Goods and Service Tax (GST) Stakeholders Perspective

Goods and Service Tax (GST) – Stakeholders

Perspective

Presented by:

CA M.S.Keshava

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Stake Holders in the GST supply chain

Impact on Central Government

Impact on State Government

Impact on Manufacturers

Impact on Middlemen / Traders

Impact on Works Contractors

Impact on Service Providers

Impact on Consumer

Role of CAs

Presentation Plan

STAKE HOLDERS

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GS

T Government

Central

State

Industry

Supplier of goods

Manufacturer

Traders / Middlemen Supplier of

Services

Works Contractor Consumer

Government - Central

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Central Government Taxes collected – present regime Transactions covered

Central Excise Duty (CENVAT)

Manufacture Additional Duty on Excise

ED levied under Medicinal & Toiletries Preparation Act

Surcharge & Cess on ED

BCD

Import Excise duty levied under Additional duties of customs (CVD & SAD)

Surcharge & Cess on Customs Duty

Service Tax Service

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Central Government

Central Taxes – GST regime

Transactions covered

Central GST (CGST) Import / Supply

BCD

Import Surcharge & Cess on Customs Duty

Additional Tax (on i/s transactions)

Supply

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CENVAT

Service Tax

SAD / CVD / ED / Cess / SC

CGST

Government - State

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State Government Taxes collected – present regime Transactions covered

VAT / Sales Tax Sale / Purchase

Purchase Tax

Entry Tax / Octroi Entry of Goods into Local Area

Entertainment Tax Entertainment events happening in the state

Luxury Tax Luxuries Provided within the state

Taxes on Betting, lottery & Gambling Events happening within the state

Surcharge & Cess On Taxes levied

CST (Central Tax collected & administered by state)

I/s Sale

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State Government

State Taxes– GST

regime

Transactions covered

State GST (SGST)

Intra State Supply of Goods & Services

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SGST Entry Tax

Entertainment Tax

VAT / CST / Sales Tax

Luxury Tax

Betting & gambling tax

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Benefits to Central Govt.

Simpler Tax system – transparent & self policing

Broadening of Tax base.

Tax collected at all stages of supply chain;

Improved compliance & revenue collections (tax booster).

Efficient use of resources;

Fewer laws / statutes to administer;

No Concessional rates (C form) - Advance collection of tax

Central Govt. gets power to collect tax on additional activities – Trading, Entertainment, betting etc – additional revenue channels;

State Governments get authority to collect tax on service activity;

Possible reduction in Cost of tax collections;

Uniformity in rates across all states – reduces flight of investments – no unhealthy competition amongst states

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Issues

Larger tax base – requires larger administrative machinery;

Concurrent Dual GST model requires both Center & State Governments to gear up administrative machinery;

If the system is not integrated, Cost of tax collections may go up

Inter-state IGST adjustments – huge responsibility on Central Government;

Inter state litigations – determining the situs of consumption.

State governments depend on Central Govt for IGST adjustments

TAXATION – PRESENT REGIME - MANUFACTURER

MANUFACTURER

IMPORT

BCD+CVD+EC+SAD

STATE TAX PAID CREDIT STATUS

ENTRY TAX / OCTROI

NIL

VAT VAT / CST

INPUTS VALUE ADDITION SUPPLY

I/S PURCHASE

LOCAL PURCHASE

CE+CST

CE + VAT

JOB WORK / SERVICE

SERVICE TAX

ENTRY TAX / OCTROI

CENTRAL TAX PAID CREDIT STATUS

BCD NIL

CVD CENVAT

EC CENVAT

SERVICE TAX CENVAT

SAD CENVAT

CST NIL

EXPORTS

I/S SALE

LOCAL SALE

STOCK TRANSFER

ZERO RATED / REFUND

CE+CST

CE+VAT

CE + VAT PARTIAL REBATING

TAXATION – PRESENT REGIME – TRADER / MIDDLE MEN

Trader / Middlemen

IMPORT

BCD+CVD+EC+SAD


ENTRY TAX / OCTROI

NIL

VAT VAT / CST


I/S PURCHASE

LOCAL PURCHASE

CE+CST

CE + VAT

JOB WORK / SERVICE

SERVICE TAX

ENTRY TAX / OCTROI


BCD NIL

CVD NIL

EC NIL

SERVICE TAX NIL

SAD Refund

CST NIL

EXPORTS

I/S SALE

LOCAL SALE

STOCK TRANSFER

ZERO RATED / REFUND

CST

VAT

VAT PARTIAL REBATING

GST REGIME

MANUFACTURER / MIDDLE MEN / TRADER

IMPORT

BCD+IGST


SGST SGST - IGST


I/S PURCHASE

LOCAL PURCHASE

IGST [CGST + SGST]

