ANote on GST - DCMSME

1 A (Goods&Services Tax) is a single tax on the supply of goods and services,rightfrom the manufacturer to the final consumer will thus bear only the GST chargedby the last dealer in the supply chain,with set-off benefits at all the previous hasbeen envisaged as a more efficient taxsystem, neutral in its application and the Central level, the following taxes will be subsumed:a. Central Excise Duty,b. AdditionalExcise Duty,c. Service Tax,d. Additional Customs Dutycommonly known as Countervailing Duty,and Additional Duty of the State level, the followingtaxes will be subsumed:a. State Value Added Tax/Sales Tax,b. Entertainment Tax (other than the tax levied by the localbodies),Central Sales Tax (levied by the Centre and collected by the States),c. Octroi and Entrytax, d. Purchase Tax, e. Luxury tax, on lottery,betting and in mind the federal structure of India,there will be two components of GST _Central GST (CGST) and State GST (SGST).

2 Both Centre and States will simultaneously levyGST across the value will be levied on every supply of goods and levy and collect Central Goods and Services Tax (CGST),and States would levy andcollect the State Goods and Services Tax(SGST) on all transactions within a input taxcredit of CGST would be available for discharging the CGST liability on the output at , the credit of SGST paidon inputs would be allowed for paying the SGST onoutput. No cross utilization of credit would be the implementation of GST in the country, the Central and State Governments havejointlyregistered Goods and Services TaxNetwork (GSTN) as a not-for-profit,non-GovernmentCompany to provide shared IT infrastructure and services to Central and State Governments, taxpayers and other stakeholders. Thekey objectives of GSTN are to provide a standard anduniform interface to the taxpayers,and shared infrastructure and services to Central and isworking on developinga state-of-the-art comprehensive IT infrastructureincluding the common GST portal providingfrontendservices of registration,returnsandpayments to all taxpayers,as well as the backend IT modules for certain States that include-~,processing of returns, registrations,audits,assessments,appeals , States,accounting,authorities,RBI and banks,are also preparing their IT infrastructure for the administration ofGST.

3 There would be no manual filing of returns. All taxes can also bepaid mis-matched returnswould be autogenerated,and therewould be no need for manual returns would The main featuresof the proposed registration procedures under GST will be dealers: Existing VAT/Central excise/Service Taxpayerswill not have to applyafresh for registration dealers: Single application to be filed onlinefor registration under registration number willbe PANbased andwill serve the purpose for Centre application to bothtax Each dealer to be given unique ID approval within three days. registrationverification in risk based The main features of the proposed returns filing proceduresunder GST will be asfollows:a. Common return would servethe purpose of both Centre and State There are eight forms provided for in the GST business processes for filing for of the average taxpayers would be using onlyfour forms for filing their return for supplies,return for purchases,monthlyreturns and Small taxpayerswho have opted composition scheme shall have to file return on Filing of returns shall be completely taxes can also be paid The main featuresof the proposed paymentsprocedures under GST will be as payment process- nogenerationof paperat anystagen.

4 Singlepoint interface for challan generation- GSTN 12iii. Ease of payment - payment can be made through online banking,Credit Card/DebitCard,NEFT/RTGS and throughcheque/cash atthe challan form with auto-populationfeaturesv. Use of single challan and single payment instrumentvi. Common set of authorized banksvii. Common Accounting Codes7. Establishment of Legal Framework will be as of the Constitution Amendment Bill from Parliament: First week of August by 50% Statesiii. Presidential Assent of Constitution Amendment and notification in official Gazetteiv. Cabinet Approval for Formation ofGST Councilv. Recommendation of Model GST laws by GST Councilvi. Cabinet Approval for the CGST and IGST laws by Centre and for SGST laws by ALLstatesPassage of CGST and IGST laws in the Centre and passage of SGST laws in ALL states:Winter Session 2016&Notification ofGST Rules8.

