New Delhi: With a constitution amendment bill all set to be introduced in Parliament on August 3, it seems that after a long delay the bill will finally see the light of the day as government has circulated official amendments to the GST bill to drop 1% additional tax and include a definite provision in the statute for compensating states for revenue loss for 5 years as it gears up to discuss the long-pending bill in the Rajya Sabha on Wednesday.
Under the modified provisions of GST Constitutional Amendment Bill circulated among the members on Tuesday, GST Council will be required to establish a mechanism for adjudication of disputes, which could arise between the Centre and states or among states themselves.
The 2014 bill authorised GST Council to decide upon the modalities for resolution of disputes.
With these official amendments, the government has partially met the demands of the Congress party which has been blocking the bill in the Rajya Sabha. One of the three demands of the Congress was to do away with the 1% additional manufacturing tax.
Finance Minister Arun Jaitley, at a meeting with his state counterparts last week, promised to keep the incidence of tax low while safeguarding the revenue of the states.
What is GST?
GST is a consumption tax that is collected on sale of manufactured goods and services. Since it is a consumption tax it is passed on until the last stage, wherein the customer bears the tax, just like excise duty is imposed currently.
GST an important tax reform is it simplifies the tax structure, increases tax compliance, increases government revenue and integrates states.
Benefits of GST:
The implementation of a unified GST in India is viewed as one of the most far-reaching indirect tax reforms that the country will see. It will replace all versions of indirect tax levies including VAT, octroi, excise duty, service tax and any other state-level taxes. But, till this time, there is no clarity on what will be the final rate structure will be.
Analysts say that after an initial increase in inflation, which will be transitory in nature, growth should kick in.
According to reports, experts says, GST would drive up CPI inflation by 20-70 basis points in the first year due to higher prices of electricity, clothing & footwear, health/medicine, and education after accounting for input taxes and potential asymmetric pricing behaviour by firms where tax increases may be quickly passed on to output prices, while firms refrain from fully passing-on tax savings to consumers.
However, in the long term, lower tax and logistic costs, productivity gains and higher investments under the GST should structurally reduce inflation.
How will this impact you
Well you may end up paying more taxes and the service tax of 15 percent may stretch to 18 percent but, the idea is to bring down the overall cost of goods and services since manufacturers will be freed from the burden of multi-level taxes and the tax will be levied only at the destination.
In general, the impact of GST seems positive on the economy, though for now GST may pinch your pocket.