Introduction to GST

Introduction to Taxation
• Taxation is defined in many ways. The most commonly heard
definitions include:
• It is process by which the sovereign, through its law making body,
races revenues use to defray expenses of government.
• It is a means of government to increase its revenue under the
authority of the law, purposely used to promote welfare and
protection of its citizenry.
• It is the collection of the shares of individual and organizational
income by a government under the authority of the law.
• Taxation is the inherent power of the state to impose and demand
contribution upon persons, properties, or rights for the purpose of
generating revenues for public purpose. The power of taxation
upon necessity is inherent in every government or sovereignty.
 Origin of Taxation
• The word ‘tax’ first appeared in the English language only in the 14th
century. It derives from the Latin ‘taxare’ which means ‘to assess’. A tax
is not a voluntary payment or donation, but an enforced contribution,
exacted pursuant to legislative authority and is any contribution imposed
by government whether under the name of toll, tribute, impost, duty,
custom, excise, subsidy, aid, supply, or by any other name.
• The basis principles of taxation are nearly as old as human society itself.
• Taxes in India today are decided on by the Governments; Central, State
and Local bodies (Rural/Urban/Municipalities). The authority to levy tax
is derived from the Constitution of India which allocates the power to
levy various taxes between Centre and State.
 Purpose of Taxation
• Taxation are mainly used to finance expenses incurred by the
government to manage an economy. These expenses include:
health care, education, garbage collection and operating
government business entities.
• Taxation is also used by government for several other purpose
such as:
• Financing government spending
• Reducing gap between rich and poor
• Reducing consumption of demerit of Goods
• Controlling inflation
• Balancing of Payments
• Protecting local industries
 Indian Tax system
Central Government State Government Local Bodies
Income Tax Sales Tax Properties
Service Tax Stamp duty Octroi
Customs duties State excise Tax on Markets
Central excise Land revenue Charges on utilities and
services like water
supply, sewage disposal
Sales Tax Duty on entertainment
Tax on Professions and
Callings
 Taxes to be subsumed under GST

Central Levies State Levies

Excise Duties including the

additional excise duties VAT/ Sales tax

Cesses in the nature of Entry tax not in lieu of octroi

excise duty /customs duty
Entertainment tax (unless
Additional duties of customs levied by the local bodies)
(ie CVD and ACD) Subsumation
Luxury tax
CST to be abolished of taxes
Taxes on lottery, betting and
Service tax gambling

Cesses and surcharges Purchase tax to Cesses and surcharges

levied by Union i.e. be subsumed levied by States, related to
education cess etc supply of goods and services

