05 August 2016

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Know 20 Facts Explained Goods and Services Tax Bill 2014

Know 20 Facts Explained Goods and Services Tax Bill 2014

In short History of the Goods and Services Tax Bill or GST Bill
The Constitution (122nd Amendment) Bill, 2014 was approved by the Upper House on 3rd August 2016
All the states supported GST expect Tamil Nadu.
AIADMK was the only party that expressed dissent with the Bill and called it unconstitutional. The MPs of the party staged a walkout during the voting process.

In Budget 2006-07, P. Chidambaram, Minister of Finance of the UPA II proposed implementation of Goods and Services Tax (GST) by April 1, 2010.
A consumption based tax, the idea was to do away with the complications afflicting the current system of taxation. In a comprehensive GST regime all the transactions would be liable to a single unified tax.
 Since the proposal involved reform/ 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 of State Finance Ministers (EC).
Based on inputs from Government of India and States, the EC released its First Discussion Paper on Goods and Services Tax in India in November, 2009.

In order to take the GST related work further, a Joint Working Group consisting of officers from Central as well as State Government was constituted in September, 2009.

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

Meanwhile, in pursuance of the decision taken in a meeting between the Union Finance Minister and the Empowered Committee of State Finance Ministers on 8th November, 2012, a ‘Committee on GST Design’, consisting of the officials of the Government of India, State Governments and the Empowered Committee was constituted.

This Committee did a detailed discussion on GST design including the Constitution (115th) Amendment Bill and submitted its report in January, 2013. Based on this Report, the EC recommended certain changes in the Constitution Amendment Bill in their meeting at Bhubaneswar in January 2013.

The Empowered Committee in the Bhubaneswar meeting also decided to constitute three committees of officers to discuss and report on various aspects of GST as follows: -
  (a)Committee on Place of Supply Rules and Revenue Neutral Rates;
  (b)Committee on dual control, threshold and exemptions;
 (c)Committee on IGST and GST on imports.

The Parliamentary Standing Committee submitted its Report in August, 2013 to the Lower House. The recommendations of the Empowered Committee and the recommendations of the Parliamentary Standing Committee were examined in the Ministry in consultation with the Legislative Department. Most of the recommendations made by the Empowered Committee and the Parliamentary Standing Committee were accepted and the draft Amendment Bill was suitably revised.

 The final draft Constitutional Amendment Bill incorporating the above stated changes were sent to the Empowered Committee for consideration in September 2013.

 The EC once again made certain recommendations on the Bill after its meeting in Shillong in November 2013. Certain recommendations of the Empowered Committee were incorporated in the draft Constitution (115th Amendment) Bill. The revised draft was sent for consideration of the Empowered Committee in March, 2014.

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

 In June 2014, the draft Constitution Amendment Bill was sent to the Empowered Committee after approval of the new Government.

 Based on a broad consensus reached with the Empowered Committee on the contours of the Bill, the Cabinet on 17.12.2014 approved the proposal for introduction of a Bill in the Parliament for amending the Constitution of India to facilitate the introduction of Goods and Services Tax (GST) in the country.

 The Bill was introduced in the Lower House on 19.12.2014, and was passed by the Lower House on 06.05.2015.

It was then referred to the Select Committee of Upper House which submitted its report on 22.07.2015.

Year 2016 –
The Goods and Services Tax Bill or GST Bill officially known as The Constitution (One Hundred and Twenty-Second Amendment) Bill, 2014 passed by the Upper House on 3rd August 2016

The bill will now go back to the Lower House to incorporate the amendments approved by the Upper House.

The bill will also have to be approved by 50 per cent of all the state assemblies.

In short Congress party started the work on GST and it was finished by BJP.

Congress Party spokesman Jairam Ramesh told reporters that “The Prime Minister was not on a foreign tour. He was sitting in his office in Parliament. It is a contempt of Parliament,”
“It is a matter of lament that the Prime Minister could not spare even five minutes to be present during the passage of the legislation which he had labelled as one of the most progressive and revolutionary,”
Ramesh suggested that Prime Minister could have deliberately stayed away from Parliament given the fact that earlier as Gujarat Chief Minister, he had opposed GST for three years.

