Thursday, December 11, 2014

Modi's Draft GST Bill Sinks

 

States oppose GST Bill; compensation, petro remain vexed issues

Last Updated: Thursday, December 11, 2014, 17:41 

States oppose GST Bill; compensation, petro remain vexed issues
New Delhi: In a setback to the Centre, states Thursday rejected the draft Goods and Services Tax (GST) Bill saying it does not address their concerns, particularly on entry tax and taxation of petroleum products.

At a meeting of the Empowered Committee of State Finance Ministers, the Centre's plan to bring petroleum goods under GST regime was opposed.

They also objected to the the Constitutional Amendment Bill as it does not contain provisions for giving states compensation against any possible loss of revenue after GST roll-out for five years.

"There is no consensus between the Centre and states on these three things (compensation issue, petrol tax and entry tax). The Empowered Committee is not supporting the Bill without these three things," Empowered Committee Chairman Abdul Rahim Rather said after a meeting of the state Finance Ministers.

The central government, he stressed, "will have to respect views of the states."

The states want that the Centre to compensate them for any loss of revenue on implementation of the GST for five years and a clause regarding the compensation be included in the Constitution Amendment Bill, Rather said.

The state governments are also keen on keeping the entry tax and petro tax out of the ambit of the GST.

In a bid to roll out the GST, which would subsume excise and service taxes, the Centre has come out with a new Constitutional Amendment Bill.

"Government hasn't agreed to our recommendations made last time, except one recommendation. We had said that the share of Union government in GST should go to the divisible pool and should be devolved among states , that has been agreed by Centre," Rather said. 

Rather said that the draft of the new Constitutional Amendment Bill, which was received by the Committee earlier in the month, did not take on board the suggestions of the state Finance Ministers.

"But we were surprised to know that government hasn't agreed to our recommendations made last time, except one recommendation with regard to putting GST in divisible pool," he added.

However, with regard to petroleum products, entry tax and compensation, he said, "the Government of India has not agreed to our recommendation."

Rather welcomed the decision of the Centre to release Rs 11,000 crore to states as compensation towards the central sales tax (CST) this financial year.

"So far as CST compensation is concerned, we are happy to know that the Centre has agreed to keep a provision of Rs 11,000 crore in the current year's budget...That will settle the claim of CST compensation up to the year 2010-11," he said, adding that the compensation for latter years would be discussed with Union Finance Minister Arun Jaitley.

Jaitley announced release of additional funds to the states while replying to a discussion on supplementary demands for grants in the Lok Sabha yesterday.

Clearance of CST compensation arrears has been a bone of contention between Centre and states.

CST, a tax imposed on the inter-state movement of goods, was reduced from 4 percent to 3 percent in 2007-08 and further to 2 percent in 2008-09 after the introduction of Value-Added Tax (VAT). The Centre had then promised the states that it would bear losses due to reduction of CST.

As part of the roll-out of GST, the CST is being phased out and has been reduced to two percent from the earlier four percent. The Centre collects CST and distributes it among states.

The GST roll-out has missed several deadlines because of lack of consensus among states over certain crucial issues on the proposed new tax regime.



PTI

First Published: Thursday, December 11, 2014, 16:57

GST to get Union Cabinet nod this week

tax
The GST — that will replace most indirect taxes such as central excise, service tax, VAT and surcharges and cess — is the most ambitious indirect tax reform initiated during the previous UPA regime .
NEW DELHI: The law ministry has cleared the goods and services tax (GST) bill that was brought to it for legal consultation and now the finance ministry will take the proposed constitutional amendment to the Cabinet in the coming week for its approval before it is tabled in the winter session of Parliament.

"We have cleared the goods and services tax (GST) bill and it is for the finance ministry to take it to the Cabinet," Law secretary P K Malhotra told TOI. Though the law secretary did not disclose the taxation rates to be proposed by the Centre for the new indirect tax structure, sources said the combined rates could be around 22% with states getting a higher levy and the freedom to impose certain taxes in addition to the central GST. A final decision on the tax structure in any case will be left to the GST council with state finance ministers as its members.

The GST — that will replace most indirect taxes such as central excise, service tax, VAT and surcharges and cess — is the most ambitious indirect tax reform initiated during the previous UPA regime but due to lack of consensus from states, the bill could not be taken up in Parliament for its passage. 
 
