GST-2016

[Deepak Aggarwal]

GST-2016

Latest development

• Union Cabinet gave its assent on Wednesday to the constitutional amendment bill.
• GST on April 1, 2016, replacing a range of indirect taxes levied by the Centre, states and local bodies with one unifying levy.
• The bill all set to be presented in the current session of Parliament; it would be seen as enormously positive towards GST implementation on April 1, 2016."The bill will have to be ratified by a two-thirds majority.
• The government is hoping for parliamentary approval in the budget session. The constitution has to be amended to allow states to tax services and the Centre to tax goods at the retail level besides laying down the basic framework for GST by creating a council and a dispute settlement mechanism.
• Government has accommodated these concerns by providing for a five-year tapering compensation in the constitutional amendment bill itself. Petroleum products have been included in GST but will be taxed at zero rate for three years, implying that states will be able to tax these for that period.
• After three years, a decision will be taken by the proposed GST Council, which will take decisions on the tax, on which states will have about two thirds of the vote.
• Entry tax has been included in GST, making it a more rounded tax, but states will be adequately compensated. States had wanted this levy kept out. Tobacco and alcohol, major revenue sources for states, are not likely to be covered by GST.
• Finance minister held a series of meetings over the past few days with state finance ministers to address their concerns including compensation. He had also announced compensation of ₹ 11,000 crore to make up for the cut in the central sales tax (CST) rate to 2% from 4% and assured an additional sum in the coming budget. The issue of CST compensation had been a key irritant.