GST: Goods and Services Tax (Part 2)

Timeline of GST

• 1986: VishwanathPratap Singh, Finance Minister in Rajiv Gandhi’s government, proposed in the Budget a major overhaul of the excise taxation structure. This was similar to GST in a theoretical sense.
• 2000: Initiating discussions on GST, Vajpayee government appoints an Empowered Committee headed by the then finance minister of West Bengal Asim Gupta.
• 2004: Vijay Kelkar, then advisor to the Finance Ministry, recommends GST to replace the existing tax regime.
• Feb 28, 2006: GST appears in the Budget speech for the first time. Finance Minister Chidambaram sets an ambitious task of implementing GST by April 1, 2010.
• Feb 28, 2007: Chidambaram said in his Budget speech that the Empowered Committee of finance ministers will prepare a road map for GST.
• April 30, 2008: The Empowered Committee submits a report titled ‘A Model and Roadmap Goods and Services Tax (GST) in India’ to the government.
• Nov 10, 2009: Empowered Committee submits a discussion paper in the public domain on GST welcoming debate.
• Feb 2010: Government launches project for computerisation of commercial taxes. Finance Minister Pranab Mukherjee defers GST to April 1, 2011.
• March 22, 2011: Constitution Amendment Bill (115th) to GST introduced in the LokSabha
• March 29, 2011: Bill referred to Standing Committee on Finance.
• Nov 2012: Finance minister and state ministers decide to resolve all issues by Dec 31, 2012.
• Feb 2013: Declaring government’s resolve to introduce GST, the finance minister makes provisions for compensation to states in the Budget.
• Aug 2013: The standing committee submits a report to Parliament suggesting improvements. But the bill lapsed as the 15th LokSabha was dissolved.
• Dec 18, 2014: Cabinet approval for the Constitution Amendment Bill (122nd) to GST.
• Dec 19, 2014: The Amendment Bill (122nd) in the Lok Sabha
• May 6, 2015: The Amendment Bill (122nd) passed by the Lok Sabha.
• May 12, 2015: The Amendment Bill presented in the Rajya Sabha
• May 14, 2015: The Bill forwarded to joint committee of Rajya Sabha and Lok Sabha
• Aug 2015: Government fails to win the support of Opposition to pass the bill in the RajyaSabha where it lacks sufficient number.
• Aug 3, 2016: RajyaSabha passes the Constitution Amendment Bill by a two-thirds majority.Note: GST constitutional amendment bill needs to passed by at least 50% of state legislatures to be implemented. Assam is 1st State to pass GST bill.
• 1 July 2017: GST to be applicable across India.

GST Council

• It is the 1st Federal Institution of India, as per the Finance minister.
• It will approve all decision related to taxation in the country.
• It consists of Centre, 29 states, Delhi and Puducherry.
• Centre has 1/3rd voting rights and states have 2/3rd voting rights.
• Decisions are taken after a majority in the council.

Supporting Laws to implement GST

For the implementation of GST, apart from the Constitution Amendment Act, some other statutes are also necessary. Recently 5 supporting laws to the GST were recommended by the council. 4 for the bills should be passed by the parliament, while the 5th one should be passed by respective state legislatures. The details are given below.

1. The Central Goods and Services Tax Bill 2017 (The CGST Bill).
2. The Integrated Goods and Services Tax Bill 2017 (The IGST Bill).
3. The Union Territory Goods and Services Tax Bill 2017 (The UTGST Bill).
4. The Goods and Services Tax (Compensation to the States) Bill 2017 (The Compensation Bill).
5. And a state GST will be passed by the respective state legislative assemblies.
6. 
   

