The much awaited GST (Goods and Service Tax) Bill was recently passed in Lok Sabha. Unfortunately though, a lot of individuals did not pay heed to this news because a Bollywood celebrity was sentenced to some punishment on the date of this important update.
Nevertheless, as a practicing professional and part of the taxation community, I though it is my duty to explain the students about the GST and its implications. Let us take account of some of the most important factors:
a) What is GST: Most of the developed nations impose tax on the basis of the customer spending. Whenever a consumer spends on goods or services, GST shall be applicable on him. The rate shall be specified, which is not yet disclosed. However, if we take account of the experts, GST rate shall be more than 20% in all proximities.
b) What is the need: Right now, the indirect taxation processes and laws in the nation are very complex. There are state laws and central laws. For goods, we have different set of laws in VAT and CST. For manufacturing and production in factories, we have Excise rules, and for export-imports, we have Customs Rules. The services are taxed under Finance Act, 1994 along with Service Tax Rules.
This makes the situation for a student really difficult. In the given circumstances, the direct laws seem to be simplified, despite the fact that they are really lengthy. However, indirect tax laws are at times contradictory and confusing. I have been to a number of seminars including Company Secretaries and Chartered Accountants, and have noticed that Indirect Tax laws more often than naught create confusion even in the minds of the professionals.
Since India is a Federal State, the Central Government has the power to introduce a simplified and centralized system of laws, which will assure better management and functioning of the processes.
c) The Exports will be zero-rated: This is another prominent feature of the GST.
d) Distribution of revenue between the Centre and the states: The state governments have expressed opposition of GST as they consider it as a threat against their sovereign tax collection processes in case of VAT and CST. It will be unwise to comment on this right now as the white paper on the new law has not yet been introduced.
Once the government comes up with the draft bill and publishes it on its Official Gazette, then only some interpretations could be made out of it. The bill targets to assure equality of tax laws, and simplify the procedures, which is really needed, especially when we talk about the Indirect Tax Laws.
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