GST (Goods and Services Tax) in India

Journey of GST in India from 2000 to 2017:

2000 – A committee was set up to draft the law.

2004 – A task force concludes GST to improve current tax structure.

2006 – Finance Minister proposes GST.

2011 – Constitution amendment bill to enable GST law introduced.

2013– standing committee tables its report on GST.

2014 – GST bill introduced in parliament by finance Minister.

2015 – GST bill passed in Lok Sabha but not passed in Rajya Sabha.

2016 – Amendment Model GST passed in both houses.

2017 – Four supplementary GST bill passed first in Lok Sabha and then in Rajya Sabha. GST is launched on 1st July 2017

What is GST:

  • GST is said to be one of the most important Indirect Tax Reforms in India’s history.
  • Goods and Service Tax (GST) is an indirect tax levied on the supply of goods and services in India right from the manufacturer to the consumer.
  • It is also called consumption tax.
  • The 101st constitution Amendment Act of September 2016 was made in this regard.
  • It is a single unified tax created by amalgamating a large number of Central and State taxes presently applicable in India.
  • GST is levied at every step in the production process but refunded to all parties in the various stages of production other than the final consumer.
  • GST means any tax on supply of goods, or services, or both, except taxes on supply of the Petroleum products such as petrol, diesel, aviation turbine fuel and alcoholic liquor for human consumption have been kept out of GST.

Components of GST:

  • In India, both the Centre and the States have been assigned the powers to levy and collect taxes. Both the levels of Government have distinct responsibilities to perform for which they need to raise resources.
  • Central GST or CGST – To be charged by the central government.
  • State GST or SGST – To be charged by the state government.
  • Integrated GST or IGST – To be charged by central government on the inter-state supply of various goods and services.
  • Union Territory GST or UTGST- GST levied by Union Territories without legislature.

GST Council:

GSTC (GST Council) would be responsible for deciding the rates of CGST, IGST and SGST/UTGST with mutual agreement of the states and the center.

Need of GST:

  • To regulate and organize certain industries.
  • To improve efficiency of logistics.
  • To improve the economic growth.
  • To bring transparency in the taxation system.
  • To reduce the complexities of the tax system.
  • To integrate the whole nation.
  • To get rid of tax cascading and double taxation

 

How GST is better than previous indirect taxes:

For government:

  • In the earlier Indirect Tax regime, there were many indirect taxes (like VAT, CST, Service tax, CAD, SAD, and Excise) levied by both state and centre but GST brings all the indirect taxes on one platform.
  • GST is a destination-based tax i.e. tax is imposed at the point of consumption but previous tax structure was origin based.
  • GST also helps in better tax collections as it streamlines the tax administration, avoid harassment of the business and result in higher revenue collection, both for the Centre and the States.
  • This law has replaced many indirect tax laws that previously existed in India.
  • It integrates the country through a uniform tax rate thus help in boosting the Indian economy.
  • GST will also make Indian products competitive in the domestic and international markets.

For tax payers:

  • It is more transparent as it is designed in such way that all tax payer services such as registrations, returns, payments, etc. would be available to the taxpayers online, which would make compliance easy and transparent.
  • It reduces harassment and corruption.
  • GST avoids cascading effect (tax on tax) as the tax is calculated only on the value-add at each stage of transfer of ownership.
  • This has been beneficial for start-ups especially, as they do not have to run from pillar to post to get different registrations such as VAT, excise, and service tax.
  • It leads in reduction of manufacturing costs due to lower burden of taxes on the manufacturing sector. Hence prices of consumer goods will be likely to come down followed by lower burden on the common man.

 

How GST works:

  • Under GST, every registered taxable person is assigned a unique identification number for every state he is registered in. This number is known as GSTIN
  • GST process is very simple and it is made online from registration to filing returns.

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