goods and services tax
DESCRIPTION
One of the biggest taxation reforms in India -- the Goods and Services Tax (GST) -- isall set to integrate State economies and boost overall growth. GST will create asingle, unified Indian market to make the economy stronger. The implementation ofGST will lead to the abolition of existing taxes such as excise duty, service tax,Central Sales Tax, State-level sales tax, octroi, turnover tax, etc. thus avoidingmultiple layers of taxation that currently exist in India.Another reason to go the GST way is to facilitate seamless credit across the entiresupply chain and across all States under a common tax base. Introduction of GSTwould also rationalize tax content in product price, enhance the ability of companiesto compete globally, and possibly trickle down to benefit the ultimate consumer.ICAI plays a key role in disseminating information regarding upcoming reforms inthe economy. This is done with the help of various programmes, seminars, webcasts,background material, manuals etc. In order to get well versed with the Goods andServices Tax (GST), the Indirect Taxes Committee of ICAI has come up with a“Background Material on GST”. The material covers various nitigrities connectedwith Goods and Services and addresses many questions, apprehensions of membersand otherwise with its self-explanatory compilations. Topics like concept of GST,benefits arising of GST, its feasibility & impact in India, challenges for Indianeconomy, GST in other countries etc. are covered herein.A lot of efforts and hard work is undergone in preparing this material and efforts ofthe contributors are commendable. I hope this material benefits you in the bestpossible manner. I wish you a great learning spree.TRANSCRIPT
GST (Goods and Service Tax)
GST (Goods and Services Tax)Biggest Tax Reform Since Independence..Swapnil W BorekarMBA++Department of Management sci.University of Pune (PUMBA)
GSTG GoodsS ServicesT TaxGoods and Service Tax (GST) is a comprehensive tax levy on manufacture, sale and consumption of goods and service at a national level.GST is a tax on goods and services with value addition at each stage. GST will include many state and central level indirect taxes It overcomes drawback present tax system
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Tax Structure in IndiaDirect Tax :Incident and Impact at same pointe.g.: Income Tax, Corporate Tax, Wealth Tax
Indirect Tax :Incident Impact are at different point.e.g.: Excise duty, custom duty, Service Tax, Octrai Tax, VAT, CENVAT.
Method Of TaxationProgressive Tax :Increasing rate of tax for Increasing Value or Volume. Regressive Tax :Decreasing rate tax for Increasing Value or VolumeProportional Tax :Fixed rate of tax for every level of income or production
Short comings in current Tax SystemTax Cascading (Tax on Tax)ComplexityTaxation at Manufacturing Level Exclusion of Services Tax EvasionCorruption
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Cascading Effect of Present Tax system
Reform In Tax System
VAT (Value Added Tax)
Implemented in April-1/2005It is replacement to complex Sales TaxIt overcomes a Cascading Effect of Tax It applied on Value Added Portion in sales price
Illustration of VAT
In the previous example, value added by B is only Rs.50 (150100)
tax on producer B would be only Rs.5 (i.e., 10 % of Rs. 50) while
the tax paid in previous system was Rs. 15 (10 % of Rs. 150).
In Old Tax System Consumer has to pay Rs 220
In VAT system Consumer Actually Paid Rs 205
Problems with VATA major problem with VAT is the way it taxes inputs and outputs. Input are taxed at 4 percent and outputs at 12.5 percentSome goods are included in both CENVAT and VATIt is not uniform in natureVAT is different for different Statesnumber of exemptions for some sensitivedifferent rates of taxation for different goods
What is GSTGST is a comprehensive value added tax on goods and servicesIt is collected on value added at each stage of sale or purchase in the supply chain No differentiation between Goods and Services as GST is levied at each stage in the supply chainSeamless input tax credit throughout the supply chainAt all stages of production and distribution, taxes are a pass through and tax is borne by the final consumerAll sectors are taxed with very few exceptions / exemptions
HistoryFeb, 2006 : First time introduced concept of GST and announced the date of its implementation in 2010Jan. 2007: First GST study by ASSOCHAM released by Dr. Shome Feb. 2007: F.M. Announced introduction of GST from 1 April 2010 in BudgetThe Government came out with a First Discussion Paper on GST in November, 2009Introduced the 115th Constitution Amendment (GST) Bill in the year 2011.
Model Of GST
Proposed GST RateItemsTotal GST rates (in %)CentreStateGoods20128Services1688Essential Goods1266
Presently it is (26.5 % , CENVAT-14 % and State VAT 12.5% )
Taxes proposed to be subsumed in GST Central TaxesExcise DutyAdditional Excise dutyExcise duty under medicinal and toilet preparation ActService TaxAdditional Custom duty commonly known as countervailing duty (CVD), special additional duty( SAD)SurchargeCENVAT
Taxes proposed to be subsumed in GST State TaxesValue added tax (VAT)Entertainment tax levied by statesLuxury TaxTax on Lottery, betting and gamblingEntry tax other than for local bodies (Octroi)
Product Excluded from GSTPetroleum ProductAlcoholTobacco ProductPurchase Tax
Zero Rating For Exports
Illustration Of GSTProduct AVAT SystemGST SystemBase Price100100 + 12% Excise duty12NA +12.5% VAT14NAState GSTNA8centre GSTNA12Total Tax Burden2620Value Of Product to Consumer126120
Benefits of GST Transparent Tax System Uniform Tax system Across India Reduce Tax Evasion Export will more competitive
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Hurdles in ImplementationDispute between centre and Tax over Tax SharingHighly sophisticated IT infrastructure required .Issue of taxing financial services and e-commerce is to be appropriately addressed and integrated. Political Imbalace
GST Global ScenarioMore than 140 countries have already introduced GST/National VAT.France was the first country to introduce GST system in 1954. Typically it is a single rate system but two/three rate systems are also prevalent. Canada and Brazil alone have a dual VAT.Standard GST rate in most countries ranges between 15-20%.
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