The GST bill in India: All your Questions Answered
GST may well be the biggest tax reform that India has ever undertaken. But, like most tax issues, it is rather complex to understand. The ‘one nation, one tax’ regime change is a huge challenge for the government. GST proposes to replace as many as 17 indirect tax levied by the Centre and states. In their place will come one comprehensive tax that will cover all other taxes.
To give you a better understanding of the new goods and services tax system, here are some FAQs about the GST Bill :
What is the Existing Indirect Tax Structure?
The Goods and Services Tax (GST) seeks to do away with the existing indirect tax structure in India. At present, goods and services attract central excise. The Center imposes this tax at the point of manufacturing of goods. There is also the value-added tax. The state government charges this at the point of consumption. Besides these, there are many other taxes. For example, state governments impose a sales tax when goods or services move from one state to another.
How would GST Change This?
GST proposes to replace such taxation, which is commonly referred to as ‘tax on tax’. The idea is to have a single comprehensive tax. The Centre and the state governments will share the proceeds at an agreed slab. The idea is to create a single market for goods and services in the country. This would do away with the fragmented structure that exists today.
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Why is the GST Bill Necessary?
To change the existing tax structure, a constitutional amendment is essential. This is why the GST bill was prepared and placed in the Parliament for approval. Finance Minister Arun Jaitley first placed the bill in the Lok Sabha in 2014. The Lok Sabha passed the bill last year in May. But then the bill underwent some amendments in the upper house. The Lok Sabha then passed the changes to the Constitution (22nd Amendment) Bill, 2014, in August this year. The Rajya Sabha had cleared the bill a week earlier.
How will GST Work?
Goods and services will come under various slabs for imposition of GST. The phasing out of some state taxes would happen once the GST replaces them. The final net burden of tax on goods, under GST, is likely to fall. GTS would make things a lot more transparent. It would help widen the coverage of the tax base and improve tax compliance. This may lead to a higher generation of revenues. In turn, it may lower the average tax burden.
Also Read : Breaking down GST
What is the GST Rate Structure?
The GST council is the core group set up by the government to implement GST in India. This council has decided on a five-tier rate structure for GST at 0%, 5%, 12%, 18%, and 28%. Essential items that people use on a daily basis will come under the lower bracket. Meanwhile, luxury goods will fall under the topmost slab. Preparing the broad framework is already complete. But the classification of all goods and services into the respective slabs has not been decided yet.
What are the components of GST?
GST will have two components: Central GST and State GST. These will denote the taxation powers of the two respective domains.