Indian Taxes

Direct

Indirect

Central

Central

State

Local

Income

Corporate

FBT

BCD

Excise

CST

Service

R&D Cess

VAT

Work Contract

Entry

Ancillary

Octroi

Upto 32 Tax Laws at Province level in addition to various central & state taxes !
2

35.0

30.0
25.0 20.0 15.0 10.0 12.5 10.0 12 14.0 15.0 17.0 15 17.5 19.0 19.6 20.0

26.4

13.0

5.0
0.0 Australia Germany New Zealand Mexico

South Africa

Italy

Canada

China

* CENVAT: 12.36 % + VAT;12.5 % =26.40%) 3

France

India

UK

Source : DHL

Central taxes

GST
SGST, CGST, IGST

State taxes

Centre and State to legislate, levy and administer

5

HIGHLIGHTS

1) A dual GST structure 2) Have two components,

a) Central GST (CSGT) and State GST (SGST) b) Implemented through multiple statutes.

3) Applicable to all transactions of goods and services except

few exempted goods / services, goods outside the purview of GST 4) Exemptions under Central Excise to be aligned with current exemptions under VAT which would ensure alignment of CGST and SGST exemptions. 5) The CGST and SGST are to be paid to the accounts of the Centre and the States separately. 6) Cross utilization of ITC between the CGST and the SGST would not be allowed.

Excise Duty

CENTRAL

Special Additional Duty (SAD)

CGST
Service Tax Surcharges

Additional Custom Duty (CVD)

Cesses

VAT/Sales Tax

STATE

Entry Tax/Octroi

State surcharges and cesses relating to goods and services

7

SGST
Taxes on lotteries

Entertainment Tax

Luxury Tax

1) For goods- Two rate structure-

a) lower rate for necessary items and items of basic importance b) standard rate for goods in general There will be a special rate for precious metals and also a list of exempted items
2) For services a single rate for CGST and SGST

Goods Lower

Goods Standard

Services

Year - 1
Year - 2 Year - 3

12%
12% 16%

20%
18% 16%

16%
16% 16%

Source - Finance Ministers speech at the meeting with State Finance Ministers on July 21, 2010

Supply chain

Purchase Value of Input

Value addn 30

Value to next stage 130

Rate GST of GST Amount 20% 26

Input tax credit 20 (20% of 100 inputs)

Net GST

Manufacturer 100

26-20=6

Whoesaler

130

20

150

20%

30

26 (20% of 130 inputs)

30 (20% of 150 inputs)

30-26=4

Retailer

150

10

160

20%

32

32-30=2

Total GST

20+6+4+2= 32

10

Goods will be cheaper Household services-Telephone, mobile, cable, insurance will be costlier since presently the service tax @12.36% The impact may not be 4% if service providers pass on benefit of tax on procurements A 2% point rate difference between goods and services would mean that the classification of certain items (e.g. intangibles) as goods or services would continue to be relevant under GST.

11

Existing
T A X
Date

With GST
T A X
360 01/04/2012
TCSL/PO/POWAI /33283

I N V O I C E
:

I N V O I C E

Invoice No. :

Cust. Ord. No.:

Date
Quantity
50

:
Rate
2,000.00

01/04/2012
Amount (Rs.)
100,000

Ass. Value BED. @12 % Ed. Cess on BED @ 2 % S.& H.Ed.Cess on BED @ 1% Total Rs. S.T./C.S.T. @ 12.5%

100,000 12,000 240 120 112,360 14,045

Total Rs.
Octroi. 5.5% Grand Total

126,405
6952 133,357 12

Exemption threshold and composition for small dealers Threshold for both goods and services at

INR 1 million for CGST and SGST. Composition to be made available to small dealers up to an agreed common limit under both CGST and SGST to bring simplification and improve compliance.

13

In line with the Thirteenth Finance Commissions recommendations, States would be compensated for initial four years for loss of VAT and Purchase tax revenues.
This will remove the apprehension of states that GST would adversely affect their revenue and will ensure speedy implementation

14

- for All

Agriculture Industry Exporters Entrepreneurs Traders Common consumers

15

 Cost of procurement Discontinuance of CST / SAD Flexibility in selection of vendor

Discontinuance of area based exemption Consolidation of mfg loc based on network design

Potential improvement in channel Distribution Strategy Review of Current network structure and warehouse location

Sourcing

Manufacturing

Sales & Distribution

Revise pricing strategies Sales promotion schemes

Revisit existing ERP

Testing & Analysis exemption

Pricing

IT

Services
16

1.
2. 3.

Finance & Taxation

Operational Documentation

4.
5. 6.

Information Technology
Logistics Legal

17

18

19

 Integration of Order Management and Cash cycle through O2C technology Customer Segmentation for differential service offering Network Rationalization Inventory Optimization Infrastructure Health check and enhancement Transportation augmentation
20

 industry views "We know that the Central duties are rebated but the State duties are not rebated. We were hoping that the government will come with a scheme then everybody thought that GST will be put in to place. I personally dont feel that we would see the GST in 2014 or 2015," -Ajay Sahai, Director General, Federation of Indian Exports Organization (FIEO).

Parthasarathi Shome, one of the architects of the proposed goods and service tax, does not expect the government to implement GST regime before 2014 as the next Lok Sabha election may delay preparations for the eagerly awaited tax reform.
The Director and chief executive of Indian Council for Research on International Economic Relations (ICRIER) said the country is most unlikely to put up a finetuned administrative setup before 2014 even as the Parliamentary Committee on Finance has completed its hearings on GST and is expected to table report before the Monsoon session.

