Presented By CA Swatantra Singh, B.Com , FCA, MBA Email ID: [email protected] New Delhi , 9811322785 , www.caindelhiindia.com, www.carajput.com. GST – Where are we and what next ?. - PowerPoint PPT Presentation
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1
Presented By Presented By
CA Swatantra Singh, CA Swatantra Singh, B.Com , FCA, MBAB.Com , FCA, MBA
Sale price 120Add: IGST (20 percent) 24Total 144IGST payable (24-10-10) 4IGST payable by utilising IGST, CGST, SGST
CGST + SGST
IGST
Proposed IGST Model
28
Impact of taxing Inter-state stock transfers: Illustration
Company A manufactures Product P which is stock transferred at INR 1000
Raw Material
Pre – GSTPrice Excis
e (10%)
VAT (12.5%) /
CST (2%)
Product X (local)
400 40 55
Product Y (inter-state)
400 40 8.8
Total 800 80 63.8
Raw Material
Post - GST
Price
CGST (10%)
SGST (10%)
IGST (20%)
Product X (local)
400 40 40 -
Product Y (inter-state)
400 - - 80
Total 800 40 40 80
Input Tax Credit
Comprehensive for each level
Central to Central and State to State
Restrictions and limitations – capital goods, consumables, promotional materials, fuel?
Deemed sale transactions
Interpretations – how to ensure uniformity ?
Credit available for utilisation
IGST
CGST
SGST
Output Liability
IGST, CGST, SGST
CGST, IGST
SGST, IGST
Proposed Credit utilisation under GST
Basic Exemption
Common or different?
For goods and services
For Central GST and State GST
Between States
Should apply on cumulative basis?
Others
Incentive Schemes
Records
Advance Rulings
Assessments / Audits
Transition provisions ……
& More……
33
Taxable event – sale / supply (for inter-state) / raising of invoice
MRP scheme to be abolished
Job work arrangements - valuation, treatment of credit etc
Job work – whether supply of ‘goods’ or ‘service’?
Impact on high seas sales, exemption to in-transit sales?
Transition related matters – closing stock, accumulated credit
Other Issues
Central Indirect Tax Regulatory Authority/GST Council…
…formalization of EC...
… a possible solution ?
Road ahead – what businesses ought to do?
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Changes in effective tax rates for supplies as well as purchases
Transactions/ Supplies which are currently exempt from tax may become liable to GST, and vice-versa
Input taxes which are currently a cost may be eligible as ‘credit’ in future
Special tax computation schemes, valuation provisions may be amended/ withdrawn
Supply chain: Tax cost on sourcing/ distribution/ logistics
Finance: Impact on cash flows, project costs
Marketing: Impact on product price, promotional schemes
IT: Invoicing, returns, MIS reports
What this transition will entail
Pur goods in Maharashtra
Interstate Purchase
Import - Tech services
Interstate Services
60
40
50
40
10Domestic Services
Stock transfer to Gujarat
Sale to Rajasthanconsumer
Sale to Madhya Pradesh dealer
80
100
70
Import goods 100
Sale in Maharashtra
150
AssumptionsC-GST: 12 %S-GST: 8 %I-GST: 20 %
Manufacturer-Maha
Compute GST Liability
Basic Elements of GST
GST is an indirect tax on consumption. GST (multi-stage) is contemplated to be charged and
collected at each stage of the production / processing / trading, on the value addition of goods and services
A dual GST is being proposed wherein a Central Goods and Services Tax (CGST) and a State Goods and Services Tax (SGST) will be levied on the taxable value of a transaction.
Imports would be subject to GST.
Basic Elements of GST
Exports would be zero-rated. GST must contemplate set-off of tax paid
on inputs / capital goods and services. GST will require maintenance of accounts
of tax paid on purchases and sales of goods and services.
