Legal cases with fixed pricing, standardized processes, and firm timelines
GST is the term commonly used for “Goods and Services Tax” and much hype was created when GST Bill, 2014 [The Constitution (122nd Amendment) Bill, 2014] was passed by the Rajya Sabha on 3 August 2016 and thereafter by the Lok Sabha on 8 August 2016. The bill has received assent from President Pranab Mukherjee on 8 September 2016. Thereafter, on 12th September the Union approved setting up of GST Council As per an official release, Finance Minister Arun Jaitley has called the first meeting of the GST Council on September 22 and 23 in New Delhi. The Council will be created as per Article 279A of the amended Constitution, with its office in New Delhi. The Council, headed by Finance Minister Arun Jaitley, will be responsible for taking all key decisions relating to the indirect tax levy, including rates and exemptions as well as the subsequent Centre, state and integrated GST laws.
The Goods and Service Tax is basically one indirect tax that will be levied on both goods and services (except for a list of exempted goods and services), at both the Central and state levels (Central GST and State GST respectively). In other words, the single GST will replace multiple taxes like CENVAT, central sales tax, state sales tax, and octroi tax. More than 150 countries (including all OECD countries except US) around the world follow this taxation structure.
Let’s consider an example:
For sale within a state, currently we pay VAT, Excise Duty and Sales Tax. But under the new system, we will only pay a State GST (SGST) and Central GST (CGST). For sale outside the state, we pay a Central Sales Tax, Excise and a whole host of other local taxes. Under the new GST system of taxation, we will pay a fixed Integrated GST (IGST) which will be collected by the Centre. For example, a phone manufactured in Tamil Nadu and sold in Punjab will cost the same anywhere, as it would – should the phone were to be sold within Tamil Nadu.
Under the current regime, hypothetically speaking, a 100 rupee phone manufactured in Chennai sent in a truck to Chandigarh through six states with each state levying tax plus the central taxes will cost 130 rupees by the time it reaches its destination. But Under GST, assuming the revenue neutral rate to be 18%, a 100 rupee phone manufactured in Chennai sent. in a truck to Chandigarh will cost just 118 rupees by the time it reaches because we will pay one Integrated GST (IGST) to the Central government.
So GST aims to make India one unified market, provided all states implement GST and all states comply with the same rates.
Need of GST Bill
Currently in India, there are parallel systems of indirect taxation at the state and Central levels. There are multiple points of taxation and a cascading of taxes, that is, tax on tax. Interstate commerce has also been hampered due to the dead-weight burden of Central sales tax and entry taxes. By minimising the cascading effect of multiple taxes, not only is GST expected to iron out the wrinkles in the existing tax system, it is hoped that it will spur much needed growth in the Indian economy.
Moving the Constitution (122nd Amendment) Bill, 2014 Finance Minister Arun Jaitley said, the merits of the system are that it will convert India into one economic market and will introduce a uniform tax across the country, check evasion of tax. This would also give a boost as far as growth rate is concerned.
CHARACTERISTICS OF GST BILL
Following are the features of the GST:
Adoption of GST is an iconic example of cooperative federalism. While the states have agreed to give up their right to impose sales tax on goods (VAT), the Centre has given up its right to impose excise and services tax. In exchange, each of them will get a share of the unified GST collected nationally.
By eliminating barriers such as entry taxes, GST will result in a unified national market for goods and services that will be accessible to the smallest entrepreneur. It could potentially make sourcing, distribution and warehousing of goods easier and faster between the Indian states. Also, as companies will no longer need to pay interstate
OPPOSITION FACED BY THE BILL
According to Livemint, if we assume the tax rate falls anywhere below the sector’s current 27 per cent, the automobile sector will clearly emerge as a big winner. With the 27 per cent entertainment tax going away, you can probably assume going o the movies will become cheaper. With movement of goods becoming smoother, the tax rate on things like cement is
likely to come down from 25 per cent. GST may bring down transaction cost for retail businesses thus help in reducing prices for consumers.
However, According to Economic Times, the cost of electronics like laptops and mobile phones could go up if you assume the GST rate at 18 per cent, as the duty on these manufactured goods currently stands at about 14 per cent. Aerated beverages and tobacco products could see prices increase by 20 per cent, according to Economic Times. Also, as services tax on flying ranges from six per cent to nine per cent, a higher GST could make flying more expensive.