Huawei India – Manufacturing Opportunity Assessment in India by hcj


									  Goods & Service Tax
          Challenges in implementation

   Bipin Sapra

4 December 2009
GST in India

►   First Discussion Paper on GST was released on 10 November 2009
►   Proposed basic structure of GST
    ►   Dual GST i.e. transaction of supply of goods or services to attract both Central GST
        and State GST
    ►   Inter-state transactions to attract Integrated GST
    ►   Threshold for State GST: INR 1 million & proposed threshold for Central GST: INR
        15 million
    ►   Different threshold for services
    ►   Consumption-based, destination based
    ►   Less tax cascading
    ►   Replace most of the transaction based levies
►   Officially, proposed date for implementation of GST is April 2010 – is it

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GST implementation – A long way to go…
►   Constitutional Amendment(s) – not yet in place
►   No clarity on the fundamental issues like rate of GST, base of GST, ‘place of
    supply rules’
►   Consensus on revenue sharing, basic structure
►   No time frame for release of GST legislations
►   Dual control of Central & State Government – Modalities needed
►   Way forward for presently exempted sectors e.g. GTA service providers
►   Administrative hurdles

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GST implementation – Structural Challenges

►   Amendment of the Constitution
    ►   Requires approval by majority of the members of both the houses of the
        Parliament, also requires acceptance by at least two-third of the members present
        and voting; and
    ►   ratification by at least one-half of the States
    ►   Potential litigation against the constitutional amendment –
    ►   Keshawananda Bharti’s judgment – violative of the basic structure of the
    ►   Carry forward of present structure for limited cases

►   Need for enactment of Central & State GST legislations
    ►   Burdensome task – rewriting the indirect tax laws
    ►   Consistency in the provisions of Central & State GST legislations to be maintained
    ►   Consensus between Centre & State

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GST implementation – Legislative
►   Defining Service – taxable event
►   Place of Supply Rules
    ►   Exhaustive & practical
    ►   Tax on B2B service – location of service recipient
    ►   Tax on B2C services – location of service provider
    ►   Different rules possible for different types of services (such as telecom service,
        health club membership, airline services, banking services etc)
    ►   Consistency in the place of supply rules
    ►   In case of telecom service – no fixed place of performance or use, difficult to
        determine the State empowered to levy tax, e.g.:
         ►   Which State would levy tax in case of pre-paid cards activated in one State but used in
             another State?

         ►   Which State would levy tax in case of data connectivity service provided to banks for its
             offices spread throughout the country?

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GST implementation – Legislative
►   Place of Supply Rule – conti…
    ►   Lease Circuit connection between X Co and Y Co’s office both in Karnataka. Y
        Co. bills from Delhi to X Co’s corporate office in Bangalore. Which state will levy
        SGST under the GST regime?
    ►   X purchases an air ticket from Gurgaon for a flight between Mumbai and Pune.
        Which state will levy SGST under the GST regime?
    ►   X residing in Haryana purchases an insurance policy from AIG Life Insurance in
        Delhi. Which state will levy SGST under the GST regime?
    ►   X residing in Noida takes a loan of Rs. 10 lakhs for buying a car from HDFC Bank,
        Delhi. Which state will levy SGST under the GST regime?

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GST implementation – Administrative
►   Uniform and simple formats of returns and forms supported by uniform
    guidelines - Single return for Centre & State

►   Common e-payment and e-filing facility

►   Self assessment to continue

►   Uniform invoicing to be permitted, e-invoicing to be allowed

►   Single authority for audit/ dispute resolution/ anti evasion

►   Single authority and simplified mechanism for refund

►   Self adjustment of excess tax to be allowed
►   Training the tax officers for effective implementation of GST
►   Adequate IT infrastructure

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Thank You

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