GOODS

and
SERVICES TAX
 The Wall Street Journal
• Despite years of efforts by Prime Minister Narendra
Modi to sweep away arcane rules and simplify
procedures, India remains one of the planet’s
toughest places to do business, according to the
World Bank.

• In the development lender’s latest “Doing Business”

report, which ranks 190 nations on how easy it is
for private companies to follow regulations in 11
areas, India comes in 100th (2017 – June) , to bring
down 134 to 100 it took Three years.

2
 Where India stands?
Country 1 2 3 4 5 6 7 8 9 10 11

Singapore 2 6 16 12 19 29 4 7 42 2 27

Malaysia 24 111 11 8 42 20 4 73 61 44 46

Thailand 26 36 43 13 68 42 16 67 57 34 26

China 78 93 172 98 41 68 119 130 97 5 56

India 100 156 181 29 154 29 4 119 146 164 103

Pakistan 147 142 141 167 170 105 20 172 171 156 82

Bangladesh 177 131 130 185 185 159 76 152 173 189 152

6. Getting Credit
1. Ease of Doing Business Rank
7. Protecting Minority Investors
2. Starting a Business
8. Paying Taxes
3. Dealing with Construction Permits
9. Trading across Borders
4. Getting Electricity
10. Enforcing Contracts
5. Registering Property
11. Resolving Insolvency
http://www.doingbusiness.org/data/exploreeconomies/india
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College of Agricultural Banking, RBI, PUNE
 Types of Tax

• Direct Tax: When the tax is directly imposed and

collected from the one who is required to pay
Eg: Income tax, Corporate tax, Gift tax, Wealth tax
• Indirect Tax: The person on whom the tax is
imposed and the person who pays the tax is
different.
Eg: Excise, Customs, Service Tax (by Centre)
VAT/Sales Tax, CST, Luxury Tax etc. (by
State)

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College of Agricultural Banking, RBI, PUNE
 OCTRAI

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 Indirect Taxes

Indirect Taxes Subsumed under GST Indirect Taxes not Subsumed under GST

Taxes by the Centre Taxes by the States Taxes by the Centre Taxes by the States
t t

Central Excise Duty Stat VAT/Sales Tax Basic Custom Duty Stamp Duty

Additional Excise Duty Luxury Tax Export Duties Property Tax

Additional Customs Duty Entry Tax Clean Energy Cess Tax on Liquor and
Petroleum Products
Special Additional Duty of Entertainment and Amusement Tax Customs Cess
Customs
Taxes on Advertisements
Service Tax
Purchase Tax
Excise Duty under
Medicinal and Toilet Taxes on Lotteries, Betting and Gambling
Preparations
States Surcharges and Cesses
Central Surcharges and Cesses

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 So the GST
• What is GST?
• Goods and Services Tax

• What is so good about it?

• One tax – One Nation
• Manufacturing – Trading - Service

• Who is first in GST?

• France in 1954
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 Why GST?
Prior to GST, a training institute offering coaching classes for Rs 1,00,000 used to
charge 15% service tax of Rs 15,000. Say, it bought office stationery for Rs.
30,000 by paying 5% VAT of Rs 1,500 (Rs. 30,000 × 5%). It had to pay output
service tax of Rs 15,000 without getting any deduction of Rs.1,500 VAT paid on
office supplies. As a result, its total tax payment was Rs.16,500. Thus, payment of
double taxes led to cascading effect.
Under GST regime, say, GST is levied at 18% on coaching services and 12% on
office stationery. Hence, after deducting the tax paid on its input, the training
institute pays only (Rs 18% of Rs. 1,00,000 – 12% of Rs. 30,000) Rs 14,400. As a
whole, its tax liability came down by Rs. 2,100 (Rs. 16,500 – Rs.14,400).
•Thus, GST would reduce cascading effects of double taxation, as it allows the set-
off of tax paid on input at the time of payment of output tax.
•Physical interface between the tax payer and tax authorities is negligible under
GST, as all activities starting from registration, filing returns, tax payment, refunds
etc. are made online.
•It helps in achieving improved transparency & tax compliances and seamless
flow of credit.
College of Agricultural Banking, RBI, PUNE
 Issues with existing tax system

1. Multiplicity of indirect taxes 9. Valuation issues

2. Different Taxable events 10. Multiple penalties
3. Taxable values 11. Frequent changes in
4. Tax rates multiple laws
5. Threshold limits 12. Litigation
6. Exemptions 13. Compliances
7. Set offs 14. Pricing
8. Double taxation-conflicts 15. Exports
16. Consumers- higher price
17. Revenues
There were a total of 1.4 lakh cases, which were pending for refund with the
VAT department with the pendency dating back to 2005 with Delhi government

