Select a date Select month July 2018 June 2018 May 2018 April 2018 March 2018 February 2018 January 2018 December 2017 November 2017 October 2017 September 2017 August 2017 July 2017 June 2017 May 2017 April 2017 March 2017 February 2017 January 2017 December 2016 November 2016 October 2016 September 2016 August 2016 July 2016 June 2016 May 2016 April 2016 March 2016 February 2016 January 2016 December 2015 November 2015 October 2015 September 2015 August 2015 July 2015 June 2015 May 2015 April 2015 March 2015 February 2015 January 2015 December 2014 November 2014 October 2014 September 2014 August 2014 July 2014 June 2014 May 2014 April 2014 March 2014 February 2014 January 2014 December 2013 November 2013 October 2013 September 2013 August 2013 July 2013 June 2013 May 2013 April 2013 March 2013 February 2013 January 2013 December 2012 November 2012 October 2012 September 2012 August 2012 July 2012 June 2012 May 2012 April 2012 March 2012 February 2012 January 2012 December 2011 November 2011 October 2011 September 2011 August 2011 July 2011 June 2011 Select a category Agriculture Bihar Votes For Its (and India’s) Future BUDGET 2014 Budget 2015: Modi’s Moment of Reckoning Budget 2016: The stories behind the numbers Chart of the Day Climate Change Cover Story Currency Chaos Development Education Elections 2014 Employment Fact Check Governance Newsletter Health homepage video Hunger India’s Great Challenge: Health & Sanitation IndiaSpend In The News IndiaSpend Interviews Industry Investigations Central State Latest Headlines Latest Reports Making Sense of Breaking News Modi’s Message: India’s States Reply Modi’s Report Card Mumbai Special Mumbai Special: The Revival Agenda Opinion – Videos Opinions Pollution Poverty Prime Time: India’s Grand Challenges Resources Central State Sectors Agriculture Defence Economy & Policy Education Health Infrastructure Snapshots States Central India Chattisgarh Madhya Pradesh EAST Bihar Jharkhand Orissa West Bengal NORTH Haryana Himachal Pradesh Jammu & Kashmir New Delhi Punjab Rajasthan Uttar Pradesh Uttarakhand NORTH EAST Arunachal Pradesh Assam Manipur Meghalaya Mizoram Nagaland Sikkim Tripura SOUTH Andhra Pradesh Karnataka Kerala Tamil Nadu WEST Goa Gujarat Maharashtra Story In A Minute The Air We #Breathe The Road To Delhi: Elections 2015 The Transition: 2015-2016 Uncategorized Viznomics: A Quick Glance At Big Issues Welfare Women Women@Work Women@Work Search with Google

A truck driver next to his parked truck while waiting to get his loads cleared to cross a checkpoint at the Commercial Taxes Department check post at Walayar in Palakkad district in southern Indian state of Kerala, India. At the Walayar checkpoint, lines of idle trucks stretch as far as the eye can see in both directions along the tree-lined interstate highway, waiting for clearance from tax inspectors that can take days to complete.

About 42% of the Rs 22 lakh crore ($328 billion) revenue of the central government and 35 states and union territories will now be subsumed under the goods and services tax (GST), passed by Parliament’s upper house on August 3, 2016 and being touted by some as one of independent India’s “boldest reforms”.

Around Rs 9.20 lakh crore ($137 billion) of central and state revenue from 15 taxes–from central excise to levies on gambling–in 2014-15 ($1 = Rs 67) will be brought under the GST, scheduled to be levied from April 1, 2017, although the government might be hard-pressed to make this deadline.

Revenue Receipts Of Centre And States, 2014-15 (Rs. crore) Revenue Head Tax Revenue Under GST Not Under GST Direct Taxes 7,48,643 7,48,643 Customs 2,01,819 1,47,413 58,1061 Union Excise Duties 2,06,356 1,28,356 90,0002 Service Tax 2,15,973 2,15,973 State Excise Duty 1,00,577 1,00,577 Stamp Duty and Registration Fees 98,175 98,175 General Sales Tax (VAT) 5,61,597 4,26,600 1,35,0003 Taxes on Vehicles 43,469 43,469 Entertainment Tax 2,294 2,294 Taxes on goods and Passengers 21,276 21,276 Electricity duty 24,947 24,947 Taxes on purchase of Sugarcane 186 186 Others 12,373 12,373 Total 22,37,685 9,20,822 13,32,566

Source: Indian Public Finance Statistics 2014-15, Ministry of Finance, Petroleum and Natural Gas Statistics, 2014-15, Revenue Receipts, Budget 2014-15, Report No. 17 of 2013, CAG of India

[1] Basic Customs Duty, [2] Excise Revenue from Petroleum and cigarettes (2013 data for cigarettes), [3] VAT through petroleum products

(Other taxes have been considered under sources not subsumed, although some might have been included in the GST.)