• Municipal levies - likely to be out

Central GST State GST
• Stamp duty - likely to be out
• The Central Board of Revenue of Department of
Revenue is the apex body charges with the
administration of taxes. It is a part of the Ministry of
Finance which came into existence as a result of the
Central Board of Revenue Act, 1924. Initially the Board
was in charge of both direct and indirect taxes. However,
now the Board was split into two, namely the Central
Board of Direct Taxes (CBDT) and Central Board of
Excise and Customs (CBEC) with effect from January 1,
1964.
 Indirect Taxes
Excise Duty Tax charged on goods produced within the country
Customs duty & Custom duty- Tax charged on goods imported into India
Octroi (On Octroi- Tax applicable on goods entering in to municipality of any other
Goods) jurisdiction for use, consumption or sale.
Service Tax Tax on service providers on certain service transactions, but borne by
the customers.
Sales Tax Tax on the sale of goods and services. Sales can be broadly classified
into three categories (a) Inter-State Sales (b) Sales that come under
import/export © Intra-State (i.e. within the State) sales
Value Added Tax Tax on the amount by which the value of an article has been increased at
each stage of its production or distribution
Anti-Dumpling Tariff that government imposes on foreign imports that it believes are
Duty priced below fair market value.
Entertainment Tax on every financial transaction that is related to entertainment such as
Tax movie tickets, major commercial shows, exhibition, broadcasting
services, DTH services and cable services.
Stamp Duty, Taxes on the handling over of the title of property ownership by one
Registration fees, person to another
transfer tax
Entry Tax Tax imposed by some State Government for items entering to the state
boundaries ordered via E-Commerce.
 Central Excise Duty
• Central Excise duty is an indirect tax levied on those goods which
are manufactured in India and are meant for home consumption.
The taxable event is ‘manufacture’ and the liability of central excise
duty arises as soon as the goods are manufactured. It is a tax on
manufacturing, which is paid by a manufacturer, who passes its
incidence on to the customers.
• The term “manufacture” includes any process,
 Incidental or ancillary to the completion of a manufactured product
and
 Which is specified in relation to any goods in the Section or Chapter
Notes of the First Schedule to the Central Excise Tariff Act, 1985 as
amounting to manufacture or
 Which, in relation to the goods specified in the Third Schedule,
involves packing or repacking of such goods in a unit container or
labelling or re-labelling of containers including the declaration or
alteration of retail sale price on it or adoption of any other treatment
on the goods to render the product marketable to the consumer.
• As incidence of excise duty arises on production or
manufacture of goods, the law does not acquire the sale of
goods from place of manufacture, as a mandatory
requirement. Normally, duty is payable on ‘removal’ of
goods.
• The Central Excise Rules provide that every person who
produces or manufactures any ‘excisable goods,’ or who
stores such goods in a warehouse, shall pay the duty
leviable on such goods in the manner provided in rules or
under any other law.
• No excisable goods, on which any duty is payable, shall
be ‘removed’ without payment of duty from any place,
where they are produced or manufactured, or from a
warehouse, unless otherwise provided.
• The word ‘removal’ cannot be necessarily equated with sale.
• The removal may be for:
• Sale
• Transfer to depot etc.
• Captive consumption
• Transfer to another unit
• Free distribution
• Thus, it can be seen that duty becomes payable irrespective of
whether the removal is for sale or for some other purpose.
 Service Tax
• Service tax is a tax levied on services rendered
by a person and the responsibility of payment of
the tax is cast on the service provider. It is an
indirect tax as it can be recovered from the
service receiver by the service provider in
course of his business transactions.
• Service tax was introduced in India in 1994 by
Chapter V of Finance Act, 1994.
 Customs Duties
• Custom Duty is a type of indirect tax levied on goods
imported into India as well as on goods exported from
India. Taxable event is import into or export from India.
• India includes the territorial waters of India which extend
upto 12 nautical miles into the sea to the coast of India.
Export of goods means taking goods out of India to a
place outside India.
• In India, the basic law for levy and collection of customs
duty is Customs Act, 1962. It provides for levy and
collection of duty on imports and exports, import/export
procedure, prohibitions on importation and exportation of
goods, penalties, offences.
 VAT
• VAT is a tax on the final consumption of goods or
services and is ultimately borne by the consumer. It is a
multi-stage tax with the provision to allow Input tax credit
(ITC)’ on tax at an earlier stage, which can be
appropriated against the VAT liability on subsequent
sale.
• This input tax credit in relation to any period means
setting off the amount of input tax by a registered dealer
against the amount of his output tax.
• It is given for all manufacturers and traders for purchase
of inputs/supplies meant for sale, irrespective of when
these will be utilized/sold.
• The VAT liability of the dealer/manufacturer is calculated by
deducting input tax credit from tax collected on sales during
the payment period. If the tax credit exceeds the tax payable
on sales in a month, the excess credit will be carried over to
the end of next financial year. If there is any excess
unadjusted input tax credit at the end of second year, then
the same will be eligible for refund.
• VAT is basically a state subject, derived from Entry 54 of the
State list, for which the State are sovereign in taking
decisions. In India’s prevalent sales tax structure, there
have been problems of double taxation of commodities and
multiplicity of taxes, resulting in a cascading tax burden.
 Introduction to GST
• The Goods and Services Tax (GST), the biggest reform in
India’s indirect tax structure since the economy began to be
opened up 25 years ago, at last looks set to become reality.
• The reform process in indirect tax regime of India was
started in 1986 by VP Singh by introduction of Modified
Value Added Tax (MODVAT).
• However, the tax policies stayed behind and could not keep
pace with the growing economy as well as changing reality
of doing business.
• GST is expected to have a fare reaching impact, much
beyond taxes on economy and the society. Globally, GST is
acknowledge as a progressive tax regime, with inbuilt
efficiencies to broaden the tax base, decrease cascading
effect and reduce revenue leakage.
• The propose GST in India is expected to bring in uniform
tax rates and provisions to simplify the compliance
requirements across the country, supported by
automated systems and processes. A well designed GST
structure can foster common market and economic
growth.
• India has adopt a dual GST model where the central and
state governments will levy GST simultaneously, on a
common taxable value, on the supply of goods and
services.
• However, in the case of imports and interstate supplies,
an IGST shall be levied by Central Government.
• With GST, there will be a significant shift from origin-
based taxation to a destination based tax structure
impacting not only the operating business models but
also the revenues of the centre/states. GST has the
potential to impact cash flow, pricing, working capital,
supply chain and IT systems and hence provides an
opportunity to transform your business.
• GST, one of the widely accepted indirect taxation
systems prevalent in more than 160 countries, is a single
tax rate levied on the manufacture, sale and
consumption of goods & services at a national level.
 Definition: Goods & Services
• As per GST Act 2017
• Goods- Means every kind of movable property
• Includes: actionable claim, growing crops, grass
and things attached to or forming part of land.
• Excludes: money, securities
 Services
• Means anything other than goods
• Includes: activity related to the use of money or its
conversation by cash or by any other mode for which a
separate conversion is charged.
• Excludes: goods, money, securities
• GST is levied on the supply of goods and services at
each stages of the supply chain from the supplier up to
the retail stage of the distribution. Even though GST is
imposed at each level of the supply chain, the tax
element does not become part of the cost of the product
because GST paid on the business inputs is claimable.
 Assuming GST @ 18%

