Brief Intro to GST in India

You would be hearing this term “GST” in probably almost every news channel, social media and other viewer platforms. So what actually this GST is ?

Let’s Decode it-

Termed as The Constitution “One Hundred and one Amendment Act” it is said to be one of the Most important Economic reforms after the 1991.

Goods and Services Tax (GST) is an indirect taxation in India merging most of the existing taxes into single system of taxation. It is comprehensive indirect tax on manufacture, sale and consumption of goods and services throughout India (Except state of Jammu and Kashmir) . It will replace the taxes levied by central government and state government and with this a seamless indirect tax regime which will come to an end.

GST STRUCTURE-

GST will be governed by 4 Central laws and 29 State laws. 4 Central laws (listed below) received assent from the president on 12th April 2017 are –

1. Central Goods and Services Tax Act, 2017
2. Integrated Goods and Services Act, 2017
3. Union Territory Goods and Services Act, 2017
4. The Bill for Compensation to States

It was introduced as The Constitution (One Hundred and First Amendment) Act 2016. The GST is governed by GST Council and its Chairman is Union Finance Minister of India Arun Jaitley.

GST Mechanism

GST is collected on value-added goods and services at each stage of sale or purchase in the supply chain. GST paid on the procurement of goods and services can be set off against that payable on the supply of goods or services. The manufacturer or wholesaler or retailer will pay the applicable GST rate but will claim back through tax credit mechanism.

But being the last person in the supply chain, the end consumer has to bear this tax and so, in many respects, GST is like a last-point retail tax. GST is going to be collected at point of Sale

     SOME IMPORTANT HIGHLIGHTS-

• GST would be applicable on “supply” of goods or services as against the present concept of tax on the manufacture of goods or on sale of goods or on provision of services.
• It would be a dual GST module for the country . Under this model GST have two components viz. the Central GST to be levied and collected by the Centre and the State GST to be levied and collected by the respective States
• GST is a consumption based tax/levy. It is based on the “Destination principle.” GST is applied on goods and services at the place where final/actual consumption happens.

CONCLUSION-

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 to be around 25%-30%. Free movement of goods from one state to another without stopping at state borders for hours for payment of state tax or entry tax and reduction in paperwork to a large extent.

Introduction of GST would also make Indian products competitive in the domestic and international markets. Studies show that this would have a boosting impact on economic growth. Last but not the least, this tax, because of its transparent and self-policing character, would be easier to administer.

GST will come to effect from 1^st July 2017.