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The Goods and Services Tax (GST) is a uniform indirect tax levied on goods and services across the country. GST, as an umbrella tax, replaced central taxes like central excise, service tax, additional duties of excise & customs, special additional duty of customs, besides cesses and surcharges, on supply of goods and services. Central GST and State GST CGST is levied on intrastate supplies by the central government and SGST is levied on intrastate supplies by respective state governments.
Integrated GST IGST is levied on interstate supplies by the Centre (equal to CGST + SGST combined on supplies made within the state). Any supply of goods or services or both on interstate basis typically attracts IGST on the consideration thereof. What is the objective of GST? How Will it Work? * GST envisages all transactions and processes to be done only through the electronic mode, to achieve a non-intrusive administration.
This minimises the taxpayer’s physical interaction with tax officials. * GST provides for the facility of auto-populated monthly returns and annual return. * It also facilitates taxpayers by prescribing grant of refund within 60 days, and provisional release of 90 per cent refund to exporters within 7 days.
* Further facilitation measures include interest payment if refund is not sanctioned in time, and refund to be directly credited to bank accounts. * Comprehensive transitional provisions for ensuring smooth transition of existing taxpayers to GST regime, credit for available stocks, etc. * Other provisions include system of GST compliance rating, etc.
* Anti-profiteering provisions for protection of consumer rights: Any benefit by way of reduction in rate of tax or increase in input tax credit arising due to introduction of GST are passed on to customers (through reduction in sale price) by way of commensurate reduction in prices. * Under the GST regime, exports are zero-rated in entirety, unlike the earlier system where refund of some of the taxes did not take place due to fragmented nature of indirect taxes between the Centre and states. * GST is largely technology-driven and reduces the human interface to a great extent * GST is believed to have improved ease of doing business in India.
The primary objective of GST is to remove the multiplicity of taxes across states and create a single national taxation system, thereby forming a unified common market. GST is envisaged as a consumption tax, meaning the tax is passed on through the production and distribution stages, with the final customer bearing the tax. The current tax system, including CENVAT (central VAT) and state VAT (SVAT), suffers from multiple layers and a cascading burden of taxes.
While state VAT provides tax credits for intrastate transactions (within a state), the existing system cannot provide tax credits for interstate transactions. GST will subsume other forms of indirect taxation, making it easier for businesses to comply with the tax regime. Being a multi-stage tax, GST provides an input tax credit mechanism, allowing businesses to claim set-offs for tax paid in the prior stages of production or distribution.
This is expected to improve invoicing and promote voluntary compliance. The simplified tax structure, along with a broader tax base (fewer exemptions and taxation of all goods and services), is expected to increase revenue collections for the government. Corporates will no longer base their decisions to set up production operations on tax benefits but rather on core business efficiencies.
Additionally, with the destination-based principle and the provision to claim input tax credits, exports are likely to be taxed at zero percent, increasing the competitiveness of Indian firms. In the short term, the implementation of GST may lead to a slight uptick in inflation, but it is expected to have a positive impact on growth and public finances. Any inflationary impact is likely to be temporary.
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