The Goods and Service Tax (GST) ....................

One of the biggest taxation reforms in India -- the Goods and Service Tax (GST) -- is all set to integrate State economies and boost overall growth.GST will create a single, unified Indian market to make the economy stronger.The implementation of GST will lead to the abolition of other taxes such as octroi, Central Sales Tax, State-level sales tax, entry tax, stamp duty, telecom licence fees, turnover tax, tax on consumption or sale of electricity, taxes on transportation of goods and services, et cetera, thus avoiding multiple layers of taxation that currently exist in India.But just what is GST all about and how will it impact you?

What is GST?

Goods and Services Tax -- GST -- is a comprehensive tax levy on manufacture, sale and consumption of goods and services at a national level.Through a tax credit mechanism, this tax is collected on value-added goods and services at each stage of sale or purchase in the supply chain. The system allows the set-off of GST paid on the procurement of goods and services against the GST which is payable on the supply of goods or services. However, the end consumer bears this tax as he is the last person in the supply chain.Experts say that GST is likely to improve tax collections and boost India's economic development by breaking tax barriers between States and integrating India through a uniform tax rate.

OBJECTIVES OF GST:-

One of the main objectives of GST would be to  eliminate the cascading impact of taxes on  production and distribution cost of goods and services. The exclusion of cascading effects i.e.  tax on tax will significantly improve the competitiveness of original goods and services which leads to beneficial impact to the GDP growth. It is felt that the GST would serve a superior reason to achieve the objective of streamlining indirect tax regime in India which can remove cascading effects in supply chain till the level of final consumers only when all such above mentioned indirect

taxes are completely included in GST. It is understood that alcohol, tobacco and petroleum products will not be enclosed by GST as alcohol and tobacco are considered as Sin Goods, and governments do not like to allow free trade on these property.

What are the benefits of GST?

Under GST, the taxation burden will be divided equitably between manufacturing and services, through a lower tax rate by increasing the tax base and minimizing exemptions.It is expected to help build a transparent and corruption-free tax administration. GST will be is levied only at the destination point, and not at various points (from manufacturing to retail outlets).Currently, a manufacturer needs to pay tax when a finished product moves out from a factory, and it is again taxed at the retail outlet when sold.

1. GST provide comprehensive and wider  coverage of input credit setoff, you can use  service tax credit for the payment of tax on sale 

of goods etc.

2. CST will be removed and need not pay. At  present there is no input tax credit available for  CST.

3. Many indirect taxes in state and central level  included by GST, You need to pay a single GST  instead of all

4. Uniformity of tax rates across the states

5. Ensure better compliance due to aggregate tax rate reduces.

6. By reducing the tax burden the  competitiveness of Indian products in  international market is expected to increase and there by development of the nation.

How will it benefit the Centre and the States?

It is estimated that India will gain $15 billion a year by implementing the Goods and Services Tax as it would promote exports, raise employment and boost growth. It will divide the tax burden equitably between manufacturing and services.

What are the benefits of GST for individuals and companies?

In the GST system, both Central and State taxes will be collected at the point of sale. Both components (the Central and State GST) will be charged on the manufacturing cost. This will benefit individuals as prices are likely to come down. Lower prices will lead to more consumption, thereby helping companies.

Indirect taxes included under GST.......................

The following indirect taxes from state and  central level is going to integrated with GST

State taxes

1. VAT/Sales tax

2. Entertainment Tax (unless it is levied by local bodies)

3. Luxury tax

4. Taxes on lottery, betting and gambling.

5. State cesses and surcharges in so far as they relate to supply of goods and services.

6. Entry tax not on in lieu of octroi.

7. Purchase tax (This is not sure still under discussion)

 Central Taxes

1. Central Excise Duty.

2. Additional Excise Duty.

3. The Excise Duty levied under the medical and Toiletries Preparation Act

4. Service Tax.

5. Additional Customs Duty, commonly known as countervailing Duty (CVD)

6. Special Additional duty of customs- (SAD)

7. Surcharges

8. Cesses The above taxes dissolve under GST; instead only CGST & SGST exists.

 Salient features of the GST model

Salient features of the proposed model are as  follows:

(I) the GST shall have two components: one levied  by the Centre (referred to as Central GST), and  the other levied by the States (referred to as 

State GST). Rates for Central GST and State GST  would be approved appropriately, reflecting  revenue considerations and acceptability.

(ii) The Central GST and the State GST would be  applicable to all transactions of goods and  services made for a consideration except the 

exempted goods and services.

(iii) The Central GST and State GST are to be paid  to the accounts of the Centre and the States  individually.

(iv) Since the Central GST and State GST are to be  treated individually, taxes paid against the  Central GST shall be allowed to be taken as input  tax credit (ITC) for the Central GST and could be  utilized only against the payment of Central GST.

(v) Cross utilization of ITC between the Central  GST and the State GST would not be permitted except in the case of inter-State supply of goods 

and services.

(vi) Ideally, the problem related to credit 

Justification of GST:-

The introduction of GST at the Central level will  not only include comprehensively more indirect  Central taxes and integrate goods and service 

taxes for the purpose of set-off relief, but may  also lead to revenue gain for the Centre through widening of the dealer base by capturing value 

addition in the distributive trade and increased  compliance. In the GST, both the cascading  effects of CENVAT and service tax are removed 

with set-off, and a constant chain of set-off from  the original producer’s point and service  provider’s point up to the retailer’s level is  established which reduces the burden of all  cascading effects. This is the real meaning of GST, and this is why GST is not simply VAT plus service tax but an improvement over the previous system  of VAT and disjointed service tax. Moreover, with  the introduction of GST, burden of Central Sales Tax (CST) will also be removed. The GST at the State-level is, therefore, justified for-

(a) Additional power of levy of taxation of services for the States

(b) System of comprehensive set-off relief,

(c) Subsuming of several taxes in the GST

(d) Removal of burden of CST

CONCLUSION...............................................

GST is the most logical steps towards the comprehensive indirect tax reform in our country since independence. GST is leviable on all supply of goods and provision of services as well combination thereof. All sectors of economy whether the industry, business including Govt. departments and service sector shall have to bear impact of GST. All sections of economy viz., big, medium, small scale units, intermediaries, importers, exporters, traders, professionals and consumers shall be directly affected by GST... One of the biggest taxation reforms in India -- the Goods and Service Tax (GST) -- is all set to integrate State economies and boost overall growth. GST will create a single, unified Indian market to make the economy stronger. Experts say that GST is likely to improve tax collections and Boost India’s economic development by breaking tax barriers between States and integrating India through a uniform tax rate. Under GST, the taxation burden will be divided equitably between manufacturing and services, through a lower tax rate by increasing the tax base and minimizing exemptions.