THE UNION Cabinet chaired by Prime Minister Narendra Modi on Monday approved four bills related to Goods and Services Tax (GST) , paving the way for the introduction and eventual passage of these draft laws by Parliament. The Central GST Bill, the Integrated GST Bill, the Union Territory GST Bill and the GST (Compensation to the States) Bill, which were cleared, are expected to be introduced in Parliament this week.
“With the Cabinet approval of these four bills, the GST regime in India is in the final stages of culmination and the GST law will most likely be implemented from July 1, 2017. The above four Bills have been earlier approved by the GST Council after thorough, clause by clause, discussion over 12 meetings of the Council held in the last six months,” the finance ministry said in a statement after Cabinet clearance. ‘Hope To See Breakthrough On GST’: PM Modi Before Budget Session
“It is expected that the implementation of the Goods and Services Tax law will lead to an increase in Gross Domestic Product (GDP) of the country by 1-2%. This in turn will lead to the creation of more employment and increase in productivity,” it said.
The CGST Bill makes provisions for levy and collection of tax on intra-state supply of goods or services or both by the central government. The IGST Bill makes provisions for levy and collection of tax on inter-state supply of goods or services or both by the central government. The UTGST Bill makes provisions for levy on collection of tax on intra-UT supply of goods and services in the Union Territories without legislature.
The Compensation Bill provides for compensation to the states for loss of revenue arising on account of implementation of GST for five years.
The GST regime is expected to make the tax administration efficient and result in a reduction in tax evasion as a result of the computerisation of the taxation process, the finance ministry said.
The GST Council chaired by Union Finance Minister Arun Jaitley, which is scheduled to meet on March 31, would now discuss the formulation of rules that will govern the new tax. After the rules are approved, the Council will then decide the fitment of various commodities into the tax slabs.
The GST Council had last year decided on four tax slab rates — 5 per cent , 12 per cent, 18 per cent and 28 per cent — with another “zero tax rate” on several items that approximately constitute half of the consumer price index basket including food grains.
In its meeting last week, the Council has also approved the upper limits on the various cess that are to be imposed on luxury and demerit goods. While the cess on luxury goods has been capped at 15 per cent, the maximum cess on pan masala has been capped at 135 per cent and 290 per cent for tobacco.
The environment cess has been capped at Rs 400 per tonne. The actual cess on these items will be decided later but the cap has been provided in the draft legislation. Finance ministry officials had said that the government plans to maintain the same level of tax incidence as it applied earlier.
The government will also regularly review price of 300 commodities post introduction of the GST to ensure the new tax regime does not lead to inflation. These items in the basket of Consumer Price Index (CPI) will be reviewed to study impact on inflation.