GST Bill: Uniform Taxation Across India

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The much awaited and highly anticipated Constitution Amendment Bill for Goods and Services Tax (GST) has finally been approved by the President of India post its way in the Parliament (RajyaSabha on the 3rd August 2016 and LokSabha on 8th August 2016) and confirmation by more than 50 percent of state legislatures. In additional, the LokSabha on 29th March 2017 has also passed four supplementary bills namely – The Central GST Bill, The Integrated GST Bill, The Union Territory GST Bill and the Compensation to the States Bill. With passing of the above bills, all the hurdles around the GST have been cleared setting the stage for 28 states, along with Delhi and Puducherry, to enact state laws over the next three months to roll out the new tax regime from July 2017.

GST will have a far-reaching impact on almost all the aspects of the business operations in the country, including but not limited to pricing of products and services, supply chain optimization, IT, accounting, tax compliance systems, etc. The GST Bill lays down a destination taxation regime where end users or consumers will be taxed. The GST Council made it a four-tier tax structure with lowest tax slab fixed at 5 per cent followed by 12, 18 and 28 per cent brackets with lower rates for essential items and the highest for luxury and de-merits goods which would also attract an additional cess to compensate states for potential revenue loss during the first five years of implementation.

With GST, it is expected that the tax base will be comprehensive, as virtually all goods and services will be taxable, with minimum exemptions. However, the GST will bring down the number of taxes currently being imposed in the country. Today more than 25 kinds of taxes including Service tax, state Value Added Tax (VAT), Central Excise and several other leviesare imposed in the country. The GST Bill is likely to reduce the number of taxes to only around half-a-dozen.

GST will be a game changing reform for the Indian economy by creating a common Indian market and reducing the cascading effect of tax on the cost of goods and services. It will impact the tax structure, tax incidence, tax computation, tax payment, compliance, credit utilization and reporting, leading to a complete revamp of the current indirect tax system.

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