The most ambitious indirect tax reform, the Goods and Services Tax (GST) will soon be a reality. The Union Cabinet at a meeting chaired by Prime Minister Narendra Modi on Monday approved four Bills related to GST, paving the way for introduction and eventual passage of these laws by Parliament.
The Central GST Bill, the Integrated GST Bill, the Union Territory GST Bill and the GST (Compensation to the States) Bill were cleared by the Cabinet and are expected to be introduced in Parliament this week.
“With the Cabinet approval of these four Bills, the GST regime in India is in the final stages of culmination and the GST law will most likely be implemented from July 1, 2017. The above four Bills have been earlier approved by the GST Council after thorough, clause by clause, discussion over 12 meetings of the Council held in the last six months,” the Finance Ministry said in a statement after the Cabinet clearance.
“It is expected that the implementation of the Goods and Services Tax law will lead to an increase in gross domestic product (GDP) of the country by 1-2 per cent . This in turn will lead to the creation of more employment and increase in productivity,” it said.
The CGST Bill makes provisions for levy and collection of tax on intra-state supply of goods or services or both by the Central government. On the other hand, IGST Bill makes provisions for levy and collection of tax on inter-state supply of goods or services or both by the Central government. The UTGST Bill makes provisions for levy on collection of tax on intra-UT supply of goods and services in the Union Territories without legislature.
The Compensation Bill provides for compensation to the states for loss of revenue arising on account of implementation of GST for a period of five years.
The GST Council chaired by Union Finance Minister Arun Jaitley, which is scheduled to meet on 31 March, would now discuss the formulation of rules that will govern the new tax. After the rules are approved, the Council will decide the fitment of various commodities into the tax slabs.
The GST Council had last year decided on four tax slab rates, 5 per cent , 12 per cent, 18 per cent and 28 per cent. In its 12th Council meeting held last week, it has also approved the upper limits on the various cesses that are to be imposed on luxury and demerit goods. While the cess on luxury goods has been capped at 15 per cent, the maximum cess on pan masala has been capped at 135 per cent and it is 290 per cent for tobacco.