A BRIEF ON GST BILL

Historical background
GST was first recommended by Kelkar Task Force on implementation of Fiscal
Reforms and Budget Management Act 2004 but the First Discussion Paper on Goods
and Services Tax in India was presented by the Empowered Committee of State
Finance Ministers dtd.10th Nov.10th, 2009.

In 2011, the Constitution (115th Amendment) Bill, 2011 was introduced in

Parliament to enable the levy of GST. However, the Bill lapsed with the dissolution
of the 15th Lok Sabha.

Subsequently, in December 2014, the Constitution (122nd Amendment) Bill, 2014

was introduced in Lok Sabha. The Bill was passed by Lok Sabha in May 2015 and
referred to a Select Committee of Rajya Sabha for examination.

Definition
GST

is a tax on goods and services with value

addition at each stage having comprehensive
and continuous chain of set of benefits from
the producers / service providers point up to
the retailers level where only the final
consumer should bear the tax.

OBJECTIVE

One Country - One Tax

Consumption based tax instead of Manufacturing

Uniform registration, payment and Input Credit

To eliminate the cascading effect of Indirect taxes on single transaction

Subsume all indirect taxes at Centre and State Level under

Reduce tax evasion and corruption

Increase productivity

Increase Tax to GDP Ratio and revenue surplus

Increase Compliance

Reducing economic distortions

Regulatory Framework

A new set up by Government of India named as GST Council.

The GST Council consists of

(a)

the Union Finance Minister (as Chairman),

(b)

(b) the Union Minister of State in charge of Revenue or Finance, and

(c)

(c) the Minister in charge of Finance or Taxation or any other Minister,

nominated by each state government.

All decisions of the GST Council will be made by three fourth majority of the
votes cast; the centre shall have one-third of the votes cast, and the states
together shall have two-third of the votes cast.

Action Plan of GST Council

List number of Taxes, cesses, and surcharges to be subsumed under GST

Preparation of list of goods and services subject to, or exempt from GST

Determination of threshold limit of turnover for application of GST

Fixation of rates

Preparation of model GST Laws, principles of levy, apportionment of tax

benefits

Firming up Place of supply Rules

Recommend on Compensation to states losing on revenue post

implementation of GST, subject to maximum time limit of 5 years.

SCOPE OF GST

All goods and services are covered under GST Regime except Alcoholic liquor
for Human Consumption,

Tobacco Products subject to levy of GST and Centre may also levy excise duty

GST Council yet to decide the incidence and levy of GST on following;

a)

Crude Petroleum

b)

High Speed Diesel (HSD)

c)

Motor Spirit (Petrol)

d)

Natural Gas

e)

Aviation Turbine Fuel

Key changes between the current Tax Structure and proposed

GST Regime
SL.

Particulars

Current Scenario

GST Scenario

1)

Structural
Difference

a) Central Taxes:-Central
Excise/Custom Duty,
Central Sales Tax on
Goods and Service Tax
charged on Services,
Surcharge & Cess
b) State Taxes-State Vat,
Sales Tax Deducted at
Source, WCT, Luxury
Tax, Entertainment Tax,
Tax on Lottery,
Surcharge & Cess

A dual layered tax system

with both Central and State
GST levied on same base on
all the goods and services
except Petroleum ,High
Speed Diesel, Motor spirit
and Natural Gas to be
brought at a later date,
subject to recommendation
of GST Council.

2)

Basis of Levy

Taxable at the place of

a) Manufacture/Sale of
goods,
b) Rendering of services

Taxable at the place of

Consumption, a destination
based tax

SL.

Particulars

Current Scenario

GST Scenario

3)

Registration

Decentralised registration
under Central and State
Authorities

Uniform E-Registration
process based on PAN of
Entity

4)

Procedures for
Collection of
Tax and Filing
of Returns

Central Excise and Service

Tax-Uniform,
VAT-Varies from State to
State and

Uniform process and

common dates for
collection/deposit of tax and
filing of returns

5)

Validation and
of Challan/
Returns,
Input Credit
and Payment of
Tax

Part validation by system,

full verification subject to
assessments by relevant
Central/State authorities

System based validation and

consistency checks on Input
Credit availed, utilisation
and Tax Payments

SL.

