India Sets Month-End Deadline for Model GST Law

Before GST rollout, the government worked to finalise the Model GST Law that would form the basis of central and state legislation. This article looks at the push to finalise the Model GST Law and what it set out to do.

India is actively preparing for the nationwide implementation of the Goods and Services Tax (GST) by July, though the intricate details of the GST law are still being refined. The law department has been diligently reviewing GST provisions, and states have been deliberating on these aspects, contributing to some delays. However, a senior official within the finance ministry in Delhi recently indicated that the comprehensive model GST law is likely to be finalized by the conclusion of the current month. The law ministry is currently engaged in vetting both the model GST and the State Goods and Services Tax (SGST). Following this review, the GST Council is slated to make its definitive decision on February 18. If all progresses as planned, the finalized model GST law, which will encompass both SGST and Integrated Goods and Services Tax (IGST), could then be presented in Parliament during the Budget Session, commencing March 9.

Future Steps for GST Implementation

Upon the finalization and subsequent tabling of the model GST law in Parliament, individual states will be required to enact their respective SGST legislation. This SGST will be applied to the movement of goods within state boundaries. Furthermore, Parliament must approve a GST Compensation Act. This act is designed to facilitate states in recovering any potential revenue losses they might incur during the initial five years following SGST implementation. The GST Council has already established a four-tiered tax structure, with proposed rates set at 5%, 12%, 18%, and 28%. The specific tax levies for various goods and services are anticipated to be finalized around May or June.

Business Implications of the New Tax Structure

For an in-depth understanding of the various taxes under GST, a comprehensive report is available to clarify the new regime. Under the proposed GST model, three distinct taxes will be applied, allowing taxpayers to claim credit against each other, thereby embodying the principle of “One nation, one tax.” While the intra-state movement of goods will be subject to both SGST (State GST) and CGST (Central GST), inter-state movement of goods will be taxed under IGST. Additionally, IGST will have an impact on imports. This three-tax structure is expected to streamline business operations for states, as they will primarily interact with the central government regarding tax matters, rather than engaging with every other state involved in a transaction. Businesses and dealers with pan-India operations are likely to find this new tax regime advantageous. To delve deeper into GST, you can explore our blogs here. Key considerations for ensuring GST readiness include:

• Ensuring timely completion of your enrollment process. To understand more about the enrollment procedure and its significance, access information here.
• Meticulous planning of your logistics and warehousing requirements. A detailed guide analyzing the impact of GST on the logistics and warehousing sector is available here.

Frequently Asked Questions

What was the Model GST Law?

The Model GST Law was the draft framework circulated to build consensus between the centre and states, forming the template for the CGST, SGST and IGST Acts that were later enacted.

Why was a Model GST Law needed?

Because GST is levied concurrently by the centre and states, a common model was needed so that state and central laws stayed aligned on definitions, procedures and rates.

How did the Model GST Law become the final GST Acts?

After stakeholder feedback and GST Council deliberations, the model provisions were refined and enacted as the CGST Act, IGST Act and the respective state GST Acts.