GST – Goods and Service Tax – All you need to know about it

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WHAT IS GST?

GST (Goods and Service Tax) is a major step towards improving the tax structure of India. GST is an indirect tax law. It is an integrated tax that will look at both goods and services. With the introduction of GST, the entire country will be transformed into a unified market and mostly indirect taxes such as central excise, service tax, VAT, entertainment, luxury, lottery tax etc. will be included in GST. This will make a single unified tax that the citizens will need to pay for goods and services from the manufacturing stage until it is delivered to the final consumer.

WHY IS GST NECESSARY?

The current tax structure of India is very complex. The Indian Constitution gives the Central Government the right to impose taxes on the production and services of the goods, while the state government holds the right to decide taxes for the sale of goods. Due to this, there are various types of taxes applicable in the country. This makes the current tax system of the country very complex. Different companies and small businesses find it very difficult to follow different tax laws.

SALIENT FEATURES OF GST

• GST will only integrate indirect taxes. The direct taxes such as income tax etc. will be imposed according to the present system. With the introduction of GST, there will be only one type of indirect taxes across India, which will lead to stability in the cost of goods and services.
•  With the introduction of GST, there will be only one type of indirect tax all over India. It will maintain stability in the cost of goods and services.
• To maintain the federal structure, GST will be at two levels – CGST (central commodity and service tax) and SGST (state goods and services tax). The share of CGST will be given to the Center and the share of SGST will be received by the state government.
• In the case of sale of goods and services from one state to another, IGST (integrated goods and services) will be imposed. A part of the IGST will go the center government while another part of the tax will be received by the state government which is consuming the goods or service.
•  Businessmen will be able to take input credit of GST on the items and services purchased, which they can use for the payment of GST on the goods and services sold. The input credit of CGST can be used to pay the output tax of IGST and CGST while SGST credit can be used to pay the output Tax of SGST and IGST. The credit of IGST can be used to pay the output tax of IGST, SGST and CGST.
• All the businessmen, producers or service providers need to get themselves registered under GST whose total sale price is more than a fixed price throughout the year.
• In the proposed GST, businessmen will have to fill three different types of tax returns, including output tax,  input tax and integrated returns.

IMPACT OF GST ON COMMON MAN

• The final consumer (common man) has to bear the entire burden of indirect taxes. At present, different types of different taxes are imposed on the same item but with the introduction of GST, all the goods and services will be charged with the same type of tax, which will help in reducing the cost of goods. However, this will result in the increase in the cost of services.
• The other important benefit would be that the same rate would be taxed across India, which will keep the prices of goods and services same in all the states.
• With the introduction of GST (Goods and Service Tax) Law, the CST (Central Sales Tax) will be included in GST, which will reduce the prices of various items.

IMPACT OF GST ON BUSINESS

• At present, businessmen are required to pay different types of indirect taxes such as sales tax on trading, excise duty on producing commodities, service tax on providing service etc. As a result, they are forced to comply with various types of tax laws, which is a very difficult and complex task. But after the implementation of GST, they will have to follow indirect laws only, which will facilitate business in the country. It will help in simplifying the administration.
• Currently, 2% of Central sales tax is imposed in order to sell goods from one state to another. Once the GST is introduced, the Central sales tax will be abolished which will make many products cheaper.
• The threshold limit (exemption limit) is different in different types of indirect taxes. The Threshold Limit for sales tax is Rs 5 lakh, Rs 10 lakh in service tax and Rs 1.5 crores in excise duty. GST will propose to have the same type of Threshold Limit for all types of businesses (trade, product or service provider). This threshold limit will be created according to the current limit of all three laws (service tax, sales tax and excise duty). The main impact would be that the exemption limit will be kept less than 50 lakhs, which will be brought under the GST of small producers who are currently availing the limit of 1.5 crore exemption limits.
• GST will help in improvement in the competitiveness of the trade industry by resulting in the reduction of transaction costs.

TAXES WHICH WILL BE SUBSUMED INTO GST

At Central level

• Additional Exercise Duty
• Special Additional Duty of Customs
• Service Tax
• Central Exercise duty
• Additional Customs Duty

At State level

• Entertainment tax, Central Sales tax
• Purchase Tax
• State Value Added Tax/Sales Tax
• Tax on gambling, betting and lottery
• Luxury Tax
• Octroi and Entry Tax

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