GST: One Nation, One Tax
Submitted by root on Tue, 08/29/2017 - 08:15
Introduction: 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 tax.
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 implementation:
(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 the members.
- 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 Administration system.
5. Develop tax payer profiling utility (TPU) for central and state tax administration.
(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 revenue.
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.