Manufacturer Wholesaler Retailer Consumer

Consumer
Pays 18%
Manufacture Wholesaler
Retailer GST
claims back claims back
GST from claims back
GST
suppliers. GST
• Hence, it does not matter how many stages, where a
particular goods and service goes through the supply
chain because the input tax incurred at the previous
stage is always deducted by the business at the next
stage of the supply chain.
Input Tax, Output Tax, Input Tax Credit
 Input Tax is the GST charged on the purchase of goods and
services used in the business activity. It is refunded from the
government.
 Output Tax on the other hand, is GST charged and collected on
sales/supplies of goods and services. It is paid to government.

 Input tax credit means tax input claimable by businesses

registered under GST.
 Why GST
• The introduction of GST would not only lead to the simplification of
the tax regime, but would help remove its inherent defects. Some
o the critical flaws such as the multiplicity of laws and taxes, the
cascading effect of taxes, the possibility for taxpayers to shift their
base only to take advantage of a low tax regime, among other
factors, would be addressed in due course by the new system.
• The need of GST can further be explained in the following points;
• There are various definitional issues related to manufacturing
sales, service, valuation etc. that arises. There need to be
rationalized.
• Several transactions take the character of sales as well as
services, thus there is complexity in determining the nature of
transaction.
• The mechanism of imposing taxes, exemptions, abatements and
other benefits are different in state and centre.
 Proposed Indirect Tax Structure

Intra State TaxableExcise and Service TaxLocal VAT & Other taxes
Supply will be known as CGSTwill be known as SGST

Inter State TaxableCST will be replaced by Approx. Sum Total of

Supply Integrated GST (IGST) CGST and SGST

Import From Outside Custom Duty

In Place of CVD and SAD,
India IGST will be charged
FEATURES OF PROPOSED GST
MODEL
 Features of Proposed GST
 Destination based Taxation
 Apply to all stages of the value chain
 Apply to all taxable supplies of goods or services (as against
manufacture, sale or provision of service) made for a
consideration except –
o Exempted goods or services – common list for CGST &
SGST
o Goods or services outside the purview of GST
o Transactions below threshold limits
 Dual GST having two concurrent components –
o Central GST levied and collected by the Centre
o State GST levied and collected by the States
 Features of Proposed GST contd.
 CGST and SGST on intra-State supplies of goods or services in India.

 IGST (Integrated GST) on inter-State supplies of goods or services in

India – levied and collected by the Centre.

 IGST applicable to
o Import of goods and services
o Inter-state stock transfers of goods and services

 Export of goods and services – Zero rated.

