GST-Goods & Service Tax

GST-Goods & Service Tax
We have to pay Entertainment Tax for watching a movie. We have to pay Value
Added Tax (VAT) on purchasing goods & services. And there are Excise duties,
Import Duties, Luxury Tax, Central Sales Tax, Service Tax.hhmmm..
As of today some of these taxes are levied by the Central Government and some are
by the State governments. How nice will it be if there is only one unified tax rate
instead of all these taxes?
In this post, let us understand what is Goods and Services Tax and its importance.
What are the benefits of GST Bill to Corporates, common man and end consumer?
What are the advantages, disadvantages and challenges?
What is GST?
It has been long pending issue to streamline all the different types of indirect taxes and
implement a single taxation system. This system is called as GST ( GST is the
abbreviated form of Goods & Services Tax). The main expectation from this system is
to abolish all indirect taxes and only GST would be levied. As the name suggests, the
GST will be levied both on Goods and Services.
GST was first introduced during 2007-08 budget session. On 17th December 2014, the
current Union Cabinet ministry approved the proposal for introduction GST
Constitutional Amendment Bill. On 19th of December 2014, the bill was presented on
GST in Loksabha. The Bill will be tabled and taken up for discussion during the
coming Budget session. The current central government is very determined to
implement GST Constitutional Amendment Bill.
GST is a tax that we need to pay on supply of goods & services. Any person, who is
providing or supplying goods and services is liable to charge GST.
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 consumption happens.
GST is collected on value-added goods and services at each stage of sale or purchase
in 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 or
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.
The GST is an indirect tax which means that the tax is passed on till the last stage
wherein it is the customer of the goods and services who bears the tax. This is the case
even today for all indirect taxes but the difference under the GST is that with
streamlining of the multiple taxes the final cost to the customer will come out to be
lower on the elimination of double charging in the system.

Let us understand the above supply chain of GST with an example:
The current tax structure does not allow a business person to take tax credits. There
are lot of chances that double taxation takes place at every step of supply chain. This
may set to change with the implementation of GST.
Indian Government is opting for Dual System GST. This system will have two
components which will be known as
Central Goods and Service Tax (CGST) and
State Goods and Service Tax (SGST).
The current taxes like Excise duties, service tax, custom duty etc will be merged under
CGST. The taxes like sales tax, entertainment tax, VAT and other state taxes will be
included in SGST.
So, how is GST Levied? GST will be levied on the place of consumption of Goods
and services. It can be levied on :
Intra-state supply and consumption of goods & services
Inter-state movement of goods
Import of Goods & Services
What is the applicable GST rate?
The rate (percentage) of GST is not yet decided. As mentioned in the above table,
there might be CGST, SGST and Integrated GST rates. It is also widely believed that
there will be 2 or 3 rates based on the importance of goods. Like, the rates can be
lower for essential goods and could be high for precious/luxury items.
Benefits of GST Bill implementation
The tax structure will be made lean and simple

The entire Indian market will be a unified market which may translate into
lower business costs. It can facilitate seamless movement of goods across states
and reduce the transaction costs of businesses.
It is good for export oriented businesses. Because it is not applied for
goods/services which are exported out of India.
In the long run, the lower tax burden could translate into lower prices on goods
for consumers.
The Suppliers, manufacturers, wholesalers and retailers are able to recover
GST incurred on input costs as tax credits. This reduces the cost of doing
business, thus enabling fairer prices for consumers.
It can bring more transparency and better compliance.
Number of departments (tax departments) will reduce which in turn may lead
to less corruption
More business entities will come under the tax system thus widening the tax
base. This may lead to better and more tax revenue collections.
Companies which are under unorganized sector will come under tax regime.
Challenges for implementing Goods & Services Tax system
Courtesy
https://www.relakhs.com/gst-goods-services-tax-in-india/

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GST-Goods & Service Tax

Import Duties, Luxury Tax, Central Sales Tax, Service Tax.hhmmm..

instead of all these taxes?

What are the advantages, disadvantages and challenges?

GST will be levied both on Goods and Services.

implement GST Constitutional Amendment Bill.

providing or supplying goods and services is liable to charge GST.

How is GST applied?

GST is a consumption based tax/levy. It is based on the Destination principle. GST

against that payable on the supply of goods or services.The manufacturer or

lower on the elimination of double charging in the system.

may set to change with the implementation of GST.

components which will be known as

Central Goods and Service Tax (CGST) and

State Goods and Service Tax (SGST).

and services. It can be levied on :

Intra-state supply and consumption of goods & services

Inter-state movement of goods

Import of Goods & Services

What is the applicable GST rate?

Benefits of GST Bill implementation

The tax structure will be made lean and simple

and reduce the transaction costs of businesses.

It is good for export oriented businesses. Because it is not applied for

goods/services which are exported out of India.

The Suppliers, manufacturers, wholesalers and retailers are able to recover

business, thus enabling fairer prices for consumers.

It can bring more transparency and better compliance.

Challenges for implementing Goods & Services Tax system

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