Goods and Services Tax (GST) - AT A GLANCE

The introduction of Goods and Services Tax (GST) would be a remarkable step in the reform of indirect taxation in India. As the name suggests, GST is imposed when a consumer purchases any goods or services. This bill will be India’s biggest tax reform since independence as it will untangle the current taxation policy by integrating all indirect taxes(sales tax, VAT etc) with sole tax

From the consumer point of view, the immense edge would be in terms of a reduction in the overall tax liability on goods, which is presently evaluated at 25%-30%, free movement of goods from one state to another without obstruction at state entrance for hours for payment of state tax or entry tax and relaxation in paperwork to a monstrous extent.

Many taxes has been subsumed GST which are as under:

Central Indirect Taxes & Levies:

• Central Excise Duty
• Excise Duty levied under the Medicinal Preparations (Excise Duties) Act, 1995
• Service Tax
• Additional Customs Duty (CVD)
• Central Surcharge and Cess

State Indirect Taxes & Levies:

• VAT/Sales Tax
• Entertainment Tax (other than the tax levied by local bodies)
• Central Sales Tax
• Octroi & Entry Tax
• Purchase Tax
• Luxury Tax

Favorable Aspects:

1. The major purpose to execute GST is to remove the cascading effect on tax. A product on which excise duty is paid can also be liable for VAT. Suppose a Product A is manufactured in a factory. As soon as it releases from factory, excise duty has to be paid to central government.  When that Product A is sold in the same state the VAT then VAT has to paid to state government. Also no credit on excise duty paid can be taken against output VAT. This is termed as cascading effect since double tax is levied on same product.

2. The GST is being instigated to create a standard market across states, not only to avoid crippled effect of indirect tax but also to refine tax compliance.

3. GST will conduct a better explicit and unbiased manner to increase revenue.

4. Cost depletion as credit of input tax is available against output tax.
5. Untangled and price saving system as procedural cost reduces due to uniform accounting for all types of taxes. Only three accounts, CGST, SGST, and TGST have to be maintained.

6. GST is build to untangle the present indirect system. It is long term plan leading to a higher output, more employment opportunities and economic boom.

7. GST is favorable for both economy and corporate. The depleted tax load on companies will diminish production cost making exports more aggressive.

Unfavorable Aspects:

1. GST is being mentioned as a sole taxation system but in actually it is a two fold  tax in which state and center both  accrue separate tax on a sole transaction of sale and services.

2. At present the main tax indirect system of Central Government excise. All the goods and commodities are not covered by the central excise and further there is an exemption limit of Rs. 1.50 Crores in the central excise and further traders are not liable to pay central excise.   The central excise is payable up to the stage of manufacturing ,but now GST is payable up to sale.

3. Most of the dealers are not covered with central excise but are only paying VAT in the state. Now of all the VAT dealers it will be mandatory to pay “Central Goods and Service Tax”

4. The calculation of RNR ( Revenue Neutral Rate) is very difficult and further Govt. wants to intensify  its revenue hence rate of Tax will be problem. As per the news reports the propounded rate for state GST is 12% and Central GST is 14% plus Govt. wants to impose 1% CST  at the primary stage of GST on the interstate sale of goods and services. So the common rate of overall tax will be 26%. The rate is very high collating to the fact that small and medium industries are at present not covered by central excise and most of the goods such as agricultural products are out of the preview of the central excise.

5. Advancement in the manufacturing and distribution of goods, increase in exports, various reforms, check on corruption, less government control are some of the components responsible for the economic growth of the country. A tax system can make revolution in the economy of the country is “rarest of the rare” thing.