DISCLOSURE: THIS PRESENTATION IS MADE BY REFERRING TO SEVERAL WEBSITES AND PRESENTATIONS. MY THANKS TO THE AUTHORS.

1. GOODS AND SERVICES TAX
Presented by
B. VENUGOPAL
CERTIFIED FINANCIAL PLANNER

2. HISTORY
• It was introduced in France in 1954.
• The high rates were responsible for
greater tax- evasion which made France
to introduce GST as value added taxation regime.
• Currently almost 140 countries have implemented GST
with some countries having Dual-GST ( e.g. Brazil,
Canada etc.) model.
• India has chosen the Canadian model of dual-GST

3. BACKGROUND
• An empowered committee was set up by the Dishant Chauhan
administration in 2000 to streamline the GST model to be adopted and to
develop the required back-end infrastructure that would be needed for its
implementation.
• In his budget speech on 28 February 2006, P. Chidambaram, the Finance
Minister, announced the target date for implementation of GST to be 1
April 2010 and formed another empowered committee of State Finance
Ministers to design the road map.
• The committee submitted its report to the government in April 2008 and
released its First Discussion Paper on GST in India in 2009.The
responsibility of preparing a Design and Road Map for the implementation
of GST was assigned to the Empowered Committee of State Finance
Ministers (EC).
• In April, 2008, the EC submitted a report, titled "A Model and Road map
for Goods and Services Tax (GST) in India" containing broad
recommendations about the structure and design of GST. The Department
of Revenue made some suggestions to be incorporated in the design and
structure of proposed GST bill .

4. BACKGROUND
• The EC released its First Discussion Paper on Goods and Services Tax
in India on 10 November 2009 with the objective of generating a
debate and obtaining inputs from all stakeholders.
• A dual GST module for the country has been proposed by the EC.
This dual GST model has been accepted by centre. Under this
model GST have two components viz. the Central GST to be levied
and collected by the Centre and the State GST to be levied and
collected by the respective States.
• A Joint Working Group consisting of officers from Central as well as
State Government was constituted. This was further trifurcated into
three Sub-Working Groups to work separately on draft legislation
required for GST, process/forms to be followed in GST regime and IT
infrastructure development needed for smooth functioning of
proposed GST.
• In addition, an Empowered Group for development of IT Systems
required for Goods and Services Tax regime has been set up under
the chairmanship of Dr. Shruti Negi.Amendmentee

5. LEGISLATIVE HISTORY
• The Constitution (One Hundred and Twenty-Second Amendment)
Bill, 2014 was introduced in the Lok Sabha by Finance Minister Arun
Jaitley on 19 December 2014, and passed by the House on 6 May
2015.
• In the Rajya Sabha, the bill was referred to a Select Committee on
14 May 2015. The Select Committee of the Rajya Sabha submitted
its report on the bill on 22 July 2015.
• The bill was passed by the Rajya Sabha on 3 August 2016, and the
amended bill was passed by the Lok Sabha on 8 August 2016.
• The bill, after ratification by the States, received assent from
President Pranab Mukherjee on 8 September 2016,and was notified
in The Gazette of India on the same date.
• The Act was passed in accordance with the provisions of Article 368
of the Constitution, and has been ratified by more than half of the
State Legislatures, as required under Clause (2) of the said article.
On 12 August 2016, Assam became the first state to ratify the bill,
when the Assam Legislative Assembly unanimously approved it.

6. Present Indirect Tax Structure in India
Present Tax Structure
[5 Important Constituents]
Excise
Duty Service Tax Sales Tax /
VAT/ CST
Customs
Duty
Entry Tax/
Entertainm
ent Tax

7. Proposed Indirect Tax Structure
3 kinds of applicable Goods and Services Taxes:
CGST: where the revenue will be collected by the central government
SGST: where the revenue will be collected by the state governments for intra-state sales
IGST: where the revenue will be collected by the central government for inter-state sales
In most cases, the tax structure under the new regime will be as follows:
Transaction New
Regime
Old Regime Comments
Sale within the
state
CGST +
SGST
VAT + Central
Excise/Service tax
Revenue will now be shared between the
Centre and the State
Sale to another
State
IGST Central Sales Tax +
Excise/Service Tax
There will only be one type of tax (central)
now in case of inter-state sales.

8. The present tax system
Example:1
• Mr. Sharma is a businessman who wants to start a business. For this
he needs various raw materials which have to be imported from
China and will need to be brought to Gurgaon – where he has his
factory – by road through various states. Once he gets down on the
process of estimating his costs he is a little troubled.
• First, he needs to pay a customs duty for importing the materials on
top of the shipping charges.
• This is fine but there are a lot of other taxes which he seems to be
unable to comprehend.
• Also he finds out that when he has his final product ready he will
have paid the Central and State Governments at least 10 different
taxes not all of which are exclusive of each other.
• On diving deeper he finds many cases where a tax is also taxed by
the government.