CGST + SGST

JOB WORK / SERVICE

CGST + SGST

ADDL TAX 1%


BCD NIL

IGST IGST – CGST - SGST

ADDL TAX NIL

CGST CGST - IGST

EXPORTS

I/S SALE

LOCAL SALE

STOCK TRANSFER

ZERO RATED / REFUND

IGST [CGST + SGST]

CGST + SGST

IGST

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Benefits to Manufacturers / Traders

Lesser statutes to comply;

No tax on tax – cascading of taxes – reduces cost

Seamless credits for all taxes paid on inputs;

Taxable event shifts from Manufacture to supply;

No Statutory forms – C Form / F Form / I form;

Full credit for taxes paid on capital goods;

Uniformity in taxation across boundaries;

For traders / middle men – credit for taxes paid on services;

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Issues - Manufacturers / Traders

Higher Working Capital requirement;

Inputs – higher taxes

Imports – higher taxes

Stock transfers – Fully taxable

Distribution chain will need relook

Traders / Middlemen – additional compliance of CGST

Determining supply & consumption – fresh litigations – will need time for the law to evolve

Pressure on Margins – transparent tax system;

Transitional issues;

Up gradation of accounting systems – requires investments in IT and People

UNCERTAIN ISSUES • RNR???

• Thresh hold limits

• Exemptions / Incentives

• SSI Units

• Check posts

• Place of supply rules – especially for service

• Transitional provisions and unutilized tax credits

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Supplier of Services

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TAXATION – PRESENT REGIME

Service Provider

IMPORT OF SERVICE

SERVICE TAX (REVERSE

CHARGE)


VAT NIL


INPUT SERVICE

CAPITAL GOODS

SERVICE TAX

CE + VAT / CST


SERVICE TAX CENVAT

CE duty (capital goods & iputs) CENVAT – 50% + 50%

CST NIL

EXPORT OF SERVICE

OUT PUT SERVICE

ZERO RATED / REFUND OF

CENTRAL TAXES ONLY

SERVICE TAX

TAXATION – GST REGIME

Service Provider

IMPORT OF SERVICE

IGST (REVERSE CHARGE)


SGST SGST - IGST


INPUT SERVICE

CAPITAL GOODS

IGST / CGST + SGST

IGST / CGST + SGST

EXPORT OF SERVICE

OUT PUT SERVICE

ZERO RATED / REFUND

IGST / CGST + IGST


IGST IGST – CGST - SGST

ADDL TAX NIL

CGST CGST - IGST

ADDL TAX 1%

Impact on Service suppliers

Positives Negatives Input credit for capital goods and input goods used in delivery of service

Rate of tax on inputs bound to go up

Clarity in taxation laws – confusion whether transaction is sale or service is mitigated

More laws to comply; Central laws + state laws

Distinction between local supply of service and i/s supply will be made – can possibly create confusions

Service Providers will be subjected to state government compliances

Rate of tax is bound to increase as against 12.36% service tax being applied presently – results in higher working capital requirement

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Works Contractor

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TAXATION – PRESENT REGIME

Works contractor

Input Goods

CE + VAT / CST


VAT Regular Scheme only


INPUT SERVICE

CAPITAL GOODS

SERVICE TAX

CE + VAT / CST


SERVICE TAX NIL

CST NIL Regular Scheme

Composition Scheme

VAT on 70% of Value + Service Tax on

40% or 70% of Value

VAT on Total TO + Service Tax

TAXATION – GST REGIME

Works contractor

Input goods - Local

CGST + SGST


SGST SGST - IGST


Input Goods – I/s

Input Service

IGST

IGST / CGST + SGST

Regular Scheme

Composition

CGST + SGST

CGST + SGST


ADDL TAX NIL

CGST CGST - IGST

ADDL TAX 1%

Impact on Works Contractors

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• + Clarity in the taxation;

• + Tax payable only on the 100% contract value;

• + Seamless credit for all taxes paid;

• + Credit of tax paid on capital goods;

• + No statutory forms to be issued;

• - Works contractors will come under Central levy;

• - Higher tax on inputs will require higher working capital;

• - Tax rates bound to go up;

• - Long term contracts will spill over two tax regimes;

Consumer

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Present Scenario (Intra-State Trade of Goods)

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Input Manufacturer Output Manufacturer Dealer Consumer

State Tax = ₹ 13.31 (₹ 11 + ₹ 1.10 + ₹ 1.21)

VAT = ₹ 11 VAT = ₹ 12.10 ITC = (₹ 11) ₹ 1.10

VAT = ₹ 13.31 ITC = (₹ 12.10)

₹ 1.21

Excise = ₹ 10 Excise = ₹ 11 ITC = (₹10)