In a GST regime the tax component in any transaction is identifiable /computable
VAT vs GST - Preamble
VAT / CST
Governed under entry no. 54 of List II and entry no. 92A of the List I to the Seventh Schedule
GST
GST will be governed under List I of the Seventh Schedule
GST will be governed under List II of the Seventh Schedule
Or Possible that both CGST
and SGST will be governed under List III of the Seventh Schedule
VAT vs GST – Preamble
VAT / CST Article 286 lays down
the principles for formulating the transactions relating to export / import / sale effected outside the State
GST It appears that Article
286 may continue even under GST regime with certain modifications to include interstate movement of goods and principles relating to services
GST Preamble Taxes most likely to be subsumed by GST
Central Excise
Service tax
Additional duty of customs
VAT
Entry tax not in lieu of Octroi
Luxury tax, Entertainment tax, Electricity taxes. Most of the Local laws, except stamp duty.
State surcharges related to supply of goods and services
Customs duty will remain outside GST
VAT vs GST – Preamble
VAT / CST Currently there are 29 State
VAT laws
CST law – applicable in case of inter-State transaction and subject to tax at the rate of 2% (against C Form) or local rate (without C Form) as the case may be
GST It appears that even
under GST regime there will be 29 SGST laws and one CGST law.
IGST law will be favoured in respect of inter-State movement of Goods. The taxes charged under IGST could be available for set-off.
VAT vs GST - Preamble
VAT / CST
VAT is not adopted in its pure form
No set-off is allowed on central sales tax paid and other State levies such as luxury tax, entry tax etc
GST Same will be the case even
under GST regime No set-off will be allowed under
other State levies It appears there will be certain
restrictions in respect of allowing set-off of Central GST against State GST or vice versa. Further Customs duty paid may not be allowed as set-off under State GST.
VAT vs GST - Preamble
VAT / Service Tax / Excise Under VAT law – Goods
are listed for the purpose of levy of taxes
Under Service Tax – Taxable services are defined
Under Excise Law – Excisable Goods are listed for the purpose of levy of taxes
GST Under CGST / SGST –
- Goods will be listed for the purpose of levy of taxes. This will be based on the HSN classification
- Services will be defined as – those which are not goods. The law will only list down the exempted services.
VAT vs GST - Registration
VAT/CST Registration
mandatory if the total turnover is in excess of Rs. 2 lakhs (Rs. 1 lakh in certain cases).
One registration number (TIN) applicable for VAT / CST / KTEG / PT.
GST Registration is mandatory
under- SGST –threshold limits will be in
the range of Rs. 10 lakhs.
- CGST – threshold limits will be in the range of Rs. 10 lakhs
Two registration numbers may be applicable – one for CGST based on PAN number and other for SGST State wise which may include KTEG / PT
VAT vs GST - Transitional Provision
VAT / CST Transitional
provisions – allowed to avail set-off only in respect of those purchases which are:
- effected within the State;
- effected within one year; and
- Lying in the closing stock
GST Transitional provisions – Set-off
may be allowed in the following manner:
- Excise duty / service tax (CENVAT credit) will be allowed only against Central GST;
- VAT will be allowed to be set-off only against State GST;
- CST paid would not be entitled for set-off;
- Credits relatable to immediately preceding 6 months or 1 year and are lying in the stock / WIP in respect of goods. Services is an issue.
VAT vs GST – Output tax / Output service
VAT Applicable on sale of
goods It is an origin based
levy
The rate of tax followed by different States are:
- 1%, 4%, 7.5%,8%, 12.5%, 20%, 2%, 5%, 15% etc
GST Applicable on both goods and services In respect of goods, the SGST levy will
be origin based whereas in respect of service tax the levy will be consumption based.
The rate of tax that may be followed by different States are:
- Central GST - 8% to 10%, 0%, 1%, 4%, 20% and exempt
- State GST - 8% to 10%, 0%, 1%, 4%, 20% and exempt.
VAT vs GST – Output tax / Output service
VAT / CST Few commodities are
subject to tax under the KST law even after VAT is introduced.
GST It appears that KST / VAT
/ CST law will continue parallelly even under the GST regime and may not be repealed till such time litigation concludes and time for revision exists.
