Gst.docx

INTRODUCTION There are two types of taxes in India 1. Direct Tax – Taxes which are paid directly by the person on whom it is imposed. For example- Income Tax, Property Tax, Wealth Tax, Gift Tax etc. 2. Indirect Tax – Tax whose Burden can be transferred to others. For example- Sales Tax, Excise Duty, Service Tax etc. GST stands for “Goods and Services Tax”/ It is a comprehensive indirect tax. Its main objective is to consolidates all indirect tax into a single tax - replacing multiple taxes, overcoming the limitations of existing indirect tax structure, and creating efficiencies in tax administration. GST was also introduced to make tax simpler and to reduce the tax liabilities of small-scale industries and small businessman. It’s very much simpler to understand and pay - for both customer and seller respectively. A major change in administering GST will be that the tax incidence is at the point of sale as against the present system of point of origin. GST is a tax on goods and services, which will be levied at each point of sale, in which at the time of sale of goods the seller or can claim the input credit of tax which he has paid while purchasing the goods. This is because they include GST in the price of the goods they sell and can claim credits for the most GST included in the price of goods they buy. The cost of GST is borne by the final consumer, who can’t claim GST credits, i.e. input credit of the tax paid.

Example: A product whose base price is ₹ 100 and after levying excise duty @ 12%value of the product is ₹ 112. On sale of such goods VAT is levied @ 12.5% and value to the ultimate consumer is ₹ 126. In the proposed GST system on base price of ₹ 100 CGST and SGST both will be charged, say @ 8% each, and then the value to the ultimate consumer is ₹ 116. So, in such a case the industry can better compete in global environment. Therefore, GST is a broad based and a single comprehensive tax levied on goods and services consumed in an economy.

GST – EXPLAINED IN DETAIL What Taxes GST Will Replace GST will replace the following indirect taxes as these will taxes will be subsumed in the proposed GST At Central level      

Central Excise Duty Service Tax Additional Excise Duties CVD (levied on imports in lieu of Excise duty) SAD (levied on imports in lieu of VAT) Surcharges and cesses

At State level VAT/Sales tax Entertainment tax (unless it is levied by the local bodies)

Luxury Tax Taxes on lottery, betting and gambling Entry tax not in lieu of Octroi Cesses and Surcharges

ALL these taxes come to an end with only one indirect tax in the country called GST. Now you only need to register your business for GST as it is a collaboration of all taxes with a new name which is replacing all indirect taxes with a new and single tax.

Tax Rates under GST GST rates are divided into five categories which are 0% , 5%, 12%, 18%, 28%. All the basic need requirement goods are pleased in 0% category like food grains, bread, salt, books etc. Goods like paneer, packed food, tea coffee etc are placed under 5% category. Mobiles, sweets, medicine, are under 12%. All types of services are under 18% category. All other remaining luxury items are placed under the last head of 28%. Petrol, gas, crude oil, diesel etc. are still out from the criteria of GST. Types of GST There are three kinds of taxes under the GST. SGST, CGST, and IGST

1. SGST STATE GOODS AND SERVICE TAX is the part of tax diverted to the state government which is credited to revenue department of state government. This is generally equivalent to CGST. This compensates the loss of existing VAT or Sales Tax revenue to state government. In the case of local sales, 50% quantum of tax amount under GST is diverted to SGST TAX. 2. CGST CENTRAL GOODS AND SERVICE TAX is the share of GST TAX diverted to revenue department of central government and is also equivalent to SGST. This share of tax compensates the loss of existing excise duty and service tax to the central government. In the case of local sales, balance 50% quantum of GST is transferred to CGST. 3. IGST INTEGRATED GOODS AND SERVICES TAX is levied when inter-state sales and purchase is made. One part of this tax transferred to central government and another to state government to whom goods and services belong. The IGST is charged only in case of inter-state sales or when transactions between two states involved.

Problems in Implementation of GST Vat or sales tax is levied and collected by the state government. Different state government charge different rate of taxes on different kind of goods traded within their respective territorial limits under the extreme power provided to the state. Whereas CST central sales tax is levied by the central government and collected by the state government EXCISE duty is levied and collected by the central government.

No state government wants to losses the revenue source called VAT or Sales tax. GST is the subject matter of union list and no state agrees to bifurcate their income to the central government but now as the same political party is in majority in most of the states and central. All state government agreed to the proposal, as a result, GST was Rollout. Despite of the fact that GST was ideally thought to be proposed as “one single indirect tax“ GST as one tax in India is not the correct statement as GST has not replaced entire indirect taxes, Custom Duty or Import Export Duty will remain continued to levy.

Benefits of GST Boost to Make in India  Will help to create a unified common national market for India, giving a boost to Foreign investment and “Make in India” campaign  Will prevent cascading of taxes as Input Tax Credit will be available across goods and services at every stage of supply  Harmonization of laws, procedures and rates of tax  It will boost export and manufacturing activity, generate more employment and thus increase GDP.  Uniform SGST and IGST rates will reduce the incentive for evasion by eliminating rate arbitrage between neighboring States and that between intra and inter-state sales  Lower tax will reduce prices and lower prices mean more consumption, which in turn means more production thereby helping in the growth of the industries . This will create India as a ” Manufacturing hub”.

Ease of Doing Business  Reductions in the multiplicity of taxes leading to simplification and uniformity  Reduction in compliance costs - No multiple record keeping for a variety of taxes.  Simplified and automated procedures for various processes such as registration, returns, refunds, tax payments  All interaction to be through the common GSTN portal- so less public interface between the taxpayer and the tax administration.  Will improve environment of compliance as all returns to be filed online, input credits to be verified online.

Benefit to Consumers:  Final price of goods is expected to be lower due to seamless flow of input tax credit between the manufacturer, retailer and service supplier

Conclusion: Implementation of GST is one of the best decisions taken by the Indian government. Transition to the GST regime in other countries was also not easy. Confusions and complexities prevailed. Though the structure might not be a perfect - but once in place, such a tax structure will make India a better economy much favourable for foreign investments. Until now India was a union of 29 small tax economies and 7 union territories with different tax levies unique to each state.

GST is a much accepted and appreciated regime because it does away with multiple tax rates by Centre and States. And if you are doing any kind of business then you should register for GST as it is not only going to help Indian government but will help you also to track your business weekly as in GST you have to make your business activity statement each week.