GST (01/07/17)

Goods and Services Tax (GST) is an indirect tax applicable throughout India which replaced multiple cascading taxes levied by the central and state government. It was introduced as The Constitution Act (Amendment101). It is used in India on the supply of goods and services.  GST has replaced some indirect taxes in India such as the excise duty, VAT, services tax, etc. The Goods and Service Tax Act was passed in the Parliament on 29th March 2017 and came into effect on 1st July 2017.

BRIEF HISTORY

The start of reform in India’s indirect tax regulation dates back to Rajiv Gandhi’s government. It started with the introduction of Modified Value Added Tax (MODVAT) in 1986 by Vishwanath Pratap Singh, the then Finance Minister. Subsequently PM P.V. Narsimha Rao and his finance minister Manmohan Singh initiated early discussion on Value Added Tax (VAT) at the state level. A single common Goods and Services Tax was introduced during Atal Bihari Vajpayee’s government (1999); in a meeting between him and his economic advisory panel.

FORMATION

In 2016, the Lok Sabha passed the Constitution Amendment Bill. However due to disagreements on several statements in the bill and on opposition’s demand, the GST bill was sent back for review. A 21 member committee was formed to look in the proposed GST laws. After approval of Central Goods and Services Tax Bill 2017 (The CGST Bill), the Integrated Goods and Services Tax Bill 2017 (The IGST Bill), the Union Territory Goods and Services Tax Bill 2017 (The UTGST Bill), the Goods and Services Tax (Compensation to the States) Bill 2017 (The Compensation Bill), these bills were passed by Lok Sabha on March 29, 2017. The Rajya Sabha passed the bills on April 6, 2017. They were enacted as Acts on April 12, 2017.

IMPEMENTATION

Goods and Services Tax was launched all over India with effect from July 1 2017. The Jammu and Kashmir legislature passed its GST act on 7 July 2017, thereby ensuring the entire nation brought under a unified indirect taxation system. The GST has ben modified many times since it’s implementation, the latest being on 22 December 2018. The panel of federal and state finance ministers decided to revise GST rates on 28 goods and 58 services.

FEATURES OF GST IN INDIA

DUAL GST:

  • India has adopted dual GST
  • Central GST (CGST) and State GST/ Union Territories GST (SGST/ UTGST)
  • Central govt. and State/UT govt. collect respective GSTs.
  • This feature owes to Amendment 101 of constitution
  • Integrated GST is leviable on inter-state transactions. It is levied and collected by the Central Government. It is equal to CGST + SGST.

TAXES SUBSUMED IN GST:

Central Government

  • Central Excise Duty
  • Additional Excise Duty
  • Service Tax
  • Additional Customs Duty (CVD)
  • Special Additional Duty of Customs (SAD)
  • Excise Duty on Medicinal and Toilet Preparations.

State Government

  • Sales Tax/Value Added Tax (VAT)
  • Entertainment Tax (other than collected by local bodies)
  • Central Sales Tax (CST)
  • Octroi and Entry Tax
  • Purchase Tax
  • Luxury Tax
  • Taxes on Lottery, Betting and Gambling

BENEFITS

  • Removal of Cascading Effect: The earlier system where tax was levied upon tax thereby burdening the consumer was removed effectively. Black money also seems to be reduced.
  • Uniformity in tax rate therefore rate arbitrage: While there used to be fluctuation in some commodities due to manufacture and inter state business, GST has levelled the taxes to a lot extent.
  • Decrease in prices because of cascading effect and rate arbitrage.
  • Abolition of interstate check-posts placed to enforce taxes on cross border transactions. This also reduced long-distance travel time for goods and transportation by 20 percent.
  • Creation of Nation Common Market

SHORTCOMINGS

  • Large list of GST- exempted goods which make the system unnecessarily complicated.
  • The decision to exempt almost 50 percent of items in the consumer price index basket has narrowed the base.
  • High tax rates on automobiles, construction of buildings have slowed down the progress of these sectors.
  • CAG report observed “Post-implementation of GST, the Centre’s revenue from goods and services registered a decline of 10% in 2017-18 compard to the revenue from the subsumed taxes in 2016/17”
  • Government’s gross tax revenue collection in Apr-Jun grew at the slowest pace in 10 years.

Thus we see as many benefits as the disadvantages are. Lets look forward to future amendments and openly keep our thoughts, for India is a democratic country!

 

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