What is Goods and Services Tax (GST)? Introduction to GST in India (Post-1)
GST is very vast and cannot be covered in single article. So this is the first article on GST regarding the introduction. Please do read my next article for further details:
Many of us might want to know basic information about GST and are willing to know about it in detail, well here is a small glimpse of the GST that will help to know about GST, how GST was implemented in India, :
What is Goods and Service Tax (GST)?
It is a destination based tax on consumption of goods and services. It is proposed to be levied at all stages right from manufacture up to final consumption with credit of taxes paid at previous stages available as setoff. In a nutshell, only value addition will be taxed and burden of tax is to be borne by the final consumer
Now, the question comes: What exactly is the concept of destination based tax on consumption? Well the answer is the tax would accrue to the taxing authority which has jurisdiction over the place of consumption which is
also termed as place of supply.
also termed as place of supply.
We will discuss the benefits of GST at the end of this blog. For now, lets see the history of GST Law in India and The Counsil structure of GST.
History Of GST In India:
The idea of a Goods and Services Tax (GST) for India was first mooted
years back, during the Prime Ministership of Shri Atal Bihari
Vajpayee. Thereafter, on 28th February, 2006, the then Union Finance
Minister in his Budget for 2006-07 proposed that GST would be introduced
from 1st April, 2010. The Empowered Committee of State Finance
Ministers (EC), which had formulated the design of State VAT was
requested to come up with a roadmap and structure for the GST. Joint
Working Groups of officials having representatives of the States as well
as the Centre were set up to examine various aspects of the GST and
draw up reports specifically on exemptions and thresholds, taxation of
services and taxation of inter-State supplies. Based on discussions
within and between it and the Central Government, the EC released its
First Discussion Paper (FDP) on GST in November, 2009. The FDP spelled
out the features of the proposed GST and has formed the basis for the
present GST laws and rules.
In March 2011, Constitution (115th Amendment) Bill, 2011 was
introduced in the Lok Sabha to enable levy of GST. However, due to lack
of political consensus, the Bill lapsed after the dissolution of 15th
Lok Sabha in August 2013.
On 19th December, 2014, The Constitution (122nd Amendment) Bill 2014
was introduced in the Lok Sabha and was passed by Lok Sabha in May 2015.
The Bill was taken up in Rajya Sabha and was referred to the Joint
Committee of the Rajya Sabha and the Lok Sabha on 14th May, 2015. The
Select Committee submitted its report on 22nd July, 2015. Thereafter,
the Constitutional Amendment Bill was moved on 1st August 2016 based on
political consensus. The Bill was passed by the Rajya Sabha on 3rd
August 2016 and by the Lok Sabha on 8th August 2016. After ratification
by required number of State legislatures and assent of the President,
the Constitutional amendment was notified as Constitution (101st
Amendment) Act 2016 on 8th September, 2016. The Constitutional amendment
paved way for introduction of Goods and Services Tax in India.
After GST Council approved the Central Goods and Services Tax Bill
2017 (The CGST Bill), the Integrated Goods and Services Tax Bill 2017
(The IGST Bill), the Union Territory Goods and Services Tax Bill 2017
(The UTGST Bill), the Goods and Services Tax (Compensation to the
States) Bill 2017 (The Compensation Bill), these Bills were passed by
the Lok Sabha on 29th March, 2017. The Rajya Sabha passed these Bills on
6th April, 2017 and were then enacted as Acts on 12th April, 2017. T
2015. 6 on 08.09.2016
Thereafter, State Legislatures of different States have passed
respective State Goods and Services Tax Bills. After the enactment of
various GST laws, GST was launched with effect from 1st July 2017 by
Sh.Narendra Modi, Hon'ble Prime Minister of India in the presence of
Sh.Pranab Mukherjee, the then President of India in a mid-night function
at the Central Hall of Parliament of India.
GST Council structure
As per Article 279A of the amended Constitution, the GST Council is a joint forum of the Centre and the States, and consists of the following members: -| Union Finance Minister | Chairperson |
| The Union Minister of State, in-charge of Revenue, Min. of Finance | Member |
| The Minister In-charge of Finance or Taxation or any other Minister nominated by each State Government | Members |
The Council is empowered to make recommendations to the Union and the States on the following:-
- the taxes, cesses and surcharges levied by the Union, the States and the local bodies which may be subsumed in the goods and services tax;
- the goods and services that may be subjected to, or exempted from the goods and services tax;
- model Goods and Services Tax Laws, principles of levy, apportionment of Integrated Goods and Services Tax and the principles that govern the place of supply;
- the threshold limit of turnover below which goods and services may be exempted from goods and services tax;
- the rates including floor rates with bands of goods and services tax;
- any special rate or rates for a specified period, to raise additional resources during any natural calamity or disaster;
- special provision with respect to the States of Arunachal Pradesh, Assam, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand; and
- the date on which GST shall be levied on petroleum crude, high speed diesel, motor spirit (petrol), natural gas and aviation turbine fuel
- any other matter relating to the goods and services tax, as the Council may decide.
The Constitution (One Hundred and First Amendment) Act, 2016 provides that every decision of the GST Council shall be taken at its meeting by a majority of not less than 3/4th of the weighted votes of the Members present and voting. The vote of the Central Government shall have a weightage of 1/3rd of the votes cast and the votes of all the State Governments taken together shall have a weightage of 2/3rd of the total votes cast in that meeting. One half of the total number of members of the GST Council shall constitute the quorum at its meeting.
On 12th September,2016 the Union Cabinet under the Chairmanship of the Hon'ble Prime Minister approved setting up of GST Council and creation of its Secretariat as follows:
- GST Council as per Article 279A of the amended Constitution;
- GST Council Secretariat, with its office at New Delhi;
- Secretary (Revenue) as the Ex-officio Secretary to the GST Council;
- Inclusion of the Chairperson, Central Board of Excise and Customs (CBEC), as a permanent invitee (non-voting) to all proceedings of the GST Council;
- One post of Additional Secretary to the GST Council in the GST Council Secretariat (at the level of Additional Secretary to the Government of India), and four posts of Commissioners in the GST Council Secretariat (at the level of Joint Secretary to the Government of India).
Benefits of GST to previous Taxation in India:
- Life got simpler: GST replaced 17 indirect tax levies and compliance costs fell.
- Revenue got a boost: Evasion drop. Input tax credit encourage suppliers to pay taxes. States and Centre have dual oversight. The number of tax exempt goods declined.
- A common market: No fragmented along state lines, which was pushing costs up 20-30% of goods.
- Logistics, Inventory costs fell: Checks at state borders slow movement of trucks. In India, they travel 280 km a day compared with 800 km in the US.
- Investment boost: For many capital goods, input tax credit is not available. Full input tax credit under GST mean a 12-14% drop in the cost of capital goods. Thanks to GST a 6% rise in capital goods investment, 2% overall.
- More Make in India: Manufacturing got more competitive as GST addresses cascading of tax, inter-state tax, high logistics costs and fragmented market. Increased protection from imports as GST provides for appropriate countervailing duty. Manufactured goods became cheaper thanks to lower logistics and tax costs.
- Less developed states got a lift: Previously 2% inter-state levy means production was kept within a state. Under the GST national market, this was dispersed, creating opportunities for others.
- GDP Lift: HSBC estimated an 80 basis point rise in GDP growth over 3-5 years. NCAER pegs this at 0.9-1.7% thanks to the elimination of tax cascading before implemenation. The Annual GDP went up also upto 8.2% and Quarterly GDP data last shown says 7.2% as on 28 Feb 18
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