Goods and Services Tax (GST) Bill - A Short Note

GST Bill or Goods and Services Tax - Brief Note

GST or Goods and Services Tax is considered as major Tax reform policy in India which will be implemented from July 2017, passed in Parliament session. Most Economists are very positive about GST implementation.

It has been long pending issue to streamline all the different types of indirect taxes and implement a “single taxation” system. This system is called as GST ( GST is the abbreviated form of Goods & Services Tax). The main expectation from this system is to abolish all indirect taxes and only GST would be levied. As the name suggests, the GST will be levied both on Goods and Services.

GST was first introduced during 2007-08 budget session. On 17th December 2014, the current Union Cabinet ministry approved the proposal for introduction GST Constitutional Amendment Bill. On 19th of December 2014, the bill was presented on GST in Loksabha. The Bill will be tabled and taken up for discussion during the coming Budget session. The current central government is very determined to implement GST Constitutional Amendment Bill.

GST is a tax that we need to pay on supply of goods & services. Any person, who is providing or supplying goods and services is liable to charge GST.

GST Bill or Goods and Services Tax 2017 - Brief Note

Some Facts about GST in 250 Words, which you should know, this includes advantages and disadvantages of GST as well.

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-Interstate 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.