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India took another critical step towards ushering in the Goods and Services Tax (GST) regime after Finance Minister Arun Jaitley introduced as many as four Bills — Central GST; integrated GST; Compensation to States and Union Territory GST— in the Lok Sabha on Monday.
Having been categorised as “money bills”, they are expected to have a smooth passage in the ongoing Budget session itself.
The Central Goods and Services Tax Bill 2017, among other things, has sought to cap the Central GST rate at 20 per cent for all intra-State supply of goods or services, or both. The only exception is in case of supply of alcoholic liquor for human consumption, where the rate will be separately notified.
This Bill also seeks to impose obligation on electronic commerce operators to collect tax at source, at such rate not exceeding one per cent of net value of taxable supplies, out of payments to suppliers supplying goods or services through their portals.
It also provides for self-assessment of the taxes payable by the registered person. Another interesting proposal relates to the anti-profiteering clause that ensures the business passes on the benefit of reduced tax incidence on goods or services, or both, to the consumers.
The Integrated Goods and Services Tax Bill 2017 has capped the rate on inter-State supplies of goods or services at 40 per cent except in the case of alcoholic liquor for human consumption. The integrated GST is proposed to be levied on both goods imported into India and also services imported into India. Services imported into India will be taxed on a reverse charge basis (service recipient to fork out the tax).
A supplier of online information and database access or retrieval services will also come under the integrated GST net.
The Goods and Services Tax (Compensation to States) Bill 2017 provides for payment of compensation to the States for loss of revenue arising on account of GST implementation for a period of five years. It provides that financial year 2015-16 would be taken as the base year for the purpose of calculating the compensation.
The compensation would be released bi-monthly against the figures given by the central accounting authorities provisionally. The final adjustment would be done after getting audited accounts of the year.
The biggest benefit of GST regime is that it would ensure seamless flow of credit from the raw material stage to the final retail stage. Under GST, the value chain will get integrated for tax purposes — a benefit that is not present in the current system.
The Centre is looking to roll out the dual-GST system from July 1 this year. .
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