Govt tables GST bills in Lok Sabha, stokes hopes of 1 July rollout
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New Delhi: The government introduced the supporting legislation for the goods and services tax (GST) in Parliament on Monday, reinforcing expectations that it would make the 1 July deadline for the rollout of this singular tax reform.
The four supporting bills have been tabled as money bills in the Lok Sabha, which will ensure their smooth passage in Parliament; the Rajya Sabha, where the ruling National Democratic Alliance is a minority, cannot reject a money bill.
Finance minister Arun Jaitley introduced the central GST bill, the integrated GST bill, the Union territory GST bill and a bill to compensate states for revenue losses arising from the transition to GST amid protests from opposition parties, which pointed out that the bills were not listed in the agenda of the house.
The bills, which will be taken up for debate on Wednesday, are expected to be passed in the ongoing second half of the budget session.
Finalization of the legislation will give industry the necessary framework to prepare for the transition to GST. The tax aims to remove barriers to trade across states and integrate India into a common market.
The central GST bill empowers the central government to collect taxes on intra-state supply of goods and services.
It lays down the provisions based on which the various processes such as registration, tax payment, return filing, audit and assessment will function.
It also specifies the way tax evaders will be penalized and the dispute resolution mechanism, as well as powers of search and seizure and arrest given to the tax authorities.
The bill also includes an anti-profiteering mechanism to prompt companies to pass on the benefits of GST to end consumers.
The bill caps the effective tax rate under GST at 40%, though the tax rates agreed upon by the GST council are much lower. The council has agreed to a four-tier rate structure—5%, 12%, 18% and 28%.
The industry has been critical of some of the provisions of the bill—such as the need for service providers to register in every state, input tax credit availment subject to matching of tax returns filed by the buyer and supplier, powers of checking vehicles in transit and the provision to levy tax collected at source on e-commerce companies—arguing that they are counter to the aim of ease of doing business and may lead to an Inspector Raj. Still, these provisions have been retained at the instance of states.
The Union territory GST bill deals with levy of GST in Union territories. The integrated GST bill deals with intra-state sales and empowers the state tax authorities along with the central tax authorities to administer the act.
The finance minister also tabled the GST (compensation to states) bill, providing states compensation for five years for losses arising from a transition to GST. It provides for the levy of cess on items such as tobacco, cars, aerated drinks and pan masala over and above 28%.
The bills have been in the works over the past few months with the GST council—the representative body comprising of the Union finance minister and state finance ministers—finalizing the contours of the bill over 12 meetings.
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“With GST bills being presented in Lok Sabha, it has now reached the last mile,” said Pratik Jain, indirect tax leader at PricewaterhouseCoopers India.
“As next steps, industry would hope that adequate time is given to the working groups constituted last week on various sectors to examine the critical issues and provide their recommendations. The rules, which are to be taken up by the GST council on March 31st, also assume significance. Given the ground still to be covered, it would be good to implement GST by September 1 and give couple of more months to the industry to prepare for this huge transformation,” he said in a note.