Industries and commercial enterprises currently pay various taxes at various stages of a product or service, such as manufacture, transport, wholesale, logistics and retail. The administration of these taxes is often tangled in paperwork, contradictory, results in slow inter-state movement of products and increases costs for consumers.

Most of these taxes will be subsumed by the GST, barring a few, such as those on vehicles, roads, property and electricity, as the chart below explains.

Taxes Subsumed Under GST Central Taxes State Taxes Central Excise Duty VAT/Sales Tax Additional Excise Duty Central Sales Tax (levied by the Centre and collected by the States) Excise Duty levied under the Medicinal and Toiletries Preparation Act Entertainment Tax, Luxury Tax Service Tax Octroi and Entry Tax (all forms) Additional Customs Duty, commonly known as Countervailing Duty (CVD) Purchase Tax Special Additional Duty of Customs-4% (SAD) Taxes on lottery, betting and gambling Cesses and surcharges in so far as they relate to supply of goods and services. State cesses and surcharges in so far as they relate to supply of goods and services. Taxes Not Subsumed Under GST Petroleum, Tobacco, Alcohol, Vehicles, Road and Tolls, Stamp Duty and Registration, Land Revenue

Source: Concept note on GST, Department of Revenue, Government of India

The law enabling the GST must now go back to the lower house, the Lok Sabha, which must clear new amendments brought in by the government to get political consensus, after which it must be ratified by half of all state legislatures.

Simultaneously, the information-technology backbone that the GST will require is getting ready, with software testing set for October 2016, the Economic Times reported on August 3, 2016.

1/4 Passing of GST bill: This is only end of a beginning. The real hard work starts now. — Dr Hasmukh Adhia (@adhia03) August 3, 2016

2/4 I compliment team of officers of Centre and States who worked hard for last 10 years to see this day today. — Dr Hasmukh Adhia (@adhia03) August 3, 2016

3/4 We will make all attempts to implement GST asap. — Dr Hasmukh Adhia (@adhia03) August 3, 2016

4/4 We are ready with state of art IT design for GST implementation. Hardware and software will all be ready for testing by jan 17. — Dr Hasmukh Adhia (@adhia03) August 3, 2016

Hard to implement, but basic design is ready

It isn’t yet clear what the GST taxation rate will be, but 17%-18% is likely. Implementing the GST will not be easy because many taxes and their administration must be disentangled and brought online into a single, nationwide system. However, the basic architecture of such a system has been created.

Our 2010 design of IT strategy for GST which led to GSTN formation. Another leapfrog! @arvindsubraman @thesuniljain https://t.co/JVXXTldVNX — Nandan Nilekani (@NandanNilekani) August 4, 2016

As that nationwide system is constructed and brought online, tax administrators will also have to be retrained.

“For effective implementation of GST, tax administration staff–both at central and state levels–would require to be trained properly in terms of concept, legislation and procedure,” Karthik S and Satish Dedhia, tax experts at PriceWaterhouseCoopers, a consultancy, wrote in Forbes India in February 2016. “The tax administration staff would also need to change their mindset, approach and attitude towards the tax payers. And for this, they would have to ‘learn, unlearn, and relearn’ the GST not only in letter but in spirit too.”

