GST BILL

Samarth

AUGUST 10, 2015

Saikat Pain

GD on GST

GST which is goods and services tax (GST) is aimed at creating a single, unified market that will benefit both corporates and the economy. Govt of India wants to implement it and wants to diminish the taxation complexity in India but the path is still being obscure. As important objective of GST is to remove double taxation structure and middle main tax evasion which will create only one uniform tax system and will reduce the tax burden on corporate and individual also.

On the other hand it will help to boost up Indian economy as overall tax is being less so the production cost will be low and will boost up export and competency of Indian Industries. Even putting the GST in place will give a relax on tax burden to organized market which it could not enjoy before of unorganized sector and will make the overall market more competitive.

On the contrary RNR which will increase the tax rate is placing questions whether it will improve tax collection and what should be the right percentage.

Adding to it implication of GST also raising another issue as how the revenue from tax will be shared among the states and the discontent among the states to share their revenue in the first five years and what will it be after that.

As there was not clear answer some of the tax in GST will be under state’s control and what those are and how much control will handover to states, making the implementation far from sight.

Nandeesh

GST (Goods & Services Tax)

ST stands for “Goods and Services Tax”, and is proposed to be a comprehensive indirect tax levy on manufacture, sale and consumption of goods as well as services at the national level. It will replace all indirect taxes levied on goods and services by the Indian Central and State governments. It is proposed to be implemented from April 2016.

The introduction of Goods and Services Tax (GST) would be a very significant step in the field of indirect tax reforms in India.

By amalgamating a large number of Central and State taxes into a single tax, it would mitigate cascading or double taxation in a major way and pave the way for a common national market.

From the consumer point of view, the biggest advantage would be in terms of a reduction in the overall tax burden on goods, which is currently estimated at 25%-30%.

Introduction of GST would also make Indian products competitive in the domestic and international markets.

Studies show that this would instantly spur economic growth.

Last but not the least, this tax, because of its transparent character, would be easier to administer.

Presently India has a dual tax system for taxation of Goods and Services. The tax system is described by Central Taxes and State Taxes, which may be further described as EXCISE DUTY, SERVICE TAX, VAT AND CUSTOM DUTY. INDIA has VAT mechanism which was introduced in year 2005 which is working on input tax credit principle but this limited to Intra-State transaction. However this problem is not for service sector, as service tax is levied by central government.

Due to non-availability of tax credit for inter-state transactions of Goods consumer suffers double taxation burden of VAT.

Benefits of GST to various Stake holders

For the Centre and the States

According to experts, by implementing the GST, India will gain $15 billion a year. This is because, it will promote more exports, create more employment opportunities and boost growth. It will divide the burden of tax between manufacturing and services.

For individuals and companies

In the GST system, taxes for both Centre and State will be collected at the point of sale. Both will be charged on the manufacturing cost. Individuals will be benefited by this as prices are likely to come down and lower prices mean more consumption, and more consumption means more production, thereby helping in the growth of the companies.

Anshul

What is GST?

GST is goods and service tax. It is an indirect tax which will replace all indirect taxes levied at central and state level.

Not only will the taxation system will become simpler, GST is also expected to help in the economic growth. GST will help avoid the double taxation.

Recent developments for implementing GST

-GST bill passed in Lok Sabha -States will be given relief for five years from the implementation date of GST.-Finance Minister indicates that 27% GST would be too high; may be decided around 18% on consultation.

Impact on Indian economy

The bill is slated to improve the Indian Economy. Due to simpler taxation system, foreign players may be attracted to invest in India and the conditions of doing business in India will improve.

Pros

- Boost for the Indian economy- Easy tax system- Foreign investors will be attracted to Indian market

Cons

- Higher tax rate than the present- May lead to more occurrences of avoidance of tax- States prospering at their own merit may have to share their own revenues with other states

which are not doing well- Share of states in inter-state transactions still not clearly defined or accepted by states

Shekhar

Introduction:

GST is a comprehensive tax levy on manufacture, sale and consumption of goods and

services at a national level. GST is a part of proposed tax reforms in India. GST has been

commonly accepted by world and more than 140 countries have acknowledged the same.

