NEW DELHI: Parliament will today debate and vote on four supporting bills crucial to the implementation of the Goods and Services Tax, which will subsume a slew of indirect taxes currently levied by the centre and states. On the table in the Lok Sabha is the Central Goods and Services Tax (CGST) Bill, 2017, along with three other related bills, providing for a maximum GST rate of 40 per cent, an anti-profiteering authority and imprisonment for evading taxes.
The CGST Bill will allow the levy and collection of tax on supply of goods and services or both by the central government within a state. Actual tax rates will be based on a four-tier rate structure of 5, 12, 18 and 28 per cent, approved by the all-powerful GST Council that is headed by Finance Minister Arun Jaitley and has as members finance ministers of all states. The peak rate of 40 per cent is only an enabling provision in case of financial emergencies.
The CGST Bill also provides for e-commerce companies to collect tax at source at a rate not exceeding 1 per cent of net value of taxable supplies, out of payments to suppliers supplying goods or services through their portals.
For small businesses, the CGST Bill provides for a tax of no more than 1 per cent of turnover for manufacturers with annual turnover of up to Rs. 50 lakh. A 2.5 per cent tax is prescribed for suppliers.
On Monday, Mr Jaitley also introduced in the lower house of Parliament the Integrated Goods and Services Tax (IGST) Bill, 2017, the Union Territory Goods and Services Tax Bill, 2017, and the Goods and Services Tax (Compensation to States) Bill.
The IGST provides for the levy and collection of tax on supply of goods and services between states. The bill provides for a maximum tax of 40 per cent. A new clause has been introduced in the IGST bill to permit refund of taxes to foreign tourists for products bought during their stay in India. The tax refund will be on the lines of the VAT refund in England.
The Goods and Services Tax (Compensation to States) Bill provides for compensation to states for any loss of revenue from the implementation of GST. The Compensation Law provides for a levy of cess on top of the peak rate of approved tax (28 per cent presently) on paan masala, tobacco, aerated water, luxury cars and coal to create a non-lapsable fund for compensating states for five years after the launch of GST.
This cess has a ceiling of 135 per cent in case of paan masala, Rs. 4,170 per thousand cigarettes sticks or 290 per cent ad valorem, Rs. 400 per tonne on coal and 15 per cent on aerated water and luxury cars.
An anti-profiteering measure in the bill provides for setting up an authority to examine whether input tax credits availed by any registered taxable person, or the reduction in the price on account of any cut in tax rate, has resulted in a commensurate reduction in the price of goods or services supplied by the person.
The law provides for arrest, ordered by a Tax Commissioner, in case of suppression of any transaction or evasion of tax. A person convicted is punishable by up to five years in prison plus a fine.
The Union Territory Goods and Services Tax Bill, 2017, will enable levy and collection of tax on supply of goods and services or both within a union territory.
After the four bills being debated today are approved by Parliament, a state GST bill will need to be cleared by state assemblies before the unified tax regime can be launched. The state GST will amalgamate all state taxes like VAT or Value Added Tax and will be imposed by states.
GST will subsume various indirect taxes of the Centre and states like service tax, excise duty, octroi and value added tax (VAT) and create an input tax credit chain for refunds. GST is expected to boost economic growth by about 0.5 percentage points in its first year of implementation. The government also hopes the new taxes will broaden its revenue base and cut compliance costs for companies.