 

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Sid Harth
For Departmental Officers only 6 formidable. The number of taxpayers is likely to go up significantly. The existing IT infrastructure of CBEC would need to be suitably scaled up to handle such large volumes. B ased on the legal provisions and procedure for GST, the content of work - flow software such as ACES (Automated Central Excise & Service Tax) would require review. A ugmentation in human resources would be necessary to handle such large number of taxpayer s sc attered across the length and breadth of the country. 9 . The GST law is still evolving and the dialogue continues between the Centre and the States on related issues. A number of procedural, legal and administrative issues relating to GST are under active discussions in various Committees / Sub - committees constituted by the EC and in various Groups constituted by the CBEC. (This Note is for creating general awareness about the GST among the officers and staff of CBEC)
Sid Harth
For Departmental Officers only 5 the State VAT, the date of commencement of this levy w ould have to be synchronized across the Centre and the States. This is because the IGST model cannot function unless the Centre and all the States participate simultaneously. Recent Developments on the GST 7 . In 2013, four C ommittees have been constituted by the Empowered Committee of State Finance Ministers (EC) to deal with the various aspects of work relating to the introduction of GST . The Committees are: (i) The Committee on the Problem of Dual Control, Threshold and Exemptions in GST Regime ; (ii) Th e Committee on Revenue Neutral Rates for State GST & Central GST and Place of Supply Rules (A Sub - Committee has been constituted to examines issues relating to the Place of Supply Rules) ; (iii) The Committee on IGST & GST on Imports ( A Sub - Committee has been set up to examine issues pertaining to IGST model) ; (iv) The Committee to draft model GST Law (Three Sub - Committees have been constituted to draft various aspects of the model law) . 7 .1 The first three Committees have submitted their interim reports and final report s are awaited. 7 .2 CBEC officials , as members of these Committees / Sub - committees, are playing a significant role in the work relating to design and contours of the proposed GST regime. 7 .3 The meetings of the Empowered Committee are attended by the Nodal Member of the CBEC and other officials . 7 .4 A GST Cell has been created with in CBEC which functions under the Joint Secretary TRU – II. Two Groups have been constituted by CBEC to work on va rious aspects of the GST. Role of CBEC 8 . The CBEC is expected to play an important role in the drafting of GST law and procedures , particularly the CGST and IGST law , which will be exclusive domain of the Centre . This apart, the CBEC would need to prepare , in advance , for meeting the implementation challenges , which are quite
Sid Harth
For Departmental Officers only 4 ensure that decisions about the structure, design and operation of GST are taken jointly by the two. For it to be effective, such a mechanism also needs to have Constitutional force. Constitution (One Hundred and Fifteenth) Amendment Bill , 2011 5 . To address all these and other issues, t he Constitution ( 115 th Amendment ) Bill was introduced in the Lok Sabha on 22.03.2011 . The Bill provides for a levy of GST on all goods or services except for the specified goods . The tax shall be levied as Dual GST separately by the Union and the States. The Parliament would have exclusiv e power to levy GST on inter - State trade or commerce (including imports) in goods or services. The Central Government will have the power to levy excise duty in addition to the GST on tobacco and tobacco products. 5.1 A GST Council would be constituted co mprising the Union Finance Minister, the Minister o f State (Revenue) and the State Finance Ministers to recommend on the GST rate, exemption and thresholds, taxes to be subsumed and other features. This mechanism would ensure some degree of harmonization o n different aspects of GST between the Centre and the States as well as among States. 5.2 The Constitution Amendment Bill needs to be passed by a two - third majority in both Houses of Parliament and subsequent ratification by at least h alf of the State Leg islatures. The Bill was referred to the Parliamentary Standing Committee on Finance for examination and its report has since been received . C ertain official amendments are under discussions in the light of latest developments in the matter and the report of the Standing Committee . After passage of the Bill by both Houses of Parliament, ratification by State legislatures and receipt of assent by the President , the process of enactment would be complete. Other Legislative Re quirements 6 . Suit able legislation for the levy of GST (Central GST Bill and State GST Bills) drawing powers from the Constitution can be introduced in Parliament or the State Legislatures only after the enactment of the Constitution Amendment Bill. Unlike the Constitutiona l Amendment, the GST Bills would need to be passed by a simple majority. Obviously, the levy of the tax can commence only after the GST law has been enacted by the respective legislatures. Also, unlike
Sid Harth
