GST stands for Goods and Services Tax. It is a kind of tax imposed on sale, manufacturing and usage of goods and services. Goods and Services Tax is applied on services and goods at a national level with a purpose of achieving overall economic growth.
Goods and Services Tax (GST) in India:
In India, the Goods and Services Tax Bill was officially introduced in 2014 as The Constitution (One Hundred and Twenty-Second Amendment) Bill, 2014. The GST Bill in India proposes the implementation of nationwide Value Added Tax on sale, manufacturing and the use of different goods and services. The Goods and Services Tax act is expected to be operative in India from April 2016.
The taxes levied by the State and Central Governments is given in the table below:
| Central Government | State Government | Local Administration |
| Income Tax | Sales Tax | Property Tax |
| Excise Duty or Central VAT | Value Added Tax | |
| Service Tax | Entertainment Tax | |
| Customs Duty | Road Toll | |
| Central Sales Tax | Professional Tax | |
| Stamp Duty | ||
| Luxury Tax | ||
| Octroi Duty | ||
| Capital Gains Tax | ||
| Entry tax |
Of these, excise duty/CENVAT, customs duty, service tax, central and state sales tax, VAT, octroy, entry tax, road toll, luxury tax and entertainment tax are applicable to goods and services.
GST will also prevent the multiple taxations occurring on certain goods, and ensure transparency with regards to the rate of taxation and the total amount that goes to the government as taxes on a product. Currently, a consumer is not aware of the total amount of taxes s/he pays for a product, apart from VAT which is mentioned in the bill.
Here’s a list of taxes that the GST will likely replace:
- Service Tax
- Cesses and surcharges related to supply of goods or services
- Central Excise Duty
- Excise Duties on medicinal and toilet preparations
- Additional Excise Duties on textiles and textile products
- Additional Excise Duties on goods of special importance
- Additional Customs Duties (CVD)
- Special Additional Duty of Customs (SAD)
These are the taxes that could be absorbed into the GST regime:
- Central Sales Tax
- State VAT
- Entry Tax
- Purchase Tax
- Entertainment Tax (not levied by local bodies)
- Luxury Tax
- Taxes on advertisements
- State cess and surcharges
- Taxes on lotteries, betting and gambling
The exact rates of GST have not been decided yet. This will be done only after repeated consultations on the reports made by the GST Council. The rates being discussed as of now hover around 18%, which may be higher than the current system for certain goods and services, and lower for the others.
Advantages of GST:
- This is a federal law, which means that the states will no longer have the right to make new laws on taxation towards goods and services.
- It simplifies the tax system and makes it easier to understand as well as cheaper to implement at various levels.
- Tax evasion at various stages will be eliminated as tax offsets can be collected only if taxes have been paid originally. You will also be able to buy raw materials or constituent materials for production only from those who have paid taxes, in order to claim benefits.
- It will be cheaper to buy input goods and services for production from other states.
- The current supply and distribution chain may undergo a change with a change in a taxation system that does away with excise and customs duties.
- The consumer will get the end-product at cheaper rates because of elimination of multiple taxes and the tax cascade.
- As of now, petroleum and petroleum products have been kept out of the GST regime until further notice.
- Sale of newspapers and advertisements are also likely to fall under the GST regime, allowing the government to increase its revenue considerably.
- While there will be central GST and state GST, the tax applicable on goods and services being exported and imported between states in India would fall under an Integrated GST (GST) system in order to avoid conflict of dominion.
Disadvantages of GST:
- GST is not good news for all sectors, though. In the current system, many products are exempted from taxation. The GST proposes to have minimal exemption list. Currently, higher taxes are levied on fewer items, but with GST, lower taxes will be levied on almost all items.
- GST is not applicable on liquor for human consumption. So alcohol rates will not get any advantage of GST.
- Stamp duty will not fall under the GST regime and will continue to be imposed by states.
Goods and Services Tax Bill:
The Goods and Services Tax GST Bill is officially known as The Constitution (One Hundred and Twenty-Second Amendment) Bill, 2014 which is formulated to create a pan-India tax system and end the number of multiple taxes charged by the Center and the States on various goods and services. The key points of the GST bill are given below:
- It is an indirect, uniform tax that is levied on the goods and services throughout a particular country. Several developed countries add a tax on sale, manufacture and consumption using single comprehensive tax.
- Surcharge on a supply of goods, cesses, special add-on duty of customs, add-on duties of customs and excise and central excise duty would be replaced by Central Taxes GST.
- Entertainment tax, entry tax, purchase tax, central sales tax, VAT, etc. would be replaced by State Tax GST.
- The primary objectives of GST are eliminating the excessive taxation.
- The 2014 bill deleted the 2011 bill provision that imposed certain restrictions on the states on taxation of the products that are important for interstate commerce and trade.
Goods and Services Tax Act:
Goods and Services Tax act is one of the most remarkable tax reforms that has taken place in India so far. The GST act, which is also known as The Constitution (One Hundred and Twenty-Second Amendment) Bill, 2014, mainly focuses on changing the Constitution of India to simplify the process taxation on goods and services in India. The act bestows power on the Parliament and the State legislatures to make laws for imposing taxes on goods and services at the national level.
Key Features of Goods and Services Tax:
Listed below are the main features of the Goods and Services Tax in India:
- The Goods and Services Tax will include Central Indirect taxes such as Excise Duty, Service Tax, Special Additional Duty of Customs, Countervailing Duty, Central Surcharges and Cesses as long as they are related to the supply and consumption of goods and services.
- It will also include State Value Added Tax or Sales Tax, Entertainment Tax, (excluding the tax charged by the local bodies), Entry and Octroi tax, Central Sales Tax (taxed by the Centre and collected by the State Government) , Purchase Tax, Luxury tax, Taxes on betting, lottery and State cesses and surcharges involved in the supply and consumption of services and goods.
- The inclusion of the concept of ‘declared goods of special importance’ as per the Indian Constitution.
- Will levy integrated Goods and Services Tax on inter-State transactions of goods and services.
- Will levy an additional tax of 1% on a supply of goods in inter-State trade which will be collected by the Government of India for a period of two years and will be allocated to the states from where the supply comes.
- Petroleum and petroleum products and alcohol have been kept out of the reach of GST.
- The act will have two constituents – Central GST charged by the Centre and State GST charged by the states. But, in case of inter-state trade or commerce, only the Centre will levy a tax and collect Goods and Services Tax, and the tax collected would be divided between the Centre and the State as per the provision made in the parliament.
- Also an additional tax of 1% on the interstate trade in goods and services will be imposed and collected by the Centre and provided to the states for two years to compensate the loss ( of any) faced by the states for implementing the GST.
- A Goods and Services Tax Council will be created to address the issues relating to goods and services tax and give recommendations to the Union and the States on areas such as rates, exemption list and threshold limits. The GST Council will constitute of the Union Finance Minister as chairman followed by the Minister –in-charge of Finance or Taxation or any other Minister nominated by each State Government. The GST Council will function under the Chairmanship of the Union Finance Minister and it will be a joint forum of the Centre and the States.
