2011- Inching Towards GST. GST refers to GOODS AND SERVICE TAX.

The proposed introduction of GST signals the new generation tax reforms.

This reduces barriers to trade and improve the tax base system.

GST was about to implement on April 10, but the said date rollout to April 11, and again GST missed its next deadline too. The Reason behind this is that the states like

Madhya Pradesh, Chhattisgarh and Tamil Nadu says that the information technology systems (which is very important for implementation of GST) and the administrative infrastructure will not be ready by the said date .

Some States fear if the uniform tax rate (which is one of the features of GST) is lower than their existing rates, it will hit their tax kitty.

Yes I too agree that backward and less-developed States could see a fall in tax collections. But GST can give better revenue collection for some States as the consumption of Goods and services will rise due to simplified tax rate system which is expected to be in range of 14% to 16% for GST.

WHAT DOES U MEAN BY GOODS AND SERVICE TAX??

The basis of GST and frankly the reason y it is popular in over 140 countries today is that it follows value added tax which is completely different  from the way tax is levied in India today and PLEASE here m only talking about indirect taxes.

Now what GST is classically defined as- it is a destination based consumption tax.

So please note the two key words

1^st one is- Destination based- means it is paid where the consumer is. Ultimately pays where the consumer is and

2^nd it is a consumption tax

And it is also known as transaction tax. Which means at every lag of transaction where there is value addition GST become applicable

HOW GST WORKS??

GST is a broad based and a single comprehensive tax levied on goods and services consumed in an economy. India is planning to implement Dual GST system  

Under dual GST, a Central Goods and Services Tax (CGST) and a State Goods and Services Tax (SGST) will be levied on the taxable value of a transaction.

After knowing this, question arises, IS THIS AN EXTRA TAX?? Well said “NO”

GST subsume all major indirect taxes levied by the Central Government i.e. central excise, customs and service tax and majority of the taxes levied by the State Government i.e. VAT, luxury tax, entertainment tax, etc

GST paid on the procurement of goods and services can be set off against that payable on the supply of goods or services. However the end consumer bears this tax as he is the last person in the supply chain, and so in many respects GST is like a last-point retail tax

Here, many of u ll might be thinking its similar to VAT, but will say no. As it is  much simpler then VAT. Today what we actually find in VAT, Multiply rates.. Yes, different rates in different states, different definitions and border control. But! Here only single rate governing all states.

Here I would like you to make note before there was a war among states for Sale Tax rate as it differed for state to state for same commodity but after GST only single rate will be in existence. Hence GST Unites States.

TODAY a lay man faces confusion; he says he get credit of excise duty from service tax then y not custom duty credit from the same?? But after GST no more such confusions, the taxes paid at central level known as CGST, will get input tax credit there

Through a tax credit mechanism, this tax is collected on value-added goods and services

And setoff is available at each stage of sale or purchase in the supply chain and since the Central GST and State GST are separately paid, the tax paid against the central GST can be utilized as setoff for central GST only and the same will be applicable for State GST.

That mean Cross utilization of Input Tax Credit between the Central GST and the State GST would not be allowed except in the case of inter-State transaction.

4. In GST, a continuous chain of set-off from the original producer’s point and service provider’s point up to the retailer’s level is established which reduces the burden of all cascading effects and as there would be no cascading effect we can say the prices of commodities are likely to come down in long run.

Definitely there will be a price hike for services as the present service tax rate 10.3 go up to 16% as expected.

Let’s take an example, currently a manufacturer needs to pay tax when a finished product moves out from a factory, and it is again taxed at the retail outlet when sold. It is simply a double taxation.

But after GST, the manufacturer will get setoff of tax paid by him and the chain will go on. Hence, the price of commodity ultimately decreases. But this benefit is only for consumer and industries.

What for central and state government??

It is estimated that India will gain $15 billion a year by implementing the Goods and Services Tax as it would promote exports, raise employment and boost growth. Further, it is also anticipated that the number of exemptions would be significantly reduced. Accordingly, the total revenue collections are expected to go up, as already proven by post-GST scenarios in several other countries

Rate Structure:

The tax will be collected in three tiers rates.

1^st Lower Rate for necessary items and goods of basic importance.

2^nd Standard Rate for other goods

3^rd one is for Services.

Uniform GST threshold – at state level proposed to be10 Lakhs and at central level 150 Lakhs for both goods and services

7.  Exemptions- .THERE ARE GOODS EXEMPTED FROM VAT. But GST will change the matters. Exemtions will go away.

1^st exemption which is no more in existence is of area base like kuch, chandrapur,

2^nd are investments

V small list like life saving drugs etc ill be there

So we are expecting there would be negative list. But goods like alcohol, tobacco, petroleum products are likely to be out of the GST regime.

.Conclusion:

1. Put simply, GST is Transaction Tax which is Destination Based.

2. As there would be no interaction between two persons or say everything would totally depended on information technology system GST is expected to be transparent and most important fast which is absent in today’s tax system.

4. States running in different directions can be managed only by receiving strong    collective support from all political parties.

5. This makes India a single, unified and expected to create a stronger economy. .

6. Hopefully, India would walk down this difficult but worthwhile path to create an efficient and transparent indirect tax structure that would help India to achieve its desired status in the global market

7. And after the Successful implementation of GST, it will bring win win win situation for Central- State, industry and consumers.