In this blogpsot, Harsha Jeswani, Student, National Law Institute University, Bhopal writes about the salient features and impact of the Goods And Service Tax Bill, 2015
INTRODUCTION
The Constitutional 122nd Amendment Bill, 2014 proposes to introduce one of the most controversial bills of all the times officially called as The Goods and Services Tax Bill or GST Bill. GST is a value added tax that is likely to substitute all indirect taxes imposed on goods and services both by the Central and the State Government once it is implemented. It is considered as the biggest tax reforms in India that is set to consolidate the economies of the state and increase the economic growth.
BACKGROUND
The discussion on GST was started by Vajpayee Government in 2000 by setting an empowered committee. However, it was only in 2009, the GST (Goods and service Tax) Bill was introduced for the first time by the UPA Government. The bill seeks to roll out the nation’s biggest indirect tax reforms since 1947. However, the bill was repeatedly being opposed. It became a topic of discussion in every session of Parliament. Finally after seven years of continuous discussion between the Centre and the States, a consensus has been developed on sharing tax revenue. The GST system is adopted by over 130 countries around the world. It is targeted to be a simple, transparent and efficient system of indirect taxation. The newly formed NDA government introduced the GST Bill in Lok Sabha on 6th May 2015. Before the beginning of the voting session, the Finance Minister Arun Jaitley promised states to compensate for any loss of revenue due to proposed bill and also assured that the new uniform indirect tax rate will be much less than 27% recommended by an expert panel. The Congress walked out in protest. Finally, the Bill was passed by the lower house with 352 votes against 37 paving way for a new tax regime in India. It is proposed to be implemented from April 2016.
What is GST?
GST is a comprehensive tax levy on the manufacture, sale and consumption of goods and services at a national level. Presently, different taxes are levied on goods and services. With the coming of GST, the difference between goods and services will narrow down. The central idea is thus to create a single, accommodating and integrated Indian market to strengthen the economy and making it powerful. The GST is aimed to increase the GDP of India by one or two percent.
GST is a uniform tax which is levied on both goods and services payable at the final point of consumption. It is likely to replace the indirect taxes imposed by the Central and State Governments like central excise duty, service tax, central surcharges and cesses, state sales tax, VAT, entertainment tax not levied by local bodies, luxury tax, taxes on lottery, betting and gambling, tax on advertisements and state cesses and surcharges related to supply of goods and services. These taxes have always suffered as these taxes have been ineffective and have suffered from infirmities and, therefore, GST will introduce an effective way of tax imposition process.
SALIENT FEATURES OF THE BILL
The Bill makes legislation on the taxation of goods and services a subject of concurrent list thus empowering both Centre and the State to makes laws on GST.
The Bill provides for a GST Council which will have the discretion to decide the taxes which will be included in GST; the goods and services subjected to GST, the rate at which GST will be applicable.
The GST Council has a duty to ensure optimum tax collection for goods and services by the state and the 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
The Bill exempts alcohol for human consumption from GST. Also, it empowers GST Council to decide when GST would be levied on various categories of fuel, including crude oil and petrol.
The Centre can levy an additional tax of up to 1%, on the on the supply of goods during trade between states which will go to the States for two years or till when the GST Council decides.
Parliament may, by law, decide to compensate states for a period of five years for any revenue loss due to GST.
IMPACT OF THE BILL
The introduction of GST provides for a single comprehensive taxation system for all goods and services making tax regime more simple and easy. The major advantages of GSṬ are-
It is assumed that the implementation of GST will boost the Indian economy by increasing employment opportunities, promoting exports with a gain of $15 billion every year.
In the GST system; taxes will be collected at the time of sale at the manufacturing cost. This means that the individuals will now consume the goods at a reduced price. Thus, it will certainly reduce the tax burden for consumers.
GST will lead to easy, transparent and simple tax structure by integrating all indirect taxes on goods and services into single GST. This will result in uniformity in tax rates thereby making the administration of tax structure more efficient.
CONCLUSION
Thus, GST was introduced with an aim to harmonise a system of taxation by including all indirect taxes into one tax. It seeks to settle the issues of the present indirect tax structure by enlarging the tax base, increasing compliance, and preventing economic disturbances caused by different interstate taxes. However, the new bill fails to comply fully with an ideal GST. The imposition of additional one percent tax on goods traded between the states is likely to impede the objective of creating a harmonized system of levying a tax on goods and services. The burden on retail consumers will also increase, the interstate trade will become more expensive than intrastate trade. Thus, even though GST is seen as a positive move to simplify the tax regime in India still, some amendments are needed to make it more flexible, transparent and comprehensive.
