Biggest Tax Reform Since Independence…..

Goods and Service Tax

(GST)
 Old Tax Structure
Why India need GST?
What is GST?
Basics of GST
Features of GST
Objectives of GST
Constitutional Amendment
Registrations
Tax Invoices / Rates
Input Tax Credits (ITC)
Refunds
Accounting entries under GST
 Old Tax Structure
Old Tax Structure
[5 Important Constituents]

Entry Tax/
Excise Duty Service Tax Sales Tax / Customs Duty Entertainme
VAT/ CST nt Tax
* GST (Goods and Services Tax) is the biggest indirect tax reform of India. GST is a single
tax on the supply of goods and services. It is a destination based tax. GST has subsumed
taxes like Central Excise Law, Service Tax Law, VAT, Entry Tax, Octroi, etc. GST is one of the
biggest indirect tax reforms in the country. GST is expected to bring together state
economies and improve overall economic growth of the nation.
* GST is a comprehensive indirect tax levy on manufacture, sale and consumption of goods
as well as services at the national level. It will replace all indirect taxes levied on goods
and services by states and Central. Businesses are required to obtain a GST Identification
Number in every state they are registered.
* There are around 160 countries in the world that have GST in place. GST is a destination
based taxed where the tax is collected by the State where goods are consumed. GST has
been implemented in India from July 1, 2017 and it has adopted the Dual GST model in
which both States and Central levies tax on Goods or Services or both.
GST is introduced majorly due to two reasons:
1. The current indirect tax structure is full of uncertainties due
to multiple taxes and multiple rates.
2. Due to multiple rates, there are multiple forms and intern
cumbersome compliances. This will improve Tax compliances.
Because of above transparency, Taxation would increase and
lead to reduced tax evasion.
It would also reduce cascading effect(tax on tax) up to much
extent
GST is a single tax on the supply of goods and services, right from the
manufacturer to the consumer
The Input Tax credit paid at each stage will be available in the
subsequent stage of value addition, which makes GST essentially a tax
only on value addition at each stage.
It is the end consumer who will bear only the GST charged by the last
dealer in the supply chain, with set-off benefits at all the previous stages.
With the streamlining of the multiple taxes, the final cost to the
consumer will turn out to be low because of elimination of double
charging system
* Ensuring that the cascading effect of tax on tax will be eliminated.
* Improving the competitiveness of the original goods and services, thereby
improving the GDP rate too.
* Ensuring the availability of input credit across the value chain.
* Reducing the complications in tax administration and compliance.
* Making a unified law involving all the tax bases, laws and administration
procedures across the country.
* Decreasing the unhealthy competition among the states due to taxes and
revenues.
* Reducing the tax slab rates to avoid further clarification issues.
* Dual Goods and Service Tax : CGST and SGST
* Inter-State Transactions and the IGST Mechanism: The Center would levy and collect the Integrated Goods and Services Tax
(IGST) on all inter-State supply of goods and services. The IGST mechanism has been designed to ensure seamless flow of
input tax credit from one State to another. The inter-State seller would pay IGST on the sale of his goods to the Central
Government after adjusting credit of IGST, CGST and SGST on his purchases
* Payment of GST: The CGST and SGST are to be paid to the accounts of the central and states respectively.
* Goods and Services Tax Network (GSTN): A not-for-profit, Non-Government Company called Goods and Services Tax
Network (GSTN), jointly set up by the Central and State Governments will provide shared IT infrastructure and services to
the Central and State Governments, tax payers and other stakeholders.
* INPUT TAX CREDIT (ITC) SET OFF : ITC for CGST & SGST will be taken for taxes allowed against central and state
respectively.
* GST on Imports : Centre will levy IGST on inter-State supply of goods and services .Imports of goods will be subject to basic
customs duty and IGST.
* Maintenance of Records : A taxpayer or exporter would have to maintain separate details in books of account for, utilization
or refund of Input Tax Credit of CGST, SGST and IGST.
* Administration of GST : Administration of GST will be the responsibility of the GST Council , which will be the apex policy
making body of the GST. Members of GST Council comprised of the Central and State ministers in charge of the finance
portfolio.
While the Centre is empowered to tax services and goods upto the
production stage, the States have the power to tax sale of goods.
The States do not have the powers to levy a tax on supply of
services while the Centre does not have power to levy tax on the
sale of goods. Thus, the Constitution does not vest express power
either in the Central or State Government to levy a tax on the
‘supply of goods and services’. Moreover, the Constitution also does
not empower the States to impose tax on imports. Therefore, it is
essential to have Constitutional Amendments for empowering the
Centre to levy tax on sale of goods and States for levy of service tax
and tax on imports and other consequential issue.
 • PROOF OF CONSTITUTION OF BUSINESS
• DETAILS OF ALL BANK ACCOUNTS
Documents • PROOF OF PRINCIPAL AND ADDITIONAL PLACE OF BUSINESS
Required for • DETAILS OF PARTNERS/ PARTNERS/ DIRECTORS
• DETAILS OF GOODS OR SERVICES TO BE SUPPLIED
Registration • HSN CODE OF GOODS AND SERVICES
• PHOTOGRAPHS OF PARTNERS/ DIRECTORS/ PROPRIETOR
• ANY OTHER DOCUMENTS AS MAY BE PRESCRIBED.

