Challenges & Opportunity Era: Post GST, Preview

Amendments of GST BILL

NEW DELHI, 3 AUGUST 2016: Further to discussion with various stake holders, the Government has recently circulated official amendments to the GST Bill.  Commenting on the key amendments, Rajeev Dimri Leader, Indirect Tax, BMR & Associates  commented, “The key amendments include dropping of 1 per cent additional tax which was earlier proposed to be applied on the inter-state supplies.  The additional tax would have distorted the GST design and led to cascading of taxes, thereby negating the potential benefits of the GST structure.  Elimination of this tax would enable businesses to structure their operations based on commercial imperatives rather than being guided by the tax environment.  The proposed amendments suggest that the Parliament would now be necessarily required to legislate on providing compensation to the States for any loss of revenues, thereby, giving the compensation mechanism a statutory backing.  It has also been made obligatory for the GST council to develop a mechanism for addressing disputes between various Governments arising out of the recommendations of the GST council.  The proposed amendments are likely to make the GST design and policy mechanism robust and efficient.”

From GST Bill to GST Law: Process Afterwards

Once the Parliament passes the GST Bill, 50 percent of the States shall have to ratify it followed by the assent of the President.  The GST council can be constituted only after the Presidential assent. Meanwhile, the Empowered Committee would need to develop consensus on complex matters such as tax rates, exemptions, threshold limits, dual administration etc.  “Once such consensus is arrived at and blessed by the GST council, various GST legislations such as the Central GST law, Integrated GST law and 29 State GST laws including allied rules and notifications would need to be passed by the relevant legislative bodies.  During this process, there would also be a need for a substantial engagement with the industry bodies. Meeting the timeline of implementing GST by April 1, 2017 would require these processes to run in parallel and in a time bound manner.” Rajeev added.

“GST is likely to subsume some major Central and State levies such as duties of excise, additional duties of customs (applied in lieu of excise and local taxes), service tax, value added tax, central sales tax, entry tax, octroi and luxury tax.  These taxes in aggregate constitute typically 25 percent to 40 percent of the price of products with certain categories being taxed at lower rates.  There could be a reduction of tax incidence for several product categories if the standard GST rate is notified in the range of 18 percent to 20 percent.  Headline tax r,ate on services is likely to increase as these are currently taxed at 15 percent even though expansion of the input credit base should partially offset the increase.” He concluded.