Finance minister Arun Jaitley tabled the Constitution Amendment Bill to roll out the Goods and Services

Tax (GST) in
Lok Sabha on Friday.
GST is Indias most ambitious indirect tax reform plan, which aims to stitch together a common market by dismantling
fiscal barriers between states. It is a single national uniform tax levied across the country on all goods and services.
The indirect tax system in India is currently mired in multi-layered taxes levied by the Centre and state governments at
different stages of the supply chain such as excise duty, octroi, central sales tax (CST), value added tax (VAT) and
octroi tax, among others. In GST, all these will be subsumed under a single regime.
Here's an explainer.
What next
Parliament will have to pass it by a two-third majority and at least half of the state assemblies will have to pass for the
Constitution Amendments.
When?
The government plans to roll out GST from April 1, 2016.
What is GST?
# GST will offer a single shot solution by subsuming a welter of local levies into one system.
# States impose different taxes with varying rates on same products.
# For instance, a cars price will vary among states because of different rates of taxes such as VAT, octroi and road
tax.
# Under GST all these will be subsumed under a single tax, virtually making India a single market.
# Alcohol and tobacco will remain outside GST.
What about services
# Under current laws only the Centre can impose a tax on services.
# GST will empower states to collect service taxes.
How will it work?
# Under GST, the states and the Centre will collect identical rates of taxes on goods and services.
# For instance, if 16% is the GST rate on a good across the country, the states and the Centre will get 8% each called
the CGST and SGST rates.
What about the tax rates?
# The GST rates on goods have not been specified in the bill.
# A GST council headed by the central finance minister and represented by the state FMs will decide on the rates,
exemptions, threshold limits and dispute resolution

What impact would it have on overall prices?

The 13th finance commission estimates prices of agricultural goods will increase by between 0.61 % and 1.18%,
while prices of manufactured items would fall by 1.22-2.53 %.
What about entry tax?
# States will be allowed to collect an additional tax of 1% above the GST for goods that enter the state.
# This can be imposed for a maximum period of two years.
Why did it take so long?
# States feared that GSTs implementation will rob them of fiscal powers and erode revenues
Whats the solution?
# The Constitution Amendment Bill will offer a compensation package to states for potential revenue loss.
# The package will come with a sunset clause of five years.
# In the first three years, the Centre will reimburse 100% of the revenue loss, 75% in the fourth year and 50% in the
fifth year.
What about petroleum products?
# States wanted petroleum products to be kept out of GST.
# Taxes from petro products yield more than a third of states indirect tax revenues.
Whats been decided?
# Petro products will be within GST, but zero-rated to begin with.
# The status quo will continue for the time being.
# States will continue to collect sales tax/VAT on petro products, while the Centre will levy excise duty as is the case
now.