[Link].

in

Association of
National Exchanges
Members of India
Looking at a new horizon
Preparing for Goods and
Services Tax
November 2015
Agenda

Overview of GST

Current state of play

GST impact

Preparing for GST

Association of National Exchanges Members of India November 2015

PwC 2
Overview of
GST

Microchip Technology (India) Private Limited February 2015

PwC Slide 3
 Overview of GST

• At present, various indirect taxes are levied at both

Central and State level - not all indirect taxes are
creditable against each other, leading to
• Less tax cascading
cascading effect
• Increased investment
• A system of unified GST has been proposed to bring a • Improved competitive
fundamental shift in the way business transactions are position of Indian
producers
taxed in India, which will subsume various State and Improved cash flow
Central level indirect taxes position

• Proposal to implement a ‘Dual GST model’ comprising

- Central GST (‘CGST’) - levied by the Broader base, lower
taxes
Central Government
- State GST (‘SGST’) - levied by the
States Government Simpler and rational
tax structure
• Inter-state transactions proposed to be covered under
Integrated GST (‘IGST’), to be levied by Central
Government (likely tax rate for IGST to be sum of Improved administration
CGST and SGST) (simplicity and lower cost
of administration)
• Input credit mechanism to ensure no cascading effect
and ensure minimal blockage of funds
Association of National Exchanges Members of India November 2015
PwC 4
Overview of GST
Proposed tax structure

Taxes to be subsumed
Central taxes State taxes
• Additional duty of customs • Value added tax (‘VAT’)

• Special additional duty of customs • Other State taxes such as Luxury tax, MTP (Excise
duty), Octroi, Entry tax, Purchase tax, etc.
• Central excise duty (‘ED’)

• Service tax • Surcharge and cess related to supply of goods and

services
• Central sales tax (‘CST’)

• Surcharge and cess related to supply of goods and services • Taxes on lottery, betting and gambling

• Medicinal and toilet preparations (Excise duties) Act, 1955

Taxes outside the purview of GST

• Basic customs duty • State excise duties

• Stamp duty • Taxes and duties on electricity

• Taxes and duties on alcohol for human consumption • Taxes and duties on tobacco and tobacco products

Taxes and duties on petroleum products may be included within GST from a notified date

Association of National Exchanges Members of India November 2015

PwC 5
Overview of GST
Rate of tax

• Under the proposed GST, the following rate structure

expected:
- Concessional rate for goods and services of basic
importance
- Standard rate for all other goods and services
- Exemption to certain specified goods and services
• Rate of CGST expected to be uniform, while rate of SGST may
differ from State to State within a prescribed range (upto 2%)
• As per NIPFP’s calculations, the general rate of GST is
expected to be around 23% - 25%. However, Congress is
trying to push the general rate below 18%
• An additional tax, not exceeding 1%, on inter-state sale of
goods for a period of 2 years is also proposed to be levied.
Further, the same will not be available as credit and will be a
cost in the system. However, Congress is opposing the levy of
such additional tax

Association of National Exchanges Members of India November 2015

PwC 6
Overview of GST
Credit Mechanism

Nature Adjustable against

Leviable on
of levy (in specified order)

CGST Local supply of goods/ services • CGST; and

• IGST

SGST Local supply of goods/ services • SGST; and

• IGST

IGST • Inter-State supply of goods/ services • IGST;

• Imports into India of goods/ services • CGST; and
• SGST

Association of National Exchanges Members of India November 2015

PwC 7
 Key concepts to change under GST

Place of Valuation
supply
Multiplicity of Likely to be
Taxable event taxes Destination consistent for all
based rules goods and
Taxable event to GST to subsume services
change to ‘supply’
majority of
Inter-unit indirect taxes
transfers – taxed
To be replaced
States to levy tax with CGST, SGST,
on ‘services’ Credits IGST and Classification Rates and
additional tax on Uniform across exemptions
No differentiation interstate supply
between goods States? Rates to change
and services for RNR and lower
credit availment Transitional issues Exemptions
rate of tax on
likely to be
Credit pool to be goods?
withdrawn or
maintained State-
wise converted to
refund schemes

Association of National Exchanges Members of India November 2015

PwC 8
Anticipated place of supply rules

Rule Place of provision of services

Generic Rule

• Location of service receiver

• Where service receiver is not a registered person, location of service provider

Rule 16 – Place of supply of banking and other financial services including stock
broking service

• Location of service receiver on record of service provider

• Where service receiver is not a registered person, location of service provider

Association of National Exchanges Members of India November 2015

PwC 9
 Current state
of play

Microchip Technology (India) Private Limited February 2015

PwC Slide 10
Current state of play
Process for implementation

Constitution Amendment Bill Bill to be ratified by

Legislatures in half of the States

Constitution Amendment
Bill passed by the Lok
Sabha on 6 May 2015
Bill to be presented to
President for assent

