Unifying India’s Economy: GST

EDITOR: ADITYA PRAKASH


In 2000, PM Atal Bihari Vajpayee’s government set up an empowered committee, which was given the task of streamlining the GST (Goods and Services Tax) model to be adopted as well as putting in place the required backend infrastructure that would be needed for its implementation.

On 28 February 2006, P. Chidambaram, the then Finance Minister, in his budget speech announced the target date for implementation of GST to be 1 April 2010 and formed another empowered committee of State Finance Ministers to design the roadmap. The committee submitted its report to the government in April 2008 and released its First Discussion Paper on GST in India in 2009. The UPA government in 2013 failed to win the support of BJP-ruled states forcing the legislation to lapse with the dissolution of the 15th Lok Sabha.

In 2014, the NDA (National Democratic Alliance) government, which stormed to power in May, began pushing the legislation through with Finance Minister Arun Jaitley by introducing the Constitution (122nd Amendment) Bill, 2014. It was introduced in the Lok Sabha on 19 December 2014 and passed by the House on 6 May 2015. In the Rajya Sabha, the bill was referred to a Select Committee on 14 May 2015. The Select Committee of the Rajya Sabha submitted its report on the bill on 22 July 2015. The Parliament had on August 8 passed the bill which was then circulated to state governments seeking its ratification.

A Constitution amendment bill needs to be ratified by the Legislative Assemblies of at least 50% of the states. The bill was sent to the President’s secretariat after as many as 17 states ratified the bill. The states which have passed the legislation include Assam, Bihar, Jharkhand, Chhattisgarh, Himachal Pradesh, Gujarat, Madhya Pradesh, Delhi, Nagaland, Maharashtra, Haryana, Sikkim, Mizoram, Telangana, Goa, Odisha, Rajasthan, Andhra Pradesh, Arunachal Pradesh, and Meghalaya. On 8th September 2016, President Pranab Mukherjee signed the government’s Goods and Services Tax Bill, which will usher in one tax regime for the entire country.

GST in Simple Term: When your Doctor says – to be healthy and for all your different diseases you have to eat only one medicine but it will be little costly and time-consuming. What will you do? I am sure all of you would choose to take one medicine instead of different medicines for other diseases because it will save your time and it will reduce your expenses. GST is that one medicine which will cure the disease of different taxes in India.

The GST is an indirect tax that brings most of the taxes imposed on goods, services, manufacture, sales and consumption of goods and services under its ambit into a single domain at the national level. It will change the taxation that is levied separately on goods and services and will introduce a consolidated tax based off a uniform rate on both goods and services and it is payable at the final point of consumption.

The benefits of GST after the implementation; India with a population of 1.32 billion will pay one tax instead of paying different taxes like; Service Tax, VAT, CST, SST, Excise Duty, Additional Duty of Custom, Entertainment Tax, Luxury Tax and overall GST will replace 17 indirect tax levies and compliance costs will fall. In the present scenario, Service Tax is 15%, Excise Duty is 12.5% and Vat 14.5% but now after GST applicability, it will be 18%.

The GST has been proposed to be kept between 18% and 20%. Since all products and services will have unified taxation, the products or services that a person could avail at lower tax rates will have 18-20% tax on the bill. GST will subsume most of the indirect taxes. The government has also assured states to compensate for 5 years in a case of revenue loss because of GST.

You must be thinking GST to be the only tax that we have to pay now. Technically there will be three type of Taxes under GST i.e. CGST (Central Goods and Service Tax), SGST (State Goods and Service Tax), and IGST (Integrated Goods and service Tax).

There is a prediction that after GST is implemented the country’s GDP might increase up to 1%–2%. GST will remove Tax Evasion and Multiple Taxations.

Overall, GST will boost the revenue. Less developed states will get aid. Logistics and inventory costs are likely to come down and in the result, manufactured goods will become cheaper. The state restrictions and levies have complicated doing business online so it will help in freeing up e-commerce. There is a long way to go and much work has to be done before the government’s April 1, 2017, deadline can be met.

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