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What is GST (Goods and Services Tax) Bill ?

The Good and Services Tax being passed by the Rajya Sabha on Wednesday 3rd Aug, 2016 is regarded as one of the most crucial indirect tax  reforms since independence of India. GST was first introduced in 2006 by Palaniappan Chidambaram , the then Union Finance Minister. It certainly took a long time coming to the Rajya Sabha. Back in 2006 , while it was introduced in India, there were around 45 countries which already had it in place, today the no. has gone up to 160 plus countries.

What is GST Bill?

The Goods and Services Tax aims to amend the constitution by creating a common market across India. Being formulated on the idea of One Nation One Tax , it focuses to absorb the central and state level indirect taxes into one common tax. GST is dual regime , which would be levied concurrently by the Centre (CGST) and States (SGST). This potentially means that taxes such as VAT , Excise Duty , Entertainment tax and Luxury tax would now be replaced by a single tax.  The Centre and State legislatures will have concurrent powers to make laws on GST but it would only be the centre who may levy any tax on the interstate supply of goods. Inter-State supplies within India would attract an Integrated GST (aggregate of CGST and the SGST of the destination State) which means State tax would apply in the State of destination as opposed to that of origin. States will have the right to levy tax on intra-State transactions including on services.

GST                                  SGST

The rate of tax under GST is yet to be decided. Within 60 days of enactment of the constitution Amendment Bill the President will set up the GST council. GST council once formed will recommend the rates of tax , exemptions , threshold limits , special provisions to certain states and all other guidelines which are to be followed. The Council will consist of minister from central and local government which will be headed by the finance minister and include State Finance Minister and Union Minister of State for Revenue.

India’s chief Economic advisor Arvind Subramaniam has suggested a standard GST rate of 17 to 18% , a lower rate of 12% and rate of 40% which would apply to luxury cars, aerated drinks , pan
masala and tobacco products. Alcohol , petroleum and real estate has been kept out of GST.

Consequences of GST:

  • GST promises to make the taxation process more transparent as it would eliminate of multiplicity of taxes and their cascading effects.
  • Harmonization of center and State tax administrations, which would reduce duplication and compliance costs
  • With lower tax rate it is expected that the dealers would lower down the prices of goods which would benefit the customers.
  • On-road price for entry level cars would come down.
  • Paints , furniture , Ply, Courier services , Electronic goods (Stabilizers , LED bulbs , tube lights) would cost less.
  • E-commerce industries like Flipkart , Snapdeal etc, are expected to be hugely benefited as no inter state tax would mean cheaper products and fast delivery.
  • The prices of Tobacco products , Cigarette are expected to hike.

Next Step for getting GST implemented:

Once the bill is passed by both the houses of the parliament, atleast 15 out of the 29 states need to give a formal consent to make it officially valid. Further more , GST Council needs to decide and come up with the standard tax rate under GST and it needs to be presented again in the parliament for final agreement.

If everything goes as planned by government, then Goods and Services Tax  might come into place on 1st April 2017

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