Goods and services tax (GST)
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[[File: Goods and Services Tax will replace the above mentioned taxes levied by the state.jpg|Goods and Services Tax will replace the above mentioned taxes levied by the state; Graphic courtesy: [http://timesofindia.indiatimes.com/india/How-GST-will-work/articleshow/53521692.cms ''The Times of India''], August 4, 2016|frame|500px]] | [[File: Goods and Services Tax will replace the above mentioned taxes levied by the state.jpg|Goods and Services Tax will replace the above mentioned taxes levied by the state; Graphic courtesy: [http://timesofindia.indiatimes.com/india/How-GST-will-work/articleshow/53521692.cms ''The Times of India''], August 4, 2016|frame|500px]] | ||
| − | + | [[File: The impact of GST on the various sectors of the economy.jpg| The impact of GST on the various sectors of the economy; Graphic courtesy: [http://epaperbeta.timesofindia.com/Article.aspx?eid=31808&articlexml=AUTO-RETAIL-GAIN-CIGARETTE-COS-LOSE-04082016023037 ''The Times of India''], August 4, 2016|frame|500px]] | |
[[File: 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).jpg| 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: [http://epaperbeta.timesofindia.com/Gallery.aspx?id=04_08_2016_016_008_009&type=P&artUrl=GOOD-SENSE-TAX-04082016016008&eid=31808 ''The Times of India''], August 4, 2016|frame|500px]] | [[File: 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).jpg| 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: [http://epaperbeta.timesofindia.com/Gallery.aspx?id=04_08_2016_016_008_009&type=P&artUrl=GOOD-SENSE-TAX-04082016016008&eid=31808 ''The Times of India''], August 4, 2016|frame|500px]] | ||
Revision as of 21:51, 17 September 2016
This is a collection of articles archived for the excellence of their content. |
Contents |
Introduction
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.
In the view of economists
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?
10 key points
The Times of India, August 4, 2016
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1. GST is a uniform indirect tax levied on goods and services across a country. Many developed nations tax manufacture, sale and consumption using a single, comprehensive tax.
2. Central Taxes GST would replace Central Excise Duty, Service Tax, Additional Duties of Excise & Customs, Special Additional Duty of Customs, and cesses and surcharges on supply of goods and services.
3. State Taxes GST would replace VAT, Central Sales Tax, Purchase Tax, Entry Tax, Entertainment Tax, taxes on advertisements, lotteries, betting and gambling, and state cesses and surcharges.
4. The main objectives of GST would be to eliminate excessive taxation. Central and state agencies often calculate taxes based not on the original cost of the product, but over and above the several layers of tax already levied on the product. This negatively affects the Gross Domestic Product of a nation.
GST is also expected to disincentivize tax evasion, lower tax rates, and make business operations easier.
5. The current NDA government and the Opposition disagree over the contents of the GST Bill
6. According to PRS Legislature Research, the 2011 Bill defined GST as any tax on the supply of goods or services, except taxes on the supply of petroleum crude, high speed diesel, motor spirit (petrol), natural gas, aviation turbine fuel and alcoholic liquor for human consumption.
7. The 2011 Bill provided for the creation of the Goods and Services Tax Dispute Settlement Authority to adjudicate disputes between the central government and state governments on the issues of GST resulting in any loss in revenue, and affecting the harmonized structure of the tax. The 2014 Bill deleted the provision of such an authority.
8. The 2014 Bill defined GST as any tax levied on the supply of goods, or services, except taxes on the supply of alcoholic liquor for human consumption.
9. In addition, the 2014 bill also deleted a provision of the 2011 bill that imposed restrictions on states on taxation of products deemed of special importance in inter-state trade or commerce.
10. It also removes a 2011 provision allowing states to tax the entry of goods into a local area that are for use or sale only to the extent levied by a Panchayat or a Municipality.
History
Congress’ aggressive disruption of LS
The Times of India, Aug 04 2016
The hurdles in the way of the GST law were as much political as disagreements over clauses and design of the tax reform, as the government's lack of numbers in Rajya Sabha gave Congress a stranglehold on the legislation. The passage of the Constitution amendment bill was hardly seen as a major issue when the Modi government assumed office and Congress functionaries wondered why the new dispensation was taking its time over the reform measure.
Things changed swiftly as BJP and Congress settled into a deeply hostile and suspicious relationship, souring any possibility of bipartisanship.Congress's aggressive disruption of Lok Sabha despite its reduced strength of 44 over `Lalitgate' made it clear that the main opposition was not going to be deterred by BJP's emphatic win in 2014.
Congress's tactics of disruption and delay in the Upper House centred around party vice-president Rahul Gandhi's conviction that the Modi government should not be given easy passage with legislation as an act of assertion.
BJP functionaries said the demands raised by Congress were an afterthought as issues like writing an 18% tax rate or the formulation on a dispute resolution mechanism were not part of the bill piloted even by the UPA government.
The decision to block the GST bill was also driven by Congress's calculation that delaying the reform measure would slow down the Modi government's political momentum and the frustration in the BJP camp indicated that this was a worry.
The balance began to slowly tilt towards the government as states under regional parties began to back the law and BJP launched a powerful campaign alleging that Cong ress -unable to swallow its Lok Sabha defeat -was seeking to undermine PM Narendra Modi's mandate.
