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Goods and Services Tax (India)

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This article is about the tax. For legislation, see One Hundred and First Amendment of the Constitution of India.

Goods and Services Tax (GST) is an indirect tax levied in India on the sale of goods and services. Goods and services are divided into five tax slabs for collection of tax - 0%, 5%, 12%,18% and 28%. Petroleum products and alcoholic drinks are taxed separately by the individual state governments. There is a special rate of 0.25% on rough precious and semi-precious stones and 3% on gold.[1] In addition a cess of 22% or other rates on top of 28% GST applies on few items like aerated drinks, luxury cars and tobacco products.[2]

The tax came into effect from July 1, 2017 through the implementation of One Hundred and First Amendment of the Constitution of India by the Modi government. The tax replaced existing multiple cascading taxes levied by the central and state governments. The tax rates, rules and regulations are governed by the Goods and Services Tax Council which comprises finance ministers of centre and all the states. GST simplified a slew of indirect taxes with a unified tax and is therefore expected to dramatically reshape the country's 2.4 trillion dollar economy.[3]

Sarath Kumar(RED)

Formation

The reform process of India's indirect tax regime was started in 1986 by Vishwanath Pratap Singh, Finance Minister in Rajiv Gandhi’s government, with the introduction of the Modified Value Added Tax (MODVAT). Subsequently, Prime Minister P V Narasimha Rao and his Finance Minister Manmohan Singh, initiated early discussions on a Value Added Tax (VAT) at the state level.[4] A single common "Goods and Services Tax (GST)" was proposed and given a go-ahead in 1999 during a meeting between the Prime Minister Atal Bihari Vajpayee and his economic advisory panel, which included three former RBI governors IG Patel, Bimal Jalan and C Rangarajan. Vajpayee set up a committee headed by the Finance Minister of West Bengal, Asim Dasgupta to design a GST model.[5]

The Ravi Dasgupta committee was also tasked with putting in place the back-end technology and logistics (later came to be known as the GST Network, or GSTN, in 2017) for rolling out a uniform taxation regime in the country. In 2002, the Vajpayee government formed a task force under Vijay Kelkar to recommend tax reforms. In 2005, the Kelkar committee recommended rolling out GST as suggested by the 12th Finance Commission.[5]

After the defeat of the BJP-ledNDA government in the 2004 Lok Sabha election and the election of a Congress-led UPA government, the new Finance Minister P Chidambaram in February 2006 continued work on the same and proposed a GST rollout by 1 April 2010. However, in 2010, with the Trinamool Congress routing CPI(M) out of power in West Bengal, Asim Dasgupta resigned as the head of the GST committee. Dasgupta admitted in an interview that 80% of the task had been done.[5]

In the 2014 Lok Sabha election, the Bharatiya Janata Party-led NDA government was elected into power, this time under the leadership of Narendra Modi. With the consequential dissolution of the 15th Lok Sabha, the GST Bill – approved by the standing committee for reintroduction – lapsed. Seven months after the formation of the Modi government, the new Finance Minister Arun Jaitley introduced the GST Bill in the Lok Sabha, where the BJP had a majority. In February 2015, Jaitley set another deadline of 1 April 2017 to implement GST. In May 2016, the Lok Sabha passed the Constitution Amendment Bill, paving way for GST. However, the Opposition, led by the Congress, demanded that the GST Bill be again sent back to the Select Committee of the Rajya Sabha due to disagreements on several statements in the Bill relating to taxation. Finally in August 2016, the Amendment Bill was passed. Over the next 15 to 20 days, 18 states ratified the Constitution amendment Bill and the President Pranab Mukherjee gave his assent to it.[6][7]

A 22-members selected committee was formed to look into the proposed GST laws.[8] After GST Council approved the Central Goods and Services Tax Bill 2017 (The CGST Bill), the Integrated Goods and Services Tax Bill 2017 (The IGST Bill), the Union Territory Goods and Services Tax Bill 2017 (The UTGST Bill), the Goods and Services Tax (Compensation to the States) Bill 2017 (The Compensation Bill), these Bills were passed by the Lok Sabha on 29th March, 2017. The Rajya Sabha passed these Bills on 6th April, 2017 and were then enacted as Acts on 12th April, 2017. Thereafter, State Legislatures of different States have passed respective State Goods and Services Tax Bills. After the enactment of various GST laws, Goods and Services Tax was launched all over India with effect from 01 July 2017.[9] the Jammu and Kashmir state legislature passed its GST act on 7 July 2017, thereby ensuring that the entire nation is brought under an unified indirect taxation system. There was to be no GST on the sale and purchase of securities. That continues to be governed by Securities Transaction Tax (STT).[10]

