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Govt provides 1-year grace period to states for implementing GST

31 Dec 2014 Evaluate

With states like West Bengal and Tamil Nadu still voicing their concerns over GST implementation, the government has provided 1-year grace period to implement the provision of Goods and Services Tax (GST) after introduction of the new indirect tax regime from April 2016. However, the government has cleared that one-year grace period is only a transitory provision to remove any inconsistency arising from the commencement of the provisions of the Act and all states will have to finally implement it.

The government aims to roll out the goods and services tax (GST) from April 1, 2016. The proposed GST is one of the biggest taxation reforms in India and will replace existing state and federal levies such as excise duty, service tax and value-added tax (VAT) and will integrate State economies and boost overall growth. Under GST, the taxation burden will be divided equitably between manufacturing and services, through a lower tax rate by increasing the tax base and minimizing exemptions. The industry is awaiting its introduction, as GST would boost revenues and aid economic growth.

The GST rollout has missed several deadlines because of lack of consensus among states over certain crucial issues on the new tax regime. Meanwhile, some states in the country are still opposed the introduction of the GST Bill. Gujarat has proposed that 1% additional tax that manufacturing states can charge on inter-state trade for two years after GST roll out should not be withdrawn. West Bengal is also raised demand for full one time payment of Central Sales Tax (CST) compensation and as well the losses likely to accrue due to abolition of entry tax.

According to the GST Constitutional Amendment Bill, liquor has been completely kept out of the GST, while, petroleum products like petrol and diesel will be part of the new regime from a date to be decided by the GST Council having two-third of its members from states. Also the states where goods originate can levy 1% additional tax over GST to make up for any revenue loss for the first two years. Furthermore, Centre will pay 100% compensation in the first three years, 75% in the fourth year and 50% in the fifth year to the states on account of any possible loss of revenue following implementation of the GST.

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