Rules and Procedure

Opening Statements

The members will be delivering an opening statement at the start of the council. The default
speakers time for this will be 60 seconds extendable up to 90 seconds. After every speech
members are obligated to yield the floor back to the Executive Board who will then direct the
members to ask questions, the number of questions to be asked- if any depending on the time,
will be decided by the Executive Board.

Public Session

In order to discuss various sections of the agenda, a separate time frame is allotted for the
members to put their views on the floor of the house. A public session can be of 15-30
minutes but the individual speakers time will remain 60 seconds. Everything is in public
domain and on record in presence of media.

Private Session

Two types: Moderated and Unmoderated. Nothing on record or on public domain.

Points

All MUN based points are valid in the committee at all times, except the point of information
which shall be in place only in the opening statements.

Written Document

The members can prepare a press release or a communique.

Introduction

Goods and Services Tax (GST) will indeed be an important perfection and the next logical
step towards a widespread indirect tax reforms in India. As per, First Discussion Paper
released by the Empowered Committee of the State Finance Ministers on 10.11.2009, it has
been made clear that there would be a Dual GST in India, i.e. taxation power lies with both
by the Centre and the State to levy the taxes on the Goods and Services.

The scheme was supposed to be implemented in India from 1st April 2016, however it may
get delayed since the NDA government does not have majority in Rajya sabha (The upper
house of parliament or the house of states).

Further, Punjab and Haryana were reluctant to give up purchase tax, Maharashtra was
unwilling to give up its stake, and all states wanted to keep petroleum and alcohol out of the
ambit of GST. Gujarat and Maharashtra want the additional one per cent levy extended
beyond the proposed two years, and raised to two per cent. Punjab wants purchase tax outside
GST.

Constitutional Amendment
While the Centre is empowered to tax services and goods upto the production stage, the
States have the power to tax sale of goods. The States do not have the powers to levy a tax on
supply of services while the Centre does not have power to levy tax on the sale of goods.
Thus, the Constitution does not vest express power either in the Central or State Government
to levy a tax on the supply of goods and services. Moreover, the Constitution also does not
empower the States to impose tax on imports. Therefore, it is essential to have Constitutional
Amendments for empowering the Centre to levy tax on sale of goods and States for levy of
service tax and tax on imports and other consequential issue.

What is GST?
G Goods
S Services
T Tax
Goods and Service Tax (GST) is a comprehensive tax levy on manufacture, sale and
consumption of goods and service at a national level under which no distinction is made
between goods and services for levying of tax. It will mostly substitute all indirect
taxes levied on goods and services by the Central and State governments in India.
GST is a tax on goods and services under which every person is liable to pay tax on his
output and is entitled to get input tax credit (ITC) on the tax paid on its inputs(therefore a tax
on value addition only) and ultimately the final consumer shall bear the tax.

Objectives of GST
One of the main objective of Goods & Service Tax(GST) would be to eliminate the doubly
taxation i.e. cascading effects of taxes on production and distribution cost of goods and
services. The exclusion of cascading effects i.e. tax on tax till the level of final consumers
will significantly improve the competitiveness of original goods and services in market which
leads to beneficial impact to the GDP growth of the country. Introduction of a GST to replace
the existing multiple tax structures of Centre and State taxes is not only desirable but
imperative. Integration of various taxes into a GST system would make it possible to give full
credit for inputs taxes collected. GST, being a destination-based consumption tax based on
VAT principle.
Highlights of the Bill
The Bill amends the Constitution to introduce the goods and services tax (GST).
Parliament and state legislatures will have concurrent powers to make laws on GST.
Only the centre may levy an integrated GST (IGST) on the interstate supply of goods
and services, and imports.
Alcohol for human consumption has been exempted from the purview of GST.
GST will apply to five petroleum products at a later date.
The GST Council will recommend rates of tax, period of levy of additional tax,
principles of supply, special provisions to certain states etc. The GST Council will
consist of the Union Finance Minister, Union Minister of State for Revenue, and state
Finance Ministers.
The Bill empowers the centre to impose an additional tax of up to 1%, on the inter-
state supply of goods for two years or more. This tax will accrue to states from where
the supply originates.
 Parliament may, by law, provide compensation to states for any loss of revenue from
the introduction of GST, up to a five year period.

Worldwide GST
France was the first country to introduce GST in 1954. Worldwide, Almost 150 countries
have introduced GST in one or the other form since now. Most of the countries have a unified
GST system. Brazil and Canada follow a dual system vis--vis India is going to introduce. In
China, GST applies only to goods and the provision of repairs, replacement and processing
services. GST rates of some countries are given below:-

Country Rate of GST

Australia 10%

France 19.6%

Canada 5%

Germany 19%

Japan 5%

Singapore 7%

New Zealand 15%

Rate of GST
There would be two-rate structure a lower rate for necessary items and items of basic
importance and a standard rate for goods in general. There will also be a special rate for
precious metals and a list of exempted items. For goods in general, government is considering
pegging the rate of GST from 20% to 23% that is well above the global average rate of 16.4%
for similar taxes, however below the revenue neutral rate of 27%.

Model of GST with example

o The GST shall have two components: one levied by the Centre (referred to as Central
GST orCGST), and the other levied by the States (referred to as State GST
or SGST). Rates for Central GST and State GST would be approved appropriately,
reflecting revenue considerations and acceptability.

o The CGST and the SGST would be applicable to all transactions of goods and
servicesmade for a consideration except the exempted goods and services.

o Cross utilization of ITC both in case of Inputs and capital goods between the CGST
and the SGST would not be permitted except in the case of inter-State supply of
goods and services (i.e. IGST).

o The Centre and the States would have concurrent jurisdiction for the entire value
chain and for all taxpayers on the basis of thresholds for goods and services
prescribed for the States and the Centre.

