All You Need To Know About Goods and Services Tax (GST)
GST becomes a reality
Finally, after a long wait of 10 years, the Rajya Sabha passed the Goods and Services Tax (GST) which is going to be a reality in 2017. This is the 122nd constitutional amendment and is speculated to be the biggest economic reform in India since liberalisation in 1991.
The GST is an indirect tax that brings most of the taxes imposed on goods, services, manufacture, sale and consumption of goods and services under its ambit into a single domain at the national level. It will change the taxation that is levied separately on goods and services and will introduce a consolidated tax based on a uniform rate of tax fixed for both goods and services and it is payable at the final point of consumption.
By when will it be implemented?
Constitution Amendment Bill is not expected to come into force before April 1, 2017. This is beside the fact that states, India Inc, and industries will have to prepare themselves for a completely new tax regime.
How would GST be administered in India?
GST has two components – Central GST (CGST) and State GST (SGST). Both Centre and States will simultaneously levy GST across the value chain. The tax will be levied on every supply of goods and services. Centre would levy and collect Central Goods and Services Tax (CGST), and States would levy and collect the State Goods and Services Tax (SGST) on all transactions within a State.
Benefits of GST Bill
Under GST, all the taxes will be integrated, hence, it will be possible to bring a transparency in the levying of taxes and the burden of taxation will be shared equally between manufacturing and services. According to experts, by implementing the GST, India will gain $15 billion a year. This is because, it will promote more exports, create more employment opportunities and boost growth.
The entire Indian market will be a unified market which may translate into lower business costs. It can facilitate seamless movement of goods across states and reduce the transaction costs of businesses. Companies that are under unorganised sector will come under the tax regime.
What is not so right about GST?
The GST has been proposed to be kept between 18 and 20 percent. Now, since all products and services will have unified taxation, the products or services that a person could avail at lower tax rates, now will have 18-20% tax with it. This is expected to have an inflationary effect in the country. GST by nature is against the spirit of federalism as it snatches away the state’s taxation powers enshrined in the constitution.
The USA and the European Union are now the two biggest economies of the world. In both cases, they have almost a similar federal structure as India. A considerable amount of power is vested in the different state of the USA and different nations of the EU, where they enjoy different taxation system and yet GST was never considered.