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Pattern of Tax Levy before GST

13
 Dual GST

GST

Intra-State Supplies Inter-State Supplies

CGST SGST / UTGST IGST

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College of Agricultural Banking, RBI, PUNE
 Intra-State Supply of Goods or Services
• When the location of the supplier and the place of supply are in the same state, it is intra-state
supply. Intra-state supplies attract Central GST (CGST) and State GST (SGST) or UTGST in
case of Union Territories. It means in this case, seller collects both CGST and SGST
(UTGST) from the buyer and deposits CGST with Central Government and SGST with State
Government.
A furniture dealer in Hyderabad supplies furniture worth Rs 100,000 to a customer in
Warangal. GST rate applicable on furniture is 12%. Since the supply is intra-state within
Telangana, GST in the invoice is shown as follows:

Taxable value of supply Rs 1,00,000

Add: CGST @ 6% Rs 6,000
SGST @ 6% Rs 6,000
Total amount Rs 1,12,000

If the furniture dealer does not have input tax credit, he will deposit Rs 6,000 with the
Central Government and Rs 6,000 with the Telangana Government through internet
banking using the same challan.

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• If a furniture dealer in Chandigarh supplies furniture to a customer in
Chandigarh, GST is shown in invoice as follows:

Taxable value of supply Rs 1,00,000

Add: CGST @ 6% Rs 6,000
UTGST @ 6% Rs 6,000
Total amount Rs 1,12,000

In this case, furniture dealer will deposit Rs 6,000 with the Centre and
Rs 6,000 with Chandigarh Government.
 Inter-State Supply of Goods or Services

When the location of the supplier and the place of supply are in different states, it is
inter-state supply. Inter-state supplies attract Integrated GST (IGST) and the
supplier collects the same from the receiver and deposits with Central Government.
Subsequently, revenue from IGST will be distributed among Union and States on
the basis of recommendation of GST council.
A furniture seller in Hyderabad supplies furniture worth Rs 1,00,000 to a customer
in Bangalore. Since, it is an inter-state supply between Telangana and Karnataka, it
attracts IGST.. If applicable GST rate on such supplies is 12%, invoice in this
transaction reflects GST as follows:

Taxable value of supply Rs 1,00,000

Add: IGST @ 12% Rs 12,000
Total amount Rs 1,12,000
In this case, assuming that furniture seller does not have any input tax credit, he deposits the entire tax
amount of Rs 12,000 with the Centre.
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 If a furniture dealer in Chandigarh supplies furniture to a customer in
Lakshadweep, invoice reflects GST as follows:

Taxable value of supply Rs 1,00,000

Add: IGST @ 12% Rs 12,000
Total amount Rs 1,12,000
In this case, furniture dealer deposits Rs 12,000 with Central government.
This is because, supply between two Union Territories is considered as
inter-state supplies. Similarly, supply between a state and a UT is also an
inter-state supply.
Supply From Supply To Type of Supply
Mumbai Pune
Intrastate Supply
Chandigarh Chandigarh
Mumbai Bangalore
Mumbai Chandigarh Interstate Supply
Chandigarh Lakshadweep
• IGST Act and CGST Act: The Goods and Services Tax is based on two Acts – the IGST
(Integrated Goods and Services Tax) Act and the CGST (Central Goods and Services Tax)
Act. These two Acts were passed in the House of Parliament in April 2017.
• SGST Act: To levy SGST on the supply of goods and services within a state, each state has
passed its own State GST Act, which is primarily a copy of CGST Act.
• UTGST Act: The act has been passed for Union Territories (UTs) which do not have
legislature. These UTs are Andaman and Nicobar Islands, Lakshadweep, Dadra and Nagar
Haveli, Daman and Diu and Chandigarh. As Delhi and Puducherry have their own
legislatures, they have passed SGST Acts.
• GST Compensation Cess:
In addition to CGST, SGST, UTGST and IGST, GST compensation cess is levied on specified
products i.e tobacco products, pan masala, coal, motor cars, aerated waters etc. to compensate
the revenue loss for the states for the next 5 years, due to the abolition of Central Sales Tax
(CST).
• Destination Based Consumption Tax (DBCT): If the goods manufactured in Ahmadabad
are sold to a customer in Bhopal, the tax revenue goes to Madhya Pradesh Government not to
Gujarat Government. Since GST is imposed at the point of consumption, it is destination
based consumption tax.