Particulars

Current Scenario

GST Scenario

5)

Excise Duty

Excise Duty charged up to

the point of Manufacturing

Replaced by CGST (Central

Goods and Service Tax, to be
charged up to Retail Level

6)

Basic Customs
Duty

In case of Import, taxed by

Centre under separate act

No Change

7)

Countervailing
Duty/Special
Additional Duty

In case of Import, taxed by

Centre, separately

To be subsumed under GST

(CGST)

8)

Service Tax

Charged by Centre on list of

Services under Finance Act
on Payment/Provision Basis

To be subsumed under SGST

(State Goods and Service
Tax), based upon Place of
Supply Rules

SL.

Particulars

Current Scenario

GST Scenario

9)

Central Sales
Tax (CST)

Applicable at concessional
rate of 2% on inter-state
transfers against C-Forms,
otherwise full rate i.e. 5%
to 14.5%

To be subsumed in IGST
(Integrated Goods and
Service Tax)

10)

State VAT

Except exempt items, all

goods are taxed

Subsumed in SGST (State

Goods and Service Tax)

11)

Entry Tax

Currently being charged by

selected states for
interstate transfers, held as
import in local area

No entry tax, Additional 1%

of Tax to be levied on interstate supply of selected
goods, list yet to be finalised

12)

Tax on Export
of Goods and
Services

Exempt/Zero rated

No Change

SL.

Particulars

Current Scenario

13)

Tax on Inter
Exempt against Form F
State Transfer
of Goods to
Branch or Agent

To be taxable but full credit

available to dealers

14)

Tax on Transfer Generally Exempt; Depends

of Goods to
Upon State Procedures
Branch or Agent
within State

Might Be taxable , Unless TIN

of Transferor and Transferee
is same

15)

Cascading
Effect

Credit available on the full

amount of taxes up to
retailer

16)

Cross Set-Off of Currently set-off of Excise

Levy
duty and Service tax is
allowed

Credit between Excise Duty

& Service Tax available, but
no set-off against VAT on
Excise Duty

GST Scenario

No cross Set-off between

CGST and SGST

SL.

Particulars

Current Scenario

GST Scenario

17)

Cascading
Effect

Credit between Excise Duty

& Service Tax available, but
no set-off against VAT on
Excise Duty

Credit available on the full

amount of taxes up to
retailer

18)

Disallowance of
Credit on
selected items

There are certain nonNo such disallowance, unless

creditable goods and services specified by GST Council
under both VAT & CENVAT
Rules

19)

Disallowance of Not Allowed

inputs/input
services used in
Exempted
Goods /Services

No such disallowance, unless

falling under the Negative
List which is yet to be
finalised by GST Council

SL.

Particulars

Current Scenario

GST Scenario

20)

Exemptions
Excise Free
Zone, VAT
Remissions

Some areas enjoy status of

Excise/Vat Exemptions i.e.
North East, Himachal

No such Exemptions,
Investment Refund Scheme
(IRS) may be introduced for
existing zones based upon
recommendations of GST
Council

21)

Levy of Tax on
Government
Bodies, NGOs

Certain Govt. bodies, PSUs

and Non-for-profit bodies
covered

Not Changed

22)

Threshold
Limits for levy
of Tax

a) Central Excise-1.5 Crores

b) VAT-Varies from Rs. 5 to
20 Lacs from state to
state
c) Service Tax- Rs.10 Lacs

CGST-Limits to be decided
SGST-Rs.10 Lacs to 20 Lacs as
recommended by GST
Council

SL.

