Académique Documents
Professionnel Documents
Culture Documents
on
At By
Residential Refresher Course Dr. Sanjiv Agarwal
Organized by ICAI – CMI FCA, FCS,
Hosted by Goa Branch of WIRC Jaipur
June, 2012
Agricult ure
19%
Service
Sect or
Indust ry 59%
22%
to be contd……..
Power to Tax in India
• India has a two tier federal power to collect tax –
the Union Government,
the State Governments including urban/rural local
bodies
• Presently goods are liable to Vat / Excise / Customs duty
while taxable services attract service tax.
• Certain transactions subject to both - Vat and Service tax
• Efforts to revamp the direct tax structure - New direct
tax code (Income Tax Act, 1961 & Wealth Tax Act, 1957
would be scrapped) proposed
• Efforts to bring on a single indirect tax – GST proposed
Taxonomy of Indian Taxation
TAXATION POWERS OF UNION
A Common Tax on
Goods Services
Pre-requisites for migrating to a
GST regime
• Setting up of empowered committee for GST (like VAT) which can steer the
road map into action - done
• Broaden the tax base for excise duty (presently 40% comes from
petroleum products) – being done
• Finishing area based and product based exemptions – being done
• Rationalization of concessions and exemptions including that on exports –
being done
• Expanding service tax to almost all services – now proposed
• Common/unified tax rate for goods and services which may be ideally,
revenue neutral (a suitable GST rate) – dual tax proposed
• Avoiding or minimizing differential tax rates – under discussions
• Abolition of other small taxes - under discussions
• Abolition of CST in a phased manner - being done
• Power to levy service tax on select/agreed services to States - under
discussions
• Issue of inter-State services and goods movement vis-à-vis levy of duty or
tax to be sorted out - under discussions
• Revenue sharing mechanism to be rationalized - under discussions
GST - Journey so far
Feb, 2006 : First time introduced concept of GST and announced the date of its
implementation in 2010
Jan. 2007: First GST study by ASSOCHAM released by Dr. Shome
Feb. 2007: F.M. Announced introduction of GST from 1 April 2010 in Budget
April 2007 : CST phase out started - CST reduced to 3%, currently 1%
May 2007: Joint Working Group formed by EC
Nov. 2007: Joint Working Group submits report
April 2008 : Empowered Committee (EC) finalizes views on GST Structure
July 2009: FM announces commitment to bring GST from April 2010
Consultation on interstate services in progress
to be contd……
GST - Journey so far
Budget 2010
– to achieve the roll out of GST by April 2011
– Revamping of indirect tax administration at centre/ states
internal work processes based on use of information technology
- massive information technology (IT) platform
– project ‘ACES- Automation of Central Excise and Service Tax’
rolled out
– rate of service tax retained at ten per cent
– states to revamp their internal work processes
to be contd……
GST - Journey so far
Budget 2011
• non-committal on timing and roll out but the Government keen to bring in
Constitutional Amendment Bill
• overall amendments targeted towards moving close to harmonize with GST regime in
future
• major highlights of budget discussions/proposals on GST –
DTC and GST to mark a water shed
Decisions on GST to be taken in concert with the states
Areas of divergence between centre and states narrowed
Constitutional Amendment Bill likely to be introduced in current session
Drafting of model legislation for central and state GST underway
Establishment of IT infrastructure in process (GST network)
NSDL selected as technology partner for GST
Tax rates maintained at same level of 10% to stay on course towards ST
Certain central excise rates changed to prepare the ground for transition to GST by
reducing number of exemptions
Nominal central excise duty of 1% imposed on 130 items, no Cenvat credit allowed on
such items.
• In service tax, proposals aim to achieve a close fit between the present service tax
regime and GST.
GST - Journey so far
Budget 2012
• No announcement on GST rollout date
• GST to be implemented in consultation with the States at the earliest
• GST network (GSTN) likely to be in place from August, 2012
• GSTN will implement common PAN based registration, return filing and
processing of payments for centre and all states on a shared platform.
• Bringing closer of Service Tax and Central Excise for transition to GST
• Drafting of modal legislation for CGST and SGST under progress.
• Common forms for Service Tax and Central Excise registration and return
proposed.
• Place of Supply Rules, 2012 to trigger debate to assess issues that may
arise in taxation of inter state services for eventual launch of GST.
The Journey – beginning of end
Past Now Future
to be contd…..
•
GST today – Need & Advantages
• Nature of complexities i.e. classification to valuation
regarding taxability, exist in the present structure.
Some of such burning issues are:
Excise on MRP
Excise, VAT and Service Tax on Software,
VAT & Service tax on:
• Works Contracts
• Right to Use
• Composite Contracts such as AMC transactions
to be contd…..
GST today – Need & Advantages
Exempt sectors are not allowed to claim any credit for the
CENVAT or the service tax paid on their inputs
What is GST
• GST is a comprehensive value added tax on goods and services
• It is collected on value added at each stage of sale or purchase in the supply chain
• No differentiation between Goods and Services as GST is levied at each stage in the
supply chain
• Seamless input tax credit throughout the supply chain
• At all stages of production and distribution, taxes are a pass through and tax is borne by
the final consumer
• All sectors are taxed with very few exceptions / exemptions
• Full tax credits on inputs – 100 % set off
• In most countries, a single VAT exists which covers both goods and services.