₹ 1

Tax Invoice (A) Value = ₹ 100 Excise = ₹ 10 VAT = ₹ 11 ₹ 121

Tax Invoice (B) Cost = ₹ 100 Value = ₹ 110 Excise = ₹ 11 VAT = ₹ 12.10 ₹ 133.10

Tax Invoice (C) Cost = ₹ 121 Value = ₹ 133.10 VAT = ₹ 13.31 ₹ 146.41

Central Tax = ₹ 11 (₹ 10 + ₹ 1)

GST Scenario (Intra-State Trade of Goods)

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State Tax = ₹ 12.10 (₹ 10 + ₹ 1 + ₹ 1.10)

SGST = ₹ 10 SGST = ₹ 11 ITC = (₹ 10)

₹ 1

SGST = ₹ 12.10 ITC = (₹ 11) ₹ 1.10

CGST = ₹ 10 CGST = ₹ 11 ITC = (₹10)

₹ 1

Tax Invoice (A) Value = ₹ 100 CGST = ₹ 10 SGST = ₹ 10 ₹ 120

Tax Invoice (B) Cost = ₹ 100 Value = ₹ 110 CGST = ₹ 11 SGST = ₹ 11 ₹ 132

Tax Invoice (C) Cost = ₹ 110 Value = ₹ 121 CGST = ₹ 12.10 SGST = ₹ 12.10 ₹ 145.20

Central Tax = ₹ 12.10 (₹ 10 + ₹ 1 + ₹ 1.10)

CGST = ₹ 12.10 ITC = (₹11) ₹ 1.10

Present Scenario (Inter-State Trade of Goods)

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State Tax (Y) = ₹ 16.91 (₹ 13.91 + ₹ 3)

VAT = ₹ 11 CST = ₹ 2.42

ITC = (₹ 11.00) = (8.58)

VAT = ₹ 13.31 ITC = (₹ 12.10)

₹ 1.21

Excise = ₹ 10 Excise = ₹ 11 ITC = (₹10)

₹ 1

Tax Invoice (A) Value = ₹ 100 Excise = ₹ 10 VAT = ₹ 11 ₹ 121

Tax Invoice (B) Cost = ₹ 100 Value = ₹ 110 Excise = ₹ 11 CST = ₹ 2.42 ₹ 123.42

Tax Invoice (C) Cost = ₹ 126.42 Value = ₹ 139.06 VAT = ₹ 13.91 ₹ 152.97

Central Tax = ₹ 11 (₹ 10 + ₹ 1)

Entry Tax = ₹ 3


GST Scenario (Inter-State Trade of Goods)

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State Tax (Y) = ₹ 12.22 (₹ 2.44 + ₹ 9.78**)

SGST = ₹ 10 SGST = ₹ 12.22 ITC = (₹ 9.78)

₹ 2.44

CGST = ₹ 10

IGST = ₹ 22 CGST = (₹10) SGST = (₹10)

₹ 2


Tax Invoice (B) Cost = ₹ 100 Value = ₹ 110 IGST(20%) = ₹ 22 Add. Tax = ₹ 1.10 ₹ 133.10

Tax Invoice (C) Cost = ₹ 111.10 Value = ₹ 122.21 CGST = ₹ 12.22 SGST = ₹ 12.22 ₹ 146.55

Central Tax = ₹ 12.22 (₹ 10 + ₹ 2 + ₹10* - ₹ 9.78**)

Add. Tax = ₹ 1.10


State Tax (X) = ₹ 1.10 (₹ 10 - ₹ 10* + ₹ 1.10)

CGST = ₹ 12.22 IGST = (₹12.22)

₹ 0

Comparison (Trade of Goods)

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Sr. No. Particular Intra-State Inter-State

Present GST Present GST

1. Initial Value ₹ 121.00 ₹ 120.00 ₹121.00 ₹120.00

2. Centre’s Tax ₹ 11.00 ₹ 12.10 ₹ 11.00 ₹ 12.22

3. State (X)’s Tax ₹ 13.31 ₹ 12.10 - ₹ 1.10

4. State (Y)’s Tax - - ₹ 16.91 ₹ 12.22

5. State’s Total ₹ 13.31 ₹ 12.10 ₹ 16.91 ₹ 13.32

6. Total Tax paid to Govt. ₹ 24.31 ₹ 24.20 ₹ 27.91 ₹ 25.54

7. Non-Vatable Tax borne by Business

₹ 11.00 ₹ 0.00 ₹ 14.00 ₹ 1.10

8. Total Tax paid by Consumer ₹ 13.31 ₹ 24.20 ₹ 13.91 ₹ 24.44

9. Final value paid by Consumer ₹ 146.41 ₹ 145.20 ₹ 152.97 ₹ 146.65

Present Scenario (Intra-State supply of Service)

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Input Service Provider Output Service Provider Consumer

Service Tax = ₹ 10

Service Tax = ₹ 11 ITC = (₹10)

₹ 1

Tax Invoice (A)