Issues Arisen OR Unresolved

• Not all items are covered: Taxation for certain items such as Alcohol, Tobacco etc. are still not under the GST domain. States argue that including them would hamper their revenue and they would suffer a huge resource. However, some experts say that the real reason is the nexus of politicians with some business class and high profile lobbying. Further, the Finance minister of India has said in the parliament that the consensus to include alcohol and tobacco under GST regime is possible in foreseeable future.
• Decision criteria for the tax bracket: There are apprehensions that how to decide about the items and the criteria that which item will fall into which tax bracket. It may lead to lobbying. To this, the Finance minister has said that the decision will be taken by the GST Council only and after due diligence and most probably by the consensus.
• Multiple tax rates and brackets: The philosophical idea that GST means “One Nation one Tax” is currently diluted due to multiple tax rates and brackets. To this, the Finance minister has said that since the target consumer of goods and services have different capabilities and therefore there must be a system similar to the democratic lines where higher value consumer pays more taxes.
• Power to impose tax taken away by Central Government from the Parliament: The Central GST Bill, 2017 allows the central government to notify CGST rates, subject to a cap. This implies that the government may change rates subject to a cap of 20%, without requiring the approval of Parliament. Under the Constitution, the power to levy taxes is vested in Parliament and state legislatures. Though the proposal to set the rates through delegated legislation meets this requirement, the question is whether it is appropriate to do so without prior parliamentary scrutiny and approval.
• Confusion regarding the location of consumption: Under GST, both state and Centre can tax the services based on their location of consumption. Now the confusion arises since the general rule to determine the location of the recipient is his location or address on record; there are specific rules for various services such as telecom, property, transportation, etc. This means that while a service may be consumed across multiple states, the tax revenue would be attributed to the state where the recipient is registered or his office is located.  This could lead to higher tax attributed to states that have more registered offices. For example, suppose a company is located in Bangalore and advertises its products in the Kolkata edition of a newspaper, which has its registered office in Delhi. In this case, one may argue that the service is being finally consumed in Kolkata. However, as the recipient of services is in Bangalore, the tax would accrue to Karnataka.

• Anti-Profiteering Clause: The government is planning to set up an authority to see if any reduction in tax rates after GST is passed on to the consumer by companies or not. The industry and businesses are not taking this idea kindly and they see it as a backdoor entry of inspector raj. Experts say that prices should be market determined and no government authority has the business of deciding prices for goods and services.
• Confusion regarding the control over taxation: To avoid dual control, the GST council has reached a compromised formula. 90 percent of tax assesses with an annual turnover of Rs 1.5 crore or less, will be assessed by states and the rest by the Centre. For those with a turnover of over Rs 1.5 crore, the states and the Centre will share it equally. However, this ‘solution’ has its own set of issues. For example, if an entity with a turnover of less than Rs 1.5 crore in one year, posts a turnover of Rs 1.5 crore in the following financial year, who would be the new authority to take over the assessment? And, how will the existing investigations, if any, against the entity be addressed, and by whom? “There are a lot of procedural issues, and if these issues are not addressed properly, they would lead to litigations.

• The issue of casual taxable person: If a person registered in one state moves to another state for a short period for some business transaction – say to participate in a fair or exhibition, then that person would have to get himself registered in that state for that period.

Benefits of GST

For Central and State Governments

• Simple and Easy to administer: Because multiple indirect taxes at the central and state levels are being replaced by a single tax “GST”. Moreover, backed with a robust end to end IT system, it would be easier to administer.
• Better control on leakage: Because of better tax compliance, reduction of rent seeking, transparency in taxation due to IT use, an inbuilt mechanism in the design of GST that would incentive tax compliance by traders.
• Higher revenue efficiency: Since the cost of collection will decrease along with an increase in the ease of compliance, it will lead to higher tax revenue.

For the Consumer

• The single and transparent tax will provide a lowering of inflation.
• Relief in overall tax burden.
• Tax democracy that is luxury items will be taxed more and basic goods will be tax-free.

For the Business Class

• Ease of doing business will increase due to easy tax compliance.
• Uniformity of tax rate and structure, therefore, better future business decision making and investments by the corporates.
• Removal of cascading effects of taxes.
• Reduction in transactional cost will lead to improved competitiveness.
• Gain to the manufacturer and exporters.
• It is expected to raise the country GDP by 2% points.

GST: Goods and Services Tax (Part 1)

What is GST?

“Goods and Service Tax (GST) is a comprehensive tax levy on manufacture, sale and consumption of goods and service at a national level under which no distinction is made between goods and services for levying of tax. It will mostly substitute all indirect taxes levied on goods and services by the Central and State governments in India.