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• GST Council: GST council consists of representatives from the Centre and the States as
follows:
• Chairperson: The Union Finance Minister, currently (Nirmala Sita Raman)
• Member: The Union Minister of State in charge of Revenue or Finance
• Members: The Minister in charge of Finance or Taxation or any other Minister nominated by
each State Government
• GST Council will make recommendations on various important issues in relation to GST like
goods and services that may be subject to or exempted from GST, principles of place of
supply, GST rates etc.
Tax slabs under GST:
• GST rates applicable to the supply of goods: GST rates on the supply of goods are primarily
0%, 5%, 12%, 18% and 28%.
• GST rates applicable to the supply of services: GST rates on the supply of services are 5%,
12%, 18% and 28%.
• Under Inter-state supplies, the entire tax rate is considered under IGST, whereas in case of
intra-state supplies, the tax rate is divided into CGST and SGST (UTGST) equally.

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College of Agricultural Banking, RBI, PUNE
 Goods outside the purview of GST

• Petroleum crude
• High-speed diesel
• Motor spirit (commonly known as petrol)
• Natural gas and
• Aviation turbine fuel

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 Category of States

Special Category States: Arunachal Pradesh, Assam, Jammu & Kashmir,

Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal
Pradesh, Uttarakhand
Normal States: All other States
Union Territories: Andaman and Nicobar Islands, Lakshadweep, Dadra
and Nagar Haveli, Daman and Diu and Chandigarh.
As Delhi and Puducherry have their own legislatures, they have passed
SGST Acts.

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 Threshold Exemptions under GST

• The GST Council, on considering the demands raised by MSME, increased the
threshold limits for GST registration.
• The states have an option to opt for a higher limit or continue with the existing
limits.
Overview of earlier limits, new limits and the date of applicability
Earlier Limits – For the sale of Goods/Providing Services
• Exceeds Rs.20 lakh – For Normal Category States - Up to 31st March 2019
• Exceeds Rs.10 lakh - For Special Category States - Up to 31st March 2019
New Limits – For Sale of Goods
• Exceeds Rs.40 lakh - For Normal Category States - From 1st April 2019
• Exceeds Rs.20 lakh - For Special Category States - From 1st April 2019
New Limits – For Providing Services
• There has been no change in Threshold limits for Service Providers

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 Threshold Exemptions under GST
• States who opted for the new limit
The above changes were proposed in the 32nd GST Council Meeting held on 10th January
2019. An option was provided to the states to opt for the new limits or continue the earlier
ones (status quo).
• States/UTs who opted for a new limit of Rs.40 lakh
Chhattisgarh, Jharkhand, Delhi, Bihar, Maharashtra, Andhra Pradesh, Gujarat, Haryana, Goa,
Punjab, Uttar Pradesh, J&K, Assam, Himachal Pradesh, Karnataka, Madhya Pradesh, Odisha,
Rajasthan, Tamil Nadu, West Bengal, Delhi, Andaman and Nicobar Islands, Lakshadweep,
Dadra and Nagar Haveli, Daman and Diu and Chandigarh
• Normal Category States who choose status quo
Kerala and Telangana
• States /UTs who opted for new limit of Rs.20 lakh
Puducherry, Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland,,Sikkim, Tripura,
Uttarakhand
• Note 1: Two hilly states J&K and Assam have also opted to raise the limit to Rs.40 lakh.
These two states had the option to remain under lower threshold limits as they fall under the
Special Category States. Even previously when these two states had the option to charge GST
only on aggregate turnover exceeding Rs.10 lacs, they had opted for a higher threshold limit
of Rs.20 lakh.
• Note 2: Kerala can now charge ‘calamity cess’ up to 1% on all intra-state supply of goods and
services to cope up with natural
College calamities Banking,
of Agricultural faced byRBI,
thePUNE
state last year.
 Aggregate Turnover
• All taxable supplies
• Exempt supplies
• Exports of goods/services
• Inter-State supplies
• All supplies made by the taxable person, whether on his own account or
made on behalf of all his principles
• Note:
1. All the above supplies
• To be made by a person having the same PAN
• To be computed on all India basis in a financial year
2. Aggregate turnover does not include
 Value of supplies on which tax is levied on reverse charge basis
 Value of inward supplies
 Central Tax, State Tax, Union Territory Tax and Cess

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 Aggregate Turnover
• Example 1: Mr Agarwal has his business operations in 4 different states
and his aggregate turnover in those states is as follows:

Delhi Karnataka Madhya Tamilnadu

Pradesh
Taxable Supply 16,00,000 10,00,000
Exempted Supply 6,00,000
Supply on behalf of his 14,00,000
principal

