The Goods and Service Tax (GST) – the most listening word by the Indian trade now a days. It is a biggest indirect tax reform by India and just a step away from coming in to an enactment.
Through this article we would like to create basic awareness of the GST and in the day to come it will be easy for us to know the in depth analysis and its impact on each sector of the industry. Therefore, here we start with:
1. What is GST?
GST is a value added tax, levied at all points in the supply chain with credit availability for the tax paid on inputs/input services/capital goods for use in the supply. GST in India is going to be a destination based tax
2. Why India needs GST?
At present, the tax structure in India seems to be so complicated since there are number of tax implications in the country. Not only Tax structure but the tax burden also very high in our country by way of double taxation on the same products/services by the centre and state respectively. Even though there are CENVAT Credit and VAT credit available but there is no inter adjustment of state and central taxes. It is huge administration cost to the industry who are operating their business in various states of India in order to comply with different state levies like VAT, Octroi, Entry Tax, Entertainment tax, Luxury Tax, state cess and surcharges etc. Due to these complicated tax structure and tax burden, it becomes very difficult for the country to get investments as well as to do business in normal way by the existing entrepreneurs. GST is going to be “single stop” to overcome the above mentioned complicated tax structure & tax burden in our country.
Hence, it seems to be positive approach towards Make India concept with “One India” and “One GST”.
3. What are the taxes subsumed in GST?
Central Excise Duty ——– VAT/CST
Service Tax ——————Entertainment Tax
Additional Customs Duty /CVD—-Octroi & Entry Tax
Special Customs Duty of Customs—-Luxury Tax
Central Surcharges & Cess—–Tax on Lotteries, Betting’s & gambling
4. What are the Benefits of GST?
a. Reduction in prices due to seamless flow of credit between manufacturers, traders and service providers
b. It reduces compliance and procedural costs drastically.
c. Growth in Industry and growth rate in GDP
d. Elimination for statutory form like C- form, F- form etc
e. Long waiting of trucks at check-posts will done away
f. More transparency and increases revenue collection to the Govt.
g. Common exemptions and HSN based classification
5. The following are drawbacks of GST based on the Model GST bill kept in public domain recently:
a. The definition of turnover includes aggregate value of all taxable and nontaxable supplies, exempt supplies and export of goods and/or services.
b. Total number of various returns to be filed by an entity doing business will be 36-61 (approx)
c. Service providers under service tax who are filing 2 half yearly returns now has to file returns as specified above in point b.
d. No concept of centralized registration under GST
e. Tobacco, alcoholic liquor, petroleum are kept out of GST regime. Because states are not ready to loose its revenue.
f. As per model GST law, the threshold limit for exemption is Rs.5 Lakhs in North eastern states and Rs. 10 lakhs in other states leading to bring small and medium entities into GST regime.
In order to allow the Central Govt to levy tax on the matters of state list it requires amendment to the constitution. Hence, 122nd Amendment bill was passed in the both houses of parliament. At least 50% of the states have to pass the constitution amendment bill,2014 for next steps of legislative action to follow to ultimately introduce a pan- India Goods and Service Tax regime. Assam was the first state to ratify the constitution amendment bill related to GST. The Govt is supposing to implement GST from 1st April 2017.
It is bound to face some hiccups in the beginning due to its complex nature. Since both state and centre will have dual control, this may create lot of tension in the early phase of implementation. The IT infrastructure may also throw up some technical problems. Hence, GST is going to give benefit not only to the existing industries as well as to the customers by way reduction in prices