GST

Contents
• What is GST?
• Subsumed Taxes.
• Global Scenario.
• Why GST?
• Indian background.
• Features.
• Hurdles in implementation.
• Suggestion.
DCSMAT 2
 What is Goods & Services Tax?

• GST is a broad based and a single comprehensive tax levied

on goods and services consumed in an economy.

• GST paid on the procurement of goods and services can be

set off against that payable on the supply of goods or
services. But being the last person in the supply chain, the
end consumer has to bear this tax and so, in many respects,
GST is like a last-point retail tax.

DCSMAT 3
Taxes proposed to be subsumed by GST
• Value Added Tax
• Service Tax
• Central Excise
• Entertainment Tax
• Luxury Tax
• Octroi
• Lottery Tax

DCSMAT 4
 GST –Global Scenario

• More than 140 countries have already introduced GST.

• France was the first country introduced GST in 1954.

• Most of the countries follow a single GST rate.

• The standard GST rate prevail in most of the countries is

range between 15 to 20 %.

• Countries like Brazil and Canada follows dual GST system.

DCSMAT 5
 Why GST ???
• A simple tax structure with only one or two rates of taxes.

• Uniform single tax across the supply chain.

• Reduced transaction cost in the hands of the tax payers.

• Increased tax collections due to wider tax base and better

compliance.

• Improvement in international cost competitiveness of

indigenous goods and services.

• Replacing the cascading effect [tax on tax] created by

existing indirect taxes. DCSMAT 6
 Continued…
• Enhancement in efficiency in manufacture and distribution
due to economies of scale.

• GST encourages an unbiased tax structure that is neutral to

business processes, business models, organization structure,
product substitutes and geographical locations.

• The prices of commodities are expected to come down in

the long run as dealers pass on the benefits of reduced tax
incidence to consumers by slashing the prices of goods.

DCSMAT 7
 Background in India
• First effort in 2006-07 budget speech.
• In May 2007, Empowered Committee (EC) of State Finance
Ministers in consultation with the Central Government,
constituted a Joint Working Group (JWG).
• In November 2007, JWG presented its report to the
Empowered Committee.
• The Empowered committee accepted the report submitted
by the JWG.
• Finance Minister Mr. Pranab Mukherjee proposed GST for
India while presenting the union Budget on July 6, 2009.

DCSMAT 8
 Recommendations by JWG
• The JWG recommended a dual GST for India- Cental GST & state
GST
• The whole GST system will be further bifurcated into ‘Goods tax’
and ‘Services Tax’.
• Proposed a rate of 16% for the GST in India.
• Indian GST will have two components central Tax and single
uniform State Tax.
• State will tax intra state services and Centre will tax inter state
services.
• Petroleum products will remain outside the ambit of GST.
• Educational Cess and Oil cess will keep outside the GST structure.
• Octroi, stamp duty collected by state and local levels will be
outside the GST.
DCSMAT 9
 Features of GST
• Credit of tax paid on purchases would be allowed across
the supply chain
• Credit of State GST may not be allowed against Central
GST or vice versa.
• State GST paid in one State would be creditable against
State GST liability of another State.
• Requirement of ‘C’ forms and ‘F’ forms would be
abolished.
• Certain specified goods may be subject to a lower State
GST rate or be exempted.

DCSMAT 10
 Continued……..

• Manufacturers, traders and service providers having

turnover more than the threshold limit to register under
Central and State GST.
• A single Tax Identification Number (TIN) would be
allotted for both Central and State GST.
• Both Central as well as State GST would be levied at
every point of sale.

DCSMAT 11
 Hurdles in implementation

• Widespread amendments.
• Additional constitutional powers to states.
• Far reaching effects of constitutional amendments.
• Integration of services in the tax network.
• Exemptions to be decided.
• Treatment of interstate branch transfer.
• Balancing the present and future revenue of state and centre.
• Compensation to states for revenue loss.

DCSMAT 12
 Suggestions
• The dual structure should be simple to understand and
implement.

• Government should create consumer and supplier

awareness before introduction of the dual structure.

• The cost of compliance should be minimum.

• Reporting and compliance procedures should be identical

across all the States.
DCSMAT 13
 Suggestions
• The format of periodical returns should be identical across all
the States.

• Dispute settlement machinery should be uniform in all states.

• Lower level tax authorities should get proper training.

• State should have the power to control the rate of state GST
on certain items as per the conditions.

DCSMAT 14
THANK YOU………..

DCSMAT 15