Features of GST
The features of GST can be summarized as under:
- Subsuming of 17 taxes at Central/States level.
- Consumption Based Tax.
- One Tax rate across the country.
- Taxable event – “Supply of Goods or Services”
- No differentiation in Goods or Services
- Comprehensive tax on Goods & Services
- No tax on tax.
- Free flow of credit.
- Value Addition Tax at each stage.
India has adopted dual GST. There would be two components of GST viz. Central GST (CGST) and State GST (SGST). Centre will collect CGST and States/Union Territories would collect SGST/UTGST on all transactions of supply of goods or services or both. Owing to 101st constitutional amendment, Central as well as States/Union Territories could simultaneously levy tax on supply of goods & services.
Integrated GST is leviable on inter-state transactions. It is levied & collected by the Central Government. It is equal to CGST + SGST.
TAXES SUBSUMED IN GST:
- Central Excise Duty
- Additional Excise Duty
- Service Tax
- Additional Customs Duty (CVD)
- Special Additional Duty of Customs (SAD)
- Excise Duty on Medicinal & Toilet Preparations.
- Sales Tax/Value Added Tax (VAT)
- Entertainment Tax (other than collected by local bodies)
- Central Sales Tax (CST)
- Octroi & Entry Tax
- Purchase Tax
- Luxury Tax
- Taxes on Lottery, Betting & Gambling
BENEFITS OF GST
For Businesses & Industry:
1) Easy Compliance:
A robust and comprehensive IT system would be the foundation of GST Regime in India. All tax-payer services such as registrations, returns, payment etc. would be available online. It would make compliance easy and transparent.
2) Uniformity Tax Rates & Structures/Development of Common National Market:
GST will ensure that indirect tax rates and structures are common across the country. It would increase the certainty and ease of doing business. In other words, GST would make doing business in the country tax neutral, irrespective of choice of place of doing business.
3) Removal of cascading effect:
A seamless flow of tax-credit through-out the value chain and across boundaries of states, would ensure that there is minimal cascading of taxes. This would reduce the hidden cost of doing business.
Reduction in transaction cost of doing business would eventually lead to an improved competitiveness for the trade & industry.
5) Boost to exports:
Subsuming of major Central/State taxes in GST, complete and comprehensive set-off of tax paid on goods & services, phasing out of Central Sales Tax (CST) would reduce the locally manufactured goods & services. This will increase the competitiveness of Indian Goods & Services in the International Market and give boost to Indian Exports.
For Central & State Governments:
1) Simple & Easy to administer:
Multiple indirect taxes at Central/State Level are replaced by GST. Backed with robust, end to end IT system, GST would be simpler and easier to administer.
2) Better Control on leakages:
GST will result in better tax compliance due to a robust IT infrastructure. Owing to seamless transfer of input tax credit from one stage to another in the chain of value addition, there is an inbuilt mechanism in the design of GST that would incentivize tax compliance by traders.
3) 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 consumers:
1) Single & Transparent Tax proportionate to the value of goods & services:
Owing to multiple taxes levied by Central/State with incomplete or no ITC available at progressive stages of value addition, the cost of most goods & services in the country was laden with many hidden taxes. Under GST, there would be only one tax from the manufacturer to consumer leading to transparency of taxes paid.
2) Relief in overall tax burden:
Because of efficiency gains and prevention of leakage, the overall tax burden on most commodities will come down, which will benefit the consumers.