GST

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.

http://indianexpress.com/article/explained/gst-most-important-tax-reform-since-1947/