GST Rates

Proposed GST Regime

The Government of India (led by the BJP) introduced four crucial bills pertaining to GST in the Parliament in March 2017. Those bills are the Central Goods and Services (CGST) Bill; the Integrated Goods and Services Tax (IGST) Bill; the Goods and Services Tax (Compensation to States) Bill; and the Union Territory Goods and Services Tax (UTGST) Bill. All these bills have been passed by the Parliament. During the GST Council meet on November 3rd, 2016, it was mutually decided that there would be four GST rate slabs, and those are of 5%, 12%, 18%, and 28%.

According to the proposed GST rate in India, luxury and demerit goods would be taxed at 28% excluding cess, and goods associated with daily needs would be taxed at 5%. GST threshold for exemption is set at ₹10 lakh for the north-eastern as well as hill-area states, and it is ₹20 lakh for rest of the states in India. All the taxpayers who are liable to acquire GST registration now will have to make use of robust GST software and automated compliance engine to perform comprehensive range of compliance functions adroitly.

Benefits for small tax payers under the GST regime

  • If the aggregate turnover of a taxpayer is less than ₹75 lakhs in the preceding financial year (₹50 lakhs in case of few states), then he/she can opt for a simplified composition scheme. Such taxpayers shall pay tax at a concessional rate (depending upon the turnover).
  • Earlier, Centre and states agreed that the assessees with the annual turnover of up to ₹1.5 crore (US$220,000) will be assessed and administered by the states, whereas assessees with the annual turnover of more than ₹1.5 crore (US$220,000) will be assessed and administered by the center and states.
  • To ensure single interface, it was decided that administrative control over:
  • 1) 90% of taxpayers having turnover below ₹ 1.5 crore would vest with State tax administration.
  • 2) 10% of taxpayers having turnover below ₹ 1.5 crore would vest with Central tax administration.
  • 3) Taxpayers having turnover above ₹ 1.5 crore would be divided equally between Central and State tax administration.
  • However, during the ninth GST Council meet in January 2017, it was decided that whether a state or the center will assess an entity would be solely decided by computer programme.
  • The GST Council during the ninth meeting also resolved the logjam over the right to tax any economic activity that is performed or conducted within 12 nautical miles from India’s costs.
  • There will be no GST on the sale/purchase of securities; that would be governed by Securities Transaction tax (STT).

Five Concerns Outlined By The Opposition

There is no denial to the fact that GST rates had always been a point to ponder upon for the political parties in India. However, apart from discussing GST rate in India elaborately, opposition parties have also highlighted five crucial concerns that need urgent attention and fast-track resolution. Those concerns are:

  • Cap of GST Rate: Opposition parties have demanded a constitutional provision to cap the GST rate at 18% so as to protect the common man from the impact of rate of GST in India. Moreover, states have also demanded that the rate of GST in India should not impact the revenue generation capability of states.
  • 1% Manufacturing Tax: The 1% levy was to help manufacturing states remain assured of the fact that the implementation of proposed GST rates in India 2016/2017 do not lead to revenue loss; however, most of the sates in India are against this. Finally, the Cabinet has agreed to drop this additional manufacturing tax.
  • Compensation Guarantee: The Cabinet has made changes to the Bill to ensure compensation to the states that can encounter any revenue loss owing to implementation of the law as per the specified rate of GST in India during the first five years after GST is rolled out.
  • Dual Control: States had demanded an assurance that the central government will not have any control to tax businesses with a turnover of up to ₹1.5 crore. The current central government has agreed to include this provision in the GST Bill.
  • Dispute Resolution Mechanism: States and opposition have demanded a strategic and pragmatic mechanism that can resolve all sorts of dispute (that might occur once the GST is rolled-out) between center and states, and it has also been suggested that this proposed dispute resolution mechanism should be headed by a retired High Court judge.

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