GST Bill: States to get relief Union Finance Minister will seek the Cabinet’s nod on Wednesday for the 122nd Constitutional Amendment Bill on the Goods and Services Tax. The Constitutional Amendment Bill proposes to empower both the States and the Centre to levy the GST. At present, the Centre can tax services but not sales and distribution of goods. States can currently tax sales and distribution of goods but not services. The Bill proposes that the Centre be empowered to tax sales of goods and States get to tax services. The States have consistently demanded that the GST regime exclude real estate transactions and stamp duties. But the central government has said that extending the GST to real estate transactions will reduce black money generation in the sector. Consequently, low-cost housing will become more affordable. Modifications in the Bill: The Ministry has inserted into its draft Bill a provision guaranteeing compensation to States for losses of revenues owing to the transition to the GST. Now, it is proposed that the Constitution itself will provide that the Centre transfer funds to States to make good their losses of revenue owing to the shift to the GST over the first five years of the transition. The Bill provides further comfort to States by allowing them to charge additional 1 to 2 per cent GST to cover up for losses. This provision will have a sunset clause and will be available only for two to three years. Several GST rollout deadlines have been missed over the lack of consensus between the Centre and the States over a number of issues. Since the GST will be levied on consumption of goods and services, States that are net producers stand to lose revenue. A study commissioned by the Thirteenth Finance Commission had estimated that the simplification, efficiency and savings consequent to shift to a well-designed GST regime can boost India’s growth by up to 2.5 percentage points. The GST will subsume into one levy all indirect taxes imposed by the Centre and the States. These include entry tax. The GST will subsume the services tax, excise duties, stamp duties, entry tax, central sales tax etc.
Posted on: Thu, 18 Dec 2014 08:57:50 +0000