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1 ABC of GST and the key business considerations What is GST? The Goods and Services Tax (GST) is expected to be the most significant tax, or more so, business transformation reform in the fiscal history of India. It is likely to impact prices, business processes, investments and profitability in all segments of the economy. GST is a comprehensive tax levied on manufacture, sale and consumption of goods and service at a national level. Under GST there will be no difference between goods and services. Only the final consumer will bear the tax on value addition at every stage from producer/service provider to the retailer. It tries to eliminate indirect taxes and mitigate cascading or double taxation issues and leads to a common national market, with elimination of state boundaries. Evolution of GST Budget 2006-07 – FM proposed introduction of GST from April, 1 2010. Empowered Committee of State Finance Ministers constituted Joint Working Group in May, 2007 EC finalized its views on broad GST structure – consensus on Dual GST (Central and state GST), separate legislation, levy and administration. First Discussion Paper on GST was released by EC. Constitution Amendment Bill to enable roll out of GST was tabled in Parliament. . EC rejected Central Govt’s proposal to include petroleum products under GST in Nov, 2013 2006 2007 2008 2009 2013 2011 2007 2007 2008 2009 2013 2014 Phasing out of CST began from April, 2007 with the reduction . in CST rate from 4% to 3%. Study Paper on GST authored by Dr. Parthasarathy Shome was released. CST rate was further reduced from 3% to 2% in June, 2008 The 13th Finance Commission released its Report on GST in Dec, 2009 Standing Committee on Finance tabled its Report on GST Bill in August, 2013 June 2014 - Passed in Lok Sabha ( awaiting Rajya Sabha approval Source: EY analysis 4 | The retailer
GST is a need of the hour The need to implement GST arises from the inherent complexity in the existing tax system in India. GST is needed to simplify the existing complex tax structure; minimize the cascading effects of double taxation, streamline interstate transactions and make doing business in India easier for Indian as well as multinational companies (MNCs). Why is GST needed? Double taxation Interstate transactions International standards • Elimination of cascading effect of taxes at various stages • Tax computation to become simpler in cases where value of goods and services need to be split for separate taxation • Full input tax credit possible at the Central and state level • Smoothen the tax structure and make tax return filing less cumbersome • Ease in getting full input tax credit • Will streamline compliance and administrative procedures across states, and between states and the Center • Reduce administrative costs and help develop a common national market • Doing business is likely to become easy and boost overall economic growth • GST – an international standard • Important factor in investment decisions for MNCs • Non-implementation of GST – a major disadvantage for India vis-à-vis other destinations with GST • Would help attract more FDIs and FIIs Source: EY analysis Why GST since VAT is there? GST is a destination-based consumption tax (similar to VAT). VAT was implemented first in 2005. Despite the success of VAT, there are still certain shortcomings in its structure, both at the center and the state level. Shortcomings of VAT Center State Inter-state • Input credit is available only on the excise duty paid on raw material. • No input credit is paid on other taxes and duties on post-manufacturing activities. • Although, there is CENVAT, other taxes, e.g., surcharges, additional customs duties is not included. • Services are taxed selectively and only at the center; input credit on service tax paid is allowed only to a limited extent. • States charge VAT on the excise duty paid to the Center. • CENVAT is allowed on goods remains included in the value of goods to be taxed. • Many states still charge various indirect taxes, such as luxury tax, entertainment tax, and there is no input tax credit in case of CENVAT paid on certain items. • Inter-state tax (CST) is levied on interstate transfer of goods. There is no provision for input credit on CST. Manufacturers producing goods in one state and distributing them in other states, end up paying taxes in each state. Source: EY analysis The retailer | 5
Page 1 and 2: The retailer EY’s publication in
Page 3: Contents ABC of GST and the key bus
Page 7 and 8: Overall impact of GST is anticipate
Page 9 and 10: Impact of GST implementation in var
Page 11 and 12: Nitesh Mehrotra Director Nitesh is
Page 13 and 14: Alternate therapy services: signifi
Page 15 and 16: Strategies to develop a successful
Page 17 and 18: Ravi Kapoor Director Krishnaprasad
Page 19 and 20: This year’s survey brings good ti
Page 21 and 22: Analytics: stretching your customer
Page 23 and 24: Nitin Mehta Director Sneha Gandhi S
Page 25 and 26: Notes The retailer | 25
Page 27 and 28: Our offices Ahmedabad 2 nd floor, S

The retailer

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