Stages the GST bill have to cross
The GST bill passed in the Rajya Sabha on the 3rd of August 2016 will now be sent back to the Lok Sabha, where the amendments made to the GST bill will be discussed and cleared, following which each state will have to pass their own GST legislation. Once a minimum of 15 out of the 31 states (50% states) ratify it, the bill will be sent to the President of India for his assent and signature, to render it into an act. Thereafter the actual rollout of GST may begin from 2017 or later.
Key features of the GST
The proposed GST will have two components 1. Central GST (CGST) and 2. State GST (SGST). They will be collected simultaneously and what's collected as CGST would go to the center, likewise what's collected as SGST would go to the state. An additional component called Interstate GST (IGST), which unlike the other two, will be added for cross utilization by both Centre and the State. While many countries have implemented a singular GST model, India has chosen a dual GST model to accommodate the interests of its federal states.
The GST rate will be fixed based on the decision taken by the GST council. Currently, the overall tax burden on goods is estimated to be around 25-30%. The GST rate may be fixed at 17-18% as per the recommendation of the Cheif Economic Advisor Arvind Subramanian. There are fears that rates higher than that may trigger inflation, but lower rates may result in revenue loss for states. The government may adopt a middle path to strike a balance.
In general, the rollout of GST is expected to make commodity rates cheaper. The reason why some goods may become costlier in the short term is because of the discount clause of GST, which says there won't be tax deductibles. But then, sans tax exemptions, loopholes for evading tax payment will get sealed. Cumulatively, with an overall reduction in the tax rate, elimination of double taxation through Input Tax Credit (ITC) and exports getting zero-rated, Indian goods are likely to become more competitively priced at both domestic and international markets.
The government has also planned for a special purpose IT vehicle 'GST N' for tax collection. It will link GST to PAN and facilitate online filing of tax returns, in this case, the ITC or the Input tax Credits.
Eventually, the design and structure of GST will aid in the creation of a simple and transparent system that will facilitate ease in doing business. Certainly, compared to the present multiple taxation system GST, in all likelihood, scores high on many fronts. To ensure that a reformative GST bill is drafted and implemented, political parties must keep aside their political differences and come together to pass a legislation that will work in the common interest of citizens.
Who said what on GST?
Arun Jaitley (BJP):
“The GST will bring in three developments 1) The system will be more efficient and compliance will be met. Avoidance is going to be difficult because you will be detected at some stage or the other. 2) There will be no cascading effect on tax on tax 3) There are few goods on which the tax might be higher or lower. 54 percent of the CPI basket is tax exempt. 32 percent are taxed at a lower rate. Only 15 percent are taxed at the standard rate.”
Bhupendra Yadav (BJP):
“GST will make India one from 29 States.”
P. Chidambaram (INC):
“World over the tax rate is between 14.1 and 16.8 percent. The idea is, being an indirect tax, should be kept as low as possible...In the last few months, the government tried to pass the bill without the support of the opposition and it failed, and I’m glad it failed.”
Anand Sharma (INC):
“Dialogue on GST incomplete without talking about its origin. Then BJP-led Opposition said Congress’ GST Bill push would weaken states, even called it ‘unconstitutional’. Would’ve been better had there been better dialogue when Finance Minister Chidambaram tried to take GST Bill forward. Still believe it was a momentous, historic moment for the Congress.
A Navaneethakrishnan (AIADMK):
“It violates state’s fiscal autonomy and also because of this bill there is a permanent revenue loss to the state of Tamil Nadu. Our Chief Minister Amma has produced a memorandum to the Prime Minister and a dissent note has been given to the select committee."
Sitaram Yechury (CPM):
“Are we going to reduce the states to come to Centre with begging bowls to ask for money? How do we protect the rights of states? We (Rajya Sabha) are the council of states. I urge the Finance Minister to address this issue, and a provision be made when we discuss the GST bill.”
Derek O’Brien (Trinamool Congress):
“It’s often confusing whether the BJP and Congress is supporting or not supporting the GST bill. Unlike our party, which has promised the GST in its manifestos. I feel like a teenager in the presence of these senior lawyers... GST can also be interpreted as Girgit Samjhauta Tax - it’s like a ping-pong match between the two sides - (BJP and Congress).”
Sanjay Raut (Shiv Sena):
“Shiv Sena’s stand is clear, how will you compensate loss that will be caused to BMC through GST?”
FICCI:
“From the consumer point of view, the biggest advantage would be in terms of a reduction in the overall tax burden on goods, which is currently estimated at 25 to 30 per cent. Introduction of GST would make Indian products competitive in the domestic and international markets. Studies show that this would instantly spur economic growth.”
