GOODS AND SERVICE TAX

 

GOODS AND SERVICE TAX

 

What is GST?

Goods and service tax Is an indirect and value-added tax levied by the government on goods and services sold for domestic consumption.  It is the tax that customers bear when they buy goods or services, for example, food, clothes, transportation, electrical things, daily consumer goods, etc. This tax has replaced multiple taxes levied by the central and state govt. on the goods and services.

When GST was introduced?

If we go into deep then we will find that the concept of GST was first proposed under the Atal Bihari Vajpayee government. And after that with long nationwide debate and some with some good numbers of revisions and also with some negotiations this tax was finally launched into operation on the midnight of June 30, 2017 in the central hall of parliament in Delhi. President Pranab Mukherjee, prime minister Narendra Modi, Finance minister Arun Jaitley recited various provisions of tax in their speeches. Therefore, this tax came into effect on 1 July 2017.

What are the key features of GST? 

• Goods and service tax has replaced several taxes like, excise duty, services tax, octroi, additional custom duty, surcharges etc.  

• The rates of GST get mutually decided by the central and state government. The rates are notified on the recommendation of GST Council.
• Other and different levies that were applicable on inter-state transportation of goods and services were also changed by the launch of the GST regime.
• GST has levied different rates for different goods and services. Rates are as follows: 0%, 5%,12%,18%,28%.
• Also, GST has special rates for some special goods, 0.25% on rough precious and semi-precious stone and 3% on gold. Also, it applies a cess of 15% or other rates on top of 28% GST for the products like aerated drinks, luxury cars and tobacco products.

 

What are the different types of GST?

There are 4 type GST. As follows-

• Central GST- The GST paid of each transaction is divided in two equal parts. The part of the Center is known as CGST.
• State GST- The GST art of State is SGST, when the transaction takes place within the state.
• Union Territory GST- when the transaction takes place in a union territory with the presence of a legislator, the part of GST that union territory gets is called UGST.
• Integrated GST- when transaction takes place between a state/UTs or in between UTs/state and any foreign territory, IGST is levied without any bisection on the applicable GST rate.

 

What are the Activities covered under GST?

• Whatever transaction takes place within a single state, it will be imposed with CGST (central GST) by the central government and SGST (State GST) by the state government. Or if any inter-state transaction takes place then IGST(Integrated GST) gets imposed by the central government.
• No transaction is spared in GST, this tax is levied on all kinds of transactions whether it is a purchase, transfer, import/export, or lease. Dual model GST has been adopted by India i.e. taxation is administered and managed by both the State and Union Government.
• GST is based on consumption, which impact or result will be seen at the final destination. The taxes are then paid to the state government where the goods and services are finally consumed and not to the government of the state where the goods have been produced.

How GST is calculated?

Let’s assume that GST is set at 10%. Now suppose that the manufacturing cost of product is 100 and assuming a GST at 20% the total amount is Rs. 110. The next step of taxation would be when the product will be sold to the consumers. If suppose the product is sold at a price of 140. The GST will charge another 10% on just the difference od Rs. 140 and Rs. 110 i.e. only 10% on Rs. 30 which is equal to Rs. 3. So, then the final price is Rs. 150+ Rs. 3. GST will be applied on every step of value creation. 

What is the need and importance of GST?

Goods and service tax is an instrument and a biggest tax reform taken place in 2017, it is needed in respect to below mentioned points 

• National Council of Applied Economic Research, has mentioned in its report that GST is expected to boost economic growth of the country by 0.9% and 1.7%.
• Businesses registered under GST will be able to claim tax credit to the value of GST they paid on their commercial activity.
•  GST is said to be a right step to move ahead with ‘Make in India’ vision.
• With the help of GST, the multi-tier tax system has been eliminated from the country and it has provided some kind of relaxation to the economy.
• GST is a destination-based tax, so the tax structure is much easier to perceive.
• In GST the taxable goods and services are not different from one another and taxed at a solo rate till it reaches the consumer.
• GST has eliminated complexities in tax structure and hence inhibit the loss of 50%.
• In GST only a single authority will have the administrative responsibility to impose tax on goods and services.
• GST implementation has assured a single taxation system for the whole nation for the goods and services and making it much convenient and more effective.

What items are not covered under GST?

 

There are few items or products, which are not under the girth of GST till after its launch.

• Liquors and alcohol.
• Petroleum products: GST is not imposed on five petroleum products- crude oil, diesel, petrol, natural gas and ATF.
• Tobacco.

 

What are the challenges in GST?

 

• The SCGT and CGST input credit cannot be utilized.
• The states involved in manufacturing lose revenue on a bigger scale.
• The reduction in fiscal autonomy of the respective state.
• Banking and insurance companies concern over the various and multiple registration under GST.
• GST results in the imposition of additional cess.

 

Conclusion

  

However, GST is a positive step towards shifting the Indian economy from informal to formal to informal economy. It is important to use the experiences of global economies that have implemented GST in front of us to overcome imminent challenges.