5 things you need to know about the GST bill.

Goods and Services Tax (GST) is a comprehensive tax levy on manufacture, sale and consumption of goods and services and is considered to be the biggest economic reform in the nation since independence which will function in order to transform India into a uniform market by breaking the current fiscal barrier between states.

Taxation is a very complicated subject and therefore it becomes very difficult for a layman to understand it. So here is everything you need to know about GST bill.

1. The GST Work Mechanism

The GST will work both at the Central as well as the State level thereby having a dual structure. They will both have separate powers to legislate and administer their respective taxes. Thus, both shall be equally empowered.

Further, taxes such as Excise Duty, Service Tax, Central Sales Tax, VAT, Entry Tax or Octroi will all be subsumed by the GST under a single umbrella.

2. GST driven benefits (Government as well as Companies/Individuals).

The taxation burden gets divided equitably between manufacturing and services by establishing a lower tax rate by increasing the tax base and minimizing exemptions.

GST will be levied only at the destination point, and not at various points (from manufacturing to retail outlets). As of now, a manufacturer has to pay tax when a finished product moves out from a factory and secondly at the retail outlet when sold.

3. Estimated rate of GST

The current prevailing rate at which services are taxed is 14% and this charge when gets combined with the indirect taxes, sums up to be around 20%.

As far as the combined GST rate is concerned, it is still under consideration and being discussed by the government. The rate is expected around 14–16 per cent. After the total GST rate is arrived at, the States and the Centre will decide on the CGST and SGST rates.

4. The Opposition’s Stand on GST

Congress demands reforms in a few concepts of the GST which has led the process of passage of bill to a standstill.

Three main concerns of the Congress over the bill are:

1. one per cent additional tax as goods move across states;
2. the constitutional cap of 18% along with an independent dispute redressal mechanism;
3. the party has maintained that the government was ignoring the concerns raised by the party on the legislation.

5. Items to be replaced by GST.

The following items will be replaced by GST which are currently levied by Centre:-

• Central Excise duty
• Duties of Excise (Medicinal and Toilet Preparations)
• Additional Duties of Excise (Goods of Special Importance)
• Additional Duties of Excise (Textiles and Textile Products)
• Additional Duties of Customs (commonly known as CAD)
• Special Additional Duty of Customs (SAD)
• Service Tax
• Cess and surcharge

The following items will be replaced by GST which are currently levied by State:-

• State VAT
• Central Sales Tax
• Luxury Tax
• Entry Tax (other than those in lieu of octroi)
• Entertainment Tax (not levied by the local bodies)
• Taxes on advertisements
• Taxes on lotteries, betting and gambling
• State cess and surcharges, as they relate to supply of goods or services

About the Author

This article has been authored by Ayushi Sharma, Founding Intern at LegalNow.