GST goods and service tax introduction process

Gst

1. Tax is a compulsory payment to be made by every resident of India. It is a main source of revenue for the government. The Indian Tax system is well structured and has a three-tire federal structure The taxes are levied by C entral Government and States Government. Some minor taxes are levied by Municipalities and local authorities. WHAT IS TAX ?

2. The payment of tax is beneficial on multiple levels including the development of the nation, betterment of infrastructure, the upliftment of the society, and even for welfare activities for the nation WHY DO WE NEED TAX ?

3. Source of Revenue Tax Revenue Non Tax Revenue Direct Tax Indirect Tax Fees Fine Earnings from Public Enterprises Special Assessment of betterment levy Gifts, Grants and Aids Escheats Interest

4. TAXES (Paid to the Govt via Third person) Income Tax Imposed on Persons (Paid directly to the Govt ) Imposed on Goods and Services Direct Taxes Service Tax Indirect Taxes

5. Existing Direct Tax Structure

6. Central Levies Customs Duty Service Tax Excise Duty Cess Central Sales Tax Purchase Tax Entertainment Tax Entry Tax & Octroi Luxury Tax VAT State Levies Existing Indirect Tax Structure

7. Problems in Earlier Tax Structure Cascading Effect Complexity Lack of Uniformity Corruption Tax Evasion Complexity in determining the nature of transaction

8. CASCADING EFFECT OR TAX ON TAX SYSTEM Cost of Raw materials = 50 Labor charges = 50 100 Tax 10% 10 110 Cost of Finished good = 110 Profit = 10 120 Tax 10% = 12 132 Cost of Finished good = 132 Profit = 10 142 Tax 10% 14.2 156.2 156.20 133.20 Cost of Raw materials = 50 Labor charges = 50 100 Tax 10% 10 110 Cost of Finished good = 110 Profit = 10 120 Tax 10% (12-10) = 2 122 Cost of Finished good = 122 Profit = 10 132 Tax 10%(13.2-12) = 1.2 133.2 BEFORE GST AFTER GST

9. Indirect tax levied on Goods and Services It will replace all major Indirect taxes levied by both Central govt. and State govt. The vision behind this taxing is to bring the nation together under a single tax structure, right from manufacturers to end consumers creating a unified common market.

10. For the implementation of GST Constitution Amendment Act, Supporting Laws to the GST

11. Journey of GST in India July 17, 2000 Vajpayee government appoints an Empowered Committee 2004 Vijay Kelkar recommends GST to replace the existing tax regime Feb 28, 2006 GST appears in the Budget speech for the first time April 30, 2008 Report ‘A Model and Roadmap GST in India’ Feb 2010 FM Pranab Mukherjee defers GST to April1, 2011

12. March 22, 2011 Constitution Amendment Bill (115 th ) to GST Introduced in LS 2014 Bill lapsed as the 15 th LS was dissolved, BJP government comes to power December 19, 2014 Constitution (122 nd )) Amendment Bill in the LS August, 2016 RS Passes the Constitution Amendment Bill by 2/3 majority. September 8, 2016 16 States ratify GST Bill, President gives assent to the Bill

13. September , 2016 Union Cabinet clears formation of GST Council March, 2017 CGST, IGST, UTGST and Compensation bills in Parliament June 21, 2017 All states except Jammu and Kashmir pass SGST law 1 July, 2017 GST to be applicable across India

14. GST Law from a Constitutional Perspective Concurrent jurisdiction for levy & collection of GST by the Centre & the States – Article 246A Centre to levy & collect IGST on supplies in the course of inter-State trade or commerce including imports – Article 269A Compensation for loss of revenue to States for five years on recommendation of GST – Clause 19 GST on petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas & aviation turbine fuel to be levied from a later date on recommendations of GSTC

15. GST Council – Constitution (Article 279A ) Chairperson – Union FM Union Minster of State in charge of Revenue or Finance Members - MOS (Finance) and all Ministers of Finance / Taxation of each State Quorum is 50% of total members States Govt. - 2/3 weight age and Centre - 1/3 weight age Decision by 75% majority Council to make recommendations on everything related to GST including laws, rules and rates etc.

