Goods and Services Tax (GST): An Outlook

After 17 years of waiting, replacing many indirect tax laws[1] making “One Nation One Tax” into reality. GST bill as The Constitution (One Hundred and First) Amendment Bill, 2017 has been passed by NDA government in the year 2016, August and after ratification by states and president assent, it came into force on 1^st July 2017.

History of the GST Bill

The restructuring process of India’s indirect tax was started in 1986 by the then Finance Minister in Rajiv Gandhi’s government by Vishwanath Pratap Singh with the introduction of the Modified Value Added Tax (MODVAT). Afterward, Manmohan Singh and the then Finance Minister P V Narasimha Rao initiated early discussions on a Value Added Tax at the state level.

The idea of GST model was conceived by the then BJP government as a reform of one tax rate under of leader of Atal Bihari Vajpayee during 1999, and he formed a 3 member committee headed by Asim Dasgupta to design the model of GST.

In the year 2004, Vijay Kelkar Task Force had strongly recommended that the integration of indirect taxes into the form of GST in India.

After 2004, fall of BJP government, the then-new finance minister P.Chidambaram in February 2006 continued work on the same and proposed a GST rollout by 1 April 2010.

At the union budget session for 2008-09, the finance minister confirmed that considerable progress was being made in the preparation of the GST.

Again in July 2009 Pranab Mukherjee, the new finance minister of India, announced the basic skeleton of the GST system. During November 2009, Asim Dasgupta put forth theFirst Discussion Paper (FDP), describing the proposed GST regime. The paper was expected to start a debate that would generate further inputs from stakeholders. And to begin the process the government introduced the mission-mode project that laid the foundation for GST. This project, with a budgetary outlay of Rs. 1,133 crore, computerized commercial taxes in states. Following this, the implementation of GST was pushed by one year.

In March 2011 Congress government put forth the Constitution (115th Amendment) Bill for the introduction of GST. Following a protest by the opposition party, the Bill was sent to a standing committee for a detailed examination but due to various reasons, the constitution bill has lapsed.

Again in December 2014, the new finance minister, Arun Jaitley, submits the Constitution (122nd Amendment) Bill, 2014 in the parliament. The opposition demanded that the Bill be sent for discussion to the standing committee.

In May 2015 Lok Sabha passed the Constitution Amendment Bill. But the bill has not passed in the Rajya Sabha. Later in March 2016, Jaitley had agreed Congress’s demand for the GST rate not to be set above 18%. In June 2016, The Ministry of Finance released the draft model law on GST to the public, for suggestions and views.

In August, the Congress-led opposition agreed to the Government’s proposal on the four broad amendments to the Bill. The Bill was passed in the Rajya Sabha.

The assent of President was given in the month of September 2016 and four Bills related to GST become Act, which is Central GST Bill, Integrated GST Bill, Union Territory GST Bill, GST (Compensation to States) Bill. Finally, GST was launched on 1^st July 2017.

The object of the bill was to introduce a uniform and transparent indirect tax regime in the country that will bring ease in doing new start-ups, widen the tax base and increase tax revenues, improve compliance, remove multiple tax structures, ease filing of tax returns by businesses, reduce inflation and increase overall GDP.

Changes after GST Bill

The GST Portal [2] has been introduced is a website where all the returns and registration related processes under GST is carried out. After GST Login, the registration, uploading of returns, uploading of invoices and payment of taxes, and other things are required to be done on the GST Portal.NSDL has been appointed to incubate the GST Portal and develop its functionality. NSDL has created a pilot portal known as “GST Pilot Portal”.

Here, every taxpayer will be issued a 15 digit common identification number which will be called as “Goods & Service Tax Identification Number” (GSTIN) a PAN-based number.

Online application form for dealers will be available to provide their details and upload documents. Registration includes basic steps like register themselves on the Enrolment page, and then Login using the given “User ID” and “password”, filling the application form by uploading the requisite documents related to excise, Service Tax, IEC, CIN, Professional Tax number, Shops & Establishment Number and any other state-specific registration numbers, contact numbers, postal address & E-mail address of business entity, bank account details including MICR code, place of business, details of goods & services, scanned signed photographs.

GST stands for Goods and Service Tax, it is a uniform indirect tax across the country on the products and services, where the tax will be laid on the value added at each stage of production (at each stage of change in ownership)with a slab ranging from 0%, 5%, 12%, 18% and 28%. And recently 3% slab has been added specifically for gold.

GST has been divided into three kinds,

• Central Goods and Service Tax, (CGST)
• State Goods and Service Tax, (SGST); Union Territories GST,
• Interstate Goods and Service Tax,(IGST)

As the names suggest, CGST, SGST, and UGST are levied by the central government, state government and UT government respectively on supplies within the state. IGST would be levied on interstate supplies and imports and collected by the Central government.

Advantages of GST

• Uniform Tax laws in whole of the country
• GST eliminates the cascading effect of tax
• Composition scheme for small businesses
• Defined treatment for E-commerce operators
• Inclusion and Regulation of unorganized sector

Challenges in Implementations of GST

• It is a completely online process beginning from the registration to the payment of tax and for a traditional method of pen-paper followers of India would find it difficult to understand.
• And also, ita difficult task for the small and medium enterprise to adapt it as they wouldn’t have equipped with such technical support.
• The whole GST is a complex concept to understand and it wouldn’t be easy for everyone to understand and adhere to it.
• Even though the aim was to simplify the whole tax structure but because of multiple tax slabs, it would be difficult in actual implementation.
• The job of corporate sector is going to, be doubled up as instead of 13 returns filling now they have to file 37 returns (3 returns per month and one annual return) and that is just for the office located in a single state, if they have multiple branches across the country, then multiple returns need to be filed.
• The accounting business software needs to be changed in the whole of the country enterprises who have VAT and Service tax incorporated in them.
• Apart from these, there are technological issues, bugs temporary blackouts in the GST portal regarding logging in.
• A major challenge would be to the companies who have to completely revamp their tax and IT infrastructure which would be a burden on them.

Conclusion

This major tax reform is not easy to digest sooner by everyone in the country. The challenges need to be overcome and complexes in the Act have to be reduced so that it accomplishes its actual object.

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– Vaishnavi Sabhapathi

Content Writer @ Legal Bites

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References

[1] Service tax, excise duty, countervailing duty (CVD), special additional duty (SAD), Additional duties of excise (ADE), and any other indirect central levy, VAT, sales tax, luxury tax, entry tax ,entertainment tax, purchase tax, Octroi, taxes on lottery, Central sales tax (CST).

[2] Hosted at https://www.gst.gov.in/

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Related Links

1. Exclusive Interview: Mr. Balesh Kumar – Principal ADG, Directorate General of GST Intelligence

2. Point of Action after GST

3. Actions Points for adoption of GST (Goods and Services Tax)

4. Indian Chamber of Commerce – 8th National Legal Summit, 2018