Goods and Services Tax (GST) Bill
The Goods and Services Tax Bill or GST Bill, proposes a national Value added Tax to be implemented in India from 1 April 2017
"Goods and Services Tax” is an indirect tax, levied on manufacture, sale and consumption of goods and services throughout India.
GST was introduced to replace taxes levied by the central and state governments.
Goods and Services Tax would be levied and collected at each stage of sale or purchase of goods or services based on the input tax credit method.
"Goods and Services Tax” is an indirect tax, levied on manufacture, sale and consumption of goods and services throughout India.
GST was introduced to replace taxes levied by the central and state governments.
Goods and Services Tax would be levied and collected at each stage of sale or purchase of goods or services based on the input tax credit method.
History
An empowered committee was set up by the Atal Bihari Vajpayee government in 2000 to streamline the GST model
In his budget speech on 28 February 2006, P. Chidambaram, the then Finance Minister, announced the target date for implementation of GST to be on 1st April 2010
The Constitution (122nd Amendment) Bill, 2014 was introduced in the Lok Sabha by Finance Minister Arun Jaitley on 19 December 2014, and passed by the House on 6 May 2015. The Select Committee of the Rajya Sabha submitted its report on the bill on 22 July 2015. The bill was passed by the Rajya Sabha on 3 August 2016, and the amended bill was passed by the Lok Sabha on 8 August 2016.
Features of GST
1) GST has dual structure
a) A Central component levied and collected by Central Government (CGST)At Central level it will include – Central excise duty, Service tax and additional customs duties
b) A State component administered by State Government (SGST)
At state level it will include – VAT, Luxury tax, Entertainment tax
2) Central Sales Tax(CST) will be completely removed
3) GST of export will be zero
4) Both CGST and SGST will be levied on import of goods and services
5) A new article 279A is proposed for the creation of GST council which will be joint forum of Center and states. 2/3rd representatives will be of state and 1/3rd of the center. Union Finance Minister will be the Chairman of the council.
Rate of Tax
It is estimated that the rate of GST will be between 16 to 27%, this represents the aggregate of Central GST and State GST payable on transaction.
There will be 2 rate structures:
1) Lower rate for necessary items
2) Special rate for precious items and a list of exempted items
The GST bill provides for a 1% additional tax on interstate trade.
GST workings
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Supply Chain Stage
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Purchase Value
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Value Addition
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Sale Price
|
Rate Of GST
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GST On Sale
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Input Tax Credit
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Net GST
|
|
|
|||||||
|
Manufacturer
|
100
|
30
|
130
|
18%
|
23
|
18
|
5
|
|
|
|||||||
|
Whole seller
|
130
|
20
|
150
|
18%
|
27
|
23
|
4
|
|
|
|||||||
|
Retailer
|
150
|
10
|
160
|
18%
|
29
|
27
|
2
|
|
GST On Sale
|
(Sale Price*GST rate)
|
|
Input Tax Credit
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(Purchase Value*GST rate)
|
|
Net GST
|
(GST on Sale -Input Tax credit)
|
Present Vs Future
At Present
2) Different taxes are levied on supply of goods like excise duty, entry tax VAT/CST
3) At present the taxes are levied as follows:
|
Value of Goods
|
100
|
|
(+) Central excise
@ 10%
|
10
|
|
Sub Total
|
110
|
|
(+) VAT @ 14%
|
15.4
|
|
Grand Total
|
125.4
|
4) There are lots of ambiguity and litigations because manufacture, supply and services are charged differently under present tax system
Under GST regime
1) State and centre will levy taxes on services
2) GST will replace multiple taxes like entry tax, VAT/CST, state cess and surcharges
3) GST will be available as input tax credit
4) A single tax on manufacture, supply as well as on services
5) The GST will be levied simultaneously by state as well as centre. Consequently the taxable value will be the same. For example the rate of GST will be 24% which will be split as 10% Centre GST and 14% as State GST.
|
Value of Goods
|
100
|
|
(+) Central GST @
10%
|
10
|
|
(+) State GST @ 14%
|
14
|
|
Grand Total
|
124
|
Benefits
1) GST will reduce logistics cost for industries
2) Results in growth of GDP
3) Multiple taxes will be eliminated which results in smooth flow of goods and services
4) Uniformity of taxes and structures
5) For ultimate consumers –
a) Due to multiple taxation system in present tax systems lead to high cost of goods and services, under GST the tax system will be transparent no hidden taxes, which results in reduction of value of goods and services
b) The overall tax burden will be reduced
Conclusion
All the shortcomings of the present taxation system lead to develop GST. The dual model will be like joint venture between states and centre. Some states might lose revenue after the introduction of GST but will lead to prosper of entire country.
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