GST Implementation in India

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India’s biggest indirect tax reform in the form of Goods and Services Tax (GST) has completed more than nine months. A comprehensive dual GST was introduced in India from 1 July 2017.

The idea of moving toward 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 the 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 till 30 June 2018. Additionally, an invoice-wise return of outward supplies needs to be submitted in Form GSTR-1. The due dates for filing Form GSTR-1 are as follows:

For taxpayers with an annual aggregate turnover up to INR1.5 crore:

Period

Dates

Jan–Mar 2018

30 Apr 2018

Apr–Jun 2018

31 Jul 2018

For taxpayers with an annual aggregate turnover of more than INR1.5 crore:

Period

Dates

Feb 2018

10 Apr 2018

Mar 2018

10 May 2018

Apr 2018

31 May 2018

May 2018

10 Jun 2018

Jun 2018

10 Jul 2018

The Government has deferred the requirement of filing Form GSTR-2 (containing details of inward supplies) and GSTR-3 (a consolidated statement of inward and outward supplies) till such time the nominated Committee reviews and comes out with a simplified mechanism for the invoice-matching process.

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 from 1 April 2018 for inter-state movement of goods. For intra-state movement of goods, e-way bill will be introduced in a phased manner before 30 June 2018.


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  • GST Rates

    Rate classification for goods

    Exempt

    5%

    12%

    18%

    28%

    28% + Cess

    Electrical energy
    Newspapers
    Milk
    Duty credit scrips
    Food grains

    Apparels valued less than INR1,000
    Fly ash
    Fishing net and fishing hooks
    Aircraft engines
    Bio-gas

    Articles of apparels exceeding INR1,000
    Bio-diesel
    Printing ink
    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
    Chocolates
    Slabs of marbles and granite

    Paints and varnishes
    Refrigerators
    Air-conditioners

    Cars
    Pan masala

    Cigars

    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
    • Works contract
    • Business Class air travel
    • Telecom services
    • Financial services
    • Hotel/ Lodges with tariff between INR 1000 and 7500
    • Betting
    • Gambling
    • 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 expected to be a destination-based tax that should replace the current 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 will be 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.

  • EY Advantage

    Policy advocacy

    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:

    EY - Satya Poddar

    Satya Poddar

    Tax Partner – Policy Advisory Group;
    Recognized as global thought leader on GST

    EY - V S Krishnan

    V S Krishnan

    Advisor, Tax Policy group;
    Former Member (Service Tax & GST), CBEC, and member of the GST core group

    EY - Venkatesh Narayan

    Venkatesh Narayan

    Executive Director, Tax & Regulatory Services;
    Architect of IT initiatives in CBEC; initiated the GSTN, pilot project with NSDL & IT readiness survey in states

    EY - Prakash Jayaram

    Prakash Jayaram

    Partner, Advisory;
    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.

    Integrated approach

    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:

    EY - Harishanker Subramaniam

    Harishanker Subramaniam

    National Leader – Indirect Tax Services

    EY - Neel Goyal

    Neel Goyal

    Partner – Advisory Services

    Technology edge

    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

    EY - GST 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

    Destination principle

    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)