10/08/2016
*GST Update*
The amendments made to the 122nd Constitution Amendment Bill were passed by the Lok Sabha and the bill now awaits the approval of the States. A minimum of 16 States have to approve the bill for it to become the law. Given that 13 states are governed by the BJP or a BJP-led coalition, and others such as Bihar, Uttar Pradesh, West Bengal and Orissa have extended support to the GST, it should not be difficult for the Centre to cross that hurdle. Once the Constitution is amended there will be GST Bills which shall contain the draft law. If the GST Bill is introduced as a Finance Bill (as opposed to Money Bill) there will again be discussions on the Bill in the Parliament and only upon its approval will there be a GST Act.
Even though there is time in the GST Bill getting introduced in the Parliament, there are certain hints regarding its contents. In the speech of PM Narendra Modi on 8th August he has hinted the following:
1) Presently a lot of time of the judiciary is wasted in deciding on things like whether Coconut is a fruit or a vegetable so that the fate of some tax benefit can be decided. The need for such unnecessary litigation shall come down - This is a great sign and we can infer that in most cases distinction between goods and services will also not be required. A big relief to Works Contractors and Restaurant Owners
2) India loses over Rs.1 Lakh Crores per annum because of delays while transporting goods from one city to another as the vehicles have to wait in long queues at check posts for inspections and approvals. The cost of the time spent in wait has been computed by considering the cost of labour which is paid for but is unproductive, the cost of fuel utilised when waiting and the opportunity cost of Indian goods becoming noncompetitive in the global markets due to increased costs and time delays. PM Narendra Modi has indicated that such waits will be significantly reduced or done away with - A big sigh of relief
3) Destination based Taxation - The money generated via taxes shall be directed towards States which are consuming States. Most of the backward States are consuming States. These States will have enough money to spend for the upliftment of their States Education, Health Care, Infrastructure etc. The manufacturing states will be at a disadvantage, he agreed, and there will be provisions to compensate the manufacturing states
4) Since GST will result in a rise of prices in the short run because of higher rates of taxes, the goods which are essential goods for the poor will be made exempt. PM Narendra Modi hinted that 55% of the Food and Medicines will be made exempt under the GST Law
5) Presently when a person approaches a Bank for a loan the Bank hands over a big list of documents required and then questions the genuineness of each document. After GST law is in effect the GST related data (like the returns downloaded from the GST website) will be accepted as proofs of the Business to Banks and others. These returns will be sufficient to prove the genuineness of the transactions and provisions will be made so that these are not questioned further by anyone.
6) There is expected to be significant decline in corruption, black money and the prevalent "Kacha Bill" tradition. PM Modi admitted there wherever Government is allowed to intervene that area stinks of corruption and hence under GST most of the things have been kept online. Businessmen will have to keep all the documents in relation to their sales and purchase transactions in place so that they may produce them when called for.