 Additional Tax of 1% on Inter State Taxable supply of Goods by State of

Origin and non CENVATABLE
 Features of Proposed GST contd.

 All goods or services likely to be covered under GST except :

o Alcohol for human consumption - State Excise plus VAT
o Electricity - Electricity Duty
o Real Estate - Stamp Duty plus Property Taxes
o Petroleum Products (to be brought under GST from
date to be notified on recommendation of GST Council)
 Tobacco Products under GST with Central Excise duty.
 Features of Proposed GST contd.

Taxes to be subsumed

Central Taxes to Subsumed State Taxes to subsumed

 Central Excise duty  State VAT / Sales Tax

(CENVAT)  Central Sales Tax
 Additional duties of  Purchase Tax
excise  Entertainment Tax (not
 Excise duty levied under levied by the local
Medicinal & Toiletries bodies)
Preparation Act  Luxury Tax
 Additional duties of  Entry Tax ( All forms)
customs (CVD & SAD)  Taxes on lottery, betting
 Service Tax & gambling
 Surcharges & Cess  Surcharges & Cess
 Features of Proposed GST contd.
 GST Rates – to be based on RNR – Four rates
– Merit rate for essential goods and services
– Standard rate for goods and services in general
– Special rate for precious metals
– NIL rate
 Floor rate with a small band of rates for standard rated goods or
services for SGST
– This is similar to mandatory guidelines which will be issued by GST
Council in line with European Directive 12/2006
 Optional Threshold exemption in both components of GST.
 Optional Compounding scheme for taxpayers having taxable turnover up
to a certain threshold above the exemption.
 HSN Code likely to be used for classification of goods.
 Present Accounting codes likely to be used for Services.
 Road to GST- Milestones

 2006, announcement of the intent to introduce GST by

01.04.2010
 November 2009 – First Discussion Paper (FDP)
released by EC on which Comments were provided by
Government of India.
 June 2010- Three sub-working Groups constituted by
Government of India on:
– Business Process related issues.
– Drafting of Central GST and model State GST
legislations.
– Basic design of IT systems required for GST in
general and IGST in particular.
 Road TO GST- Milestones contd.

 March 2011 - Constitution (115th Amendment) Bill

introduced in Parliament
 November 2012 – Committee on GST Design
constituted by EC
 February 2013 - Three Committees constituted by EC
o Dual Control, Thresholds and Exemptions in GST
regime
o RNRs for SGST & CGST and Place of Supply Rules
o IGST and GST on Imports
 March 2013- GSTN Incorporated as Section 25
Company
 Road TO GST- Milestones contd.

 June 2013- Committee constituted by EC to

draft model GST Law
 August 2013- Standing Committee on Finance
submitted Report
 April 2014- Committee constituted by EC to
examine business processes under GST
 December 2014- 122nd Constitutional
Amendment bill introduced in Parliament
 Features of Constitutional Amendment Bill

• 122nd Amendment Bill introduced in LS on 19.12.2014

• Key Features
o Concurrent jurisdiction for levy of GST by the Centre and
the States –proposed Article 246A
o Authority for Centre to levy & collection of IGST on
supplies in the course of inter-State trade or commerce
including imports – proposed Article 269A
o Authority for Centre to levy non-vatable Additional Tax –
to be retained by originating State
o GST defined as any tax on supply of goods or services or
both other than on alcohol for human consumption –
proposed Article 366(12A)
 Features of Constitutional Amendment Bill contd.
 Key Features contd.
o Goods includes all materials, commodities & articles – Article 366 (12)
o Services means anything other than goods – proposed Article 366 (26A)
o Goods and Services Tax Council (GSTC) - proposed Article 279A
 To be constituted by the President within 60 days from the coming
into force of the Constitutional Amendments
 Consists of Union FM & Union MOS (Rev)
 Consists of all State Ministers of Finance
 Quorum is 50% of total members
 Decisions by majority of 75% of weighted votes of members present
& voting
 1/3rd weighted votes for Centre & 2/3rd for all States together
 Features of Constitutional Amendment Bill contd.
 Key Features contd.
Council to make recommendations on
 Taxes, etc. to be subsumed in GST
 Exemptions & thresholds
 GST rates
 Band of GST rates
 Model GST Law & procedures
 Special provisions for special category States
 Date from which GST would be levied on petroleum products
Council to determine the procedure in performance of
its functions
Council to decide modalities for dispute resolution
arising out of its recommendations
o Changes in entries in List – I & II
o Compensation for loss of revenue to States for five years
Integrated Goods And Service Tax
(IGST)
 Integrated Goods and Service Tax (IGST)

