SSB General Awareness Series: All you need to know about GST Bill

Critical Analysis of GST Bill: Goods and Services Tax

The Goods and Service Tax Bill or GST Bill, officially known to be The Constitution (One Hundred and Twenty-Second Amendment) Bill, 2014, would be a Value added Tax (VAT) to be implemented in India, from April 2016.

GST or the Goods and Services Tax is an indirect tax that brings together most of the taxes that are imposed on all goods and services (except a few) under a single banner. This is in contrast to the current system, where taxes are levied separately on goods and services. However, the GST is payable only at the final point of consumption.

The Bill seeks to amend the Constitution to introduce a goods and services tax (GST) which will subsume 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.

Under the bill, alcoholic liquor for human consumption is exempted from the 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.

How will it work in India?

The GST was first mentioned in India during the 2006-2007 budget and the latest budget too includes the need to take steps to make the implementation possible by April 1, 2010. Given the federal nature of the country, GST in India is expected to take the form of a dual GST including both a Central and a state GST.

The bill seeks to establish a GST council tasked with optimising tax collection for goods and services by the State and the Centre. The council will consist of Union Finance Minister (as Chairman), the Union Minister of the State of Revenue or Finance, and the Minister in charge of Finance and Taxation or any other, nominated by each State Government.

The GST Council will be the body that decides which taxes levied by the centre, State and the 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.

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What are the benefits of the GST?

At the simplest level, the GST reduces the number of instances where taxes need to be paid thus reducing the possibility of manipulation on the part of tax authorities and is hence assumed to be a much transparent mode of administering taxes. It will alleviate the burden of cascading taxes for individuals. It is also expected to boost revenue collection in certain states and to reduce the prices of goods.

What are the difficulties involved?

With heterogeneous State laws on VAT, the debate on the necessity for a GST has been reignited. The best GST systems across the world use a single GST, while India has opted for a dual-GST model. Critics claim that CGST, SGST and IGST are nothing but new names for Central Excise/Service Tax, VAT and CST, and hence GST brings nothing new to the table.

Also, the fundamental problem involved is the decision of a revenue-neutral rate for the GST that will be acceptable to all those involved. The federal nature of the country also accounts for its own share of complications and delays. For the Centre to be able to impose tax at the retail level and for states to be able to tax services will require constitutional amendments, which will further need to be passed by the Parliament and state legislatures.

 Conclusion:

Finally I would like to conclude, that if the mechanism for GST is thought out clearly by depleting the ambiguities of Duel-taxation between the Central and the State government it will be a Taxation system which will benefit both the People and the Government. It will be an easier way of taxation which will not only reduce the overall prices of the goods but also increase the transparency in the Taxation system, which will ultimately benefit the consumers.

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About the Author:  Pranav Nikam is an Electrical and Electronics engineer who is working in a renowned MNC in Chennai. He likes to work out in gym, do photography and play badminton. Through his articles he wants to spread awareness among other defence aspirants.