Facts about GST Bill passed in Rajya Sabha.

Facts about GST Bill passed in Rajya Sabha.

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Facts about GST Bill passed in Rajya Sabha.

The 10-year-long wait for Goods and Service Tax (GST) Constitutional Amendment Bill is most likely to see the end of the tunnel in a matter of days. After deliberating through hours of Parliament over several sessions, both the Centre and the state governments have agreed to meet at a common ground.

The final stroke in completing the picture came on Wednesday when the Union Cabinet agreed to drop the 1 percent manufacturing tax and providing guarantee to compensate states for any revenue loss in the first five years of the rollout of GST.

This was at a meeting of the Empowered Committee of State Finance Ministers convened by Union finance minister Arun Jaitley.  The meeting also came to a broad agreement on the principle that the common man will benefit from introduction of GST by way of lower tax rates while the states will not face any loss of revenue.

The Bill was earlier passed in the Lok Sabha in May 2015, when the Centre had proposed 100% compensation for first three years, and 75% and 50% for the next two years. However, the select committee of the Rajya Sabha has now recommended 100% compensation for probable loss of revenue for five years.

Going by the Cabinet considering the Opposition’s major amendments that had once been a tough hurdle, the government may be able to get the mammoth of a constitutional amendment moving. Here are a few FAQs answered.

Why does GST need a constitutional amendment? 

Under the law, only the Centre can impose taxes on the services provided. But if GST is in place, states need to be allowed to collect service taxes as well. Hence, there needs to be constitutional amendment to empower states to do so.

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This will be the 122nd Constitution Amendment Bill.  What’s the purpose of GST?

In India, there are a number of taxes that are collected at various stages for goods and services by both Centre and the states. Manufactures are required to pay taxes when finished goods are out of their factory and the goods are again taxed by retail outlets. GST will unify all these different taxes and bind them into a single tax.

What kind of a GST model is proposed?

There are 140 countries that have already implemented GST, while most of them follow a unified GST. India will follow a dual-system as both Centre and state governments will be imposing tax. India will be the third country to follow a dual-system after Brazil and Canada.

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Currently what are under Central taxes and states taxes?

Central taxes: Central excise duty, Additional excise duty, Additional customs duty, Special Additional customs duty, Countervailing duty, Service tax, cesses and surcharges.  State taxes: VAT/sales tax, interstate sales tax, local tax, entertainment tax, purchase tax, mandi tax, luxury tax, tax on lottery and betting, and octroi or entry tax.  Goods that will be taxed separately from the GST:  Alcohol, tobacco, petroleum products are likely to be out of the GST umbrella.

Is there a last date for the government to pass the bill?

The government has already missed many deadlines. Currently, 1 April 2017 is set as the deadline for rolling out the GST and to bring trade under a common national market. To meet this deadline, it is necessary for the government to pass the Bill in the current Winter Session of Parliament.

If passed, then what?

Once the Bill is passed, the government will need to begin processes to implement it before the April 2017 deadline.

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