Description
Describing what is good and services tax (GST), why is it required, benefits of GST, basic structure of GST, impact of GST on various states.
Indirect Taxation - Goods and Service Tax
Submitted by : Biswadeep Ghosh MBA –II , Finance 31262
Why a new indirect tax regime
• 1990s marked the beginning of new era of economic policy after formally moving away eschewing Nehruvian socialistic pattern of economy. New economic and industrial policy spurred the growth and India could shed its stereotype image of Hindu growth rate. reforms in almost all sectors of Economy this led to rapid growth in all the sectors but indirect tax regime remained one area where minimum amount of reform was made. With the high growth rate, there is a great need to change the overall system Present regime is marked by plethora of taxes collected both by States and the Centre. This system of taxation is cumbersome, complicated and taxing as well as unfriendly to honest tax payers.
•
• •
What is GST
• 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.
Why GST
1. The introduction of GST is likely to rationalize irrational, complicated, cumbersome and multiple indirect tax. It will help stop pilferage and also off load the over loaded tax burden from some organizations. Improve the tax collection by efficient agency based on scientific and rational system of assessment rather than current scenario which is largely affected by corruption Better management of refunding of taxes and hence savings which is a boon for honest taxpayers
2.
3.
Why GST(contd)
4 . Taxes to be levied at the destination which would make the system less distorting and non-complicated. The current system involves cumbersome process of assessment and primitive ways of collection which ultimately leads to encourage tax evasion and also increase cost of commodities. 5. Introduction of GST would certainly increase the volume of the tax collection and also put India at par with many major economies of the world.
Some Facts about GST.
• The goods and services tax (GST) is a comprehensive value-added tax (VAT) on goods and services. • France was the first country to introduce this system in 1954 and is spread over 140 countries • Many countries have a unified GST system. However, countries like Brazil and Canada follow a dual system wherein GST is levied by both federal and state or provincial governments. • In India, 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. • The central and state governments are discussing the GST system proposed to be implemented in India from April 1, 2010.
GST in India
• The effort to introduce the new tax regime was reflected, for the first time, in 2006-2007 Union Budget Speech. • The then Finance Minister Mr. P. Chidambaram remarked that there is a large consensus that the country must move towards a national level GST that must be shared between the centre and the states. • He proposed 1 April, 2010 as the date for introducing GST. After successful introduction of Value Added Tax (VAT) in almost all the states and continuous increase in number of services under the service tax net.
• Finance Minister Pranab Mukherjee while presenting the Budget on July 6, 2009, said that GST would come into effect from April 2010.
Benefits of CGST
The result of implementing CGST would be simple and transparent tax structure with only one or two rates of taxes.
• Reduction in the number of taxes at the Central and state levels. (central excise duty , service tax, and additional duties of customs at the Central level; and value-added tax, central sales tax, entertainment tax, luxury tax, octroi, lottery taxes, electricity duty, state surcharges related to supply of goods and services and purchase tax at the state level) • Cut in effective tax rate for many goods. (The rate is expected to be in the range of 14-16 %. Once the total GST rate is determined, the states and the Centre have to agree on the CGST and SGST rates.) • Removal of the current cascading effect of taxes. (Today, services are taxed at 10% and the combined incidence of indirect taxes on most goods is around 20%) • Reduction of transaction costs for taxpayers through simplified tax compliance. • Increased tax collections due to wider tax base and better compliance.
Basic Structure of GST
• ‘Central GST’ and ‘State GST’ to operate in a parallel fashion.
•
• •
Both Central and State GST to be further bifurcated into ‘Goods Tax’ and ‘Services Tax’.
The proposed rate of GST in India is 16%. Tax to be subsumed by GST
• • • • • • • Value Added Tax Service Tax Central Excise Entertainment Tax Luxury Tax Octroi Lottery Tax
How will the dual structure work?
• • • • • • • • Central GST and State GST would be levied on different services. State GST would be levied on services of ‘local nature’. Single periodical return would be filed under the dual structure. Export of goods and services would be zero rated, meaning exporters of goods and services need not pay GST on their exports.GST paid by them on the procurement of goods and services will be refunded. Any economic activity which is not supply of goods is supply of services. All services to be taxed with few exceptions. Central GST on services relatively easy to collect. State GST on services will be far more complex – particularly on cross border services.
•
•
Cross border Services
Taxed at the place of consumption of services
Contd……
• • GST paid on imports (goods as well as services) would be available as credit. Input tax Credits ( ITC) – full credits under the Central and the State GST that will operate in parallel – cross utilization of credits between Central GST and State GST not permitted – refund of unutilized accumulated ITC. Inter-State transactions – goods to be taxed in the destination/importing State – services to be taxed in the State of consumption – zero rating in the originating State Difficult to determine the actual place of effective use/enjoyment of services. Rules for place of supply of services to be framed. Currently no uniform practice exists. Administrative convenience & convenience of the trade & industry to be factored to determine the place of collection of service tax.
•
• • • •
Impact to Various States
• Consumption-based tax, dual GST will result in better revenue collection for states with higher consumption of goods and services. Backward and less-developed states would see fall in collections. The Centre is expected to put in place a mechanism to compensate states for any revenue loss due to GST. Before it’s implementation the states need to Centre and states have to sort out issues like agreement on GST rates, constitutional amendments empowering states to tax services, taxation on inter-state transactions of goods and services, drafting of CGST and SGST laws etc.
