Cabinet may clear GST Bills to ensure roll out from July 2017

The Cabinet may take up for discussion and clearance on Monday five draft laws on Goods and Services Tax (GST) needed to implement the country’s biggest tax regime from July 2017.

“The Bills will be taken up by the Cabinet and after its approval they will be introduced in the Parliament,” a finance ministry official told Hindustan Times.

Read All About GST from Beginning

The Narendra Modi government is racing against time to roll out GST from July, after successive governments have missed several deadlines.

The GST Council headed by finance minister Arun Jaitley has cleared all the five draft laws–Central GST (CGST), Integrated GST (IGST), Compensation Rule, State GST (SGST) and Union Territory GST (UT-GST) bills.

On March 16, the Centre and states approved SGST and UT-GST Bills that will enable states and Union territories to introduce the GST, billed as India’s biggest tax reforms.

On March 4, the council had approved the CGST and IGST Bills.

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In the last meeting, the GST Council capped cess on demerit goods and luxury products at 15%.

The Modi government has been able to bring all states on board, overcoming almost a decade of political differences on how to replace a multi-layered set of central and state taxes and levies with a unified nationwide GST.

The ruling BJP’s victories in the latest assembly elections, especially in Uttar Pradesh, are expected to embolden the government to accelerate reforms and growth before the country heads for parliamentary polls in 2019.

The GST council has already approved two draft bills, for central and integrated GST. These will be tabled in Parliament and go to the states for ratification.

The unified tax will have four slabs of 5%, 12%, 18% and 28%. Farmers and small traders are exempt.

GST roll out is perceived to create a common market and help lower the tax burden, shore up government revenues, temper inflation and boost economic growth by at least two percentage points.

The GST legislation is likely to be taken up as money bills in Parliament this budget session, which restarted on March 9 after a month-long recess. The Rajya Sabha can’t reject money bills as it only has powers to make recommendations on such legislation, which the Lok Sabha can choose to accept or reject.

The passage of the bills will remove tax barriers, and subsume a host of indirect taxes levied by the Centre and the states, including excise, service, entertainment, entry, luxury and value-added taxes.


Hindustan Times, 20 March 2017

GST induces conflicts among state governments

Even as the government readies itself for rolling out Goods and Services Tax (GST) many Indian companies are worrying that they may be stuck between cross fire of two states fighting for revenues.

According to the GST law a state can challenge and demand a separate tax under GST, even if the amount was paid in another territory. Industry trackers say that many states that are set to lose out on revenues could become aggressive and can challenge GST calculations conducted by companies that doesn’t benefit them.

Read All About GST from Beginning

The problems say experts, is that currently there is no proper dispute resolution mechanism between the states and they will have to approach the appellate body or the Supreme Court. Industry trackers say that a separate readdressal mechanism is required for GST.

Under the GST mechanism some of the states where there are manufacturing hubs are set to lose out on revenues. This is mainly because GST is a consumption based tax. So GST would be paid at the point where goods or services are consumed and not where they are manufactured or generated. This would mean that poorer states like Bihar,

Uttar Pradesh or North Eastern states could see their revenues going up. While states like Maharashtra, Gujarat and Tamil Nadu would see their revenues depleting.

Many companies have already started preparing themselves for the GST. Some of the biggest manufacturers in the country have moved to level the playing field even before GST is put in place demanding that their vendors cut prices of goods supplied to comply with the anti-profiteering clause in the new tax regime.

The companies have already calculated the exact jump in the vendors’ margins and want that they pass it on to them. Most automobile companies and a handful of petroleum companies have started communicating to their vendors about this from early February.

The Economic Times, 10 March 2017

Government Should Have Cut Indirect Taxes, Says P Chidambaram

Former Union Finance Minister P. Chidambaram on Monday said that the best way to boost demands would have been to cut the indirect taxes.

“I would have cut indirect taxes. Thats the best way to boost aggregate demands. Nine out of ten economists will tell you to do that,” the Congress leader said in an interview to India Today news channel.

Asked to rationalise his suggestion in terms of Goods and Service Tax (GST) which will change the tax regime of the country, Chidambaram said: “GST is not around the corner. Not coming any where before October 1.