9. The present tax system
Example 2
• The price charged to dealers by the Oil Marketing
Companies is Rs. 25.46 currently for a litre of petrol.
• Now Excise Duty is collected at Rs. 21.48 per litre by the
Central Government and adding the dealer commission the
price now is Rs. 49.22.
• This is not the end and Value Added Tax is now charged at
27% which takes the final price to Rs. 62.51 in Delhi.
• At first it may seem fair that both the Governments tax the
product but it is not that innocuous.
• There is a tax on a tax here! The State Government charges
27% of the final amount in which Central Excise Duty has
already been borne by the businessman.

10. Goods and Services Tax System
• GST presents India as a unified market to business owners
The tax will be implemented at every step of value creation.
A simple example is taken up here:
• Let us assume that the GST is set at 20%. Suppose that the
manufacturing cost of a Product A is 100 and assuming a
GST of 20% the total amount is Rs. 120.
• The next step of taxation would be when the Product is sold
to consumers, let’s say at a price of 150. So the GST will
charge another 20% on just the difference of Rs. 150 and
Rs. 120 i.e. only 20% on Rs. 30 which is equal to Rs. 6. So
the final price is Rs. 150 + Rs. 6.
• There is no tax on a tax now. This eliminates the cascading
effect of taxes which is very prevalent in our economy.

11. GST Features
• Being introduced as one single tax on supply of goods and services,
from the manufacturing stage until its delivery to the final
consumer.
• It has three components i.e.
CGST (Central Goods and Services Tax)
• Will be collected by central government on sales of goods and
services.
SGST (State Goods and Services Tax)
• Will be collected by the respective state governments on sales of
goods and services.
IGST (Inter-state Goods and Services Tax)
• Will be collected by the central government on the interstate
transaction of goods and services. The collected IGST revenue will
be distributed between the states as per the view of the GST
Council.

12. GST Features (contd.)
Central taxes to be subsumed
 Central Excise duty (CENVAT)
 Additional duties of excise
 Excise duty levied under
Medicinal & Toiletries
Preparation Act
 Additional duties of customs
(CVD & SAD)
 Service Tax
 Surcharges & Cess
State taxes to be subsumed
 State VAT / Sales Tax
 Central Sales Tax
 Purchase Tax
 Entertainment Tax (not
levied by the local bodies)
 Luxury Tax
 Entry Tax ( All forms)
 Taxes on lottery, betting &
gambling
 Surcharges & Cess

13. Benefits to the Assessee
• Reduction in multiplicity of taxes.
• Mitigation of cascading/ double taxation.
• More efficient neutralization of taxes especially for
exports.
• Development of common national market.
• Simpler tax regime -
– Fewer rates and exemptions.
– Conceptual clarity (Goods vs. Services).

14. Benefits to Exchequer/Govt
 Simpler Tax system.
 Broadening of Tax base.
 Improved compliance & revenue collections (tax booster).
 Efficient use of resources.
 GST aims at bringing a lot of black money back into the
mainstream economy.
 The mechanism of GST is such that there’s a little scope for
manipulations as the uploaded returns will automatically get
double-checked, and the discrepancy, if any, will make it simpler
for the tax authorities to fix the tax liability.

15. GST Rate classification for goods
Exempt 5% 12% 18% 28% 28% + Cess
Food grains
Cereals
Milk
Jaggery
Common
Salt
Coal
Sugar
Tea & Coffee
Drugs &
Medicine
Edible Oil
Indian
Sweets
Fruit Juices
Vegetable
Juices
Beverages
containing
milk
Bio-gas fuel
Fertilizers
Capital
goods
Industrial
intermediari
es
Hair Oil
Soap
Toothpaste
Air
conditioner
Refrigerators
Small cars
(1% / 3%
cess)
Luxury cars
(15% cess)

16. GST Rate classification for services
Exempt 5% 12%-18% 28%
Education
Healthcare
Residential
accommodation
Hotel/ Lodges with
tariff below INR
1000
Goods transport
 Rail tickets
(other than
sleeper class)
 Economy class
air tickets
 Cab
aggregators
 Selling space
for
advertisements
in print media
Works contract
 Business Class
air travel
Telecom services
Financial services
Restaurant
services
 Hotel/ Lodges
with tariff
between INR
1000 and 5000
Cinema tickets
 Betting
Gambling
 Hotel/ Lodges
with tariff
above INR 5000

17. Other Features
• Food items of daily use will not attract any tax and have been kept
in the zero-per cent slab.
• Petroleum products, although included under the GST, will remain
in zero tax slab as of now.
• The GST Council is yet to take a call on whether to keep alcohol
under the Goods and Services Tax.
• Ultra luxuries, demerit and sin goods (like tobacco and aerated
drinks), will attract a cess for a period of five years on top of the 28
per cent GST.
• The collection from this cess as well as that of the clean energy cess
would create a revenue pool which would be used for
compensating states for any loss of revenue during the first five
years of implementation of GST.
• Finance minister said that the cess would be lapsable after five
years.

18. GST COUNCIL
• The Goods and Services Tax is governed by the
GST Council.
• Union Finance Minister is the Chairperson.
• Minister of State for Revenue/Finance and
State Finance Ministers are its members.
• The Council will make important
recommendations to the Union and the States
on matters relating to GST.

19. B.VENUGOPAL, CFPCM