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GST AND IT’S IMPLEMENTATION – A RETROSPECTION

By Sudarsan

GST – a brief explanation

Before explaining on GST it is better to lay out a brief intro on the indirect tax scenario prevailing in the country as of now. There are 2 levels of indirect levies on goods as of now ie by each State and by Central Government and on services only by Central Government. Also there are multiple taxes at various stages in case of products and services like

• Central Excise Duty
• Additional Excise Duties
• The Excise Duty levied under the Medicinal and Toiletries Preparation Act
• Service Tax
• Additional Customs Duty, commonly known as Countervailing Duty (CVD)
• Special Additional Duty of Customs – 4% (SAD)
• Surcharges, and

Levied by the Central Government and

• VAT / Sales tax
• Entertainment tax
• Luxury tax
• Taxes on lottery, betting and gambling.
• State Cesses and Surcharges in so far as they relate to supply of goods and services.
• Entry tax not in lieu of Octroi

Levied by the State Governments as applicable.

This Multiplicity of taxes and the lack of cross credit system, has caused a scenario of “tax on tax” in India.

With the implementation of GST all these taxes are expected to be subsumed and only GST will prevail so that the problem of tax on tax is avoided and need of cross credit does not arise. In respect of Central Taxes Customs Duty on import of goods will continue to protect national interest in line with the foreign trade policies.

Moving on to GST, meaning “Goods and Service Tax” , is a destination based consumption tax and the implementation of which is expected to result in reduction of product prices mainly due to Input credit becoming available for tax paid on services against tax paid on goods sold and vice versa.

GST adoption and rates in various countries.

More than 160 countries have adopted to or moved to destination based consumption tax in the name GST or VAT and the rates ranges from 5 to 25%. One of the early adopters were Canada in 1905 and recent adopter include Malaysia.

GST scenario and road map in India

On looking into GST Scenario or road map in India, implementation of GST was in the pipeline for the government from 2006 onwards and is hopefully going to be implemented after 11 years of planning and deliberation from 1^st April 2017.

The whole process kicked off with the then Finance Minister P.Chidambaram in Budget 2006-07 proposed the introduction of GST from 1^st April 2010. Accordingly in 2007 as part of phasing out  of CST (Central Sales Tax) to implement GST , CST was reduced from 4% to 3%. In May 2007, the Empowered committee of State Finance Ministers constituted a Joint Working Group. Also a study paper on GST by Dr. Parthsarathy Shome was released during this year.

In 2008, Empowered committee finalized it’s views on the broad GST Structure like Dual GST (Central & State), Separate Legislation, Levy and Administration. Also the CST rate was brought down from 3% to 2% in June 2008.By 2009, Empowered Committee released the first discussion paper on GST and in December 2009, the Finance Commission released it’s report on GST.

Due to Election etc the implementation was delayed in 2010 and the constitution amendment bill to roll out GST could be tabled in parliament  only in 2011. Due to political issues, passing of the bill was delayed. As a result, the Standing Committee on Finance could table it’s report on GST only in August 2013. In November 201, In discussions over the bill , the Empowered Committee rejected the Central Governments proposal to include petroleum products under GST.

The new government coming to power in 2014 revived the implementation process and based on the outcomes of the discussions, a revised Constitution Amendment Bill was tabled in Parliament on 19^th December 2014. After serious deliberations, the Constitution Amendment Bill on GST was passed in Lok Sabha on 6^th May 2015 and a select Committee forwarded it’s report to Rajya Sabha. By October 2015 the Joint Committee constituted by Empowered Committee released it’s business process reports on GST related to Payment, Refund, Registration and Return in public domain for comments. A model Draft Law of  GST was also released in public domain on 14^th June 2016 .

The Constitution Amendment Bill on GST was passed by Rajya Sabha on 14^th August 2016 and forwarded for assent by President of India. The bill got the assent of the President of India on 8^th September 2016 paving the way for enacting the GST Bill as Constitution (101 Amendment) Act 2016. Accordingly the Central Board of Excise and Customs released in Public Domain the Draft Rules and Formats related to Registration, , Invoice, Payment, Return and Refund for public opinion on 26^th September 2016. All of the above is indicating towards the implementation of GST from April 1^st 2017 onwards as targeted by the government.

GST – Difference in general GST legislation in other countries and of India

On implementation India will become the 3^rd country to implement Dual GST apart from Brazil and Canada. All other countries have implemented a single unified GST System.