Lok Sabha Question No. 45 (STARRED), answered on 2016-11-18
Subject: Goods and Service Tax
Ministry: FINANCE
Asked by: KOTHA PRABHAKAR REDDY, DINESH TRIVEDI

## GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE

## LOK    SABHA STARRED QUESTION NO. *45

TO BE ANSWERED ON FRIDAY, THE 18 TH  NOVEMBER, 2016 27 th  Kartika, 1938 (SAKA)

## GOODS AND SERVICE TAX

*45. SHRI PRABHAKAR REDDY KOTHA:

SHRI DINESH TRIVEDI:

Will the Minister of FINANCE be pleased to state:

- a)  the salient features of Goods and Service Tax (GST) and its benefits to various stakeholders  including  Centre,  States,  Industry  and  Consumers,  its  present status and the likely date of its implementation;
- b)  whether  the  Government  has  reached  a  consensus  with  the  States  and  other stakeholders  on  various  contentious  issues  like  cess  on  certain  items  of consumption and also compensation to States for losses post implementation;
- c)  if so, the details thereof and the outcome thereon;
- d)  whether the said Bill has been passed by many of the States and if so, the details thereof, State-wise along with the reasons for not enacting the legislation by the remaining States; and
- e)  the steps taken/being taken by the Government to reach out consensus with the States and expedite the implementation of GST across the country?

## ANSWER FINANCE MINISTER (SHRI ARUN JAITLEY)

- (a) to (e) A Statement is laid on the Table of the House.

## STATEMENT AS REFERRED TO IN REPLY TO PART (a) to (e) of STARRED QUESTION NO. *45 ON GOODS AND SERVICE TAX ASKED BY SHRI PRABHAKAR REDDY KOTHA & SHRI DINESH TRIVEDI TO BE ANSWERED ON 18.11.2016 IN LOK SABHA

- (a) The  President  gave  his  assent  to  the  Constitution  (One  Hundred  First Amendment)  Act, 2016 on 8 th September, 2016 paving the way  for introduction of Goods and Service Tax (GST) regime in the Country. All the provisions of the Act have now been brought into force.

The salient features of GSTare as under:

1. Dual GST: Both Centre and States will simultaneously levy GST across the value chain. Tax will be levied on supply of goods and services, as per recommendations of the GST Council. Centre would levy and collect Central Goods and Services Tax (CGST),  and  States  would  levy  and  collect  the  State  Goods  and  Services  Tax (SGST) on all  transactions  within  a  State.  The  Centre  would  levy  and  collect  the Integrated Goods and Services Tax (IGST) on all inter-State supply of goods and services. The IGST mechanism has been designed to ensure seamless flow of input tax credit from one State to another.
2. Destination-Based Consumption Tax: GST will be a destination-based tax. This implies  that  all  SGST  collected  will  ordinarily  accrue  to  the  State  where  the consumer of the goods or services sold resides.
3.  Central Taxes to be subsumed:
- i. Central Excise Duty
- ii. Additional Excise Duty
- iii. The Excise Duty levied under the Medicinal and Toiletries Preparation Act
- iv. Service Tax
- v. Additional Customs Duty, commonly known as Countervailing Duty (CVD)
- vi. Special Additional Duty of Customs-4% (SAD)
4.  State Taxes to be subsumed:
- i. VAT/Sales Tax
- ii. Central Sales Tax (levied by the Centre and collected by the States)
- iii. Entertainment Tax
- iv. Octroi and Entry Tax (all forms)
- v. Purchase Tax
- vi. Luxury Tax
- vii. Taxes on lottery, betting and gambling
5. All goods and services, except alcoholic liquor for human consumption, will be brought under the purview of GST :
- i. Petroleum  and  petroleum  products  have  been  constitutionally  included  as 'goods'  under  GST.  However,  it  has  also  been  provided  that  petroleum  and petroleum products shall not be subject to the levy of GST till notified at a future date on the recommendation of the GST Council. The present taxes levied by the  States  and  the  Centre  on  petroleum  and  petroleum  products,  viz.  Sales

Tax/VAT and CST by the States, and excise duty the Centre, will continue to be levied in the interim period.

- ii. Taxes on tobacco and tobacco products imposed by the Centre shall continue to be levied over and above GST.
- iii.  In  case  of  alcoholic  liquor  for  human  consumption,  States  would  continue  to levy  the  taxes  presently  being  levied,  i.e.,  State  Excise  Duty  and  Sales Tax/VAT.