What is GST? How does it work?
GST is one indirect tax for the whole nation, which will make India one unified common market.
GST 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 GST will do?
An inclusive tax that will replace current indirect taxation regime.
It will be levied on both goods and services.
It will have a dual structure Central GST and State GST.
The constitutional amendment will enable both the Centre and the States to simultaneously levy the GST, which will subsume all indirect taxes currently levied, including excise duties and service tax. It will be levied on consumption rather than production.

Following are the Central Taxes GST will subsume
a-Central Excise Duty
b-Additional Duties of Excise and Customs
c-Special Additional Duty of Customs [ SAD]
d-Service Tax
e-Cesses and Surcharges on supply of goods and services.

Following are the state taxes which GST subsume
b-Central Sales Tax
c-Purchase Tax
d-Luxury tax
e-Entry tax
f-Entertainment tax
g-Taxes on advertisements, lotteries, betting, and gambling
h-state cesses and surcharges

Effects of GST –
Uniform Tax will help to reduce corruption

It will end the system of multiple taxes on companies, firms.

It will make easy for the companies to do business

It will become easy to transport goods from one state to another state without fearing the tax problems

It will abolish octroy toll collection points ultimately this will reduce the corruption.

A robust and comprehensive IT system would be the foundation of the GST regime in India. Therefore, all tax payer services such as registrations, returns, payments, etc. would be available to the taxpayers online, which would make compliance easy and transparent.

GST will ensure that indirect tax rates and structures are common across the country, thereby increasing certainty and ease of doing business. In other words, GST would make doing business in the country tax neutral, irrespective of the choice of place of doing business.

A system of seamless tax-credits throughout the value-chain, and across boundaries of States, would ensure that there is minimal cascading of taxes. This would reduce hidden costs of doing business.

Reduction in transaction costs of doing business would eventually lead to an improved competitiveness for the trade and industry.

The subsuming of major Central and State taxes in GST, complete and comprehensive set-off of input goods and services and phasing out of Central Sales Tax (CST) would reduce the cost of locally manufactured goods and services. This will increase the competitiveness of Indian goods and services in the international market and give boost to Indian exports. The uniformity in tax rates and procedures across the country will also go a long way in reducing the compliance cost.

Multiple indirect taxes at the Central and State levels are being replaced by GST. Backed with a robust end-to-end IT system, GST would be simpler and easier to administer than all other indirect taxes of the Centre and State levied so far.

GST will result in better tax compliance due to a robust IT infrastructure. Due to the seamless transfer of input tax credit from one stage to another in the chain of value addition, there is an in-built mechanism in the design of GST that would incentivize tax compliance by traders.

Under GST, there would be only one tax from the manufacturer to the consumer, leading to transparency of taxes paid to the final consumer.

How would GST be administered in India?
 Keeping in mind the federal structure of India, there will be two components of GST – Central GST (CGST) and State GST (SGST). Both Centre and States will simultaneously levy GST across the value chain. Tax will be levied on every supply of goods and services. Centre would levy and collect Central Goods and Services Tax (CGST), and States would levy and collect the State Goods and Services Tax (SGST) on all transactions within a State. The input tax credit of CGST would be available for discharging the CGST liability on the output at each stage. Similarly, the credit of SGST paid on inputs would be allowed for paying the SGST on output. No cross utilization of credit would be permitted.

How would a particular transaction of goods and services be taxed simultaneously under Central GST (CGST) and State GST (SGST)?
 The Central GST and the State GST 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 VAT which is levied on the value of the goods inclusive of Central Excise.

