availed, utilisation
and Tax Payments
SL.
Particulars
Current Scenario
GST Scenario
5)
Excise Duty
Excise Duty charged up to
the point of Manufacturing
Replaced by CGST (Central
Goods and Service Tax, to be
charged up to Retail Level
6)
Basic Customs
Duty
In case of Import, taxed by
Centre under separate act
No Change
7)
Countervailing
Duty/Special
Additional Duty
In case of Import, taxed by
Centre, separately
To be subsumed under GST
(CGST)
8)
Service Tax
Charged by Centre on list of
Services under Finance Act
on Payment/Provision Basis
To be subsumed under SGST
(State Goods and Service
Tax), based upon Place of
Supply Rules
SL.
Particulars
Current Scenario
GST Scenario
9)
Central Sales
Tax (CST)
Applicable at concessional
rate of 2% on inter-state
transfers against C-Forms,
otherwise full rate i.e. 5%
to 14.5%
To be subsumed in IGST
(Integrated Goods and
Service Tax)
10)
State VAT
Except exempt items, all
goods are taxed
Subsumed in SGST (State
Goods and Service Tax)
11)
Entry Tax
Currently being charged by
selected states for
interstate transfers, held as
import in local area
No entry tax, Additional 1%
of Tax to be levied on interstate supply of selected
goods, list yet to be finalised
12)
Tax on Export
of Goods and
Services
Exempt/Zero rated
No Change
SL.
Particulars
Current Scenario
13)
Tax on Inter
Exempt against Form F
State Transfer
of Goods to
Branch or Agent
To be taxable but full credit
available to dealers
14)
Tax on Transfer Generally Exempt; Depends
of Goods to
Upon State Procedures
Branch or Agent
within State
Might Be taxable , Unless TIN
of Transferor and Transferee
is same
15)
Cascading
Effect
Credit available on the full
amount of taxes up to
retailer
16)
Cross Set-Off of Currently set-off of Excise
Levy
duty and Service tax is
allowed
Credit between Excise Duty
& Service Tax available, but
no set-off against VAT on
Excise Duty
GST Scenario
No cross Set-off between
CGST and SGST
SL.
Particulars
Current Scenario
GST Scenario
17)
Cascading
Effect
Credit between Excise Duty
& Service Tax available, but
no set-off against VAT on
Excise Duty
Credit available on the full
amount of taxes up to
retailer
18)
Disallowance of
Credit on
selected items
There are certain nonNo such disallowance, unless
creditable goods and services specified by GST Council
under both VAT & CENVAT
Rules
19)
Disallowance of Not Allowed
inputs/input
services used in
Exempted
Goods /Services
No such disallowance, unless
falling under the Negative
List which is yet to be
finalised by GST Council
SL.
Particulars
Current Scenario
GST Scenario
20)
Exemptions –
Excise Free
Zone, VAT
Remissions
Some areas enjoy status of
Excise/Vat Exemptions i.e.
North East, Himachal
No such Exemptions,
Investment Refund Scheme
(IRS) may be introduced for
existing zones based upon
recommendations of GST
Council
21)
Levy of Tax on
Government
Bodies, NGOs
Certain Govt. bodies, PSUs
and Non-for-profit bodies
covered
Not Changed
22)
Threshold
Limits for levy
of Tax
a) Central Excise-1.5 Crores
b) VAT-Varies from Rs. 5 to
20 Lacs from state to
state
c) Service Tax- Rs.10 Lacs
CGST-Limits to be decided
SGST-Rs.10 Lacs to 20 Lacs as
recommended by GST
Council
SL.
Particulars
Current Scenario
GST Scenario
23)
Exemptions –
Excise Free
Zone, VAT
Remissions
Some areas enjoy status of
Excise/Vat Exemptions i.e.