Generally the GST ranges between 15%- 20% in most of the countries.

Despite the success with VAT, there are still certain shortcoming in structure in the levy of

VAT both at Central level and State level. If VAT is considered to be a major improvement

over the pre-existing Central excise duty at the national level and the sales tax system at the

State level, then GST will be a further significant breakthrough – the next logical step –

towards a comprehensive indirect tax reform in the country.

However, the paper makes some crucial assumption such as pegging the revenue-neutral rate

in the range of 6.2 percent and 9.4 percent. The revenue-neutral rate is the rate for GST that

will not make a net difference to the overall tax collection of centre and states.

The Goods and Services Tax(GST) is a value added tax that will replace all the indirect taxes

levied on goods and services by the government, both central and states, once it is

implemented. The basic idea of this bill is to create a single, cooperative and undivided

Indian market to make the economy stronger and powerful.

Motives behind the GST:

Subsume all indirect taxes at the centre and the state level

One-Country-One-Tax

Reduce the cascading effect of taxes on taxes.

Increase productivity and transparency; increase tax-GDP ratio.

Reduce/Eliminate tax evasion and corruption 

Pros of GST Bill:

GST is a transparent tax and also reduce number of indirect taxes.

Cost of doing business will be lower because there will be no hidden charges.

Benefit people as prices will come down which in turn will help companies as

consumption will increase.

The taxation burden to be split equitably between manufacturing and services.

Benefit of GST for the Centre and the States

According to experts, by implementing the GST, India will gain $15 billion a year. This is

because, it will promote more exports, create more employment opportunities and boost

growth. It will divide the burden of tax between manufacturing and services.

Cons of GST in India

GST in India would impact negatively on the real estate market. It would add up to 8

percent to the cost of new homes and reduce demand by about 12 percent.

Some Economist says that CGST (Central GST), SGST (State GST) are nothing but

new names for Central Excise/Service Tax, VAT and CST.

Conclusion

The macroeconomic impact of a change to the introduction of the GST is significant in terms

of growth effects, price effects, current account effects and the effect on the budget balance.

A change in the tax mix from income to consumption-based taxes is likely to provide a

fruitful source of revenue.

The aggregate consumer price impact of the introduction of the GST in India on the macro-

economy was both limited and temporary.

Shailesh

GST or Goods and Services Tax is considered as major Tax reform policy in India which will be implemented from January 2016 if passed in next Parliament session. Most Economist are very positive about GST implementation. We have brought you some Facts about GST which you should know, this includes advantages and disadvantages of GST as well. You can include some points in comment section also.

The Goods and Service Tax (GST) is a new form of indirect tax which will replace others like service tax, sales tax, octroi, central and state sales tax imposed under the current multi-tax system. It was expected to be a single tax levied by the central government on the production of goods and services. Currently, each state imposes a different tax. So, each state was counted as a different market by businesses. It is a huge task to move goods from one state to another due to differential taxes. GST will remove such demarcation and create a unified market. This is expected to help ease movement of goods across states and reduce costs for businesses.

 

The Goods and Services Tax is one of the main items on the finance agenda of the BJP government. Finance Minister Arun Jaitley has said that it can raise India’s GDP by one to two per cent.As the Lok Sabha takes up the GST Bill, here is your cheat sheet to the debate:

1- Constitutional Amendment Bill Number

Officially, the Constitution (One Hundred and Twenty-Second Amendment) Bill 2014.

2- When it Was introduced In Parliament 

It was introduced in the Lok Sabha on December 19, 2014 by Finance Minister Arun Jaitley.

