GOODS AND SERVICES TAX

The Central government passed four sets of GST Acts in the Budget session this year. These were Central GST Act, 2017; Integrated GST Act, 2017; Union Territory GST Act, 2017 and GST (Compensation to States) Act, 2017. The Acts were approved by the Parliament after they were introduced as part of the Money Bill. Following the passage of the GST Acts, the GST Council decided the rate slabs for the Goods and Services to be taxed under the GST regime. This guide will help you build a basic understanding of GST, its role in your day to day life and its benefits.

What is GST?

GST (Goods and Services Tax) is the biggest indirect tax reform of India. GST is a single tax on the supply of goods and services. It is a destination based tax. GST has subsumed taxes like Central Excise Law, Service Tax Law, VAT, Entry Tax, Octroi, etc. GST is one of the biggest indirect tax reforms in the country. GST is expected to bring together state economies and improve overall economic growth of the nation.

GST is a comprehensive indirect tax levy on manufacture, sale and consumption of goods as well as services at the national level. It will replace all indirect taxes levied on goods and services by states and Central. Businesses are required to obtain a GST Identification Number in every state they are registered.

There are around 160 countries in the world that have GST in place. GST is a destination based taxed where the tax is collected by the State where goods are consumed. GST has been implemented in India from July 1, 2017 and it has adopted the Dual GST model in which both States and Central levies tax on Goods or Services or both.

SGST – State GST, collected by the State Govt.
CGST – Central GST, collected by the Central Govt.
IGST – Integrated GST, collected by the Central Govt.
UTGST – Union territory GST, collected by union territory government.

Why is GST needed in India?

Introduction of GST is considered to be a significant step in the reform of indirect taxation in India. Amalgamating of various Central and State taxes into a single tax would help mitigate the double taxation, cascading, a multiplicity of taxes, classification issues, taxable event, etc., and leading to a common national market.

VAT rates and regulations differ from state to state. On the other hand, GST brings in uniform tax system across all the states. Here, the taxes would be divided between the Central and State government.

Impact of GST on Indian Economy

GST offers several benefits to our economy. Here are some key advantages:

Create unified common national market for India, giving a boost to Foreign investment and “Make in India” campaign
Boost export and manufacturing activity and leading to substantive economic growth
Help in poverty eradication by generating more employment
Uniform SGST and IGST rates to reduce the incentive for tax evasion

Impact of GST on Consumers

GST is also beneficial for consumers. Here is how it impacts the Indian consumers:

Simpler Tax system
Reduction in prices of goods & services due to elimination of cascading
Uniform prices throughout the country
Transparency in taxation system
Increase in employment opportunities

Impact of GST on Traders

GST is also has some positive impact on traders. Let’s see how it affects the traders:

Reduction in multiplicity of taxes
Mitigation of cascading/ double taxation through input tax credit
More efficient neutralisation of taxes especially for exports
Development of common national market
Simpler tax regime
Fewer rates and exemptions
Distinction between Goods & Services no longer required