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Goods and Services Tax (GST) is an indirect tax (or consumption tax) imposed in India on the supply of goods and services. It is a comprehensive multistage, destination based tax. Comprehensive because it has subsumed almost all the indirect taxes except few. Multi-Staged as it is imposed at every step in the production process, but is meant to be refunded to all parties in the various stages of production other than the final consumer. And destination based tax, as it is collected from point of consumption and not point of origin like previous taxes.

Goods and services are divided into five different tax slabs for collection of tax - 0%, 5%, 12%, 18% and 28%. However, petroleum products, alcoholic drinks, and electricity are not taxed under GST and instead are taxed separately by the individual state governments, as per the previous tax regime.[citation needed] There is a special rate of 0.25% on rough precious and semi-precious stones and 3% on gold.[1] In addition a cess of 22% or other rates on top of 28% GST applies on few items like aerated drinks, luxury cars and tobacco products.[2] Pre-GST, the statutory tax rate for most goods was about 26.5%, Post-GST, most goods are expected to be in the 18% tax range.

The tax came into effect from July 1, 2017 through the implementation of One Hundred and First Amendment of the Constitution of India by the Indian government. The tax replaced existing multiple flowing taxes levied by the central and state governments.

The tax rates, rules and regulations are governed by the GST Council which consists of the finance ministers of centre and all the states. GST is meant to replace a slew of indirect taxes with a federated tax and is therefore expected to reshape the country's 2.4 trillion dollar economy, but not without criticism.[3] Trucks' travel time in interstate movement dropped by 20%, because of no interstate check posts.[4]

Contents

HistoryEdit

FormationEdit

The reform of India's indirect tax regime was started in 1986 by Vishwanath Pratap Singh, Finance Minister in Rajiv Gandhi’s government, with the introduction of the Modified Value Added Tax (MODVAT). Subsequently, Prime Minister P V Narasimha Rao and his Finance Minister Manmohan Singh, initiated early discussions on a Value Added Tax (VAT) at the state level.[5] A single common "Goods and Services Tax (GST)" was proposed and given a go-ahead in 1999 during a meeting between the Prime Minister Atal Bihari Vajpayee and his economic advisory panel, which included three former RBI governors IG Patel, Bimal Jalan and C Rangarajan. Vajpayee set up a committee headed by the Finance Minister of West Bengal, Asim Dasgupta to design a GST model.[6]

The Ravi Dasgupta committee which was also tasked with putting in place the back-end technology and logistics (later came to be known as the GST Network, or GSTN, in 2015). It later came out for rolling out a uniform taxation regime in the country. In 2002, the Vajpayee government formed a task force under Vijay Kelkar to recommend tax reforms. In 2005, the Kelkar committee recommended rolling out GST as suggested by the 12th Finance Commission.[6]

After the defeat of the BJP-led NDA government in the 2004 Lok Sabha election and the election of a Congress-led UPA government, the new Finance Minister P Chidambaram in February 2006 continued work on the same and proposed a GST rollout by 1 April 2010. However, in 2011, with the Trinamool Congress routing CPI(M) out of power in West Bengal, Asim Dasgupta resigned as the head of the GST committee. Dasgupta admitted in an interview that 80% of the task had been done.[6]

In the 2014 Lok Sabha election, the Bharatiya Janata Party-led NDA government was elected into power. With the consequential dissolution of the 15th Lok Sabha, the GST Bill – approved by the standing committee for reintroduction – lapsed. Seven months after the formation of the then Modi government, the new Finance Minister Arun Jaitley introduced the GST Bill in the Lok Sabha, where the BJP had a majority. In February 2015, Jaitley set another deadline of 1 April 2017 to implement GST. In May 2016, the Lok Sabha passed the Constitution Amendment Bill, paving way for GST. However, the Opposition, led by the Congress, demanded that the GST Bill be again sent back for review to the Select Committee of the Rajya Sabha due to disagreements on several statements in the Bill relating to taxation. Finally in August 2016, the Amendment Bill was passed. Over the next 15 to 20 days, 18 states ratified the Constitution amendment Bill and the President Pranab Mukherjee gave his assent to it.[7][8]

