Cabinet Clears Four Bills for GST; Will Move Parliament Next

The Cabinet on Wednesday cleared four bills related to the Goods and Services Tax (GST) and is likely to introduce the same in the ongoing session of Parliament. The proposed GST regime is expected to simplify the existing indirect tax structure in India and create a unified market, boosting economic growth.

What is GST?

GST is a comprehensive indirect tax on manufacture, sale, and consumption of goods and services throughout India, replacing several earlier indirect taxes levied by the central and state governments, such as excise duty, service tax, and value-added tax (VAT). The GST regime will have a dual structure, with both the central and state governments levying taxes on supplies, based on the place of supply, with a mechanism for tax-credit on input taxes paid to the supplier.

Key Provisions of the Four Bills

The four bills cleared by the Cabinet are:

The Central GST Bill (CGST Bill)
The Integrated GST Bill (IGST Bill)
The Union Territory GST Bill (UTGST Bill)
The Goods and Services Tax (Compensation to States) Bill

The CGST Bill provides for the levy of the central GST on all goods and services supplied within a state, except those exempted by the GST Council. The IGST Bill provides for the levy of the integrated GST on all inter-state supplies of goods and services, with the credit for the IGST paid being available for the payment of central GST or state GST. The UTGST Bill provides for the levy of the GST on all goods and services supplied within the Union Territories, except those exempted by the GST Council. The Compensation to States Bill provides for compensation to the states for any loss of revenue due to the implementation of the GST for a period of five years.

Impact of GST on Small and Medium Businesses

The proposed GST regime is expected to have a positive impact on small and medium businesses in India, as it will provide for a simplified tax structure and reduce the compliance burden. Under the GST regime, businesses with a turnover of up to Rs. 20 lakhs will be exempted from registration, and those with a turnover of up to Rs. 50 lakhs will be eligible for a composition scheme, under which they can pay taxes at a lower rate.

The GST regime will also provide for a seamless flow of input tax credit, as it will be available across the entire supply chain, from the manufacturer to the end consumer. This will reduce the cascading effect of taxes and result in lower prices for consumers.

Conclusion

The clearing of the four GST bills by the Cabinet is a major step forward in the implementation of the GST regime in India. The proposed GST regime is expected to simplify the existing indirect tax structure and create a unified market, boosting economic growth. The regime will also have a positive impact on small and medium businesses in India, by providing for a simplified tax structure and reducing the compliance burden. The GST regime is expected to be implemented from July 1, 2017.