GST Legislation: Fixation of Rate of Tax can be Most Problematic

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GST Legislation Fixation of Rate of Tax can be
Most Problematic
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• The most violent criticism of the NDA Govt.,
  headed by Shri Narendra Modi, had been that in
  two years of its functioning, he has not made any
  big bang economic reforms. The passage of the
  Constitution (122nd amendment) Bill by the Rajya
  Sabha on 3rd August, 2016 blunts this criticism
  and ushers in a historic change in the field of
  taxation relating to Indirect Taxes. This is
  hailed as the most significant important step on
  the lines of economic reforms introduced by the
  UPA Govt. in the year 1991.
• Why the Constitutional amendment needed?
• 2. The Constitution provides for clear division
  of powers in respect of taxation between Centre
  and states. While the Centre at present does not
  have the right to tax sale of goods, except in
  the case of inter-state sale, states cannot levy
  tax on services. The divisions are mentioned in
  the Article 246 under the Seventh Schedule of the
  Constitution.
• 2.1 The Constitution needs to be amended to
  provide for giving power to both the Centre and
  states in respect of GST, a single tax on goods
  and services. Therefore, the very first provision
  of the Bill is to add Article 246A after Article
  246. It says Parliament and the legislature of
  every state will have the power to make laws with
  respect to goods and services tax imposition by
  the Union or by such state. In the case of
  inter-state supply of goods or services or both,
  only Parliament will have the power.

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• Benefits from GST law
• 3. There have been jubilation all around in
  support of the Constitutional amendment, which
  when GST Act is enacted, lead to one nation one
  tax, one common market, lower rate of tax because
  of avoidance of cascading effect, simplified tax
  structure, subsuming of nearly 17 taxes into one
  single tax, boost to investment via cheaper
  capital goods, manufacturing to become
  competitive, higher tax revenue owing to lesser
  tax evasion, wider tax-base, lower costs in tax
  collections and compliance, lower logistics,
  protection from cheaper imports, transparency in
  working, input tax credits to incentivize
  suppliers to pay taxes, online trading will
  provide greater freedom, provide impetus to 'Make
  in India' campaign, lift GDP and various other
  such benefits.
• Many levels to cross
• 4. However, these benefits will enure only by
  crossing of large number of stages the passing
  of constitutional amendment, being the first
  stage, though most important one, which held
  further progress concerning GST law for nearly a
  decade, which stands crossed. Before the law
  becomes a reality, many more levels have to be
  passed through such as-
• The Constitutional amendment, after it has been
  assented to by the Parliament, will have to be
  ratified by 50 of States.
• The next important step, to be taken, is the
  constitution of GST Council.
• The Council will have to give recommendation on
  model GST laws, GST rate(s), etc.

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• Union Cabinet will have to approve Central GST
  Integrated GST and States will have to give
  approval to State's GST laws. Thus, what will
  emerge after such exercises is not one GST law,
  but a set of 38 taxes 29 State Taxes (SGSTs), 7
  Union Territories taxes, one Central GST (CGST)
  and one Integrated GST (IGST).
• The GST law, as formulated by the Central
  Cabinet and IGST, will need to be passed by the
  Union Parliament. State and UTs GST will need
  passage by the respective legislatures.
• After the GST Acts (supra) have been enacted,
  the respective Govts. will need to frame Rules
  for carrying out such Acts.
• IT infrastructure will have to be created for
  various laws of the Centre, the States and the
  UTs.
• Testing of the infrastructure will have to be
  done by January-March, 2017
• Officers of the Central, State Govts. and UTs
  (approx 60,000 to 70,000) will have to be trained
  preferably by Dec-2016.
• Outreach and sensitization for trade and industry
  will also need to be done, preferably by March,
  2017.
• 4.1 The Central Govt. proposes to bring into
  effect GST laws from 1st April, 2017. The task is
  formidable. One can wish good speed in this
  regard.

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