AN OVERVIEW OF GST

National Convention of CA Students

July 9, 2010
Vijayawada

By,
Srihari VK
EXISTING INDIRECT TAXES IN
INDIA
EXISTING INDIRECT TAXES IN INDIA
Legislations Activity Taxes

Customs Act, 1962 Import and Export • Basic Customs Duty (BCD)
C
E • Counterveiling Duty (CVD)
N Customs Tariff Act, 1975 Import and export • Special Additional Duty (SAD)
T
R Manufacture /
A Central Excuse Act, 1944 Production • Excise Duty
L Finance Act, 1994 Services • Service Tax
Central Sales Tax Act,
1956 Interstate Sales • Central Sales Tax

State VAT Laws Sales and purchases • VAT

S
T State Electricity Tax Sale of electricity • Electricity Cess
A
Import of goods to
T
Entry Tax Acts specified area • Entry Tax
E
Stamp Acts Sale of asset • Stamp duty
EXISTING INDIRECT TAXES IN INDIA
Customs Duty:
Suziki Japan BCD, CVD,SAD Outside
India

Manufacturing: Excise
Maruti
Duty India
Sales: VAT/CST

Show Room

Service provider
Sales: VAT/CST
Customer Service: Service Tax
EXISTING INDIRECT TAXES IN INDIA
 Currently the average rate of tax for a product which is manufactured
and sold will be 15% to 24%
 If you levy the GST on a comprehensive basis on all goods and services,
the tax rate can be reduced to 16%-18%
 There are almost 32 VAT acts in addition to which there is a Central
Sales Tax Act, so there are 33 sales tax laws
 VAT is levied on an amount which includes Excise duty and Customs
duty, which results in cascading effect of tax
 Excise duty has not yet been extended to include chain of value
addition in the distributive trade below the stage of production
 Cenvat credit has also not included several Central taxes, such as
Additional Excise Duties, Additional Customs Duty, Surcharges etc. and
thus restrict the benefits of comprehensive input tax and service tax
set-off to the manufacturers (of exempted goods)/ dealers
(unregistered)
GST OVERVIEW AND
EXPECTED MODEL IN INDIA
WHAT IS GST?
• Goods and Services Tax (“GST”) - a comprehensive value added tax on
Tax on goods and goods and services
services • In a GST regime, goods and services are not differentiated as they move
through the supply chain

• Covers levies on a transaction which commences with import/ domestic

procurement/ manufacture/ production of goods or provision of
Tax on each
services at one end and consumption of goods and services at the other
transactions
end
• Levied on the value added at each stage of sale and purchase

Free flow of tax • Results in free flow of tax credits without limit or barriers of state
credits boundaries till it reaches the ultimate consumer
• In a GST environment, different stages of production and distribution
Tax to be borne by
consumer are interpreted as a mere pass through
• Incidence of tax is borne by the ultimate consumer
• GST will subsume all transaction taxes and levies that are
Subsume all taxes
and levies – primarily in the nature of indirect taxes and
– levied on supply of goods or on provision of services
EXPECTED BENEFITS OF GST
GST offers benefits similar to that offered by VAT and much more, such as:
• Eliminate cascading effect of taxes across the supply chain thereby
reducing cost of doing business and making the economy competitive
• Business to be free of taxes instead taxes to be borne entirely by customer
• Eliminate multiplicity of taxes, rates, exemptions and exceptions
• Eliminate dual taxation of the same transaction (eg VAT & Service tax on IT
Software, lease transactions)
• Reduce cost of production
• Achieve uniformity of taxes across the Indian territory
• Provide greater certainty and transparency of taxes
• Ensure tax compliance across the economy

• Augments and creates buoyancy in the economy

WHAT WOULD GST REPLACE?
• Central excise duty
• Service tax
• Countervailing duty (on imports in lieu of
excise duty) (“CVD”)
Central • Additional duty of Customs (on imports in
levies to lieu of VAT/CST) (“ACD”)
be • Central Sales Tax (“CST”) (to be abolished)
subsumed • Cesses and surcharges levied by Union
Government
WHAT WOULD GST REPLACE?

• VAT/ Sales tax

• Entry tax (not in lieu of octroi)
State • Entertainment tax (unless it is levied by local
bodies)
levies to • Luxury tax
be • Taxes on lottery, betting and gambling
subsumed • Cesses and surcharges levied by States
WHAT WOULD GST REPLACE?

• Purchase tax – In discussion

• Tax on items containing Alcohol – Outside
Specific GST
Items • Tobacco products – Outside GST
• Petroleum Products – Outside GST
• Natural Gas – Final view to be taken
KEY FEATURES OF PROPOSED GST
Dual
GST
Model

Central GST State GST

• To be administered by Central • To be administered by State

Government through a Governments through a
Central GST legislation State GST legislation
• Revenue to be credited to • Revenue to be credited to
Central government State government

However, broadly uniform provisions across Central and all State

GST laws
KEY FEATURES OF PROPOSED GST
• All transactions of goods or services (local and
Threshold interstate) above a prescribed threshold to be
for GST concurrently liable to Central GST as well as State
levy GST
• Thrush hold limit is likely to be same for SGST
and CGST
• Optional composition/ compounding scheme
proposed for tax payers with annual turnover of
upto INR 1 Crore
KEY FEATURES OF PROPOSED GST
• GST rate being finalized: Standard rate of Central
and State GST (combined) expected to be around 16
Rate of percent to 18 percent
GST
• Dual GST rate structure proposed for Central & State
GST for goods:

Necessary Items 4-5%

Standard rate 8-9%
Precious metal 1%

• Single GST rate for both Central & State GST

proposed for services
• An appropriate mechanism is expected to be
put in place to legally bind the Centre and
States to achieve (and maintain) a harmonized
rate structure – A Council to be created
KEY FEATURES OF PROPOSED GST
• All transactions of goods and services made for a
Taxable
event/ consideration to attract Central GST and State
Point of GST except:
levy
– Exempted goods and services
– Goods and services that do not fall within the purview
of GST
– Transactions below the prescribed threshold

• Clarity is awaited with regard to the appropriate

taxable event
KEY FEATURES OF PROPOSED GST
• Integrated GST or IGST levy proposed on
Interstate interstate transactions
Transactions
• IGST rate likely to be CGST+ SGST
• with appropriate provisions to be made for stock
transfer of goods:
KEY FEATURES OF PROPOSED GST
• Imports to be subject to Central and State GST in
Exports addition to Basic Customs duty
and
imports • State GST on imports to accrue to the State
where the imported goods and services are
consumed
• Exports to be zero rated with adjustment/ refund
of input GST credits

• Exemptions currently available under excise, VAT

and service tax laws are likely to be eliminated /
Exemptions
minimized under GST
 GST TAX STRUCTURE
Customs Duty: BCD, CGST
Suziki Japan imports, SGST imports Outside
India

Manufacturing & Sales:

Maruti
CGST & SGST or IGST India

Show Room

Service provider
Sales: CGST &
SGST or IGST Customer Service: CGST &
SGST or IGST
THANK YOU