GST is all set to roll out from 1 July 2017. Broadly GST is referred as "One nation one tax". GST is one indirect tax for the whole nation, converting India into the single unified market. GST is a single tax on the supply of goods and services, right from the manufacturer to the consumer. Credits of input taxes paid at each stage will be available in the subsequent stage of value addition, which makes GST essentially a tax only on value addition at each stage. The end consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages.
What are the benefits of GST?
GST have lots of benefits for the business, industry as well as consumers. The benefits of GST is listed here
Easy compliance: A strong and comprehensive IT system would be the inspiration of the GST regime in India. Therefore, all tax regulators and service tax admire registrations, returns, payments, etc. would be accessible to the taxpayers online, which might build compliance straightforward and clear.
Uniformity of tax rates and structures: Goods and Services Tax (GST) will make sure that taxation rates and structures are common across the country, thereby increasing certainty and ease of doing business. In different words, GST would build doing business within the country tax neutral, regardless of the selection of the place of doing business.
Removal of cascading taxation system: A system of seamless tax credits throughout the value-chain, and across boundaries of States, would make sure that there should exist smallest cascading of the taxes. This could scale back the hidden prices of doing business.
Improved competitiveness: Reduction in dealings prices of doing business would eventually result in associate improved competitiveness for the trade and business.
Ensure gain to manufacturers and exporters: The subsuming of major Central and State taxes in GST, complete and comprehensive set-off of input merchandise and services and phasing out of Central excise tax (CST) would scale back the price of regionally factory-made merchandise and services. This may increase the competition among Indian merchandise and services within the international market and provides a boost to Indian exports. The uniformity in tax rates and procedures across the country also will go a protracted manner in reducing the compliance price.
Simple and easy to administer: Multiple indirect taxes at the Central and State levels area unit are being replaced by GST. Backed with a strong end-to-end IT system, GST would be less complicated and easier to administer than all alternative indirect taxes of the Centre and State levied up to now.
Higher controls on leakage: GST will result in a higher tax compliance: thanks to a strong IT infrastructure. Thanks to the seamless transfer of input reduction from one stage to another within the chain. There's an associate degree inbuilt mechanism within the style of GST that may incentivize tax compliance by traders.
Higher revenue efficiency: GST is anticipated to decrease the price of collection of tax revenues of the government, and can so, will result in higher revenue potency.
Single and clear tax proportionate to the worth of products and services: Thanks to multiple indirect taxes being levied by the Centre and State government, with incomplete or no input tax credits accessible at progressive stages of value addition, the price of most product and services within the country these days are laden with several hidden taxes. Under GST, there would be just one tax from the manufacturer to the patron, resulting in the transparency of taxes paid to the ultimate shopper.
Relief in overall tax burden: Owing to potency gains and interference of leakages, the tax burden on most commodities can return down, which will profit shoppers.
Central government taxes which are being subsumed into GST
With the introduction of GST, several indirect taxes levied by the central as well as state government are being subsumed into GST.
Central Excise Duty: The Central government has the power to levy excise duty on goods manufactured in India meant for the domestic consumption under the Central Excise Act, 1944. Depending upon the various conditions special excise duty and additional excise duty is also charged under the above-mentioned Act.
Additional Excise Duty: The additional excise duty is an additional tax besides excise duty being levied by the central government. This scheme was introduced based on the suggestion made by the manufacturers to Government, that multiple level taxes and duties should be avoided.
Service Tax: Service Tax is levied by the central government on providers of service whose total revenue received is more than the 10 lakh. Service tax is being levied at the rate of 15 percent.
Additional Customs Duty is commonly known as Countervailing Duty: Customs duty in India is defined under the Customs Act, 1962 and enables the government to levy duty on exports and imports, prohibit export and import of goods, procedures for importing/exporting and offences, penalties etc. Under customs duty, different taxes are levied like Basic Customs Duty, Additional Customs Duty (CVD), Protecting duty, Anti-dumping Duty and Safeguard duty.
Value Added Tax (VAT): VAT is the form of state sales tax levied by the state government on sales of good within the state boundary. VAT is applied by the state government at each stage of the sale, with a particular apparatus of credit for the input VAT paid. In several states the current VAT rate is around 3-4 percent. Most of the manufacturing in India is largely carried under the composite scheme of taxations. Input tax credit could not be claimed on purchases from the suppliers under the composite scheme.
Central Sales Tax: Central sales tax is collected and retained by the state government but levied by the central government. It is collected and retained by the originating state or interstate sale of goods. Central sales tax is charged at the rate of 2 percent on the value of goods. This tax is payable at the time of sale of goods.
State government taxes which are being subsumed into GST
List of indirect taxes levied by central government which are being subsumed into GST
- Subsuming of State Value Added Tax/Sales Tax,
- Entertainment Tax (other than the tax levied by the local bodies), Central Sales Tax (levied by the Centre and collected by the States),
- Octroi and Entry tax,
- Purchase Tax,
- Luxury tax, and
- Taxes on lottery, betting and gambling
- State cesses and surcharges