Jaitley moves GST bills in Lok Sabha, rates capped at 40%
With the introduction of the GST bills in Parliament, the government is in the last lap of the tax reform that will integrate India as one market with one rate of tax replacing multiple state and central levies.business Updated: Apr 02, 2017 07:58 IST
Finance minister Arun Jaitley on Monday introduced in Lok Sabha four crucial bills required to implement the Goods and Services Tax (GST).
The legislation capped the maximum GST levy at 40%, tweaked the compensation formula while mandating an anti-profiteering authority and jail term for tax evaders.
The four bills moved in the lower house of Parliament are the Central Goods and Services Tax (CGST) Bill, Integrated Goods and Services Tax (IGST) Bill, the Goods and Services Tax (Compensation to States) Bill and the Union Territory Goods and Services Tax (UT-GST) Bill.
The CGST, IGST and SGST provide for a maximum tax of 20% each. Taken any of the two taxes together, the bills provide that the maximum tax burden in the GST regime at 40% as an enabling provision for financial emergencies.
The actual rates in the four-slab structure will be 5%, 12%, 18% and 28%, as approved by the GST Council.
The GST (Compensation to States) Bill provides for mechanism for making good any loss of revenue of states from introduction of GST in first five years of rollout.
Businesses in the Northeastern and hill states with annual turnover below Rs.10 lakh would be out of the GST net, while the threshold for the exemption in the rest of India would be an annual turnover of Rs.20 lakh.
The GST will reduce the cascading impact of taxes, help shore up revenues, moderate inflation and spur economic growth by 1-2 percentage points.
The Compensation Law provides for levy of cess on top of the peak rate of approved tax on paan masala, tobacco, aerated waters, luxury cars and coal to create a fund for compensating states.
Such cess has been capped at 135% in case of paan masala, Rs 4,170 per thousand cigarettes sticks or 290% on value (ad valorem), Rs 400 per tonne on coal and 15% on aerated water and luxury cars.
The compensation to states will be paid bi-monthly and the amount due would be calculated after considering a 14% growth rate in taxes over the base year of 2015-16.
The GST legislations will be taken up as money bills in Parliament this budget session, which restarted on March 9 after a month-long recess. The Rajya Sabha can’t reject money bills as it only has powers to make recommendations on such legislation, which the Lok Sabha can choose to accept or reject.
The Narendra Modi government is racing against time to roll out GST from July, after successive governments have missed deadlines.
With the introduction of the bills in Parliament, the government is in the last lap of the tax reform that will integrate India as one market with one rate of tax replacing multiple state and central levies.