GST is a tax on goods and services under which every person is liable to pay tax on his output and is entitled to get input tax credit (ITC) on the tax paid on its inputs(therefore a tax on value addition only) and ultimately the final consumer shall bear the tax”.

• It is a destination-based taxation system.
• It has been established by the 101st Constitutional Amendment Act.
• It is an indirect tax for the whole country on the lines of “One Nation One Tax” to make India a unified market.
• It is a single tax on supply of Goods and Services in its entire product cycle or life cycle i.e. from manufacturer to the consumer.
• It is calculated only in the “Value addition” at any stage of a goods or services.
• The final consumer will pay only his part of the tax and not the entire supply chain which was the case earlier.
• There is a provision of GST Council to decide upon any matter related to GST whose chairman in the finance minister of India.

What taxes at center and state level are incorporated into the GST?

At the State Level

• State Value Added Tax/Sales Tax
• Entertainment Tax (Other than the tax levied by the local bodies)
• Octroi and Entry Tax
• Purchase Tax
• Luxury Tax
• Taxes on lottery, betting, and gambling

At the Central level

• Central Excise Duty
• Additional Excise Duty
• Service Tax
• Additional Customs Duty (Countervailing Duty)
• Special Additional Duty of Customs

The Central GST and the State GST would be levied simultaneously on every transaction of supply of goods and services except on exempted goods and services, goods which are outside the purview of GST and the transactions which are below the prescribed threshold limits. Further, both would be levied on the same price or value unlike State VAT which is levied on the value of the goods inclusive of Central Excise.

How will be Inter-State Transactions of Goods and Services be taxed under GST in terms of IGST method?

In case of inter-State transactions, the Centre would levy and collect the Integrated Goods and Services Tax (IGST) on all inter-State supplies of goods and services under Article 269A (1) of the Constitution. The IGST would roughly be equal to CGST plus SGST. The IGST mechanism has been designed to ensure seamless flow of input tax credit from one State to another. The inter-State seller would pay IGST on the sale of his goods to the Central Government after adjusting credit of IGST, CGST and SGST on his purchases (in that order). The exporting State will transfer to the Centre the credit of SGST used in payment of IGST. The importing dealer will claim credit of IGST while discharging his output tax liability (both CGST and SGST) in his own State. The Centre will transfer to the importing State the credit of IGST used in payment of SGST.Since GST is a destination-based tax, all SGST on the final product will ordinarily accrue to the consuming State.

Current Affairs June 29, 2017

1. Sharjah named World Book Capital

Sharjah has been named the ‘World Book Capital’ title for 2019 by United Nations Educational, Scientific and Cultural Organisation (UNESCO).

The honour is a recognition of the emirate’s pioneering role in supporting and expanding the local and regional publishing industries.

The accolade is an important addition to Sharjah’s existing portfolio of milestones like, Capital of Arab Culture (1998), Capital of Islamic Culture (2014), and Capital of Arab Tourism (2015).

2. Communication satellite GSAT-17 launched from French Guiana

India's latest communication satellite GSAT-17 was successfully launched by a heavy duty rocket of Arianespace from the spaceport of Kourou in French Guiana.

Configured around I-3K extended bus, GSAT-17 with a lift-off mass of about 3,477 kg carries payloads in Normal C- band, Extended C-band and S-band to provide various communication services.

It also carries equipment for meteorological data relay and satellite based search and rescue services being provided by earlier INSAT satellites.

3. Odisha to set up blood bank for cattle 

Odisha is all set to become the first state in the country to have a blood bank for the cattle.

Vice-chancellor of the Odisha University of Agriculture and Technology (OUAT) Surendra Nath Pasupalak said that the first of its kind blood bank would be established on the premises of OUAT at an estimated cost of Rs. 3.25 crore.

The project will have a 60:40 sharing between the Centre and the state government, the OUAT VC said.

