GST stands for “Goods and Services Tax”, and aimed at creating a single, unified market that will benefit both corporates and the economy. It is an indirect tax that will lead to the abolition of all other taxes such as octroi, central sales tax, state-level sales tax, excise duty, service tax, and value-added tax (VAT). Both the state and the central governments will impose GST on almost all goods and services produced in India or imported into the country.
GST is levied at every stage of the production distribution chain with applicable set off in respect of the tax remitted at previous stages. It is basically a tax on final consumption. GST is to be a comprehensive indirect tax levy on manufacture, sale and consumption of goods as well as services at the national level. GST is an destination based taxed. Its main objective is to consolidates all indirect tax levies into a single tax, except customs (excluding SAD) replacing multiple tax levies, overcoming the limitations of existing indirect tax structure, and creating efficiencies in tax administration.
Example: - A product whose base price is Rs.1000 and after levying excise duty @ 12.5% value of the product is Rs. 1125. On sale of such goods VAT is levied @ 12.5% and value to the ultimate consumer is Rs. 1265.62. In the proposed GST system on base price of Rs.1000. CGST and SGST both will be charged, say @ 10% each, then the value to the ultimate consumer is Rs. 1200. So, in such a case the industry can better compete in global environment.
Therefore, GST is a broad based and a single comprehensive tax levied on goods and services consumed in an economy.
Features of GST:
1. Subsume following indirect taxes:-
-Central Indirect Taxes- Central Excise duty (CENVAT), Additional duties of excise, Excise duty levied under Medicinal & Toiletries Preparation Act,
Additional duties of customs(CVD&SAD), Service Tax, Surcharge &Cess .
-State Indirect Taxes- Value added tax (VAT/CST), Purchase tax, Entry tax, Octroi, Surcharge & Cess.
2. GST will have two components comprising - Central GST (CGST) levied and collected by the Centre government and State GST (SGST) levied and collected by the states government. The Centre would levy and collect the Integrated Goods and Services Tax (IGST) on all inter-State supply of goods and services. There will be seamless flow of input tax credit from one State to another. Proceeds of IGST will be apportioned among the States.
3. GST will applicable at every stage of value addition in chain.
4. An additional Tax of 1% on Inter State Taxable supply of Goods by State of Origin and it would be non CENVATABLE. This additional tax on supply of goods shall be assigned to the States from where such supplies originate
5. All goods or services likely to be covered under GST except :
1) Alcohol for human consumption- State Excise plus VAT
2) Electricity - Electricity Duty
3) Real Estate- Stamp Duty plus Property Taxes
4) Petroleum Products (to be brought under GST from date to be notified on recommendation of GST Council)
6. Codification is to be specified for all goods and services(i.e. Taxable supplies) in the purposed GST structure. New HSN code can be used for classification of goods and existing accounting code can be used for classification of services.
7. Removes cascading effect of taxation .
In nut shell, it could be a revolutionary change in the Indian economy in regards to indirect tax structure of India after independence.
CA Mohit Singhal
E mail:- email@example.com