Saturday, October 10, 2015

GST Bill (Background, Definition, Objective, Scope, Etc)

Historical background
GST was first recommended by Kelkar Task Force on implementation of Fiscal Reforms and Budget Management Act 2004 but the First  Discussion Paper on Goods and Services Tax in India was presented by  the Empowered Committee of State Finance Ministers dt:10th Nov.2009.

In 2011, the Constitution (115th Amendment) Bill, 2011 was introduced in Parliament to enable the levy of GST. However, the Bill lapsed with the dissolution of the 15th Lok Sabha. 

Subsequently, in December 2014, the Constitution (122nd Amendment) Bill, 2014 was introduced in Lok Sabha. The Bill was passed by Lok Sabha in May 2015 and referred to a Select Committee of Rajya Sabha for examination.

“GST is a tax on  goods and services with value addition at each stage having  comprehensive and continuous chain of set of benefits from the  producer’s / service provider’s point up to the retailers level where  only the final consumer should bear the tax.” 

  1. One Country - One Tax 
  2. Consumption based tax instead of Manufacturing
  3. Uniform registration, payment and Input Credit
  4. To eliminate the cascading effect of Indirect taxes on single transaction
  5. Subsume all indirect taxes at Centre and State Level under 
  6. Reduce tax evasion and corruption
  7. Increase productivity 
  8. Increase Tax to GDP Ratio and revenue surplus
  9. Increase Compliance
  10. Reducing economic distortions 

Regulatory Framework
A new set up by Government of India named as ‘GST Council’.
The GST Council consists of
(a) the Union Finance Minister (as Chairman), 
(b) the Union Minister of State in charge of Revenue or Finance, and 
(c) the Minister in charge of Finance or Taxation or any other Minister, nominated by each state government. 
All decisions of the GST Council will be made by three fourth majority of the votes cast; the centre shall have one-third of the votes cast, and the states together shall have two-third of the votes cast.

Action Plan of GST Council
  1. List number of Taxes, cesses, and surcharges to be subsumed under GST
  2. Preparation of list of goods and services subject to, or exempt from GST
  3. Determination of threshold limit of turnover for application of GST
  4. Fixation of rates
  5. Preparation of model GST Laws, principles of levy, apportionment of tax benefits
  6. Firming up Place of supply Rules
  7. Recommend on Compensation to states losing on revenue post implementation of GST, subject to maximum time limit of 5 years.

  1. All goods and services are covered under GST Regime except Alcoholic liquor for Human Consumption,
  2. Tobacco Products subject to levy of GST and Centre may also levy excise duty
  3. GST Council yet to decide the incidence and levy of GST on following;

a) Crude Petroleum
b) High Speed Diesel (HSD)
c) Motor Spirit (Petrol)
d) Natural Gas
e) Aviation Turbine Fuel

Key changes between the Current Tax Structure and Proposed GST Regime

Tax layers under proposed GST Model

Comparative Analysis (Intra-State Trade)

Current Scenario - Tax Implications against Sales and Stock Transfers by an MNC



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