April 2, 2015

About GST

A proposal to introduce a national level Goods and Services Tax (GST) by April 1, 2010 was first mooted in the Budget Speech for the financial year 2006-07. Introduction of an Goods and Services Tax (GST) to replace the existing multiple tax structures of Centre and State taxes is not only desirable but imperative in the emerging economic environment. GST system is targeted to be a simple, transparent and efficient system of indirect taxation as has been adopted by over 160 countries around the world.

  • The Kelkar Task Force on implementation of the FRBM Act, 2003 had pointed out that although the indirect tax policy in India has been steadily progressing in the direction of VAT principle since 1986, the existing system of taxation of goods and services still suffers from many problems and had suggested a comprehensive Goods and Services Tax GST based on VAT principle.
  • GST system is targeted to be a simple, transparent and efficient system of indirect taxation as has been adopted by over 160 countries around the world.
  • Introduction of an Goods and Services Tax (GST) to replace the existing multiple tax structures of Centre and State taxes is not only desirable but imperative in the emerging economic environment.
  • Full implementation of GST could raise India’s GDP growth by 0.9 to 1.7 percent, according to the National Council of Applied Economic Research (NCAER).
  • GST, being a destination-based consumption tax based on VAT principle, would also greatly help in removing economic distortions caused by present complex tax structure and will help in development of a common national market.
  • No taxing system can completely eradicate the effect of cascading, but GST implementation, to a large extent, will minimize the effect. GST will provide a simple structure to levy, collect and administer the taxes in the Country.
  • A proposal to introduce a national level Goods and Services Tax GST by April 1, 2010 was first mooted in the Budget Speech for the financial year 2006-07.
  • A dual GST module for the country has been proposed by the Empowered Committee of State Finance Ministers (EC). This dual GST model has been accepted by centre. Under this model GST have two components viz. the Central GST to be levied and collected by the Centre and the State GST to be levied and collected by the respective States. Central Excise duty, additional excise duty, Service Tax, and additional duty of customs (equivalent to excise), State VAT, entertainment tax, taxes on lotteries, betting and gambling and entry tax (not levied by local bodies) would be subsumed within GST.
  • In order to take the GST related work further, a Joint Working Group consisting of officers from Central as well as State Government was constituted.
  • The Constitutional Amendment Bill has been prepared and placed on the table of Parliament in December 2014 after obtaining views of the States.
  • After long political negotiations, the Constitutional Amendment Bill was passed in both houses of the Parliament in July 2016 with certain amendments.
  • The SPV called GSTN (Network) will be owned by the three stakeholders; the Centre, states and technology partner NSDL, which is expected to provide an interface to all stakeholders, and avoid evasion in indirect taxation systems.
  • The GSTN will implement common PAN-based registration, returns filing and payments processing for all States on a shared platform.

 

Proposed Tax System

  • World over, GST rates are typically between 15 per cent and 20 per cent. In India, it is likely to be the same
  • The tax-rate under the proposed GST would come down, but the number of assesses would increase by 5-6 times
  • More than 160 countries have introduced GST in some form.
  • It is interesting to note that there are over 40 models of GST currently in force, each with its own peculiarities.
  • GST have two components viz. the Central GST to be levied and collected by the Centre and the State GST to be levied and collected by the respective States.
  • The best GST systems across the world use a single GST while India has opted for a dual-GST model. Critics claim that CGST, SGST and IGST are nothing but new names for Central Excise/Service Tax, VAT and CST and hence GST brings nothing new to the table.

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