16. TAXES (Paid to the Govt via Third person) Income Tax Imposed on Persons (Paid directly to the Govt ) Imposed on Goods and Services Direct Taxes Service Tax Indirect Taxes

17. Taxable Event Supply Supply includes sale, transfer, exchange, barter, license, rental, lease and disposal. If a person undertakes either of these transactions during the course or furtherance of business for consideration, it will be covered under the meaning of Supply under GST. Supply has two important elements: Supply is done for a consideration Supply is done in course of furtherance of business

18. Examples: Mr. Surya buys a table for Rs.10,000 for his personal use and sells it off after 10 months of use to a dealer. This is not considered as supply under CGST as this is not done by Mr. Surya for the furtherance of business Mrs. Jyothika provides free coaching to neighboring students as a hobby. This is not considered as supply as this act is not performed for a consideration.

19. Classification of supply Composite supply Mixed Supply A supply comprising of two or more goods/services, In other words, these items cannot be supplied individually. There is a principal supply and a secondary supply in the whole transaction. A supply comprising of two or more goods/services, wherein the supplies are independent of each other and are not necessarily required to be sold together is called a  mixed supply .

20. HSN/SAC Code HSN Stands for Harmonized System Nomenclature and SAC stands for Service Accounting Code . It is an internationally adopted system for commodity description and product nomenclature system developed by the World Customs Organization (WCO). It came into existence in the year 1988.

21. The taxpayers with the annual turnover below 1.5 crores are not required to follow HSN. The taxpayers whose annual turnover is above 1.5 crores but below 5 crores will have to use 2 digit HSN code The businesses whose annual turnover exceeding 5 crores will have to use 4 digit HSN code. The one who deals with Import and Export have to follow 8 digit HSN code. Structure of HSN code

22. Digits of HSN code: The HSN has 21 sections, with 99 Chapters, about 1,244 headings, and 5,224 sub-headings. For example, all the natural commodities like vegetables, fruits, etc. come under one section. For example, the HSN Code is (0701 1000) for Potato seeds First two digits (07) represent the chapter number which is  Chapter 07 - Edible vegetables and certain roots and tubers Next two digits (01) represent the heading number which is  POTATOES, FRESH OR CHILLED Next two digits (10) represent the product code which is Last two digits (00) are for final or deeper classification which is  POTATO SEEDS FRESH OR CHILLED

23. Digits of SAC Code: Services Accounting Code (SAC) is a classification system for services which is developed by the Service Tax Department of India . With the help of GST SAC code, the GST rates for services are fixed in slabs namely 5%, 12%, 18%, and 28%. Indian Taxation System has categorized roughly over 120 services for levy of GST For example, the SAC Code is ( 998725 ) for Repair Services of Bicycles The first 2 digits (99) are common for all services. The next 2 digits represent the major nature of service. (Maintenance, Repair and Installation Services) The last 2 digits represent the detailed nature of service. (Repair Services of Bicycles)

24. Types of Dealers Regular Dealer Composition Dealer Unregistered Dealer Consumer

25. Registered Person Regular Dealer Composition Dealer Taxable Goods Exempt Goods Goods Based on Schedule Tax Invoice Bill of Supply Bill of Supply

26. Aggregate Turnover Registration Required Applicability Earlier Limits- For Sale of Goods/Providing Services Exceeds ` 20 Lakhs Yes-For normal Category States Up to 31 st March 2019 Exceeds ` 10 Lakhs Yes-For Special Category States Up to 31 st March 2019 New Limits – For Sale of Goods Exceeds ` 40 Lakhs Yes-For normal Category States From 1 st April 2019 Exceeds ` 20 Lakhs Yes-For Special Category States From 1 st April 2019 New Limits – For Providing Services There has been no change in Threshold limit for Service Providers Threshold Limits – Regular Dealer

27. Aggregate Turnover Registration Required Applicability Earlier Limits Up to ` 1 Crore Yes-For normal Category States Up to 31 st March 2019 Up to ` 50 Lakhs Yes-For Special Category States Up to 31 st March 2019 New Limits Up to ` 1.50 Crore Yes-For normal Category States From 1 st April 2019 Up to ` 75 Lakhs Yes-For Special Category States From 1 st April 2019 Threshold Limits – Composition Dealer

28. Persons ineligible to Opt GST composition scheme: Manufacturers of ice cream, pan masala, or tobacco A person making inter-state supplies A casual taxable person A non-resident taxable person A person engaged in the supply of non-taxable goods under the GST law A supplier who has exceeded the turnover threshold limit specified for opting into the composition scheme, and Businesses which supply goods through an e-commerce operator.

29. Service Provider GST Rate Restaurants (Not serving alcohol) – 5% GST Other Service Providers – 6% GST (WEF 01.04.2022)

30. Understanding CGST, SGST, UTGST & IGST Foreign Territory State 1 Union territory without legislature State 2 IGST CGST + SGST IGST IGST IGST CGST + SGST CGST + UTGST 37