The Union Cabinet chaired by Prime Minister Narendra Modi on Monday gave its approval to four bills related to Goods and Services Tax (GST)- The Central GST Bill, the Integrated GST Bill, the Union Territory GST Bill and the GST (Compensation to the States) Bill. The approval from the cabinet has paved the way for introduction and eventual passage of the draft laws by the Parliament.
What is GST bill?
Goods and Services Tax bill is India’s biggest reform in India’s indirect tax structure. The purpose of the bill is to introduce one single tax on supply of goods and services, from the manufacturing stage until its delivery to the final consumer. The final consumer of the goods and/or services will only have to bear the GST charged by the final dealer in the supply chain, and avail set-off benefits at all the previous stages. This means interim tax stages such as excise duties and service tax and state levies like VAT will be absorbed under GST.
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What are the four bills that were approved by the Union Cabinet?
Central GST Bill: The CGST Bill sets the tax regime for levying and collection of GST on supply of goods and/or services that are happening within the boundaries of a state by the Central Government.
Integrated GST Bill: The IGST bill decides the tax regime for levy and collection of GST on supply of goods and/or services carried out between different states by the Central Government.
Union Territory GST Bill: The UTGST fixes the tax regime for levying and collection of GST on supply of goods and services in the Union Territories without legislature.
The Compensation Bill: The Compensation bill will compensate the states for loss of revenue which will occur due to the implementation of GST for a period of five years.
The four bills need an approval from the parliament to be implemented as laws. It is expected the government will table them as money bills in the parliament to ensure its smooth passage.
What are the benefits of GST?
The introduction of GST bill will help in simplifying administration as it removes multiple taxation systems at every stage of trade model and removes disturbances in production. It also aims towards providing a uniform tax rate for all goods and services. The manufacturers will be benefited by the tax regime as it will reduce the tax that levied on them. A system of seamless tax-credits will lead to minimal cascading of taxes, thus reducing hidden costs during trade.
Roadblocks for GST bill
The state GST bill has to be approved by every state government, before its introduction in Parliament for approval. At the moment, the state GST bill has been sent to all the states by their respective state legislatures for the approval.