•
•
Thank You
doc_582449736.pptx
Describing what is good and services tax (GST), why is it required, benefits of GST, basic structure of GST, impact of GST on various states.
Indirect Taxation - Goods and Service Tax
Submitted by : Biswadeep Ghosh MBA –II , Finance 31262
Why a new indirect tax regime
• 1990s marked the beginning of new era of economic policy after formally moving away eschewing Nehruvian socialistic pattern of economy. New economic and industrial policy spurred the growth and India could shed its stereotype image of Hindu growth rate. reforms in almost all sectors of Economy this led to rapid growth in all the sectors but indirect tax regime remained one area where minimum amount of reform was made. With the high growth rate, there is a great need to change the overall system Present regime is marked by plethora of taxes collected both by States and the Centre. This system of taxation is cumbersome, complicated and taxing as well as unfriendly to honest tax payers.
•
• •
What is GST
• 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.
Why GST
1. The introduction of GST is likely to rationalize irrational, complicated, cumbersome and multiple indirect tax. It will help stop pilferage and also off load the over loaded tax burden from some organizations. Improve the tax collection by efficient agency based on scientific and rational system of assessment rather than current scenario which is largely affected by corruption Better management of refunding of taxes and hence savings which is a boon for honest taxpayers
2.
3.
Why GST(contd)
4 . Taxes to be levied at the destination which would make the system less distorting and non-complicated. The current system involves cumbersome process of assessment and primitive ways of collection which ultimately leads to encourage tax evasion and also increase cost of commodities. 5. Introduction of GST would certainly increase the volume of the tax collection and also put India at par with many major economies of the world.
Some Facts about GST.
• The goods and services tax (GST) is a comprehensive value-added tax (VAT) on goods and services. • France was the first country to introduce this system in 1954 and is spread over 140 countries • Many countries have a unified GST system. However, countries like Brazil and Canada follow a dual system wherein GST is levied by both federal and state or provincial governments. • In India, 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. • The central and state governments are discussing the GST system proposed to be implemented in India from April 1, 2010.
GST in India
• The effort to introduce the new tax regime was reflected, for the first time, in 2006-2007 Union Budget Speech. • The then Finance Minister Mr. P. Chidambaram remarked that there is a large consensus that the country must move towards a national level GST that must be shared between the centre and the states. • He proposed 1 April, 2010 as the date for introducing GST. After successful introduction of Value Added Tax (VAT) in almost all the states and continuous increase in number of services under the service tax net.
• Finance Minister Pranab Mukherjee while presenting the Budget on July 6, 2009, said that GST would come into effect from April 2010.
Benefits of CGST
The result of implementing CGST would be simple and transparent tax structure with only one or two rates of taxes.
• Reduction in the number of taxes at the Central and state levels. (central excise duty , service tax, and additional duties of customs at the Central level; and value-added tax, central sales tax, entertainment tax, luxury tax, octroi, lottery taxes, electricity duty, state surcharges related to supply of goods and services and purchase tax at the state level) • Cut in effective tax rate for many goods. (The rate is expected to be in the range of 14-16 %. Once the total GST rate is determined, the states and the Centre have to agree on the CGST and SGST rates.) • Removal of the current cascading effect of taxes. (Today, services are taxed at 10% and the combined incidence of indirect taxes on most goods is around 20%) • Reduction of transaction costs for taxpayers through simplified tax compliance. • Increased tax collections due to wider tax base and better compliance.
Basic Structure of GST
• ‘Central GST’ and ‘State GST’ to operate in a parallel fashion.
•
• •
Both Central and State GST to be further bifurcated into ‘Goods Tax’ and ‘Services Tax’.
The proposed rate of GST in India is 16%. Tax to be subsumed by GST
• • • • • • • Value Added Tax Service Tax Central Excise Entertainment Tax Luxury Tax Octroi Lottery Tax
How will the dual structure work?
• • • • • • • • Central GST and State GST would be levied on different services. State GST would be levied on services of ‘local nature’. Single periodical return would be filed under the dual structure. Export of goods and services would be zero rated, meaning exporters of goods and services need not pay GST on their exports.GST paid by them on the procurement of goods and services will be refunded. Any economic activity which is not supply of goods is supply of services. All services to be taxed with few exceptions. Central GST on services relatively easy to collect. State GST on services will be far more complex – particularly on cross border services.
•
•
Cross border Services
Taxed at the place of consumption of services
Contd……
• • GST paid on imports (goods as well as services) would be available as credit. Input tax Credits ( ITC) – full credits under the Central and the State GST that will operate in parallel – cross utilization of credits between Central GST and State GST not permitted – refund of unutilized accumulated ITC. Inter-State transactions – goods to be taxed in the destination/importing State – services to be taxed in the State of consumption – zero rating in the originating State Difficult to determine the actual place of effective use/enjoyment of services. Rules for place of supply of services to be framed. Currently no uniform practice exists. Administrative convenience & convenience of the trade & industry to be factored to determine the place of collection of service tax.
•
• • • •
Impact to Various States
• Consumption-based tax, dual GST will result in better revenue collection for states with higher consumption of goods and services. Backward and less-developed states would see fall in collections. The Centre is expected to put in place a mechanism to compensate states for any revenue loss due to GST. Before it’s implementation the states need to Centre and states have to sort out issues like agreement on GST rates, constitutional amendments empowering states to tax services, taxation on inter-state transactions of goods and services, drafting of CGST and SGST laws etc.
•
•
Thank You
doc_582449736.pptx