North East, Himachal
No such Exemptions,
Investment Refund Scheme
(IRS) may be introduced for
existing zones based upon
recommendations of GST
Council
24)
Levy of Tax on
Government
Bodies, NGOs
Certain Govt. bodies, PSUs
and Non-for-profit bodies
covered
Not Changed
25)
Threshold
Limits for levy
of Tax
a) Central Excise-1.5 Crores
b) VAT-Varies from Rs. 5 to
20 Lacs from state to
state
c) Service Tax- Rs.10 Lacs
CGST-Limits to be decided
SGST-Rs.10 Lacs to 20 Lacs as
recommended by GST Council
Tax layers under proposed GST Model
It is a Dual-GST structure proposal wherein the Central Government and State
Government will simultaneously charge GST on the same economic supply
Inter-state transactions or supplies to be charged an Integrated GST (IGST) which is a
combination of Central-GST (CGST) and State-GST (SGST) rates
Unique input tax credit mechanism; as illustrated below:
CGST Credits
SGST Credits of State A
IGST Credits
CGST Liability
SGST Liability of State A
IGST Liability OR
CGST Liability OR
SGST Liability of State A
Comparative Analysis (Intra-State Trade)
(Assumed Rates for Excise Duty, CGST & SGST @12%, VAT @12.5%)
Transaction
Current Scenario
(Amt. in Rs.)
GST Scenario
(Amt. in Rs.)
Cost of Raw Materials to Input Manufacturer
Profit Margin @ 25%
Assessable Value
Add: Excise Duty @12% I CGST @ 12%
Add: VAT@12.5% I SGST@12%
Invoice Value (Input Manufacturer to Output Manufacturer)
Cost of Goods to Output Manufacturer (Net of ITC)
Add: Value Addition @ 40% on Cost (incl. of Profit Margin)
Assessable Value (Manufacturer to Wholesaler)
Add: Excise Duty @12% I CGST @ 12%
Add: VAT@12.5% I SGST@12%
Invoice Value (Manufacturer to Wholesaler)
Cost of Goods to Wholesaler (Net of ITC)
Add: Profit Margin of Wholesaler @10%
Add: Excise Duty @12% I CGST @ 12%
Add: VAT@12.5% I SGST@12%
100
25
125
15
18
158
100
40
140
16.80
19.60
176.40
156.80
15.68
0.00
100
25
125
15
15
155
100
40
140
16.80
16.80
173.60
140.00
14.00
18.48
21.56
Invoice Value (Wholesaler to Retailer)
194.04
Cost of Goods to Retailer (Net of ITC)
172.48
Add: Profit Margin of Retailer @10%
17.25
Add: Excise Duty @12% I CGST @ 12%
0.00
Add: VAT@12.5% I SGST@12%
23.72
Final Price to be paid by Consumer
213.44
Cost Saving to Consumer
18.48
190.96
154.00
15.40
20.33
20.33
210.06
3.39
Comparative Analysis (Inter-State Trade)
(Assumed Rates for Excise Duty, CGST & SGST @12%, CST @ 2% each)
Transaction
Current Scenario
(Amt. in Rs.)
Cost of Raw Materials to Input Manufacturer
90
Profit Margin Rs.10
10
Assessable Value
100
Add: Excise Duty @12% I CGST @ 12%
12
Add: Vat 12.5% I SGST@12%
14
Invoice Value (Input to Output Manufacturer)
126.00
Cost of Goods to Output Manufacturer (Net of ITC)
100
40
Add: Value Addition @ 40% on Cost (incl. of Profit Margin)
Assessable Value (Manufacturer to Wholesaler)
140
Add: Excise Duty @12% I CGST @ 12%
16.80
Add: CST@2% I IGST@24%
3.14
Add: Additional Tax @1%
0
Invoice Value (Manufacturer to Wholesaler)
159.94
Cost of Goods to Wholesaler (Net of Input Credit)
159.94
Add: Profit Margin of Retailer @10%
15.99
Add: Excise Duty @12% I CGST @ 12%
0
Add: VAT@12.5% I SGST@12%
21.99
Invoice Value (Wholesaler to Retailer)
181.93
Cost of Goods to Retailer (Net of Input Credit)
175.93
Add: Profit Margin of Retailer @10%
17.59
Add: Excise Duty @12% I CGST @ 12%
0
Add: VAT@12.5% I SGST@12%
24.19
Final Price to be paid by Consumer
217.71
Cost Saving to Consumer
GST Scenario
(Amt. in Rs.)
