The Lok Sabha on recently passed the much-awaited Central Goods and Services Tax (GST) Bill, after opposing all the changes put forward by the Opposition. All the four bills that were moved by Finance Minister Arun Jaitley in the lower house were passed by voice vote. The remarkable GST regime is now closer to meet its July 1 objective of rollout.

What is GST?
The GST proposes to unify India into a common market with a single tax across all states, which aims to eliminate the present cascading effect of the central taxes. But the real motto of the GST which was “One country, one tax” could not completely meet demands. Thus the GST that was finally tabled and passed in both the houses will have a few components to it.
Central taxes namely include Central Excise Duty, Additional Customs Duty, Additional Excise Duty and Service Tax will all be merged into one CGST.
State taxes such as VAT, sales tax, purchase tax, entertainment tax, mandi tax, luxury tax, octroi and entry tax will be subsumed into SGST.
Integrated GST will be levied and collected by the Centre on inter-State supply of goods and services.
So now centre will levy the Central GST and Integrated GST, while states will impose the SGST.
The new GST regime is to have a four-slab structure of 5%, 12%, 18% and 28%.
Items such as rice, wheat and other essential items have been excluded from the tax regime, these items constitutes 50% of CPI (Consumer Price Index) inflation basket.
The lowest tax slab of 5% is proposed for items of mass consumption i.e. they are widely used by common people such as spices, tea and mustard oil.
The tax slab of 12% and 18% will majorly cover most of the manufactured goods and services.
The highest tax slab of 28% will be imposed on items like luxury cars, tobacco and aerated drinks and so on. These items are currently attracting a taxes varying from 27-31%.

What is in for the States?
The Compensation Bill has been introduced to ensure that states will be compensated for the initial five years if they incur revenue loss after GST is rolled out. The compensation money shall be generated from the compensation fund created from cess that the centre will impose on certain goods.

How will the dual control on assessing taxpayers work?
The Centre and states will both assess taxpayers having an annual turnover of Rs 1.5 crores, whereas the states will have the power to assess taxpayers below Rs 1.5 crores in turnover.

For North Eastern states those with an annual turnover of Rs 10 lakh or below will be exempt from the ambit of GST, for the rest of India this limit is Rs 20 lakh.

How will GST impact inflation?
Initially, GST may lead to a higher inflation as many services and manufactured products get costlier and as compliance improves. However, GST is expected to help moderate inflation in the medium to long term as the cascading impact of taxes goes.

Way forward?
On one hand the Government is rushing its way, on the other hand there are clause which still need to be notified properly and one of them being the anti profiteering clause in the GST regime which has left the India Inc with contemplations and cold feet.
Anti profiteering aspect – Clause 171(1) of the GST Bill provides that any reduction in rate of tax on any supply of goods or services, or the benefit of input tax credit shall be passed on to the recipient (consumer) by way of a commensurate reduction in prices. There are many aspects that are currently open ended.
Industry representatives have spilled out their anxiety on the same. To begin with the term ‘commensurate’ is not defined. While pre-GST figures (such as profits) will be compared with the post-GST numbers, the basis of valuation itself will be different under the old laws and under GST. For instance, a product could currently be taxable on MRP basis at a central level and against the billing price in a state, they point out. The issue also remains on whether anti-profiteering will be seen on a pan-India basis or state to state. For instance, in one state after the implementation of GST, the tax rate could be lower. Will an average pan-India figure be considered to determine whether the benefit of reduction in tax rate has been passed on? Also will the profit analysis be done at the entity level or product level? The rules that should provide clear guidelines to all these issues, is the wide sweeping comment across India Inc.

To sum up facts, the GST is an indirect tax which demands that the tax is approved till the last stage where it is the consumer of the goods and services who bears the tax. The GST will substitute most other indirect taxes and synchronize the differential tax rates on mass-produced goods and services.



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Aparna Deb

I love people who get their fiction & Bollywood allusions right, but apart from that, I am a relatively normal person with happy feet attracting good vibes from everyone I meet. Loves reading Non-Fiction.

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