(Bloomberg) -- Finance Minister Arun Jaitley has introduced a range of bills to parliament, including legislation that sets out the compensation to be provided to states under India's landmark new sales tax law.
The nationwide tax will replace more than a dozen levies at both the federal and state level, reducing the cost of production and promoting free flow of trade, the government said.
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Lawmakers need to approve these bills in the ongoing parliament session to meet the government's deadline of implementing the goods and services tax on July 1, and also frame rules about rates for various products and services. The parliament session ends on April 12.
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Here are the key points of the bills introduced in the lower house:
Central Goods and Services Tax Bill 2017
- CGST to replace a web of levies including central excise duty, central sales tax and service tax
- Proposed law will harmonize the indirect tax system in the country as well as reduce the cost of production and inflation in the economy
- Maximum GST rate of 20 percent to be levied on all goods and services
- E-commerce operators to collect up to 1 percent tax at source
- Proposed law to provide for self-assessment of taxes payable
- Proposed law provides for an anti-profiteering clause to ensure that businesses pass on the benefit of reduced tax incidence on goods/services to consumers
- It also lays down transitional provisions for the smooth transition of existing taxpayers to the new tax system
Integrated Goods and Services Tax Bill 2017
- IGST to be levied on inter-state trade -- it will allow businesses to take credit for the tax paid
- Tax rate to be capped at 40 percent
- Suppliers of online information and database access (for instance downloading content from, say, Netflix) will have to pay tax
- It will ensure refund of GST paid by tourists leaving India
GST (Compensation to States) Bill 2017
- The law will ensure compensation to states for loss of revenue due to implementation of the new nationwide tax system for five years.
- FY16 to be the base year for calculating compensation payable to states
- A duty is to be levied on goods recommended by the GST Council, which is a panel of federal and state finance ministers, over and above the GST rate
- Proceeds of the duty to be credited to GST Compensation Fund
- Funds left after five-year compensation period to be shared equally between the federal and state governments
To contact the reporter on this story: Shruti Srivastava in New Delhi at ssrivastav74@bloomberg.net.
To contact the editors responsible for this story: Ruth Pollard at rpollard2@bloomberg.net, Jeanette Rodrigues
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