GST – As the name suggests, it is a tax levied when a consumer buys a good or service. It is meant to be a single, comprehensive tax that will subsume all the other smaller indirect taxes on consumption like service tax, etc. This is how it is done in most developed countries.
GST is a proposed system of inner taxation in India merging most of the existing taxes into single system of taxation. it was introduced by The Constitution (One hundred and first amendment) Act 2016. The chairman of GST bill is union finance minister which is currently Arun Jaitley.
GST is one indirect tax for the whole nation, it is a single tax on the supply of goods and services, right from the manufacturer to the consumer. Here the credits of input taxes are paid at each stage and will be available in the subsequent stage of value addition, which makes GST essentially a tax only on value addition at each stage.
Taxes subsumed by the central and state level into GST:-
- Central Excise Duty.
- Additional Excise Duty.
- Service Tax.
- Additional Custom Duty.
- Special Additional Duty of Customs.
- Subsuming of State Value Added Tax/Sales Tax.
- Entertainment Tax,Central Sales Tax.
- Octroi and Entry tax.
- Purchase Tax.
- Luxury Tax.
- Taxes on lottery, betting and gambling.
Benefits of GST :-
For Business and Industry –
- Easy Compliance – A robust and comprehensive IT system would be the foundation of the GST regime in India. Therefore, all the Tax payer services would be available online to the tax payers and therefore, the compliance easy and transparent.
- Uniformity of tax rates and structures – GST will ensure that indirect tax rates and structure are common across the country, it increases certainty and ease of doing business.
- Improve Competitiveness – It reduces the transaction costs of doing business and will eventually improvises competitiveness for the trade and industry.
- Cascading Removal – This reduces hidden costs of doing business as a system of seamless tax credits throughout the value-chain, and across boundaries of States, this ensures, minimal cascading of taxes.
- Gain to manufacturer and exporters – This increases the competitiveness of Indian goods and services in the international market and it boosts the Indian exports. The uniformity in tax rates and procedures across the country will also go a long way in reducing the compliance costs.
For Consumer –
- Single and transparent tax proportionate to the value of goods and services – Due to multiple indirect taxes being levied by the Central and State, with incomplete or no input tax credits available at progressive stages of value addition, the cost of most goods and services in country today are laden many hidden taxes.
- Relief in overall tax burden – Because of efficiency gains and prevention of leakages, the overall tax burdens on most of the commodities will come down and this benefits the consumers.
For Central and State Governments –
- Simple and easy to administer – Multiple indirect taxes at the Central and State levels are being replaced by GST. Baked with a robust end-to-end IT system. GST would be simpler and easier to administer than all other indirect taxes of the Central and State levied so far.
- Better controls on leakage – GST will result in better tax compliance due to a robust IT infrastructure. Due to the seamless transfer of input tax credit from one stage to another in the chain of value addition, there is an in-built mechanism in the design of GST that would incentivize tax compliance by traders.
- Higher revenue efficiency – GST is expected to decrease the cost of collection of tax revenue of the Government, and will therefore, lead to higher efficiency of the revenue.