1. GST Tax Rate Finds
Room in Draft Law
Also in law: input tax credit, compounding
scheme and tax on transaction value
2. Contd…
The draft goods & services tax (GST) law provides for tax rates in the legislation, partly
addressing a key demand of Congress for a cap on the levy .The law that's in the works also
suggests that all tax-related decisions will be under the purview of the proposed GST
Council and that the states and the Centre will not be able to unilaterally exempt any good
or service from the levy .
The law provides for full input tax credit flow, proposes a compounding scheme for
turnover up to ` . 50 lakh and introduces the concept of tax on transaction value. This is
absent in value-added and service taxes but is a feature of excise and customs duties.
“Work is going full throttle... The draft is being finalised,“ said an official who is part of the
deliberations on GST while confirming the broader details cited above.
The Narendra Modi government has been seeking to persuade Congress to drop its
resistance to GST and help get parliamentary approvals needed so the April 1 deadline can
be met for what is seen as a crucial economic reform. GST seeks to replace central and
state taxes such as excise duty, service tax, value-added tax, entry tax and octroi with a
single levy and create a unified national market.
3. Contd…
Congress has set four conditions for backing the constitutional amendment Bill in
Upper House, where the ruling dispensation does not have requisite numbers.
The main opposition party wants the rate to be capped at 18% in the Constitution
and the 1% levy on inter-state sales to be scrapped. It also wants an independent
dispute settlement mechanism and voting power of three-fourths for states in
place of the two-thirds suggested.
The government is not inclined to impose a constitutional cap on the rate, which
will be difficult to change, but has instead provided for the levy in the GST law.
In at least two key areas, building a consensus would appear to have become
simpler. A panel headed by Chief Economic Adviser Arvind Subramanian has
suggested a standard rate of 17-18% and recommended scrapping the 1%
additional levy. TALKS WITH CONG LIKELY SOON The recommendations provide the
government with a good starting point for talks with Congress that are likely later
this week.
4. Contd…
The draft law provides both rigidity and flexibility to GST framework by leaving
decision-making with the GST Council, which is being proposed in the constitutional
amendment Bill.
“This draft Act, though a work in progress, has finally given clarity regarding the
structure and can be a good base for individual indus tries to assess the impact of
GST on their business and represent to the government in case of issues,“ EY
Partner Bipin Sapra told ET.
Full input tax credit will also allow retailers to offset expenses against the total tax
liability, such as that paid on a refrigerator in a chemist's shop.
“Input tax credit provisions would be much broader and GST paid on any goods
services used in the course of, or in furtherance of, business would be allowed as
credit. This is good for businesses as their credit pool would be bigger and
hopefully litigation would be reduced,“ said Pratik Jain, partner, KPMG India. Under
the current value-added tax regime, there is a compounding scheme for businesses
below a turnover of ` . 50 lakh with a flat tax rate of 1% in many states.
5. For details and bookings contact:-
Parveen Kumar Chadha… THINK TANK
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