A 21-member selected committee was formed to look into the proposed GST laws.[9] After GST Council approved the Central Goods and Services Tax Bill 2017 (The CGST Bill), the Integrated Goods and Services Tax Bill 2017 (The IGST Bill), the Union Territory Goods and Services Tax Bill 2017 (The UTGST Bill), the Goods and Services Tax (Compensation to the States) Bill 2017 (The Compensation Bill), these Bills were passed by the Lok Sabha on 29 March 2017. The Rajya Sabha passed these Bills on 6 April 2017 and were then enacted as Acts on 12 April 2017. Thereafter, State Legislatures of different States have passed respective State Goods and Services Tax Bills. After the enactment of various GST laws, Goods and Services Tax was launched all over India with effect from 1 July 2017.[10] The Jammu and Kashmir state legislature passed its GST act on 7 July 2017, thereby ensuring that the entire nation is brought under an unified indirect taxation system. There was to be no GST on the sale and purchase of securities. That continues to be governed by Securities Transaction Tax (STT).[11]

LaunchEdit

The GST was launched at midnight on 1 July 2017 by the President of India, and the Government of India. The launch was marked by a historic midnight (30 June – 1 July) session of both the houses of parliament convened at the Central Hall of the Parliament. Though the session was attended by high-profile guests from the business and the entertainment industry including Ratan Tata, it was boycotted by the opposition due to the predicted problems that it was bound to lead for the middle and lower class Indians.[12][13] It is one of the few midnight sessions that have been held by the parliament - the others being the declaration of India's independence on 15 August 1947, and the silver and golden jubilees of that occasion.[13] After its launch, the GST rates have been modified multiple times, the latest being on 22 December 2018, where a panel of federal and state finance ministers decided to revise GST rates on 28 goods and 53 services.[14]

Members of the Congress boycotted the GST launch altogether.[15] They were joined by members of the Trinamool Congress, Communist Parties of India and the DMK. The parties reported that they found virtually no difference between the GST and the existing taxation system, claiming that the government was trying to merely rebrand the current taxation system.[citation needed] They also argued that the GST would increase existing rates on common daily goods while reducing rates on luxury items, and affect many Indians adversely, especially the middle, lower middle and poorer income groups.[16]

TaxEdit

Taxes subsumedEdit

The single GST subsumed several taxes and levies which included: central excise duty, services tax, additional customs duty, surcharges, state-level value added tax and Octroi.[17][18] Other levies which were applicable on inter-state transportation of goods have also been done away with in GST regime.[19][20] GST is levied on all transactions such as sale, transfer, purchase, barter, lease, or import of goods and/or services.

India adopted a dual GST model, meaning that taxation is administered by both the Union and State Governments. Transactions made within a single state are levied with Central GST (CGST) by the Central Government and State GST (SGST) by the State governments. For inter-state transactions and imported goods or services, an Integrated GST (IGST) is levied by the Central Government. GST is a consumption-based tax/destination-based tax, therefore, taxes are paid to the state where the goods or services are consumed not the state in which they were produced. IGST complicates tax collection for State Governments by disabling them from collecting the tax owed to them directly from the Central Government. Under the previous system, a state would only have to deal with a single government in order to collect tax revenue.[21]

HSN codeEdit

HSN is an 8-digit code for identifying the applicable rate of GST on different products as per CGST rules of government of India. If a company has turnover up to ₹1.5 Crore in the preceding financial year then they need not mention the HSN code while supplying goods on invoices. If a company has turnover more than ₹1.5 Crore but up to ₹5 Cr then they need to mention the first two digits of HSN code while supplying goods on invoices. If turnover crosses ₹5 Cr then they shall mention the first 4 digits of HSN code on invoices.[22]

RateEdit

The GST is imposed at variable rates on variable items. The rate of GST is 18% for soaps and 28% on washing detergents. GST on movie tickets is based on slabs, with 18% GST for tickets that cost less than Rs. 100 and 28% GST on tickets costing more than Rs.100 and 28% on commercial vehicle and private and 5% on readymade clothes.[23] The rate on under-construction property booking is 12%.[24] Some industries and products were exempted by the government and remain untaxed under GST, such as dairy products, products of milling industries, fresh vegetables & fruits, meat products, and other groceries and necessities.[25]

Checkposts across the country were abolished ensuring free and fast movement of goods.[26]