“In August last year, Goods and Services Tax (GST) bill, a proposed system of indirect taxation, was passed which will merge most of the existing taxes into single system of taxation.”

He was dismissive of it. He has not cut any indirect taxes that I think is a terrible mistake,” Chidambaram said while referring to Finance Minister Arun Jaitley’s decision to not cut indirect taxes in the Union budget.

Explaining further, he said, “The budget was presented on February 1. Indirect tax cut would come to force immediately.

He had eight full months to cut indirect taxes and see the effect of that on the economy.”Talking on the benefits of the reduction in the indirect taxes in the union budget, he added: “It would have boosted sales.

It would have allowed or encouraged people to make new investments.””There is so much slack in existing capacity, why would any one invest in creating new capacity?” he said.

Jagran English, 7 February 2017

Government will reach out the industry from April 1 to awareness of GST : FM

Presenting the Union Budget 2017, Jaitley said the government was ready for the implementation of the GST.

The finance minister, however, did not spell out any likely date for implementation of the new tax regime.

“GST Council has finalised recommendations on all issues, the preparedness of IT is on schedule. On April 1, the reaching out to the industry will begin to make them aware of the new tax system, as per schedule,” the finance minister said.

“Preparatory work on GST is top priority of the government. Several teams of the Centre and states are working towards it,” he added.

Jaitley refrained from making too many changes in the excise and customs as they would soon be replaced by the GST.

He further said the implementation of GST will bring in increased revenues to the Centre and states and spur competitiveness.

The GST Council held nine meetings to discuss the tax rate, threshold exemptions, compensation to the states, draft laws and administrative mechanism, among others.
The Finance Minister had earlier said that July 1, 2017, appeared to be a realistic option for implementing GST. The earlier implementation date was April 1, which is fairly out of the question after the GST Council resolved all its issues only by January 16 this year.
The Centre and the states agreed on a formula to resolve the issue of cross-empowerment and dual control under the Goods and Services Tax regime.


Times of India, 01 February 2017

Note Ban, GST to bring more revenues to government: Arun Jaitley

Finance Minister Arun Jaitley today put up a spirited defence of demonetisation, saying the drive “shook” the financial system for a short while, but will integrate the shadow economy with the formal in the long run and ensure better tax compliance.

He said most contentious issues regarding the Goods and Services Tax (GST) have been sorted out between the Centre and states and the new indirect tax regime is at the final stages of implementation.

“This (demonetisation), coupled with GST, in the days to come will ensure much larger revenues as far as states and the central government are concerned and expand the size as far as the formal economy is concerned,” Jaitley said at the CII Partnership Summit here.

Stating that India is largely a tax non-compliant society, he said states and the central government struggled with their revenues to run the system which created an unfair enrichment in favour of the evader.

“It also becomes very unfair on the normal taxpayer because what the evader manages to evade is what the compliant has to pay more,” Jaitley said.

The government, therefore, decided to demonetise the high denomination currency, “which shook the system for some time”.

Jaitley said demonetisation has gradually increased the process of integrating the shadow, parallel and informal economies in far greater number with the formal economy.

“The size of the formal economy is expanding, so are the transactions in the banking system and through the digital mode,” he said.

As for the implementation of GST, the finance minister said new indirect tax regime will make India one single market, eliminate multiple assessments, check evasion and bring more revenues into the system.

“I am glad that almost all state governments have actively co-operated in making this a reality. Most of the contentious issues have been sorted out in the GST Council, a forum where you will see deliberative democracy in action. Those are now at final stages of implementation,” Jaitley said.

The government plans to implement GST, which will subsume excise, service tax, VAT and other local levies, from July 1.

The Economic Times, 27 Janury 2017

GST Implementation – Government’s Perspective

After the enactment of Constitutional (101st Amendment ) Act, 2016, the hope for advent of Goods and Service Tax (“GST”) in India is no distant dream.  GST Council has also been notified on September 15, 2016 and thus, the policy formulators have taken their positions as part of this Think-tank and shall be responsible for taking the biggest fiscal decisions of the Country.   The initial decisions would include formulation of Model GST law, rates as shall be applicable to different goods / services, determination of exemption to goods and / or services, Rules and processes etc.

