Goods and Services Tax(GST)Bill: All you need to know

 

The Goods and Services Tax(GST) seeks to bring in a uniform tax structure subsuming a number of levies and the government claims that it will help add 1-2 % to the country's GDP.

The GST subsumes various central indirect taxes including the central excise duty, countervailing duty, service tax, etc. It also subsumes state value added tax, octroi and entry tax, luxury tax, etc. 

WHAT GOES?

Central taxes That The GST will replace

# Central Excise Duty
# Duties of Excise (medicinal and toilet preparations)
# Additional Duties of Excise (goodsof special importance)
# Additional Duties of Excise (textiles and textile products)
# Additional Duties of Customs (commonly known as CVD)
# Special Additional Duty of Customs (SAD)
# Service Tax
# Cesses and surcharges in so far as they relate to supply of goods or services
State taxes That The GST will Subsume
# State VAT
# Central Sales Tax
# Purchase Tax
# Luxury Tax
# Entry Tax (all forms)
# Entertainment Tax (not levied by local bodies)
# Taxes on advertisements
# Taxes on lotteries, betting and gambling
# State cesses and surcharges

 

The GST Bill has been passed in the BJP-dominated Lok Sabha, the government has faced roadblocks in the upper house where it lacks the numbers to get it cleared.

The GST Bill has been hanging fire in the Rajya Sabha for a long time due to stiff opposition from the Congress.

GST, which was first mooted by the UPA government in 2006, is expected to streamline the taxation system and cut down multiplicity of compliance and cascading effect of taxes

 

The journey so far…

Budget 2006-07: GST by April 1, 2010, announced. Subsequently, Empowered Committee (EC) of state Finance Ministers tasked with drawing up roadmap and design
April 2008: EC, headed by the then West Bengal Finance Minister Asim Dasgupta, submits report to the central government, which offers its views and comments in October and December of that year. Joint working groups are then set up to examine options on exemptions and thresholds, taxation of services and inter-state supplies, etc
November 2009: EC releases its First Discussion Paper
March 22, 2011: The Constitution (115th Amendment) Bill is introduced in Lok Sabha; is referred to Parliamentary Standing Committee on Finance, which submitted its report on August 7, 2013. Bill lapsed as term of the Lok Sabha ended in 2014
December 19, 2014: Constitution (122nd Amendment) Bill introduced in Lok Sabha
May 6, 2015: Constitution Amendment Bill passed by Lok Sabha
May 12, 2015: Bill referred to a 21-member Select Committee of Rajya Sabha headed by Bhupender Yadav
July 22, 2015: Select Committee submits its report
Monsoon and Winter Sessions 2015, Budget Session 2016: Bill not tabled in the face of opposition led by the Congress and persistence of sticking points

Stage 1
Imagine a manufacturer of, say, shirts. He buys raw material or inputs — cloth, thread, buttons, tailoring equipment — worth Rs 100, a sum that includes a tax of Rs 10. With these raw materials, he manufactures a shirt.
In the process of creating the shirt, the manufacturer adds value to the materials he started out with. Let us take this value added by him to be Rs 30. The gross value of his good would, then, be Rs 100 + 30, or Rs 130.
At a tax rate of 10%, the tax on output (this shirt) will then be Rs 13. But under GST, he can set off this tax (Rs 13) against the tax he has already paid on raw material/inputs (Rs 10). Therefore, the effective GST incidence on the manufacturer is only Rs 3 (13 – 10).
Stage 2
The next stage is that of the good passing from the manufacturer to the wholesaler. The wholesaler purchases it for Rs 130, and adds on value (which is basically his ‘margin’) of, say, Rs 20. The gross value of the good he sells would then be Rs 130 + 20 — or a total of Rs 150.
A 10% tax on this amount will be Rs 15. But again, under GST, he can set off the tax on his output (Rs 15) against the tax on his purchased good from the manufacturer (Rs 13). Thus, the effective GST incidence on the wholesaler is only Rs 2 (15 – 13).
Stage 3
In the final stage, a retailer buys the shirt from the wholesaler. To his purchase price of Rs 150, he adds value, or margin, of, say, Rs 10. The gross value of what he sells, therefore, goes up to Rs 150 + 10, or Rs 160. The tax on this, at 10%, will be Rs 16. But by setting off this tax (Rs 16) against the tax on his purchase from the wholesaler (Rs 15), the retailer brings down the effective GST incidence on himself to Re 1 (16 –15).
Thus, the total GST on the entire value chain from the raw material/input suppliers (who can claim no tax credit since they haven’t purchased anything themselves) through the manufacturer, wholesaler and retailer is, Rs 10 + 3 +2 + 1, or Rs 16.

