Finance Minister Arun Jaitley on Monday introduced in Lok Sabha four bills on Goods and Services Tax, providing for a maximum GST rate of 40 per cent, an anti- profiteering authority and arrests for evading taxes.
With this, rollout of GST – the biggest tax reform since independence – has entered the last lap and its passage by Parliament will pave the way for integrating India as one market with one rate of tax replacing multiple state and central levies.
Jaitley introduced a Central Goods and Service Tax or CGST bill which will amalgamate all the indirect central government levies like sales tax, service tax, excise duty, additional customs duty (Countervailing Duty), special additional duty of customs, surcharges and cesses.
CGST provides for a maximum tax of 20 per cent.
Actual rates would however be a four-tier tax structure of 5, 12, 18 and 28 per cent as approved by the GST Council.
The peak rate of 40 per cent is only an enabling provision for financial emergencies.
A Union Territory GST Bill will take care of taxation in UTs of Chandigarh, Andaman and Nicobar Islands, Lakshadweep, Dadra and Nagar Haveli and Daman and Diu.
A Bill on Integrated-GST — to be levied and collected by the Centre on inter-state supply of goods and services, was also introduced in the Lok Sabha.
The IGST law provides for a maximum tax of 40 per cent.
Jaitley also introduced a fourth legislation called GST (Compensation to States) Bill, 2017 that provides for mechanism for making good any loss of revenue of states from introduction of GST in first five years of rollout.
These four bills will be taken up for discussion together.
Another mirror legislation of CGST, called State-GST, will amalgamate all state taxes like VAT, will be levied by states and has to be approved by all state legislatures.
Together, CGST and SGST will enable the GST incidence of 40 per cent. GST will not apply to Jammu and Kashmir.
The CGST Bill also provides for e-commerce companies to collect tax at source at a rate not exceeding 1 per cent of net value of taxable supplies, out of payments to suppliers supplying goods or services through their portals.
To protect small businesses, the CGST provides for a tax of no more than 1 per cent of turnover for manufacturers with annual turnover of up to Rs 50 lakh. A 2.5 per cent tax is prescribed for suppliers.
To ensure that benefit of lower taxes is passed on to consumers, an anti-profiteering measure has been incorporated in the law.
It provides for constituting an Authority to examine whether input tax credits availed by any registered taxable person, or the reduction in the price on account of any reduction in the tax rate, have actually resulted in a commensurate reduction in the price of the said goods and/or services supplied by him.
The law provides for arrest, ordered by no less than a Tax Commissioner, in case of suppression of any transaction or evading taxes. A person convicted is punishable by up to 5 years of imprisonment and/or fine.