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News: Recently, at the 47th meeting of the Goods and Services Tax (GST) Council, chaired by Union Finance Minister, officials approved hiking the rates for some goods and services while removing exemptions for several mass consumption items to simplify the rate structure.
• The Goods and Services Tax regime came into force after the Constitutional (122nd Amendment) Bill was passed by both Houses of Parliament in 2016.
• The GST Council is a joint forum of the Centre and the states.
• It was set up by the President as per Article 279A (1) of the amended Constitution.
• The members of the Council include the Union Finance Minister (chairperson), the Union Minister of State (Finance) from the Centre.
• Each state can nominate a minister in-charge of finance or taxation or any other minister as a member.
Function of Council:
• The Council, according to Article 279, is meant to “make recommendations to the Union and the states on important issues related to GST, like the goods and services that may be subjected or exempted from GST, model GST Laws”.
• It also decides on various rate slabs of GST.
What are the key changes in GST rates now?
Significance of GST:
• Increased tax compliance and discourages tax evasion
• Creation of a ‘unified common market’
• It will boost export and manufacturing sector
• Reduces corruption
Concerns around GST:
• Multiple Tax Rates.
• Sectors such as petroleum, real estate, electricity duties remain outside the purview of GST.
• Though rates are rationalized, there is still 50 % of items are under the 18 % bracket.
• While GST scrapped multiplicity of taxes and cesses, a new levy in the form of compensation cess was introduced for luxury and sin goods.
• The GST legislation requires the filing of the GST annual returns by specified categories of taxpayers along with a GST audit. But, filing annual returns is a complex and confusing one for the taxpayers.
• Addressing the contentious issues will, first and foremost, require bridging the trust deficit between the Centre and states. The spirit of cooperative federalism, often advocated by the ruling dispensation, must be upheld.
• The trust deficit can be bridged only through acts of good faith. The Union government should commit to the states that it will not resort to cesses and surcharges that are outside the shareable pool of revenues. It must resolve to honour the revenue guarantee commitment to the states. It must respect and uphold the true spirit of not just fiscal federalism but political and constitutional federalism too.