It was a charge Congress vehemently denied, but BJP members found it a convenient argument that helped cover up some of the government's shortcomings in its two years in office.
The charge stung and barring success in Bihar, the strategy did not deliver any political gains in state elections, where Congress found itself on a losing wicket.
Business also played a role in convincing Congress that its opposition to the GST law, despite the party's claim that it was raising important issu es, was being seen as a negative tactic and was perceived to be hurting the economy .
In an astute move, Congress agreed to drop its insistence on writing the tax rate into the Constitution amendment as long as it was ring fenced. The government's decision to bring only the amendment now and leave the central GST bill for the winter session smoothened the path further.
The view of several state finance ministers that an 18% rate may not be adequate and the daunting process of getting parliamentary approval to alter the rate also persuaded Congress to amend its position.
Cabinet approves key changes in GST Bill
The Times of India, Jul 27, 2016
Cabinet approves key changes in GST Bill
In a bid to strengthen the chances of passage of the crucial GST Bill, the Union Cabinet here on Wednesday approved key changes in the proposed legislation, including dropping the proposed one per cent additional tax on inter-state sale, sources said.
This provision's removal has been a key demand of the opposition Congress.
The cabinet, which met under the chairmanship of Prime Minister Narendra Modi, also agreed to include the mechanism to compensate states for all loss of revenues for five years.
Minister of State for Parliamentary Affairs Mukhtar Abbas Naqvi earlier told the Rajya Sabha that the GST Bill will come up for discussion in the first week of August. It is pending in the Rajya Sabha, where the National Democratic Alliance government lacks a majority.
West Bengal Finance Minister Amit Mitra chaired the meeting of the empowered committee of state Finance ministers to form a consensus on the bill, and the states agreed to keep the GST rate out of the bill. However, there was no decision on what the rate should be as all the states did not agree on the proposed 18 per cent rate.
The Congress demands that the constitutional amendment bill sould provide for capping the GST rate at 18 per cent. Mitra said a broad consensus has been worked out on the GST and all are of the opinion that taxes on the common man need to be reduced. At the same time, there is a need to ensure that the trend of revenue collection continues, he added. "It is very important that tax on the common man is significantly reduced. At the same time we need to safeguard the taxes going to the state exchequer," he said.
The states are demanding that there should be no dual control on businesses with an annual turnover of less than Rs 1.5 crore, and this issue has to be resolved for the GST to happen, Mitra said after the panel's meeting. "We will work towards this so that small businesses do not suffer. It has to be through a consensus for the GST to happen," Mitra added. The Congress is also demanding an independent dispute resolution mechanism for the GST. The GST was first mooted by the previous Congress-led United Progressive Alliance government.
Congress’ U-turn
The Times of India, Aug 04 2016 Congress made a bold bid to deny the Centre the bragging rights for rolling out GST, stating that its demand for changes in the draft had made it “pro-people“ even as it stressed that these were not a pretext for obstruction. P Chidambaram told reporters the Centre had accepted the call for removal of 1% surcharge and reformulation of dispute redressal mechanism because the GST draft was “flawed“.
He also said Congress would continue to insist on the 18% cap while expressing confidence that the Centre would include it in the subsequent legislation. He warned that a high rate would be inflationary and hurt the common man but put the burden of convincing states in favour of a lowrate cap on the FM.
The states voiced support for around 23%.
The arguments at the Congress briefing sought to lay the ground for the party to fight back in popular perception over its dramatic change in position after it single-handedly held back GST for a year. Veterans like Anand Sharma spoke in RS in Hindi to carry the message wide in a bid to explain to voters the party's about-turn.
After sound & fury, CPM yields quietly:
Despite the noises CPM made against the bill, it was a foregone conclusion that it would support it as the party had come around in the last month or so. Two factors were at play . One, the party's changed equation with Congress. And, two, support to GST by the newly-elected CPM regime in Kerala.
Benefits
How almost everybody gains
The Times of India, Aug 4, 2016
After decades of tying itself up in political knots debating a transparent, simple, efficient, one-nation system, India will soon be on a clutter-free tax highway. Around 6 million entities are expected to be covered under GST+ and more than 10 tax rates are likely to fall. Here's a quick look at how GST will impact the economy, businesses and the consumer.
ECONOMY
- Dual monitoring by the Centre & states to reduce tax evasion
- Better compliance through real time matching of supplier & purchaser
- Reduction in approximately Rs 1.8 lakh crore annual loss due to excise duty exemptions
- Cut in Rs 1.5 lakh crore estimated loss to states due to tax exemptions
COMPANIES
- Tax credits to lower tax burden, improve profit margin for some
- No distinction between product and service for tax
- Uniform tax across the country to ease business
- Smooth movement of products across states
- One-time increase in compliance cost likely
CONSUMER
- No tax rates have yet been decided though a suggestion of 3 rates-12%,
- 17-18% and 40% has been made
- Most products are likely to be less expensive over time
- Most services (eg. restaurants, travel, mobile bills, insurance premium) likely to cost more
- Mobiles, jewellery, some readymade wear in some states may cost more
