An article on Role of Company Secretaries in GST Era was published in Souvenir of 43rd National Convention of Institute of Company Secretaries of India. Article was contributed by Team : Lex Bolster Global LLP.

1. A – 114
43rd National Convention of Company SecretariesGST - Move Towards Consumption based Tax — An Introductory Study
Role of Company Secretaries in GST Era
Pawan Dubey* & Sachin Arora**
* FCS, Partner, Lex Bolster Global LLP, Delhi.
** FCS, Partner, Lex Bolster Global LLP, Delhi.
The views expressed are personal views of the author(s) and do not necessarily reflect those of the
Institute.
Every change is challenging. A step towards the Ease of Doing Business and Make in India
the Prime Minister Mr. Modi said. “We have introduced the Goods & Service Tax (GST) Bill in
Parliament and we are hopeful on rolling it out in 2016.’’
After seeing the recent statements and confidence of the Prime Minister and the Finance
Minister of India at International platforms, it will give hope of the roll out of Goods and Service
Tax in 2016. It is only a matter of time. This is also reflected from the recent draft reports on
Business Processes of GST regarding Registrations, Refund and Payment on the portal
www.mygov.in by the Ministry of Finance to engage various stakeholders and know their
opinion and comments.
A company secretary is well versed in laws subject without any doubt by virtue of his
academic knowledge and practical training and particularly master to understand the law
subjects. It is the first priority of ICSI to have due recognition in the GST Era and to start with
the ICSI organized a national seminar on GST in Odisha in September, 2015 and released a
Referencer on GST. ICSI is also working on a plan to offer course on GST. Nation is convinced
about the immense benefits of GST.
Present Indirect Taxation System in India and its Shortcomings
Taxes on goods are described as “VAT” at both Central and State level. It has adopted
value added tax principle with input tax credit mechanism for taxation of goods and services,
respectively, with limited cross-levy set-off.
Present Indirect Tax Structure covers:

2. Role of Company Secretaries in GST Era
A – 115
Apart from aforesaid Indirect Taxes, there are, Octroi, Entry Tax, Luxury Tax, Lottery Tax,
Various Cess, Betting & Gambling Tax, Stamp Duty, Property Tax, Toll Tax, Road Tax among
others. However, there are various shortcomings in the present Indirect tax structure which
requires the need of GST and a few of those are listed herein below:
1. Various Indirect Taxes available in present system as levied by Centre and States.
2. High Cost of Compliances for both assessees and the Government due to multiplicity of
taxes
3. Tax Cascading effects i.e. Tax on taxes in present system
Tax cascading occurs under both Centre and State taxes. In present system, Excise Duty
is levied on the manufacturing of products and its credit is not available against liability
of VAT and the VAT is charged on the value of Excise. Thus causing cascading effect i.e.
Tax on Taxes. The major contributing factor to tax cascading is the CST on inter- state
sales, collected by the origin state and for which no State Govt allows input tax credit.
Tax cascading remains the most serious flaw of the current system.
4. Low Logistics efficiency due to multiple barriers & check points
5. Multiple Taxable events – Levy of Excise on manufacturing point then sale to another
dealer attracts VAT / Sales Tax as per state point; supporting services for sale will attract
Service Tax at Centre level and then further sale outside the State will cover under
Central Sales Tax.
6. Different Interpretations for same term due to different legislation – We find a significant
number of litigation surrounding this issue only. To decide whether an activity is sale or
works contract; sale or service, is not free from doubt in many cases.
7. Lack of Uniformity in provisions and Rates – The provisions & rates for state tax laws vary
from another state and so the lack of uniformity.
8. No clarity between Goods and Services due to bundled supplies of goods and services
e.g. work contracts, restaurants, constructions.
All these shortcomings lead us to adapt a new system of Taxation for ease of doing the
business and for the seamless flow of credit across the whole supply chain. So the entire
system needs to be rebuilt from scratch. GST seems to be the only solution.
Introduction of GST
The GST, “Goods and Services Tax”, is proposed to be a comprehensive indirect tax levy
on manufacture, sale and consumption of goods as well as services at the national level. GST
is a destination based multipoint tax system covering in its ambit both Goods and Services.
There will be uniformity to taxation as far as whole country is concerned. There will be a
seamless transfer of Goods and Services.
It is unquestionably a very important moment because the whole process of indirect
taxation in India will change once the GST itself is implemented. The other important feature
of this taxation is that there would be no tax on tax. It may bring inflation slightly down.
Economists estimate that it has a potential to give boost to India’s GDP itself.

