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Goods and Services Tax(GST) in India
September 29, 2016

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The most awaited tax reform of the post independent india is ready to be implemented from 1st April 2017. GST which stand as goods and services tax is going to make tremendous improvement in indirect tax  framework in india. Kelkar Task Force in 2004 introduced the concept of GST in  india. The present indirect tax system is complex due to multiplicity of taxes having large cascading effect .The tax reforms of independent india can be summed as adoption of taxes like MODVAT, CENVAT,VAT and finally GST.Keeping with the spirit of federalism there is CGST levied by the central government and SGST levied by the respective state government and IGST levied on interstate transactions by the central government.The GST council is entrusted with the task of creating a model GST laws which has representatives from both central and state government.All the decisions in the council will be decided by majority vote with the the states having two- third voting power and the centre has one third.

FEATURES OF GST

 
  • GST is a kind of  value added tax.GST will retain input tax credit.
  • GST aims to promote the concept of one nation one tax.
  • The CGST and SGST would be applicable on all goods and services expect the exempted goods and services i.e the goods which are outside the purview of GST.
  • The GST would be levied on the import of goods and services into the country.

GST will subsume several central taxes and state taxes.The central taxes that are covered under GST are-
  • Service Tax
  • Central Excise Duties
  • Additional Excise Duties
  • Additional Custom Duty
  • Central Surcharge and Cesses

The state level taxes that will be subsumed under GST are-
  • State Vat
  • Sales Tax
  • Entertainment Tax not levied by local bodies
  • Tax on lottery, betting and gambling
  • Tax on advertisements
  • Cesses and Surcharges 
GST will not be applicable on alcoholic liquor. In case of petroleum and petroleum products, it has been decided that these goods will not be under GST till a date notified on the recommendation of GST Council.
 

BENEFITS OF GST

  • Simplication of the tax system-GST will replace 17 indirect tax levies leading to a fall in compliance cost
  • It will lead to increase in resource mobilisation due to fall in cases of tax evasion, motivation to suppliers to pay taxes due to the provision of input tax credit, less goods will be in exempted list under GST.
  • It will pave the way for the creation of a common market .The current fragmentation along state lines pushes cost upto 20 to 30 percent
  • Logistics and inventory cost will fall after the implementation of GST.In india checks at state borders lead to slow movement of trucks in india . In india on an average a truck travels for 280km a day while the sme is 800 kms for US
  • It will give a filip to investment in the country. Full input tax credit under GST will mean a 12-14% drop in the cost of capital goods thus expecting a 6% rise in capital goods investment
  • It will give a boost to the manufacturing sector as GST takes into account the problems of cascading of taxes, high logistic cost, fragmentation of markets. It provides for protection from imports as GST has provision of countervailing duties
  • It will create opportunities for less developed states as under the current regime of 2% inter-state levy production is kept within the state .GST will cater this problem to a larger extent
  • GDP Growth Rate will get a filip.It is expected that in the next 3-5 yrs a 2% increase in Gdp Growth Rate can be achieved
  • It will give a boost to the e-commerce sector. Under the current regime state restrictions and levies have complicated the e-commerce segment
CONCLUSION
 
GST can be regarded as one of the most ambitious reform of the present era for india.The reform has wide wide reaching implications for each and every sector of the economy . Rationalisation of tax system is the most essential reguirement for the competitiveness of any economy.
 

 

 
 

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