What is GST? How does it work?
GST is one indirect tax for the whole nation, which will make India one unified common market.
GST is a single tax on the supply of goods and services, right from the manufacturer to the consumer. Credits of input taxes paid at each stage will be available in the subsequent stage of value addition, which makes GST essentially a tax only on value addition at each stage. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages.
What are the benefits of GST?
The benefits of GST can be summarized as under:
For business and industry
o Easy compliance: A robust and comprehensive IT system would be the foundation of the GST regime in India. Therefore, all tax payer services such as registrations, returns, payments, etc. would be available to the taxpayers online, which would make compliance easy and transparent.
o Uniformity of tax rates and structures: GST will ensure that indirect tax rates and structures are common across the country, thereby increasing certainty and ease of doing business. In other words, GST would make doing business in the country tax neutral, irrespective of the choice of place of doing business.
o Removal of cascading: A system of seamless tax-credits throughout the value-chain, and across boundaries of States, would ensure that there is minimal cascading of taxes. This would reduce hidden costs of doing business.
o Improved competitiveness: Reduction in transaction costs of doing business would eventually lead to an improved competitiveness for the trade and industry.
o Gain to manufacturers and exporters: The subsuming of major Central and State taxes in GST, complete and comprehensive set-off of input goods and services and phasing out of Central Sales Tax (CST) would reduce the cost of locally manufactured goods and services. This will increase the competitiveness of Indian goods and services in the international market and give boost to Indian exports. The uniformity in tax rates and procedures across the country will also go a long way in reducing the compliance cost.
For Central and State Governments
o Simple and easy to administer: Multiple indirect taxes at the Central and State levels are being replaced by GST. Backed with a robust end-to-end IT system, GST would be simpler and easier to administer than all other indirect taxes of the Centre and State levied so far.
o Better controls on leakage: GST will result in better tax compliance due to a robust IT infrastructure. Due to the seamless transfer of input tax credit from one stage to another in the chain of value addition, there is an in-built mechanism in the design of GST that would incentivize tax compliance by traders.
o Higher revenue efficiency: GST is expected to decrease the cost of collection of tax revenues of the Government, and will therefore, lead to higher revenue efficiency.
For the consumer
o Single and transparent tax proportionate to the value of goods and services: Due to multiple indirect taxes being levied by the Centre and State, with incomplete or no input tax credits available at progressive stages of value addition, the cost of most goods and services in the country today are laden with many hidden taxes. Under GST, there would be only one tax from the manufacturer to the consumer, leading to transparency of taxes paid to the final consumer.
o Relief in overall tax burden: Because of efficiency gains and prevention of leakages, the overall tax burden on most commodities will come down, which will benefit consumers.
Which taxes at the Centre and State level are being subsumed into GST?
At the Central level, the following taxes are being subsumed:
Central Excise Duty,
Additional Excise Duty,
Service Tax,
Additional Customs Duty commonly known as Countervailing Duty, and
Special Additional Duty of Customs.
At the State level, the following taxes are being subsumed:
Subsuming of State Value Added Tax/Sales Tax,
Entertainment Tax (other than the tax levied by the local bodies), Central Sales Tax (levied by the Centre and collected by the States),
Octroi and Entry tax,
Purchase Tax,
Luxury tax, and
Taxes on lottery, betting and gambling.
What are the major chronological events that have led to the introduction of GST?
Answer: GST is being introduced in the country after a 13 year long journey since it was first discussed in the report of the Kelkar Task Force on indirect taxes. A brief chronology outlining the major milestones on the proposal for introduction of GST in India is as follows:
In 2003, the Kelkar Task Force on indirect tax had suggested a comprehensive Goods and Services Tax (GST) based on VAT principle.
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.
Since the proposal involved reform/ restructuring of not only indirect taxes levied by the Centre but also the States, the responsibility of preparing a Design and Road Map for the implementation of GST was assigned to the Empowered Committee of State Finance Ministers (EC).
Based on inputs from Govt of India and States, the EC released its First Discussion Paper on Goods and Services Tax in India in November, 2009.
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 in September, 2009.
In order to amend the Constitution to enable introduction of GST, the Constitution (115th Amendment) Bill was introduced in the Lok Sabha in March 2011. As per the prescribed procedure, the Bill was referred to the Standing Committee on Finance of the Parliament for examination and report.
Meanwhile, in pursuance of the decision taken in a meeting between the Union Finance Minister and the Empowered Committee of State Finance Ministers on 8th November, 2012, a ‘Committee on GST Design’, consisting of the officials of the Government of India, State Governments and the Empowered Committee was constituted.
This Committee did a detailed discussion on GST design including the Constitution (115th) Amendment Bill and submitted its report in January, 2013. Based on this Report, the EC recommended certain changes in the Constitution Amendment Bill in their meeting at Bhubaneswar in January 2013.
The Empowered Committee in the Bhubaneswar meeting also decided to constitute three committees of officers to discuss and report on various aspects of GST as follows:-
(a) Committee on Place of Supply Rules and Revenue Neutral Rates;
(b) Committee on dual control, threshold and exemptions;
(c) Committee on IGST and GST on imports.
