India is all set to join the select club of nations such as Canada, Australia,
Singapore and Malaysia which have GST as a indirect tax system with its 122nd
constitutional amendment bill (101st Amendment) enabling centre and state to
levy GST concurrently.
What is GST?
Simplified tax structure applied on both goods and services.
Applicable on supply of goods or services as against prevailing system
of tax on manufacture of goods & provision of services.
A destination based tax as against the existing system of origin based
In order to introduce GST from financial year 2017-18, the government
needs to set the process in motion with:
Goods & Services Council: the apex body of centre & state.
GST Network: for providing all kinds of information technology support.
GST Rates Law: to finalize the GST rates.
Now, let us see into the details of these processes required for GST
(I) GST Council : An apex body comprising of
centre and state for GST, has been empowered to prepare nitty-gritty of GST and
also to resolve disputes.
Council is headed by Union Finance Minister.
Union Minister of State for finance, minister incharge of finance or
taxation or any other minister nominated by each state government will be
Therefore, total of 33 members with 2 members from centre, one from each
29 states and 2 union territories.
It will make recommendations to the union and states on important issues
related to GST such as goods and services that may be exempted from GST, model
GST laws, principles, that govern place of supply threshold limits, special
rates for raising additional resources etc.
Central government will have a weightage of 1/3rd of total votes.
State & Union Territory will have 2/3rd of total votes.
Decision to be taken will require 3/4th of total votes.
Key Decisions by GST council
1. Threshold limit: The exemption threshold limit is fixed at Rs. 20
lakh and this will be 10 lakhs for business in 7 north eastern states and 3 hill
states (J & K, Himachal Pradesh, Uttrakhand).
2. Cross Empowerment: It is agreed that states will get exclusive
control over all dealers upto annual turnover of Rs. 1.5 crore and for traders
with revenue above Rs. 1.5 crore, there will be dual control and cross
empowerment of officials of centre and state.
3. Composition Scheme: Reaching on consensus for composition scheme it
was decided that traders with gross turnover upto 50 lakhs will pay 1-2% tax and
this will aim to facilitate small traders. Also the floor rate of tax for
central GST and state GST will not be less than 1%.
(II) Goods & Service tax Network (GSTN): It is a
non-government and private limited company and has been mandated to:
1. Provide common and shared IT Infrastructure & Services to the Central &
State government, tax payers and other stakeholders.
2. ncourage and collaborate with GST suvidha providers (GSP's) to roll out GST
application for providing services to stakeholders.
3. Carry research, study best practices and provide training to tax authorities
& other stakeholder.
4. Assist Tax authorities in improving tax compliance and transparency of Tax
5. Develop tax payer profiling utility (TPU) for central and state tax
(III) GST Rates: The empowered committee of the
finance minister suggested two guiding principle for finalising GST rates:
a. That the GST rates should help the present taxation rate to gradually come
down in becoming citizen friendly.
b. The amount collected to taxation after GST should be adequate enough so that
the centre & state governments are able to maintain their present level of
Therefore the four rates: 1. Food grains to be : 0% tax (i.e. Nil rate)
2. Items of common consumption – 5% (i.e. Merit Rate)
3. Ultra luxeries, demerit & sin goods at 28%
4. 2 standard rates of 12% and 18% under GST.
Conclusion: GST will bring benefit not just for the industry/business
but also for masses. This new system will not only reduce multiplicity of taxes,
cascading effects but also it will bring revenue gain for centre & state due to
widening of tax base and improved tax compliance.