The Goods and Service Tax (‘GST’) is a Value Added Tax (VAT) aimed at creating a single tax for goods and services across the country as it will replace all indirect taxes levied on goods and services by the Central and State Governments. The Finance Minister, Arun Jaitley, tabled the long-pending GST bill in ‘Lok Sabha’. The GST bill is seen as biggest tax reform in indirect taxation since independence.
The salient features of GST Bill are given hereunder:
1) A new Article 246A is proposed in the Bill, which will confer simultaneous power to Union and State legislatures to legislate on GST.
2) A new Article 279A is proposed for the creation of a Goods & Services Tax Council, which will be a joint forum of the Centre and the States. The Council will make recommendations to the Union and the States on important issues like tax rates, exemptions, threshold limits, dispute resolution modalities, etc.
3) It is proposed to do away with the concept of ‘declared goods of special importance’ under the Constitution.
4) Centre will compensate States for loss of revenue arising on account of implementation of the GST for a period up to five years. A provision in this regard has been made in the Amendment Bill (The compensation will be on a tapering basis, i.e., 100% for first three years, 75% in the fourth year and 50% in the fifth year).
5) At the State level, taxes like VAT/Sales Tax, Central Sales Tax, Entertainment Tax, Octroi and Entry Tax, Purchase Tax and Luxury Tax, etc. would be subsumed in GST.
6) All goods and services, except alcoholic liquor for human consumption, will be brought under the purview of GST. Petroleum and petroleum products have also been constitutionally brought under GST. However, it has also been provided that petroleum and petroleum products shall not be subject to the levy of GST till notified at a future date on the recommendation of the GST Council. The present taxes levied by the States and the Centre on petroleum and petroleum products, i.e., Sales Tax/VAT, CST and Excise duty only, will continue to be levied in the interim period.
7) The Centre would levy and collect the Integrated Goods and Services Tax (IGST) on all inter-State supply of goods and services. There will be seamless flow of input tax credit from one State to another. Proceeds of IGST will be apportioned among the States.
8) GST is a destination-based tax. All SGST on the final product will ordinarily accrue to the consuming State.
9) GST rates will be uniform across the country. However, to give some fiscal autonomy to the States and Centre, there will a provision of a narrow tax band over and above the floor rates of CGST and SGST.
10) It is proposed to levy a non-vatable additional tax of not more than 1% on supply of goods in the course of inter-State trade or commerce. This tax will be for a period not exceeding 2 years, or further such period as recommended by the GST Council. This additional tax on supply of goods shall be assigned to the States from where such supplies originate.
The bill is seen as very transparent and will also improve the cumbersome indirect tax issues.