The Central Government had proposed to insulate the revenues of the States from the impact of GST, with the expectation that in due course, GST will be levied on petroleum and petroleum products. The central government had assured states of compensation for any revenue loss incurred by them from the date of GST for a period of five years. However, no concrete laws have yet been made to support such action.[27] GST council adopted concept paper discouraging tinkering with rates.[28]

E-Way BillEdit

An e-Way Bill is an electronic permit for shipping goods similar to a waybill. It was made mandatory for inter-state transport of goods from 1 June 2018. It is required to be generated for every inter-state movement of goods beyond 10 kilometres (6.2 mi) and the threshold limit of 50,000 (US$720).[29]

It is a paperless, technology solution and critical anti-evasion tool to check tax leakages and clamping down on trade that currently happens on a cash basis. The pilot started on 1 February 2018 but was withdrawn after glitches in the GST Network. The states are divided into four zones for rolling out in phases by end of April 2018.

A unique e-Way Bill Number (EBN) is generated either by the supplier, recipient or the transporter. The EBN can be a printout, SMS or written on invoice is valid. The GST/Tax Officers tally the e-Way Bill listed goods with goods carried with it. The mechanism is aimed at plugging loopholes like overloading, understating etc. Each e-way bill has to be matched with a GST invoice.

Transporter ID and PIN Code now compulsory from 01-Oct-2018.

It is a critical compliance related GSTN project under the GST, with a capacity to process 75 lakh e-way bills per day.

Intra-State e-Way BillEdit

The five states piloting this project are Andhra Pradesh, Gujarat, Kerala, Telangana and Uttar Pradesh, which account for 61.8% of the inter-state e-way bills, started mandatory intrastate e-way bill from 15 April 2018 to further reduce tax evasion.[30] It was successfully introduced in Karnataka from 1 April 2018.[31] The intrastate e-way bill will pave the way for a seamless, nationwide single e-way bill system. Six more states Jharkhand, Bihar, Tripura, Madhya Pradesh, Uttarakhand and Haryana will roll it out from 20 April 18. All states are mandated to introduce it by May 30, 2018.

Reverse Charge MechanismEdit

Reverse Charge Mechanism (RCM) is a system in GST where the receiver pays the tax on behalf of unregistered, smaller material and service suppliers. The receiver of the goods is eligible for Input Tax Credit, while the unregistered dealer is not.

In a notification on 29 January 2019, the Indian government implemented the Reverse Charge Mechanism which started from 1 February 2019 as per the GST acts and amendments. Exemptions up to INR 5000 were removed effectively.[citation needed]

Goods kept outside the GSTEdit

  • Alcohol for human consumption(i.e. Not for commercial use).
  • Petrol and petroleum products (GST will apply at a later date) viz. Petroleum crude, High speed diesel, Motor Spirit (petrol), Natural gas, Aviation turbine fuel.[32]

GST CouncilEdit

GST Council is the governing body of GST having 33 members.[33] It is chaired by the Union Finance Minister. GST Council is an apex member committee to modify, reconcile or to procure any law or regulation based on the context of goods and services tax in India. The council is headed by the union finance minister Nirmala Sitharaman assisted with the finance minister of all the states of India. The GST council is responsible for any revision or enactment of rule or any rate changes of the goods and services in India.

Goods and Services Tax Network (GSTN)Edit

The GSTN software is developed by Infosys Technologies and the Information Technology network that provides the computing resources is maintained by the NIC. "Goods and Services Tax" Network (GSTN) is a nonprofit organisation formed for creating a sophisticated network, accessible to stakeholders, government and taxpayers to access information from a single source (portal). The portal is accessible to the Tax authorities for tracking down every transaction, while taxpayers have the ability of connect for their tax returns.

