Gearing up to roll out Goods and Services Tax (GST) on July 1st, Finance Minister Arun Jaitley introduced four bills backing GST implementation on Monday.
Amongst other things, the bills set the peak GST rate at 40% and makes provisions for setting up an anti-profiteering authority. The matter is to be discussed in the house on 29th March.
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GST enters final lap: Benefits, consequences and more
Tax structure in India
The Constitution of India distributes taxation powers between the centre and the states. Direct taxes, including income tax from companies are collected by the centre. While indirect taxes on manufacturing and provision of services go to the centre, those on consumption belong to the states.
Representing the largest indirect tax reform in India since 1947, the GST is intended to avoid cascading or multiple taxation, resulting in taxes being levied at various stages including manufacture, transport and consumption, thereby reducing the consumer's financial burden.
GST will further have the effect of unifying India as a single market, with a single rate of tax replacing multiple central and state levies.
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The GST number game
The four GST bills include: the Central GST Bill (CGST), the Integrated GST Bill (IGST), the Union Territory GST Bill (UT-GST), and the GST Compensation to States Bill.
The four-slab structure sets rates at 5%, 12%, 18% and 28%, with maximum tax burden at 40%.
The Compensation bill is intended to reimburse states on losses incurred in the first five years of GST implementation.
The GST Council
The GST Council, a federal body was constituted under the amended Article 279A of the Constitution. The Council, chaired by the Finance Minister, would oversee tax collection that currently comes up to about Rs. 13 trillion and will decide on tax rates and goods exemptions.
GST: The positives
Implementation of the GST is purported to boost GDP growth rate up to 1-2%, improve ease of doing business, as well as help make Indian products more competitive in domestic and international markets.
It will further serve to boost revenue collection for both the centre and the states and is purported to bring in transparency, reducing chances of evasion and simplify tax administration.
The State GST Bill, needs to be passed in 29 state assemblies for the regime to come into effect. States including Kerala, West Bengal and Meghalaya have raised concerns in past council meetings on issues concerning rate split and sharing of administrative powers. Disagreements could still surface.
Crucial aspects including anti-profiteering provisions and credit of tax paid on opening stock remain to be clarified.
13 Apr 2017
GST: President Mukherjee approves four key legislations
President Pranab Mukherjee has cleared the Goods and Services Tax bill and four supporting legislations related to it.
The central GST Bill, integrated GST Bill, Union territory GST Bill, and GST (Compensation to states) Bill were cleared by Rajya Sabha on April 6.
The new tax regime is expected to be rolled out from July 1, as was initially planned by the BJP government.
13 Apr 2017
GST: Service Tax may move to 18%; services more expensive
It is currently taxed at 14%; but along with the two additional Swachh Bharat and Krishi Kalyan cesses of 0.5% each, it totals to 15%.
However, exempted sectors -healthcare, education, and agriculture- are likely to remain unchanged.