After a long time of push and pull by the government and opposition, the Goods and Services Tax Bill or the GST Bill has finally been passed by the Rajya Sabha. The bill which is likely to become an act soon is being hailed as the biggest economic reform in India since the liberalization of the economy in 1991. Before moving ahead, let us see what the GST Bill is all about.
What is GST Bill?
Usually, when a product is created, a tax is levied on it in several stages such as the manufacturing stage on the purchase of raw materials, in the wholesale market, and finally at the retail stage. Other than this, there is also several indirect state and federal taxes such as value added tax (VAT) and excise duty, and different state taxes, central surcharges, entertainment tax, luxury tax and a slew of related levies by local bodies. This scenario leads to an add-up of all things leading to a tax on tax scenario.
The GST Bill aims to rectify this scenario by subsuming central- and state-level taxes and levies within an integrated Goods and Services tax with only two components, a central GST, and a state GST. Thus, GST Bill aims to impose a single tax on the supply of all goods and services, right from the manufacturer to the consumer.
The GST Timeline
16 years ago, it was AB Vajpayee who first asked the Empowered Committee to explore the concept of uniform taxation and chalk out a model. The GST has been in the making since 2006 when the Congress originally mooted it. Since then, it has been introduced in Lok Sabha in 2011 but was lapsed due the dissolution of the Lower House. In 2015, the Bill was passed in the Lok Sabha but not in the Rajya Sabha. Finally, the GST Bill has now received a nod from two-third members in both Houses of the Parliament although it will have to be ratified by 50 percent of state legislatures.
The Impact of GST
The benefits of GST are huge for both consumers and manufacturers. For the industry and business side, GST is likely to bring easy compliance, uniform tax rate, and structures as well as profit to manufacturers and exporters. For consumers, this single and transparent tax proportionate to the value of goods and services will bring an overall relief in the tax burden. Even the Central and State governments would have better controls on leakage and higher revenue efficiency with the introduction of GST.
What Next?
The GST Bill was passed with some amendments made to it. The Government’s next steps would likely be to put these amendments in place. This includes among others a compensation to the states for loss of revenue up to five years. Additionally one of the amendments proposed that the adjudication of dispute, if any, between the states over the GST issue would be dealt with by a mechanism proposed by the GST Council which will consist of the union Finance Minister (chairman) and MoS in charge of Revenue; Minister in charge of Finance or Taxation, or any other Minister, nominated by each state.
