Goods and Service Tax - GST

GOODS AND SERVICE TAX (GST)What is GST?The GST is basically an indirect tax that brings most of the taxes imposed on most goods and service, on manufacture, sale and consumption of goods and services, under a single domain at the national level the earlier system, taxes were levied separately on goods and services. The GST is a consolidated tax based on a uniform rate of tax fixed for both goods and services and it is payable at the  final point of consumption. At each stage of sale or purchase, in the supply chain, this tax is collected on value-added goods and services, through a tax credit mechanism.

GST Model and RatesA dual GST system has been implemented in India as proposed by the Empowered Committee underwhich the GST is divided into two parts:State Goods and Services Tax (SGST)Central Goods and Services Tax (CGST)

Both SGST and CGST are levied on the taxable value of a transaction. All goods and services, leaving aside a few, have been brought into the GST and there is no difference between goods and services. The GST system combines Central Excise Duty, Additional Excise Duty, Services Tax, State VAT or EntertainmentTax etc.  under one banner.There see presently 5 slabs of GST rate, the lowest being o, and the highest 28%. The rates of GST on specific goods and services are fixed/modified from time to timely GST Council that comprises representatives of the States and the Centre.Presently, there are around 160 countries that have implemented the GST or VAT in some form or the other. France was the first country to introduce GST. The only other country with a dual GST is Canada.

How is GST applied ?GST is a consumption based tax/levy. It is based on the "Destination Principle". GST is applied on goods and services at the place where final/ actual conumption happens. GST is collected on value-added goods and services at each stage of sale on purchase iin the supply chain. GST paid on the procurement of goods and services can be set off against that payable on the supply of goods or services. The manufacturer, wholesaler or retailer will pay the applicable GST rate but will claim back through tax credit mechanism.

But, being the last person in the supply chain, the end consumer has to bear this tax and so, in many respects, GST is like a last-point retail tax. GST is going to be collected at point of sale.Differential treatment for alcohol, tobacco and petroleum products(1) Alcoholic liquor, for human consumption, has been excluded from the purview of GST. The  definition of goods and services tax in the proposed clause (12A) to be inserted in Article 366 of the Constitution is "tax on the supply of goods or services or both (except tax on the supply of alcoholic liquor for human consumption)." The manufacture and sale of the product will continue to be states.(2) Tobacco and tobacco products will be subject to central excise duty in addition to GST. While not excluded from GST, it is retained in entry 84 of List I (union list) also.

(3) Petroleum products are excluded from GST for the present, and will continue to be taxed in the present mode - central excise duty on manufacture and VAT/CST on sale. However, the proposed  Constitutional amendment requires the GST Council to fix the date by which these products wàubrought into the purview of GST. This is in clause (5) of the proposed Article 279A, Goods Services Tax Council (GSTC), inserted by the Constitution (101stAmendment) Act.

Advantages of GST(1) Speeds up economic union of India;

(2) Better compliance and revenue buoyancy;

(3) Replaces the cascading effect [tax on tax] created by existing indirect taxes;

(4) Tax incidence for consumers may fall;

(5) Lower transaction cost for final consumers;

(6) By merging all levies on goods and services into one, GST acquires a very simple and transparent character;

(7) Uniformity in tax regime with only one or two tax rates across the supply chain as against multi tax structure as of present;

(8) Efficiency in tax administration;

(9)  May widen tax base;

(10) Increased tax collections due to wide coverage of goods and services; and(11) Improvement in cost competitiveness of goods and services in the international market.

List of Crucial Changes Occurred Due to GST

1. No More Hidden Taxes: With GST, people can be assured that the commodities have been taxed at a single tax bracket, split between the Centre and the State.

2.Check on price rise: Under the previous tax regime, producers had to pay taxes at every stage which was added to the final selling price. This was called cascading effect of taxes. Now. GST replaces cascading effect of taxes with input lax credit. Under the new tax regime, the tax paid for inputs is taken off taxes to be paid for the final product, or output. This way more people pay taxes instead of the consumer bearing the burden of taxes levied at every step of manufacturing.

3. Traders go digital: Traders will have to change the way they used to do business before the advent of GST. With the tax return filing process going digital, traders will have to upgrade to  electronic means to keep up. Those who used to generate invoices digitally will have to change their IT systems to accommodate changes brought about by GST.4. Check-posts removed: With GST being a destination-based tax, border check-posts at state limits have become obsolete and were done away with. With no toll booths to cross, goods carriers are transporting their cargo swiftly between states. Cutting the delay in delivery of goods has helped save crores of rupees in lost time

5. Price change of essential commodities: No change was observed in the prices of essential commodities as they were kept in the zero percent tax bracket under GST. Luxury cars made in India saw a decline in their prices, though, as they were categorised in the lower tax bracket under GST.