I would like to add that GST will also be the best example of cooperative federalism. Together we will take India to new heights of progress — Narendra Modi (@narendramodi) August 3, 2016

Passing 122 Const. amend. Bill 2014 #GST in RS today is a historic event. It would herald one market-one nation, a way to #TransformingIndia — Arun Jaitley (@arunjaitley) August 3, 2016

#GST Bill. Quality of debate illustrated Indian parliamentary functioning at its best. 2/2 — arvind subramanian (@arvindsubraman) August 4, 2016

Structural reforms thru GST, Bankruptcy law,Jam trinity, Company law tribunal will make India an easy & simple place 2 do business in. Gr8! — Amitabh Kant (@amitabhk87) August 4, 2016

FT on #GST: One of the most significant reforms since liberalization began 25 years ago. https://t.co/YJq5N8KXId pic.twitter.com/9Hm32MJgg8 — Sadanand Dhume (@dhume) August 4, 2016

GST has to go a long way, especially clear a dope test without fear of sabotage #GSTBill — Madhavan Narayanan (@madversity) August 4, 2016

A GST council will control the new tax regime across Centre and states; it will fix tax rates, exemptions and other issues. The Centre’s representatives control a third of the vote in the council.

Two central representatives (Finance Minister and Minister of State for Finance) account for 33.3% of the vote, while 29 finance ministers account for the remaining 66.7% vote, according to the 122nd Constitutional Amendment Bill passed in the Lok Sabha (lower house of Parliament).

Balancing act ahead, but calculations for UP, Maharashtra show it can work

The key challenge for the central government is to ensure both Centre and states benefit from the GST; in other words, get as much as or more money than they currently do.

The Centre is likely to compensate states for lost revenue on ‘goods’ by increasing their share of taxes on services, according to this analysis by the Institution of Chartered Accountants of India (ICAI).

Indian states cannot afford to lose revenue because they are already in debt, as IndiaSpend reported.

Maharashtra, India’s most industrialised state, and Uttar Pradesh (UP), the most populous, expect to get at least Rs 60,000 crore and Rs 65,000 crore, respectively, per year, as IndiaSpend‘s calculations revealed in December 2015. We found that these figures, based on data from the Reserve Bank of India’s Study of State Finances, are almost equal to the revenue Maharashtra and UP currently receive through a host of taxes, which the GST will replace.

Expected Revenue Through GST, Based On Tax Revenue, 2014-15 Revenue Head Maharashtra Uttar Pradesh Tax Revenue Subsumed Under GST Not subsumed Under GST Tax Revenue Subsumed Under GST Not Subsumed Under GST State’s Own Tax Revenue Taxes on Income 2,138 0 2,138 48 0 48 Taxes on Property and Capital Transactions 21,293 0 21,293 13,592 0 13,592 Sales Tax 69,090 51,526 17,5641 47,500 34,764 12,7361 State Excise 11,500 0 11,500 14,500 0 14,500 Taxes on Vehicles 5,250 0 5,250 3,950 0 3,950 Taxes on Goods and Passengers 1,098 0 1,098 0 0 0 Taxes and Duties on Electricity 6,501 0 6,501 850 0 850 Entertainment Tax 578 578 0 540 540 0 Other Taxes and Duties 1,141 0 1,141 20 0 20 Share in Central Taxes Corporation Tax 6,736 0 6,736 25,493 0 25,493 Income Tax 4,798 0 4,798 18,160 0 18,160 Taxes on Wealth 16 0 16 59 0 59 Customs 3,116 2,336 7802 11,793 8,844 2,9502 Union Excise Duties 2,012 2,012 0 7,615 7,615 0 Service Tax 3,535 3,535 0 13,380 13,380 0 Other Taxes and Duties on Commodities and Services 51 51 0 0 0 0 TOTAL TAX REVENUE 1,38,854 60,039 78,815 1,57,502 65,144 92,358

Source: RBI, Study of State Finances; figures in Rs crore

[1] Sales tax on petroleum products, [2] Proportion of basic customs duty has been assumed as 25% of total customs duty, as per national revenue statistics

(Note: State Revenue Receipts through Alcohol, Tobacco and allied products have been considered subsumed under GST on account of Data unavailability.)

We chose Maharashtra for the analysis because it the state with highest revenue from its own taxes, as a share of total revenue, at 66%; and UP because it has the highest total revenue but no more than 36% from its own taxes.

We welcome feedback. Please write to respond@indiaspend.org. We reserve the right to edit responses for language and grammar.

__________________________________________________________________

Liked this story? Indiaspend.org is a non-profit, and we depend on readers like you to drive our public-interest journalism efforts. Donate Rs 500; Rs 1,000, Rs 2,000.