understanding goods & services tax (gst), india
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GOODS AND SERVICES TAX, INDIA
PREPARED BY:ANKITA MAHAJAN
PRESENT TAXATION SYSTEM
LIMITATIONS OF PRESENT SYSTEM
PROPOSED GST TAXATION SYSTEM
CURRENT STATUS
CONCLUSION
INTRODUCTION
AGENDA
ADVANTAGES AND DISADVANTAGES
HOW GST SOLVES PRESENT PROBLEMS
• DIRECT V/S INDIRECT TAXES• DEFINITION• SUBSUMED TAXES• GOALS• EXCLUSIONS AND ZERO-RATED
Tax
Indirect
A tax levied on the price of a good or
service
Central – Service tax, Excise, CST
State – VAT, Entry tax
Town/Municipal -
Octroi
Direct
A tax levied directly on personal or corporate
income
Income Tax
EXCLUSIONS• ALCOHOL FOR HUMAN CONSUMPTION –
STATE VAT PLUS EXCISE WOULD LEVY• ELECTRICITY – ELECTRICITY DUTY WOULD
LEVY• REAL ESTATE – STAMP DUTY PLUS
PROPERTY TAX• PETROLEUM PRODUCTS – WOULD BE
APPLICABLE FROM A DATE IN FUTUREZERO-RATED• EXPORTED GOODS AND SERVICESCONCESSIONAL THRESHOLD• TAXPAYERS WITH A TURNOVER BELOW A
COMMON THRESHOLD, (RS 5 LAC FOR NORTH-EAST AND RS 10 LAC FOR OTHERS), WOULD BE EXEMPTED FROM GST
• Empowered Committee of State Finance Ministers (EC) was requested to design road-map and structure of GST
• GST was first mooted in Budget of 2006-07• First Discussion Paper (FDP) on GST
was released in November, 2009• Objectives:
Elimination of cascading effect of taxes
Simplification of tax-compliance
INTRODUCTIONGoods and Services Tax (GST) is a nationwide comprehensive, value-added, indirect tax that will be levied on sale, manufacturing and consumption of goods and services, from April 2016. It will subsume the following:
PRESENT TAXATION SYSTEM
TAX STRUCTURE
DIRECT TAX
INCOME TAX
INDIRECT TAX
CENTRAL TAX
EXCISE
SERVICE TAX
CUSTOM
STATE TAX
VAT/SALES/CST
ENTRY TAX, LUXURY TAX, LOTTERY TAX,
ETC.
PRESENT TAXATION SYSTEM• CASCADING EFFECT OF TAXES• INTRODUCTION OF VAT: TO REDUCE CASCADING• SET-OFF OR TAX-CREDIT: “OUTPUT-MINUS-INPUT”
VAT-TO-VAT CST-TO-CST EXCISE/SERVICE-TO-EXCISE/SERVICE
• SELLER A ADDS SALES TAX AT 10% AND SELLS GOODS WORTH RS 100 TO B AT RS 110 (100+10).
• B ADDS SALES TAX ON PURCHASE PLUS PROFIT, AND RE-SELLS TO C AT RS 132 (100+10+10+12).
• TAX-LIABILITY OF A IS RS 10 AND B IS RS 12
CASCADING EFFECT(Tax-on-tax)
Tax-Paid-to-A
TAX-LIABILITY OF A IS RS 10 AND B IS RS 2
LIMITATIONS OF PRESENT TAX SYSTEM
CROSS-UTILIZATION OF CREDITS BETWEEN
STATE AND CENTRAL TAXES
NO TAX CREDIT FOR INTER-STATE TRADE
DEPOSIT TAX, IRRESPECTIVE OF
PAYMENT
COMPLIANCE COST AND ADMINISTRATION
DIFFICULTIES
FILE MULTIPLE RETURNS
LACK OF IT INFRASTRUCTURE
HOW GST SOLVES PRESENT PROBLEMS
UNIFIED AND
COMPREHENSIVE
SIMPLIFY TAX STRUCTURE
CROSS-UTILIZATION
ADMINISTRATIVE
CONVENIENCEREDUCE
COMPLIANCE COST
FILE A SINGLE RETURN
VALUE-ADDED
CHARGEABLE AT EACH
TRANSACTION
DIRECT SALES
STOCK TRANSFER
DESTINATION-BASED,
CONSUMPTION TAX
TAXABLE EVENT IS “SUPPLY”NOT SALES,
MANUFACTURE OR RENDER
GST
PROPOSED GST TAXATION SYSTEM
TAX STRUCTURE
DIRECT TAX
INCOME TAX
INDIRECT TAX = GST (EXCEPT
CUSTOMS)
INTRA-STATE
CGST (CENTRAL)
SGST (STATE)
INTER-STATE
IGST (CENTRAL)
PROPOSED GST TAXATION SYSTEMSALE IN ONE STATE, RE-SALE IN THE SAME STATE
PROPOSED GST TAXATION SYSTEMSALE IN ONE STATE, RE-SALE IN ANOTHER STATE
PROPOSED GST TAXATION SYSTEMSALE OUTSIDE THE STATE, RE-SALE IN THAT STATE
ADVANTAGES OF GST
GST
CROSS UTILIZATION
LESS MFT COST
IMPORT & EXPORT
INDUSTRIAL GROWTH
MONITORING
TAX COMPLIANC
E
LESS PRICES
MORE REVENUE
CHALLENGES
CHALLENGES
ADMINSTRATIVE
STATE RESISTANCE
POLITICALIT
INFRASTRUCTU-RE
EXEMPTIONS
CURRENT STATUS & WAY FORWARD
THE GST 122ND CONSTITUTION AMENDMENT BILL PASSED BY LOK SABHA
PROPOSED STANDARD GST RATE 27%
CURRENTLY TABLED IN RAJYA SABHA
GST COUNCIL (GSTC) TO BE CONSTITUTED
GST NETWORK TO BE GIVEN AUTONOMY
CONCULSION
INVESTMENT & EMPLOYMENTSIMPLIFICATION OF TAXESINDUSTRIAL GROWTHINCREASE IN TAX BASE
GDP GROWTH
QUESTIONS
THANK YOU
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