3- Main Objective Of GST Bill 

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-Insert A New Article In Indian Constitution

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- Restriction On States for Taxing

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-To Establish GST Council

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- GST council Main Authority To decide Tax

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- Exceptions to GST

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. The state governments wanted to exclude taxes on petroleum and alcohol

products from the purview of GST. This is because, these items account for significant portion of the state’s

revenues. This was a key issue of discussions between the centre and the states. It has now been decided that alcohol will be exempt from GST. Petroleum

products too will be excluded from GST initially. It would be slowly included in the purview of GST later.

9-Inter state  Trade Tax 

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 Power to Decide compensation to states

Parliament can decide on compensating States for up to a five-year period if States incur losses by implementation of GST.

Currently, the state government has a separate tax structure from the central government.

State tax rates are often higher than the central government’s rates. The GST – levied by the centre – was to replace the state taxes too. This means state governments would lose out on key revenue. This is why they have been at loggerheads with the central government for

compensation. Finally, the central government has decided to compensate the states for all the

losses incurred in the first three years. Further, it will pay 75% and 50% of the losses in the fourth and fifth year

respectively.

Shashank

What is the GST bill ?

The Goods and Services Tax(GST) is a value added tax that will replace all the indirect taxes levied on goods and services by the government,both central and states,once it is implemented.

The basic idea of this bill is to create a single, cooperative and undivided Indian market to make the economy stronger and powerful.  

     

Pros of GST bill :

GST is a transparent tax and also reduce number of indirect taxes.With GST implemented a business premises can show the tax applied in the sales invoice. 

GST will not be a cost to registered retailers therefore there will be no hidden taxes and  and the cost of doing business will be lower.

Benefit people as prices will come down which in turn will help companies as consumption will increase.

There is no doubt that in production and distribution of goods, services are increasingly used or consumed and vice versa. Separate taxes for goods and services, which is the present taxation system, requires division of transaction values into value of goods and services for taxation, leading to greater complications, administration, including compliances costs. In the GST system, when all the taxes are integrated, it would make possible the taxation burden to be split equitably between manufacturing and services.

GST will be levied only at the final destination of consumption based on VAT principle and not at various points (from manufacturing to retail outlets). This will help in removing economic distortions and bring about development of a common national market.

It will also help to build a transparent and corruption free tax administration.Presently, a tax is levied on when a finished product moves out from a factory, which is paid by the manufacturer, and it is again levied at the retail outlet when sold.

Benefit of GST for the Centre and the StatesAccording to experts, by implementing the GST, India will gain $15 billion a year. This is because, it will promote more exports, create more employment opportunities and boost growth. It will divide the burden of tax between manufacturing and services.

Benefit of GST for individuals and companiesIn the GST system, taxes for both Centre and State will be collected at the point of sale. Both will be charged on the manufacturing cost. Individuals will be benefited by this as prices are likely to come down and lower prices mean more consumption, and more consumption means more production, thereby helping in the growth of the companies.

Some of Disadvantages/Cons of GST in India are given below 

• Some Economist say that GST  in India would impact negatively on the real estate market. It would add up to 8 percent to the cost of new homes and reduce demand by about 12 percent. 

•Some Economist says that CGST(Central GST), SGST(State GST) are nothing but new names for Central Excise/Service Tax, VAT and CST.

Almost 140 countries have already implemented the GST including Australia, Canada,Germany,Japan and Pakistan.

France was the first country to implement GST in 1954.

Ravi

The Goods and Services Tax (GST) is a value added tax that will replace all indirect taxes levied on goods and services by the Government, both Central and States, once it is implemented. The GST is all set to consolidate all State economies. This will be one of the biggest taxation reforms that will take place in India once the Bill gets officially the green signal to implement. The basic idea is to create a single, cooperative and undivided Indian market to make the economy stronger and powerful. The GST will see a significant breakthrough towards an all-inclusive indirect tax reform in the country.In the year 2000, for the first time the idea of initiating the GST was made by the then

BJP Government under the leadership of Atal Behari Vajpayee. An empowered committee was also formed for that, headed by Asim Dasgupta (the then Finance Minister of the West Bengal Government). The committee was formed to design the model of the GST and at the same time inspect the preparation of the IT department for its rollout. In 2011, the previous United Progressive Alliance (UPA) Government also introduced a Constitution Amendment Bill to facilitate the introduction of the GST in the Lok Sabha but it was rejected by many States.

