GST Implementation in India
India’s biggest indirect tax reform in the form of Goods and Services Tax (GST) has completed 1 year. A comprehensive dual GST was introduced in India from 1 July 2017.
The idea of moving towards the GST was first mooted by the then Union Finance Minister in his Budget for 2006-07. The talks of ushering in GST took concrete shape with the introduction of Constitution (122nd Amendment) Bill, 2014. The Bill was passed by the Parliament on 8 August 2016. This was followed by the ratification of the Bill by more than 15 states. On 12 April 2017, the Central Government enacted four GST bills:
- Central GST (CGST) Bill
- Integrated GST (IGST) Bill
- Union Territory GST (UTGST) Bill
- The GST (Compensation to States) Bill
In a short span of time, all the states approved their State GST (SGST) laws. Union territories with legislatures, i.e., Delhi and Puducherry, have adopted the SGST Act and the other 5 union territories without legislatures have adopted the UTGST Act.
The GST Council, a recommendatory body consisting of representatives of Central as well as state governments, has met on several occasions and taken important decisions relating to tax rate structure, exemptions, rules, composition scheme etc. Over the period, the Council has recommended a reduction in the tax rates of various goods and services. It is also considering the various issues faced by trade and industry and endeavoring to simplify the new tax regime and ease compliance.
On the compliance front, all registered persons have to file monthly returns in Form GSTR-3B (containing a summary of outward and inward supplies) by the 20th of the succeeding month. Additionally, an invoice-wise return of outward supplies needs to be submitted in Form GSTR-1 by the 10th of the succeeding month. Taxpayers with turnover upto INR 1.5 crores can file Form GSTR-1 on quarterly basis. The Government has suspended the requirement of filing Form GSTR-2 (containing details of inward supplies) and GSTR-3 (a consolidated statement of inward and outward supplies).
The GST Council has approved a simplified GST return format wherein the taxpayers will be required to file only one monthly return. Input tax credit will be available based on invoice details of outward supplies uploaded by the supplier. Taxpayers having turnover below INR 5 crores will have an option to file return on quarterly basis.
Under GST, there is a provision for the person in charge of a conveyance to carry electronic way bill (e-way bill) if the consignment value exceeds INR50,000. E-way bill can be generated through various modes such as web (online), Android app, SMS using Bulk Upload Tool and API-based site-to-site integration. The e-way bill system has become effective for inter-state as well as intra-state movement of goods.
GST has been a major transition in the Indian tax framework. It has evolved significantly from the time of its inception. It is expected that Government’s pro-active measures and industry’s active participation, will make it a truly “Good and Simple Tax” in the times to come.
- GST Rates
Rate classification for goods
28% + Cess
Duty credit scrips
Apparels valued less than INR1,000
Fishing net and fishing hooks
Articles of apparels exceeding INR1,000
Specified parts of sewing machine
Furniture wholly made of bamboo or cane
Fork lifts, lifting and handling equipment
Electrical apparatus for radio and television broadcasting
Slabs of marbles and granite
Transmission apparatus for radio-broadcasting
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
- Works contract
- Business Class air travel
- Telecom services
- Financial services
- Hotel/ Lodges with tariff between INR 1000 and 7500
- Hotel/ Lodges with tariff above INR 7500
- 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 Vailing 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, Taxes on lottery, betting and gambling, 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 attract an Integrated GST, which is 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.
- 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:
National Leader, Tax and Economic Policy Group, EY India
Former Member (Service Tax & GST), CBEC, and member of the GST core group
Partner and National Leader, Tax Technology and Transformation, EY India
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
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)