Government Plan Programme Policies for UPSC Exam

:: Goods and Services Tax ::

President has recently signed the 122nd constitutional amendment act, which is to bring a single taxation system of GST in India. This constitutional amendment will make India a single market and will have various important benefits for the common people of India. It will lead to reduction on tax on tax as well as movement of goods would be more smooth across the India. Till now we pay different taxes in different states. After the proper implementation of GST, tax on goods and services would be similar in all the states. GST is one indirect tax for the whole nation, which will make India one unified common market. GST is a single tax on the supply of goods and services, right from the manufacturer to the consumer. GST is a tax on value addition at every stage, taxes paid during the previous stage will be given at next stage as crduts. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages.

Various very important taxes would be subsumed under the Goods and services tax after its implementation. List of important taxes to be subsumed under the GST is given below:

At the Central level, the following taxes are being subsumed:

a. Central Excise Duty,
b. Additional Excise Duty,
c. Service Tax,
d. Additional Customs Duty commonly known as Countervailing Duty, and
e. Special Additional Duty of Customs.
At the State level, the following taxes are being subsumed:
a. Subsuming of State Value Added Tax/Sales Tax,
b. Entertainment Tax (other than the tax levied by the local bodies), Central Sales Tax (levied by the Centre and collected by the States),
c. Octroi and Entry tax,
d. Purchase Tax,
e. Luxury tax, and
f. Taxes on lottery, betting and gambling.

After coming together of all these taxes, cmpliance would be much more. There are also various other benefits which would come after the implementation of Goods and Services tax. Major important benefits are given below.

• GST will ensure that indirect tax rates and structures are common across the country, thereby increasing certainty and ease of doing business.
• A system of seamless tax-credits throughout the value-chain, and across boundaries of States, would ensure that there is minimal cascading of taxes. This would reduce hidden costs of doing business.
• Reduction in transaction costs of doing business would eventually lead to an improved competitiveness for the trade and industry.
• The subsuming of major Central and State taxes in GST, complete and comprehensive set-off of input goods and services and phasing out of CST would reduce the cost of locally manufactured goods and services.

Keeping in mind the federal structure of India, there will be two components of GST – Central GST (CGST) and State GST (SGST). Both Centre and States will simultaneously levy GST across the value chain. Tax will be levied on every supply of goods and services. Centre would levy and collect Central Goods and Services Tax (CGST), and States would levy and collect the State Goods and Services Tax (SGST) on all transactions within a State. The input tax credit of CGST would be available for discharging the CGST liability on the output at each stage. Similarly, the credit of SGST paid on inputs would be allowed for paying the SGST on output. No cross utilization of credit would be permitted.

The Central GST and the State GST would be levied simultaneously on every transaction of supply of goods and services except on exempted goods and services, goods which are outside the purview of GST and the transactions which are below the prescribed threshold limits. Further, both would be levied on the same price or value unlike State VAT which is levied on the value of the goods inclusive of Central Excise. Cross utilization of credit of CGST between goods and services would be allowed. Similarly, the facility of cross utilization of credit will be available in case of SGST. In case of inter-State transactions, the Centre would levy and collect the Integrated Goods and Services Tax (IGST) on all inter-State supplies of goods and services under Article 269A (1) of the Constitution. The IGST would roughly be equal to CGST plus SGST. The IGST mechanism has been designed to ensure seamless flow of input tax credit from one State to another. The exporting State will transfer to the Centre the credit of SGST used in payment of IGST. The importing dealer will claim credit of IGST while discharging his output tax liability (both CGST and SGST) in his own State. GST is a destination-based tax, all SGST on the final product will ordinarily accrue to the consuming State.

Along with these there are some other salient features which are present in the Goods and services tax Act. Some of these important features related to taxation and loss of revenue to the states under GST are mentioned below:

The salient features of the Bill are as follows:

• simultaneous power upon Parliament and the State Legislatures to make laws governing goods and services tax;
• Dispensing with the concept of ‘declared goods of special importance’ under the Constitution;
• GST to be levied on all goods and services, except alcoholic liquor for human consumption.
• Petroleum and petroleum products shall be subject to the levy of GST on a later date notified on the recommendation of the Goods and Services Tax Council;
• Compensation to the States for loss of revenue arising on account of implementation of the Goods and Services Tax for a period of five years;

Along with this Bill will also creat a Goods and Services Tax Council. Council will examine issues relating to goods and services tax and make recommendations to the Union and the States on parameters like rates, taxes, cesses and surcharges to be subsumed, exemption list and threshold limits, Model GST laws, etc. The Council shall function under the Chairmanship of the Union Finance Minister and will have all the State Governments as Members.

For the implementation of GST in the country, the Central and State Governments have jointly registered Goods and Services Tax Network (GSTN) as a not-for-profit, non-Government Company to provide shared IT infrastructure and services to Central and State Governments, tax payers and other stakeholders. The key objectives of GSTN are to provide a standard and uniform interface to the taxpayers, and shared infrastructure and services to Central and State/UT governments. GSTN is working on developing a state-of-the-art comprehensive IT infrastructure including the common GST portal providing frontend services of registration, returns and payments to all taxpayers, as well as the backend IT modules for certain States that include processing of returns, registrations, audits, assessments, appeals, etc.

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