3. A – 116
43rd National Convention of Company Secretaries
In a diagrammatical manner, GST could subsume the below taxes:
GST Worldwide
Almost 160 countries have introduced GST in one or the other form till now. Most of the
countries have a unified GST system. Brazil and Canada follow a dual system vis-à-vis India is
going to introduce.
Expected Model of GST in India - Dual GST
In India, the GST model could be “dual GST” having both Central and State GST component
levied on the same base. Few exceptions will be brought into the GST base for all goods and
services. Importantly, there will be no distinction between goods and services for the purpose
of the tax with common legislations applicable to both.
As per the recommendations of Joint Working Group (JWG) appointed by the Empowered
Committee in year 2007, the GST in India may not have a dual VAT structure exactly but it will
be a quadruple tax structure. It may have 4 components, lised below –
— Central tax on goods extending up to the retail level;
— Central Service Tax;
— State-VAT on goods; and
— State-VAT on services.
The significant features of Dual GST recommended in India, in concurrence with the
aforesaid recommendations by the JWG, are as under :
1. There will be Central GST to be administered by the Central Government and there
will be State GST to be administered by State Governments.
2. Central GST will replace existing CENVAT and service tax and the State GST will replace
State VAT.

4. Role of Company Secretaries in GST Era
A – 117
3. Central GST may subsume the indirect taxes on supplies of goods and services covering
Central Excise Duty; Additional Excise Duty; Additional Customs Duty in nature of
countervailing duties i.e. CVD, SAD; Service Tax, Central Sales Tax; Cesses levied by
Union; Surcharges levied by Union.
4. State GST may subsume the State Laws covering Value Added Tax; Purchase Tax; State
Excise Duty (except on liquor); Entertainment Tax; Luxury Tax; Octroi; Entry Tax; Taxes
on Lottery, Betting & Gambling.
5. The proposed GST will have two components – Central GST and State GST – the rates
of which will be prescribed separately keeping in view the revenue considerations,
total tax burden and the acceptability of the tax.
6. Taxable event in case of goods would be ‘sale’ instead of ‘manufacture’.
7. Exports will be zero rated and will be relieved of all embedded taxes and levies at both
Central and State level.
8. The JWG has also proposed a list of exempted goods, which includes items, such as,
life saving drugs, fertilizers, agricultural implements, books and several food items.
9. Certain components of petroleum, liquor and tobacco are likely to be outside the GST
structure. Further, State Excise on liquor may also be kept outside the GST.
10. Taxes collected by Local Bodies would not get subsumed in the proposed GST system.
Inter-State Transactions and GST
Present Indirect Tax Structure in Inter-State Transactions is explained below:
IGST Model - Integrated Goods and Service Tax on Inter-State Transactions
The features of IGST model are:
— GST in India envisaged on destination / consumption principle. Place of Supply to
determine where supply of goods / services will take place and then to determine
whether supplies are Inter-State or Intra-State.

