WHAT IS GST ?
GST stands for “Goods and Services Tax”, and is proposed to be a comprehensive indirect tax levy on manufacture, sale and consumption of goods as well as services at the national level.
Its main objective is to consolidates all indirect tax levies into a single tax, except customs (excluding SAD) replacing multiple tax levies, overcoming the limitations of existing indirect tax structure, and creating efficiencies in tax administration.
The introduction of Goods and Services Tax (GST) would be a very significant step in the field of indirect tax reforms in India. By amalgamating a large number of Central and State taxes into a single tax, it would mitigate cascading or double taxation in a major way and pave the way for a common national market.
From the consumer point of view, the biggest advantage would be in terms of a reduction in the overall tax burden on goods, which is currently estimated at 16%-18%.
Introduction of GST would also make our products competitive in the domestic and international markets. Studies show that this would instantly spur economic growth. Last but not the least, this tax, because of its transparent character, would be easier to administer.
How GST Works?
GST proposes to abolish the varying levels of taxation between States, and consider the country as a single whole organism when it comes to taxes on goods and services instead of as a segmented creature. All the sundry taxes will be clubbed into just 2 levels – Central GST and State GST. What a trader will essentially be able to do is claim a refund on the taxes already paid at different stages of value addition.
The consumer who buys the product will have to pay only the GST charged by the last dealer in the supply chain, as everyone else would have the opportunity to set-off the taxes paid at the previous stages. If we take the example above under the GST system, the Cenvat on manufacturing the dress and the taxes paid on dyes and buttons can be offset at each level, thereby considerably reducing the total taxes paid.
Central Taxes That Would Be Subsumed Within GST
b. Duties of Excise (Medicinal and Toilet Preparations)
c. Additional Duties of Excise (Goods of Special Importance)
d. Additional Duties of Excise (Textiles and Textile Products)
e. Additional Duties of Customs (commonly known as CVD)
f. Special Additional Duty of Customs (SAD)
g. Service Tax
h. Cesses and surcharges
State Taxes That Would Be Subsumed Within The GST
b. Central Sales Tax
c. Luxury Tax
d. Entry Tax (other than those in lieu of octroi)
e. Entertainment Tax (not levied by the local bodies)
f. Taxes on advertisements
g. Taxes on lotteries, betting and gambling
h. State cesses and surcharges