GST- Goods and Services Tax (Download PDF)

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The Goods and Services Tax is an indirect tax which is a comprehensive multistage, destination based tax imposed in India on the supply of Goods and Services. “One nation, One indirect tax” is the dictum of GST which is expected to make India one unified common market.

The idea of GST was suggested in the year 2003 by Kelkar Task Force for the very first time in 2003.

This image show in Model of GST

This Image Show in Model of GST

This image show in Model of GST

Overview & Features

  • GST encourages a single tax on supply of goods and services, right from the manufacturer to the consumer

  • The present taxation scheme is origin based but GST is a destination based tax.

  • It is a value based tax as credits of input taxes paid at each stage will be available in the subsequent stages

  • At the central level, GST subsumes following taxes

    • Central Excise Duty

    • Additional Excise Duty

    • Service Tax

    • Countervailing Duty

    • Special Additional Duty of Customs

      At the state level, following taxes are being subsumed under GST

    • State VAT/Sales Tax

    • Entertainment Tax

    • Central Sales Tax

    • Octroi and Entry Tax

    • Purchase Tax

    • Luxury Tax

    • Taxes on lottery, betting and gambling

  • Two components of GST – Central GST and State GST

  • Both CGST and SGST will be simultaneously levied across the value chain, both on goods and services

  • The tax will not be levied on exempted goods (alcohol, petroleum and its products) and those transactions which are below the prescribed threshold limits

  • IGST would come into picture when there is an inter- state transfer of goods and services.

  • Central and State governments have registered Goods and Services Tax Network (GSTN) which is a not for profit, non-government company to provide shared IT infrastructure to central and state government, tax payers and other stakeholders. The tax payments and credit will be done through an online network.

Benefits

  • One tax payment creates one market making the compliance easier.

  • Ease of Doing Business is facilitated.

  • Removal of cascading taxes which will lower the prices.

  • With the reduction in transaction cost for doing business competitiveness gets improved.

  • More transparency in Taxation regime and easier understanding for the consumers.

  • The government can easily administer new taxation regime.

  • The single tax mechanism will lead to tax competition and cooperation between centre and states.

  • The poorer states with low level of manufacturing and services are expected to get benefitted with GST being a destination based tax.

GST Issues

  • Difficult to decide the exemption limit below which traders will not come under GST regime.

  • The states would lose their autonomy while deciding the taxation rates based on their expenditure plan. The GST Council would decide the rates in GST regime. As per the GST Bill, the “floor rate along with bands” will be fixed by the Council. Imposing tax such as on fast foods as recently in Kerala becomes an issue.

  • An effective mechanism to deal with the dual policing by centre and state to administer and implement GST remains a major concern.

- Published/Last Modified on: July 31, 2019

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