Indirect Taxation

GST Council Approved Final Draft of Central GST and Integrated GST

04.03.2017

The all-powerful GST Council headed by Union Finance Minister Arun Jaitley approved final draft of Central GST (C-GST) and Integrated GST (I-GST). Further, on 16th march Council will finalise State-GST and Union Territory-GST (UT-GST) laws. The C-GST, empowers Centre to levy GST on goods and services after union levies like excise and service tax are subsumed, and I-GST that is to be levied on inter-state supplies, will go to Parliament for approval in the second half of the Budget session beginning from 9th March. GST will be implemented across the nation from July 1 provided Parliament approved it during budget session beginning from 9th March.

Under GST, a four-tier tax system has been fixed by Council that is slab of 5 per cent, middle range tax slabs of 12 and 18 per cent and one peak tax rate of 28 per cent to be implemented across the country. Further,GST Law will have an enabling provision for levy of up to 40 per cent tax (20 per cent by the Centre and an equal amount by the states) but the effective tax rates will be approved levels of 5, 12, 18 and 28 per cent. Cap rate in the legislation is put at a higher level to leave a space, just as in the Customs Act, there is a difference between the bound rate and applied rate. Applied rate is the one decided by council. The Council also decided to levy a 5 per cent GST (2.5 per cent by Centre and 2.5 per cent by state) on small hotels, restaurants and dhabas with an annual turnover of up to Rs 50 lakh.

In case of losses because of implementation of Goods and Service Tax (GST) in first five years, GST compensation law is introduced. The compensation will be funded by imposing cess on demerit and luxury goods. "The maximum cess rate will be mentioned in the compensation law. It would be applicable on basis of council’s decision. This law will go for approval in Budget Session.

Implementation of GST could not take place without amendment of the Indian Constitution. Therefore, Constitution (101st Amendment) Bill, 2016 has been passed. Article 246A provides that both parliament and state legislatures shall have concurrent powers to make laws with respect to goods and services tax (GST). The Parliament will retain exclusive power to legislate on inter-state trade or commerce. As per Article 269A, tax will be levied and collected by the Government of India and shared between the Union and States as per recommendation of the GST Council where interstate trade is concerned.

GST will replace several central and state indirect taxes. Article 279A of the Constitution provides for constitution of GST council. Council has been established for recommendations on important issues related to GST. Union Finance Minister is Chairperson of the Council. Nation looks forward for implementation of GST from 1st July.

Tags : Council Approval Implementation GST

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