By Faiz Askari, Editor, SMEStreet
The much awaited GST is set to embark into Indian economic system. The Constitutional Amendment Bill for introduction of Goods and Services Tax a (GST) cleared first hurdle on Wednesday when Lok Sabha approved the Bill by division vote.
The Government aims to introduce GST from April 1, next year. This new indirect tax regime will subsume central indirect taxes such as Central Excise and Additional Excise Duty and Service Tax besides others into Central Good & Service (CGST) and state levies such as VAT and entry tax besides others into States Good &Service Tax (SGST).
While adding his first hand views on an major milestone achieved by the GST roll out, Rajeev Dimri, Leader, Indirect Tax, BMR & Associates LLP said, “As widely expected by the industry, the GST related Constitution Amendment Bill was passed with the required majority by the Lower House of the Parliament. It is indeed a significant step towards implementation of the single largest indirect tax reform in India. However, passage of this bill by the Upper House of the Parliament, as well as ratification by more than 50 percent of the State Legislature is imperative for the implementation of GST in India. The aforesaid bill has been passed with amendments and therefore the impact of the same will only be known once the same is made available in the public domain.”
Mr Dimri specializes in structuring domestic & cross-border transactions for goods and services covering a range of indirect tax issues.
The Finance Ministers stated that the revenue neutral rate of 27 percent was very high and not based on recommendation of the Government or the Empowered Committee. The statement that it is expected to be significantly diluted allays fears of the industry and is welcome. While adding to this point, Mr Dimri also quoted, “It was also interesting that while responding to a specific question on the cascading effect on additional tax, the Finance Minister stated that the objective was to provide compensation to the states in which goods were manufactured, no explanation was provided on how the cascading effect of levy of such additional tax would be minimized. It would be useful to wait and watch the views of the proposed GST Council which will eventually have a final say in these matters.”
It is expected that GST will reduce prices in the long run and boost economic growth, Finance Minister Arun Jaitley said in the Lok Sabha. Finance Minister reiterated that Centre will compensate for any loss to the States. This package comprises compensation for five years, additional 1 per cent taxation for the manufacturing states and keeping alcohol and petroleum products out of GST.