Trending Now- GST Bill- Know What It Includes And The Benefits It Offers
Are you ready for the change? GST Bill will be bringing in significant change in doing business in India. Advocacy for the best practices, gearing up for changes in processes, training teams and developing IT systems for being GST compliant are the key areas to be assessed.
On August 3rd, 2016, India took a giant step towards goods and services tax (GST) with Rajya Sabha, approving the tax reform measure first considered almost 30 years ago. Once implemented it is expected to do away with multiple indirect taxes, making the economy more transparent, efficient.
The Modi Government was finally able to cross the Rajya Sabha hurdle, where it lacked majority after a18 months of strong negotiations with Congress.
How GST helps?
Goods and Service Tax – GST is an indirect tax reform which aim to remove the tax barriers between states and create one market. Once the step is implemented, the tax barriers between the centre and states will disappear.
Features of GST Bill
- Centre will levy IGST on inter-State supply of goods and services. Import of goods will be subject to basic customs duty and IGST.
- GST defined as any tax on supply of goods and services other than on alcohol for human consumption.
Central taxes like, Central Excise duty, Additional Excise duty, Service tax, Additional Custom duty and Special Additional duty and State level taxes like, VAT or sales tax, Central Sales tax, Entertainment tax, Entry tax, Purchase tax, Luxury tax and Octroi will subsume in GST.
- Petroleum and petroleum products i.e. crude, high speed diesel, motor spirit, aviation turbine fuel and natural gas shall be subject to the GST on a date to be notified by the GST Council.
- Provision for removing imposition of entry tax / Octroi across India.
- Entertainment tax, imposed by States on movie, theatre, etc will be subsumed in GST, but taxes on entertainment at panchayat, municipality or district level to continue.
- GST may be levied on the sale of newspapers and advertisements and this would give the government’s access to substantial incremental revenues.
- Stamp duties, typically imposed on legal agreements by the state, will continue to be levied by the States.
- Administration of GST will be the responsibility of the GST Council, which will be the apex policy making body for GST. Members of GST Council comprised of the Central and State ministers in charge of the finance portfolio.
The GST Benefits
Now that Rajya Sabha have passed this constitutional amendment paving way for the goods and services tax, have a look at the benefits it offers:
- A common market
Presently it is fragmented along state lines, pushing the cost up to 20-30%
- Life gets way simpler
GST Bill will be replacing the 17 indirect tax levies and compliance cost will fall
- Boost investment
For several capital goods, input tax credit is not available. Complete input tax credit under GST Bill will mean 12-14% drop in the cost of capital goods. It is expected of 6% rise in the capital goods investment.
- Revenue gets the boost
Evasion is set to drop- input tax credit will encourage suppliers to pay the taxes. The number of tax exempt goods will decline.
- Freeing up online restrictions
Some sellers do not ship to certain locations, all this will end with GST.
- Under developed states get lift
Under GST national market, it will be creating opportunities for the less developed states to come up.
Time is the ESSENCE
Government is committed to introduce GST by April 2017, and the tax payers need to be GST compliant to be able to test system changes in time. Depending on the operating geographies, size and sector and the changes would be substantial and may require a proactive planning with a time bound action plan.
In order to prepare for the implementation of GST, the companies need to understand the GST policy development and its implications to scenario planning and preparing a transition roadmap.
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