The GSTN's authorised capital is 10 crore (US$1.4 million) in which initially the Central Government held 24.5 percent of shares while the state government held 24.5 percent. The remaining 51 percent were held by non-Government financial institutions, HDFC and HDFC Bank hold 20%, ICICI Bank holds 10%, NSE Strategic Investment holds 10% and LIC Housing Finance holds 11% .[34][35]

However, later it was made a wholly owned government company having equal shares of state and central government..[1]

StatisticsEdit

CollectionsEdit

Month 2019-20 Collections Change 2018-19 Collections Change 2017-18 Collections Change
April 113,865 crore (US$16 billion)   103,459 crore (US$15 billion)   NA
May 100,289 crore (US$15 billion)   94,016 crore (US$14 billion)[36]   NA
June 99,939 crore (US$14 billion)   95,610 crore (US$14 billion)[36]   NA
July 96,483 crore (US$14 billion)[36]   NA
August 93,960 crore (US$14 billion) [36]   93,590 crore (US$14 billion)
September 94,442 crore (US$14 billion)[36]   93,029 crore (US$13 billion)  
October 100,710 crore (US$15 billion)[36]   95,132 crore (US$14 billion)  
November 97,637 crore (US$14 billion)   85,931 crore (US$12 billion)  
December 94,726 crore (US$14 billion)[37]   83,716 crore (US$12 billion)  
January 102,503 crore (US$15 billion)   88,929 crore (US$13 billion)  
February 97,247 crore (US$14 billion)   88,407 crore (US$13 billion)  
March 106,577 crore (US$15 billion)   89,264 crore (US$13 billion)  
Annual Average 98,114 crore (US$14 billion)   89,750 crore (US$13 billion)[a]

ReturnsEdit

Around 38 lakh new taxpayers have registered under GST regime and the total count has crossed one crore if we include the 64 lakh earlier ones.[38] Total number of taxpayers were above 1.14 crore in October 2018.[39]

2018-19 2017-18
Month No. of returns Change No. Change
March
February
January 73.30 lakh
December 72.44 lakh 67 lakh[38]  
November 69.60 lakh 64 lakh[38]  
October 67.45 lakh[36] 65 lakh[38]  
September 69 lakh[38]  
August 67 lakh[38]  
July 63 lakh[38]
June
May
April

CriticismEdit

Technicalities of GST implementation in India have been criticized by global financial institutions, sections of Indian media and opposition political parties in India. World Bank's 2018 version of India Development Update described India's version of GST as too complex, noticing various flaws compared to GST systems prevalent in other countries; most significantly, the second highest tax rate among a sample of 115 countries at 28%.[40][40]

GST's implementation in India has been further criticized by Indian businessmen for problems including tax refund delays and too much documentation and administrative effort needed.[41] According to a partner at PwC India, when the first GST returns were filed in August 2017, the system crashed under the weight of filings.[41]

The opposition Congress party has consistently been among the most vocal opponents of GST implementation in India with party President, and leader of the opposition, Rahul Gandhi, slamming BJP for allegedly "destroying small businessmen and industries" in the country.[42] He went on to pejoratively dub GST as "Gabbar Singh Tax" after an ill-famed, fictional dacoit in Bollywood films.[42] Blaming the implementation of gst as a "way of removing money from the pockets of the poor", Rahul has lamented it as a "big failure"[43] while declaring that if Congress Party is elected to power, it will implement a single slab GST instead of different slabs. [44] In the run-up to the elections in various states of India, Rahul has intensified his "Gabbar Singh" jibes on Modi government.[45]