• Typically it is a single rate VAT but two - three rate VAT systems are also prevalent –
India will be following multi rate / multi tier tax
• Canada and Brazil alone have a dual VAT
• Standard GST rate in most countries range between 15-20 percent
• GST exists in over 140 countries .
GST : Proposed Key Features
Dual GST : Central GST & State GST
Destination based State GST
Common Base
Uniform Classification
Uniform Forms – Returns, Challans ( in electronic mode)
No cascading of Central and State taxes
Cross credit between Centre and State not allowed
Tax levied from production to consumption
to be contd……..
GST : Proposed Key Features
Central Taxes
– Excise Duty
– Additional Excise duty
– Excise duty under medicinal and toilet preparation Act
– Service Tax
– Additional Custom duty commonly known as countervailing duty (CVD), special additional
duty( SAD)
– Surcharge
– Cess
State Taxes
– Value added tax (VAT)
– Entertainment tax levied by states
– Luxury Tax
– Tax on Lottery, betting and gambling
– Entry tax other than for local bodies
– State surcharge Cess /
to be contd…..
Taxes proposed to be subsumed in GST
to be contd…..
GST- RATES WORLD WIDE
Country GST Rates
China - 17%
Indonesia - 10%
Philippines - 10%
Taiwan (Chinese Taipei) - 5%
Australia - 10%
Germany - 16%
Denmark - 25%
Japan & Singapore - 5%
UK - 17.5%
France - 19.6%
New Zealand - 12.5%
to be contd…..
GST : Global Perspective
• Goods and Services Tax in Canada
• GST is a multi-level value added tax introduced on January 1, 1991.
• The GST replaced a hidden 13.5% Manufacturers’ Sales Tax (MST).
• As of May 18th, 2010, the GST rate is 5% and some goods &
services are exempt from GST zero-rated goods & services
• Model has helped the Canada’s economy to be more efficient and
competitive
• Goods and Services Tax in Japan
• In Japan, VAT or GST is known as Consumption Tax (CT)
introduced in January 1989.
• It requires re-calculation and payments to the tax authorities at
each transaction point in the onward sales chain.
• The Japanese Consumption Tax rate is currently 5% and out of
which 4% is national levy and 1% regional levy.
• There is an annual threshold of YEN 10 million, based on the base
year of two years prior to the tax year.
to be contd…..
GST : Global Perspective
Goods and Services Tax in Australia
• Consumption tax is called Value Added Tax.
• GST provisions are set out in a piece of Legislation called the ‘A
New Tax System (Goods and Service Tax) Act 1999’ and the GST
was implemented on 11th July, 2000.
• GST@10% will be charged on most goods and services consumed
in Australia.
• All imported goods are assigned a tariff classification obtained from
the Australian Customs Tariff which determines the rate of duty will
pay for the product.
• GST is not intended to apply to goods and services which are
exported from Australia and there are specific provisions in the GST
law designed to make exports GST-free.
to be contd…..
GST : Global Perspective
• Goods and Services Tax in Brazil
• Brazil was the first country to adopt GST system.
• Brazil has adopted a dual GST where the tax is levied by
both the central and the provincial governments.
• GST rate is 20 %.
GST- CAN WE ADOPT IT
• An information network allowing states to cross-check payment information
(TINXSYS) has been put to trial and is expected to improve compliance and
reduce evasion.
To be cont.
IGST
• Buyer in State - B can avail credit of the IGST
charged.
• Buyer in State - B can use the IGST to discharge
output tax liability in his own State.
• Centre has to transfer credit of IGST used for
payment of SGST to State Government - B.
.
IGST – ILLUSTRATION
• Maharashtra seller selling to Karnataka buyer for
Rs.1,00,000/-.
• IGST payable assuming an 8% rate is Rs.8,000/-.
• Rs.8,000/- can be paid by adjusting
– Inter-State purchases (IGST) Rs.3,000/-
– Local purchases (CGST) Rs.1,500/-
– Local purchases (SGST) Rs.1,500/-
• Since dealer has used SGST of Maharashtra to the extent
of Rs.1,500/-, Centre has to transfer Rs.1,500/- to
Maharashtra Government.
IGST – ILLUSTRATION
• The sellers or service providers collect the tax from their customer.
• Before depositing the same to the exchequer, they deduct the tax
they have already paid.
• Area Based
To be discontinued after current eligibility period
• Product Based
To be converted in to refund route
• Limited Flexibility
To Centre & States barring few exceptions
GST- It’s System
Invoice System
to be contd…….
GST - Humor
Business Man: Yes Sir.
CA: Now Empowered Committee of states is saying that their demand
was not taken into consideration and negative list will lead to double
taxation and litigation….correct?
Business Man: Yes Sir.
CA: So the negative list of services when implemented will Complement
the Centre -States contended road to GST, and can fit in as
pavement along with that road whenever it comes into
existence….Understood??
Business Man: No Sir……..I mean. Yes Sir……I mean I will think over
it…and am sure that I will understand!!!
THANK YOU
FOR
YOUR
PRECIOUS TIME
AND
ATTENTION
Dr. Sanjiv Agarwal
FCA, FCS, Jaipur
asandco@gmail.com
sanjivservicetax@gmail.com