INDIA after GST

After a long wait, finally the Good and service tax (GST) has passed in the upper house of parliament (Rajya  sabha). In short we can say “One nation, one tax”.

It is 122nd constitutional amendment Bill – “India’s biggest tax reform” yet.

Now there are many questions in everyone’s mind regarding GST Bill , so here are the question and answer format regarding the GST Bill.

 

What makes the passing of GST Bill a rare political event?

  • The constitution (122 amendment) Bill 2014 or the GST bill was approved by the Rajya sabha with 203 votes in favour and none was against. This is a best example of democracy because this marked a rare amiability between ruling and opposition parties.
  • This bill was supported by 2/3rd majority in the upper house, while all parties supported, except AIADMK staged walkout ahead of voting.
  • 6 amendments, including scrapping the 1 % additional tax moved by government were approved by cent percent of votes.

Two major concerns:

  • Former finance Minister P Chidambaran asked for the Bill to be passed as a Finance Bill and not as a Money Bill. This is because upper house can not reject money bill constitutionally. It can just discuss but cannot vote on money bill.
  • Also Congress party made it clear that they want the standard rate of GST to be capped at 18%.

Response of finance minister over two concern:

  • Finance minister Arun jaitly refused to yield (give up) , stating that could not give commitment on future legislation whose contours(outline) would be decided by the centre and the states together.

What’s Next?

  • Now the bill will be returned back to the lok sabha for its approval. This is merely(simply) a formality because the government has the majority in lower house ( Lok sabha)

What are the Benefits of GST?

  • The taxation burden will be divided equitably between manufacturing and services, through a lower tax rate.
  • It is expected to help build a transparent and corruption free tax administration.
  • Currently, a manufacturer needs to pay tax when a finished product moves out from a factory, and it again at retail taxed outlet when sold.
  • GST – This tax will be only levied at the destination point, not at various points (From manufacturing to retail outlets).

Why GST is important?

  • When this become an act, the GST will subsume (count) all indirect taxes currently levied(charge/tax), including excise duty and service tax.
  • It will be levied on consumption rather than production.
  • It will lead to a uniform, seamless (faultless) market across the country with same tax. And will check tax evasion (avoidance) and boost growth rate.
  • This will gradually transform India into a uniform market by breaking all fiscal barrier between states.

What will be effect of GST?

Due to cascading of taxes in retail prices of goods higher than they should be. GST, being a Value Added Tax (VAT) system, will lower the price of goods and services.

 

When GST will be implementing?

Even though it passed in Rajya sabha with the required two third majority. It might will take some months before it becomes an act.

Government plans to implement this by 1 April 2017.

Just now on Monday (8th august 2016)  bill got passed again in Lok sabha.

Next Steps:

  1. Bill again passed in Lok sabha.
  2. This bill is a constitutional amendment that involve state, at least 50% of them have to ratify it. BJP and its allies are in power in 13 out of 29 state so it should not take much time.
  3. Post completion of the above two process , the bill have to go to president for his consent (approval) .
  4. Parliament have to pass the subsequent bill for central GST. While states have to enact their own legislation for central GST. This bill are required to set the rate of GST. This might take some time.

India is latecomer to this system of GST. 160 countries in the world already implemented VAT / GST.

By Sourabh Prajapat

source: Internet and Newspaper

 

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