The curtains dropped on the second part of the Budget session on the 12th of April with the historic GST bills being approved by the Rajya Sabha. The draft legislations were already through from the Lok Sabha and the Rajya Sabha did not have the powers to reject the money bills. All that Rajya Sabha could do was to make recommendations on the legislations and it was up to the Lok Sabha to accept or reject them. However, it was a smooth sailing and now it appears as the government is racing against time to introduce GST from its own set target date of July 1.
The GST Council had cleared all the five draft legislations- CGST, IGST, SGST, UTGST and the compensation rule is successive meeting spread over the last month. In addition to these, the GST council also capped the possible cess on demerit goods and luxury products at 15 per cent. The Modi government has done a commendable job by getting all the states on board in the journey leading to a unified GST. The whole country will be a single market under the new GST regime.
The Central government will garner the taxes on intra-state delivery of goods and services by means of CGST. The Inter-state aspect has been covered under the IGST bill. The SGST caters to the State government’s tax revenue on goods and services while the UTGST bill makes provisions for a levy on the collection of tax on intra-UT supplies. The Compensation bill, stands behind the state governments to cover them for the revenue shortfall if any arriving out of the GST implementation. The Central government has agreed for GST revenue loss compensation to the states for the next five years.
The Compensation bill requires a big pool to be created to fund the shortfalls in revenue. The government has been looking at a number of options and has invited flak for itself too. The country’s carbon tax, in the form of a cess on every tonne of coal that was mined, was introduced in 2010. It has been increased over the years and is being used for funding of the clean energy projects like wind and solar energy. Now, this cess is being diverted to feed the GST Compensation Fund, a move which is being detested by one and all.
People are used to VAT and will have to understand the difference with GST. VAT is applicable on goods only while GST applies on both goods and services. The GST rates will be 5, 12, 18 and 28 per cent as against 6, 13.5 and 20 per cent in case of VAT. In the intrastate transaction, VAT is applied while CST becomes applicable on interstate transactions. These will be replaced by CGST, SGST & IGST. To claim the input credit it would be necessary to match the transactions bill wise in GST.
For the businessman, trader, dealer and other taxpayers it would be prudent to pay taxes on time and furnish the desired information for reconciliation. This will make things simpler for ease of doing business.