One India, One Tax- GST
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Goods and Service Tax (GST)
GST will be a game changing reform for the Indian economy by creating a common Indian market and reducing the cascading effect of tax on the cost of goods and services. It will have an impact on the tax structure, tax incidence, tax computation, tax payment, compliance, credit utilization and reporting, leading to a complete overhaul of the current indirect tax system.
Background
The Constitution Amendment Bill for Goods and Services Tax (hereinafter referred to as “GST”) has been approved by the President of India post its passage in the Parliament (by Rajya Sabha on 3 August 2016 and by Lok Sabha on 8 August 2016) and has also been ratified by more than 50 percent of state legislatures. The Government of India is committed to replace all the indirect taxes levied on goods and services by the Centre and States and to implement GST by April 2017.
Salient Features of the proposed Indian GST System:
- GST is defined as any tax on supply of goods and services other than on alcohol for human consumption.
- Taxes would be subsumed under this regime as per follows:
- Petroleum and petroleum products, i.e., crude, high speed diesel, motor spirit, aviation turbine fuel and natural gas, may be subject to GST – if changed, the date shall be notified by the GST Council.
- Provisions will be made for removing imposition of entry tax / Octroi across India.
- Entertainment tax, imposed by states on movie, theatre, etc., will be subsumed in GST, however taxes on entertainment at panchayat, municipality or district level will remain unchanged.
- GST may be levied on the sale of newspapers and advertisements.
- Stamp duties, typically imposed on legal agreements by states, will continue to be levied.
- Administration of GST will be the responsibility of the GST Council, which will be the Apex policy making body for GST and it shall comprise of Central and State ministers in charge of the finance portfolio.
10. Since, India is federal State, it is proposed that GST will be levied concurrently by the Centre (CGST) and the states (SGST). It is expected that the base and other essential design features would be common between CGST and SGST across SGSTs for individual states. Both CGST and SGST would be levied on the basis of the destination principle. Thus, exports would be zero-rated, and imports would attract tax in the same manner as domestic goods and services. Inter-state supplies within India would attract an Integrated GST (aggregate of CGST and the SGST of the destination State).
11. In addition to the IGST, in respect of supply of goods, an additional tax of up to 1% has been proposed to be levied by the Centre. Revenue from this tax is to be assigned to origin states. This tax is proposed to be levied for the first two years or a longer period, as recommended by the GST Council.
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