Goods & Service Tax (GST)
Introducing GST in India, what is GST, its features, the Constitution (122nd Amendment) Bill, GST tax rate to be levied and business impact of GST in India
With the unanimous approval of all the members of the Parliament, GST Bill 2016 leaves a mark on the history of India.
It will change the indirect tax structure of the nation, taking it towards a single tax system. Goods and Services Tax (GST) will replace the existing central and state taxes levied by the government. It will cover everything including manufacturing, sale or consumption of goods and services. All the authority to administer and levy GST will rest with only one body, the Union Government. One tax system will reduce the tax evasion from the country, giving rise to transparency. Additionally, elimination of inter-state taxes will decrease the procedural compliance and paperwork to a great extent. The consumers will be most benefitted by free movement of goods across the nation and reduction in the tax burden.
The successful implementation of the Goods and Service Tax will be a significant phase in India. Overall it can be said that GST will have a substantial impact on the entire working of the industries in the nation.
What is GST?
What is GST? Goods and service tax (GST) is a single rate of indirect tax to be applied in the country. It subsumes all the central and state taxes levied presently in the country into one single tax rate. In India, GST Bill was first introduced in 2014 as The Constitution (122nd Amendment) Bill. This got an approval in 2016 and was renumbered in the statute by Rajya Sabha as The Constitution (101st Amendment) Bill, 2016.
India being a federal republic, GST will be concurrently levied at Central (CGST) and state (SGST) level. The Union will prepare and implement a common base for both the levels. Destination principle will be considered as a basis for the levy for CGST and SGST. Hence, exports will become zero-rated and import taxes will equalise with domestic goods and services taxes. An Integrated Goods and Service Tax (IGST) will be imposed on inter-state supplies in the country. IGST will be a sum of CGST and SGST of the relevant state. GST council will be formed for solving all the issues and recommendations relating to GST.
Also, an additional tax of 1% will be levied by the Centre for the supply of goods over and above IGST, assigning the income earned to the origin states.
For an efficient and fruitful implementation of GST, the government will bear the losses incurred by the states and provide with compensations for five years.
GST will reduce the administrative complications and simplify the indirect tax system in India. It will result in a significant change, creating a single national market under one tax procedure.
- The Union Government will be vested with all the powers to make the rules and regulations in the matter of supplies in the system of inter-state trade. For intra-state transactions (including services) the right to levy GST will be with states.
- GST will contain current Central and state-level taxes in itself. The Central taxes subsumed will include service tax, excise duty, additional excise duty, additional customs duty (CVD) and special additional duty. State VAT, entertainment tax, central sales tax, luxury tax, entry tax (other than Octroi) and purchase tax are state level taxes to be included in GST.
- Alcohol for human consumption will be kept away from GST.
- Integrated Goods and Service Tax (IGST) will be levied by the Centre on the inter-state goods and services.
- Application of GST on petroleum and petroleum products might happen.
- Basic customs duty will be levied on goods imported.
- Provisions relating to removal of Octroi or entry tax across India will be made.
- GST Council comprising of Central and state ministers will administer the GST in India.
The Constitution (101st Amendment) Bill
The Bill introduces the Goods and Service Tax (GST) in the Constitution of India. It highlights the structure of the GST to be implemented. The key features presented in the Bill are scope, levy, construction of GST Council, additional tax on goods supply and compensation given to the states.
It is hoped that the Bill will be implemented by 2017.
Tax-rate Proposed for GST
The central question for the Government is to decide a GST tax rate to be applied. Currently, no tax rate is agreed upon but, Finance Minister has stated that it will be within 17% to 20%. He also promises to keep the GST tax rate as low as possible.
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