21

22

1) A Dual GST model with appropriate binding mechanism to harmonize the various aspects of GST 2) A dual GST structure shall have two components, Central GST (CSGT) and State GST (SGST) which would be implemented through multiple statutes. 3) Applicable to all transactions of goods and services except the exempted goods / services, goods outside the purview of GST and the transactions below the prescribed threshold limits. 4) The CGST and SGST are to be paid to the accounts of the Centre and the States separately. 5) Cross utilization of ITC between the CGST and the SGST would not be allowed.

23

(i) Taxes or levies to be subsumed should be primarily in the nature of indirect taxes, either on the supply of goods or on the supply of services. (ii) Taxes or levies to be subsumed should be part of the transaction chain which commences with import/ manufacture/ production of goods or provision of services at one end and the consumption of goods and services at the other. (iii) The subsumation should result in free flow of tax credit in intra and inter-State levels. (iv) The taxes, levies and fees that are not specifically related to supply of goods & services should not be subsumed under GST. (v) Revenue fairness for both the Union and the States individually would need to be attempted.

24

Central Level GST

State Level GST

Centre and State to legislate, levy and administer

25

1.
2. 3.

4.
5. 6.

Excise Duty Service Tax Additional Custom Duty (CVD) Special Additional Duty (SAD) Surcharges Cesses

26

1.
2. 3.

4.
5. 6.

VAT/Sales Tax Entertainment Tax Luxury Tax Entry Tax/Octroi Taxes on lotteries State surcharges and cesses relating to goods and services

27

1.

For goods- Two rate structurea) lower rate for necessary items and items of basic importance b) standard rate for goods in general

There will be a special rate for precious metals and also a list of exempted items 2. For services a single rate for CGST and SGST

28

Goods Goods Services Lower Standard . Year 12% 20% 16% 1

Year 2
Year 3

12%
16%

18%
16%

16%
16%

29

Finance Ministers speech at the meeting with State Finance Ministers on July 21, 2010

30

Supply chain

Purchase Value of Input

Valu Value to Rate e next of addit stage GST ion 30 130 20%

GST Input tax Amount credit

Net GST

Manfacturer

100

26

20 (20% of 26-20=6 100 inputs)

Whoesaler

130

20

150

20%

30

26 (20% of 30-26=4 130 inputs)

30 (20% of 32-30=2 150 inputs)

Retailer

150

10

160

20%

32

Total GST

20+6+4+ 2=32

31

Goods- cheaper Household services-Telephone, mobile, cable, insurance will be costlier since presently the service tax @12.36% The impact may not be 4% if service providers pass on benefit of tax on procurements

32

A 2% point rate difference between goods and services would mean that the classification of certain items (e.g. intangibles) as goods or services would continue to be relevant under GST. One would hope that the GST law would provide absolute clarity on the distinction between goods and services, to ensure that there is no ambiguity over classification.

33

N R J SEATING SYSTEMS
Plot no.(24), Wagle Industrial Estate Thane, Maharashtra 410 012

T A X

I N V O I C E
Invoice No. Date : : 360 01/04/2012
TCSL/PO/POWAI /33283

Cust. Ord. No.: Date :

01/04/2012

Quantity 50 Ass. Value

Rate 2,000.00

Amount (Rs.) 100,000 100,000

BED. @12 %

12,000

Ed. Cess on BED @ 2 % S.& H.Ed.Cess on BED @ 1% Total Rs. S.T./C.S.T. @ Total Rs. 12.5%

240 120 112,360 14,045 126,405 6,952

Octroi. 5.5% Grand Total

% % % %
133,357

34

35

Exemption threshold and composition for small dealers - Threshold for both goods and services at INR 1 million for CGST and SGST. - Composition to be made available to small dealers up to an agreed common limit under both CGST and SGST to bring simplification and improve compliance.

36

In line with the Thirteenth Finance Commissions recommendations, States would be compensated for initial four years for loss of VAT and Purchase tax revenues. This will remove the apprehension of states that GST would adversely affect their revenue and will ensure speedy implementation

37

Exemptions under Central Excise to be aligned with current exemptions under VAT which would ensure alignment of CGST and SGST exemptions.

38

Agriculture, industry, trade Exporters Entrepreneurs Traders Common consumers

39

1.
2. 3.

4.
5. 6.

Finance & Taxation Operational Documentation Information Technology Logistics Legal

40

Excise Duty

Service Tax

Additional Custom Duty (CVD)

CENTRAL
Special Additional Duty (SAD) Surcharges Cesses

VAT/Sales Tax

Entertainment Tax

Luxury Tax

STATE

Entry Tax/Octroi

Taxes on lotteries

State surcharges and cesses relating to goods and services

41

"We know that the Central duties are rebated but the State duties are not rebated. We were hoping that the government will come with a scheme then everybody thought that GST will be put in to place. I personally dont feel that we would see the GST in 2014 or 2015," said Ajay Sahai, Director General, Federation of Indian Exports Organization (FIEO) recently.

Parthasarathi Shome, one of the architects of the proposed goods and service tax, does not expect the government to implement GST regime before 2014 as the next Lok Sabha election may delay preparations for the eagerly awaited tax reform. The director and chief executive of Indian Council for Research on International Economic Relations ( ICRIER) said the country is most unlikely to put up a fine-tuned administrative setup before 2014 even as the Parliamentary Committee on Finance has completed its hearings on GST and is expected to table report before the Monsoon session.

43