Value = ₹ 100 Service Tax = ₹ 10 ₹ 110

Tax Invoice (B)

Cost = ₹ 100 Value = ₹ 110 Service Tax = ₹ 11 ₹ 121

Central Tax = ₹ 11 (₹ 10 + ₹ 1)

GST Scenario (Intra-State Supply of Service)

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Input Service Provider Output Service Provider Consumer

CGST = ₹ 10

CGST = ₹ 11 ITC = (₹10)

₹ 1

Tax Invoice (A)

Value = ₹ 100 CGST = ₹ 10 SGST = ₹ 10 ₹ 120

Tax Invoice (B)

Cost = ₹ 100 Value = ₹ 110 CGST = ₹ 11 SGST = ₹ 11 ₹ 132

Central Tax = ₹ 11 (₹ 10 + ₹ 1)

State Tax = ₹ 11 (₹ 10 + ₹ 1)

SGST = ₹ 10 SGST = ₹ 11 ITC = (₹ 10)

₹ 1

Present Scenario (Inter-State Supply of Service)

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State Tax (Y) = ₹ 0

Service Tax = ₹ 10 Service Tax = ₹ 11

ITC = (₹10) ₹ 1

Tax Invoice (A) Value = ₹ 100 Service Tax = ₹ 10 ₹ 110

Tax Invoice (B) Cost = ₹ 100 Value = ₹ 110 Service Tax = ₹ 11 ₹ 121

Tax Invoice (C) Cost = ₹ 110 Value = ₹ 121 Service Tax = ₹ 12.10 ₹ 133.10

Central Tax = ₹ 12.10 (₹ 10 + ₹ 1 + ₹1.10)

Input Service Provider Output Service Provider Agent Consumer

State Tax (X) = ₹ 0

Service Tax = ₹ 12.10 IGST = (₹11) ₹ 1.10

GST Scenario (Inter-State Supply of Service)

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State Tax (Y) = ₹ 12.10 (₹ 2.20 + ₹ 9.90**)

SGST = ₹ 10 SGST = ₹ 12.10 ITC = (₹ 9.90)

₹ 2.20

CGST = ₹ 10

IGST = ₹ 22 CGST = (₹10) SGST = (₹10)

₹ 2


Tax Invoice (B) Cost = ₹ 100 Value = ₹ 110 IGST(20%) = ₹ 22 ₹ 132

Tax Invoice (C) Cost = ₹ 110 Value = ₹ 121 CGST = ₹ 12.10 SGST = ₹ 12.10 ₹ 145.20

Central Tax = ₹ 12.10 (₹ 10 + ₹ 2 + ₹10* - ₹ 9.90**)

Input Service Provider Output Service Provider Agent Consumer

State Tax (X) = ₹ 0 (₹ 10 - ₹ 10*)

CGST = ₹ 12.10 IGST = (₹12.10)

₹ 0

Comparison (Supply of Service)

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Sr. No. Particular Intra-State Inter-State

Present GST Present GST

1. Initial Value ₹ 110.00 ₹ 120.00 ₹110.00 ₹120.00

2. Centre’s Tax ₹ 11.00 ₹ 11.00 ₹ 12.10 ₹ 12.10

3. State (X)’s Tax ₹ 0.00 ₹ 11.00 ₹ 0.00 ₹ 0.00

4. State (Y)’s Tax - - ₹ 0.00 ₹ 12.10

5. State’s Total ₹ 0.00 ₹ 11.00 ₹ 0.00 ₹ 12.10

6. Total Tax paid to Govt. ₹ 11.00 ₹ 22.00 ₹ 12.10 ₹ 24.20

7. Non-Vatable Tax borne by Business

₹ 0.00 ₹ 0.00 ₹ 0.00 ₹ 0.00

8. Total Tax paid by Consumer ₹ 11.00 ₹ 22.00 ₹ 12.10 ₹ 24.20

9. Final value paid by Consumer ₹ 121.00 ₹ 132.00 ₹ 133.10 ₹ 145.20

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Benefits to Assessee

• Reduction in multiplicity of taxes.

• Mitigation of cascading/ double taxation.

• Transparent system – payer will know how much tax is paid;

• More efficient neutralization of taxes especially for exports.

• Development of common national market.

• Simpler tax regime -

o Fewer rates and exemptions.

o Conceptual clarity (Goods vs. Services).

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Role of Chartered Accountants

Tax Planning;

Pricing decisions;

Business re-structuring;

Documentation help;

Certification work;

Compliance Registration

Payment of taxes – availing credits properly;

Returns

Assessments

Accounting help

Representation before authorities

Appeal and revisions

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THANK YOU

CA M.S.KESHAVA., B.COM., LL.B., FCA

[email protected];

mailto:[email protected]

Goods and Service Tax (GST) Stakeholders Perspective

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