“GOODS AND SERVICES TAX”
The 122nd Amendment Bill of the Constitution of India introduced a National Goods and Services Tax in India from 1st July 2017.
What is GST?
Goods and Services Tax (GST) in India is a comprehensive, multi-stage, destination-based tax that is levied on every value addition. Goods and Services Tax(GST) is an indirect tax levied when a consumer buys a good or service. GST has replaced many indirect taxes that previously existed in India. This act was passed in the Parliament on 29th March 2017 and came into effect on 1st July 2017. India’s current tax scenario is riddled with various indirect taxes which the GST aims to subsume with a single pan India comprehensive tax, by bringing all such taxes under a single umbrella.
After 17 years of continuous efforts the present Goods and Services Tax law has come into effect. The journey of GST in India was not simple unlike to other. From 2000 to its implementation in 2017, it has gone through many changes.
The Goods and Services Tax is being rated as the most reformative measure proposed in the field of Indirect Taxation in the history of India. It has been termed a potential gamechanger, the single biggest tax reform undertaken by India in 70 years of Independence.
The Rollout of the GST:
The rollout of the GST on 1st July 2017 in a single stroke convert India into a unified, continent-sized marked of 1.3 billion people. It will bring uniformity of tax rates and structures across the country. It will increase certainty and ease of doing business i.e. make it tax neutral, irrespective of the choice of place of doing business in the country.
In order to understand the features and objectives of the GST Act, first, we need to take a quick look on the previous taxation system. Previously taxes were charged on every stage viz excise on manufacture. VAT/CST on sales, entry tax on entry of goods in local are etc. This cascading effects of tax i.e. tax on tax results in hiking the prices of goods or services. These taxes were imposed by the Center and State differently according to the lists in the Constitution of India. Now the new concept of GST is that the GST would be a single tax system which would be levied on “supply” of goods and services and this tax will be jointly imposed by the Center and the State with the recommendation of a Federal Institution created the GST Council.
Levies in GST :
There would be three different types of levies in GST:
(i) CGST :
The Central GST tax that is levied by the Central Government of India on any transaction of goods and services tax taking place within a state. CGST replaces all the existing central taxes including Service Tax, Central Excise Duty, CST, Customs Duty, SAD etc. The rate of CGST is usually equal to the SGST rate. Both taxes are charged on the base price of the product.
(ii) IGST :
IGST (Integrated Goods and Services Tax) is applicable on an interstate (between two states) transactions of goods and services as well on imports. This tax will be collected by the Central Government and will further be distributed among the respective states. IGST is charged when a product or service is moved from one state to another.
(iii) SGST & UTGST :
SGST (State Goods and Services Tax) and UTGST (Union Territory Goods and Services Tax) are applicable on the goods and services supply that take place in respective states and Union TerritoriTerritories. It replaces all the existing state taxes including VAT, Central Sales Tax, Purchase Tax, Luxury Tax, Entry Tax, Entertainment Tax, Taxes on advertisements, lotteries, betting, gambling, and state cess and surcharge.
Rates for goods and services to be taxed :
The current form has four rates for goods and services- 0%, 5%, 12%, 18%, and 28% and excludes five hydrocarbons crude oil, petrol, diesel, jet fuel, and natural gas as well as liquor, real estate, and electricity from the purview of GST. Also, there are basic items on which there is no tax like unbranded products, vegetables, milk, fruits, bread, salt, bindi, curd, sindoor, natural Honey, bangles, handloom, besan, flour, eggs, newspaper etc.
Since India has different GST tax rates compared to a single GST rate in most prosperous nations across the globe, the national economy would undergo a major shift from the times of multiple taxes. From a common man to the riches, the word GST will have a significant bearing. While some goods and services would become cheaper, others may just take out more from the pocket of the consumers.
Filling of GST return :
With the introduced of Goods & Services Tax, taxpayers are now required to fulfill a set of compliances which mandates them to file multiple returns for each Financial year. Some of these are monthly requirements where details regarding invoices raised as well as received have to be filed with GSTN. GSTN will act as a repository of data the taxpayers which can be accessed in future.
The GST Council and the Ministry of Finance have come up with a great solution to record all such invoices in one place and collate data for the taxpayer. The processes have been simplified and many taxes have been removed. The whole nation shall report using the same structure irrespective of where and how you carry your business. A widespread IT system has been deployed by the Ministry to cope up with such a huge influx of data. It is called GSTN (Goods and Services Tax Network) that will house all the information of sellers and buyers together, collaborate the details submitted and even maintain 3 registers for you for future reference and anytime reconciliation.
For properly updating the invoices, India taxpayers and businesses have to file certain returns with the Government. These returns have to be mandatorily filed as any non-compliance towards the same may lead to disallowance of input tax credit, apart from attracting penalties and interests etc. Proper filing of information and passing the same in the returns is a mandatory process for smooth flow of credit to the last recipient. The returns have been designed so that all transactions are in sync with each other and that no transaction is left unattended between the buyer and the seller. The tale starts from GSTR-1. All the data is stored in GSTN, which can be accessed by users/taxpayers anytime online.
The impact of GST on macroeconomic indicators is likely to be very positive in the medium-term. Inflation would be reduced as the cascading (tax on tax) effect of taxes would be eliminated. The revenue from the taxes for the government is very likely to increase with an extended tax net and the fiscal deficit is expected to remain under the checks. Moreover, exports would grow, while Foreign Direct Investment (FDI) would also increase. Industry leaders believe that the country would climb several leaders in the ease of doing business with the implementation of the most important tax reform ever in the history of the country.
Goods and Services Tax has all the ingredients of a modern, seamless taxation system. But its success will depend on taking onboard all the stakeholders and eliminate all the irritants which go against the principles of GST. Goods and Services Tax will also contribute to a robust macroeconomic parameter, thereby increasing investor sentiments. Finally, the consumers will be the ultimate beneficiary as it would eliminate the cascading effect of taxes.