The Goods and Services Tax Bill or the GST Bill is due to be discussed in Rajya Sabha or the upper house of Parliament this week. The bill was passed by the Lok Sabha last week.
Here are 10 facts about GST – hailed by Finance Minister Arun Jaitley as the biggest tax reform since independence – which the government wants to roll out by April 2016:
1) The GST will cut down the large number of taxes imposed by the central government and states and will lead to the creation of a unified market, which would facilitate seamless movement of goods across states and reduce the transaction cost of businesses.
2) While the existing central taxes include excise duty, service tax and additional customs duties, the state taxes comprise of entertainment tax, luxury tax, lottery taxes, electricity duty, central sales tax, octroi, value added tax (VAT). The GST will dissolve all the taxes into one making India a single, unified national market.
3) GST can lead to 2 per cent increase in GDP or gross domestic product, Mr Jaitley had said after introducing the bill in the lower house of Parliament or Lok Sabha. Economists and analysts back the Finance Minister on this claim. “GST is going to lead to a win-win situation as far as the centre and the states are concerned. It is going to up India’s GDP. It is going to up India’s revenue,” Mr Jaitley had said.
4) GST will help corporates by simplifying taxation – it will reduce tax on tax, reduce tax compliance burden, and there will be more transparency and efficiency as it will reduce corruption and increase competitiveness.
5) For consumers, GST will reduce prices of goods and services in the long run, and will improve the efficiency of goods and services being delivered to them. They will pay one tax.
6) The bill on GST was introduced in the Lok Sabha in December last year and its roll-out has missed several deadlines because of lack of consensus among states. GST is in force in 150 countries.
7) While liquor has been completely kept out of the GST, petroleum products like petrol and diesel will be part of the new regime from a date to be decided at a future date by the GST Council, which will have two-third of its members from states.
8) As per the Bill, the states where goods originate can levy 1 per cent additional tax over GST to make up for any revenue loss for the first two years.
9) The Centre and states have been working on a new Revenue Neutral Rate (RNR), which is currently pegged at 27 per cent. RNR is one at which there will be no revenue loss to states after GST implementation.
10) The re-calculation of RNR is necessary as at present it does not take into account the taxation of petroleum products as also the 1 per cent additional tax which states can levy as part of the GST Bill.