The Goods and Services Tax(2): A few more Provisions

In this article, we will be covering the rest of the provisions of the GST Bill.

  • What is IGST?
    • IGST or Integrated Goods and Services Tax is a tax to be imposed by the centre on inter-state trade of goods and services.
    • Value of IGST: Approx equal to the sum of CGST and SGST.
    • This provision is made under Article 269(1) of the constitution, that is, “levy and collection of goods and services tax in the course of inter-state trade and commerce”.
  • Is there any use of IT in the GST?
    • Development of GST Network, a non-profit, non-government company.
    • Both centre and the states would register on this network.
    • The purpose of this would be to provide state-of-the-art IT infrastructure.
    • Also, a uniformity of interface for tax payment would be ensured all across the country.
    • This would ensure ease of tax payments and collection for all the stakeholders.
  • There has been a contention regarding loss of revenue to the states after the promulgation of the GST. How will it be addressed?
    • The centre will completely compensate for the losses to the states arising out of the promulgation of GST for 5 years.
  • What is 1% additional tax?
    • This provision sought to compensate the manufacturing states for the losses they had to face due to imposition of GST. Taxes like Excise , sales tax etc. were of primary advantage to the manufacturing states. GST would subsume them all resulting in a loss of revenue.
    • However, now this provision which was opposed by many has been removed and 100% compensation to the states for the losses that they incur, will be provided for 5 years as mentioned in the previous.
  • What are a few exempted goods/services under the GST bill?:
    • The list of exemptions is yet to be decided.
    • However, there has been a clarity on alcohol being out of the GST ambit.
    • Also, petroleum and petroleum products remain out of the ambit till the time decided by GST Council.
  • What is the GST Council?
    • Created as per Article 279A of the ‘amended’ constitution, that is, this article will be inserted in the constitution for the creation of the GST Council. So, the bill contains this provision.
    • Functions:
      • Decides on rates of the GST.
      • Goods and Services to be subsumed and exempted will be decided by the council.
      • Decision of Threshhold .
      • Decisions on Revenue Neutral Rate.
      • Decides on Model GST laws.
  • What is the Revenue Neutral Rate(RNR)?:
    • It is the rate at which the new tax, that is, GST should be levied so that the revenue generation remains the same.
    • For instance, there are two companies, say A and B. One is taxed at 20 and other at 30%.
    • So, on Rs.100 revenue , A would pay Rs.20 and B Rs. 30. Thus, revenue is Rs.50
    • When GST applies, there has to be a uniform rate of taxation.
    • Here, the most obvious choice is 25%  . Both companies taxed at 25% means a revenue generation of Rs.50.
    • This is the concept of revenue neutral rate.
  • What is the threshold limit?
    • It is the value of the turnover of the businesses below which there is no application of GST.
    • In other words, it is the minimum value of turnover of the businesses to come under GST net.
    • GST council has decided it to be 10% for the N-E and Hilly states(as their Revenue is generally low –>greater limit may mean complete exemption of all the businesses of the state) and Rs. 20 Lakh for the rest of India.

The next article will cover the advantages and the disadvantages of the GST.

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