Features and benefits of GST

Features and benefits of GST

Question - Budget 2015-2016 has made many provisions for a new taxation policy in India. Discuss the benefits of the rollout of GST (Goods and Services Tax) in India and the features of the legislation as well.

Benefits of GST (Goods and Services Tax)

• GST will harmonise and simplify the indirect tax system in the nation. It will broaden the tax base.

• It will improve tax compliance through the creation of a strong IT infrastructure

• There is an in-built mechanism in GST for giving incentives to traders who are tax compliant

• Rollout of GST will create a seamless and common market in India

• It will also contribute towards economic growth

Highlights of the Bill

• New Article 246A has been proposed for conferring power simultaneously to Union as well as State legislatures for management of GST

• New Article 279A has been put forth for creation of a Goods & Services Tax Council, which is the joint forum of Centre as well as States

• Council will operate under the leadership of the FM and have nominated ministers of taxation/finance from States and UTs with legislatures as members
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• Council will also make recommendations to Union as well as States on critical issues such as tax rates, threshold limits, exemptions and dispute resolution modalities

• GST bill will eliminate concept of declared goods of special importance as per the constitution

• Centre will also provide compensation for loss of revenue emanating from implementation of the GST for 5 year duration

• Provision concerning this has been made in the Amendment Bill-compensation will be given on a tapering basis:
- 100% for the first 3 years
- 75% in the fourth year
- 50% in the fifth year

• Proposed GST has been designed taking the federal structure into account
• GST will subsume central taxes including:

- Central Excise Duty
- Additional Excise Duties
- Service Tax
- Additional Customs Duty
- Special Additional Duty of Customs

• GST will also encompass State level taxes such as:

- VAT/Sales Tax
- Central Sales Tax
- Entertainment Tax
- Octroi and Entry Tax
- Purchase Tax
- Luxury Tax

• Goods and services with the exception of alcoholic liquor will be brought under the limit of the GST; this includes petrol and petrol products

• Centre and State will levy GST in tandem across the value chain.

• Centre will levy and collect Central Goods and Services Tax

• State will levy and collect State Goods and Services Tax on all transactions within the state

• Centre will levy and collect Integrated Goods and Services Tax on inter-State supply of goods as well as services
• Seamless inflow of input tax credit across States will be facilitated

• Proceeds of IGST will be apportioned amidst the states

• GST is a destination based tax while SGST on the final product will accrue to consuming States

• Uniformity of GST rates will be maintained across the country

• To provide fiscal autonomy to States as well as the Centre, there will be provision of restricted tax band above floor rates of CGST and SGST.

• The Bill also proposes levying non-VATable additional tax not exceeding more than 1% on supply of goods during the course of inter-State trade or commerce

• Tax will last for a period not more than 2 years or further than this as recommended by the GST Council

• Additional tax on supply of goods to be assigned to States from which supplies originate

Facts and Stats

• GST at the Central level will include indirect Central taxes as well as integration of goods and services tax for set off relief.

• Cascading effects of CENVAT and service tax are removed with the set-off and constant state of set-off from the viewpoint of the original producer and service provider up to the retailer’s level.

• GST is not VAT plus service tax, but an improvement of this system