GST Implementation in India
India’s biggest tax reform is now a reality. A comprehensive dual Goods and Services Tax (GST) has replaced the complex multiple indirect tax structure from 1 July 2017.
The concept of GST was visualized for the first time in 1999. On 8 August 2016, the Constitutional Amendment Bill for roll out of GST was passed by the Parliament, followed by ratification of the bill by more than 15 states and enactment of the bill in early September.
The GST Council consisting of representatives from the Central as well as state Government, met on eighteen occasions in last ten months and cleared –
- GST laws,
- GST Rules,
- Tax rate structure including Compensation Cess,
- Classification of goods and services into different rate slabs,
- Tax administration
On 12 April 2017, the Central Government enacted four GST Bills:
- Central GST (CGST)
- Integrated GST (IGST)
- Union Territory GST (UTGST)
- Bill to Compensate States
In a short span of time, all the states (excluding Jammu and Kashmir) approved their State GST (SGST) laws. Union territories with legislature, i.e., Delhi & Puducherry, have adopted SGST Act and the balance 5 Union territories without legislatures have adopted UTGST Act.
The government has also notified GST rules, tax rates on goods and services, exemption list and categories of services on which reverse charge is applicable.
The second phase of enrolment process for migrating existing taxpayers to the proposed tax regime through GST common portal has already commenced from 1 June 2017. GST Network, an IT backbone of GST, has also carried out the test run of its Portal. GSTN has released offline utility for GSTR-1.
Return filing procedure for the first two months of GST implementation is relaxed. Tax would be payable for the first two months based on a simple return Form GSTR – 3B containing a summary of outward and inward supplies. This form is required to be submitted before the 20th of the succeeding month. However, invoice details in regular GSTR-1 would also have to be filed for the month of July and August 2017, as per the timelines given below:
Return for month
GSTR – 1
GSTR – 2 (auto populated from GSTR-1)
GSTR – 3B
- Way Forward
- Facility for uploading details of outward supplies for July 2017 on GST portal is expected to be available from 15 July 2017.
- Filing of return in form GSTR – 3B and payment of taxes for the month of July 2017 is to be done before 20 August 2017.
- GST Rates
Rate classification for goods
28% + Cess
Tea & Coffee
Drugs & Medicine
Beverages containing milk
(1% / 3% cess)
Rate classification for services
- 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 7500
- Cinema tickets
- Hotel/ Lodges with tariff above INR 7500
Only rates of select goods and services have been mentioned here
- GST rate on pearls, precious or semi-precious stones, diamonds (other than rough diamonds), precious metals (like gold and silver), imitation jewellery, coins – 3%
- GST rate on rough diamonds – 0.25%
- What GST brings with it?
GST is a destination-based tax that replaces the earlier Central taxes and duties such as Excise Duty, Service Tax, Counter Veiling Duty (CVD), Special Additional Duty of Customs (SAD), central charges and cesses and local state taxes, i.e., Value Added Tax (VAT), Central Sales Tax (CST), Octroi, Entry Tax, Purchase Tax, Luxury Tax, state cesses and surcharges and Entertainment tax (other than the tax levied by the local bodies).
It is a dual levy with State/Union territory GST and Central GST. Moreover, inter–state supplies would attract an Integrated GST, which would be the sum total of CGST and SGST/UTGST.
Petroleum products, i.e., petroleum crude, high speed diesel, motor spirit, aviation turbine fuel, natural gas will be brought under the ambit of GST from such date as may be notified by the Government on recommendation of the Council. Alcohol for human consumption has been kept outside the purview of GST.
A well-designed GST in India is expected to simplify and rationalize the current indirect tax regime, eliminate tax cascading and put the Indian economy on high-growth trajectory. The GST levy may potentially impact both manufacturing and services sector for the entire value chain of operations, namely procurement, manufacturing, distribution, warehousing, sales, and pricing.
- EY Advantage
EY has been closely involved with the GST initiative through its Policy Advisory Group - it comprises a specialized team of experienced professionals, including former government officials who advise businesses as well as governments on diverse policy issues. The Group has diverse VAT and GST experience through extensive interactions with both the Centre and the State Governments in India and overseas engagements in various jurisdictions.
EY Policy Advisory Group helps businesses anticipate policy changes, assess their impact on their operations, and engage in a constructive dialog with relevant authorities for remedial measures to address any concerns. Our Policy Advocacy group includes:
Tax Partner – Policy Advisory Group;
Recognized as global thought leader on GST
Advisor, Tax Policy group;
Former Member (Service Tax & GST), CBEC, and member of the GST core group
Executive Director, Tax & Regulatory Services;
Architect of IT initiatives in CBEC; initiated the GSTN, pilot project with NSDL & IT readiness survey in states
Former Program Director for the project for designing and implementing the Goods and Services Tax system and network for the GoI
Global experience and network strength
EY has global expertise in delivering large transformation programs that includes a proven deployment approach, change management and PMO structure. EY also brings global experience in successfully delivering GST implementations, with market leading companies utilizing proven change management techniques.
EY’s transformation methodology leverages best practices, introduces innovation and builds a clear manageable roadmap.
GST is an organisation-wide transformational change that will impact the entire value chain of operations, including procurement, manufacturing, distribution, warehousing, sales and pricing.
EY has subject matter experts in goods and service tax, accounting, supply chain, project management, and IT across sectors providing thought leadership and advice on GST best practices. Our multi competency teams from Tax and Advisory with expertise on accounting standards/ principles, sector and functional understanding will facilitate companies to comply with statutory changes, while supporting in process readiness.
Our Tax and Advisory GST team is led by:
National Leader – Indirect Tax Services
Partner – Advisory Services
EY has developed a Proprietary Tool - ‘GST Navigator’ to assess and simulate business impact in the GST environment. It focusses on taxes payable, credits, pricing and margin impact and cash flow considerations. This will drive key business decisions on operating model changes required to optimize tax outcomes.
- Business Impact
- Benefits of GST
GST has been envisaged as a more efficient tax system, neutral in its application and attractive in distribution. The advantages of GST are:
- Wider tax base, necessary for lowering the tax rates and eliminating classification disputes
- Elimination of multiplicity of taxes and their cascading effects
- Rationalization of tax structure and simplification of compliance procedures
- Harmonization of center and State tax administrations, which would reduce duplication and compliance costs
- Automation of compliance procedures to reduce errors and increase efficiency
The GST structure would follow the destination principle. Accordingly, imports would be subject to GST, while exports would be zero-rated. In the case of inter-State transactions within India, the State tax would apply in the State of destination as opposed to that of origin.
Taxes to be subsumed
GST would replace most indirect taxes currently in place such as:
Central Taxes State Taxes
- Central Excise Duty [including additional excise duties, excise duty under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955]
- Service tax
- Additional Customs Duty (CVD)
- Special Additional Duty of Customs (SAD)
- Central Sales Tax ( levied by the Centre and collected by the States)
- Central surcharges and cesses ( relating to supply of goods and services)
- Value Added Tax
- Octroi and Entry Tax
- Purchase Tax
- Luxury Tax
- Taxes on lottery, betting & gambling
- State cesses and surcharges
- Entertainment tax (other than the tax levied by the local bodies)
- Central Sales Tax ( levied by the Centre and collected by the States)