In respect of inter-State movement of goods IGST will be introduced.
Integrated GST (IGST)
In case of inter-State movement of goods- The dealer is required to pay IGST.
- IGST will be administered by the Central Government.
- The buyer will be entitled to avail IGST as credit and can claim set-off against only CGST or IGST
VAT vs GST – Output tax / Output service
VAT / CST
The concept of HSN classification is not followed in totality.
Tax will be levied on sale price
GST It is widely expected that HSN
system of classification will be implemented only in respect of Goods but not in respect of services. Both Centre and State will list down the services which would be exempt.
The same concept will be implemented wherein the taxes will be levied on sale price. However, in respect of services, valuation rules might be considered.
VAT vs GST – Output tax / Output service
VAT / CST Declared goods under
the CST law is subject to tax at the rate of 4%
Each State has the power to exempt few commodities
C Form / Form F / Form H / Form I
GST The concept of declared
goods may be continued even under the GST regime specifically under State GST
Same may be continued even under the GST regime
Similar statutory forms will be continued in order to have control over the movement of goods from one State to another State
VAT vs GST – Output tax / Output service
VAT / CST Works contract is a
complex issue and subject to tax only in respect of goods sold.
Composition scheme is applicable for works contract
GST Possible that there will be a
different chapter itself in respect of works contract. However, each State may have its own method of levying taxes on works contract. A set-off valuation rules might be introduced in this regard.
Same may not be continued under the GST regime. However, each SGST law may have composition scheme for small dealers, subject to threshold.
VAT vs GST – Input tax / CENVAT credit
VAT / CST No set-off against
inter-State purchases
No set-off against duty paid under both Central Excise and Service Tax
No set-off against Customs duty paid
GST Set-off may be permissible in
respect of inter-State purchase – since the IGST payable in the buying State will be subject to e-clearing home mechanism.
Set-off may not be allowed in respect of customs duty under SGST.
VAT vs GST – Input tax / CENVAT credit
VAT / CST
Partial rebating is allowed in respect of goods used for both taxable and exempted
Stock transfer to a place outside the State - not liable to tax but subject to input tax restriction
GST
Partial rebating concept may be introduced even under the GST regime. There will be different formulae one needs to adopt for CGST and SGST
Major issue under the GST law more specifically concerned with stock transfer of services. It appears that there will not be any stock transfer concept under GST regime in respect of services.
VAT vs GST – Input tax / CENVAT credit
VAT / CST Input tax credit in respect of
specified capital goods is allowed immediately in few States.
Movement of capital goods from one State to another – input tax credit is allowed partially
GST IGST – set off may be
allowed over a period of time;
SGST – May vary between the States
SGST – May be allowed partially and be subject to restrictions
VAT vs GST – General Exemption
VAT / CST Sale to SEZ unit /
International Organization
Based on white paper – around 50 commodities were identified for the purpose of exemption
GST Same will continue
even under the GST regime
Similarly, States may be empowered to exempt certain commodities. In other words, goods which are exempt from State GST need not be exempted from IGST.
VAT vs GST - Administration
VAT / CST VAT / CST law –
administered by one authority
Clarification / Notification issued by the authorities / Government is applicable only in the State
GST State GST will be
administered by the State and Central GST will be by the Union.
Clarification / Notification issued by the Union in respect of Central GST may not hold good in the appropriate State and vice versa
VAT vs GST - Administration
VAT / CST Assessee / Dealer is
subject to various assessments, appeals etc.
Few States have abolished Advancing Ruling Authority
GST Even under the GST regime,
the dealer / assessee will have to undergo various assessments, appeals etc.
Advance Ruling provision may be enacted subject to certain conditions. It appears that two authorities will be constituted.
VAT vs GST - Administration
VAT / CST In respect of inter-State
transaction – CST law monitors the movement of goods and also the applicability of taxes
Checkpost is established for monitoring the movement of goods within the State
GST There will be clearing
housing mechanism which will be adopted in the GST regime for inter-State transactions.
The concept of checkpost will be continued even under GST regime