GST – An overview

The Government of India has implemented GST w.e.f. 01.07.2017. The acronym  ‘GST’ Stands for Goods and Services Tax.  GST is foreseen to be the biggest taxation reform after independence that has been chosen by the Government of India and that too in the field of indirect taxes. It is now being inferred that the onset of GST would lead to a situation which is best being described as  – “One Tax, One Nation and One Market”

 

As per GST India.com – “GST is a comprehensive tax which will be levied on manufacture , sale and consumption of goods & services at a national level”

 

Through this and subsequent blogs on the topic, we’ll try to understand the basic concepts related to GST and will be moving forward as the law unfolds itself in the Indian Economic scenario.

 

The idea of moving into GST regime was first of all proposed by the then Union Finance Minister in his Budget for 2006-07 and it was proposed at that time that GST would be introduced from 1st April, 2010.  The Empowered Committee of State Finance Ministers (EC) was told to present a basic framework and roadmap for GST and it then formulated the design of State VAT.

 

On the basis of various discussions within Joint Working Groups of officials from both State and Central Government, the Empowered Committee released its First Discussion Paper (FDP) on GST in November, 2009.

 

Finally, after addressing all intermediary and other issues which were brought in the notice from time to time, the Constitution (122nd  Amendment) Bill was introduced in the 16th Lok Sabha on 19.12.2014. The Bill provided for levying  GST on supply of all types of goods and  services provided, except for Alcohol for human consumption. Alcohol for human consumption and Five petroleum products viz. petroleum crude, motor spirit (petrol), high speed diesel, natural gas and aviation turbine fuel have been considered as SIN goods, on which Governments do not like to allow free trade. So these will not be covered under the ambit of GST. GST on these SIN goods would be levied at a later date as and when it will be recommended by the GST council.

 

The Bill after amendment was passed in May 2015 by the lower house of Parliament, Lok Sabha. The Bill was referred to the Select Committee of Rajya Sabha on 12.05.2015. The Select Committee had submitted its Report on the Bill on 22.07.2015. The Bill with amendments was finally passed in Rajya Sabha and thereafter by Lok Sabha in August, 2016. Further the bill had been ratified by required number of States and received assent of the President on 08.09.2016 and enacted as Constitution (101st Amendment) Act, 2016 w.e.f. 16.09. 2016.

 

The present system of Indirect Taxes comprises of multiplicity of taxes, some of them levied at Central level and some at State Level. The Centre has the powers to levy tax on the  manufacture of goods (except alcoholic liquor for human consumption, opium, narcotics etc.) while the States have the powers to levy tax on sale of goods. In case of inter-State sales, the Centre has the power to levy a tax (the Central Sales Tax) but, the tax is collected and retained entirely by the originating States.

 

There are several limitations and inefficiencies with each kind of tax. One of the major limitation is the cascading effect of tax in the supply chain.

 

GST is a destination based tax on consumption of goods and services. It is proposed to be levied at all stages right from manufacture up to final consumption with credit of taxes paid at previous stages , which is available as setoff in the subsequent stages. In a nutshell, under GST only value addition will be taxed and burden of tax is to be borne by the final consumer.

 

By accommodating / subsuming a large number of Central and State taxes into a single tax, it intends to reduce cascading or double taxation. From consumer perspective, the biggest gain would be – reduction in the overall tax burden on goods. Indian products would become competitive with GST in both the domestic and international markets.

By Ms Rachna Kathuria

Assistant Professor

JIMS Kalkaji

Rachna

 

 

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