TOWARDS GST CA. SANJEEV MALHOTRA, email@example.com
Expectations from GST • Abolition of multiple types of taxes. • One or two floor rate of taxes. • Removes cascading effect. • Neutral to Business models and processes • Zero rating of exports and inter state sales. • Common law and procedure • Single administration.
Decisions till date • Dual GST structure • CGST and SGST. • Rate of tax • 16-18% total • 4% on manufacturing inputs (Desired). • Service tax levy by States.
International Experience • Canada Model • Dual GST • Central Level GST extending to all goods and Services. • In addition there is tax at Provincial level in different forms.
International Experience – Contd. • European Union (EU) Model • EU is akin to a country and nations akin to States. • All have agreed to adopt common principles to tax goods and services. • EU has only state level VAT. • Special Rules for inter member state transactions.
Central Taxes • Central GST will subsume following Central Taxes. • Central Excise Duty and AED • Additional Customs duty (in nature of countervailing duty) • CVD or other taxes (imposed on imports for level playing.) • Cess levied by Union • Surcharge levied by Union • Service Tax levied under Finance Act 1994
State Taxes • State GST will subsume the following taxes. • State VAT • Purchase Tax • State Excise duty • Entertainment tax • Luxury tax • Octroi • Entry tax in lieu of Octroi • Taxes on Lottery etc. • Tax on consumption or sale of electricity
GST Administration • CGST by Union department and SGST by State Revenue deptt. • Cases with turnover upto 1.5 crores exclusively with State Revenue deptt. • Union to deal only with Enterprises having Pan India presence. • Routine matters with State and monitoring with Union.
Inter State Sale under GST • Likely subject to tax at rates applicable to sale within State. • Input tax credit likely to be eligible in destination state. • Modalities of collection, remittance of tax and mechanism for availment of ITC yet to be worked out.
Stock transfer under GST • Likely to be same as Inter State Sale with Input tax Credit in destination State.
Imports under GST • CVD as at present to continue with Credit of CVD to importer. • Tax equal to State GST to be levied. • Modalities of tax collection and distribution are being worked out.
Exports under GST • Continue to be zero rated as at present. • Input Tax Credit will be eligible for adjustment or Refund.
Implementation Status • State Governments concern of revenue loss not addressed yet. • I.T infrastructure not ready yet. • Reqd. Constitutional amendments. • WILL THERE BE PARTIAL ROLL OUT WITH SOME STATES OPTING OUT?
Prerequisites for Success of GST • Dematerialization of Forms C and F (if not dispensed) • Single Return for Central GST and State GST. • Uniform State GST legislations. • Uniform procedures and return formats. • Tax Administration to be faceless. • Disposal of all pending work under present Acts.
Issues and Concerns • Will states continue to refund unutilised ITC ? – not likely. • Carry over of transition CENVAT / ITC. • Supply to Government / Charitable institutions. • Treatment of existing tax concessions. • Threshold limit for registration under Central and State GST. • Continuance of Composition Schemes. • Classification of Goods. • Exemption to goods and services – will it be uniform across states.
Challenges Ahead • Is Central & State Administrations ready? • Efficient computerisation essential to track & monitor inter state sale and availment of credit. – Verification Agency. • Educating officials at grass root level. • Efficient and fast system of Advance Ruling and Dispute resolution. • Educating all stake holders.
GST Transition planning – Impact Analysis • Transition will pose significant challenges to trade and industry. • Impact can not be generalised. – Needs to be analysed on individual business model. • Marginal impact on small organisations procuring and selling within State. • Impact will be substantial on organisations with multi locational operations in India.