“In this world nothing can be said to be certain, except death and taxes.”
– Ben Franklin
1. The GOODS AND SERVICES TAX (GST) is a bold financial reform introduced with effect from 01 July 2017 which will have far-reaching impact across the economic canvass of India. GST is aimed at simplifying procedures, optimizing tax revenues to benefit all the principal stake holders namely, The Consumer, The Manufacture and The Central & State Governments. This will enable integrating the entire country as one market facilitating ease of doing business and propelling India as the top preference in the emerging market arena. Emerging Market Arena.
What is GST?
2. The broad framework of this Tax Regime is as under:-
a. One indirect tax for the entire country.
b. Comprehensive, multi-stage, destination-based tax that is levied on every value addition.
c. The single GST has replaced several taxes and levies which includes: central excise duty, services tax, additional custom duty, surcharges, state-level value added tax and octroi.
d. Other levies which were applicable on inter-state transportation of goods have also been done away within the GST regime.
e. Transactions made within a single state are levied with Central GST (CGST) by the Central Government and State GST (SGST) by the State governments.
f. For inter-state transactions and imported goods or services, an Integrated GST (IGST) is levied by the Central Government.
g. GST is a consumption-based tax/destination-based tax, therefore, taxes are paid to the state where the goods or services are consumed not the state in which they were produced.
h. Goods and services are divided into five tax slabs for collection of tax – 0%, 5%, 12%,18% and 28%.
i. Petroleum Products, Alcoholic Drinks, Electricity and Real estate are taxed separately by the individual state government.
j. GST Council is the governing body of GST. It is chaired by the Union Finance Minister and has the finance ministers of all the state governments.
k. Revenue Sharing. The revenue sharing will be as under:-
i. Any sale within the state will be levied CGST and SGST (as against the earlier levy of vat + central excise / service tax) and the revenue will be shared equally.
ii. In the case of sale to another state, there will only be one type of tax (central) (as against the earlier levy of central sales tax, excise / service tax). The Center will then share the IGST revenue based on the destination of goods.
Advantages of GST
3. GST will impact the country with several transformational advantages:-
a. Remove the Cascading effect on the sale of goods and services.
b. Directly impact the cost of goods. Since tax on tax is eliminated.
c. GST is also mainly technologically driven. All activities like registration, return filing, application for refund and response to notice needs to be done online on the GST Portal. This will speed up the processes.
d. Increased efficiency in logistics.
e. Unorganized sector is regulated thus widening tax base and enhancing revenues.
f. Check posts across the country were abolished ensuring free and fast movement of goods.
g. Trucks travel time in interstate movement dropped by 20%, because of no interstate check posts resulting in greater efficiency and optimization in fuel consumption.
Goods and Services Tax Network (GSTN)
4. The GSTN software is developed by Infosys Technologies and IT network.
a. Maintained by the NIC.
b. “Goods and Services Tax” Network (GSTN) is a nonprofit organization formed for creating a sophisticated network.
c. Accessible to stakeholders, government and taxpayers to access information from on a single source (portal).
d. The portal is accessible to the Tax authorities for tracking down every transaction.
e. Taxpayers can access and monitor their tax returns.
5. GST is a simplified tax regime to integrate the entire nation under one simple transparent system eliminating hoarding, tax evasion, interstate rivalry and smuggling. There is a further need to refine the regime to bring all transaction under one tax slab, which should be the eventual measure envisaged in due course. Petroleum, alcohol and real estate also need to be included into the regime at the earliest as it will further benefit the consumer and the manufacturer.
6. The implementation of such a major reform will inevitably suffer from transitional and teething problems till the digital backbone and the data networks become robust and insulated from the disruptions of infrastructure expansions.