## The benefits of GST are as under:

## 1.  For business and industry

- i. Easy  compliance:  A  robust  and  comprehensive  IT  system  would  be  the foundation  of  the  GST  regime  in  India.  Therefore,  all  tax  payer  services such  as  registrations,  returns,  payments,  etc.  would  be  available  to  the taxpayers online, which would make compliance easy and transparent.
- ii. Uniformity of tax rates and structures: GST will ensure that indirect tax rates and structures are common across the country, thereby increasing certainty andease  of  doing  business.  In  other  words,  GST  would  make  doing business  in  the  country  tax  neutral,  irrespective  of  the  choice  of  place  of doing business.
- iii. Removal  of  cascading  effect  of  taxes:  A  system  of  seamless  tax-credits throughout the value-chain, and across boundaries of States, would ensure that there is minimal cascading of taxes. This would reduce hidden costs of doing business.
- iv. Improved competitiveness:Reduction in transaction costs of doing business would  eventually  lead  to  an  improved  competitiveness  for  the  trade  and industry.
- v. Gain to manufacturers and exporters: The subsuming of major Central and State taxes in GST, complete and comprehensive set-off of input goods and services and phasing out of Central Sales Tax (CST) would reduce the cost of locally manufactured goods and services. This will increase the competitiveness  of  Indian  goods  and  services  in  the  international  market and give boost to Indian exports. The uniformity in tax rates and procedures across the country will also go a long way in reducing the compliance cost.

## 2.  For Central and State Governments

- i. Simple  and  easy  to  administer:  Multiple  indirect  taxes  at  the  Central  and State levels are being replaced by GST. Backed with a robust end-to-end IT system,  GST  would  be  simpler  and  easier  to  administer  than  all  other indirect taxes of the Centre and State levied so far.
- ii. Better controls on leakage: GST will result in better tax compliance due to a robust IT infrastructure. Due to the seamless transfer of input tax credit from one  stage  to  another  in  the  chain  of  value  addition,  there  is  an  in-  built

mechanism in the design of GST that would incentivize tax compliance by traders.

- iii. Higher  revenue  efficiency:  GST  is  expected  to  decrease  the  cost  of collection  of  tax  revenues  of  theGovernment,  and  will  therefore,  lead  to higher revenue efficiency.
3.  For the consumer

Single and transparent tax proportionate to the value of goods and services: Due to  multiple  indirect  taxes  being  levied  by  the  Centre  and  State,  with incomplete or no input tax credits available at progressive stages of value addition, the cost of most goods and services in the country today are laden with many hidden taxes. Under GST, there would be only one tax from the manufacturer to the consumer, leading to transparency of taxes paid to the final consumer.

The Government is working on a target date of 1st April, 2017 for the roll out of Goods and Services Tax (GST) in the country.

- b)  & c)

Presently,  the  GST  Council  has  had  four  meetings  wherein  it  has  come  to  a decision on threshold turnover limit, draft rules on registration, payment, refund, returns  and  invoices,  GST  rate  structure  and  GST  compensation.  All  of  these decisions have been based on consensus.

The  deliberations  of  GST  Council  on  various  issues  entrusted  to  it  are  in progress. With regard to compensation to States for losses post implementation, the Council has recommend the following :

- i. The base year for calculating compensation would be 2015-16.
- ii. A growth rate of 14 per cent would be taken for calculating the projected revenue of each state in the first five years of implementation of GST.
- iii. The  revenue  foregone  on  account  of  tax  exemptions  given  to  specific industries  by  the  11  states  mentioned  in  Article  279A  (4)  (g)  of  the Constitution will be considered for the calculation of compensation.
- iv.  Cess will be imposed on certain items of consumption over and above rate of 28% on items such as tobacco, luxury cars, aerated drinks etc. on which the existing incidence of taxation is much higher. This amount will be put in a separate compensation fund, out of which compensation will be given.

So far, all the decisions taken by the Goods and Services Tax Council have been arrived at by consensus.

- d)  As per Section 12 (4) of the Constitution (One Hundred and First Amendment) Act, 2016, the Goods and Services Tax Council shall make recommendations to the Union and the States on-
2. -model  Goods  and  Services  Tax  Laws,  principles  of  levy,  apportionment  of Goods and Services Tax levied on supplies in the course of inter-State trade orCommerce under article 269A and the principles that govern the place of supply.

Since, the deliberations of GST Council are still on, the question of passing any Bill by the States regarding State GST does not arise.

- e)  The  GST  Council  is  represented  by  all  States  and  Union  Territories  with Legislature and all the decisions taken by the Council so far have been based on consensus. The target date for the roll-out of Goods and Services Tax (GST) is 1st April, 2017 and the Government is making concerted efforts in the form of IT readiness, rigorous consultations, workshops  and  training session  for the industry and traders,and all other stake holders involved.Regular meetings of the GST Council are being held to finalize various recommendations required for the rollout of GST

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