GST- HOW WILL IT
WORK IN INDIA?
Goods and Services Tax (GST) is an indirect tax levied when a consumer buys a
good or service. India’s current tax scenario is riddled with
various indirect taxes which the GST aims to subsume with a single pan India
comprehensive tax, by bringing all such taxes under a single umbrella. The aims
of bill to eliminate the cascading effect of taxes on production and distribution
prices on goods and services.
Cascading effect of taxes is caused due to levy of different charges by State
and Union Governments separately. This tax structure raises the tax-burden on
India products, affecting their prices, and as result, sales in the international
market. The new tax regime will therefore, help boost exports. In the changed
scenario, the following taxes under Centre and States will be subsumed in GST.
Central Taxes replaced by GST Bill Central Excise Duty, Additional Duties
of Excise and Customs, Special Additional Duty of Customs (SAD), Service Tax
and Cess and Surcharges on supply of goods and services
State
Taxes Subsumed in the GST Bill VAT, Central Sales Tax, Purchase Tax,
Luxury Tax, Entry Tax, Entertainment Tax, Taxes on advertisements, lotteries, betting,
gambling and Surcharge.
The Lok Sabha passed The Constitution (122nd Amendment) (GST)
Bill, 2014 on 8th August, 2016. The bill was passed by
two-third majority, with 443 members voting in its favour and none against in
the final vote. Introduced in the Lok Sabha in May 2015, the Bill was passed by
Rajya Sab ha on 3rd August, 2016 with 203 votes in favour and none against. The
passage of this historic GST Bill has now paved the way for the concept of one
nation, one tax
The Union Government has set the ambitious target to roll out of the Goods and
Services Tax, (GST) from 1st April, 2017. It was announced by Union Finance
Minister Arun Jaitley after unveiling a detailed road map for GST
implementation. This announcement was made after Rajya Sabha had passed The
Constitution (122nd Amendment) (GST) Bill, 2014.
PROVISIONS OF THE
BILL
• The GST will have
two components keeping in mind the federal structure of India: The Central GST
(CGST) and the State GST (SGST).
• For goods and
services that pass through several states or imports the Centre will levy
another tax, the Integrated GST (IGST).
• Alcohol for human
consumption has been kept out of the preview of GST.
• It empowers the
centre to impose an additional tax of upto 1% on the inter-state supply of
goods for two years or more. This tax will accrue to states from where the
supply originates.
• Initially, GST will
not apply to some products such as petroleum crude, high speed diesel, motor
spirit (petrol), natural gas and aviation turbine fuel. The GST Council will
decide when GST will be levied on them.
• Tobacco and tobacco
products will be subject to GST. The centre may also impose excise duty on
tobacco.
• Parliament may
provide for compensation to states for revenue losses arising out of the
implementation of GST for upto 5 years, based on the recommendations of the GST
Council.
BENEFITS OF GST:
• There will be
uniformity of tax rates and structures across the country. It will increase
certainty and case of doing business i.e. make it tax neutral, irrespective of
the choice of place of doing business in the country.
• Due to removal of
cascading, it will have a system of seamless tax-cred its throughout the
value-chain, and across boundaries of States. It will help to reduce hidden
costs of doing business.
• It would make
compliance easy and transparent- The GST regime will have a robust and
comprehensive IT system. Therefore, all tax payer services such as
registrations, payments, returns, etc will be available to the taxpayers
online.
• It will reduce
transaction costs of doing business that will eventually lead to an improved
competitiveness for the trade and industry.
• The subsuming of
major Central and State indirect taxes in GST would reduce the cost of locally
manufactured goods and services. It will increase the competitiveness of Indian
goods and services in t international market and give boost to Indian exports.
For Central and State
Governments
• GST backed with a
robust end-to-end IT system will be simpler and easier to administer than all
other indirect taxes of the centre and state levied so far.
•The robust IT
infrastructure of GST regime in better tax compliance that will curb leakages
and tax compliance by traders.
• GST will lead to higher revenue efficiency as it is expected to decrease the cost of collection of tax revenues of the government.
• Due to single and
transparent tax proportionate to the value of goods, and services: it will
remove many hidden taxes leading to transparency of taxes paid to the final
consumer.
• The overall tax
burden on most commodities will come down because of efficiency gains and
prevention of leakages which will benefit consumers.
Goods and Services
Tax has all the ingredients of a modern, seamless taxation system. But its
success will depend on taking onboard all the stakeholders and
eliminating all the irritants which goes against the principles of GST. Goods
and Services Tax will also contribute towards a robust macro-economic
parameter, thereby increasing investor sentiment. Finally, the consumers will
be ultimate beneficiary as it would eliminate the cascading effect of tax.
AN ESSAY/SPEECH ON GST- HOW WILL IT WORK IN INDIA?