 Basic Fundamental to discuss in IGST:

o GST in India envisaged on destination/consumption principle.
o Place of supply to determine the place where the supply of
goods/services will take place and to determine whether supplies are
inter state or intra state.
o In sub-national taxation, determining the place of supply is important
as tax revenue accrues to the State where the supply occur or deemed
to occur.
o IGST model envisage levy of IGST by the Centre on all transactions
during inter state taxable supplies.
o Tax revenues accrues to the destination/importing State based on
Place of Supply Rules.
 Integrated Goods and Service Tax (IGST) contd.

 IGST model permits cross-utilization of credit of IGST,

CGST & SGST for paying IGST unlike intra-State supply
where the CGST/SGST credit can be utilized only for
paying CGST/SGST respectively.
 IGST credit can be utilized for payment of IGST, CGST and
SGST in sequence by Importing dealer for supplies made
by him.
 IGST Model envisages that the Centre will levy tax at a rate
approximately equal to CGST+SGST rate on inter-State
supply of goods & services.
 It would basically meet the objective of providing seamless
credit chain to taxpayer located across States.
 Integrated Goods and Service Tax (IGST) contd.

 IGST model obviates the need for refunds to

exporting dealers as well as the need for every
State to settle account with every other State
 The Exporting State will transfer to the Centre the
credit of SGST used for payment of IGST
 The Centre will transfer to the importing State the
credit of IGST used for payment of SGST
 Thus Central Government will act as a clearing
house and transfer the funds across the States
 Illustration for IGST Model

 Mr. A (based in Maharashtra) supplied Goods to Mr. B (based in

Gujarat) and paid 17% IGST. Mr. A has Input credit of CGST 8% and
SGST 8% from local Purchases. So he paid only 1% to Central
Government Account i.e. in IGST code of that product. Maharashtra will
transfer to Centre 8% SGST used for payment of IGST.
 Mr. B (based in Gujarat) who had purchased those goods supplied the
same locally to Mr. C (based in Gujarat) and liable to SGST 10% and
CGST 8%. He will utilize Credit of IGST of 17% first for CGST (8%) and
balance for SGST (9%) and will pay 1% in cash. Gujarat Government
where goods are consumed is entitled to get destination based tax i.e.
SGST. Centre will transfer 9% IGST Credit used for payment of SGST to
Gujarat. In this example, few important points may be noted:
 Illustration for IGST Model

• Maharashtra Government in this transaction will not get any tax

since it is inter state supply from Maharashtra to Gujarat
• Gujarat Government will get 10% SGST for Import of Goods (9%
from central Government and 1 % paid as cash by Mr. B)
• Central Government will get 9% IGST on inter-state supply of
goods to Gujarat (8% from Maharashtra Government and 1%
paid as Cash by Mr. A)
• Important to note is that while Central Government got 9% as
tax, at the same time Mr. B (based in Gujarat) has been allowed
full credit of IGST paid by Mr. A (based in Maharashtra)
 ADVANTAGES OF IGST MODEL
For Taxpayers
• Maintenance of uninterrupted ITC chain on inter-State
transactions for dealers located across States
• No refund claim for suppliers in exporting State, as ITC
is used up while paying the Tax
• No substantial blockage of funds for the inter- State
supplier or buyer
• No cascading as full ITC of IGST paid by supplier
allowed to buyer
• Model handles ‘Business to Business’ as well as
‘Business to Consumer’ transactions
 ADVANTAGES OF IGST MODEL

For Tax Administrations

• Upfront tax payments by suppliers in exporting
State
• No refund claims on account of inter-state supplies
• Tax gets transferred to Importing State in
accordance with Destination principle
• Self monitoring model
• Result in improved compliance levels
• Effective fund settlement mechanism between the
Centre and the States
 Key Enablers for IGST

