The Goods And Services Tax Bill (GST)

The most talked about hot line today – The Goods and Services Tax Bill (GST) Amendment

Amidst our busy schedules we do find time to read the newspapers or listen to the television news. Of late it’s all about GST and its amendment and what it is and where it is and who it is meant to benefit. Well, this GST Amendment Bill is supposed to be the largest tax reform bill after the year of independence. It was actually approved by the Lok Sabha way back in May 2015 but was passed by the Rajya Sabha only on August 3rd 2016. In this article we will be looking at the purpose and importance of the GST bill and why the government is paying so much attention to implementing the GST Bill by the end of this financial year and beginning April 1sr next year.

Why is this bill considered important and why so much attention?

The Goods and Services Tax Amendment Bill is a very comprehensive tax reform that has ever been seen in a lifetime and it is all set to bring together under a single umbrella all other cumbersome state level taxes like sales tax (VAT), purchase tax, entertainment tax, luxury tax, entry tax, etc. and also central excise duty taxes will come under this single GST umbrella.

How will this consolidation of taxes help?

The purpose of this is to bring uniformity in all taxes across the entire country in all its states, increase the compliance and efficiency and also boost the Modi government’s aim towards the ease of carrying out business. Despite much opposition the amended GST Bill has been passed finally because of the following reasons:

1. It has dropped the manufacturing tax by 1% so it will not create revenue loss for any of the states.
2. Besides, it has also created a guarantee of compensation to the states if they should face any revenue loss within the first 5 years of the implementation of the GST Bill.
3. It promises that the GST rate will cushion the common man while at the same time protect the capacity of generating revenue for the states.
4. It has agreed on the dual control agreement wherein the Centre will have no control over the tax business that brings in a low turnover of less than Rs.1.5 crore.
5. The Bill also promises to provide enough space for redressal of dispute for states.

A vital question - How does the GST benefit the consumers?

The consumer is always the worst hit in good times or in bad times. However, the GST promises that goods will become cheaper while services get costlier. Under the present system of tax, consumers pay around 25-26% extra when purchasing manufactured goods because of the VAT and excise duty that is levied on the item. When this rate gets reduced to 18% because of GST, then naturally the cost gets lesser. On the other hand, the present service tax is 15% and with the GST it would become 18% making services get costlier. The following will become expensive hereafter:

• Eating at restaurants
• Air travel tickets
• Investment management and insurance premiums
• Branded jewellery and textiles
• Cigarettes
• Usage of mobiles to make calls

These will become cheaper instead:

• Electronics
• Two wheelers and small cars
• Movie tickets

A detailed version of the advantages of the GST Bill

1. Price reduction - The unified and full credit limit allows traders or manufacturers to enjoy no taxes to the production costs. This is the biggest reason that we can see a great reduction in the prices of goods. However, if the GST is introduced with a higher rate by the government then this benefit could get lost.

2. Government Revenue Increase – This may however seem a bit imprecise since at the introduction of the VAT public revenues got higher rather than lower. This is because people preferred to pay taxes and not evade the same. But with the implementation of the new GST Bill there will not be any significant increase in the revenue rate.

3. The procedural and compliance costs with be lessened – Since the bill is structured to reduce the compliance cost, there will be no necessity to maintain big records, reports or returns under the different statutes which will be beneficial to tax assesses. However, assesses should keep record of their SGST, IGST and CGST separately.

4. Moving towards an Integrated GST - In place of a dual GST, the nation will now enjoy a unified GST meaning a single tax bill for the entire nation. This is regarded as the best way to adapt to indirect taxes in the future. Though at the moment the dual GST is being adopted by India, this new method seems more promising.

A few important points to ponder over

1. Since the implementation of the new GST Bill seems to be a very effective and beneficial tax type it is in the hands of the states to maintain a uniform tax type with the same rates throughout the nation. If this is not maintained then it will become a very difficult task to maintain a smooth business type and also comply with the law. If the GST is taken seriously throughout the nation then taxes will not become a major factor in the investment decision and people will benefit a lot from it.

2. Furthermore, for a smooth functioning the GST Bill should clearly set out a taxable event. The present CENVAT point of taxation and credit rules have been introduced and amended only for this purpose.

3. Since the GST is a destination based tax there should be much clarity on identifying the goods and knowing its destination. However, in the case of services this is not possible because it is hard to identify where and when the services are provided. Hence it should be dealt with meticulously.

In Conclusion

The GST Amendment Bill seems to be a pretty good type of tax provided it is carried out meticulously and with utmost honesty. The successful implementation of this tax and its functioning lies in the hands of the citizens of India, especially the manufacturers and traders who will have to strictly abide by the rules and regulations to make it a successful venture for the government and the future of the nation at large.

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