23 December 2014

India set to introduce GST

India took its first major step on GST when the 122nd Constitutional Amendment Bill, 2014 was introduced in Lok Sabha (House of People) on 19-12-2014. The amendments proposed in the Indian Constitution relate to introduction of Goods and Services Tax across the country.

The Bill is likely to be taken up for detailed discussions in the Budget Session of the Indian Parliament which will begin in February, 2015. As per the amendments proposed, both the Union i.e. Central Government and the States i.e. the regional governments are being empowered to levy Goods and Services Tax or GST on supply of goods or services or both. On inter-State trade or commerce, the Union Government will have the power to levy integrated GST or IGST.

Central Excise Duty, Additional Customs Duty or CVD, Service Tax, Value Added Tax or VAT, Central Sales Tax (CST) and Entry Tax or Octroi are some of the current taxes proposed to be subsumed in GST. Once the amendments are passed by the Parliament, the Central Government will levy CGST based on Central GST Act and States will impose SGST under State GST Acts. Model legislations will be placed for providing guidance on drafting such GST legislations.

For the present, crude oil, petrol, diesel, aviation turbine fuel (ATF) and natural gas will be kept out of GST. On such goods existing excise duty and VAT will continue. The date from which such goods will be liable to GST will be decided by the Goods and Services Tax Council or the GST Council to be formed once the amendments to the Constitution are passed.

An additional 1% tax is proposed to be levied on supply of goods made in the course of inter-State trade or commerce to offset the revenue loss likely to result for State Governments once GST is implemented.

Compared to the amendments proposed in 2011, the present Bill does not have provisions for dispute settlement authority. But the previous Bill did not have express provision for compensating States for any loss of revenue on account of implementation of GST which the present Bill expressly seeks to provide.


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