The Parliamentary Standing Committee submitted its Report in August, 2013 to the Lok Sabha. The recommendations of the Empowered Committee and the recommendations of the Parliamentary Standing Committee were examined in the Ministry in consultation with the Legislative Department. Most of the recommendations made by the Empowered Committee and the Parliamentary Standing Committee were accepted and the draft Amendment Bill was suitably revised.
The final draft Constitutional Amendment Bill incorporating the above stated changes were sent to the Empowered Committee for consideration in September 2013.
The EC once again made certain recommendations on the Bill after its meeting in Shillong in November 2013. Certain recommendations of the Empowered Committee were incorporated in the draft Constitution (115th Amendment) Bill. The revised draft was sent for consideration of the Empowered Committee in March, 2014.
The 115th Constitutional (Amendment) Bill, 2011, for the introduction of GST introduced in the Lok Sabha in March 2011 lapsed with the dissolution of the 15th Lok Sabha.
In June 2014, the draft Constitution Amendment Bill was sent to the Empowered Committee after approval of the new Government.
Based on a broad consensus reached with the Empowered Committee on the contours of the Bill, the Cabinet on 17.12.2014 approved the proposal for introduction of a Bill in the Parliament for amending the Constitution of India to facilitate the introduction of Goods and Services Tax (GST) in the country. The Bill was introduced in the Lok Sabha on 19.12.2014, and was passed by the Lok Sabha on 06.05.2015. It was then referred to the Select Committee of Rajya Sabha, which submitted its report on 22.07.2015.
By what method will IT be utilized for the usage of GST?
For the usage of GST in the nation, the Central and State Governments have together enlisted Goods and Services Tax Network (GSTN) as a not-for-benefit, non-Government Company to give shared IT framework and administrations to Central and State Governments, citizens and different partners. The key destinations of GSTN are to give a standard and uniform interface to the citizens, and shared framework and administrations to Central and State/UT governments.
GSTN is taking a shot at building up a best in class exhaustive IT framework including the normal GST entry giving frontend administrations of enlistment, returns and installments to all citizens, and also the backend IT modules for specific States that incorporate handling of profits, enrollments, reviews, evaluations, advances, and so forth. All States, bookkeeping specialists, RBI and banks, are additionally setting up their IT framework for the organization of GST.
There would no manual documenting of profits. All charges can likewise be paid on the web. All mis-coordinated returns would be auto-produced, and there would be no requirement for manual mediations. Most returns would act naturally surveyed.
In what capacity will imports be exhausted under GST?
The Additional Duty of Excise or CVD and the Special Additional Duty or SAD by and by being required on imports will be subsumed under GST. According to clarification to provision (1) of article 269A of the Constitution, IGST will be collected on all imports into the region of India. Not at all like in the present administration, the States where imported merchandise are devoured will now pick up their offer from this IGST paid on imported products.
What are the real elements of the Constitution (122nd Amendment) Bill, 2014
The remarkable components of the Bill are as per the following:
Presenting concurrent power upon Parliament and the State Legislatures to make laws overseeing merchandise and enterprises assess;
Subsuming of different Central aberrant charges and requires, for example, Central Excise Duty, Additional Excise Duties, Service Tax, Additional Customs Duty regularly known as Countervailing Duty, and Special Additional Duty of Customs;
Subsuming of State Value Added Tax/Sales Tax, Entertainment Tax (other than the assessment required by the nearby bodies), Central Sales Tax (exacted by the Center and gathered by the States), Octroi and Entry impose, Purchase Tax, Luxury duty, and Taxes on lottery, wagering and betting;
Shedding the idea of 'pronounced merchandise of unique significance' under the Constitution;
Exact of Integrated Goods and Services Tax on between State exchanges of merchandise and enterprises;
GST to be exacted on all merchandise and enterprises, with the exception of alcoholic alcohol for human utilization. Oil and oil based goods might be liable to the demand of GST on a later date informed on the suggestion of the Goods and Services Tax Council;
Remuneration to the States for loss of income emerging because of usage of the Goods and Services Tax for a time of five years;
Making of Goods and Services Tax Council to look at issues identifying with merchandise and ventures expense and make suggestions to the Union and the States on parameters like rates, charges, cesses and extra charges to be subsumed, exception rundown and edge limits, Model GST laws, and so on. The Council might work under the Chairmanship of the Union Finance Minister and will have all the State Governments as Members.
Question 12.What are the significant elements of the proposed enlistment techniques under GST?
Answer:The real components of the proposed enrollment strategies under GST are as per the following:
Existing merchants: Existing VAT/Central extract/Service Tax payers won't need to apply over again for enrollment under GST.
New merchants: Single application to be recorded online for enrollment under GST.
iii. The enrollment number will be PAN based and will fill the need for Center and State.
Bound together application to both duty experts.
Every merchant to be given interesting ID GSTIN.
Esteemed endorsement inside three days.
vii. Post enrollment check in chance based cases as it were.