5. A – 118
43rd National Convention of Company Secretaries
— Centre will levy tax at a rate approximately equal to CGST + SGST rate on inter-State
supply of goods & services.
— IGST will be levied and collected by the Centre.
— Tax revenues accrues to the destination / importing State based on Place of Supply
rules.
— It would basically meet the objective of providing continuous credit chain across States.
— IGST Credit can be utilised for payment of IGST, CGST and SGST.
— An inter-State seller will pay IGST on value addition after adjusting available credit of
IGST, CGST & SGST on his purchases.
— The Exporting State will transfer to the Centre the credit of SGST used in payment of
IGST. The Centre will transfer to the importing State the credit of IGST used in payment
of SGST.
— The Importing dealer will claim credit of IGST while discharging his output tax liability
in his own State. The Central Govt. will act as a neutral agency and transfer the funds to
the respective State Govts. on destination principle i.e. place of supply/consumption
occurs.
Illustrative Explanation to IGST Model
Assumptions:
(1) Central GST Rate – 12% and State GST Rate – 8%;
(2) Profit Margin – Rs. 1,000/- fixed (before tax);
(3) Both, CGST & SGST, are levied on every transaction starting from manufacturing level
till it reaches the final consumer, irrespective of State boundaries.
Table A
Particulars GST A/c Total
CGST SGST
@ 12% @8%
Manufacturer (Delhi ‘D’) to Wholesaler (Punjab ‘P’)
Cost of Production 9,000
Input GST on Raw Material 600 400
Add : Profit Margin 1,000
Manufacturers Basic Price 10,000
Add : GST 1,200 800 2,000
Less : Input GST 600 400
GST Payable 600 400
Sale Price 12,000

6. Role of Company Secretaries in GST Era
A – 119
Table B
Particulars GST A/c Total
CGST SGST
@ 12% @8%
Wholesaler (Punjab ‘P’) to Retailer ‘R’
Cost of Goods 10,000
Input GST on Raw Material 1,200 800
Add : Profit Margin 1,000
Manufacturers Basic Price 11,000
Add : GST 1,320 880 2,200
Less : Input GST 1,200 800
GST Payable 120 80
Sale Price to Retailer 13,200
Table C
Particulars GST A/c Total
CGST SGST
@ 12% @8%
Retailer ‘R’ to
Final Consumer ‘C’
Cost of Goods 11,000
Input GST on Raw Material 1320 880
Add : Profit Margin 1,000
Manufacturers Basic Price 12,000
Add : GST 1440 960 2,400
Less : Input GST 1320 880
GST Payable 120 80
Sale Price to Consumer 14,400
Particulars GST A/c Total
CGST SGST
@ 12% @8%
Verification of GST 2,400
(@ 20% on 12,000 - Sale Price by Manufacturer)
‘D’ on Inputs 600 400 1,000
‘D’ on Output 600 400 1,000
‘P’ on Output 120 80 200
‘C’ on Output 120 80 200
2,400

7. A – 120
43rd National Convention of Company Secretaries
Determination of Inter-State or Intra-State Supply
The determination factors for Inter-State Transactions are as under :
— Sale of Tangible Goods It may depend either upon movement of goods or
location of parties
— Sale of Intangible Goods and It may depend either upon location of parties or
Provision of Service consumption of service
— Composite Transactions, Composite transactions involving goods & services
e.g., Works Contracts may be treated as provision of services
Determination of Place of Supply / Taxation
GST is generally levied on the basis of the destination principle. For this purpose, some
countries follow the practice of prescribing a set of rules for defining the place of taxation or
place of supply. A supply of services or intangible property might be taxable in a jurisdiction
depending upon one or more of the following factors:
— Place of performance of the service
— Place of use or enjoyment of the service or intangible property
— Place of residence / location of the recipient
— Place of residence / location of the supplier
However, below services can have their OWN SET OF RULES:
— Services relating to immovable property (eg. Service of estate agents or architects)
— Banking & other financial services
— Business auxiliary and event management services
— Transport of goods by road
— Advertisement either in print or electronic media
Further, special rules might be required for certain other supplies for which there is no
fixed place of performance or use/enjoyment, such as:
Passenger travel services, Freight transportation services, supply of Goods during
transportation, Telecommunication Services, Motor vehicle leases/rentals, E-commerce
supplies, Development of Software through electronic mode.
Collection and Payment of Tax in Inter-State Transactions
Below mechanism could be possible in Inter-State Transactions for collection and payment
of tax:
— Seller in the origin State will charge IGST on Inter-State transactions, which will be
aggregate of CGST & SGST.
— Inter-State Seller shall use his input CGST and input SGST for payment of IGST, i.e., he
shall pay net IGST.

