In India, the Goods and Services Tax (GST) is an indirect tax that takes the place of VAT, services tax, excise duty, and other indirect taxes. On 2017 march 29 Parliament endorsed the Goods and Services Tax e Act, and this Act took effect on July 1, 2017. To put it another way, the Goods and Services Tax (GST) applies to the sale of goods and services. On each value addition, the Goods and Services Tax Law of India imposes a comprehensive, destination-based, multi-stage tax.
The GST system includes the Manufacturer who is obligated to pay GST on the value of the product and the purchased raw materials. Service Providers must pay GST on both the products’ purchase price and its added value. However, the total amount of GST that must be paid can be subtracted from the tax payment made by the manufacturer. The retailer will be required to pay GST on the product it has purchased from the distributor. In addition, the total amount of GST that must be paid can be subtracted from the tax payment made by the retailer. Consumer needs to pay GST on the product that has been brought.
Types of GST
The GST is categorized into three different types
Central Goods and Services Tax (CGST)
The CGST tax is levied on the supply of goods and services within a single state and collected by the Central Government. Central taxes like the Central Excise Duty, Customs Duty, and Service Tax were eliminated when the Central GST was implemented.
State Goods and Services Tax
The State Goods and Services Tax applies to goods and services sold within the state (intra-state). Value Added Tax (VAT), Entertainment Tax, Entry Tax, State Sales Tax, and any applicable surcharges were all eliminated by SGST. The SGST revenue is given to the State Government.
Integrated Goods and Services Tax (IGST)
The interstate sale of goods and services is subject to the integrated goods and services tax (GST). Every state gets a part of the IGST income. The Integrated Goods and Services Tax (IGST) was enacted to ensure that only the Union Government conducts business in each state.
Union Territory Goods and Services Tax (UGST)
The Union Territory Goods and Services Tax applies to goods and services sold in Chandigarh, the Andaman and Nicobar Islands, and Daman and Diu union territories. The CGST and UTGST are collected combined.
The Constitution (122nd Amendment) Bill was India’s first attempt to introduce the GST Bill in 2014. This was approved in 2016, and the Rajya Sabha renumbered the law as The Constitution (101st Amendment) Act, 2016. These are its provisions: The central GST covers excise duty, while the state GST covers VAT, the luxury tax, and other taxes. The integrated GST covers trade between states. The IGST is not a tax in and of itself; rather, it is a system for coordinating state and union taxes. States are granted the authority to impose taxes on goods and services by Article 246A.
The President shall appoint a GST Council to administer and govern the GST, as stated in Article 279A. Its chairman is India’s Union Finance Minister, and its members are ministers nominated by state governments. The GST council is set up so that the states get two-thirds of the votes and the centre gets one-third. The decisions are made by the 3/4 majority.
Advantages of GST
- GST is a transparent tax that cuts down on indirect taxes.
- Registered retailers won’t be required to pay GST, there won’t be any hidden taxes and it will be cheaper to run a business.
- The drop in prices will be good for people and good for businesses because more people will buy things.
- There is no doubt that services are becoming more and more used or consumed in the production and distribution of goods, and vice versa.
- The current taxation system, which imposes separate taxes on goods and services, necessitates dividing transaction values into the taxable value of goods and services, resulting in increased administration and compliance costs.
- When all taxes are incorporated into the GST system, it will be possible to distribute the tax burden equally between services and manufacturing.
- In accordance with the VAT principle, GST will not be imposed at various points (from manufacturing to retail outlets) but only at the final destination of consumption. Economic distortions will be lessened as a result of this, as will the growth of a single national market.
- The GST will also contribute to the establishment of a tax administration free of corruption.
- Presently, a tax is levied when a finished product leaves a factory; the manufacturer pays the tax, and it is again levied when the product is sold at a retail location.
- GST is backed by the GSTN, it is a fully integrated tax platform which deal with all aspects of GST.
Disadvantages of GST
- According to some economists, India’s GST would have a negative effect on the real estate market. It would reduce demand by approximately 12% while increasing the cost of new homes by up to 8%..
- According to some experts, the terms “Central GST” (CGST) and “State GST” (SGST) are just new names for the Central Excise/Service Tax, VAT, and CST. Therefore, the number of tax layers does not significantly decrease.
- There is currently only a 4% tax on some retail products. Clothing and other articles of clothing might cost more after GST.
- The aviation sector would suffer. Currently, service taxes on airfares range from 6% to 9%.This rate will effectively double the tax rate under GST, exceeding 15%..
- The entire ecosystem would have to learn the new GST system before it could be adopted and migrated.
GST is an excellent first step toward making the Indian economy more formal. However, both the Center and States need to become aware of the limitations imposed by indirect taxes and work toward placing more people in the direct tax bracket. But, India must take drastic measures to get the GST Regime back on track, including extending the revenue guarantee to States, limiting cesses, and most importantly, recognizing the necessity of State governments’ fiscal issues. The law is still in process of evolution.