Goods and Services Tax: A primer

The GST Bill is to be tabled in the current session of Parliament

After much dilly-dallying, a constitutional amendment Bill for goods and services tax (GST) is all set to be tabled in the current session of Parliament. Here is what constitutes GST:

i) Goods and Services Tax (GST) is a value-added indirect tax at the national level. This means that taxes will be imposed on value addition in supply chain, instead of total value of products.

ii) For this purpose, taxes paid on inputs by companies are refunded to them. This is called input credit. The arrangement makes final products cheaper as there is no cascading effect of taxes.

iii) After GST is introduced, there would be only one tax on goods and services we consume, segmented in two parts. Part of it would be collected by Centre and other part by the state, where consumption takes place.

iv) GST will subsume Value Added Tax (VAT), entry tax at state and local levels. In a way, GST can also be called national level VAT.

v) At the Central level, it would subsume services tax and excise duty. 

Vi) At present, states cannot impose services tax and Centre cannot impose taxes beyond manufacturing. To enable states and Centre impose these taxes under GST, a constitutional amendment Bill is proposed. 

vii) ) However, petroleum products will not be part of GST. Those using these products as inputs, would not get credit. This will make final goods using petroleum as inputs expensive. But the Centre says petroleum products would be out of GST only for a few years

vii) The bill has undergone many changes due to differences between Centre and states.

ix) Consensus with states is required since half of India's total states--15-- will have to approve the bill for it to become a law.

xviii) The bill has to be approved by two third of those present in both the houses of Parliament.