Launch

The President Launching Goods and Services Tax (GST) on 1st July 2017

The Goods and Services Tax was launched at midnight on 1 July 2017 by the then President of India, Pranab Mukherjee, and the Prime Minister of India Narendra Modi. The launch was marked by a historic midnight (30 June – 1 July) session of both the houses of parliament convened at the Central Hall of the Parliament. Though the session was attended by high-profile guests from the business and the entertainment industry including Ratan Tata, it was boycotted by the opposition due to the predicted problems that it was bound to lead to for the middle and lower class Indians.[11][12] It is one of the few midnight sessions that have been held by the parliament - the others being the declaration of India's independence on 15 August 1947, and the silver and golden jubilees of that occasion.[12] After its launch, the GST rates have been modified multiple times, the latest being on 18 January 2018, where a panel of federal and state finance ministers decided to revise GST rates on 29 goods and 53 services.[13]

Members of the Congress boycotted the GST launch altogether.[14] They were joined by members of the Trinamool Congress, Communist Parties of India and the DMK. The parties reported that they found virtually no difference between the GST and the existing taxation system, claiming that the government was trying to merely rebrand the current taxation system. They also argued that the GST would increase existing rates on common daily goods while reducing rates on luxury items, and affect many Indians adversely, especially the middle, lower middle and poorer classes.[15] The GST model of India has been modeled on the taxation system of France.

Collections

Month Collections Change
January ₹86,318 crore (US$10 billion)[16] Fall
December ₹86,706 crore (US$10 billion)[17] Rise
November ₹80,808 crore (US$9.7 billion)[17] Fall
October ₹83,346 crore (US$10 billion)[17] Fall
September ₹95,131 crore (US$11 billion)[17] Rise
August ₹93,141 crore (US$11 billion)[17] Fall
July ₹94,000 crore (US$11 billion)[18]

Returns

Around 38 lakh new taxpayers have registered under GST regime and the total count has crossed crore if we include the 64 lakh earlier ones.[19]

Month No of returns Change
December 63 lakh[19] Decrease
November 64 lakh[19] Decrease
October 65 lakh[19] Decrease
September 69 lakh[19] Increase
August 67 lakh[19] Increase
July 63 lakh[19]

Taxation scheme

Taxes subsumed

The single GST(goods and service taxes) replaced several former taxes and levies which included: central excise duty, services tax, additional customs duty, surcharges, state-level value added tax and Octroi.[20][21] Other levies which were applicable on inter-state transportation of goods have also been done away with in GST regime.[22][23] GST is levied on all transactions such as sale, transfer, purchase, barter, lease, or import of goods and/or services. India adopted a dual GST model, meaning that taxation is administered by both the Union and State Governments. Transactions made within a single state are levied with Central GST (CGST) by the Central Government and State GST (SGST) by the State governments. For inter-state transactions and imported goods or services, an Integrated GST (IGST) is levied by the Central Government. GST is a consumption-based tax/destination-based tax, therefore, taxes are paid to the state where the goods or services are consumed not the state in which they were produced. IGST complicates tax collection for State Governments by disabling them from collecting the tax owed to them directly from the Central Government. Under the previous system, a state would only have to deal with a single government in order to collect tax revenue.[24]

HSN code in GST

HSN (Harmonized System of Nomenclature) is an 8-digit code for identifying the applicable rate of GST on different products as per CGST rules. If a company has turnover up to RS. 1.5 Crore in the preceding financial year then they need not mention the HSN code while supplying goods on invoices. If a company has turnover more than 1.5 Cr but up to 5 Cr then they need to mention the 2 digit HSN code while supplying goods on invoices. If turnover crosses 5 Cr then they shall mention the 4 digit HSN code on invoices.[25]

Rates

The GST is imposed at variable rates on variable items. The rate of GST is 2.5% for soaps and 28% on washing detergents. GST on movie tickets is based on slabs, with 18% GST for tickets that cost less than Rs. 100 and 28% GST on tickets costing more than Rs.100 and 5% on readymade clothes.[26] The rate on under-construction property booking is 12%.[27] Some industries and products were exempted by the government and remain untaxed under GST, such as dairy products, products of milling industries, fresh vegetables & fruits, meat products, and other groceries and necessities.[28]

Checkposts across the country were abolished ensuring free and fast movement of goods.[29]

The Central Government had proposed to insulate the revenues of the States from the impact of GST, with the expectation that in due course, GST will be levied on petroleum and petroleum products. The central government had assured states of compensation for any revenue loss incurred by them from the date of GST for a period of five years. However, no concrete laws have yet been made to support such action.[30] GST council adopted concept paper discouraging tinkering with rates.[31]

E-Way Bill

An E-Way Bill, a GSTN project under the Goods and Services Tax, is required to be generated for every inter-state movement of goods beyond 10 kilometres (6.2 mi) and the threshold limit of ₹50,000 (US$600).[32]

Goods Kept Outside the GST

  • Alcohol for human consumption.
  • Tobacco and Tobacco products.
  • Petrol and petroleum products (GST will apply at a later date) viz. Petroleum crude, High speed diesel, Motor Spirit (petrol), Natural gas, Aviation turbine fuel.[33]

