What
is the Goods and Services Tax (GST)?
1) A
destination-based, indirect tax that will be levied on manufacture, sale and
consumption of goods and services.
2) It will
subsume all central and state indirect taxes and levies :
i.
excise duty
ii.
additional excise duties
iii.
service tax
iv.
additional customs duty (countervailing duty, special
additional duty of customs)
v.
surcharges and cesses
vi.
value added tax
vii.
sales tax
viii.
entertainment tax (other than the tax levied by local
bodies)
ix.
central sales tax (levied by the centre and collected
by states)
x.
octroi
xi.
entry tax
xii.
purchase tax
xiii.
luxury tax
xiv.
taxes on
lottery, betting and gambling
Why
is it needed?
1) Currently,
tax rates differ from state to state.
2) GST will
bring uniformity, reduce the cascading effect of these taxes by giving input
tax credit.
3) It will
have a comprehensive tax base with minimum exemptions.
Ø It will
help industry, which will be able to reap benefits of common procedures and
claim credit for taxes paid.
4) This is
expected to reduce the cost for consumers.
5) According to some estimates,
GST will help increase India’s GDP by around 2 per cent.
What
is the constitutional status of GST?
1) Currently,
states don’t have the power to levy service tax, while the Centre does not have
the power to levy tax beyond the factory gate, i.e. VAT, sales tax, etc.
2) To
facilitate this, a constitutional amendment is required.
3) The government
introduced a “slightly modified” version of the Bill in Lok Sabha last December.
It was cleared on May 6.
4) But for GST
to become a reality, the Bill must be cleared by two-thirds majority by both
Houses, and ratified by 50% of states.
5) It is now
pending in Rajya Sabha.
Why
is the Bill stuck?
1)
Punjab and Haryana are reluctant to give up
purchase tax.
2)
Maharashtra is unwilling to give up octroi
3)
All states want to keep petroleum and alcohol
out of the ambit of GST
Despite the passage of the Bill in Lok Sabha, most of the
original concerns of states remain.
1)
Gujarat and Maharashtra want the additional one
per cent levy extended beyond the proposed two years, and raised to two per
cent.
2)
Punjab wants purchase tax outside GST.
If
it is finally passed and ratified, then?
1) The Centre
and states have to frame and pass GST laws — Central GST and State GST —
which will provide the framework for the new tax.
2) The IT
infrastructure has to be ready before April 1, 2016, the scheduled date for
implementation of the new tax.
3) A GST
Council will be formed, which will decide on issues including tax rates,
exemption list and threshold limit.
Ø GST Council
will be headed by Union Finance Minister and will have state Finance Ministers
as its members.
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