GST or the Goods and Services Tax is an indirect tax that brings together all the indirect taxes that are imposed on all goods and services under a single banner. This is in contrast to the current system, where taxes are levied separately on goods and services.The GST, however, is a comprehensive form of tax based on a uniform rate of tax for both goods and services. However, it is payable only at the final point of consumption. Experts say that GST is likely to improve tax collections and boost India’s economic development by breaking tax barriers between States and integrating India through a uniform tax rate.It was first thought of in India during the 2006-2007 budget.
*Need for GST
Introduction of a GST to replace the existing multiple tax structures of Centre and State taxes is not only desirable but imperative in the emerging economic environment. Increasingly, services are used or consumed in production and distribution of goods and vice versa. Separate taxation of goods and services often requires splitting of transaction values into value of goods and services for taxation, which leads to greater complexities, administration and compliance costs. Integration of various taxes into one system would make it possible to give full credit for inputs taxes collected. GST, being a consumption tax based on VAT principle, would also greatly help in removing economic distortions and will help in development of a common national market.The replacement of state sales tax by the value-added tax (VAT) in 2005 was considered a significant step forward in the reform of domestic trade taxes in India, but under the current economic scenario the adoption of the GST bill would be a significant step in the development of Indian economy.It would be adapted by both the central and the state governments (as proposed).
1. It would be applicable to all transactions of goods and service.
2. It will be paid to the accounts of the Centre and the States separately.
3. The rules for taking and utilization of credit for the Central GST and the State GST would be aligned.
4. Cross utilization of ITC between the Central GST and the State GST would not be allowed except in case of inter-State supply of goods.
5.The Centre and the States would have concurrent jurisdiction for the entire value chain and for all taxpayers on the basis of thresholds for goods and services prescribed for the States and the Centre.
6. The taxpayer would need to submit common format for periodical returns to both the Centre and the concerned state GST authority.
The committe on goods and services tax (GST) rates has shown how there can be progress through this game-changer tax.
GST has been hanging in balance for about seven years now as states are concerned about their revenue losses on introduction of this new tax regime. Sources say that the Finance Ministry is seeking opinion of the law ministry to work out a mechanism for including the
compensation in the Constitution Amendment Bill. The real test of the
government would be when the bill is introduced in the rajya sabha ,where the government is in minority , the political tussle is always on as to which party is responsible for the implementation/
introduction of the tax. GST has missed several deadlines because of lack of consensus among states over certain crucial issues on the proposed new tax regime.
Hopefully it will pass in this session of the parliament and will be applied from the new financial year beginning April,1 2016.
About The Author
A commerce student at DAV college sec.10. Loves to write about youth and society related issues and is fascinated by supernatural elements.