Read how the single most significant economic reform since the liberalization affects you

Rajya Sabha TV
news GST Wednesday, August 03, 2016 - 17:55

The Rajya Sabha on Wednesday passed the single most significant economic reform since the liberalization by clearing the GST bill.

The House of Elders  as scheduled started discussing the issue at 2 pm and finally cleared the contentious bill after a marathon session of seven and a half hours. PM Modi also reacted to the  development on Twitter.

With the Rajya Sabha clearing the GST bill, here is a look back at what the GST bill is and how it will affect the public.

What is the GST ?

The GST is a single indirect tax for the whole nation, which will make India one unified common market. It is a single tax on the supply of goods and services, right from the manufacturer to the consumer.

Credits of input taxes paid at each stage will be available in the subsequent stage of value addition, which makes GST essentially a tax only on value addition at each stage. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages.

What are the benefits of GST?

 For business and industry:

** Easy compliance

** Uniformity of tax rates and structures

** Removal of cascading
** Improved competitiveness
** Gain to manufacturers and exporters

-- For central and state governments:

** Simple and easy to administer
** Better controls on leakage
** Higher revenue efficiency

-- For the consumer:

** Single and transparent tax proportionate to the value of goods and services
** Relief in overall tax burden

Which taxes at the Centre and state level are being subsumed into GST?

At the Central level: Central excise duty, additional excise duty, service tax, additional customs duty (commonly known as countervailing duty) and special additional duty of customs.

At the state level: Subsuming of state value added tax/sales tax, entertainment tax (other than the tax levied by the local bodies), central sales tax (levied by the Centre and collected by the states), octroi and entry tax, purchase tax, luxury tax, and taxes on lottery, betting and gambling.

How will GST be levied?

The Central GST (CGST) and the State GST (SGST) would be levied simultaneously on every transaction of supply of goods and services except on exempted goods and services, goods which are outside the purview of GST and the transactions which are below the prescribed threshold limits. 

Further, both would be levied on the same price or value unlike state value added tax, which is levied on the value of the goods inclusive of central excise.

How will imports be taxed under GST?

The Additional Duty of Excise and the Special Additional Duty presently being levied on imports will be subsumed under GST. Unlike in the present regime, the states where imported goods are consumed will now gain their share from this Integrated GST paid on imported goods.

Exceptions: Alcohol will remain outside the ambit of GST. Petroleum products, entertainment and electricity will also be out of the GST framework at least for two years.

*The state of Jammu and Kashmir will not adopt GST in the current form

History

Sixteen years ago, it was Atal Bihari Vajpayee who first asked the Empowered Committee headed by then WB Finance Minister CPI (M)’s Asim Dasgupta to look into the concept of uniformed taxation and chalk out a model.

In 2003, the Kelkar Committee headed by former finance secretary Vijay Kelkar also proposed a similar tax reform.

Ironically enough, it was the Congress which introduced the bill first in 2006. Then, it was opposed on certain technicalities by several BJP-ruled states including that of Gujarat under Narendra Modi. Now, the Congress was the primary opposition in passing the bill.

During the Budget discussion in 2007, the then finance minister P Chidambaram announced that the GST bill would be passed in April 2010. He also said the Empowered Committee of State Finance Ministers would bring out a blueprint.  
But in 2010, when the GST was discussed by the UPA government, a few BJP-ruled states were skeptical about the implementation of goods and services tax (GST) from April 2011. They were strongly opposed to the veto provision in the draft amendment bill giving the centre to overrule the states’ taxation decisions.

Timeline

1. In 2003, the Kelkar Task Force on indirect tax had suggested a comprehensive Goods and Services Tax (GST) based on VAT principle.

2. A proposal to introduce a national GST by April 1, 2010, was first mooted in the Budget Speech for the financial year 2006-07.

3. Since the proposal involved reforms and restructuring of not only indirect taxes levied by the Centre but also the states, the responsibility of preparing a design and road map for the implementation of GST was assigned to the Empowered Committee (EC) of State Finance Ministers. 

4. Based on inputs from the Centre and states, the empowered committee released its first discussion paper on GST in November 2009.

5. In order to amend the Constitution to enable introduction of GST, the Constitution (115th Amendment) Bill was introduced in the Lok Sabha in March 2011. As per the prescribed procedure, the Bill was referred to the Standing Committee on Finance of Parliament for examination and report.

6. The Parliamentary Standing Committee submitted its report in August 2013, to the Lok Sabha. Most of the recommendations made by the Empowered Committee and the Parliamentary Standing Committee were accepted and the draft Amendment Bill was suitably revised.

7. The 115th Constitutional (Amendment) Bill, 2011, for the introduction of GST introduced in the Lok Sabha in March 2011 lapsed with the dissolution of the 15th Lok Sabha.

8. In June 2014, the draft Constitutional Amendment Bill was sent to the Empowered Committee after approval of the new government.

9. Based on a broad consensus reached with the Empowered Committee, the Cabinet on December 17, 2014, approved the proposal for introduction of a bill in Parliament for amending the Constitution to facilitate the introduction of GST in the country. The Bill was introduced in the Lok Sabha on December 19, 2014, and was passed by the Lok Sabha on May 6, 2015. It was then referred to the Select Committee of Rajya Sabha, which submitted its report on July 22, 2015.

10. Since then the bill has been stuck in a logjam as the government lacked majority in the Rajya Sabha and at the same time failed to reach a consensus on it with the major political parties, especially the Congress. 

(With IANS inputs)