4. Dr Harsh Vardhan and Shri Dharmendra Pradhan inaugurate Swasth Saarthi Abhiyaan

Union Minister for Science and Technology and Earth Sciences and Environment, Forest and Climate Change, Dr. Harsh Vardhan and Minister of State (I/C) for Petroleum and Natural Gas, Shri Dharmendra Pradhan, together, inaugurated the Swasth Saarthi Abhiyaan (SSA).

The Swasth Saarthi Abhiyaan (SSA) is a two month long mega campaign focusing on providing preventive healthcare to the auto, taxi and bus drivers of the region.

The SSA event is a unique initiative to address the major issues being faced by public transport drivers of the region, with almost all of them being users of CNG.

5. EC partners with Facebook for voters registration

Election Commission of India (ECI) is launching a ‘Special Drive to enrol left out electors, with a special focus on first time electors from 1st July , 2017 , so as to move in the direction of Commission’s motto that 'NO VOTER TO BE LEFT BEHIND’ .

In order to reach out to maximum eligible voters, the ECI is collaborating with Facebook to launch first Nationwide “Voter Registration Reminder” on 1st July ,2017 . 

With over 180 million people in India on Face book, the ‘Register Now’ button is designed to encourage Indian citizens to register themselves with the Election Commission of India. 

On 1st July, a notification of the “voter registration reminder” will be sent to people on Facebook in India who are eligible to vote. 

The reminder will be sent out in 13 Indian languages - English, Hindi, Gujarati, Tamil, Telugu, Malayalam, Kannada, Punjabi, Bengali, Urdu, Assamese, Marathi and Oriya. 

This is the first time Facebook's voter registration reminder has been rolled out across India. In 2016 and 2017, Chief Electoral Officers made such efforts at state level during their respective state elections.  

6. Google fined record 2.42 billion euros by European Commission

The European Union has slapped a record 2.42 billion euro fine on Google for breaching the anti-trust rules with its online shopping service.

It gave the Mountain View, California, company 90 days to stop or face fines of up to 5 per cent of the average daily worldwide turnover of parent company Alphabet.

7. UP govt signs pact with ADB for strengthening of roads

Uttar Pradesh Government has signed an agreement with Asian Development Bank ADB for a loan of 1950 crore rupees for strengthening of roads in different district.

The agreement was signed at Lucknow in the presence of Chief Minister Yogi Adityanath and ADB President Takehiko Nakao.

As per agreement, ADB will provide the loan amount for Uttar Pradesh Main District Roads Development Project of 2782 crore rupees cost.

State government will spend 832 crore rupees form its own resources on the project.

Project is scheduled to be completed by 2024 and ADB will provide the loan for the period of 25 years on the interest rate of 2 percent.

8. Kaushik Basu takes over as IEA president

Former chief economic advisor Kaushik Basu has taken over as president of the International Economic Association (IEA).

Basu's three-year term started from June 23.

Basu has also served as senior vice-president and chief economist at the World Bank from 2012 to 2016 and as the chief economic adviser to the Government of India from 2009 to 2012.

9. Vidya Balan to be the ambassador of Indian Film Festival of Melbourne

Vidya Balan will be the ambassador of Indian Film Festival of Melbourne to be held from August 10 to 22.

The Indian Film Festival of Melbourne (IFFM) is one of the largest Indian film festivals being hosted outside India.

The Victorian Government supports the festival and last year they awarded the festival with the very prestigious ‘Melbourne Award’.

The core theme of IFFM will be diversity and it will showcase over 60 films this year.

10. Union Government appoints NIFT Chairperson

The Union Government (M/o Textiles) has appointed Shri Rajesh V. Shah as Chairperson on the Board of Governors of the National Institute of Fashion Technology up to 31.03.2019 as per the provisions of the National Institute of Fashion Technology Act, 2006. 

He will replace Shri Chetan Chauhan.

11. U'khand gets award of excellence at international meet

Uttarakhand was conferred with the award of excellence at the 2nd Global Skill Development Summit held in Paris recently for innovations and extensive use of IT for skilling the state's youth.

Project Director of Uttarakhand Skill Development Committee Pankaj Kumar Pandey received the honour on behalf of the state.

12. India finish second in Junior Shooting World Championship

The Indian shooting squad finished a creditable second at the ISSF Junior World Championship with three gold, two silver and three bronze medals in Suhl, Germany.

