Cabinet has introduced biggest indirect tax reforms Goods and Services Tax (GST) in the Lok Sabha to roll out the ambitious indirect tax regime from April, 2016.
On Wednesday cabinet has given assent to the revised constitution amendment bill which is now in Lok Sabha awaiting to be passed with two-third majority in both the houses of parliament and by the legislatures of half of the states to become a law. Constitution amendment bill will provide unified market at nation level by subsuming all other various indirect taxes such as service tax, excise duty, countervailing duty etc at center level and vat etc at state level. With the introduction of GST both the center and state needs to levy GST on both supply of goods as well as on rendering of services therefore providing a simplified system of levying the tax at various stage of transaction involving goods and services in comparison to earlier one where various tax structures are present.
While moving the bill in parliament, Finance Minister Arun Jaitley said that no state will loose in this tax reforms. There will be win win situation where center and state both will charge GST on supply of goods and rendering of services. There will be single most important tax reforms with potential to convert entire nation into single market and avoid taxation over taxation. This will replace series of various overlapping taxes.
Petroleum product will be included in GST with the zero rate for initial few years and thereafter decision will be taken by the GST council on this. By that time both center as well as state can levy their respective taxes i.e. center can levy excise duty and state have power to charge vat on the same. Entry tax will be completely subsumed under GST regime. For subsuming the taxes center will pay compensation to the states.
GST regime will remove cascading effects which is the drawback of present taxation system in the form of tax on tax. After series of negotiation on the amendment bill finally it is likely to become reality in this budget session meeting the deadline of April, 2016.