GOODS AND SERVICES TAX (GST)

-CONCEPT, MODEL & EMERGING CONSENSUS -

VIVEK JOHRI JOINT SECRETARY (TRU)

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PRESENTATION PLAN
Background
Milestones Format of discussions

Economics of GST
Basic concepts Key features (Tax base, taxes to be subsumed, credit mechanism) Why GST

Politics of GST
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Constitutional provisions Administrative structure

ROAD TO GST- MILESTONES

Budget 2006-07 announcement of the intent to introduce GST by 1st April,2010

Preparation of roadmap and design- assigned to the Empowered Committee of State Finance Ministers April 2008 EC submits its report to the Central Government
October & December 2008- Central Government offers its views/ comments January 2009- Discussions on the revised report resume
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ROAD TO GST- contd.

Three Working Groups set up to examine
List of exemptions & threshold

Modalities for taxation of services

Inter-State movement of goods and services

Budget 2009-10 : FM reaffirms the Governments intent to launch GST by 1.4.2010 10th November, 2009 Empowered Committee releases its First Discussion Paper on Goods and Services Tax in India Likely to release the Second Discussion Paper by mid- December, 2009

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FORMAT OF DISCUSSIONS
Dramatis personae Empowered Committee of State Finance Ministers
Finance Ministers of all State Governments Chairperson- Dr. Asim K Dasgupta, Finance Minister of West Bengal Secretariat at New Delhi

Government of India
Department of Revenue CBEC

Stakeholders
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BASIC CONCEPTS
Origin vs. Destination principle

Consumption type VAT vs. Production or Income type

Invoice method vs. Subtraction method Cash basis vs. accrual basis

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BASIC CONCEPTS contd.

Concept of supply
Any transaction involving exchange of value? Supply of goods transfer of the right to dispose of tangible property as owner? Supply of services -Any transaction that does not constitute a supply of goods Linked to consideration treatment of consignment sales, stock transfers, job work etc.
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FEATURES OF PROPOSED GST

Dual GST having two concurrent components
Central GST levied and collected by the Centre State GST levied and collected by the States

CGST and SGST would be applicable to supply of goods and services in India Also applicable to import of goods and services Would apply to all stages of the value chain primary, secondary and tertiary including retail
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TAX TREATMENT BY ACTIVITY

VAT VAT
Central Excise + VAT/ Sales tax Manufactu ring
State taxes + Service Tax VAT + ST + State taxes Service Tax + Property taxes
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Agriculture

Forestry, fisheries and mining

Construction, Electricity, gas & Water supply

Trade, hotels, transport & communic ation

Financial services, real estate, business services, Community & social services

Public admn

GOODS AND SERVICES TAX [except alcohol (State Excise + sales tax), petroleum (Sales Tax + C Excise), electricity (electricity duty), real estate (stamp duty, property taxes)] Tobacco (under GST + Central Excise)
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FEATURES OF GST contd.

Taxes to be subsumed within GST:
Central taxes Central Excise duty Additional duties of excise Additional duties of customs (CVD & spl. CVD) Service Tax Cesses & surcharges State taxes State VAT Central Sales Tax M & T. P. excise duty Entertainment tax Luxury tax Entry tax Taxes on lottery, betting & gambling Cesses & surcharges

Barring few exemptions, the coverage would be comprehensive and it would apply to all goods and services
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FEATURES OF GST contd.

For demerit goods such as tobacco there may be an excise duty over and above the GST by the Centre Crude petroleum, petrol, diesel & ATF may be kept out Threshold exemption in both components of GST Compounding scheme for dealers having taxable turnover up to a certain threshold above the exemption. Input tax credit (ITC) of CGST for CGST and SGST for SGST would be permissible without inter-mixing
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FEATURES OF GST contd.

Exports out of India to be zero-rated for both goods and services. Tax on Inter-state supply of goods and services to be administered by the Centre Harmonization of business processes between the Centre & the States e.g. registration, return filing audit and anti-evasion with information sharing Rate structure and exemptions

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WHY GST- perceived benefits

To trade
Reduction in multiplicity of taxes Mitigation of cascading/ double taxation Development of common national market Simpler tax regime Fewer rates and exemptions Conceptual clarity (goods vs. services?)
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To Government
Simpler tax system
Broadening of tax base

Improved compliance & revenue collections

Efficient use of resources

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CONSTITUTIONAL PROVISIONS
Problem of overlapping jurisdiction of the Union and the States basic structure Placement of respective entries in the Lists primacy of union laws Constitutional mechanism to deal with
Deviations, future changes in policy, coverage etc. Guaranteed compensation to States
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ADMINISTRATIVE ISSUES
Respective Role of States & Centre Harmonization of key business processes
Registration Return filing Dispute settlement Audit, enforcement, recovery etc.

Issues around IGST

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Thank you

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