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All you need to know about GST
December, 01st 2015

As the name suggests, it is a tax levied when a consumer buys a good or service. It is meant to be a single, comprehensive tax that will subsume all the other smaller indirect taxes on consumption like service tax, etc. This is how it is done in most developed countries.

What is preventing GST from being a reality?

A major change like GST requires a constitutional amendment, which requires a bill to passed in both houses of Parliament. The GST constitutional amendment bill was passed in the Lok Sabha in May this year.

It has been held up in the Rajya Sabha due to objections being raised by the Opposition regarding the Bill as well as issues with no direct connection to GST.

The Bill was also placed before a Rajya Sabha select committee, which made its recommendations regarding changes to the Bill. The Cabinet cleared these changes in July.

What are the Opposition’s objections?

The Congress wants a provision capping the GST rate at 18 per cent to be added to the Bill itself.

It also wants to scrap the proposed 1 per cent additional levy (over and above the GST) for manufacturing states.

This levy was demanded by manufacturing states who argued that they needed to be compensated for the investment they had made in improving their manufacturing capabilities. The Centre had agreed to this demand to encourage the states to support the GST Bill.

The third demand by the Congress was to change the composition of the GST council—the body that decides the various nitty-gritty’s like rates of tax, period of levy of additional tax, principles of supply, special provisions to certain states, etc. The proposed composition is for the Council to be two-thirds comprised from states and one-third from the Centre.

The Congress wants the Centre’s share to be reduced to one-fourth.

This demand, however, was rejected by even the Rajya Sabha Standing Committee.

1 Officially, the Constitution (One Hundred and Twenty-Second Amendment) Bill 2014.
2 It was introduced in the Lok Sabha on December 19, 2014 by Finance Minister Arun Jaitley.
3 The Bill seeks to amend the Constitution to introduce a goods and services tax (GST) which will subsumes various Central indirect taxes, including the Central Excise Duty, Countervailing Duty,
Service Tax, etc. It also subsumes State value added tax (VAT), octroi and entry tax, luxury tax, etc.
4 The Bill inserts a new Article in the Constitution make legislation on the taxation of goods and services a concurrent power of the Centre and the States.
5 The Bill seeks to shift the restriction on States for taxing the sale or purchase of goods to the supply of goods or services.
6 The Bill seeks to establish a GST Council tasked with optimising tax collection for goods and services by the State and Centre. The Council will consist of the Union Finance Minister
(as Chairman), the Union Minister of State in charge of revenue or Finance, and the Minister in charge of Finance or Taxation or any other, nominated by each State government.
7 The GST Council will be the body that decides which taxes levied by the Centre, States and local bodies will go into the GST; which goods and services will be subjected to GST; and the basis and the
rates at which GST will be applied.
8 Under the Bill, alcoholic liquor for human consumption is exempted from GST. Also, it will be up to the GST Council to decide when GST would be levied on various categories of fuel, including
crude oil and petrol.
9 The Centre will levy an additional one per cent tax on the supply of goods in the course of inter-State trade, which will go to the States for two years or till when the GST Council decides.
10 Parliament can decide on compensating States for up to a five-year period if States incur losses by implementation of GST.

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