India Introduces a Historic Tax Reform, Goods and Services Tax

Posted on : 10-07-2017 | Back | Print

President Shri Pranab Mukherjee and Prime Minister Shri Narendra Modi launched the Goods and Services Tax (GST), a historic tax reform, in the midnight of June 30-July 1, 2017 at the Central Hall of Parliament House, New Delhi.  The GST that came into force on 1st July, 2017 would completely transform the Indirect Taxation in the country involving both the Central and State levies. In a departure from the normal practice, the GST will be administered together by the Centre and States.


The GST will pave the way for realization of the goal of One Nation - One Tax - One Market. It will benefit all the stakeholders namely industry, government and consumer. It will improve the ease of doing business, lower the cost of goods and services and make the products and services globally competitive, giving a major boost to ‘Make in India’ initiative. Under the GST regime, exports will be zero-rated in entirety unlike the present system where refund of some of the taxes does not take place due to fragmented nature of indirect taxes between the Centre and the States. The GST will make India a common market with common tax rates & procedures and remove economic barriers.

The GST Council was constituted on 15.9.2016 to formulate the rules and procedure to implement this landmark tax reform. The Finance Ministers of all the States or their representatives along with Central Government officials participated in the extensive meetings of the Council and all the decisions of Council were taken with consensus.

In majority of supplies of goods, the tax incidence approved by the GST Council is much lower than the present combined indirect tax rates levied by the Centre and State(s). The GST Council has decided the structure of GST as follows:

       The threshold limit for exemption from levy of GST is Rs. 20 lakh for the States except for the Special Category States, where it is Rs. 10 Lakh;

       A four slab GST tax rate of 5%12%18% and 28% has been adopted;

       A cess would be levied on certain goods such as luxury cars, aerated drinks, pan masala and tobacco products, over and above the GST rate of 28%; and

       The threshold for availing the Composition Scheme is Rs. 75 lakh except for special category States where it is Rs. 50 lakh

Other Important Features of GST:

       GST envisages all transactions and processes to be done only through electronic means, to achieve non-intrusive administration.  This will minimise tax payers’ physical interaction with the tax officials;

       GST provides a facility of auto-populated monthly and annual returns;

      It facilitates taxpayers by prescribing grant of refund within 60 days and provisional release of 90% refund to exporters within 7 days. Further facilitation measures include interest payment if refund is not sanctioned in time. The refund is to be directly credited to bank accounts; and

       It contains anti-profiteering provisions for protection of consumers.

GST Network (GSTN) will provide interface to taxpayers and tax officials. On this common portal, taxpayers can submit their registration applications, file returns, make tax payments, claim refunds, etc.

At the launch of GST, Prime Minister Modi said that the process of GST is not restricted to the scope of economy only, but stands as a testimony to the concept of Co-operative Federalism in Indian Democracy. He described GST as a landmark achievement which is bound to take the nation towards exponential growth.  He stated that all states are slated to gain immensely as they would get equal opportunities of development. He noted that the GST regime is simpler and more transparent, and it would help curb black money and corruption, reward honesty, generate interest and enthusiasm to do business honestly, boost exports of the country and bring in a new culture of governance.

He stated that in legal parlance, GST may be known as “Goods and Services Tax”, but the benefits of GST would positively ensure it to be “Good and Simple Tax” because it liberates the people from layers of taxation and is uniformly implemented across India.

A special webpage providing all information on the new tax regime can be accessed at http://pib.nic.in/gst. It contains press releases, various presentations, FAQs, etc on GST.

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