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3rd Aug 2016
On 3 August 2016, union finance minister Arun
Jaitely tabled the Goods and Services Tax (GST) bill in Rajya Sabha. The GST
will replace a patchwork of central and state levies on goods and services and
will bring multiple taxes on goods and services and bring them under one rate.
Once passed, the GST is expected to be the most significant tax reform since
Independence. However, the passage of the GST Constitution Amendment Bill is
just one milestone and lot will depend on its implementation.
Rohit Jain, Partner, Economic Laws Practice
says that “though the passage of the Constitution Amendment Bill through the
Rajya Sabha is one of the milestone moments for the introduction of GST.
Thereafter, there is still a lot of ground to cover.” According to Jain, the
government will need to take in to account stakeholder comments, formation of
the GST Council, evolving the GST Network (GSTN) which will form the IT
backbone and to ensure that there is breathing room for industry to prepare for
the transition. The Total
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The actual GST rate will be decided over the
next few months in consultation with state governments; it will then be brought
for review to parliament in separate legislation. A GST Council combining
representatives of the Centre with state governments, with decision-making
powers skewed towards them will decide on the tax rate to be submitted to
parliament for its review. Therefore, according to Mr Jain, an April 2017
deadline would therefore be challenging – realistically, the date may be closer
to July or October 2017. The
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According to news reports, The National
Institute of Public Finance and Policy (NIPFP) favoured a standard GST rate in
the range of 23-25%. In December 2015, a committee headed by the chief economic
adviser Dr Arvind Subramanian on ‘Possible Tax rates under GST’ recommended
that lower rates be kept around 12% (Centre plus states) with standard rates
varying between 17% and 18%. On the revenue neutral rate, the Committee’s view
was that the range should between 15% and 15.5% (Centre and states combined) but
with a preference for the lower end of that range based on the analysis in this
report.
The Central levies which would be subsumed
under GST are Central Excise Duty, Service Tax, Countervailing Duty (CVD) on
imports, Special Additional Duty (SAD) on imports, Surcharges and Cesses. The
State levies which would be subsumed under GST are VAT / Sales Tax, Luxury Tax,
Taxes on Lottery, Betting and Gambling, Entertainment Tax, Entry Tax (not in
lieu of Octroi), State Surcharges and Cesses. The Total Investment & Insurance Solutions
The GST bill will cover taxes like central
excise duty, state-level taxes like, VAT or sales tax, entertainment tax, entry
tax, purchase tax, luxury tax and octroi. The reform will create uniformity in
taxes across states, increasing efficiency & compliance. The Rajya Sabha appears
ready to approve an amendment to the constitution that gives the government new
taxation powers. The Total
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