It is a tax levied when a consumer buys goods or services.
GST will be levied on buyers of goods and services, or where the service is consumed.
This means big consumer states such as Uttar Pradesh, West Bengal and Kerala will get a high share of the taxes.
To compensate for this, manufacturing states such as Tamil Nadu, Maharashtra and Gujarat fear that they will lose out on revenues.
The bill provides for 1 percentage point extra tax on goods for at least two years.
This extra revenue will go to the state from which the goods originated, or where it was manufactured.
The bill introduces a new article that says Parliament, and, subject to some conditions, the legislature of every state will have power to make laws with respect to goods and services tax imposed by the Union or the state.
Salient Features :
The bill provides for a GST Council, a joint body of the states and the Centre.
The following are the salient features of the proposed pan-India Goods and Services Tax regime that was approved by the Lok Sabha by way of an amendment to the Constitution:
1. GST, or Goods and Services Tax, will subsume central indirect taxes like excise duty, countervailing duty and service tax, as also state levies like value added tax, octroi and entry tax, luxury tax.
2. The final consumer will bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages.
3. As a measure of support for the states, petroleum products, alcohol for human consumption and tobacco have been kept out of the purview of the GST.
4. It will have two components - Central GST levied by the Centre and State GST levied by the states.
5. However, only the Centre may levy and collect GST on supplies in the course of inter-state trade or commerce. The tax collected would be divided between the Centre and the states in a manner to be provided by parliament, on the recommendations of the GST Council.
7. The GST Council is to consist of the union finance minister as chairman, the union minister of state of finance and the finance minister of each state.
8. The bill proposes an additional tax not exceeding 1% on inter-state trade in goods, to be levied and collected by the Centre to compensate the states for two years, or as recommended by the GST Council, for losses resulting from implementing the GST.