The GST bill passed in the Rajya Sabha on the 3rd of August 2016 will now be sent back to the Lok Sabha, where the amendments made to the GST bill will be discussed and cleared, following which each state will have to pass their own GST legislation. Once a minimum of 15 out of the 31 states (50% states) ratify it, the bill will be sent to the President of India for his assent and signature, to render it into an act. Thereafter the actual rollout of GST may begin from 2017 or later.
Key features of the GST
The proposed GST will have two components 1. Central GST (CGST) and 2. State GST (SGST). They will be collected simultaneously and what's collected as CGST would go to the center, likewise what's collected as SGST would go to the state. An additional component called Interstate GST (IGST), which unlike the other two, will be added for cross utilization by both Centre and the State. While many countries have implemented a singular GST model, India has chosen a dual GST model to accommodate the interests of its federal states.
The GST rate will be fixed based on the decision taken by the GST council. Currently, the overall tax burden on goods is estimated to be around 25-30%. The GST rate may be fixed at 17-18% as per the recommendation of the Cheif Economic Advisor Arvind Subramanian. There are fears that rates higher than that may trigger inflation, but lower rates may result in revenue loss for states. The government may adopt a middle path to strike a balance.
In general, the rollout of GST is expected to make commodity rates cheaper. The reason why some goods may become costlier in the short term is because of the discount clause of GST, which says there won't be tax deductibles. But then, sans tax exemptions, loopholes for evading tax payment will get sealed. Cumulatively, with an overall reduction in the tax rate, elimination of double taxation through Input Tax Credit (ITC) and exports getting zero-rated, Indian goods are likely to become more competitively priced at both domestic and international markets.
The government has also planned for a special purpose IT vehicle 'GST N' for tax collection. It will link GST to PAN and facilitate online filing of tax returns, in this case, the ITC or the Input tax Credits.
Eventually, the design and structure of GST will aid in the creation of a simple and transparent system that will facilitate ease in doing business. Certainly, compared to the present multiple taxation system GST, in all likelihood, scores high on many fronts. To ensure that a reformative GST bill is drafted and implemented, political parties must keep aside their political differences and come together to pass a legislation that will work in the common interest of citizens.
Who said what on GST?
Arun Jaitley (BJP):
“The GST will bring in three developments 1) The system will be more efficient and compliance will be met. Avoidance is going to be difficult because you will be detected at some stage or the other. 2) There will be no cascading effect on tax on tax 3) There are few goods on which the tax might be higher or lower. 54 percent of the CPI basket is tax exempt. 32 percent are taxed at a lower rate. Only 15 percent are taxed at the standard rate.”
Bhupendra Yadav (BJP):
“GST will make India one from 29 States.”
P. Chidambaram (INC):
“World over the tax rate is between 14.1 and 16.8 percent. The idea is, being an indirect tax, should be kept as low as possible...In the last few months, the government tried to pass the bill without the support of the opposition and it failed, and I’m glad it failed.”
Anand Sharma (INC):
“Dialogue on GST incomplete without talking about its origin. Then BJP-led Opposition said Congress’ GST Bill push would weaken states, even called it ‘unconstitutional’. Would’ve been better had there been better dialogue when Finance Minister Chidambaram tried to take GST Bill forward. Still believe it was a momentous, historic moment for the Congress.
A Navaneethakrishnan (AIADMK):
“It violates state’s fiscal autonomy and also because of this bill there is a permanent revenue loss to the state of Tamil Nadu. Our Chief Minister Amma has produced a memorandum to the Prime Minister and a dissent note has been given to the select committee."
Sitaram Yechury (CPM):
“Are we going to reduce the states to come to Centre with begging bowls to ask for money? How do we protect the rights of states? We (Rajya Sabha) are the council of states. I urge the Finance Minister to address this issue, and a provision be made when we discuss the GST bill.”
Derek O’Brien (Trinamool Congress):
“It’s often confusing whether the BJP and Congress is supporting or not supporting the GST bill. Unlike our party, which has promised the GST in its manifestos. I feel like a teenager in the presence of these senior lawyers... GST can also be interpreted as Girgit Samjhauta Tax - it’s like a ping-pong match between the two sides - (BJP and Congress).”
Sanjay Raut (Shiv Sena):
“Shiv Sena’s stand is clear, how will you compensate loss that will be caused to BMC through GST?”
FICCI:
“From the consumer point of view, the biggest advantage would be in terms of a reduction in the overall tax burden on goods, which is currently estimated at 25 to 30 per cent. Introduction of GST would make Indian products competitive in the domestic and international markets. Studies show that this would instantly spur economic growth.”