5 Preparation ofITInfrastructure will be as and Services Tax Network (GSTN): Not-for-profit, non Government Company setup by Centre and States to provide shared IT infrastructure and services to Central andState Governments, tax payers and other Processes: Common modules for registration, returns and payments beingdeveloped by Processes: Modules for backend processes of tax authorities such as processingregistration/returns,assessmen ts, audit, appeals, ofGST Frontend and Backend for 17 States by GSTN:End December 2016v. CBEC's Backend systems: End November systems of 14 States: End November systems of Pr. CCA, Banks, RBI&State accounting authorities: End and integration of GST Frontend and backend of all stakeholders: Jan - March20179. Returns will be filed as follows:-i. Common return would serve the purpose of both Centre and State average tax payers would be using only four forms for filing their returns.

6 These arereturn for supplies, return for purchases, monthly returns and annual taxpayers:Small taxpayers who have opted composition scheme shall have to filereturn on quarterly of returns shall be completely All taxes can also be paid GST CouncilThe GST Council will consistof: (a) the Union Finance Minister (as Chairman),(b) theUnion Minister of Statein charge of Revenue or Finance, and (c) the Minister in charge ofFinance orTaxation or any other Minister, nominated by each state government. All decisions ofthe GST Council will be made by three fourth majority of the votes cast; the centre shall haveone-third of thevotes cast,and the statestogether shall have two-third of the votes cast. TheGST Council will make recommendations on:(a) taxes, cesses,and surcharges to be subsumed under the GST;(b) goods and services which may be subject to, or exempt from GST;(c) the threshold limit of turnover for application of GST;(d) rates of GST;(e) model GST laws, principles of levy, apportionment of rGST and principles related to place ofsupply;(f) special provisions with respect to the eight north eastern states, Himachal Pradesh, Jammuand Kashmir,and Uttarakhand.

7 And related GST Council may decide the mechanism for resolving disputes ansmg out of may by law, provide for compensation to states for revenue lossesarising out of the implementation of GST, based on the recommendations of the GST compensation could be for a maximum of five Revenue NeutralRateA Committee headed by the Chief Economic Adviser Dr. Arvind Subramanian onPossible Tax rates under GST submitted its Report to the Finance Minister. The Committee in itsconcluding observationshas stated that this is a historic opportunity for India to implement agame-changing tax reform. Domestically, it will help improve governance, strengthen taxinstitutions, facilitate"Make in India byMakingOne India,"and impart buoyancyto the also set the global standard for avalue-added tax01AT) in large federal systems inthe years to are the highlights of Report:The GST has been an initiative that has commanded broad consensus across the has also been a model of cooperative federalism in practice with the Centre andstates coming together aspartners in embracing growthand reform that is long awaited and its implementation willvalidate expectations of importantgovernment actions and effective political will that have, to some extent,alreadybeen"pricedin.

8 "Gettingthe design of the GST right is,therefore,critical. Specifically,the GST should aim at taxrates that protect revenue,simplify administration,encourage compliance, avoid adding toinflationary pressures,and keep India in the range of countries with reasonable levels of of Recommended Rate Options (in percent)RNRRate onpreciousmetalsPreferred15 Alternative "Low" rate "Standard"(goods)rate(goods andservices) "HighlDemerit" rateor Non-GST excise (goods)4040 All rates are the sum of rates at centre and statesThe Committee's recommendations on rates summarized in the table above are all nationalrates,comprising the sum of Centraland State GST rates. How these combined rates areallocated between the Centre and Stateswill bedetermined bythe GST Council. Thisallocationmust reflect the revenue requirements of the Centre and States so that revenues are protected.

9 Forexample, a standard rate of 17% would lead to rates at the Centre and States of say 8 percent and9 percent,respectively. The Committee considers that there are sound reasons not to provideforan administration-complicating"band" of rates,especially given the considerable flexibility andautonomy that states will preserve under the GST(including the ability to tax petroleum,alcohol,and other goods and services).Implementing the GST will leadto some uncharted waters,especially in relation to servicestaxation bythe States. Preliminary analysisin this report indicates that there should not be largeshifts in the tax base in moving to the GST,implying that overall compensation maynot ,fair,transparent,and credible compensation will create the conditions foreffective implementation by the Statesand for engendering trust between the Centre and GST also represents a historic opportunity to Make in India by Making One all taxes on inter-State trade (including the 1 percent additional duty) and replacingthem by one GST will be critical to achieving this objective.