Example: 1 (Comprehensive Comparison)

Comparison between Multiple Indirect tax laws and

proposed one law

Particulars Without GST With GST

(Rs.)

Manufacture to
Wholesaler

Cost of Production 5,000.00 5,000.00

 Add: Profit Margin 2,000.00 2,000.00

Manufacturer Price 7,000.00 7,000.00

Add: Excise Duty @

840.00
12%

Total Value(a) 7,840.00 7,000.00

Add: VAT @ 12.5% 980.00

Add: CGST @ 12% 840.00

Add: SGST @ 12% 840.00

Invoice Value 8,820.00 8,680.00

Wholesaler to Retailer

COG to Wholesaler(a) 7,840.00 7,000.00

Add: Profit
784.00 700.00
Margin@10%

Total Value(b) 8,624.00 7,700.00

Add: VAT @ 12.5% 1,078.00

Add: CGST @ 12% 924.00

Add: SGST @ 12% 924.00

 Invoice Value 9,702.00 9,548.00

Retailer to Consumer:

COG to Retailer (b) 8,624.00 7,700.00

Add: Profit Margin 862.40 770.00

Total Value(c) 9,486.40 8,470.00

Add: VAT @ 12.5% 1,185.80

Add: CGST @ 12% 1,016.40

Add: SGST @ 12% 1,016.40

Total Price to the

10,672.20 10,502.80
Final consumer

Cost saving to
169.40
consumer

% Cost Saving 1.59

Notes: Input tax credit available to wholesaler is Rs.980

and Rs.1,680 in case of without GST and with GST
respectively.

Likewise Input tax credit available to Retailer is

Rs.1,078 and Rs.1,848 in case of without GST and with GST
 respectively.

In case, VAT rate is also considered to be 12%, the

saving to consumer would be 1.15%.

Features and impact of current system with an ideal GST regime

Comparison of the recommendations of various bodies
Certain issues on GST that must be resolved

There are so many issues in GST which are not settled, but I am now focusing on mostly
those, which came up for discussion, after a Rajya Sabha select committee, on July 20,
submitted a report endorsing majority provisions of the Goods and Services Tax (GST) Bill.
Two points are most relevant, namely, the issue about allowing states to levy one per cent
additional tax and the Centre agreeing to compensate states for revenue loss for five years.
The Congress filed a dissent note on eight provisions, including composition of the GST
council and the proposal to allow states to levy one per cent additional tax. There is also the
issue of revenue neutral rate of tax (which has of course not been dealt with by the
committee) which merits discussion here.

First, let us take the one per cent additional levy which is not to be given credit. This is the
one which is most resented by traders and manufacturers. But there are certain redeeming
features as well. This was earlier proposed, at the insistence of states, that even stock
transfers of goods of a company's transfer goods from godown to another of their own and
that would not attract one per cent. That was the view of the Centre. Now, the select
committee has confirmed this view that it is not leviable on the stock transfers. It will
immensely benefit trade and industry. Secondly, this one per cent is less than the four per
cent which was being charged earlier. So, it is a better deal. Lastly, it may be discontinued if
the revenue collection is buoyant and it depends on the GST council where two-third majority
will decide the issue.

The second issue is about the compensation of states for five years to the extent of 100 per
cent of the loss. The Centre's agreeing to the states' demand for 100 per cent for five years has
been a master-stroke. In fact, this will not be necessary for five years at all. In all arguments
of the Centre as well as the expert committees on the subject, it has been held that the
revenue will increase substantially, if only for better compliance and trade facilitation which
will increase due to common market. If it is so, it is only theoretical that the compensation
will be 100 per cent for five years. The legend has it that you can make a promise which you
do not have to keep.

The third issue is about the revenue neutral rate. Some economic analysts are of the view that
if the three items - alcohol, tobacco and petroleum - are included, then the neutral rate of 27
per cent may come down probably to 18 per cent. Actually, this is not a logical proposition. It
can come down only if the average duty of these three items is less than 27 per cent. It is just
the opposite of it. These three are highly taxed items. Cigarette is very highly taxed, both, by
the Centre and the states. The rate comes to more than 100 per cent easily. Similar is the case
of alcohol. And it varies from state to state. Petroleum is also a very heavily taxed item like
the others. The average tax, whether we take median or plain average, which is the neutral
rate for these three items, is much higher than the average rate for other goods in respect of
central excise, service tax and sales tax. So, if these three are included in GST, there is no
chance at all that the revenue neutral rate will come down. Some expert committees, in the
past, have recommended just 18 per cent, but they never calculated in great detail, as would
have been done by the National Institute of Public Finance. If there is a political decision to
reduce it to 18 per cent or 20 per cent that will be arbitrary and there will be serious revenue
short fall. One has to remember, also, that even if these three items are included in GST, then
also there will be a separate rate far higher than the general rate.

With these three items, there will be four rates. There are good reasons for including them for
expanding the tax-base but not for bringing the general rate down.

Reason for this AIPPM

Get a consensus on passing of GST in committee.

Suggestions

Think Logically
Your Portfolio shouldnt limit your research base
Your portfolio doesnt give you the final authority to take a decision in the committee
 Research more on the political angle and about past responses of different government
to this bill before 2014.
A best delegate would be one who could defend his portfolio while innovating with
solutions pertaining to both the situation as well as other portfolios.
Bluffing doesnt help, instead analyze speeches of other delegates and frame better
strategies
Research the transitional changes in both the bills
Read between the lines
The marking scheme would be objective, everything that you do in committee will be
marked.