20 Sep 2017

Arun Jaitley indicates scope for rationalization of rates under GST 

NEW DELHI: Finance minister Arun Jaitley on Wednesday said there is scope to rationalise goods and services tax (GST) and rolling 12 per cent and 18 per cent slabs into one as implementation of the country’s most comprehensive indirect tax reforms progresses.

“I do concede that as it (GST) moves forward, there will be scope for rationalising the rates. There, probably, will be scope that the two standard rates of 12% and 18 per cent, after some time, could be clubbed into one. That is a fair possibility and a suggestion,” Jaitley said replying to debate on the two bills related to GST in J&K.

Central Goods and Services Tax (Extension to Jammu and Kashmir) Bill, 2017 and the Integrated Goods and Services Tax (Extension to Jammu and Kashmir) Bill, 2017 were later passed by a voice vote.

The current GST has 5 per cent, 12 per cent, 18 per cent and 28 per cent rates, plus one for luxury and sin goods. There are some that are zero rated, or nil rates.

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GST News

The announcement of the Goods and Services Tax (GST) was a milestone in the history of indirect tax reforms in the country. Through the amalgamation of a large number of state and central taxes into a single tax, GST is expected to remove double taxation or the cascading effect of taxation in a significant way. This is in line with the government’s vision of creating a common national market as well.

The Central Government rolled out the GST system on 1 July 2017 in a historic midnight session of both houses of parliament. The GST Council has fixed the rate of taxation on 1,211 items, most of which are in the 18% tax slab.

From the perspective of the consumer, the greatest advantage of the GST implementation would be a decrease in the overall tax burden, which is currently, at an average of 25%-30%. The GST regime is also expected to make products manufactured in India more competitive in the international markets, boosting economic growth of the nation.

Apart from the above-mentioned benefits, the Goods and Services Tax will also be easier to manage owing to the transparency that it offers.

What is new in GST?

Before the implementation of GST, the fiscal powers between states and the Centre were clearly demarcated with no overlaps. The Centre levied tax on goods manufacture (except for alcohol for human consumption, narcotics, etc.) and the states levied tax on the sale of goods.

After the implementation of GST, the Centre and states are concurrently empowered to levy and collect tax. The most important tax rules under the GST regime are as follows:

  1. GST is applicable on the “supply” of services and goods, as opposed to the sale or manufacture of goods and provision of services that existed previously.
  2. The new tax system is based on destination-based taxation unlike the origin-based taxation system earlier.
  3. The GST that is levied by the Centre is called Central GST (CGST) and that levied by the states is called State GST (SGST). Union territories will levy Union Territory GST (UTGST).
  4. Integrated GST (IGST) is levied on the inter-state supply of services and goods. This is collected by the Centre.
  5. Import of goods and services will be taxed under IGST.
  6. GST has subsumed the following taxes levied by the Centre previously:
    • Duties of Excise – Medicinal and Toilet
    • Central Excise Duty
    • Additional Duties of Excise – Goods of Special Importance
    • Additional Duties of Customs (CVD)
    • Additional Duties of Excise – Textiles
    • Special Additional Duty of Customs (SAD)
    • Cesses and surcharges
    • Service Tax
  7. GST has replaced the following taxes levied by the states previously:
    • State VAT
    • Purchase Tax
    • Central Sales Tax
    • Luxury Tax
    • Entertainment Tax, except that levied by certain local entities
    • Entry Tax
    • Tax on advertisements
    • Tax on gambling and lotteries
    • State cesses and surcharges
  8. GST is applicable to all services and goods, apart from alcohol that is consumed by humans.
  9. There are 4 tax rates under GST, i.e., 5%, 12%, 18%, and 28%. Also, some services and goods fall under the list of tax-exempt items.
  • Tobacco products will attract GST and Central Excise Duty.
  • Input credit corresponding to CGST will be used for paying CGST on output. Similarly, input credit corresponding to SGST/UTGST will be used for paying SGST/UTGST on output. This implies that the two channels of input tax credit cannot cross over, except in the case of IGST payments.
  • Electronic filing of tax returns will be available for different classes of taxpayers at varying cut-off dates.
  • An anti-profiteering clause is provided which ensures that businesses pass on the tax benefits to consumers.
  • Goods and Services Tax Network (GSTN) has been established as a private company by the Government. GSTN will offer mainly three front-end services to the taxpayer, i.e., registration, payment, and return.
  • GSTN will also develop IT modules for the smooth transition from the old tax structure to GST. This service will be available to 25 states that have decided to opt for it.
  • GSTN has identified 34 financial technology and IT companies that will act as GST Suvidha Providers (GSPs). These companies will develop applications that taxpayers will use.

Latest GST Notifications

GST Notifications are the latest amendments to the existing provisions under:

  1. Central Goods and Services Tax Act, 2017
  2. Integrated Goods and Services Tax Act, 2017
  3. Union Territory Goods and Services Tax Act, 2017
  4. Goods and Services Tax (Compensation to States) Act, 2017