GST (Goods and Services Tax) is a tax levied when a consumer buys a good or service. The current tax regime is riddled with indirect taxes which the GST aims to subsume with a single comprehensive tax, bringing it all under a single umbrella. The bill aims to eliminate the cascading effect of taxes on production and distribution prices on goods and services.

Taxes levied by the Centre include: Income tax, service tax, central sales tax, excise duty and security transaction tax.

Taxes levied by the state include: VAT/sales tax, octroi, state excise, property tax, entry tax and agriculture tax.

The Bill, which was approved by the Lok Sabha in May, provided for 1 per cent additional tax on inter-state trade and commerce for two years or more as may be decided by the GST Council. Even the Rajya Sabha Select Committee had suggested removal of this provision as it would lead to cascading of taxes.

GST bill amendments made by central government :

1) Dropped 1% manufacturing tax to ensure GST does not lead to revenue loss for the states.

2) Decided to provide a guarantee to compensate states for any revenue loss in the first 5 years of GST rollout.

3) Has promised to work on a GST rate that cushions blow to the common man and also protects the revenue generating capacity of the states.

4) Agreed on dual control, which means Centre will not have control to tax businesses with a turnover below Rs 1.5 crore

Impact of GST bill on common man:

The goods will be cheaper and service will become costlier if GST is implemented. For manufactured goods we pay 25-26% more due to excise and VAT. The effective service tax at present is 15% but it will be 18% if GST goes through, making services expensive.

So, eating out , air travel, insurance premiums, investment management, textile, branded jewellery, mobile phone calls and cigarettes will become costlier. While, small cars, two-wheelers, movie tickets and electronic items will become cheaper.