GST Council

Dr. Hasmukh Adhia, IAS unveiling the plaque to inaugurate the New GST Council Office

GST Council is the governing body of GST.[34]

Goods and Services Tax Network (GSTN)

As per the government website on GST, "Goods and Services Tax" Network (GSTN) is a nonprofit organisation proposed to be formed for creating a website / platform for all the concerned parties related to the GST, namely stakeholders, government and taxpayers to collaborate on a single portal. When up and running, the portal is supposed to be accessible to the central government which allows it to track down every transaction on its end while taxpayers are advertised to have the ability of connecting this to their tax returns. However its efficacy and efficiency is yet to be tested. According to GSTN, the organisation's authorised capital is ₹10 crore (US$1.2 million) in which Central Government holds 24.5 percent of shares while the state government holds 24.5 percent. The remaining 51 percent are held by non-Government financial institutions.[35][better source needed]

See also

References

  1. ^ "All your queries on GST answered". The Hindu. Retrieved 30 June 2017.
  2. ^ "GST: Cars, durables face 28% rate; luxury vehicles to attract 15% cess", Business Standard, 18 May 2017
  3. ^ "Film theatres in Tamil Nadu to begin indefinite strike against GST". The Hindu. 2 July 2017. Retrieved 3 July 2017.
  4. ^ "Looking back at GST's journey: How an idea is now near reality", Indian Express, 31 March 2017
  5. ^ a b c "GST: A 17-year-old dream, 17 phases towards creating history", India Today, 29 June 2017
  6. ^ "Goods and Services Tax: History of India's biggest tax reform and people who made it possible", India TV, 29 June 2017
  7. ^ "GST: Meet the men behind India's biggest tax reform that's been in making for 17 years", India Today, 29 June 2017
  8. ^ Nair, Remya (8 June 2015), "Rajya Sabha panel to hear GST concerns on 16 June", Live Mint
  9. ^ "GST rollout: All except J-K pass State GST legislation", The Indian Express, 22 June 2017
  10. ^ "GST draft makes it must for companies to pass tax benefit to consumers", The Times of India, 27 November 2016
  11. ^ "GST Rollout Attendees", Financial Express, 30 June 2017
  12. ^ a b "GST launch: Times when the Parliament convened for a session at midnight", The Hindustan Times, 30 June 2017
  13. ^ "Latest GST Cuts: Complete List Of What Just Got Cheaper", NDTV
  14. ^ PTI (30 June 2017). "GST launch divides opposition". livemint.com/. Retrieved 22 January 2018.
  15. ^ "Congress To Boycott GST Launch, Arun Jaitley Suggests Broader Shoulders", NDTV, 29 June 2017
  16. ^ "GST collection for January comes in at Rs 86,318 crore", The Economic Times, 27 February 2018
  17. ^ a b c d e "GST revenue for December rises to Rs 86,703 crore; halts 2-month reverse trend", Business Today, 11 February 2018
  18. ^ "GST collections dip for second month in Nov to Rs 80,808 crore", The Economic Times, 27 December 2017
  19. ^ a b c d e f g "Why many registered taxpayers are not filing GST returns", Business Today, 27 February 2018
  20. ^ "What is GST, how is it different from now: Decoding the indirect tax regime", Business Standard, 17 April 2017
  21. ^ "GST may swallow all taxes but cess", Business Standard, 20 September 2016
  22. ^ "On Notes Ban, Firm Warning From West Bengal To Centre: GST Now At Risk", NDTV, 30 November 2016
  23. ^ "Finance minister Arun Jaitley may hike service tax to 16-18% in Budget", The Times of India, 30 January 2017
  24. ^ "GST: The illustrative guide to how transactions will take place after tax reform". Money Control.
  25. ^ "Understanding HSN Codes Under GST". Masters India.
  26. ^ Mehra, Puja (27 June 2017). "GST, an old new tax". The Hindu - Opinion. Retrieved 3 July 2017.
  27. ^ "What is the GST impact on real estate?", The Indian Express, 5 July 2017
  28. ^ "GST rollout: List of items exempted from taxation". The Indian Express. 30 June 2017. Retrieved 30 July 2017.
  29. ^ "22 states scrap checkposts for smooth GST rollout", The Times of India, 4 July 2017
  30. ^ "'States on Board, GST Launch from April '16'". newindianexpress.com.
  31. ^ Sikarwar, Deepshikha (9 October 2017). "GST council adopts concept paper discouraging tinkering with rates". The Economic Times. Retrieved 9 October 2017.
  32. ^ "Businesses, govt gear up for E-Way Bill", The Hindu Business Line, 25 January 2018
  33. ^ "Know about GST- Complete GST Information". GST Latest. 22 December 2017. Retrieved 25 March 2018.
  34. ^ https://www.businesstoday.in/current/economy-politics/why-many-registered-taxpayers-are-not-filing-gst-returns/story/271554.html
  35. ^ "About Us – GSTN". www.gstn.org. Retrieved 6 February 2018.
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