How Things Will Change In Tax By GST in India ? Complete Explanation On GST Applicability

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Concept

GST or Goods and Service Tax is an indirect tax levied on value addition done on goods and services. It shall replace all other kinds of indirect taxes levied at central or state level like excise, customs, VAT etc. It shall be a destination based tax in India.

Origination and Recent developments

This concept was first introduced by the Union Finance Minister during the central budget of 2007–2008. On 17th December, 2014 the Union Cabinet Minister approved the proposal for introduction of the GST Constitutional Amendment Bill. On 19th December, 2014, our Finance Minister Shri Arun Jaitley has presented the Constitution (122nd Amendment) Bill, 2014 on GST in Lok Sabha.

Proposed amendments in the Constitution shall harmonise the indirect tax regime as it shall provide the Central and State Legislatures to levy and collect taxes on value addition on goods as well as services. GST shall lead to reduced tax compliances, more collection of taxes, lower incidence of taxes etc. which will be beneficial to economy as well as the final consumers.

Salient features of Constitution (122nd Amendment) Bill, 2014 

The salient features of the proposed amendment in constitutional bill are as follows:

Power to levy and collect taxes

ii. Article 246A shall confer powers to Union and State legislatures to make laws on GST.

iii. Article 279A shall facilitate creation of GST council which shall be under the chairmanship of Union Finance Minister.

Nature of taxes subsumed as

i. Central taxes: Central excise duty, service tax, additional excise duty, Additional customs duty, Special Additional Duty of Customs, Central cesses and surcharges.

ii. State Taxes: VAT/Sales tax, Central Sales Tax, Entertainment tax, Octroi and Entry tax, Purchase tax and Luxury tax, Taxes on lottery, betting and gambling, state cesses and surcharges.

iii. Taxes shall be levied both at Centre and State simultaneously as CGST (Central Goods and Service Tax) and SGST (State Goods and Service Tax).

Excluded items

a. Alcoholic liquor for human consumption

b. Petroleum crude, high speed diesel, motor spirit (petrol), natural gas and aviation turbine fuel (Excluded till the date of further notification)

c. Tobacco and tobacco products

d. Taxes on entertainment and amusements are given to District Council to levy and collect taxes.

Additional tax

An additional tax not exceeding 1% shall be levied on all the interstate transactions to be collected by the state where the service or the supply of goods originate, for a period of two years or extended as may be decided by the GST council.

GST Council- Constitution and functioning

i. Shall be constituted in 60 days from the date of enactment of the bill.

ii. Shall handle major law relating issues like, rates of taxes, exempted goods, principles of levy and apportionment of IGST etc.

Other important features

i. Compensation to the states shall be provided for five years: 100% for first 3 years, 75% in fourth year and 50% in fifth year.

ii. The term ‘Services’ shall be exhaustively defined as ‘anything other than goods’.

iii. The concept of ‘declared goods of special importance’ has been done away with.

iv. The import of goods and services or both into the territory shall be considered as interstate trade or commerce.

Conclusion /Future:

i. The proposed Constitution (122nd Amendment) Bill, 2014on GST shall require at least two-third of majority of the members present and voting in Lok Sabha and Rajya Sabha.

ii. The bill shall require ratification from the State Legislatures of not less than one-half of the States.

iii. It shall then be required to take assent from the President post which the Constitution shall stand amended.

Indian economy is looking forward to this “Single biggest tax reform since Independence” which shall bring in various benefits to the assessees as well as the Governments.

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