GST
Goods and Service Tax (GST)
The implementation of the Goods and Services Tax (GST) in India was a historical move, as it marked a significant indirect tax reform in the country. The amalgamation of a large number of taxes (levied at a central and state level) into a single tax is expected to have big advantages. One of the most important benefit of the move is the mitigation of double taxation or the elimination of the cascading effect of taxation. The initiative is now paving the way for a common national market. Indian goods are also expected to be more competitive in international and domestic markets post GST implementation.
From the viewpoint of the consumer, there would be a marked reduction in the overall tax burden that is currently in the range of 25% to 30%. The GST, due to its self-policing and transparent nature, is also easier to administer on an overall scale.
The GST Council also finalised on the GST rates and GST rules. The Government declares that the GST Bill will be applicable from 1 July 2017, following a short delay that is attributed to legal issues.
Constitution (One Hundred and First) Amendment Act, 2016
- The Bill suggests levy of GST on all goods and services, except alcohol that humans consume.
- The tax is levied as Dual GST by the Centre and states/union territories. The component levied by the Centre is Central Tax – CGST, while that levied by the state is State Tax – SGST. The tax levied by union territories is Union Territory Tax – UTGST.
- The Centre would levy the GST on inter-state trade or imports of services and goods. This tax is referred to as Integrated Tax – IGST.
- The Central Government will also levy excise duty on tobacco products, in addition to GST.
- The tax on five petroleum products, i.e., high speed diesel, crude, petrol, natural gas, and Aviation Turbine Fuel (ATF) will be outlined later after a decision is made by the GST Council.
GST Council: A Goods and Services Tax Council (GSTC) was created by the union finance minister, revenue minister, and ministers of state to take decisions on GST rates, thresholds, taxes to be subsumed, exemptions, and other features of the taxation system on September 2016. The state finance ministers mentioned that the Empowered Committee (EC) would be a platform for states where there would be discussions of their regional issues. The GST Council is a separate entity that would oversee the implementation of the GST system.
Decisions taken by GST Council
Some of the major decisions taken by the GSTC so far are:
- There would be four tax rates under the GST regime, i.e., 5%, 12%, 18%, and 28%. Some goods and services were also classified as exempt from tax.
- A cess above the peak rate of 28% would be levied on certain sin and luxury goods.
- The administrative control over 90% of taxpayers with turnover less than Rs.1.5 crore would be with the State tax administration. 10% of control would be with the Central tax administration.