Goods And Services Tax (Gst)

GOODS AND SERVICES TAX (GST)

OVERVIEW:-

The proposed GST is likely to change the whole scenario of current indirect tax system. It is considered as biggest tax reform since 1947.Currently, in India complicated indirect tax system is followed with imbrications of taxes imposed by union and states separately. GST will unify all the indirect taxes under an umbrella and will create a smooth national market. Experts say that GST will help the economy to grow in more efficient manner by improving the tax collection as it will disrupt all the tax barriers between states and integrate country via single tax rate. GST was first introduced by France in 1954 and now it is followed by 140 countries. Most of the countries followed unified GST while some countries like Brazil, Canada follow a dual GST system where tax is imposed by central and state both. In India also dual system of GST is proposed including CGST and SGST.

ADVANTAGES OF GST:-

The Goods and Services Tax (GST) is a vast concept that simplifies the giant tax structure by supporting and enhancing the economic growth of a country. GST is a comprehensive tax levy on manufacturing, sale and consumption of goods and services at a national level. The Goods and Services Tax Bill or GST Bill, also referred to as The Constitution (One Hundred and Twenty-Second Amendment) Bill, 2014, initiates a Value added Tax to be implemented on a national level in India. GST will be an indirect tax at all the stages of production to bring about uniformity in the system.

On bringing GST into practice, there would be amalgamation of Central and State taxes into a single tax payment. It would also enhance the position of India in both, domestic as well as international market. At the consumer level, GST would reduce the overall tax burden, which is currently estimated at 25-30%.

Under this system, the consumer pays the final tax but an efficient input tax credit system ensures that there is no cascading of taxes- tax on tax paid on inputs that go into manufacture of goods.

In order to avoid the payment of multiple taxes such as excise duty and service tax at Central level and VAT at the State level, GST would unify these taxes and create a uniform market throughout the country. Integration of various taxes into a GST system will bring about an effective cross-utilization of credits. The current system taxes production, whereas the GST will aim to tax consumption.

Experts have enlisted the benefits of GST as under:

• It would introduce two-tiered One-Country-One-Tax regime.

• It would subsume all indirect taxes at the center and the state level.

• It would not only widen the tax regime by covering goods and services but also make it transparent.

• It would free the manufacturing sector from cascading effect of taxes, thus by improve the cost-competitiveness of goods and services.

• It would bring down the prices of goods and services and thus by, increase consumption.

• It would create business-friendly environment, thus by increase tax-GDP ratio.

• It would enhance the ease of doing business in India.

HISTORY:-

The Goods and Services Tax (GST), implemented on July 1, 2017, is regarded as a major taxation reform till date implemented in India since independence in 1947. GST was planned to be implemented in April 2010, but was postponed due to political issues and conflicting interest of stakeholders.

The primary objective behind development of GST is to subsume all sorts of indirect taxes in India like Central Excise Tax, VAT/Sales Tax, Service tax, etc. and implement one taxation system in India. The GST based taxation system brings more transparency in taxation system and increases GDP rate from 1% to 2% and reduces tax theft and corruption in country. The paper highlighted the background of the taxation system, the GST concept along with significant working, comparison of Indian GST taxation system rates with other world economies, and also presented in-depth coverage regarding advantages to various sectors of the Indian economy after levising GST and outlined some challenges of GST implementation.

For the implementation of GST in the country, the Central and State Governments have jointly registered Goods and Services Tax Network (GSTN) as a not-for-profit, non-Government Company to provide shared IT infrastructure and services to Central and State Governments, taxpayers and other stakeholders. The key objectives of GSTN are to provide a standard and uniform interface to the taxpayers, and shared infrastructure and services to Central and State governments.

GST COUNCIL:-

1) It is set up by president under article 279-A. It is chaired by union finance minister.

2) It will constitute union minister of state in charge of revenue and minister in charge of finance or taxation or of any other field nominated by state governments. The 2/3rdrepresentatives in council are from states and 1/3rdfrom union.

3) The decision of council is made by 3/4thmajority of the votes cast and quorum of council is 50%.

4) It will make recommendations on:

a) Taxes, surcharge, cess of central and states which will be integrated in GST.

b) Goods and services which may be exempted from GST

c) Interstate commerce –IGST-proportion of distribution between state and center

d) Registration threshold limit for GST

e) GST floor rates

f) Special rates during calamities

g) Provision with respect to special category states specially north east states

5) It may also work as Dispute Settlement Authority for GST.

CONCLUSION:-

Due to dissilient environment of Indian economy, it is demand of time to implement GST. Consumption and productions of goods and services is undoubtedly increasing and because of multiplicity of taxes in current tax regime administration complexities and compliance cost is also accelerating. Thus, a simplify, user -friendly and transparent tax system is required which can be fulfilled by implementation of GST.

Its implementation stands for a coherent tax system which will colligate most of current indirect taxes and in long term it will lead to higher output, more employment opportunities and flourish GDP by 1-1.5%.Itcan also be used as an effective tool for fiscal policy management if implemented successfully due to nation-wide same tax rate.

It execution will also results in lower cost of doing business that will make the domestic products more competitive in local and international market. No doubt that GST will give India a world class tax system by grabbing different treatment to manufacturing and service sector. But all this will be subject to its rational design and timely implementation. There are various challenges in way of GST implementation as discussed above in paper.