GST update

It is now almost certain that goods and services tax, which is to replace existing VAT, service tax, excise duties and central sales tax among others, will be in place from April 1 next year. The Centre and states have arrived at a broad consensus on rolling out independent India’s biggest tax reforms that will simplify how goods and services are taxed for corporates, small enterprises and traders.
Under the GST regime, there will ultimately be a flat tax rate of 16% — 8% for central GST and 8% for state GST. Now, the combined state and central levies go up to 30% on some items. The unified rate will mean taxes on these will effectively come down, but service tax, now at 12%, will go up to 16%.
Flat Rate
GST to start as dual rate with components of central and state levies
In first year, 2011-12, central GST to be 10% standard rate, with 6% on essential goods. Services to be taxed at 8%. State GST likely to be at same levels
In second year, standard rate to come down to 9% each for Centre and state, rest unchanged
In third year, combined 16% GST for Centre and states
Current taxes on goods add up to 30% in some cases. So most goods should ultimately become cheaper
But services, now taxed at 12%, will attract higher tax

The proposed reforms will not only integrate the country economically but should also ensure cheaper goods once the multiple tax structure is abolished. Almost all states have agreed to the proposed GST implementation from April 1, 2011. This is to streamline the movement of goods and services across India with a single tax structure.FM Pranab Mukherjee has proposed a three-year timeline to fully implement the GST. FM has set a deadline of August 20 for states to give their final consent on the new duty structure and all other pending issues.

The Centre and states have agreed on
Article 246A to be introduced through Constitutional amendment that would give Parliament & state assemblies power to levy GST
Constitution to be amended by introducing Article 279A that will provide for creation of a GST council. Headed by FM, council will have state FMs as members
Article 279B to be introduced through Constitutional amendment making a provision for dispute settlement authority. To consist of a chairperson and 2 members to be appointed by chief Justice
GST to be defined under Article 366(12)A

Architecture :
IT architecture with a common GST portal: All taxpayers will now directly pay tax with the GST portal; existing structures to be used for audit &enforcement issues
To create a special purpose vehicle (SPV): SPV will be responsible for running the GST portal. State, Centre & a technology company will be partners in the SPV
National Information Unit to be technology partner and IT company NSDL, with VAT experience likely to be selected to rollout and run the GST architecture

The timeline
July 25, 2010 : A empowered group on IT to be set up with 5 members from states & 1 representative each from Centre & from tech partner
August 20, 2010 : Deadline for states to give final shape to all issues. FM to move GST Bill to Parliament on Aug 27
September 30, 2010 : All SPV task groups to submit their reports to FM
December 1, 2010 : Trial begins for taxpayers’ interface on GST portal
April 1, 2011 : GST to be implemented