GST Bill

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GST Bill

The GST is a Value added Tax (VAT) is proposed to be a comprehensive indirect tax levy on manufacture, sale and consumption of goods as well as services at the national level. It will replace all indirect taxes levied on goods and services by the Indian Central and state governments. It is aimed at being comprehensive for most goods and services.

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The Goods and Services Tax bill, touted to be India's biggest tax reform, will simplify the current system of taxation. The bill will convert the country into a unified market by replacing all indirect taxes with one tax.

Why does GST need a constitutional amendment?
Under the law, only the Centre can impose taxes on the services provided. But if GST is in place, states need to be allowed to collect service taxes as well. Hence, there needs to be constitutional amendment to empower states to do so. 

This will be the 122nd Constitution Amendment Bill. What’s the purpose of GST?  
In India, there are a number of taxes that are collected at various stages for goods and services by both Centre and the states. Manufactures are required to pay taxes when finished goods are out of their factory and the goods are again taxed by retail outlets. GST will unify all these different taxes and bind them into a single tax.  

What kind of a GST model is proposed?
There are 140 countries that have already implemented GST, while most of them follow a unified GST. India will follow a dual-system as both Centre and state governments will be imposing tax. India will be the third country to follow a dual-system after Brazil and Canada.  

Currently what are under Central taxes and states taxes?  
Central taxes: Central excise duty, Additional excise duty, Additional customs duty, Special Additional customs duty, Countervailing duty, Service tax, cesses and surcharges. State taxes: VAT/sales tax, interstate sales tax, local tax, entertainment tax, purchase tax, mandi tax, luxury tax, tax on lottery and betting, and octroi or entry tax. Goods that will be taxed separately from the GST: Alcohol, tobacco, petroleum products are likely to be out of the GST umbrella.  

Is there a last date for the government to pass the bill?  
The government has already missed many deadlines. Currently, 1 April 2017 is set as the deadline for rolling out the GST and to bring trade under a common national market. To meet this deadline, it is necessary for the government to pass the Bill in the current Winter Session of Parliament.  

If passed, then what?
Once the Bill is passed, the government will need to begin processes to implement it before the April 2017 deadline.

The Goods and Services Tax (GST), the biggest reform in India’s indirect tax structure since the economy began to be opened up 25 years ago, at last looks set to become reality. 

The introduction of Goods and Services Tax (GST) would be a significant step in the reform of indirect taxation in India. Amalgamating several Central and State taxes into a single tax [2] would mitigate cascading or double taxation, facilitating a common national market. The simplicity of the tax should lead to easier administration and enforcement. From the consumer point of view, the biggest advantage would be in terms of a reduction in the overall tax burden on goods, which is currently estimated at 25%-30%, free movement of goods from one state to another without stopping at state borders for hours for payment of state tax or entry tax and reduction in paperwork to a large extent.

The Bill was earlier passed in the Lok Sabha in May 2015, when the Centre had proposed 100% compensation for first three years, and 75% and 50% for the next two years. However, the select committee of the Rajya Sabha has now recommended 100% compensation for probable loss of revenue for five years. Going by the Cabinet considering the Opposition’s major amendments that had once been a tough hurdle, the government may be able to get the mammoth of a constitutional amendment moving.

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