GST test for Narendra Modi today: Here’s what it means for PM, India and you

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The crucial constitutional amendment bill preparing the ground for the goods and services tax (GST) is all set to be taken up for consideration and approval by the Rajya Sabha.

The Bill’s passage will mark the achievement of a key milestone in the long-delayed progress of the reform, which the government wants to roll out on April 1 next year. The rollout of the key reform, however, will be a painstaking grind by the Centre and states. Here’s what you need to know about this key move.

Why is the GST Bill so important and why is there so much noise about it?

It is probably the most far-reaching tax reform in our lifetime that could end a cumbersome regime of multiple taxes on goods and services and bring them under one rate.

This one-stop tax move will cover taxes like central excise duty, state-level taxes like, VAT or sales tax, entertainment tax, entry tax, purchase tax, luxury tax and octroi.

How will that help?

The move will create uniformity in taxes across states, increasing efficiency & compliance and also boost Modi government’s big push towards ease of doing business.

But there’s been so much opposition from Congress, what makes Modi government look so sure about the GST this time?

The Centre has managed to iron out some differences with the states over GST’s implementation. It has –

1) Dropped 1% manufacturing tax to ensure GST does not lead to revenue loss for the states.

2) Decided to provide a guarantee to compensate states for any revenue loss in the first 5 years of GST rollout.

3) Has promised to work on a GST rate that cushions blow to the common man and also protects the revenue generating capacity of the states.

4) Agreed on dual control, which means Centre will not have control to tax businesses with a turnover below Rs 1.5 crore.

5) Has promised to create space for a dispute redressal system for the states

What does it mean for you, the consumer?

Expect cheaper goods but costlier services with GST. Under the current tax system, the consumer pays close to 25-26% more for manufactured goods due to excise and VAT. But an 18% GST would mean cheaper goods. The effective service tax at present is 15% but it will be 18% if GST goes through, making services expensive. So these things will become costly

1) Eating out

2) Air travel

3) Insurance premiums, investment management

4) Textile, branded jewellery

5) Mobile phone calls

6) Cigarettes

What will be cheaper

1) Small cars, two-wheelers

2) Movie tickets

3) Electronic items

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