5 things you must know about GST

MUMBAI, INDIA: The Goods and Services Tax bill has crossed the Lok Sabha hurdle. Members of the Parliament in the Lok Sabha have passed the GST constitutional amendment bill.

GST, which is proposed to be implemented from April 1, 2016, will subsume excise, service tax, state VAT, entry tax, octroi and other state levies like value added tax, octroi and entry tax, luxury tax.

However, there are 5 things you should know about GST.

1. GST will be levied on buyers of goods and services, or where the service is consumed. Therefore, large consuming states such as Uttar Pradesh, West Bengal and Kerala may get a high share of the taxes at the expense of manufacturing states such as Gujarat, Maharashtra or Tamil Nadu. To compensate for this, the bill provides for 1 percentage point extra tax on goods for at least two years. The extra revenue will go to the state from which the goods are deemed to have originated, or where it was originally manufactured. The final consumer will bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages.

2. After the Center and the states pass the GST law, a framework for the new tax will be penned. A GST council comprising the union finance minister as chairman, the union minister of state of finance and the finance minister of each state, will be formed and will decide on issues including tax rates, exemption list and threshold limit among other things. IT infrastructure has to be readied before April 1, 2016, for making the new regime operational.

3. As a measure of support for the states, petroleum products, alcohol for human consumption and tobacco have been kept out of the purview of the GST.

4. It will have two components - Central GST levied by the Centre and State GST levied by the states. However, only the Center may levy and collect GST on supplies in the course of inter-state trade or commerce. The tax collected would be divided between the Center and the states based on the recommendations of the GST Council.

5. The bill proposes an additional tax not exceeding 1 percent on inter-state trade in goods, to be levied and collected by the Center to compensate the states for two years, or as recommended by the GST Council, for losses resulting from implementing the GST.