GST Bill Cleared In Lok Sabha: How It’s Going To Benefit You (And Me)?

The much-awaited Goods and Services Tax (GST), the country’s biggest tax reform since Independence has been enacted into law on Wednesday with the passing of four bills in Lok Sabha.

The GST will unify India into a common market, eliminating a string of central and state levies.

Central taxes such as the central excise duty, additional excise duty, additional customs duty and service tax will all be merged into one CGST.

State levies such as VAT, sales tax, entertainment tax, purchase tax, mandi tax, luxury tax, octroi and entry tax will be subsumed into SGST.

The Centre will levy the central GST and integrated GST, while states will impose the SGST. Several countries have implemented GST or another form of a value-added tax, but Canada is the closest to India with a dual structure.

The new indirect tax is expected to shore up government revenue and spur economic growth by 1-2 percentage points.

Four-slab GST structure

– The new regime will have four slabs of 5%, 12%, 18% and 28%.

– There will be no tax on essential items such as rice and wheat.

– The lowest tax rate of 5% is proposed for items of mass consumption such as spices, tea and edible oil.

– There will be two “standard” rates of 12% and 18% covering most manufactured items and services.

– The highest tax, of 28%, will be imposed on items such as luxury cars, pan masala, tobacco and aerated drinks.

Compensation to states

– The compensation bill that was passed on Wednesday will ensure states get compensated for the first five years for the revenue loss after the GST rollout.

– The money will come from a fund created from the cess the Centre will charge on certain goods, above the GST rate.

Dual control on taxpayers

– The Centre and states will both assess taxpayers with an annual turnover of above Rs 1.5 crore.

– States will also have the power to assess taxpayers with a turnover below Rs 1.5 crore.

Exemption from GST

– In Northeastern states, businesses with an annual turnover of Rs 10 lakh or below will be exempt from GST. For the rest of India, the limit is Rs 20 lakh.

After an eight-hour debate, the Lok Sabha on Wednesday passed four GST or Goods and Services Tax-related bills putting the government on course for the launch on July 1 of the country's biggest tax reform since Independence. GST will subsume a slew of indirect taxes levied by the Centre and states, transforming India into a single market. The bills will now be presented in the Rajya Sabha or Upper House of Parliament. Calling it a "very significant step forward", Union Finance Minister Arun Jaitley said, "We seem to be on time... (we are) reasonably optimistic about meeting the deadline".

The bills passed on Wednesday are the Central GST bill, the Integrated GST bill, the Union Territories GST bill and the compensation law. After Parliament's nod, a state GST bill will be presented in state assemblies for their approval.

Finance Minister Arun Jaitley made a strong pitch for a simple tax regime in the debate, saying GST will make commodities "slightly cheaper".

To the opposition's objection to a GST with multiple rate slabs, the Finance Minister said, "If there are no multiple rates, it will become a highly regressive tax... Some goods are essential for the poor." To illustrate his point he said, "A BMW and Hawai chappal (slippers) can't have the same tax. What is the good, who uses it, matters."

The proposed GST rates range from five to 28 percent, with 12 percent and 18 percent being the standard rates. It has not been decided yet which tax rates will apply to which categories of goods.