The Lok Sabha today passed the Constitutional Amendment Bill that will bring in the goods and services tax (GST), a single indirect tax that will come in place of a number of central- and state-level taxes and levies. The bill was passed after division, with 352 members voting in favour of the bill and 37 against.
The bill, however, still needs to pass muster in the Rajya Sabha.
By April 2016 from the next financial year India will be a more than 150 countries including Pakistan, Srilanka adopted Goods & Service Tax (GST) followed by France who invented & implemented this system first .
In the year 2000 then Vajpayee govt initiated a discussion of adopting this system & set up a committee headed by then West Bangle Finance Minister MR. Asim Dasgupta. For more than decade efforts are on to make consensuses within center & sates ruled by regional parties.
One sentence is sufficient to understand its significance that its implementation alone will help to increase GDP by 2%.But there are several benefits as well.
Considering the countries federal system & states prerogative to generate revenue by way of state tax for its proposed development expences.GST too has accepted this & incorporated dual GST structure in form of Central Goods & Services Tax (CGST) & State Goods & Service Tax (SGST).
All the Central taxes will be clubbed in CGST such as
1. Central excise duty
2. 2. Additional excise duty.
3. 3. Service tax.
4. Additional customs duty- known as countervailing duty
5. Special additional duty.
All the state taxes will be clubbed in SGST such as
2. Luxury tax.
3. Entertainment tax (except levied by local bodies).
4. Entry Tax.
5. Taxes on lottery , betting.
There are several positive impact of the GST.
-The main benefit of GST will be by way of eliminating cascading effects (i.e. tax on tax ) of taxes which will help reduce average tax burden of the consumers..
– It will be more transparent by merging all levies.
– It will not only bring uniformity in tax rates but also in the area of interpretation of law, procedure & exemptions.
By merging /eliminating several taxes & there several compliances , record maintenance , audit, enquiry will reduce the burden of the business & certainly will help to reduce corruption (major relief).
Limited tax slabs uniformity & clarity in interpretation & maximum two compliance (CGST,SGST) will increase the tax collection.
Also it will bring the cost competitiveness & create a level playing field for the manufactures & service providers.
As per proposed GST draft CGST & SGST will remain separate credit mechanism i.e. set of against the same tax mechanism)
That means cross subsidy ( SGST set off against CGST) between CGST & SGST will not available except in case of interstate transaction. To some extent this provision will be a big set back for businesses as it removes the cost competitiveness of the business.