INDIA 2016

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Currently we pay a lot of different indirect taxes –

excise duty, VAT, Service Tax, sales tax etc.

Some are levied by the Central Government, while others

by the State Government.

Excise and Service tax are central government levied

indirect taxes. VAT and Sales tax are State Government

levied indirect taxes.

Excise Duty is a tax on the manufacturing of excisable

goods. Service Tax is a tax on ‘services rendered’ which are

not in the ‘negative list’.

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VAT – or Value Added Tax is a stage wise levy of tax on

value addition – thus at every stage of ‘value addition’ VAT

is levied and passed on to the next person in the chain of

changing hands.

Sales Tax is a tax on sale of goods – interstate and

intrastate.

The rules and regulations and compliance procedures of

all are different – and complex and tedious – and we’re

only talking about the popular four indirect taxes!

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To bring all these varied and sometimes overlapping

taxes under one umbrella and to plug the loopholes that

invariably comes with such multiple and confusing and

dual taxation system – the concept of GST was

formulated.

GST is a combined or ‘one’ tax on both goods and

services – incorporating the concept of ‘value addition’ –

extending from manufacturing to consumption.

GST will combine the best of all indirect taxes to bring a

compact, singular and easy system for levy, collection

and assessment of indirect taxes in India.

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The tax system has a fundamental impact on a society’s

economic activity and performance, since it influences

matters such as labour supply, household savings, and

companies’ business decisions (production,

employment, investment).

Constitution (122nd Amendment) Bill, known as the GST

(goods and services tax) Bill was passed in the Lok

Sabha, and then in the Rajya Sabha in 2016.

Concurrent Powers to levy GST (Article 246A)

GST defined as any tax on supply of goods or services

or both except on specified petroleum products, natural

gas and alcohol

Parliament given exclusive powers to: levy GST on inter-

state trade and imports, and apportion revenues among

the Union and the States

Parliament empowered to constitute:

GST Council

GST Dispute Settlement Authority

Restriction or deletion of existing taxation powers

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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.

A proposed tax that will alter the powers of taxation that

states enjoyed under the constitution and ushers in a

uniform consumption based tax structure across the land

for almost all goods and services.

A GST Council is proposed that will arrive at an

acceptable framework for taxation agreeable to the States

and the Center.

A nationwide common market will be ushered in.

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Reduce distortion of prices due to tax policies

Foster a common market across the country

Distribute taxation between manufacturing and services

Lower tax rate: broaden the tax base, reduce exemptions

Eliminate cascading of taxes at multiple levels

Simplify inter-state commerce

Encourage compliance, and discourage non-compliance

The GST Vision

The proposed pan-India Goods and Services Tax regime

that was approved by the Lok Sabha by way of an

amendment to the Constitution.

GST, or Goods and Services Tax, will subsume central

indirect taxes like excise duty, countervailing duty and

service tax, as also state levies like value added tax,

octroi and entry tax, luxury tax.

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The final consumer will bear only the GST charged by the

last dealer in the supply chain, with set-off benefits at all

the previous stages.

As a measure of support for the states, petroleum

products, alcohol for human consumption and tobacco

have been kept out of the purview of the GST

It will have two components - Central GST levied by the

Centre and State GST levied by the states. However, only

the Centre may levy and collect GST on supplies in the

course of inter-state trade or commerce

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The tax collected would be divided between the Centre and the

states in a manner to be provided by parliament, on the

recommendations of the GST Council.

The GST Council is to consist of the union finance minister as

chairman, the union minister of state of finance and the finance

minister of each state. The bill proposes an additional tax not

exceeding 1% on inter-state trade in goods, to be levied and

collected by the Centre to compensate the states for two years,

or as recommended by the GST Council, for losses resulting from

implementing the GST.

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Stage Date

Introduction Dec 19, 2014

Com. Ref. May 14, 2015

Com. Rep. July 22, 2015

Lok Sabha May 06, 2015

Rajya Sabha Aug 3, 2016

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Easier to understand for the taxpayers and will simplify

compliance

Uniformity of rules and regulations of levy, assessment,

collection and rates will mean easier administration and

proper collection and voluntary compliance

Bringing India at par with international taxation

standards.

Increase in revenue for the Governments.

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Experts say that GST is likely to improve tax collections

and boost India’s economic development by breaking tax

barriers between States and integrating India through a

uniform tax rate. Under GST, the taxation burden will be

divided equitably between manufacturing and services,

through a lower tax rate by increasing the tax base and

minimizing exemptions. It is expected to help build a

transparent and corruption-free tax administration.

States will have revenue sharing issue

If the dual rate and control system which is existing under the

current taxation schemes in India not properly combined –

then the purpose of GST is defeated.

The governments of Madhya Pradesh, Chhattisgarh and

Tamil Nadu say that the information technology systems and

the administrative infrastructure will not be ready by April

2016 to implement GST. States have sought assurances that

their existing revenues will be protected.

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The empowered committee is likely to finalize the details

of GST by August. But States have to sort out several

issues like agreement on GST rates, constitutional

amendments and holding talks with industry

associations.

Experts feel the drafting of legislation and the

implementation of law will take time.

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Referral of the Bill to Parliamentary Select Committee

To be followed by Committee hearings and report back to

Parliament

Preparations for GST

Drafting of Model GST Law

IGST, Place-of-Supply rules, and reporting system for inter-state

sales

IT Infrastructure

Setting up GSTN

Ramp-up implementation of e-filing, and e-payment systems

Pilot testing of GST portal

Ratification of the Constitution Bill in State Assemblies; Tabling and

enactment of GST law.

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