Goods
and Services Tax (GST)
Finally wait Ends-:GST Bill Passed in Rajyasabha-:
The Rajya Sabha on Wednesday passed the Goods and
Services Tax (GST) Constitutional Amendment Bill which the Lok Sabha had
already approved last year. The exact rate of the tax will only be decided in
the weeks or months ahead. The 66-year-old Constitution, which gives power to
Centre to levy taxes like excise, and empowers states to collect retail sales
taxes, was amended though the 122nd Constitution Amendment Bill. Dubbing
passage of the GST Constitution Amendment Bill as historic, Finance Minister
Arun Jaitley said manufacturing taxes and VAT will come down with the new
national sales tax but the same for services tax will be decided by states and
centre. A finance ministry panel has suggested the standard GST rate of 18%,
with a 12% lower and a 40% higher rate.
Take a
look at GST -:
What is GST? How does it work???
GST is one indirect tax for the whole nation, which will make
India one unified common market.
GST is a single
tax on the supply of goods and services, right from the manufacturer to the
consumer. Credits of input taxes paid at each stage will be available in the
subsequent stage of value addition, which makes GST essentially a tax only on
value addition at each stage. The final consumer will thus bear only the GST
charged by the last dealer in the supply chain, with set-off benefits at all
the previous stages.
What are the benefits of GST?
The benefits of
GST can be summarized as under:
A)
For business and industry -:
·
Easy
compliance: A robust and comprehensive IT system would
be the foundation of the GST regime in India. Therefore, all tax payer services
such as registrations, returns, payments, etc. would be available to the taxpayers
online, which would make compliance easy and transparent.
·
Uniformity
of tax rates and structures: GST will ensure that
indirect tax rates and structures are common across the country, thereby
increasing certainty and ease of doing business. In other words, GST would make
doing business in the country tax neutral, irrespective of the choice of place
of doing business.
·
Removal
of cascading: A system of seamless tax-credits throughout
the value-chain, and across boundaries of States, would ensure that there is
minimal cascading of taxes. This would reduce hidden costs of doing business.
·
Improved
competitiveness: Reduction in transaction costs of doing
business would eventually lead to an improved competitiveness for the trade and
industry.
·
Gain to manufacturers and exporters.
B) For Central and State
Governments -:
·
Simple and easy to administer: Multiple indirect taxes at the
Central and State levels are being replaced by GST. Backed with a robust
end-to-end IT system, GST would be simpler and easier to administer than all other
indirect taxes of the Centre and State levied so far.
·
Better controls on leakage: GST will result in better tax compliance
due to a robust IT infrastructure. Due to the seamless transfer of input tax
credit from one stage to another in the chain of value addition, there is an
inbuilt mechanism in the design of GST that would incentivize tax compliance by
traders.
·
Higher revenue efficiency: GST is expected to decrease the cost
of collection of tax revenues of the Government, and will therefore, lead to
higher revenue
efficiency.
C) For the
consumer -:
·
Single and transparent tax proportionate to the value of goods and
services: Due to multiple indirect taxes being levied by the Centre and
State, with incomplete or no input tax credits available at progressive stages
of value addition, the cost of most goods and services in the country today are
laden with many hidden taxes. Under GST, there would be only one tax from the
manufacturer to the consumer, leading to transparency of taxes paid to the
final consumer.
·
Relief in overall tax burden: Because of
efficiency gains and prevention of leakages, the overall tax burden on most
commodities will come down, which will benefit consumers.
Which taxes at the Centre and State level are being
subsumed into GST?
At the Central level, the following taxes are
being subsumed:
A. Central Excise
Duty,
B. Additional
Excise Duty,
C. Service Tax,
D. Additional
Customs Duty commonly known as Countervailing
Duty, and
E. Special
Additional Duty of Customs.
At the State level, the following taxes are being
subsumed:
A. Subsuming of
State Value Added Tax/Sales Tax,
B. Entertainment
Tax (other than the tax levied by the local bodies),
Central Sales Tax
(levied by the Centre and collected by the
States),
C. Octroi and
Entry tax,
D. Purchase Tax,
E. Luxury tax, and
F. Taxes on lottery, betting and gambling
These things would be costlier:
Banking
services, insurance premium and investment management, Eating out, Mobile calls
and mobile, Travelling, Cigarettes, Textile and branded jewellery, Beauty parlor etc. are likely to cost more.
These things would be cheaper:
Cars,
Construction sector, paints and cement, movie tickets, consumer durables and
electronics like fans, water heaters, AC etc. are also likely to be cheaper.
How would GST be administered in
India?
Keeping in mind the federal structure of India, there will be two
components of GST – Central GST (CGST) and State GST (SGST). Both
Centre and States will simultaneously levy GST across the value chain. Tax will
be levied on every supply of goods and services. Centre would levy and collect
Central Goods and
Services Tax (CGST), and States would levy and collect the State Goods
and Services Tax (SGST) on all transactions within a State.
The input tax credit of CGST would be available for discharging the CGST
liability on the output at each stage. Similarly, the credit of SGST paid on
inputs would be allowed for paying the SGST on output. No cross utilization of
credit would be permitted.
When will it take effect??????
The government is targeting July
2017 for GST to be in place. However, there is a lot of work to be done before
then.GST is designed to be electronic with no manual filing of returns
necessitating a vast IT infrastructure.