 

 

10 key facts you should know about GST Bill:

-Concurrent powers for GST: The Bill inserts a new Article in the Constitution to give the central and state governments the concurrent power to make laws on the taxation of goods and services.
-Integrated GST (IGST): However, only the Centre may levy and collect GST on supplies in the course of inter-state trade or commerce. The tax collected would be divided between the centre and the states in a manner to be provided by Parliament, by law, on the recommendations of the GST Council.
-GST Council: The President must constitute a Goods and Services Tax Council within sixty days of this Act coming into force. The GST Council aim to develop a harmonized national market of goods and services.
-Composition of the GST Council: The GST Council is to consist of the following three members: (i) the Union Finance Minister (as Chairman), (ii) the Union Minister of State in charge of Revenue or Finance, and (iii) the Minister in charge of Finance or Taxation or any other, nominated by each state government.
Functions of the GST Council: These include making recommendations on:
(i) Taxes, cesses, and surcharges levied by the centre, states and local bodies which may be subsumed in the GST.
(ii) Goods and services which may be subjected to or exempted from GST; (iii) model GST laws, principles of levy, apportionment of IGST and principles that govern the place of supply.
(iv) The threshold limit of turnover below which goods and services may be exempted from GST.
(v) Rates including floor rates with bands of GST; (vi) special rates to raise additional resources during any natural calamity.
(vii) Special provision with respect to Arunachal Pradesh, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand; and (viii) any other matters.
Resolution of disputes: The GST Council may decide upon the modalities for the resolution of disputes arising out of its recommendations
Restrictions on imposition of tax: The Constitution imposes certain restrictions on states on the imposition of tax on the sale or purchase of goods. The Bill amends this provision to restrict the imposition of tax on the supply of goods and services and not on its sale.
-Additional Tax on supply of goods: An additional tax (not to exceed 1%) on the supply of goods in the course of inter-state trade or commerce would be levied and collected by the centre. Such additional tax shall be assigned to the states for two years, or as recommended by the GST Council.
-Compensation to states: Parliament may, by law, provide for compensation to states for revenue losses arising out of the implementation of the GST, on the GST Council’s recommendations. This would be up to a five year period.
-Goods exempt: Alcoholic liquor for human consumption is exempted from the purview of the GST. Further, the GST Council is to decide when GST would be levied on: (i) petroleum crude, (ii) high speed diesel, (iii) motor spirit (petrol), (iv) natural gas, and (v) aviation turbine fuel.

The Bill to amend the Constitution, paving the way for the biggest, long-pending and much awaited indirect tax reform, is all set to be approved by the Rajya Sabha on Wednesday Aug 03,2016

Union Finance Minister Arun Jaitley will move amendments to the Constitution (122nd Amendment) Bill, 2014, meant for the roll-out of the Goods & Services Tax (GST) in the House, when it is taken up for consideration and passage. 

The NDA Government circulated to the MPs the amendments it has proposed in the Constitution amendment Bill to enable implementation of the tax. 

Key Changes Proposed to the Constitution (122nd Amendment) Bill, 2014

Clause	2014 Bill	2016 proposed amendments
Additional tax up to 1% on inter-State trade	An additional tax of up to 1% on the supply of goods will be levied by centre in the course of inter-State trade or commerce. The tax will be directly assigned to the States from where the supply originates. This will be for two years or more, as recommended by GST Council.	Deletes the provision.
Compensation to States	Parliament may, by law, provide for compensation to states for any loss of revenues for a period which may extend to five years. This would be based on the recommendations of the GST Council. This implies that Parliament may decide (i) whether it wants to provide compensation; (ii) the time period for which it can provide such compensation, up to five years.	Parliament shall, by law, provide for compensation to states for any loss of revenues, for a period which may extend to five years. This would be based on the recommendations of the GST Council. This implies that (i) Parliament must provide compensation; and (ii) compensation cannot be provided for more than five years, but allows Parliament to decide a shorter time period.
Dispute resolution	The GST Council may decide upon the modalities to resolve disputes arising out of its recommendations.	The GST Council shall establish a mechanism to adjudicate any dispute arising out of its recommendations. Disputes can be between: (a) the centre vs. one or more states; (b) the centre and states vs. one or more states; (c) state vs. state. This implies there will be a standing mechanism to resolve disputes.
Replacement of the term IGST	Under the 2014 Bill, the GST Council would make recommendations on the apportionment of the Integrated Goods and Services Tax (IGST). However, the term IGST was not defined. The 2016 amendments replace this term with ‘goods and services tax levied on supplies in the course of inter-State trade or commerce’.	This is a technical change in relation to the apportionment of the IGST. It clarifies that the states’ share of the IGST shall not form a part of the Consolidated fund of India.
Inclusion of CGST and IGST in tax devolution to states	The GST collected and levied by the centre, other than states’ share of IGST,(CGST and Centre’s share of IGST) shall also be distributed between the Centre and States.	The amendments state that the CGST and the Centre’s share of IGST will be distributed between the Centre and States. This is just a restatement of the provisions in the 2014 Bill in clearer terms.