Council nod to 4 rules for GST

Andrew Cummings
April 2, 2017

India's lower house of parliament on Wednesday passed key legislations, putting Asia's third-largest economy on course to launch a nationwide goods and services tax (GST) from July.

Noting that the GST would bring in lot of "revolutionary" things after implementation, he said, small companies may find it a "burden" to comply with the new procedures unlike the big corporates.

Earlier, Finance Minister Arun Jaitley introduced four bills in the Lok Sabha to give effect to the Goods and Services Tax (GST).

The GST will subsume excise, service tax and other local levies.

The Congress remonstrated with Jaitely alleging the practicality of the bills are far from the government's claim of "one nation, one tax", referring to the GST's four-slab structure.

The Bill later acquired the support from legislatures across the country, which finally led to its establishment.

However, despite demands by some sectors of industry as well concerns of a few States, the Government is unlikely to push the rollout date of GST beyond July 1.

Moreover, GST would widen the tax net, will plug the leakages and multiple taxation, would increase revenue stream and efficiency.

Petroleum products though included in the GST net have been kept zero-rated for now as states were not comfortable giving up their large share of revenue that comes from these.

The bills will also improve tax compliance and ensure that assessees get input credit of the taxes paid. "Taxes will be jointly imposed by Centre and states, there will be one tax", he said, adding an expert committee has been appointed to remove bottlenecks relating to GST implementation.

The Union Territory Goods and Services Tax Bill, 2017, will enable levy and collection of tax on intra-state supply of goods and services or both by the union territories. The Integrated GST or IGST will be a tax to be levied by the Centre on inter-state movement of goods and services. Responding to members' questions, the Minister said under the GST, for one commodity there will be only one tax rate in the country.

The Council has already agreed on a four-slab structure - 5, 12, 18 and 28 per cent - along with a cess on luxury and "sin" goods such as tobacco.

It is hoped that states would cap the State GST rate at 20 per cent, so that the combined peak GST rate would be 40 per cent.

Government and businesses have pushed hard for years to bring in the new tax regime that they say will boost economic activity and add an estimated 1.5 to 2 percentage points to the annual GDP.

"It is not going to be a bed of roses - the country needs to be ready for enormous chaos in the months after GST is implemented", said Mr Arvind Datar, a senior lawyer at the Madras High Court. "The delicate balance between what the Centre and states have unanimously agreed is nearly a federal contract", he added.

The council will meet again on March 31, and will likely approve the items in each tax category.

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