After the Union Cabinet approved the proposal for
introduction of a Bill in the Parliament for amending the Constitution of India
to facilitate the introduction of Goods and Services Tax (GST) in the country
on December 17, 2014, the Union Finance Minister Arun Jaitley introduced the
said Bill in the Lok Sabha on December 19, 2014.
Once the GST Bill is passed, it would significantly
facilitate the growth of the auto industry in India, apart from several other
industries. According to a Press Information
Bureu (PIB) press release, the proposed amendments in the Constitution will
confer powers both to the Parliament and State legislatures to make laws for
levying GST on the supply of goods and services in the same transaction.
GST will simplify and harmonise the indirect tax regime in
the country. GST will broaden the tax base, and result in better tax compliance
due to a robust IT infrastructure. Due to the seamless transfer of input tax
credit from one state to another in the chain of value addition, there is an
in-built mechanism in the design of GST that would incentivise tax compliance
by traders. It is thus, expected that introduction of GST will foster a common
and seamless Indian market and contribute significantly to the growth of the
Following are the salient features of this Bill:
• A new Article 246A is proposed which will confer
simultaneous power to Union and State legislatures to legislate on GST.
• A new Article 279A is proposed for the creation of a Goods
& Services Tax Council which will be a joint forum of the Centre and the
States. This Council would function under the Chairmanship of the Union Finance
Minister and will have Ministers in charge of Finance/Taxation or Minister
nominated by each of the States & UTs with Legislatures, as members. The
Council will make recommendations to the Union and the States on important
issues like tax rates, exemptions, threshold limits, dispute resolution
• It is proposed to do away with the concept of ‘declared
goods of special importance’ under the Constitution.
• Centre will compensate States for loss of revenue arising
on account of implementation of the GST for a period up to five years. A
provision in this regard has been made in the Amendment Bill (The compensation
will be on a tapering basis, i.e., 100% for first three years, 75% in the
fourth year and 50% in the fifth year).
The proposed GST has been designed keeping in mind the
federal structure enshrined in the Constitution and will have the following
• Central taxes like Central Excise Duty, Additional Excise
Duties, Service Tax, Additional Customs Duty (CVD) and Special Additional Duty
of Customs (SAD), etc. will be subsumed in GST.
• At the State level, taxes like VAT/Sales Tax, Central
Sales Tax, Entertainment Tax, Octroi and Entry Tax, Purchase Tax and Luxury
Tax, etc. would be subsumed in GST.
• All goods and services, except alcoholic liquor for human
consumption, will be brought under the purview of GST. Petroleum and petroleum
products have also been Constitutionally brought 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, i.e., Sales Tax/VAT, CST and Excise duty only, will
continue to be levied in the interim period.
• Both Centre and States will simultaneously levy GST across
the value chain. 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. There will
be seamless flow of input tax credit from one State to another. Proceeds of
IGST will be apportioned among the States.
• GST is a destination-based tax. All SGST on the final
product will ordinarily accrue to the consuming State.
• GST rates will be uniform across the country. However, to
give some fiscal autonomy to the States and Centre, there will a provision of a
narrow tax band over and above the floor rates of CGST and SGST.
• It is proposed to levy a non-vatable additional tax of not
more than 1% on supply of goods in the course of inter-State trade or commerce.
This tax will be for a period not exceeding 2 years, or further such period as
recommended by the GST Council. This additional tax on supply of goods shall be
assigned to the States from where such supplies originate.
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