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Home > Topics > GST

GST

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GST

Taxes were levied at each stage separately at various rates under the Indian Taxation System. But the new GST (Goods and Services Tax) has been established as the unified indirect tax on goods and services. The GST was launched on midnight 1 July, 2017 at a special event in the presence of President Pranab Mukherjee and Prime Minister Narendra Modi. From July 1, 2017, the GST being levied in India is in five categories, at the rates of zero percent, 5%, 12%, 18% and 28% per annum. Latest update by the Finance Ministry: Commodities of daily use like washing powder, aftershave cream, detergent, chocolate are likely to get cheaper as the GST Council has decided to keep only 50 items in the top tax bracket of 28 per cent. The decision was taken at a ‘close-door’ meeting of GST Council in Guwahati on Friday. Gifts up to a value of Rs 50,000/- per year by an employer to his employee are outside the ambit of GST. Gifts of more than Rs 50,000/- made without consideration are subject to GST,when made in course or furtherance of business. Watch Narendra Modi's live speech at the GST launch event in this video below: 

The GST will help consumers, as they will pay an all round tax on the products they buy instead of the VAT and other taxes that are a part of the maximum retail price. GST is a destination-based tax (consumption tax) rather than origin-based tax. It is a single tax with a full set-off for taxes paid earlier in the value chain. The Service Tax, VAT, Octroi, various state taxes, and other taxes have been done away with and now there is only one tax for the entire nation - the GST. The objective of GST is to subsume various indirect taxes levied at different levels, paving the way for a transparent indirect tax regime in India. 

History of the GST Bill

In the year 2000, an Empowered Committee (EC) was appointed by the Prime Minister Atal Bihari Vajpayee government, which was headed by Asim Gupta, the then Minister of Finance and Excise of West Bengal state. In 2004, the recommendations were made by Vijay Kelkar, advisor to the Finance Ministry, to replace the existing tax regime by GST. On February 28, 2006, the then Union Finance Minister P Chidambaram disclosed in his Union Budget speech the implementation of GST by April 1, 2010. On February 28, 2007, P Chidambaram proclaimed that the EC will prepare a GST roadmap. On April 30, 2008, EC submitted a report to the government, titled 'A Model and Roadmap Goods and Services Tax (GST) in India'. EC submitted a discussion paper on GST in public domain on November 10, 2009.

On February 2010, a project for the computerisation of commercial taxes was launched by the government and later, Pranab Mukherjee rescheduled GST to April 1, 2011. On March 22, 2011, the Lok Sabha witnessed the introduction of Constitution Amendment Bill (115th) to GST and the bill got referred to Standing Committee on Finance. The decision was made by Finance minister and state ministers to resolve all issues by December 31, 2012. The Finance minister made provisions for compensation to states on February 2016. Later, a report was submitted by the standing committee to Parliament suggesting amendments. The bill lapsed due to the dissolution of the 15th Lok Sabha. On December 18, 2014, the Cabinet approved the Constitution Amendment Bill (122nd) to GST. The Lok Sabha passed the Amendment Bill (122nd) on May 6, 2015.

The Amendment Bill was presented in Rajya Sabha on May 12, 2015. The Bill forwarded to joint committee of Rajya Sabha and Lok Sabha on May 14, 2015. The Constitution Amendment Bill was passed in Rajya Sabha by two-thirds majority on Aug 3, 2016. At the Central level, the taxes subsumed under GST include; Central Excise Duty, Additional Excise Duty, Service Tax, Additional Customs Duty commonly known as Countervailing Duty and Special Additional Duty of Customs. At the State level, the taxes subsumed under GST include; Subsuming of State Value Added Tax/Sales Tax, Entertainment Tax (other than the tax levied by the local bodies), Central Sales Tax (levied by the Centre and collected by the States), Octroi and Entry tax, Purchase Tax, Luxury tax and Taxes on lottery, betting and gambling. Central GST and State GST would be levied on every transaction of supply of goods and services except on goods which are outside the purview of GST, exempted goods and services and the transactions which are below the prescribed threshold limits.

Both CGST and SGST would be levied on the same price contrasting State VAT which is levied on the value of the goods including Central Excise. Initially for two years, an Additional Tax not exceeding 1 percent on inter-State supply of goods would be levied by the Center and assigned to the originating State. The tax should be levied only when the supply is made for a consideration.

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