Rajya Sabha yet to pass the Constitution

Amendment Bill with 2/3rd majority of members
present and voting

Association of National Exchanges Members of India November 2015

PwC 11
Current state of play

GST Constitutional Amendment Bill has been passed by the Lok Sabha

• Pending to be passed by the Rajya Sabha - Bill to be tabled in the Winter Session of Parliament,
which has commenced today

The Empowered Committee has approved and finalised the framework for IGST

Place of Supply Rules are under deliberation by the Empowered Committee

Reports of the Joint Committee on Business Processes for GST on registration, refund , payment and
return has been issued

Drafting of model GST law is in the process of finalization and would be put up in the public domain
for comments shortly

Design of the GST Network is in the process of finalisation

A contract has been awarded to Infosys to build and maintain technology network crucial for
implementing GST system across India

Association of National Exchanges Members of India November 2015

PwC 12
Key impact
areas

Microchip Technology (India) Private Limited February 2015

PwC Slide 13
Snapshot

A Current law
B Likely GST law
• Brokerage, IB, PMS services taxable at
full rate of service tax • Brokerage, IB, PMS services taxable at
• Services provided by sub-brokers to stock full rate of GST
brokers are exempt • Services provided by sub-brokers to stock
• Default place of provision – location of brokers exempt?
service receiver • Place of supply – Broking services
• Centralized registration for service tax - Registered person: Location of
compliance service receiver
• CENVAT credit reversal on account of
- Other than registered person: Location
proprietary trading
of service provider
• Place of supply – IB/PMS services
- Default rule- place of service receiver
• State wise registration and compliance
• Proprietary trading – Reversal of credit?

Association of National Exchanges Members of India November 2015

PwC 14
Few global tax treatments

European Union

• Asset management services are generally exempt

• Brokers’ services are generally exempt

Canada

• Asset management services are taxable

• Brokers’ services are generally exempt

Australia

• Asset management services are taxable

• Brokers’ services are taxable
Association of National Exchanges Members of India November 2015
PwC 15
Key Impact Areas – Place of Supply

Particulars Impact Place of supply

Fees for portfolio Location of the service receiver
management service
Brokerage received
Location of the service receiver

Brokerage paid to sub- Location of the service receiver

brokers

Location of the service receiver

Expenses (Commission,
marketing expenses, etc)

Association of National Exchanges Members of India November 2015

PwC 16
High level GST Impact on key incomes

Particulars Existing service tax regime Proposed GST regime

Brokerage Taxable Taxable

IB/ PMS fee Taxable Taxable

Proprietary trading Not taxable Not taxable

Association of National Exchanges Members of India November 2015

PwC 17
High level GST Impact on key expenses

Nature of expenses Existing service tax regime Proposed

GST regime
Relevant legislation Credit availability

Brokerage paid to sub- Not taxable Not Applicable Taxable and

brokers under Service tax Creditable?

Marketing expenses Service tax Creditable Creditable

Purchase of capital Excise Duty/ Generally credit Creditable

goods VAT/CST not available

Purchase of inputs VAT/CST Credit not Creditable

available

Association of National Exchanges Members of India November 2015

PwC 18
Likely GST law – Other impact areas

Significant increase in rate of tax

Mismatch between credit

accumulation and tax liability

State specific registration and

compliance requirement

Centralized procurement and

subsequent branch transfer will
attract GST

Basis for branch-wise allocation of

income/expenditure earned/incurred
at a global level
Association of National Exchanges Members of India November 2015
PwC 19
Thank You

© 2015 PricewaterhouseCoopers Private Limited. All rights reserved. In this document, “PwC” refers to
PricewaterhouseCoopers Private Limited (a limited liability company in India having Corporate Identity
Number or CIN : U74140WB1983PTC036093), which is a member firm of PricewaterhouseCoopers
International Limited (PwCIL), each member firm of which is a separate legal entity.

VS-CC
 Proposed GST regime

Location of
HO

Location of
branches Place of supply of services?

Service Place where tax should be paid ?

provided

Association of National Exchanges Members of India November 2015

PwC 21
Impact on brokerage paid to sub-brokers

Withdrawal of exemption may result in extra cost to brokers

Eligible input credit ratio under Rule 6(3) of CCR= 80:20

Existing indirect Proposed GST

Particular
tax regime regime

Rate of Service tax/GST 14% 20%

Expense: Brokerage paid to sub-brokers 100 100

Service tax/GST on brokerage (a) 0 15*

Eligible input credit (80%) (b) 0 12

Incremental cost (a-b) 0 3

* Assumed 25% are below threshold exemption

Association of National Exchanges Members of India November 2015

PwC 22