Overview of Proposed

Goods and Services Tax

(GST) Regime in India
Aarti Saxena
Deputy Secretary (State Taxes)
Department of Revenue, Ministry of Finance
Government of India

Outline
Indias Federal Structure
The GST Vision
Salient features of proposed GST as per Constitutional Bill
Dual GST Model
IGST Model
GSTN

Brief Chronology of Events

Contentious Issues

Indias Federal Structure

Type of Government

Indirect Taxation Powers

Central Government

Manufacturing of all goods (except alcohol and

narcotics)
Services
Imports
Inter-State taxation by the levy of origin-based tax
CST

State Government

Local Bodies

Entry Tax
Octroi

Retail sale and purchase of goods

Manufacturing of alcohol
Taxes on land and property
Misc. taxes such as luxury tax, entertainment tax.

The GST Vision

Reduce distortion of prices due to tax policies
Foster a common market across the country
Distribute the burden of taxation equitably between
manufacturing and services
Lower the tax rate by broadening the tax base and reducing
exemptions
Reduce the burden on the taxpayer by eliminating cascading
of taxes at multiple levels
Simplify inter-state commerce
Encourage compliance, and discourage non-compliance

Salient features of proposed

GST as per Constitutional Bill

Dual GST Model: CGST and SGST

Integrated GST (IGST) for inter-state transactions
Input Tax Credit
PAN based taxpayer ID facilitating data exchange and taxpayer
compliance
Applicable on all transactions of goods and services made for
consideration, other then exempted goods and services.
Multiple indirect taxes to be subsumed at the Central and State level
Harmonious Tax Rates in States
Goods and Services Tax Network (GSTN)
GST Council comprising FMs of all States and headed by Union FM to
take all major decisions relating to taxes to be subsumed, rates and
exemptions

Dual GST model

Components:
Central Goods and Services Tax (CGST): GST levied and collected by
the Centre
State Goods and Services Tax (SGST): GST levied and collected by the
State/UTs
Integrated Goods and Services Tax (IGST): GST for inter state
transactions, levied and collected by the Centre

Implemented through multiple statutes at the Central and State

level, while maintaining uniformity across basic features such as
chargeability, definitions, measures of levy, classification
Concurrent jurisdictions of Centre and States for the entire value
chain and for all taxpayers
No cross utilisation of Input Tax Credit (ITC) permitted between SGST
and CGST
Taxpayer required to maintain separate CGST and SGST details in
books of account
Single Return form for both SGST and CGST

IGST Model
Centre would levy IGST (CGST + SGST) on all interstate
transactions
The Inter state seller would pay IGST on the value addition
after adjusting available credit of IGST, CGST and SGST on his
purchases
Exporting State will transfer to the Centre the credit of SGST
used in the payment of IGST
Importing dealer can claim credit of the IGST while discharging
his output tax liability in his state
Centre will transfer to the importing state the credit of IGST
used in the payment of SGST

Goods and Services Tax

Network (GSTN)
A Special Purpose Vehicle (SPV) being set up for providing
shared IT infrastructure and services to Central and State
Governments, tax payers and other stakeholders for
implementation of GST
Incorporated as non-government, non-profit private limited
company
Common portal providing three core services:
Registration
Returns
Payment

Design to respect constitutional autonomy of States

Uniformity of policy administration across Centre and States

Brief Chronology of Events

2006- 07:

Proposal first mooted in the Budget Speech for the

financial year
Negotiation with States started soon after
Apr 2008:
Empowered Committee of State Finance Ministers
(EC) engaged
Nov 2009:
EC released its First Discussion Paper
Mar 2011:
Constitution Amendment Bill on GST introduced
2012 2013: Union Finance Minister hold two meetings
with States to push GST negotiations further
Aug 2013:
Parliamentary Standing Committee submitted its
report
Recommendations of Standing Committee incorporated in the Bill
Sep 2013:
Revised Bill sent to EC for consideration
Dec 2013:
Comments of EC received
Mar 2014:
Incorporating recommendations of EC another revised
Bill sent to EC

Contentious Issues
Two main reservations of the States:
Loss of Revenue
Loss of Autonomy

Revenue Related Concerns:

Many states want commodities such as petroleum and alcohol to be
outside the purview of GST
Producing states fear that they will lose substantial revenue on
account of GST being a destination based consumption tax
Entry Tax
Taxation Rates: Revenue Neutral Rates
Quantum of compensation from Centre

Autonomy Related Concerns:

Constitution of GST Council

Dispute Settlement Authority
Compensation Mechanism
Dual Control

THANK YOU!