Lok Sabha passed the Constitutional Amendment Bill for introducing the Goods and Services Tax (GST) last year. The government is still debating on its implementation. The tax will become a single indirect tax which will cover a myriad of taxes like Excise Duty, Service Tax, Central Sales Tax, Value Added Tax, Entertainment Tax, Luxury Tax, and tax on lottery, gambling, etc.
Nitish Kumar of the JDU has recently become a vocal supporter of the tax. Though he is in support of the tax being introduced, he showed his displeasure with the capping of GST at 18 per cent.
The GST puzzle has been going on for a decade now. Even after the Centre passes the amendment smoothly, the state assemblies have to pass it separately. The actual implementation will come only after that.
Here’s how GST will impact the economy:
- Every dealer would be identified with a 13-15 digit unique TIN which would facilitate the dealer for taking care of compliances and would link the credit mechanism. All dealers would accordingly have to upgrade their IT systems and align the same with the vendor account and the customer account
- GST implementation will reduce the statutory compliances (such as issues of statutory forms, toll tax, waybills, etc.)
- Unified tax laws will change the current system of different point of taxation, treatment of discounts by each state law, etc. Thus, the dealer might have to structure his business
- With free movement of credit, dealers might re-negotiate with its vendors on the strength of reduced costs
Proposed rate of GST:
The two taxes i.e. SGST (State GST) and CGST (Central GST), would be simultaneously imposed which would together account for around 22-25 percent.