Draft on the Goods and Service Tax Bill 2016 (GST Bill)

The GST regime has been introduced to streamline the tax regime in India for various businesses and commodities. The Bill deals with indirect taxation on account of the Central and all other State governments. Constant changes are being made to the methodology, leading to the increasing need in consensus between Central and State governments.

The purpose of introducing this Bill is to impart uniformity in the existing indirect tax system of India. The bill indicates the levying of Goods and Service Tax as against all other indirect taxes in order to bring about an economic integration in the system of the country. 

Provisions of the Bill:

1. Components:  GST is structured in two components i.e. Central and State GST, where former GST will be levied by Centre government, whereas the latter by State governments. The dual or two-foldGST model will be executed by various statutes, where certain basic features like applicability, the amount of tax levied on classification basis etc. will be practically the same.
2. Applicability: This dual GST would find application on all the commercial transactions that are made by the payment of money. It will not be applicable on the goods that have been exempted or those that do not fall within the ambit of the Goods and Service Tax bill and also those deals which are under the approved maximum limits. The rate is yet to be proposed.
3. Accounting of taxes: The tax collected will be accounted separately in the account books of the Central government and states respectively. The essential thing is to ensure that the accounting heads for the entire goods and services would indicate whether it is in relation to the central GST or state GST (it must identify the state to whose treasury the tax has to be accredited to).
4. Input Tax Credit: All the taxes that are paid against the Central GST will be considered as input tax credit for the Central GST and, if against State GST, then it will be  as State GST input tax credit.
5. Treatment of Tax credit in Books of Account: A taxpayer has to maintain separate details in his/her accounting books in order to utilize or get refund of credit.
6. Collection procedure: The respective legislation would prescribe a uniform collection procedure of both Central and State GST, respectively.
7. Synchronized Jurisdiction: The administration procedure of the GST bill highlights concurrent jurisdiction of both centre and state for complete chain of value transactions for every taxpayers depending on the thresholds limits prescribed for the states and centre.
8. Threshold limits: A threshold limit may be set for a total yearly turnover to Rs.10 Lakhs for both goods and services, whereas in case of the Center, the limit for goods will be  set at 1.5 crores and for services it may go higher than this. 
9. Periodical returns: Submission of both kinds of GST returns would be in a prescribed common format for respective Center and State GST authorities.
10. GST PAN linked system: There is a proposal of allotment of PAN linked taxpayer-identification number of 13-15 digits.

Drawbacks of the Bill:

1. It is yet to be passed.
2. It requires many changes at the administration level, requires hi-tech IT infrastructure as well as integration.
3. The State government might bear loss of revenue with the implementation and thus, need to be compensated.
4. In order to execute the GST model successfully, there is a willful need for State government’s  cooperation, which is one big tussle before the parliament. 

 It is suggested to take  legal advice from a taxation lawyer or an Indian lawyer on understanding the benefits and drawbacks of the GST bill in Delhi, Mumbai, Chennai, Bangalore, Hyderabad, Pune, Goa, Kolkata, Ahmedabad, Gurgaon and Noida. 

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