 Uniform e-Registration
 Common e-Return for CGST, SGST & IGST
 Common periodicity of Returns for a class of
dealers
 Uniform cut-off date for filing of Returns
 System based validations/consistency checks
on the ITC availed, tax refunds
 Effective fund settlement mechanism
between the Centre and the States
 Role of Dealers in GST Framework

 Every dealer has to submit one single GST

return consisting information about all his
purchases/sales at Invoice level along with
line item.
 Accordingly necessary records, registers are
to be maintained and consolidation for return
will require automation and standard
procedures.
 Role of Central/State Government in GST framework

 Central Government to act as clearing house for accounts settlement across

States.
 Handling disputes between states over jurisdictional and enforcement issues.
 Develop and maintain GSTN with best of facilities for uninterrupted flow of
credit, less litigation and facility to register, file return and in future inbuilt
other features like refund, scrutiny of returns.
 Draft model Legislation for CGST, IGST and SGST which will act as a Boundary
wall, binding in nature both on Centre and States to legislate their respective
GST Acts.
 Affix rate of SGST, within the parameters of band recommended by GST
council.
 Formulate mechanism for reconciliation of tax payments.
 Develop systems for scrutiny of returns and record of assesses for GST.
 Establish dispute resolution mechanism for issues relating to levy of GST.
 Salient features of Proposed Place of Supply Rules

 Place of Supply Rules should be framed keeping in view

the following principles:
o Rules for B2B Supplies and B2C supplies should be
different.
o Place of supply for B2B supplies should normally be the
location of recipient of goods or services and not where
services is actually performed.
o This is required to maintain smooth flow of credit. To
illustrate, Mr. A (located in Rajasthan) participates in
exhibition organized by Mr. B (located in Delhi).
Normally place of supply will be Delhi and Mr. A
located in Rajasthan will not be eligible for input tax
credit.
Salient features of Proposed Place of Supply Rules contd.

 Rules for B2B supplies should be such so that input tax

credit should be available to recipient.
 Place of Supply Rules should be guided by the principles
that tax revenue at intermediate stage does not accrue
to any tax administration as they are merely wash
transactions.
 Place of Supply Rules should be guided by the principles
that tax revenue accrues only when the goods/services
are consumed by the final consumer.
 Place of Supply Rules should take care of the situation
where intangibles are ordered from locations other than
the locations where they are consumed.
 Way Forward for Introduction of GST

 AMENDMENT BILL TO BE PASSED

o Procedure for passage of Constitutional Amendment Bill
 To be passed by 2/3rd majority in both Houses of Parliament
 To be ratified by at least 50% of the State Legislatures
 Assent by President of India
 Thereafter, GSTC to be constituted
 GSTC to recommend GST Law and procedure
 GST Law to be introduced in Parliament/ State legislatures
 GSTN (GST Network) a Section 25 Company formed to design
automation of GST in line with TINXYS/NSDL
 Key Questions before introduction of GST

Key Design issues under Discussion –

 Extent of Dual Control
 Rate structure (based on RNR)
 Exempted Goods or Services
 Exemption threshold
 Composition threshold
 Exclusion Vs. Zero rating of certain goods in GST regime
 Role of Centre / States in inter-State Trade
 Place of Supply Rules for Goods and Services
 Mechanics of IGST model
 Account settlement between the Centre and the States under IGST
model
 Key Questions before introduction of GST

Key Business processes under Discussion –

 Multiple registration within one State
 Dispute settlement over taxable and
enforcement jurisdiction
 Audit, enforcement, recovery etc.
 Revenue Neutral Rates (RNR)

 Rate which will give at-least the same level of revenue,

which the Centre and States are presently earning from
Indirect taxes.
 How to achieve this rate -- require analysis of GDP,
Consumer Consumptions, exclusion and desired level of
collection of Centre/state.
 We may derive the same by way of an illustration.
 Illustration

 Country A desires to collect Rs. 3000 Crores of revenue

from Indirect Taxes. The total Consumer Expenditure on
Purchases/services is Rs. 30000 Crores.
 Now in case taxes are applicable on every product then a
uniform rate of 10% will suffice the collection.
 In case certain products say foods, petroleum, tobacco,
electricity are excluded from tax regime and the
consumer expenditure on them is Rs. 10000 Crores, then
to achieve the same level of taxes, rate need to be 15%.
 Exclusion Vs. Zero Rated

