Professional Documents
Culture Documents
Tax(GST)
Overview
Present Taxation System
Old Sales Tax Regime
Introduction of VAT and CST
Value Added Tax and Input Credit System
Excise Tax, Service Tax, MODVAT, CENVAT
Why GST?
What is GST?
Which Central And States Taxes would be subsumed
Framework of GST
Integrated GST(IGST)
Benefits of GST
GST Council and its Objectives
Implementation Challenges
122nd Constitutional Amendment Bill, 2014
PRESENT TAX STRUCTURE IN INDIA
Tax
Tax
Entry Tax,
Excise Duty Service Tax Custom VAT Entry Tax,
Excise Duty Service Tax Custom VAT Lottery,
Lottery,
Entertainm
Entertainm
ent tax,
ent tax,
etc
etc
Till 2005
Sales Tax
It is an indirect tax levied on the sales of goods.
Rs. 10000
Rs. 10000 + Rs.1000
+
Rs. 500
Purchase(Input) =
Sales(output)=
1000 paid
1150
(VAT)
collected
10000
10000 +
0+
500
Input Tax Credit-
1000 Output Tax -
1050
+500 value added
10500 +
1050
0 0 0 - 11550
10 05
50 y =1
50 lit
a bi
Li
x
Ta 00
10
Cascading
Cascading
Excise Excise
Cascading Excise
Input Credit
Excise Excise
Excise
Cascading
Excise
Cascading of taxes removed to a large
extent.
Tax evasion reduced.
Efficient Input Credit(VAT, CENVAT)
system introduced.
Tax collection improved
Electricity Advertisement
Hoardings
CST
Final cost=all
the taxes
included
Fuel
1) Custom Duty
2) Tobacco Products
6) Service Tax
8) Cess, Surcharges
ONLY SGST
Which State Taxes Will Be Subsumed??
1) Excise On Liquor For Human Consumption
3) Electricity Duty
5) State VAT
7) Entry Tax
1. X has to collect 1.2 lakh as SGST and 1.4 lakh as CGST on sale of his goods to Y of same
state.
2. Input credit of Y is 1.2 lakh as SGST and 1.4 lakh as CGST paid by him to X of same state.
3. Rate of IGST is 26%(CGST + SGST).
4. When Y sales this to Z of Rajasthan at 10.5 lacs, he charges 2.73 lacs as IGST. Y will
deposit 13k after claiming his input credit against CGST and SGST.
5. The state of Maharashtra will transfer the amount of SGST(1.2 lacs) to the centre which is
used by Y as IGST.
6. Z of Rajasthan sold it to a consumer at cost of 11 lacs and will collect from him 1.32 lacs
as SGST and 1.54 lacs as CGST. Z has already paid 2.73 lacs while as IGST which he will
claim while paying his liability of CGST and SGST. So he has input credit of 1.26 lacs as
SGST and 1.47 lacs as CGST. After deducting, he will pay 6000 SGST and 7000 CGST.
7. A central agency will transfer the amount of input credit of SGST i.e. 1.26 lacs to the
consumer state(Rajasthan).
Benefits of GST
Improved Logistics/Seamless movement of goods across the country as entry check
points(for entry tax)wont be there. It will end the warehousing obsession of large
companies.
It will convert India into a uniform market.
Better compliance and tax buoyancy.
A lower GST rate and removal of Cascading effect will bring down the prices.
GST will be levied only at destination point and not at various points(from manufacturing
to retail outputs).
Expected to build a transparent and corruption-free tax administration.
Both CGST and SGST will be charged at same floor(manufacturing cost). This will benefit
the consumers as the cost will go down.
No distinction b/w imported goods and Indigenous goods. Same rate(CGST/SGST) on both.
Exports would however will be zero rated i.e. exporters of goods/services need not pay
the GST. GST paid by them on the procurement of goods/services will be refunded to
them.
GST Administration by GST Council
GST Council
Each decision must have
approval of 3/4th members
of the council. MIN QUORUM-
50% MEMBERS
Chairman
High Revenue Neutral Rate: After GST, the govt. revenue will not remain the same.
Through RNR govt. would try to adjust tax in such a way that its revenue remains the
same. If RNR is kept high, it will have negative impact on economy.
Support in Parliament: Lack of support in Upper house and some of the manufacturing
states.
GST IMPLEMENTATION CHALLENGES
To provide greater authority to states in tax collection, this bill amends the
constitution to provide the same.
It aims to introduce Goods and Services Tax(GST).
Parliament and state legislatures will have concurrent powers to make laws on GST.
Only Centre may levy IGST on interstate supply of goods and services, and imports.
Alcohol for human consumption has been exempted from GST. GST will apply to five
petroleum products at later date as suggested by council.
A GST council has to be constituted inside 60 days of its approval from the president.
Parliament may, by law, provide compensation to states for any loss of revenue up to
a period of 5 years.
122nd Bill
Since it is an constitution amendment bill, The govt. requires the support of 2/3 rd of
the members in both the houses (Lok Sabha and Rajya Sabha) of the parliament.
It cannot be passed by calling joint session in the parliament.
It also needs to get passed in the legislative assembly of at least half of the states.
After approval from Parliament and the states, the bill will become law as soon as the
President signs it.
Currently, this bill has been passed in the Lok Sabha but is stuck in Rajya Sabha as the
govt. is in minority there.