Overview of GST – Recent Updates on GST
GST is a type of BIT (Blanket Indirect Tax). It will subsume many indirect taxes. These include VAT (value added tax), state taxes, excise duty, entertainment tax, central surcharges, luxury tax as well as many related taxes levied by local groups. GST is expected to be at 18%. Also, the government is planning to implement GST by April 2017...
In layman terms, GST is ‘destination-based tax’. It is charged at the consumption place of the goods and services, as contrasting to their place of production.
Thereby, indirect taxes such as movement and production are charged by different states. In the wake of this process, the government has established a central GST Council.
This council will decide on the taxes that will fall under the state’s purview as well as those which could be included in the GST. For resolving any disputes related to GST, a resolution mechanism will also be established.
On 6th May 2016, the 112nd Amendment Bill, 2014 was passed in Lok Sabha. After that, a duly amended CAB (Constitution Amendment Bill) received final clearance on 3rd August 2016 by Rajya Sabha.
Thus a significant and historic GST is one its way of implementation. It will be one of the most momentous tax-reforms across the nation post-independence.
While it was reviewed in Rajya Sabha, some key amendments that were carried out included; 1.The additional 1 percent tax will be deleted. This tax was previously proposed across all interstate goods supplies 2.For the first 5 years, the states will receive full compensation towards any losses. This included any loss incurred by these states as a result of the GST implementation. 3.A mechanism will be established for settling any dispute that might occur between states and the center or between states. These disputes might occur due to the GST Council’s recommendations.
The GST rate will have a cap, which hasn’t been determined yet. As of now, this cap has not been included in the Bill.
The amended bill will now reach Lok Sabha for its approval. Once it is cleared with two-third majority it will reach the President. With the Presidential reference, this Bill will then get approval from at least half State Assemblies.
After that, it will get the assent of the President for enactment. Once it is approved by the President, the government will have 60 days of establishing the GST Council.
This will be followed by launching GST Network as well as outlining the State and Central GST laws. The bill for GST might be taken up by the government during the Parliament’s winter session. Other actions that can be seen on GST include GST legislation, compliances and administrative processes, supply places etc.
As per the commitment of the Government to introduce this bill latest by 2017 April, proper planning and implementation phases needs to be adopted.
The government will also be required to educate taxpayers about the GST compliances so that system changes can be tasted in time. GST is expected to bring significant changes across the Indian business and administrative scenario. Some of the significant areas that need assessment include development of IT systems, Training teams, best practices advocacy, change management and subsequent back-up plan for handling emergencies. On a similar note, Companies will have to prepare themselves for the GST implementation. This included a thorough understanding of the GST policies, development and implications, scenario planning as well as preparing the right transition roadmap.