Particulars

Current Scenario

GST Scenario

23)

Exemptions
Excise Free
Zone, VAT
Remissions

Some areas enjoy status of

Excise/Vat Exemptions i.e.
North East, Himachal

No such Exemptions,
Investment Refund Scheme
(IRS) may be introduced for
existing zones based upon
recommendations of GST
Council

24)

Levy of Tax on
Government
Bodies, NGOs

Certain Govt. bodies, PSUs

and Non-for-profit bodies
covered

Not Changed

25)

Threshold
Limits for levy
of Tax

a) Central Excise-1.5 Crores

b) VAT-Varies from Rs. 5 to
20 Lacs from state to
state
c) Service Tax- Rs.10 Lacs

CGST-Limits to be decided
SGST-Rs.10 Lacs to 20 Lacs as
recommended by GST
Council

Tax layers under proposed GST Model

It is a Dual-GST structure proposal wherein the Central Government and State
Government will simultaneously charge GST on the same economic supply
Inter-state transactions or supplies to be charged an Integrated GST (IGST) which is a
combination of Central-GST (CGST) and State-GST (SGST) rates
Unique input tax credit mechanism; as illustrated below:
CGST Credits
SGST Credits of State A
IGST Credits

CGST Liability
SGST Liability of State A
IGST Liability OR
CGST Liability OR
SGST Liability of State A

Comparative Analysis (Intra-State Trade)

(Assumed Rates for Excise Duty, CGST & SGST @12%, VAT @12.5%)

Transaction

Current Scenario
(Amt. in Rs.)
100
25
125
15
18

GST Scenario
(Amt. in Rs.)
100
25
125
15
15

158
100

155
100

Cost of Raw Materials to Input Manufacturer

Profit Margin @ 25%
Assessable Value
Add: Excise Duty @12% I CGST @ 12%
Add: VAT@12.5% I
SGST@12%
Invoice Value (Input Manufacturer to Output
Manufacturer)
Cost of Goods to Output Manufacturer (Net of ITC)
Add: Value Addition @ 40% on Cost (incl. of Profit
Margin)
Assessable Value (Manufacturer to Wholesaler)
Add: Excise Duty @12% I CGST @ 12%
Add: VAT@12.5% I
SGST@12%
Invoice Value (Manufacturer to Wholesaler)
Cost of Goods to Wholesaler (Net of ITC)
Add: Profit Margin of Wholesaler @10%
Add: Excise Duty @12% I CGST @ 12%
Add: VAT@12.5% I
SGST@12%
Invoice Value (Wholesaler to Retailer)
Cost of Goods to Retailer (Net of ITC)
Add: Profit Margin of Retailer @10%
Add: Excise Duty @12% I CGST @ 12%
Add: VAT@12.5% I
SGST@12%
Final Price to be paid by Consumer
Cost Saving

40
140
16.80
19.60
176.40
156.80
15.68
0.00
21.56
194.04
172.48
17.25
0.00
23.72
213.44
to Consumer

40
140
16.80
16.80
173.60
140.00
14.00
18.48
18.48
190.96
154.00
15.40
20.33
20.33
210.06
3.39

Comparative Analysis (Inter-State Trade)

(Assumed Rates for Excise Duty, CGST & SGST @12%, CST @ 2% each)
Transaction

Current Scenario
(Amt. in Rs.)
90
10
100
12
14
126.00
100

Cost of Raw Materials to Input Manufacturer

Profit Margin Rs.10
Assessable Value
Add: Excise Duty @12% I CGST @ 12%
Add: Vat 12.5% I
SGST@12%
Invoice Value (Input to Output Manufacturer)
Cost of Goods to Output Manufacturer (Net of ITC)
Add: Value Addition @ 40% on Cost (incl. of Profit
Margin)
Assessable Value (Manufacturer to Wholesaler)
Add: Excise Duty @12% I CGST @ 12%
Add: CST@2% I
IGST@24%
Add: Additional Tax @1%
Invoice Value (Manufacturer to Wholesaler)
Cost of Goods to Wholesaler (Net of Input Credit)
Add: Profit Margin of Retailer @10%
Add: Excise Duty @12% I CGST @ 12%
Add: VAT@12.5% I
SGST@12%
Invoice Value (Wholesaler to Retailer)
Cost of Goods to Retailer (Net of Input Credit)
Add: Profit Margin of Retailer @10%
Add: Excise Duty @12% I CGST @ 12%
Add: VAT@12.5% I
SGST@12%
Final Price to be paid by Consumer
Cost Saving

40
140
16.80
3.14
0
159.94
159.94
15.99
0
21.99
181.93
175.93
17.59
0
24.19
217.71
to Consumer

