Concept Of GST

GOODS AND SERVICES TAX (GST)

Concept

The Goods and Services Tax (GST) is an indirect tax levied on the supply of goods and services. 

GST Act was passed in the Parliament on 24th March, 2017 and it came into effect from 1st July 2017.

Goods & Services Tax is a comprehensive, multi-stage, destination-based tax that is levied on every value addition  by the Central and State governments.Before the implementation  GST , various central, state and local area taxes were levied in India. These indirect taxes have now been subsumed under GST which is based on the principle  of ONE NATION ONE TAX.

Features of GST 

(i)  GST is a comprehensive tax  as various indirect taxes have been merged in this single tax except Customs duty, taxes on petroleum products, alcoholic drinks and taxes levied by local bodies. 

(ii)   GST is a multi-stage tax  because it is proposed to be levied at all stages starting from production up to final consumption

(iii)GST is a Value Added tax because it is levied on value addition at each stage of the supply chain . 

(iv)GST is a destination-based tax 

as the tax would accrue to the taxing authority which has jurisdiction over the place of consumption.

GST structure in India

 There are three taxes applicable under GST:

• Central GST (CGST): Where the tax revenue will be collected by the central government.

• State GST (SGST) or Union Territory GST (UTGST): Where the tax revenue will be collected  within the same state.

• IGST: Where the tax revenue will be collected by the central government for inter-state sales.

Goods and services are divided into following tax slabs for collection of tax namely, 0% (on essential items including food), 5%, 12%, 18% and 28% (on luxury items and tobacco)

                     

India has, since launching the GST on July 1, 2017, implemented the following tax rates. 

• A 0% tax rate applied to certain foods, books, newspapers, homespun cotton cloth, and hotel services. 
• A rate of 0.25% applied to cut and semi-polished stones.
• A 5% tax on household necessities such as sugar, spices, tea, and coffee.
• A 12% tax on computers and processed food.
• An 18% tax on hair oil, toothpaste, soap, and industrial intermediaries.
• The final bracket, taxing goods at 28%, applies to luxury products, including refrigerators, ceramic tiles, cigarettes, cars, and motorcycles

Advantages of GST

Various benefits that shall accrue with the introduction of GST are discussed below

• Boost Economic Growth:

The subsuming of major Central and State taxes in GST will reduce the cost of locally manufactured goods and services and increase their competitiveness in the international market thereby giving boost to Indian exports. An increase in economic activities will also help in increasing the country’s GDP.

• Ease of doing business:  

Introduction of a single tax and automated procedures for registration etc. has led to ease of doing business for the enterprises. 

• Attracting Foreign Investment:

 Introduction of GST has given a boost to foreign investment and “Make in India” campaign by harmonising the tax base and administration procedures across the nation.

• Ensure better tax compliance: 

The transparent and complete chain of set-offs will result in widening of tax base and better tax compliance. 

•Reduction in the cost of goods: Implementation of GST will prevent cascading of taxes (i.e. tax on tax) which resulted due to multiplicity of taxes on goods and services. This will make products cheaper and would benefit the consumers.