 Exclusion while immune a product/Services from levy of

taxes on the other hand disallow the benefit of CENVAT/Input
Credit of taxes paid which in turn inflate the cost of
production/services. Buyer of these products/services while
paying this additional cost could not claim any benefit of
taxes so paid and hidden in the cost. To illustrate Electricity
company while paying 5% excise duty on coal has no option
but to add the same into cost of generation while claiming
electricity charges from a builder who in turn may have
claimed credit if such duty is charged as input taxes from him.
 Zero rated good on the other hand enable the
producer/service provider to claim the refund of input taxes
paid from department, hence will not form part of cost of
production/services.
 International Perspective in GST

 Rates and Policy issues of VAT

 Emerging Issues
o Bit Coins/Coupons
o B2C
o Online Supply of Services
o E Commerce Transactions
o Dispute Settlement between States
o Exclusions
o RNR
 Impact Areas for Businesses

 Pricing, Costing, Margins

 Supply-chain management
 Change in IT systems
 Treatment of tax incentives
 Treatment of excluded sectors
 Transaction issues
 Tax compliance
 Role of Professionals

 Tracking GST development

 Review of draft legislation and impact analysis
 Industry Consultation for improvement in
business process
 Review of final legislation and impact analysis
 Implementation assistance
 Post implementation support
 Tax Planning
 Record Keeping
 Departmental Audit
Illustration to Showcase Tax
Benefit under GST
 Present Scenario (Intra-State Trade of Goods)
State Tax = 13.31
( 11 + 1.10 + 1.21)
VAT = 12.10 VAT = 13.31
VAT = 11 ITC = ( 11) ITC = ( 12.10)
1.10 1.21

Input Manufacturer Output Manufacturer Dealer Consumer

Excise = 11
Excise = 10 ITC = (10)
1
Central Tax = 11
( 10 + 1)
Tax Invoice (B)
Tax Invoice (A) Tax Invoice (C)
Cos = 100
Value = 100 Cost = 121
Value = 110
Excise = 10 Value = 133.10
Excise = 11
VAT = 11 VAT = 13.31
VAT = 12.10
Total = 121 Total= 146.41
Total= 133.10
 GST Scenario (Intra-State Trade of Goods)
State Tax = 12.10
SGST = ( 10 + 1 + 1.10)
SGST = 11
ITC = ( 10) 12.10
SGST = 10
ITC = ( 11)
1
1.10

Input Manufacturer Output Manufacturer Dealer Consumer

CGST =
CGST = 11
12.10
CGST = 10 ITC = (10)
ITC = (11)
1
1.10 Central Tax = 12.10
Tax Invoice (C) ( 10 + 1 + 1.10)
Tax Invoice (B)
Tax Invoice (A) Cost = 110
Cost =
Value = 100 Value = 121
100
CGST = 10 CGST =
Value = 110
SGST = 12.10
CGST = 11
10 SGST =
SGST = 11
12.10
120
132
145.20
 Present Scenario (Inter-State Trade of Goods)
State Tax (X) = 11
- Refund Claim State Tax (Y) = 16.91
( 13.91 + 3)
CST = 2.42 Entry Tax
VAT = 11 ITC = ( 2.42) = 3 VAT = 13.91
0

Input Manufacturer Output Manufacturer Dealer Consumer

Excise = 11
Excise = 10 ITC = (10)
1
Central Tax = 11
Tax Invoice (B) ( 10 + 1)
Tax Invoice (C)
Cost =
Tax Invoice (A) Cost =
100
Value = 100 126.42
Value = 110
Excise = 10 Value = 139.06
Excise = 11
VAT = 11 VAT =
CST =
13.91
2.42
121
152.97
123.42
 GST Scenario (Inter-State Trade of Goods)
State Tax (X) = 1.10
( 10 - 10* + 1.10) State Tax (Y) = 12.22
SGST = ( 2.44 + 9.78**)
Add. Tax
= 1.10 12.22
SGST = 10
ITC = ( 9.78)
2.44

