Good and Services Tax (GST)
What is the Goods and Services Tax (GST)?
The Goods and services tax (GST) is a value-added tax levied on most goods and services sold for domestic GST is a single domestic indirect tax law for the entire country, which has replaced many indirect taxes in India such as the excise duty, VAT, services tax, etc. The Goods and Service Tax Act was passed in Parliament on 29th March 2017 and came into effect on 1st July 2017.
Understanding the GST
The GST portion is collected by businesses or sellers and then paid to the government. A customer buys the product or service and pays the sales price inclusive of the GST. Therefore it's called indirect tax as it is paid by businesses but collected from customers.
Features of GST
Multi-stage -
Starting from the manufacturing unit to the final sale to the Customer the goods and services tax is levied on each of these stages making it a multistage tax.
Value addition -
A smartphone manufacturer buys displays, batteries, processors, and other materials. After assembling the smartphone, the value of the inputs increases.
Destination Based Tax -
Destination Based Tax means goods manufacturers in Maharashtra and Final products sold in Gujarat. The entire revenue will go to Gujarat and not to Maharashtra.
Advantages of Goods and Services Tax (GST)
- One Nation One Tax.
- Removal of bundled indirect taxes such as VAT, CST, Service tax, CAD, SAD, and Excise.
- Removal of cascading effect of taxes i.e. removes tax on tax.
- Increased ease of doing business;
- Lower cost of production, increased demand will lead to increased supply. Hence, this will ultimately lead to a rise in the production of goods. Resultantly boost to Make in India initiative.
- It will boost export and manufacturing activity, generate more employment and thus increase GDP with gainful employment leading to substantive economic growth.
Need For GST In INDIA
GST is a Cure for ills of old Indirect Tax The given statement is true. Cascading effect of the tax is one of the vital cause-to-cause ills of existing Indirect Tax. It means a tax that is levied on a good at each stage of the production process up to the point of being sold to the final consumer. It is also known as the tax on tax. One of the fundamental features of GST is the seamless flow of input credit across the chain (from the manufacture of goods till it is consumed) and across the country.
1) Non-integration of VAT and Service Tax causes double taxation
In the present regime, restaurant services provider is liable to pay VAT on the sale of food and service tax on supply of services. There is no set-off. It means VAT is not allowed as an input tax credit against service tax and vice versa.
2) No CENVAT Credit after manufacturing stage to a dealer
In the present regime, a manufacturer of dutiable goods charges excise duty and value-added tax on intra-state sale of goods or CST on inter-state sale of goods. VAT or CST is levied inclusive of excise duty.
3) Cascading of taxes on account of levy of CST Inter-state purchases
4) The existing Indirect Tax framework in India suffer from various duties and taxes at the Central as well as at the State level
5) Non-Availment of Seamless ITC – VAT dealers were not able to take credit of excise duty charged by manufacturers.
Duties paid under excise law were subsumed into costs beyond the manufacturing level. Like
excise duty, VAT dealers were not able to take credit of service tax charged by the service providers on
various input services. Since GST is a destination-based consumption tax, the revenue of SGST ordinarily accrues to the consuming States. The inter-state supplier in the exporting State is allowed to set off the available credit of IGST, CGST, and SGST/UTGST against the IGST payable on an inter-state supply made by him.
6) Tedious Process of issuance and collection of CST Forms and losses suffered due to them
To avoid cascading effects of CST and to avail concessions or exemptions, various forms, like ‘C Form’, ‘F Form’, ‘H Form’, etc. had been prescribed which were issued/utilized by adhering to certain procedures. The forms prescribed under central sales tax rules 1957, include form C for making interstate purchases at a lower rate, form F used to transfer goods from one branch to other in a different state. The industry faced a lot of problems regarding the collection of forms and other procedural aspects. Therefore, they had to suffer losses due to the same. These are now done away with the introduction of GST in India.
7) Sharing of Data between Centre and States and various Boards
The division of assesses between Centre and State is decided by the Centre and State Governments. GSTN got an application developed using which Central and State tax authorities have uploaded the data on the allocation of migrated taxpayers in the GST System database. To ensure a single interface for assesses under GST.
Goods. And Services Tax Network (GSTN)
As GST is a destination-based tax, the inter-state trade of goods and services (IGST) would need a robust settlement mechanism amongst the State and Center. This is possible only when there is a strong IT infrastructure and Service backbone that enables capture, processing, and exchange of information amongst the stakeholders. As a result Goods and services tax network (GSTN) has been set up.
Functions of GSTN
Filing of GST registration application.
Filing of GST return,
Creation of challan of tax payment,
Settlement of IGST payment.
Generation of business intelligence and analytics etc.
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Tags : Goods and Services Tax (GST) GST Indirect Tax
Swapnil Baravkar
Finance Expert
We aim to provide best solutions to the business and provide financial awareness in India.
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