China topped the tally in the rifle/pistol tournament with 19 medals, including eight gold.

Current Affairs June 28, 2017

1. US Lists China Among Worst Human Trafficking Offenders

US President Donald Trump's administration hit China over its rights record, listing the country alongside Sudan and North Korea on a list of the world's worst human trafficking offenders.

The State Department downgraded China in its annual “Trafficking in Persons Report,” saying Beijing is doing little to combat the phenomenon or protect its victims.

2. Social Progress Index 2017: India ranks 93rd

It is observed that the world incorporating 128 countries scores 64.85 on social progress. It registers a 2.6 percent increase from 2014.

India which is ranked at 93rd position performs within the expected range on a relative basis.

Denmark ranked first, followed by Finland and Iceland.

3. US designates Hizbul chief Syed Salahuddin as global terrorist

The US has designated Hizbul chief Syed Salahuddin as a global terrorist.

Salahuddin joins the likes Lashkar chief Hafiz Mohammed Saeed and Dawood Ibrahim in the list.

Designations of terrorist individuals and groups expose and isolate organizations and individuals, and result in denial of access to the US financial system.

4. Indians become second largest group of migrants in Australia

Indians have become the second largest group of migrants living in Australia since 2011 at 1,63,000, following people of Chinese origin, according to the latest census data.

The Australian Bureau of Statistics (ABS) released the latest figures of the country's fast changing population and demographics that has recorded 1.3 million new migrants settled in Australia since 2011 from around 180 countries, including India and China.

According to official data, Census 2016 recorded new migrants from India at 1,63,000, emerging as the most common country of birth of new arrivals after China at 1,91,000 new migrants.

5. Kalraj Mishra Launches Digital MSME Scheme

Union Minister for MSME Shri Kalraj Mishra launched ‘Digital MSME Scheme’ and handed over three Memorandums of Understandings to SAP India, Intel and HMT respectively.

These steps would further boost Ministry’s effort towards making the Digital India Mission successful.

The Digital MSME Scheme is revolving around Cloud Computing which is emerging as a cost effective and viable alternative in comparison to in-house IT infrastructure installed by MSMEs.

The United Nations has declared 27th June as the UN Day for MSMEs.

6. Mihai Tudose designated Romania's new prime minister

Mihai Tudose, the outgoing economy minister of Romania, has been appointed as prime minister, days after the ruling Social Democrat Party (PSD) removed its own government.

He will replace Sorin Grindeanu.

The 50-year-old Tudose now has 10 days to gain the vote of confidence in his government and his programme.

7. Dhanraj Pillay to be awarded with Bharat Gaurav

Former India hockey captain Dhanraj Pillay will be awarded with East Bengal football club’s highest honour – Bharat Gaurav on their foundation day.

The ceremony will be held on August 1.

Pillay has played a huge role in reviving the Indian team and performed brilliantly during his 15-year career, representing the country in four Olympics, World Cups, Champions Trophy and Asian Games.

He played total 339 matches for India, scoring 170 goals.

8. Srinivas becomes 1st Indian to finish Race Across America

Srinivas Gokulnath created history by becoming the first Indian to complete what is considered to be the toughest cycle race in the world -- the 4,900-km Race Across America (RAAM) in solo category.

Another Maharashtrian, Dr Amit Samarth of Nagpur, followed him at the finish line.

Among the nine men who finished, Gokulnath stood 7th while Samarth was right on his heels at number 8. The race was won by Christoph Strasser.

9. Rajeev Shukla to head BCCI Special Committee

Rajeev Shukla, a former vice-president of the Board of Control for Cricket in India (BCCI), will head a newly-formed seven-member Special Committee, to suggest a way forward for implementing the administrative overhaul prescribed in the Supreme Court order on July 18 last year.

Besides Shukla and BCCI acting secretary Amitabh Choudhary, the committee will include former India captain Sourav Ganguly (Bengal), T.C. Mathew (Kerala), Naba Bhattacharjee (Meghalaya), Jay Shah (Gujarat) and BCCI treasurer Anirudh Chaudhry.