8. Role of Company Secretaries in GST Era
A – 121
— Inter-State Buyer shall avail input tax credit on the basis of tax invoice for payment of
his own IGST, CGST or SGST.
— Both, the seller and the buyer shall report these transactions in their respective e-returns.
— To maintain the GST to be a destination based tax, amount paid by the seller in his State
(along with input tax credit claimed by him) will be remitted by the Central Agency to
the buying State through some mechanism.
Roadmap to GST
To implement the GST in India, amendment in Constitution of India is required in below
articles:
Article 246A: Special Provisions with respect to GST
“(1) Notwithstanding anything contained in articles 246 and 254, Parliament, and, subject
to clause (2), the Legislature of every State, have power to make laws with respect
to goods and services tax imposed by the Union or by such State.
(2) Parliament has exclusive power to make laws with respect to goods and services
tax where the supply of goods, or of services, or both takes place in the course of
inter-State trade or commerce.
Explanation.—The provisions of this article, shall, in respect of goods and services tax
referred to in clause (5), of article 279A, take effect from the date recommended by the
Goods and Services Tax Council.’’
Article 269A : Levy and Collection of GST in course of Inter-State Trade or Commerce
“(1) Goods and services tax on supplies in the course of inter-State trade or commerce
shall be levied and collected by the Government of India and such tax shall be
apportioned between the Union and the States in the manner as may be provided
by Parliament by law on the recommendations of the Goods and Services Tax
Council.
Explanation.—For the purposes of this clause, supply of goods, or of services, or
both in the course of import into the territory of India shall be deemed to be supply
of goods, or of services, or both in the course of inter-State trade or commerce.
(2) Parliament may, by law, formulate the principles for determining the place of supply,
and when a supply of goods, or of services, or both takes place in the course of
inter-State trade or commerce.’’
Role of CS as Professional in GST Era
GST Implementation will lead to enormous scope for the Professionals who can play an
important role once GST is implemented. Some scope for professionals is listed below:
1. Professionals can assist compliances required under GST, Transitional Support,
Treatment of incentives, Process Documentation, Branch Transfers, Budgetary Control,
Refunds, Appeal and Adjudication etc.
2. Professionals can also help in implementing the GST system by advising with tax planning

9. A – 122
43rd National Convention of Company Secretaries
and interpretation of the Act correctly and educating the various departments like
strategic sourcing, payables, supply chain management etc;
3. Further CS can educate the suppliers/vendors about GST and ensure input tax credit is
availed correctly with their expert knowledge & understanding;
4. The opportunities also open up in the area of GSTN i.e. network support & infrastructure,
synchronizing IT systems & old data, Management Information System, System
Reconciliation, Data integration between Centre & State, Automation of returns and
other utilities, updating of amendments and data management etc.
5. They can advise and ensure proper set-off against three levies namely CGST, SGST
and IGST in the Industry;
6. The proposed GST Era has also in store a range of global opportunities for professionals,
which would involve Operational Consultancy, International Research issues,
Information and knowledge sharing, Capacity Building Services and Technology
Support Services etc.
It is just a matter of time when GST would be implemented. As our Finance Minister
asserted, “Obstruction to GST can’t be indefinite. Expect GST to become a reality soon. Reforms
being obstructed politically, Confidence in Indian economy has a reasonable sense of
satisfaction over the pace of reforms. GST is only a question of time; when it’s put to vote, we
will be able to pass it”.
We look forward to the Roll-out of GST, the biggest tax reform since independence, from
the next financial year. The GST Bill will be taken in Parliament during winter session.
***