Will cross utilization of credits between goods and services be allowed under GST regime?
Cross utilization of credit of CGST between goods and services would be allowed. Similarly, the facility of cross utilization of credit will be available in case of SGST. However, the cross utilization of CGST and SGST would not be allowed except in the case of inter-State supply of goods and services under the IGST model

How will be Inter-State Transactions of Goods and Services be taxed under GST in terms of IGST method?
In case of inter-State transactions, the Centre would levy and collect the Integrated Goods and Services Tax (IGST) on all inter-State supplies of goods and services under Article 269A (1) of the Constitution. The IGST would roughly be equal to CGST plus SGST. The IGST mechanism has been designed to ensure seamless flow of input tax credit from one State to another. The inter-State seller would pay IGST on the sale of his goods to the Central Government after adjusting credit of IGST, CGST and SGST on his purchases (in that order). The exporting State will transfer to the Centre the credit of SGST used in payment of IGST. The importing dealer will claim credit of IGST while discharging his output tax liability (both CGST and SGST) in his own State. The Centre will transfer to the importing State the credit of IGST used in payment of SGST. Since GST is a destination-based tax, all SGST on the final product will ordinarily accrue to the consuming State.

How will IT be used for the implementation of GST?
 For the implementation of GST in the country, the Central and State Governments have jointly registered Goods and Services Tax Network (GSTN) as a not-for-profit, non-Government Company to provide shared IT infrastructure and services to Central and State Governments, tax payers and other stakeholders. The key objectives of GSTN are to provide a standard and uniform interface to the taxpayers, and shared infrastructure and services to Central and State/UT governments.
 GSTN is working on developing a state-of-the-art comprehensive IT infrastructure including the common GST portal providing frontend services of registration, returns and payments to all taxpayers, as well as the backend IT modules for certain States that include processing of returns, registrations, audits, assessments, appeals, etc. All States, accounting authorities, RBI and banks, are also preparing their IT infrastructure for the administration of GST.                         
There would no manual filing of returns. All taxes can also be paid online. All mis-matched returns would be auto-generated, and there would be no need for manual interventions. Most returns would be self-assessed.

How will imports be taxed under GST?
 The Additional Duty of Excise or CVD and the Special Additional Duty or SAD presently being levied on imports will be subsumed under GST. As per explanation to clause (1) of article 269A of the Constitution, IGST will be levied on all imports into the territory of India. Unlike in the present regime, the States where imported goods are consumed will now gain their share from this IGST paid on imported goods.

What are the major features of the Constitution (122nd Amendment) Bill, 2014?
 The salient features of the Bill are as follows:
 a-Conferring simultaneous power upon Parliament and the State Legislatures to make laws governing goods and services tax;

 b-Subsuming of various Central indirect taxes and levies such as Central Excise Duty, Additional Excise Duties, Service Tax, Additional Customs Duty commonly known as Countervailing Duty, and Special Additional Duty of Customs;

 c-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;

 d-Dispensing with the concept of ‘declared goods of special importance’ under the Constitution;

 e-Levy of Integrated Goods and Services Tax on inter-State transactions of goods and services;

 f-GST to be levied on all goods and services, except alcoholic liquor for human consumption. Petroleum and petroleum products shall be subject to the levy of GST on a later date notified on the recommendation of the Goods and Services Tax Council;

 g-Compensation to the States for loss of revenue arising on account of implementation of the Goods and Services Tax for a period of five years;

 h-Creation of Goods and Services Tax Council to examine issues relating to goods and services tax and make recommendations to the Union and the States on parameters like rates, taxes, cesses and surcharges to be subsumed, exemption list and threshold limits, Model GST laws, etc. The Council shall function under the Chairmanship of the Union Finance Minister and will have all the State Governments as Members.

Updated on August 9, 2016 – GST Bill passed by Lower House, Lok Sabha

Eleven years after the GST was first proposed by former Finance Minister P. Chidambaram, in 2005, Parliament on Monday passed the Bill.
All 443 members present in the Lower House which had earlier passed it in May 2015 —voted in favor of the Constitution (122nd Amendment) Bill, 2014, as amended by the Upper House

AIADMK members walked out before the vote, as they did in the Upper House

The amendment will have to be ratified by at least 16 States.

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Friday, August 5, 2016

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