allyouwantedtoknowaboutgst-090709011322-phpapp02

7/28/2019 allyouwantedtoknowaboutgst-090709011322-phpapp02

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Shashikant S Kulkarni

Aquarius Career Academy, Dharwad


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One of the biggest taxation reforms in India --the Goods and Service Tax (GST) -- is all set to

integrate State economies and boost overallgrowth.

GST will create a single, unified Indian marketto make the economy stronger.


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The implementation of GST will lead to theabolition of other taxes such as octroi, Central

Sales Tax, State-level sales tax, entry tax,stamp duty, telecom licence fees, turnovertax, tax on consumption or sale of electricity,taxes on transportation of goods andservices, thus avoiding multiple layers oftaxation that currently exist in India.


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Goods and Services Tax -- GST -- is acomprehensive tax levy on manufacture, sale

and consumption of goods and services at anational level.

Through a tax credit mechanism, this tax iscollected on value-added goods and servicesat each stage of sale or purchase in the supplychain.


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The system allows the set-off of GST paid onthe procurement of goods and services

against the GST which is payable on thesupply of goods or services. However, the endconsumer bears this tax as he is the lastperson in the supply chain.


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Under GST, the taxation burden will be dividedequitably between manufacturing and services,through a lower tax rate by increasing the tax

base and minimising exemptions. It is expected to help build a transparent and

corruption-free tax administration. GST will belevied only at the destination point, and not atvarious points (from manufacturing to retailoutlets).

Currently, a manufacturer needs to pay tax whena finished product moves out from a factory, andit is again taxed at the retail outlet when sold.


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It is estimated that India will gain $15 billion ayear by implementing the Goods and Services

Tax as it would promote exports, raiseemployment and boost growth. It will dividethe tax burden equitably betweenmanufacturing and services.


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In the GST system, both Central and Statetaxes will be collected at the point of sale.

Both components (the Central and StateGST) will be charged on the manufacturingcost. This will benefit individuals as prices arelikely to come down. Lower prices will lead tomore consumption, thereby helpingcompanies.


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India is planning to implement a dual GSTsystem. Under dual GST, a Central Goods and

Services Tax (CGST) and a State Goods andServices Tax (SGST) will be levied on thetaxable value of a transaction.

All goods and services, barring a fewexceptions, will be brought into the GSTbase. There will be no distinction betweengoods and services.


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Almost 140 countries have alreadyimplemented the GST. Most of the countries

have a unified GST system. Brazil and Canadafollow a dual system where GST is levied byboth the Union and the State governments.

France was the first country to introduce GSTsystem in 1954.


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It will not be an additional tax. CGST willinclude central excise duty (Cenvat), service

tax, and additional duties of customs at thecentral level; and value-added tax, centralsales tax, entertainment tax, luxury tax,octroi, lottery taxes, electricity duty, statesurcharges related to supply of goods andservices and purchase tax at the State level.


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The combined GST rate is being discussed bygovernment. The rate is expected around 14-

16 per cent. After the total GST rate is arrivedat, the States and the Centre will decide onthe CGST and SGST rates.

Currently, services are taxed at 10 per centand the combined charge indirect taxes onmost goods is around 20 per cent.


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The prices are expected to fall in the longterm as dealers might pass on the benefits of

the reduced tax to consumers.


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The governments of Madhya Pradesh, Chhattisgarh andTamil Nadu say that the information technology systems andthe administrative infrastructure will not be ready by April2013 to implement GST. States have sought assurances that

their existing revenues will be protected. The central government has offered to compensate States in

case of a loss in revenues. Some States fear that if the uniform tax rate is lower than

their existing rates, it will hit their tax kitty. The governmentbelieves that dual GST will lead to better revenue collectionfor States.

However, backward and less-developed States could see afall in tax collections. GST could see better revenuecollection for some States as the consumption of goods andservices will rise.


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The empowered committee is likely tofinalise the details of GST by August. But

States have to sort out several issues likeagreement on GST rates, constitutionalamendments and holding talks with industryassociations. Experts feel the drafting oflegislation and the implementation of law willtake time.


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Alcohol, tobacco, petroleum products arelikely to be out of the GST regime.

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