GST Scenario
(Amt. in Rs.)
90
10
100
12
12
124
100
40
140
0
33.60
1.40
175.00
141.4
14.14
18.66
18.66
178.73
155.54
15.55
20.53
20.53
212.16
5.56

Transactions
between Input &
Output
Manufacturer within
State A

Transactions
between Output
Manufacturer from
State A to
Wholesaler in
State B

Transactions
between Wholesaler
and Retailer within
State B

Current Scenario - Tax Implications against Sales and Stock Transfers by an MNC
(Assumed Rates for Excise Duty @12%, VAT@12.5%, CST @ 2% each)

Particulars
Purchase of Raw & Packing Materials 20000 Kgs. @ Rs.50
18000 Kgs. (Intra-state)
2000 Kgs. (Inter-State)

Input Credit of Excise on Intra-State Purchase @ 12%

Input Credit of VAT on Intra-State Purchase @ 12.5%
Input Credit of Excise on Interstate Purchase @ 12%
Input Credit of CST on Inter-state Purchase 2%

FG sold within State-A (200 Kgs. @ Rs.75 )

Excise Duty Payable @ 12%
VAT Payable @ 12.5%

FG Stock Transfer to State -B (17000 Kgs. @ Rs.65 (TDR))

Excise Duty Payable @ 12%
VAT Payable @ 12.5% on Local Sales by Depot
Reversal of ITC of VAT (ITC x 3/12.5)

FG Inter-State Sales to State -C (2800 Kgs. @ Rs.75 )

Excise Duty Payable @ 12%
CST @ 2%

Net Excise Duty Payable after Cenvat Credit

Net VAT Payable after Vat Input Credit
Net CST Payable after CST Input Credit
Net Liability of Duties & Taxes

Basis

Amt. (in Rs.)

A
B

C=A x 12%
D=A x 12.5%
E=B x 12%
F=B x 12%

G
H=G x 12%
I =G x 12.5%

J
K=J x 12%
L=J x 12.5%
M= D x 3/12.5

N
O=N x 12%
P=N x 2%

Q=(H+K+O-C)
R=(I+L+M-D)
S=(P-F)
T=(Q+R+S)

1000000
900000
100000

108000
126000
12000
2240

15000
1800
2100

1105000
132600
159375
30240

210000
25200
4704

39600
65715
2464
107779

GST Scenario - Tax Implications against Sales and Stock Transfers by an MNC
(Assumed Rates for SGST & CGST @12%, IGST @ 24%, Add. Tax @ 1%)

Particulars
Basis
Purchase of Raw & Packing Materials 20000 Kgs. @ Rs.50

18000 Kgs. (Intra-state)

A
2000 Kgs. (Inter-State)
B
Input Credit of CGST on Intra-State Purchase @ 12% C = A x 12%
Input Credit of SGST on Intra-State Purchase @ 12%
D=A x 12%
Input Credit of IGST on Inter-State Purchase@ 24% E = B x 24%
Additional Tax @1% on Inter-State Purchase
F = B x 1%
Total Credit of GST Available to Unit-A G = (C+D+E)

FG sold within State-A (200 Kgs. @ Rs.75 )

H
CGST Payable @ 12% I=(H x 12%)
SGST Payable @ 12% J=(H x 12%)
FG Stock Transfer to State -B (17000 Kgs. @ Rs.65 (TDR))
K
IGST Payable @ 24%
L =K x 24%
Additional Tax@1%
M= K x 1%
FG Inter-State Sales to State -C (2800 Kgs. @ Rs.75 )
N
IGST Payable @ 24%
O=N x 24%
Additional Tax@1%
P=N x 1%

Balance of CGST Input Credit to be adjusted against IGST

Q= C - I
Payable
Balance of SGST Input Credit to be adjusted against IGST
R= D - J
Payable

Net IGST Payable against Stock transfers and Interstate

S=(I+J+L+O-G)
Trade
Non-Vatable Add. Tax to be retained by respective State
T

Amt. (in Rs.)

1000000
900000
100000
108000
108000
24000
1000
240000

15000
1800
1800
1105000
265200
11050
210000
50400
2100

106200
106200

79200

THANK YOU