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GST - 1 Nation 1 Tax

What is GST ?

GST is a Goods and Service Tax. It is a single indirect tax for the entire nation.

GST is one of the most important and complex Tax reform in indirect tax.

GST is a Destination based Tax. Tax is levied on consumption of Goods and Services. The burden of taxation moves from the manufacturing /producing states to the consuming states.

The constitution had to be amended because Centre will tax goods beyond the stage of manufacture & states will tax services. Also states to impose interstate tax on Imports.

Around 160 countries in the world follow GST. Canada has a dual GST similar to India.

But implementing GST in India will pose a major challenge because of its federal structure.

GST will help goods move seamlessly across all states in India. It is a single tax on Supply of goods and services. Under GST the taxable event is Supply whereas under the earlier regime the Taxable event was Production (excise duty) or Sale of goods (VAT or CST) or Provision of Service (Service Tax). 

GST is a tax on Value Addition at every stage. It aims at providing seamless credit at every stage. This will reduce the cascading effect of taxes levied under different Acts.

The taxes that are likely to be subsumed under GST regime are:

  • Excise Duty
  • Purchase Tax
  • Entry Tax / Octroi
  • Service Tax
  • Entertainment Tax (except those levied by the Local Body)
  • Luxury Tax
  • Cess

Some taxes which are not likely to be subsumed under GST regime:

  • Property Tax
  • Stamp Duty
  • Tax on sale of alcohol  for human consumption
  • Tax on sale & consumption of electricity
  • Tax on Petroleum Products such as Petrol, HSD, ATF, Crude.
  • Customs Duty
  • Entertainment Tax levied by the Local Body.
  • Petroleum products would be covered under GST at a later notified date.

There are 3 components / Taxes:

  • SGST
  • CGST
  • IGST
  • When goods or services are supplied within the state (Intra State) SGST & CGST would apply
  • When goods or services are supplied from one state to another (Inter State) IGST would apply
  • When goods or services are imported from different countries IGST(CVD/RCM) would apply
  • In case of Exports to different countries the tax would be Zero Rated

In Conclusion

The intention of the government is very clear –to provide free movement of goods across India & benefit for the consumers by removing cascading effect of taxes. But the success of the GST will depend upon how seamlessly the credits are passed on & how well it is accepted by the States.

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Published by

Sudha Shetty
Category GST   Report

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