The GST Council, headed by Finance Minister Arun Jaitley, was set up following the President’s assent on the Constitutional Amendment Bill on the Goods and Services Tax. The council has laid the foundation for a uniform and simplified tax regime, the GST, through which India is expected to move to a single rate card and a seamless transfer of goods and services across state lines. The GST Council is currently moving towards implementation of the GST Bill.
GST and Tax Implications:
GST Bill is set to provide India with a surge of 1 to 2 percentage points to boost the economy by developing a seamless national market. The GST Council has two months to clear all pending issues and finalise through council meetings. This would allow experts in the field to speed up the process and enable a smoother transition.
According to Harshavardhan Neotia, President, FICCI, “It is expected that GST will lead to easy tax compliance and improve India’s competitiveness in the global arena.”
The GST Council, together with the Central Government, has proposed a rate of 12% and 18% at the latest meeting of the GST Council. For a small business owner, these rates, once introduced, will not impact the business in terms of changes in prices or revenue. The state governments, who are currently, opposing the bill, have declared that the GST is a higher rate tax on luxury goods, in reply to which Jaitely said, “The biggest advantage of GST actually lies in the GST design itself which provides for seamless transfer of input tax credit across the value chain. The net gains of a more efficient tax would be felt over a longer period of time once the implementation glitches are all resolved.”
The Central government’s proposal is to entail a lower rate of 4% for precious metals and 6% at its highest, two base rates of 12% and 18% and a maximum rate of 26% including all cess for goods, while a tax of 12% to 18% will be levied across all services. These rates are to be finalised in the next GST Council Meeting.
Union Finance Minister Arun Jaitley mentioned that revenue targets would likely reach collections that would otherwise be met only in 2017-18. According to Union Minister M Venkaiah Naidu, the GST Bill, when implemented, will pose both a challenge and offer huge opportunities for Chartered Accountants. In effect, the GST implementation would address and curb black money.
Are the states ready for implementation?
The GST Bill will only become a law once the amendments are carried out in Parliament. If the Central Government gets the go-ahead for Integrated GST Bills, this will pave the way for a roll out of tax reforms in the entire country.
Speaking on the topic, Madhya Pradesh Chief Minister, Shivraj Singh Chouhan enumerated that tax exemptions provided will be continued for all industrialists after the GST implementation. He also mentioned that his state government is ready for skill development through a public private partnership (PPP) mode. To enable a smooth passage and seamless implementation of GST, the Chief Ministers of various states are likely to be called for special sessions with their respective state assemblies.
The Central government is intending to notify and implement GST, and the uniform tax rate, through the GST laws. The decision on levying taxes is likely to be conducted through a disputable resolution mechanism. Though the Central Government is a few months ahead of schedule, the final implementation is expected take place on April 1, 2017.
Find out more about how GST will impact your business here.