India Tax and advisory, business entry and consulting services


GST :The Constitutional (122nd Amendment) (GST) Bill 2014

GST india goods and services tax

The constitutional (122nd amendment) Bill 2014 was first introduced in the Lok Sabha by the honourable finance Minister of India, Mr Arun Jaitley. It is widely accepted that the bill shall be approved by the lower house of parliament , the Lok Sabha, during the budget session when the parliament re-convenes.

The bill is a precursor for larger steps towards the implementation of a Goods and Services Tax (GST) regime in India which would replace the various cascading layers of taxation that are in effect in India. The GST regime shall effectively replace the following taxes among other:

  • Excise
  • Service Tax
  • VAT
  • Entertainment tax
  • Octroi
  • Entry tax
  • Luxury tax

As per the bill, the president shall have to constitute a GST council within 60 days of the act coming into force. The GST council shall be responsible for :

  • Determining applicable rates and exemptions for products and services under the GST net.
  • Defining Threshold limits for applicability of GST on small units
  • Defining model laws to be used by the states to enact their own provisions
  • Determining rates of apportionment of taxes between the centre and the states etc.
  • Resolution of disputes, if any.

The GST council shall be comprised of the union as well as state finance ministers or any other ministers from the state as may be nominated. The council shall be headed by the Union finance minister who shall bear the title of chairman.
Under the GST regime the centre and the state shall have concurrent right to impose GST in the form of Central GST (CGST) and State GST (SGST) on “inter-state” sale goods and services.
Interstate transactions on the other hand will be subjected to integrated GST (IGST) to be levied by the centre, the same IGST shall also be imposed in the case of imports, it is rationally expected that such IGST would subsume customs duties in their entirety though additional clarity is awaited on this subject. The GST would also be involved in formulation of principles that determine the point during a transaction at which inter-state sales shall become subject to the applicability of IGST.

[su_note note_color=”#91d9f8″]

Arkay & Arkay Opinion
We are convinced GST shall result in removing many layers of cascading taxes and make doing business in India much easier. The cost shall be a single but high single rate of tax. Experts have thrown various numbers ranging between 27% and 15%, though clarity on this issue can only be achieved once the GST council is formed. Service providers will have to deal with the spectre of a much higher tax rate as well as a more complicated compliance system than the one they were conversant with. This will surely make services more expensive to end user. To keep states happy Alcohol and fuels have been kept outside of the purview of GST. [/su_note]

 

Comments are closed.