What is his aggregate turnover? Is he required to register under GST? The

supplies shown above include CGST, SGST and IGST to the extent of Rs.
4,00,000.
• The aggregate turnover is in this case is 16,00,000 + 10,00,000 + 6,00,000+
14,00,000 – 4,00,000 = 42,00,000. He is required to register under GST.
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 Aggregate Turnover
• Example 2: In a financial year, Mr. Sailesh, a resident of Tiruvantapuram
has generated a total turnover of Rs 50,00,000 through the sale of land and
Rs 30,00,000 through exports. Apart from this, his other supplies include
Rs 30,00,000 of exempted supplies and Rs 10,00,000 of taxable supplies.
What is his aggregate turnover? Is he required to register under GST?
• His aggregate turnover is Rs 70,00,000. He is required to register under
GST. Here, sale of land is outside the scope of GST.
• Example 3: Taxable supplies of Mr Joseph in Mumbai and Itanagar
amount to Rs 8,00,000 and Rs 22,00,000 respectively. Is he required to
register under GST law?
• Yes. his aggregate in Itanagar is Rs 22,00,000 which is more than Rs
20,00,000, he is required to get registered in Arunachala Pradesh. By virtue
of his registration in Arunachala Pradesh, he is also required to get
registered in Maharashtra, despite his aggregate turnover in Mumbai does
not exceed Rs 40,00,000.

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 What is input tax credit?

• Input credit means at the time of paying tax on

output, you can reduce the tax you have already
paid on inputs and pay the balance amount.

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 What is Input Tax Credit (ITC)

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 What is Reverse Charge?

• Normally, the supplier of goods or services pays

the tax on supply.
• In the case of Reverse Charge, the receiver
becomes liable to pay the tax, i.e., the
chargeability gets reversed.

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 Reverse Charge

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 When is Reverse Charge Applicable?

A. Supply from an Unregistered dealer to a Registered dealer

B. Services through an e-commerce operator
 If an e-commerce operator supplies services then reverse charge will be applicable to the
e-commerce operator. He will be liable to pay GST.
 For example, UrbanClap provides services of plumbers, electricians, teachers,
beauticians etc. UrbanClap is liable to pay GST and collect it from the customers instead
of the registered service providers.
C. Supply of certain goods and services specified by CBIC
Central Board of Indirect Taxes and Customs (CBIC) has issued a list of goods and a list of
services on which reverse charge is applicable.
Eg: Supply by an Agriculturist to Registered Person, by Govt. to Registered Person
The registered dealer who has to pay GST under reverse charge has to do self-invoicing for
the purchases made.

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 Why was Composition Scheme
introduced?

The GST regime has brought in many changes

along with the following:
• Increase in the number of GST returns
• Payment of tax on a monthly basis
• Small and new taxpayers will find it difficult to
comply with so many rules.

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 Who can opt for Composition Scheme

• A taxpayer making taxable supply of goods with

the turnover below Rs 1.5 crore* can opt in for
Composition Scheme. In case of Special Category
States the limit is now Rs 75* lakh
• For services providers, the limit is up to Rs 50
lakh

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 Composition Scheme
Type of Business CGST SGST Total
Manufacturers/Traders 0.5% 0.5% 1.0%
(Goods)
Restaurants not serving 2.5% 2.5% 5.0%
alcohol
Other service providers 3.0% 3.0% 6.0%
(Aggregate Turnover upto Rs 50 lakh in
the preceding FY)

However, the scheme is not available to

•The manufacturer of certain goods (ice cream, pan masala, tobacco products)
•Person making inter-state supply
•Casual taxable person or non-resident taxable person
•Person supplying goods through an e-commerce portal
Points to remember:
•No input tax credit is available
•Cannot charge GST in his invoice i.e. tax to be paid out of his own pocket
•No input tax credit to the person who gets supply of goods/services from a dealer
under composition scheme
 Harmonized System Code

• The Harmonized System is an international nomenclature for the

classification of products.
• It allows participating countries to classify traded goods on a common
basis for customs purposes.
• At the international level, the Harmonized System (HS) for
classifying goods is a six-digit code system
• The HS comprises approximately 5,300 article/product descriptions
that appear as headings and subheadings, arranged in 99 chapters,
grouped in 21 sections.

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 Harmonized System Code

• The six digits can be broken down into three parts.

• The first two digits (HS-2) identify the chapter the goods are classified
in, e.g. 09 = Coffee, Tea, Maté and Spices.
• The next two digits (HS-4) identify groupings within that chapter, e.g.
09. 02 = Tea, whether or not flavoured.
• The next two digits (HS-6) are even more specific, e.g. 09.02.10
Green tea (not fermented)...
• Up to the HS-6 digit level, all countries classify products in the same
way

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Harmonized System Code - India

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 Harmonized System Code - India

No. of digits of HSN to

Turnover
be declared
Upto 1.5 crore 0

1.5 crore- 5 crore 2

More than 5 crore 4

Exports and Imports 8

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 THANK YOU

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