90
10
100
12
12
124
100
40
140
0
33.60
1.40
175.00
141.4
14.14
18.66
18.66
178.73
155.54
15.55
20.53
20.53
212.16
5.56
Transactions
between Input &
Output
Manufacturer within
State A
Transactions
between Output
Manufacturer from
State A to
Wholesaler in
State B
Transactions
between Wholesaler
and Retailer within
State B
Current Scenario - Tax Implications against Sales and Stock Transfers by an MNC
(Assumed Rates for Excise Duty @12%, VAT@12.5%, CST @ 2% each)
Particulars
Basis
Amt. (in Rs.)
A
B
1000000
900000
100000
C=A x 12%
D=A x 12.5%
E=B x 12%
F=B x 12%
108000
126000
12000
2240
G
H=G x 12%
I =G x 12.5%
15000
1800
2100
FG Stock Transfer to State -B (17000 Kgs. @ Rs.65 (TDR))
Excise Duty Payable @ 12%
VAT Payable @ 12.5% on Local Sales by Depot
Reversal of ITC of VAT (ITC x 3/12.5)
J
K=J x 12%
L=J x 12.5%
M= D x 3/12.5
1105000
132600
159375
30240
FG Inter-State Sales to State -C (2800 Kgs. @ Rs.75 )
Excise Duty Payable @ 12%
CST @ 2%
N
O=N x 12%
P=N x 2%
210000
25200
4704
Q=(H+K+O-C)
R=(I+L+M-D)
S=(P-F)
T=(Q+R+S)
39600
65715
2464
107779
Purchase of Raw & Packing Materials 20000 Kgs. @ Rs.50
18000 Kgs. (Intra-state)
2000 Kgs. (Inter-State)
Input Credit of Excise on Intra-State Purchase @ 12%
Input Credit of VAT on Intra-State Purchase @ 12.5%
Input Credit of Excise on Interstate Purchase @ 12%
Input Credit of CST on Inter-state Purchase 2%
FG sold within State-A (200 Kgs. @ Rs.75 )
Excise Duty Payable @ 12%
VAT Payable @ 12.5%
Net Excise Duty Payable after Cenvat Credit
Net VAT Payable after Vat Input Credit
Net CST Payable after CST Input Credit
Net Liability of Duties & Taxes
GST Scenario - Tax Implications against Sales and Stock Transfers by an MNC
(Assumed Rates for SGST & CGST @12%, IGST @ 24%, Add. Tax @ 1%)
Particulars
Purchase of Raw & Packing Materials 20000 Kgs. @ Rs.50
18000 Kgs. (Intra-state)
2000 Kgs. (Inter-State)
Input Credit of CGST on Intra-State Purchase @ 12%
Input Credit of SGST on Intra-State Purchase @ 12%
Input Credit of IGST on Inter-State Purchase@ 24%
Additional Tax @1% on Inter-State Purchase
Total Credit of GST Available to Unit-A
FG sold within State-A (200 Kgs. @ Rs.75 )
CGST Payable @ 12%
SGST Payable @ 12%
FG Stock Transfer to State -B (17000 Kgs. @ Rs.65 (TDR))
IGST Payable @ 24%
Additional Tax@1%
FG Inter-State Sales to State -C (2800 Kgs. @ Rs.75 )
IGST Payable @ 24%
Additional Tax@1%
Balance of CGST Input Credit to be adjusted against IGST Payable
Balance of SGST Input Credit to be adjusted against IGST Payable
Basis
Amt. (in Rs.)
A
B
C = A x 12%
D=A x 12%
E = B x 24%
F = B x 1%
G = (C+D+E)
1000000
900000
100000
108000
108000
24000
1000
240000
H
I=(H x 12%)
J=(H x 12%)
K
L =K x 24%
M= K x 1%
N
O=N x 24%
P=N x 1%
15000
1800
1800
1105000
265200
11050
210000
50400
2100
Q= C - I
R= D - J
106200
106200
S=(I+J+L+O-G)
T
U=S+T
Total of Duties and Taxes Payable
Savings in Net Tax Payable (1,07,779-93,350)
Net IGST Payable against Stock transfers and Interstate Trade
Non-Vatable Add. Tax to be retained by respective State Governments
79200
14150
93350
14,429
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