Goods and Services Tax (India)
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Goods and Services Tax (GST) is an upcoming system of taxation in India which will merge many individually applied taxes into a single tax. It was introduced as The Constitution (One Hundred and First Amendment) Act 2016, following the passage of Constitution 122ndAmendment Bill. The GST is governed by GST Council and its Chairman is Union Finance Minister of India - Arun Jaitley.
GST is a comprehensive indirect tax on manufacture, sale and consumption of goods and services throughout India (Except state of Jammu and Kashmir) , to replace taxes levied by the central and state governments.
This method allows GST-registered businesses to claim tax credit to the value of GST they paid on purchase of goods or services as part of their normal commercial activity. Administrative responsibility would generally rest with a single authority to levy tax on goods and services.[1] Exports would be considered as zero-rated supply and imports would be levied the same taxes as domestic goods and services adhering to the destination principle in addition to the Customs Duty which will not be subsumed in the GST.
Introduction of Goods and Services Tax (GST) is a significant step in the reform of indirect taxation in India. Amalgamating several Central and State taxes into a single tax [2] would mitigate cascading or double taxation, facilitating a common national market. The simplicity of the tax should lead to easier administration and enforcement. From the consumer point of view, the biggest advantage would be in terms of a reduction in the overall tax burden on goods, which is currently estimated at 25%-30%, free movement of goods from one state to another without stopping at state borders for hours for payment of state tax or entry tax and reduction in paperwork to a large extent.
GST is expected to be applicable from 1 July 2017.[3]
History[edit]
The reform process in indirect tax regime of India was started in 1986 by Vishwanath Pratap Singh by introduction of Modified Value Added Tax (MODVAT).[4]
Goods and services tax (GST) will subsume various indirect taxes including central excise duty, services tax, additional customs duty, surcharges, state-level value added tax and Octroi.[5][6] Other levies which are currently applicable on inter-state transportation of goods are also likely to be done away with in GST regime.[7][3]
The following taxes will be bonud together by the GST:
- Central Excise Duty
- Service Tax
- Countervailing Duty
- Special Countervailing Duty
- Value Added Tax (VAT)
- Central Sales Tax (CST)
- Octroi
- Entertainment Tax
- Entry Tax
- Purchase Tax
- Luxury Tax
- Advertisement taxes
- Taxes applicable on lotteries[8]
GST is levied on all transactions such as sale, transfer, barter, lease, or import of goods and/or services. India will adopt a dual GST model, meaning that taxation is administered by both the Union and State Governments. Transactions made within a single state will be levied with Central GST (CGST) by the Central Government and State GST (SGST) by the government of that state. For inter-state transactions and imported goods or services, an Integrated GST (IGST) is levied by the Central Government. GST is a consumption based tax, therefore, taxes are paid to the state which the goods or services are consumed not the state in which they were produced. IGST simplifies tax collection for State Governments by enabling them to collect the tax owed to them directly from the Central Government. Under the previous system, a state would have to deal with multiple state governments in order to collect tax revenue.[8]
Effects of GST[edit]
The tax rate under GST may be nominal or zero rated for the time it charged. It has been proposed to insulate the revenues of the States from the impact of GST, with the expectation that in due course, GST will be levied on petroleum and petroleum products. The central government has assured states of compensation for any revenue losses incurred by them from the date of introduction of GST for a period of five years.[9]
Legislation[edit]
The goods and services tax (GST) council chaired by finance minister Arun Jaitley has urged states to approve state GST laws by the end of May to smoothen the roll-out of the historic tax reform by its target date of 1st July.[10]
As India is a federal republic, GST would be implemented concurrently by the central governments.[11] A 21-member select committee was formed to look into the proposed GST law.[12]
Section 9 is the charging section for CGST (Central Goods and Services Tax Act, 2017), which gives power to central government to levy tax on intra state taxable supply. [13]
There will be no GST on the sale and purchase of securities. That will continue to be governed by Securities Transaction Tax (STT).[14]
GSTN[edit]
Goods and Services Tax Network (GSTN) is a nonprofit organisation formed to create a platform for all the concerned parties i.e. stakeholders, government, taxpayers to collaborate on a single portal. The portal will be accessible to the central government which will track down every transaction on its end while the taxpayers will be having a vast service to return file their taxes and maintain the details. The IT network will be developed by private firms which are being in tie up with the central government and will be having stakes accordingly. The known authorised capital of GSTN is ₹10 crore (US$1.6 million) in which Central government holds 24.5 percent of shares while the state government holds 24.5 percent and rest with private banking firms. [15]
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