Input Manufacturer Output Manufacturer Dealer Consumer

IGST = 22
CGST =
CGST = (10)
12.22
CGST = 10 SGST =
IGST =
(10)
(12.22)
2 Central Tax = 12.22
Tax Invoice (B) Tax Invoice0 (C) ( 10 + 2 + 10* - 9.78**)
Tax Invoice (A) Cost = Cost = 111.10
Value = 100 100 Value = 122.21
CGST = 10 Value = 110 CGST =
SGST = IGST(20%) = 22 12.22
10 Add. Tax = SGST =
1.10 12.22
120
133.10 146.55
 Present Scenario (Intra-State Trade of Service)

Input Service Provider Output Service Provider Consumer

Service Tax = 11
Service Tax = 10 ITC = (10)
1
Central Tax = 11
( 10 + 1)
Tax Invoice (B)
Tax Invoice (A)
Cost
Value = 100
= 100 Value
Service Tax = 10 = 110
Service Tax = 11
= 110
121
 GST Scenario (Intra-State Trade of Service)
State Tax = 11
SGST = ( 10 + 1)
11
SGST = 10 ITC =(
10)
1

Input Service Provider Output Service Provider Consumer

CGST = 11
CGST = 10 ITC = (10)
Tax Invoice 1(B)
Central Tax = 11
Tax Invoice (A)
( 10 + 1)
Cost
Value = 100
= 100 Value
CGST = 110
= 10 CGST
SGST = 11
= 10 SGST
= 11
120
132
 Present Scenario (Inter-State Trade of Service)

State Tax (X) = 0 State Tax (Y) = 0

Input Service Provider Output Service Provider Agent Consumer

Service Tax =
Service Tax = 11
12.10
Service Tax = 10 ITC = (10)
ITC = (11)
1
1.10
Central Tax = 12.10
( 10 + 1 + 1.10)
Tax Invoice (B) Tax Invoice (C)
Tax Invoice (A) Cost = Cost = 110
Value = 100 100 Value = 121
Service Tax = 10 Value = 110 Service Tax =
Service Tax = 11 12.10
110
121 133.10
 GST Scenario (Inter-State Trade of Service)
State Tax (X) = 0
( 10 - 10*) State Tax (Y) = 12.10
SGST = ( 2.20 + 9.90**)
12.10
SGST = 10
ITC = ( 9.90)
2.20

Input Service Provider Output Service Provider Agent Consumer

IGST = 22
CGST =
CGST = (10)
12.10
CGST = 10 SGST =
IGST =
(10)
(12.10)
2 Central Tax = 12.10
Tax Invoice0 (C) ( 10 + 2 + 10* - 9.90**)
Tax Invoice (A) Tax Invoice (B) Cost = 110
Value = 100 Cost = Value = 121
CGST = 10 100 CGST =
SGST = Value = 110 12.10
10 IGST(20%) = 22 SGST =
12.10
120 132
145.20
 Comparison (Trade of Goods)
Sr. No. Particular Intra-State Inter-State
Present GST Present GST
1. Initial Value 121.00 120.00 121.00 120.00
2. Centre’s Tax 11.00 12.10 11.00 12.22
3. State (X)’s Tax 13.31 12.10 11.00 1.10
4. State (Y)’s Tax - - 16.91 12.22
5. State’s Total 13.31 12.10 27.91 13.32
6. Total Tax paid to Govt. 24.31 24.20 38.91 – 25.54
Refund
Claim
7. Non-Vatable Tax borne by 11.00 0.00 25.00 1.10
Business
8. Final value paid by 146.41 145.20 152.97 146.65
Consumer
 Comparison (Trade of Service)

Sr. No. Particular Intra-State Inter-State

Present GST Present GST
1. Initial Value 110.00 120.00 110.00 120.00
2. Centre’s Tax 11.00 11.00 12.10 12.10
3. State (X)’s Tax 0.00 11.00 0.00 0.00
4. State (Y)’s Tax - - 0.00 12.10
5. State’s Total 0.00 11.00 0.00 12.10
6. Total Tax paid to Govt. 11.00 22.00 12.10 24.20
7. Non-Vatable Tax borne by 0.00 0.00 0.00 0.00
Business
8. Final value paid by 121.00 132.00 133.10 145.20
Consumer