Format of •
Prov. GST Reg.
 0% Nil Rate Items
• Single Goods / Services / Commodity
shall have Rates Prescribed in CGST /
5% Essential Items
SGST & IGST. 5/6 Tier Rate 12 % Standard Rate
• If the Receiver is Located within the State Structure Proposed for
CGST & SGST both shall be made • CGST (20%) 18 % Standard Rate
applicable. • SGST (20%)
• If the Receiver is Located in other State, • IGST (40%)
28 % Luxury Items
IGST shall be made applicable. • UGST (20%) Add. Levy % Addon Tax on Ultra
Lux,
Proposed Format of the Tax Invoices Sin & Demerits
Proposed Features of Input
Tax Credit.
• No overlapping of taxes.
• Reducing Tax on Tax
Effect.
• Only one strong reason,
enabling reduction of
prices inspite of Proposed
Higher Rates of GST.
CGST paid = Rs. 10
CGST @ 10%
CGST paid = Rs. 10
(Rs. 30 – 20 (Input Tax
CGST paid = Rs. 10
(Rs. 20 – 10 (Input Tax
Credit)
Credit)
T1 T2 T3
A B C D
SGST paid = Rs. 10
(Rs. 20 – 10 (Input Tax CGST paid = Rs. 10
Credit) (Rs. 30 – 20 (Input Tax
Credit)
SGST paid = Rs. 10
SGST @ 10%
Refund of Unutilized ITC
• For exempted exports including zero rated supplies
• Rate of Tax on inputs is higher than on output supplies
(Inverted Levy)
• No Refund if Duty Drawback claimed.

Refund of Tax & Interest

• Application shall be filed before expiry of 2 years.
• Special category persons shall file before expiry of 6 months.
• Refund filed for tax, duty, cenvat credit or interest paid in earlier law shall be disposed of as per earlier law & if
admissible shall be paid in Cash. (Transitional Provision)

Procedure & Timings for Sanctioning Refunds

• Provide documentary evidence as prescribed
• If refund is < Rs.2 Lac, than he shall only file a declaration that incidence of tax has not been passed.
• If refund Zero rated supplies of G/S is claimed, 90% of claim shall be refunded on provisional basis.
• Officer shall issue order within 60 days of receipt of application
• Interest not exceeding 6%shall be paid if not refunded within 60 days
Let us consider a few basic business transactions (all amounts excluding GST)-
Example 1: Intra-state
* Mr. X purchased goods Rs. 1,00,000 locally (intrastate)
* He sold them for Rs. 1,50,000 in the same state
* He paid legal consultation fees Rs. 5,000
* He purchased furniture for his office for Rs. 12,000
Assuming CGST @8% and SGST@8%
The entries will be-
Purchase A/c Dr. 1,00,000
Input CGST A/c Dr. 8,000
Input SGST A/c Dr. 8,000
To Creditors A/c 1,16,000
Debtors A/c Dr. 1,74,000
To Sales A/c 1,50,000
To Output CGST A/c 12,000
To Output SGST A/c 12,000
Legal fees A/c Dr. 5,000
Input CGST A/c Dr. 400
Input SGST A/c Dr. 400
To Bank A/c 5,800
Furniture A/c Dr.12,000
Input CGST A/c Dr.960
Input SGST A/c Dr.960
To ABC Furniture Shop A/c 13,920
Total Input CGST=8,000+400+960= Rs. 9,360
Total Input SGST=8,000+400+960= Rs. 9,360
Total output CGST=12,000
Total output SGST=12,000
Therefore Net CGST payable=12,000-9,360=2,640
Net SGST payable=12,000-9,360=2,640
Output CGST A/c Dr. 12,000
Output SGST A/c Dr. 12,000
To Input CGST A/c 9,360
To Input SGST A/c 9,360
To Electronic Cash Ledger A/c 5,280
* Thus due to input tax credit, tax liability of Rs. 24,000 is reduced to only Rs.5,280. Also, GST on legal fees is also
adjusted which was not possible in current tax regime.
* If there had been any input tax credit left it would have been carried forward to the next year.