India moved a step closer to becoming a unified market in line with the federalist vision of the architects of its Constitution with the tabling in Parliament on Monday of the GST Bill, which extends pan-India except to Jammu and Kashmir.While welcoming the development, industry, however, called for a postponement of the targeted implementation date of July 1, to allow it to prepare adequately for the GST rollout.Union Finance Minister Arun Jaitley introduced the Central Goods and Services Tax (CGST) Bill, 2017, along with three other related bills in the Lok Sabha, providing for a maximum GST rate of 40 per cent, an anti- profiteering authority and imprisonment for evading taxes.The GST will subsume various indirect levies of the Centre and states like service tax, excise duty, octroi and value added tax (VAT) and create an input tax credit chain for refunds. The CGST Bill will enable levy and collection of tax on intra-state supply of goods and services or both by the central government.Actual tax rates would be as per four-tier rate structure of 5, 12, 18 and 28 per cent as approved by the GST Council.
The peak rate of 40 per cent is only an enabling provision in case of financial emergencies.Jaitley also tabled the Integrated Goods and Services Tax (IGST) Bill, 2017, which provides for the levy and collection of tax on inter-state supply.The IGST law provides for a maximum tax of 40 per cent.State GST, which will amalgamate all state taxes like VAT, will be levied by the states and has to be approved by the respective state legislatures. Together, CGST and SGST will enable the GST incidence of 40 per cent.The CGST Bill also provides for e-commerce companies to collect tax at source at a rate not exceeding 1 per cent of net value of taxable supplies, out of payments to suppliers supplying goods or services through their portals.For small businesses, CGST provides for a tax of no more than 1 per cent of turnover for manufacturers with annual turnover of up to Rs 50 lakh. A 2.5 per cent tax is prescribed for suppliers.The Goods and Services Tax (Compensation to States) Bill provides for compensation to the states for the loss of revenue arising on account of implementation of GST.
The Union Territory Goods and Services Tax Bill, 2017, will enable levy and collection of tax on intra-state supply of goods and services or both by the union territories.The Compensation Law provides for levy of cess on top of the peak rate of approved tax (28 per cent presently) on paan masala, tobacco, aerated water, luxury cars and coal to create a non-lapsable fund for compensating states.This cess has a ceiling of 135 per cent in case of paan masala, Rs 4,170 per thousand cigarettes sticks or 290 per cent ad valorem, Rs 400 per tonne on coal and 15 per cent on aerated water and luxury cars.An anti-profiteering measure in the bill provides for constituting an Authority to examine whether input tax credits availed by any registered taxable person, or the reduction in the price on account of any reduction in the tax rate, have actually resulted in a commensurate reduction in the price of the particular goods or services supplied by the person.
The law provides for arrest, ordered by a Tax Commissioner, in case of suppression of any transaction or evading taxes. A person convicted is punishable by up to five years of imprisonment plus a fine.As the Finance Minister stood up to introduce the CGST Bill, Congress member K.C. Venugopal raised a point of order and said the bill was not part of the list of business. However, he added that he was not opposing the bill's introduction.Minister of State for Parliamentary Affairs S.S. Ahluwalia said the bills were approved late on Friday night, and the Lok Sabha Secretariat was closed during the weekend. He said the bills were uploaded on the government website on Friday midnight.Several opposition members, including Congress leader Mallikarjun Kharge, All India Majlis-e-Ittehadul Muslimeen leader Asaduddin Owaisi and Trinamool Congress leader Saugata Roy opposed the way in which the GST bills were introduced.Lok Sabha Speaker Sumitra Mahajan said: "It (four Bills) was circulated (on Saturday), but not listed in today's (Monday) list of business. I have given the waiver."
The bills were later listed in a supplementary list of business on Monday.Pratik Jain, Indirect Tax Leader at global accounting firm PwC India said: "As next steps, industry would hope that adequate time is given to the working groups constituted last week on various sectors to examine the critical issues and provide their recommendations." "Given the ground still to be covered, it would be good to implement GST by September 1 and give couple of more months to the industry to prepare for this huge transformation."Partner Indirect Tax at KPMG in India Santosh Dalvi said in a statement: "Hope the other key pending aspects as classification of goods and services, various rules, grandfathering of tax exemption schemes etcetera are also finalised soon so that industry gets enough time to implement GST readiness from IT and business perspective." "The official announcement towards July 1, 2017, would certainly help industry big way as it would provide the clarity on implementation date," he added.