For Departmental Officers only 3 (x) A common threshold exemption would apply to both CGST and SGST . D ealers with a turnover below it would be exempt from tax. A compounding option (i.e.to pay tax at a flat rate without credits) would be available to small dealers below a certain threshold. The threshold exemption and compounding provision would be optiona l. (xi) The list of exempted goods and services would be kept to a minimum and it would be harmonized for the Centre and the States as far as possible . (xii) Exports would be zero - rated. (xiii) An Integrated GST (IGST) would be levied on inter - State supply of goods or serv ices. This would be collected by the Centre so that the credit chain is not disrupted. Accounts would be settled periodically between the Centre and the State to ensure that the S GST used for payment of IGST is transferred to the destination State where th e goods or services are eventually consumed. (xiv) Import of goods or services would be treated as inter - State supplies and therefore, would be subject to IGST in addition to the applicable customs duties. (xv) The laws, regulations and procedures for levy and collec tion of CGST and SGST would be harmonized to the extent possible. GST an d Centre - State Financial Relations 4. Currently, fiscal powers between the Centre and the States are clearly demarcated in the Constitution with almost no overlap between the respective domains. The Centre has the power s to levy tax on the manufacture of goods (except alcohol ic liquor for human consumption, opium, narcotics etc.) while the States have the powers to levy tax on the sale of good s . In the case of inter - State sale s , the Centre has the power to levy a tax (the Central Sales Tax) but, the tax is collected and retained entirely by the States. As for services, it is the Centre alone that is empowered to levy service tax . Since the States are not empowered to levy any tax on the sale or purchase of goods in the course of their importation into or exportation from India, the Centre levies and collects this tax as additional duties of customs . This duty counterbalance s excise duties, sales tax, State VAT and other taxes levied on the like domestic product . Introduction of the GST would require amendments in the Constitution so as to concurrently empower the Centre and the States to levy and collect th e GST . 4.1 The assignment of concur rent jurisdiction to the Centre and the States for the levy of GST would require a unique institutional mechanism that would
Sid Harth
(vi) State taxes that would be subsumed within the GST are: a. State VAT b. Central Sales Tax c. Luxury Tax d. Entry Tax (other than those in lieu of octroi) e. Entertainment Tax (not levied by the local bodies) f. Taxes on advertisements g. Taxes on lotteries, betting and gambling h. State cesses and surcharges insofar as they relate to supply of goods or services (vii) Credit of C GST paid on inputs may be used only for paying CGST on the output and the credit o f S GST paid on inputs may be used only for paying S GST. In other words, the two stream s of input tax credit cannot be mixed except in specified circumstances of inter - State sales. (viii) GST would apply to all goods and services barring a few to be specified. (ix) Tobacco and tobacco products would be subject to GST. In addition, the Centre could conti nue to levy Central Excise duty and the State s to levy sales tax / VAT .
Sid Harth
(Roman numeral five) GST censored
Sid Harth
(iv) CGST and SGST would be levied at rates to be mutually agreed upon by the Centre and the States.
Sid Harth
(iii) It would be a dual GST with the Centre and the States simultaneously levying it on a common base. The GST to be levied by the Centre would be called Central GST (CGST) and that to be levied by the States would be called State GST (SGST).
Sid Harth
For Departmental Officers only 2 (ii) GST would be a destination based tax as against the present concept of origin based tax .
Sid Harth
For Departmental Officers only 1 Status of GST Introduction The introduction of Goods and Services Tax (GST) would be a very significant step in the field of indirect tax reforms in India. By amalgamating a large number of Central and State taxes into a single tax , it would mitigate cascading or double taxation in a major way and pave the way for a common national market. From the consumer point of view , the biggest advantage would be in terms of a reduction in the overall tax burden on goods, which is currently estimated at 25% - 30%. Introduction of GST would also make our products competitive in the domestic and international markets. Studies show that this would instantly spur economic growth. Last but not the least, this tax, because of its transparent characte r, would be easier to administer. Genesis 2. The idea of moving towards the GST was first mooted by the then Union Finance Minister Shri P. Chidambaram in his Budget for 2006 - 07. Initially, it was proposed that GST would be introduced by 1 st April, 2010. The Empowered Committee of State Finance Ministers (EC) which had formulated the design of State VAT was requested to come up with a roadmap and structure for the GST. Joint Working Groups of officials having representation of the States as well as the Cen tre were set up to examine various aspects of the GST and draw up reports specifical ly on exemptions and thresholds, taxation of services and taxation of inter - State supplies. Based on discussions within and between it and the Central Government, the E C re leased its First Discussion Paper (FDP) on the GST in November, 2009. This spells out the features of the proposed GST and has formed the basis for discussion between the Centre and the States so far. Salient Features of GST 3. The salient features of GST are as under: (i) GST would be applicable on supply of goods or services as against the present concept of tax on the manufacture or on sale of goods or on provision of services.