Having said the same, this main body requires a lot of homework by each of its constituents.  Since the body has become a single place for determining almost everything in relation to taxing supply of goods and services in the Country, each of its constituent would now have to understand the impact of every decision of the GST Council on its own subjects, impact on its treasury from such decisions, its relationships with its fellow states and also the movement of business into and out of its states.  All these decision would change the way Governments have till now visualized their indirect policy and the way they shall be doing the same in the new era.  Also, the focus of demands of the industry might also shift from state specific requests to request to GST Council.   At this stage it is pertinent to mention that while the focus of each state should be meet its local interest, however, for the success of GST in India, the aim should be national interest.

Thus, to achieve the above objective, every stakeholder, including government of all states, Central Government and Union territories with legislature would be required to formulate certain bodies and undertake certain works, some of which are proposed in this article:

Restructuring their administration cadre:  GST enactment would not be a big change only for tax payer but also the tax administration.  The way taxes were imposed and collected would see a drastic shift and thus, the restructuring of tax administration at all levels is inevitable.  The jurisdictions and subjects shall change, thus requiring the entire administration cadre to be restructured.  The change becomes more difficult when we speak about a country like India having varied demographic and cultural profiles.

Forming their own internal think tanks:  Though every government would be part of the larger think tank – the GST Council, to support their representation in the GST Council they would require a team of experts and administrators who can present their requirement to the representative and also are capable of assessing the impact of policy decisions proposed or taken in such GST Council.  The experts would come from different walks of trade including representatives of trade bodies/ associations, Accounting professionals, representatives of consumer bodies, economists, Information technology experts etc.

Reworking their tax administration system:  Increasing tax base is always the focus of every government as it denotes both prosperity amongst citizens and more revenue for government.  The manner of increasing tax base would altogether change in the new regime and the government would be required to learn new manner of administering their subjects – through electronic systems.  The new regime would be dependent on robust IT systems and also a team of techno-administrators who could analyse the huge data as shall be supplied by the taxpayers through electronic interface of GST Network (GSTN).  The IT infrastructure, interface with tax payers and analysis interface with departmental officers shall determine the fate of ease with which collections would be maximized in a proper manner by the respective governments.

Training for the new era:  Even though the entire infrastructure and interface be placed, desired results cannot be achieved unless the entire team of officers who shall administer the tax payer in the coming times are trained in a proper and systematic manner so that when the data of the tax payers is put before them, the same can be

Approachable approach: Apart from a lenient view, the addressal of the problems of the taxpayer be handled through a matured system of online and call centres wherein a taxpayer without being asked to disclose his identification can share his problem and can get an answer and sooner we may find a compliant tax base with lesser tax shortfalls.  The model need to be replicated in physical mode in form of help-desks at the government offices to address problems of small tax payers as well who are not much acquainted with technology.

Government should also ensure that GST provisions are made available in form of small booklets and mobile app in regional languages. Even important decisions impacting common tax payers should also be communicated in regional language to ensure effective communication with all stakeholders.

A soft approach:  The initial phase of the implementation shall have teething problem for both tax payer and administration.  While the focus on part of government shall be to properly capture its tax base as well as their transactions, the trouble is no less for taxpayer as he also shall be facing a lot issues in terms of understanding the new law, upgrading his IT infrastructure to meet the requisites of compliance, training his team etc.  These changes may result in errors and omissions on part of the subjects.  Though intentional evasions can never be ruled out but it is also to be believed that most of the taxpayers are not evaders and thus, an initial moratorium be allowed to all at-least for six months where when pointed out, and when tax and interest is paid by the tax payer, penalty proceedings should not be initiated against them.

Check on rise in commodity pricing: A basic fear which has grasped the minds of the citizens before the advent of GST is the rise in prices of basic commodities.  Thus, it becomes imperative on part of both Central and State governments to ensure check on commodity prices, particularly food items and medicines and if need be to take counter measures like maintaining stock and ensuring their availability through mass distribution mechanism.

To conclude:

Though each stakeholder might have hundreds of idea to make this proposed legislature better, however, the need of the hour is to provide ideas to make it a success.  Though each of the stakeholders is important, however, being the biggest stakeholder, government need to play the most important part to support all its subjects during this most challenging transformation of Indian Indirect taxation.