Special thanks to my friend Dileep, who is a tax consultant, for all the valuable inputs provided to me.
Goods and Services Tax (GST) is a tax which will merge various applied taxes into a single tax, in India.
GST is a significant step in the field of indirect tax reforms in India. By merging large number of Central and State taxes into a single tax, it would lessen double taxation in a major way and make way for a common national market.
Few of the Central and State taxes, which shall be replaced by GST are:
a) Central Excise Duty & Service Tax
b) CST, State VAT & Entry Tax
c) Luxury Tax, Entertainment and Amusement Tax, Taxes on Advertisement
d) Purchase Tax, Taxes on Lotteries, Betting & Gambling
Advantages for the Tax payers and the Consumers:
Simpler Tax system
Uniform prices throughout the country
Transparency in taxation system by virtue of online payment of tax and filing returns
Reduction in the overall tax burden on goods, which is currently estimated to be around 25%-30%.
Reduction in prices of goods & services due to elimination of double taxation
Increase in employment opportunities due to increased GST services required by the tax payers and consultants
Since India is a federal country, both the Centre and State have power to levy and collect taxes and hence there will be dual GST in India. It means that GST shall comprise Central GST and State GST in case of intra-State (within State) supplies and Integrated GST in case of inter-State supplies.
Liability to pay GST will arise when the supplier of goods and/or services crosses the turnover of Rs.20 Lakh in a financial year (Rs.10 Lakh in North Eastern and special category states). That means, if a supplier’s yearly turnover in a financial year (April to March) is above Rs.20 Lakh, he is liable to get registered and pay the tax.
The GST is going to be rolled out through an IT enabled platform being developed by GSTN (Goods and Service Tax Network),. GSTN is developing a common GST portal in order to facilitate the taxable persons to file application for registration, payment of tax, filing of returns, etc. This is applicable for the persons carrying on any business or trade and whose yearly turnover is above Rs.20 Lakh.
There will be four tax rates under GST viz., 5%, 12%, 18% and 28. Depending upon the classification of goods and services, there will be lower rates for essential items and highest rates for luxury and 'demerit' goods, which will also attract an additional cess.
So basically, GST shall be just one indirect tax system in India, which would make Indian products competitive in the domestic and international markets. This would have a boosting impact on the economic growth of our nation
Last but not the least, this tax, because of its transparent and self-policing character, would be easier to administer
Thank you for watching! Stay Blessed
