What is the Goods and Services Tax?
As the name suggests, it is a tax levied when a consumer buys a good or service. It is meant to be a single, comprehensive tax that will subsume all the other smaller indirect taxes on consumption like service tax, etc. This is how it is done in most developed countries.
What is GST bill?
Goods and Services Tax bill is India’s biggest reform in India’s indirect tax structure. The purpose of the bill is to introduce one single tax on supply of goods and services, from the manufacturing stage until its delivery to the final consumer. The final consumer of the goods and/or services will only have to bear the GST charged by the final dealer in the supply chain, and avail set-off benefits at all the previous stages. This means interim tax stages such as excise duties and service tax and state levies like VAT will be absorbed under GST.
What are the four bills that were approved by the Union Cabinet?
Central GST Bill: The CGST Bill sets the tax regime for levying and collection of GST on supply of goods and/or services that are happening within the boundaries of a state by the Central Government.
Integrated GST Bill: The IGST bill decides the tax regime for levy and collection of GST on supply of goods and/or services carried out between different states by the Central Government.
Union Territory GST Bill: The UTGST fixes the tax regime for levying and collection of GST on supply of goods and services in the Union Territories without legislature.
The Compensation Bill: The Compensation bill will compensate the states for loss of revenue which will occur due to the implementation of GST for a period of five years.
What are the benefits of GST?
The introduction of GST bill will help in simplifying administration as it removes multiple taxation systems at every stage of trade model and removes disturbances in production. It also aims towards providing a uniform tax rate for all goods and services. The manufacturers will be benefited by the tax regime as it will reduce the tax that levied on them. A system of seamless tax-credits will lead to minimal cascading of taxes, thus reducing hidden costs during trade.
Advantage for Citizens:
(i) Simpler tax system
(ii) Reduction in prices of goods and services due to elimination of cascading
(iii) Uniform prices throughout the country
(iv) Transparency in taxation system
(v) Increase in employment opportunities
Advantage for Trade/Industry:
(i) Reduction in multiplicity of taxes
(ii) Mitigation of cascading/double taxation
(iii) More efficient neutralization of taxes especially for exports
(iv) Development of common national market
(v) Simpler tax regime-fewer rates and exemptions
Advantage for Central/State Governments:
(i) A unified common national market to boost Foreign Investment and “Make in
(ii) Boost to export/manufacturing activity, generation of more employment,
leading to reduced poverty and increased GDP growth
(iii) Improving the overall investment climate in the country which will benefit the
development of states
(iv) Uniform SGST and IGST rates to reduce the incentive for tax evasion
(v) Reduction in compliance costs as no requirement of multiple record keeping
Ten things to know about the GST Bill:-
|1||Officially, the Constitution (One Hundred and Twenty-Second Amendment) Bill 2014.
|2||It was introduced in the Lok Sabha on December 19, 2014 by Finance Minister Arun Jaitley.
|3||The Bill seeks to amend the Constitution to introduce a goods and services tax (GST) which will subsumes various Central indirect taxes, including the Central Excise Duty, Countervailing Duty, Service Tax, etc. It also subsumes State value added tax (VAT), octroi and entry tax, luxury tax, etc.
|4||The Bill inserts a new Article in the Constitution make legislation on the taxation of goods and services a concurrent power of the Centre and the States.
|5||The Bill seeks to shift the restriction on States for taxing the sale or purchase of goods to the supply of goods or services.
|6||The Bill seeks to establish a GST Council tasked with optimising tax collection for goods and services by the State and Centre. The Council will consist of the Union Finance Minister (as Chairman), the Union Minister of State in charge of revenue or Finance, and the Minister in charge of Finance or Taxation or any other, nominated by each State government.
|7||The GST Council will be the body that decides which taxes levied by the Centre, States and local bodies will go into the GST; which goods and services will be subjected to GST; and the basis and the rates at which GST will be applied.
|8||Under the Bill, alcoholic liquor for human consumption is exempted from GST. Also, it will be up to the GST Council to decide when GST would be levied on various categories of fuel, including crude oil and petrol.
|9||The Centre will levy an additional one per cent tax on the supply of goods in the course of inter-State trade, which will go to the States for two years or till when the GST Council decides.
|10||Parliament can decide on compensating States for up to a five-year period if States incur losses by implementation of GST.
Source: The hindu