YOJANA ANALYSIS AUGUST 2017 BY SHYAM S KAGGOD

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1 YOJANA ANALYSIS AUGUST 2017 BY SHYAM S KAGGOD

2 CASCADING EFFECT A B C Selling Price= % Will buy it at 110 & adds profit of 20 Selling Price= % Will buy it at 143

3 INPUT TAX CREDIT INPUTS A Tax paid is 100 OUTPUT B Tax paid is 120 Tax to be paid is 400 Tax Paid to the government is 50 C Tax paid is 130

4 WHY GST? Cascading effect Multiplicity of indirect taxes Setting off not allowed/difficult in some case The transportation costs will add to the costs Lines between goods and services have blurred (eg- IPR are considered goods for imposing sales tax and as services for imposing service tax)

5 PROBLEM Raw materials Internal-VAT External-Customs, CVD etc Research/Technology Internal-service tax External-customs or service tax Others Interstate tax Entry tax Octroi

6 GST Streamlining/subsuming all the indirect taxesone nation one indirect tax First introduced in 2011 and again in December th CAB and 122 nd CAB

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8 GST

9 PROVISIONS OF GST BILL The bill empowers both central and state governments to take decisions/make laws regarding taxes GST council Set up by the president Union Finance Minister + state Finance ministers Functions-model GST laws, taxes/surcharge/cess to be levied by the centre and state, exemptions to be given etc GST council to decide regarding resolution of disputes

10 PROVISIONS OF GST BILL

11 PROVISIONS OF GST BILL The additional Interstate GST will be levied by central government (additional levy of 1% withdrawn) Exemption-alcoholic liquor for human consumption, GST council to decide when to impose taxes on crude petroleum, high speed diesel, petrol, natural gas and Aviation Turbine Fuel (ATF) Compensation to be given for 5 years

12 COMPENSATION & CESS The government has imposed cess under GST The cess collected will be used to provide compensation

13 GST WILL SUBSUME

14 GST-EXEMPTIONS

15 OLD VS NEW Old method Goods and services were taxed separately Different states different tax rates National market not possible Tax on production (origin based taxation) Cascading effect Many indirect taxes Setting off in some cases not allowed GST No differentiation between Goods and services Uniform tax rates across the country National market can be established Tax on consumption (target/end based taxation) No cascading effect Only one Setting off is allowed

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17 GST EXAMPLE

18 SUBRAMANIAN COMMITTEE Simplify tax administration, protect revenues and encourage compliance Three rates-standard rate (17% to 18%),Lower rate (12%),Sin rate/demerit rate (40%) Alcohol and real estate must be brought under GST 1% Interstate GST should not be implemented Compensation to reinforce trust between centre and states GST implementation must be evaluated every 1 or 2 years

19 SUBRAMANIAN COMMITTEE

20 GSTN (GST NETWORK)

21 COMPOSITION SCHEME

22 BENEFITS OF GST IMPLEMENTATION

23 GST BENEFITS EASE OF DOING BUSINESS Increase tax compliance, reduce tax burden, eliminate cascading effect, boost tax revenues, improve tax administration etc It will replace host of indirect taxes and cesses Businesses dealing with exempted goods and having a turnover of 20 lakh will be exempted

24 GST BENEFITS Coverage of textile, clothing and real estate Expansion of tax base the number of tax payers and direct tax collections Logistics cost

25 GST & LOGISTICS Reason Transportation time Time taken out of the total 40% Check posts 25% Other official stoppages 35% Home Market effect Centralizing hub operations Nagpur (Zero Mile City)

26 GST CONCERNS Compliance burden

27 GST CONCERNS Anti-Profiteering Measures Set of rules/guidelines that prevent the companies from making excessive profits with introduction of GST Were cleared by GST council on June 18, 2017 A National Anti-Profiteering Authority will be set up Has a sun-set clause of two years

28 GST - CONCERNS Tax rate - multiple tax rates Revenue protection Inflation Training and Infrastructure Compliance amongst the small businesses

29 GST CONCERNS The gold should be brought under the higher tariff Health and education should be brought under the ambit of GST Tax over GST would be counter-productive

30 MULTIPLE TIERS Need/Necessity There are too many groups using too many goods. Hence based on the goods used by these groups different tax rates are needed The government needs to maintain revenue neutrality It may lead to inflation (if all/majority of the commodities used by poor are in higher slab) It may also become regressive in nature Disadvantages Administrative difficulties Goes against the central idea of GST-One Nation, One Indirect Tax May lead to inflation

31 MULTIPLE TIERS Worries with the present tiers and commodities allocation Old wine in a new bottle Better structure required Complicated structure Way ahead Exemptions should be phased out Taxes on all the goods and services should be rationalized Fiscal space for GST rationalization through reforms in Direct Tax structure

32 GLOBAL EXPERIENCE Rationalization of tax rates Inflation Compliance Has been regressive in some cases

33 QUESTIONS GST has led to co-operative federalism/economic Union of India-elaborate GST though revolutionary needs fine-tuning if India wants to reap the benefits-discuss GST implementation rather than reducing the litigation may lead to tax terrorism-discuss GST regime represents an improvement in form as well as content compared to previous tax regime-explain