Sid Harth
CST, which is levied on the movement of goods from state to state, was lowered from 4% to 3% in 2007-08, and further to 2% in 2008-09 after the introduction of Value Added Tax (VAT). States were given a compensation of Rs 6,393 crore for 2010-11 but they insist on getting Rs 12,666 crore more for the period. The finance ministry lowered compensation to states that raised their VAT from 4% to 5%, taking into account the revenue thus raised. Source: Financial Express ...and I am Sid Harth
Sid Harth
No need for a major revision in GST Bill: Sushil Kumar Modi Gireesh Chandra Prasad | New Delhi | Published: Dec 28 2012, 01:58 IST The Goods and Services Tax (GST) Bill pending with a Parliamentary panel does not require major changes before its re-introduction in Parliament despite the recently ordered review of the proposed indirect tax regime�s design, said Bihar deputy chief minister Sushil Kumar Modi, who heads a panel of state finance ministers on GST. Two panels led by revenue secretary to the central government Sumit Bose set up last month to advise on GST�s design and states� compensation will miss their December 31 deadline but will meet on January 6 to take a view on the twin issues of Centre-state dispute. Modi told FE the panels chaired by Bose are looking into the details of the proposed GST which are not covered by the Constitution (115th Amendment) Bill, 2011. �It is a two-page Bill that deals only with the broad structure of the harmonised tax regime. Review of GST�s design and compensation to states do not warrant major revisions to the Bill,� said Modi. The pending Bill proposes concurrent taxing powers to both the Union and state governments and recommends setting up of a GST Council and a GST Dispute Settlement Authority. Modi said once the Parliamentary panel gives its recommendations, the Union government would table the Bill incorporating suggestions. However, BJP�s Yashwant Sinha, who heads the Parliamentary Standing Committee on Finance said earlier this month at the Express Group�s Idea Exchange programme that the House committee has suspended discussions on the constitutional amendment Bill saying the government opened fresh negotiations with state ministers on the Bill that was before the Parliamentary Committee. Sinha said the finance ministry has been asked to clarify if fundamental changes would be made in the design of GST. The ruling UPA coalition, that is a minority in the Upper House and has only a thin majority in the Lower House of Parliament, needs outside support including from the BJP for major reform measures. More so for a Constitutional amendment. Modi, who also belongs to BJP, declined to comment on Sinha�s statement saying the state finance minister�s panel on GST does not interact with the parliamentary committee. As for the design of GST, the things to be decided include the threshold (in terms of turnover of businesses) where the tax would kick in, central and state GST rates, a common list of exemptions with a small window for state-specific alterations etc. At the scheduled January 6 meeting, officials of the Union government and state ministers are expected to give final shape to a consensus on GST�s structure and compensation to states for their reduced revenue collection from central sales tax (CST) on goods.
Sid Harth
Not so fast. States reject Goods and Services Tax bill, petro tax remains vexed issue Thursday, 11 December 2014 - 5:44pm IST | Place: New Delhi | Agency: PTI In a setback to the Centre, states on Thursday rejected the draft Goods and Services Tax (GST) Bill saying it does not address their concerns, particularly on entry tax and taxation of petroleum products. At a meeting of the Empowered Committee of State Finance Ministers, the Centre's plan to bring petroleum goods under GST regime was opposed. They also objected to the the Constitutional Amendment Bill as it does not contain provisions for giving states compensation against any possible loss of revenue after GST roll-out for five years. "There is no consensus between the Centre and states on these three things (compensation issue, petrol tax and entry tax). The Empowered Committee is not supporting the Bill without these three things," Empowered Committee Chairman Abdul Rahim Rather said after a meeting of the state Finance Ministers. The central government, he stressed, "will have to respect views of the states." The states want that the Centre to compensate them for any loss of revenue on implementation of the GST for five years and a clause regarding the compensation be included in the Constitution Amendment Bill, Rather said. The state governments are also keen on keeping the entry tax and petro tax out of the ambit of the GST. In a bid to roll out the GST, which would subsume excise and service taxes, the Centre has come out with a new Constitutional Amendment Bill. "Government hasn't agreed to our recommendations made last time, except one recommendation. We had said that the share of Union government in GST should go to the divisible pool and should be devolved among states , that has been agreed by Centre," Rather said. Source: NDA ...and I am Sid Harth

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