What is GST?

The GST is basically an indirect tax that brings most of the taxes imposed on most goods and services, on manufacture, sale and consumption of goods and services, under a single domain at the national level. In the present system, taxes are levied separately on goods and services. The GST is a consolidated tax based on a uniform rate of tax fixed for both goods and services and it is payable at the final point of consumption. At each stage of sale or purchase in the supply chain, this tax is collected on value-added goods and services, through a tax credit mechanism.

The proposed model of GST and the rate

A dual GST system is planned to be implemented in India as proposed by the Empowered Committee under which the GST will be divided into two parts:

State Goods and Services Tax (SGST)

Central Goods and Services Tax (CGST)

Both SGST and CGST will be levied on the taxable value of a transaction. All goods and services, leaving aside a few, will be brought into the GST and there will be no difference between goods and services. The GST system will combine Central excise duty, additional excise duty, services tax, State VAT entertainment tax etc. under one banner.The GST rate is expected to be around 14-16 per cent. After the combined GST rate is fixed, the States and the Centre will decide on the SGST and CGST rates. At present, 10 per cent is levied on services and the indirect taxes on most goods is around 20 per cent.

Advantages of GST

Introduction of a GST is very much essential in the emerging environment of the Indian economy.

There is no doubt that in production and distribution of goods, services are increasingly used or consumed and vice versa. Separate taxes for goods and services, which is the present taxation system, requires division of transaction values into value of goods and services for taxation, leading to greater complications, administration, including compliances costs. In the GST system, when all the taxes are integrated, it would make possible the taxation burden to be split equitably between manufacturing and services.

GST will be levied only at the final destination of consumption based on VAT principle and not at various points (from manufacturing to retail outlets). This will help in removing economic distortions and bring about development of a common national market.

It will also help to build a transparent and corruption-free tax administration. Presently, a tax is levied on when a finished product moves out from a factory, which is paid by the manufacturer, and it is again levied at the retail outlet when sold.

Benefits of GST

For the Centre and the StatesAccording to experts, by implementing the GST, India will gain $15 billion a year. This is because, it will promote more exports, create more employment opportunities and boost growth. It will divide the burden of tax between manufacturing and services.For individuals and companiesIn the GST system, taxes for both Centre and State will be collected at the point of sale. Both will be charged on the manufacturing cost. Individuals will be benefited by this as prices are likely to come down and lower prices mean more consumption, and more consumption means more production, thereby helping in the growth of the companies.Items not under GSTAlcohol, tobacco, petroleum products

Bottlenecks in the implementation of GST

Though the Government wants the GST Bill to be implemented by April 2016, there are certain bottlenecks which need to be taken care of before that:

What preparations are needed at the level of Central and State Governments for implementing the GST?

Whether the Government machinery is efficient enough for such an enormous change?

Whether the tax-payers are ready for such a change?

What will be the impact on the Government’s revenue?

How will the manufacturers, traders and ultimate consumers be affected?

Will GST help the small entrepreneurs and small traders?

