Revision as of 21:37, 17 September 2016

1986-2016: A history of the introduction of the GST in India; Graphic courtesy: The Times of India, August 4, 2016

1986 to 2016: the time it took to introduce GST ; Graphic courtesy: The Times of India, August 4, 2016

Goods and Servicces Tax: Terminology; Graphic courtesy: The Times of India, August 4, 2016

GST: Likely benefits; Graphic courtesy: The Times of India, August 4, 2016

The benefits of the GST ; Graphic courtesy: The Times of India, August 4, 2016

GST: The position is other countries; Graphic courtesy: The Times of India, August 4, 2016

Introduction

The Times of India

The constitutional amendment bill for rolling out the long-pending goods and services tax cleared the first hurdle with the legislation receiving LS approval.

What is GST?

It is a tax levied when a consumer buys goods or services. This is how what consumption is taxed in most developed countries.

What is article 246A and how will the power transfer to states take place?

The bill introduces a new article that says Parliament, and, subject to some conditions, the legislature of every state will have power to make laws with respect to goods and services tax imposed by the Union or the state.

Who will administer the levy?

The bill provides for a GST Council, a joint body of the states and the Centre.

There are fears that states may lose some revenue because of the introduction of GST. The bill allows for compensation for revenue loss to states for a period of 5 years.

GST will be levied on buyers of goods and services, or where the service is consumed. This means big consumer states such as Uttar Pradesh, West Bengal and Kerala will get a high share of the taxes. To compensate for this, manufacturing states such as Tamil Nadu, Maharashtra and Gujarat fear that they will lose out on revenues. The bill provides for 1 percentage point extra tax on goods for at least two years. This extra revenue will go to the state from which the goods originated, or where it was manufactured.

A win-win for all in long run

The Times of India, Dec 05 2015

GST a win-win for all in long run: Economists   What is the goods and services tax (GST)?

The proposed levy will be a single tax that will cover all indirect taxes at the Centre and state level, including entry tax. It is a value-added tax, which means a levy at each stage of production, sale or consumption will be set off against taxes paid in the previous stage.

Through a system of tax credits, those who are in the intermediate stages of a chain of production will get credits or refunds for whatever levies they have paid.This avoids cascading of taxes for the end-consumer. Unlike the existing VAT, which is levied only on manufactured goods, GST will also include services. Most economists agree that a GST is a win-win situation with the consumer, industry , government and economy all gaining in the long run.

When was GST conceived and when will it be implemented?

Although the plan has been discussed for years, a formal announcement was made in the 2006 Budget by P Chidambaram, the then finance minister. Since then, it has missed several deadlines. The last target date set for a nationwide roll-out of GST was April 2016, but even that is now extremely unlikely .

Why was it held up?

When the system was first discussed, there was great enthusiasm. But, gradually sta tes started raising objections.One reason is that finance ministers would lose control over the taxation system and be unable to give discretionary concessions. The other area of concern is potential loss of revenue from cash cows such as petroleum, which makes up for almost half the revenue for some states. There was also an element of bargaining in the states' objections.

What's the current status?

The Lok Sabha has approved a Bill to amend the Constitu tion so that the Centre can levy the tax. It has to be approved by the Rajya Sabha and then by state legislatures.

The NDA 's lack of maS jority in the Upper ho use means that it has to get the opposition on board.The Centre has assured states that it will compensate them for revenue loss due to GST roll-out, besides providing flexibility on entry tax and taxing oil products. Once Parliament passes the constitution amendment Bill, at least half the state legislatures will also have to do so for the Constitution to be amended. After this process is over, several other gaps need to be filled, including the rate of tax. A panel headed by chief economic adviser Arvind Subramanian has recommended standard GST rates of 17-18% and a revenue neutral rate in the 15-15.5% range.

What are the sticking points now?

The Congress says it sup ports the idea of a GST but wants several changes to the Constitution Amendment Bill introduced by the Modi government. In particular, it is focusing on three issues. The first is a demand to specify the GST rate in the Constitution Amendment Bill. The government argues that this will reduce flexibility as any change in the rate, say to deal with a natural calamity in a state, will require an amendment to the Constitution. One option is to specify a cap on the GST rate, another is to incorporate the rate in the other legislations to be enacted by the states and Centre. A second sticking point is the proposed additional levy of up to 1% by manufacturing states such as Gujarat, Maharashtra, Tamil Nadu and Karnataka to compensate them for losing out because the tax will be levied at the point of consumption instead of the point of production. The Subramanian panel has recommend that this levy be done away with.

This issued might be resolved by the Centre agreeing to compensate these states. The third point is the Congress also wants a panel of judges to deal with disputes instead of the proposal to let the GST Council decide. It is arguing that the complainant can't be the arbitrator too. Finance minister Arun Jaitley counters that by saying this will result in the legislature surrendering its powers to the judiciary.Some of the regional parties too are not in favour of letting a panel of retired judges to decide on the issue.

What is GST? How will it work?

In pictures

The Times of India, August 4, 2016

Goods and Services Tax: In brief; Graphic courtesy: The Times of India, August 4, 2016

Taxes which the GST will replace as the single umbrella tax.

Voting strength and GST council

Goods and Services Tax will replace the above mentioned taxes levied by the centre; Graphic courtesy: The Times of India, August 4, 2016

Goods and Services Tax will replace the above mentioned taxes levied by the state; Graphic courtesy: The Times of India, August 4, 2016

The GST, work to be done between 3 Aug 2016 (when the bill was passed by the Rajya Sabha) and April 1, 2017 (when the GST has to be implemented); Graphic courtesy: The Times of India, August 4, 2016