On 6th May 2015, the Lok Sabha passed the much-delayed Constitutional Amendment Bill to introduce Goods and Service Tax (GST), paving the way for a new bill on the uniform tax regime, even as the Congress Party staged a walkout in protest.
The Bill is set to be sent to a Parliamentary committee for review by the Rajya Sabha.
The opposition Congress has said that it favours the GST Bill, but wants the amendments made to it by the BJP government to be vetted by a select committee of the Rajya Sabha, where it has a majority.
In the Lok Sabha – the main Opposition party walked out as the Bill was voted on clause by clause, objecting that the changes made by BJP have not been referred to a standing committee before being brought to the house.
The bill, conceived twelve years ago, being a constitutional amendment, has to passed by both the houses of parliament by a two-third majority, and once passed, it needs ratification of more than half of the 29 states before its scheduled rollout in April 2016. It has been kept pending because there were some changes required in the basic bill and all the states were not in favour of various provisions of the Bill, particularly in sharing of the revenue collected through GST.
Finance Minister, Arun Jaitley vowed to compensate states for any revenue loss and assured that the new uniform indirect tax rate will be much less than 27% recommended by an expert panel. The minister said, GST, which is proposed to be implemented from April 1st, 2016, will subsume excise, service tax, state VAT, entry tax, octroi and other state levies. It would provide great relief to the already tired taxpayers.
He said, GST would ensure seamless and uniform indirect tax regime besides lowering inflation and promoting growth in the long run as he sought to allay concerns of the states that they would be hurt by its implementation. Meanwhile, reactions coming in from the industry welcomed the passage of the bill, and sounded confident that the deadline of April 1, 2016 will be met.
GST is a comprehensive indirect tax levy on manufacture, sale and consumption of goods as well as services at the national level. It will replace all indirect taxes levied on goods and services by the Indian Central and State governments. It is aimed at being comprehensive for most goods and services.
It would mitigate cascading or double taxation in a major way and pave the way for a common national market. From the consumer point of view, the biggest advantage would be in terms of a reduction in the overall tax burden on goods, which is currently estimated at 25%-30%. Introduction of GST would also make our products competitive in the domestic and international markets. GST is having transparent character and it would be easier to administer.
History of GST
In 2000, the Vajpayee Government started discussion on GST by setting up an empowered committee, headed by Asim Dasgupta, (Finance Minister, Government of West Bengal). The committee was given the task of designing the GST model and overseeing the IT back-end preparedness for its rollout.
Later in 2006, Union Finance Minister Shri P. Chidambaram moved towards GST in his Budget, and proposed to introduce it by 1st April, 2010. However, the Empowered Committee of State Finance Ministers (EC) released its First Discussion Paper (FDP) on the GST in November, 2009. This spells out the features of the proposed GST and has formed the basis for discussion between the Centre and the States so far.
GST and Media & Entertainment Industry
The media and entertainment industry has been pestering the government for lower tax rates and freedom from multiple taxation since many years.
The different taxes levied on various sectors across the Media & Entertainment industry are as high as 40 to 60%. It is seen that the consumers in different states pay different prices for the same content with variation in the entertainment tax.
Currently entertainment and services are taxed as follows:
According to the Federation of Indian Chambers of Commerce and Industry (FICCI) the programmes transmitted by the Cable TV and DTH provider are taxed as ‘services tax’ by the Central Government , while the same programmes are considered as ‘entertainment services’ by the state governments and are being taxed as ‘entertainment tax’. Thus, these services suffer ‘double taxation’. So it recommended that DTH and Cable TV services should be included in the negative list of service tax till the Goods and Service Tax (GST) is implemented. The film industry too has been stuck with high and different entertainment tax rates in different states. This varies between 15% and 50%.
“The 15% to 50% tax is a drain on the revenue of studios. Hope these will be subsumed by the GST (goods and services tax),” said Sujit Vaidya, chief financial officer at film company Disney UTV. He also added that films which are produced jointly are also taxed under association of persons apart from being taxed as joint venture partners.
Direct-to-home and cable, the distribution sector of the media and entertainment industry, also ends up paying dual taxes on set-top boxes, which are now required to access television channels. The set-top boxes attract both service tax and VAT. There is service tax and VAT application on recharge coupons also. The DTH industry has been asking for a reduction in the license fee from 10% to 6%, and wants to bring DTH and Cable TV on the negative list and get exemption from Service Tax.
However, to ensure proper growth and development of this sector, the multiple levies / taxation structure needs to be rationalized.
Effects on Media fraternity
Although the media fraternity has welcomed the idea of GST in India, but industry is skeptical about its implementation.
Dish TV CEO, RC Venkateish says, “GST will be good for the DTH sector. At present we are victims of multiple taxation system where we pay various taxes in entertainment tax, service tax etc. With GST, it will all get rolled under one. If it is approved and rolled out, we will have a tax reduction of 3 to 3.5 per cent and hence it will be a good move for the sector.”
According to Times Network CEO, MK Anand, “GST brings uniformity and transparency and therefore better administration. However, in the short term, there are expected to be issues. The state wise registration and filing of GST as against the current centralized filing is also an additional activity that we will now have to account for and so it increases costs to some extent.”
Although GTPL Hathway COO, Shaji Mathew supports the concept behind GST but has doubt on its successful implementation. According to him, Government has been the major gainer so far from digitisation and they have been trying to shift the tax burden on to the consumer. However, the consumer is not ready to take it and hence operators have been bearing the brunt of it all. With GST, the concern is over entertainment tax, which varies from state to state. No clear information is provided whether entertainment tax will be included in GST and if yes, then at what slab. Since the government hasn’t made any efforts to rationalise taxation, the implementation is something that remains to be observed closely. Last the Government does not consider the tax payers’ point of view while implementing an amendment.”
However, the Government is very confident to get the Bill cleared in the Monsoon Session and bring GST into effect by April 2016.