Status of implementation of GST

To be fully viable by law in all the States, the GST Bill needs to be passed by a two-thirds majority in both Houses of Parliament and by the legislatures of half of the 29 States. In December 2014, Finance Minister Arun Jaitley introduced the constitutional amendment Bill of the GST in the Lok Sabha. He announced that the GST would be a major reform in India’s taxation system since 1947, which would reduce transaction costs for business and boost the economy.Earlier, the Bill was rejected by a few States saying that it does not include the issues of compensation, entry tax and the tax on petroleum products. Jaitley while introducing the Bill said that all efforts have been taken to make sure that the States do not suffer any loss of revenue with the implementation of the GST. The States will receive Rs 11,000 crore this fiscal year so that it would compensate the losses suffered by them for decline in Central sales tax (CST) and subsequently financial assistance would be provided for a five-year period.All said and done, the GST Bill which was conceived way back in the year 2000 has not seen the light of the day as yet. If everything goes well, most likely the Bill will be legislated by April 2016. According to a study by the National Council of Applied Economic Research (NCAER), full implementation of the GST could expand India’s growth of gross domestic product by 0.9-1.7 percentage points. By removing the system of multiple Central and State taxes, the GST can help in reducing taxation and filing costs and expand business profitability, thereby attracting investments and promoting GDP growth. Simplification of tax norms can help in improving tax compliance and increasing tax revenues.

Sangeet

GST is proposed to be a comprehensive indirect tax levy on manufacture, sale and consumption of goods as well as services at national level. It will replace all the indirect taxes levied on goods and services by central and state government. The introduction of GST would be a very significant step in the field of indirect tax reforms in India. By amalgamation of central and state taxes into a single tax, it would mitigate cascading or double taxation in a major way and pave the way for common national market.

From consumer side, the biggest advantage would be in terms of a reduction in the overall tax burden on goods, which is currently estimated at 25%- 30%. Introduction of GST would also make Indian product competitive in the domestic and International market. It would instantly spur economic growth. It would be transparent and would be easier to administer.

CURRENT SCENARIO

India has dual tax system. It has VAT mechanism which is introduced in year 2005, which is limited to Intra-State transaction. But this problem is not for service sector as service tax is levied by central government.

BENEFITS OF GST

India will gain $15 bn a year since it will promote more exports, create more employment and boost growth.

Central and state tax will be collected at the point of sale. Prices are likely to come down and lower price means more consumption which

means more production, helping in growth of the company. It will boost annual economic growth by 2%

Sameep

In 2000, Vajpayee Government started discussion on GST by setting up an empowered committee. The committee was headed by Asim Dasgupta, (Finance Minister, Government of West Bengal). It was given the task of designing the GST mode.

What is GST

The Goods and Service Tax (GST) is a Value Added Tax (VAT) to be implemented in India, It will replace all indirect taxes levied on goods and services by the Indian Central and State governments. It is aimed at being comprehensive for most goods and services.

Which other nations have a similar tax structure

Almost 140 countries have already implemented the GST. Most of the countries have a unified GST system. Brazil and Canada follow a dual system where GST is levied by both the Union and the State governments.

France was the first country to introduce GST system in 1954.

Read Also: India after GST – Impact of GST in India industry

Some of advantages of GST in India is given below

GST is a transparent Tax and also reduce numbers of indirect taxes. With GST implemented a business premises can show the tax applied in the sales invoice.

GST will not be a cost to registered retailers therefore there will be no hidden taxes and the cost of doing business will be lower.

Under Goods and Services Tax, the tax burden will be divided equally between Manufacturing and services.

GST can also help to diversification of income sources for Government other than income tax and petroleum tax.

Benefit people as prices will come down which in turn will help companies as consumption will increase.

Biggest benefit will be that multiple taxes like central sales tax, state sales tax, entry tax, license fees, turnover tax etc will no longer be present and all that will be brought under the GST.

It is estimated that India will gain $15 billion a year by implementing the Goods and Services Tax

It would promote exports.

Raise employment and boost growth.

GST – Disadvantages(Disadvantages of GST in India)

Some Economist say that GST in India would impact negatively on the real estate market. It would add up to 8 percent to the cost of new homes and reduce demand by about 12 percent.

Some Economist says that CGST, SGST and IGST are nothing but new names for Central Excise/Service Tax, VAT and CST.