See alsoEdit

NotesEdit

  1. ^ For 5 months only

ReferencesEdit

  1. ^ "All your queries on GST answered". The Hindu. Retrieved 30 June 2017.
  2. ^ "GST: Cars, durables face 28% rate; luxury vehicles to attract 15% cess", Business Standard, 18 May 2017
  3. ^ "Film theatres in Tamil Nadu to begin indefinite strike against GST". The Hindu. 2 July 2017. Retrieved 3 July 2017.
  4. ^ http://www.business-standard.com/article/economy-policy/gst-impact-trucks-travel-time-in-interstate-20-says-govt-117073000276_1.html
  5. ^ "Looking back at 's journey: How an idea is now near reality", Indian Express, 31 March 2017
  6. ^ a b c "GST: A 17-year-old dream, 17 phases towards creating history", India Today, 29 June 2017
  7. ^ "Goods and Services Tax: History of India's biggest tax reform and people who made it possible", India TV, 29 June 2017
  8. ^ "GST: Meet the men behind India's biggest tax reform that's been in making for 17 years", India Today, 29 June 2017
  9. ^ Nair, Remya (8 June 2015), "Rajya Sabha panel to hear GST concerns on 16 June", Live Mint
  10. ^ "GST rollout: All except J-K pass State GST legislation", The Indian Express, 22 June 2017
  11. ^ "GST draft makes it must for companies to pass tax benefit to costumers", The Times of India, 27 November 2016
  12. ^ "GST Rollout Attendees", Financial Express, 30 June 2017
  13. ^ a b "GST launch: Times when the Parliament convened for a session at midnight", The Hindustan Times, 30 June 2017
  14. ^ "Latest GST Cuts: Complete List Of What Just Got Cheaper", NDTV
  15. ^ PTI (30 June 2017). "GST launch divides opposition". livemint.com/. Retrieved 22 January 2018.
  16. ^ "Congress To Boycott GST Launch, Arun Jaitley Suggests Broader Shoulders", NDTV, 29 June 2017
  17. ^ "What is GST, how is it different from now: Decoding the indirect tax regime", Business Standard, 17 April 2017
  18. ^ "GST may swallow all taxes but cess", Business Standard, 20 September 2016
  19. ^ "On Notes Ban, Firm Warning From West Bengal To Centre: GST Now At Risk", NDTV, 30 November 2016
  20. ^ "Finance minister Arun Jaitley may hike service tax to 16-18% in Budget", The Times of India, 30 January 2017
  21. ^ "GST: The illustrative guide to how transactions will take place after tax reform". Money Control.
  22. ^ "Understanding HSN Codes Under GST". Masters India.
  23. ^ Mehra, Puja (27 June 2017). "GST, an old new tax". The Hindu - Opinion. Retrieved 3 July 2017.
  24. ^ "What is the GST impact on real estate?", The Indian Express, 5 July 2017
  25. ^ "GST rollout: List of items exempted from taxation". The Indian Express. 30 June 2017. Retrieved 30 July 2017.
  26. ^ "22 states scrap checkposts for smooth GST rollout", The Times of India, 4 July 2017
  27. ^ "'States on Board, GST Launch from April '16'". newindianexpress.com.
  28. ^ Sikarwar, Deepshikha (9 October 2017). "GST council adopts concept paper discouraging tinkering with rates". The Economic Times. Retrieved 9 October 2017.
  29. ^ "Businesses, govt gear up for E-Way Bill", The Hindu Business Line, 25 January 2018
  30. ^ "After e-way bill, government eyes tools to check GST evasion - Times of India". The Times of India.
  31. ^ http://www.financialexpress.com/economy/interstate-e-way-bill-phased-roll-out-from-april-15/1128842/
  32. ^ "After e-way bill, government eyes tools to check GST evasion". Times of India.
  33. ^ "Why many registered taxpayers are not filing GST returns". businesstoday.in.
  34. ^ "About Us – GSTN". gstn.org. Retrieved 6 February 2018.
  35. ^ "GST pivot faces nationalise call". telegraphindia.com.
  36. ^ a b c d e f g "GST collection surges to over Rs 1-lakh crore in October", Business Today
  37. ^ "GST Collection crosses ₹94,000 Crores in December 2018". E-Startup India. Retrieved 5 January 2019.
  38. ^ a b c d e f g "Why many registered taxpayers are not filing GST returns", Business Today, 27 February 2018
  39. ^ "GST collection crosses ₹1 lakh crore in Oct", The Hindu Business Line, 1 November 2018
  40. ^ a b https://economictimes.indiatimes.com/news/economy/policy/is-the-world-simpler-than-it-was-before-gst-this-jury-is-in/articleshow/64359881.cms
  41. ^ a b "India's introduction of GST proves painful | ACCA Global". accaglobal.com.
  42. ^ a b https://www.thehindu.com/news/national/gst-is-gabbar-singh-tax-says-rahul-gandhi/article19907042.ece
  43. ^ Bureau, Our. "GST is Gabbar Singh Tax: Rahul". @businessline.
  44. ^ ""If Elected, We Will Give You GST, Not Gabbar Singh Tax": Rahul Gandhi". NDTV.com.
  45. ^ "'Gabbar Singh Tax' now globally acclaimed: Rahul Gandhi mocks PM Modi - Times of India". The Times of India.

External linksEdit