Goods and Sales Tax (GST)

GST means Goods and Sales Tax. This is one of the major reforms that government of India is implementing in Indian tax system. Government is planning to levy this tax on sales, usages of goods & services and manufacturing. Implementation of this tax system is quite important to boost the economy of our country. Main motive of this tax system is to replace all the indirect taxes of state and central government and give boost to our economy.


Definition of GST

Goods and Sales Tax (GST) is a kind of value added tax or indirect federal sales tax imposed by government in different counties against the services and goods. Tax rates may differ in different countries and on different products. Government is brining this concept to generate appropriate revenue to boost the economy. Customers pay GST on their purchase and government receives this amount through business organizations.


Goods and Service Tax (GST) in India

Government of India has brought this concept to manage Indian economy in much effective way. In 2014 government proposes 127th amendment bill of constitution to introduce new tax system in our country. Government proposes this concept to bring single tax system in across the country to impose value added tax on use of goods and services, sale and manufacturing. This tax system is going to effective from 1 July 2017.

The finance minister of India- Arun Jaitely announce constitution amendment bill or GST bill on December 19, 2014 on parliament and the parliament passes the bill on may 6, 2015 with majority of support of member of parliament.


Current Tax System in India

As per current taxation system Indian customers pay various types of taxes and cess like customer duty, value added tax, sales tax, service tax and excise duty. As we know that GST is kind of indirect tax that is going to implement soon. As per current rules and regulation state government has rights to impose other tax as per their policy to increase their revenue. State government imposes these taxes on manufacturing companies and company passes these taxes for customers.


GST Processing Steps

Goods and Sales tax is going to merger all kind of taxes of central and state governments and as per new policy there will be only two taxes state GST and central GST respect to all goods and services that they are getting. As of now if you have to pay only GST if you buy anything rather than paying various taxes. Under GST production coast of products will be much affordable and easily manageable.

GST will help government to bring transparency in Indian market and transaction system. In current payment system customers find bill quite complicated and its not easy for them to understand the mentioned amount. GST is going to replace following taxes: -
1. Central Excise Duty.
2. Special Additional Duty of Customs (SAD)
3. Surcharges and cesses related to supply of goods or services
4. Additional Customs Duties (CVD)
5. Additional Excise Duties on textiles and textile products
6. Excise Duties on medicinal and toilet preparations 7. Additional Excise Duties on goods of special importance
8. Service Tax


GST is going to include following taxes: -

1. Entry Tax
2. State VAT
3. Luxury Tax
4. State cesses and surcharges
5. Central Sales Tax
6. Taxes on lotteries, betting and gambling
7. Entertainment Tax (not levied by local bodies)
8 Purchase Tax
9. Taxes on advertisements


Key Features of Goods and Service Tax:

1. The act will have two constituents Central GST charged by the Centre and State GST charged by the states. But, in case of inter-state trade or commerce, only the Centre will levy tax and collect Goods and Service Tax, and the tax collected would be divided between the Centre and the State as per the provision made in the parliament.
2. The Goods and Services Tax will include Central Indirect taxes such as Service Tax, Special Additional Duty of Customs, Excise Duty, Countervailing Duty, Central Surcharges and Cesses as long as they are related to the supply and consumption of goods and services.
3. Inclusion of the concept of declared goods of special importance as per the Indian Constitution. 4. It will also include Tax, Luxury tax, Taxes on betting, lottery and State cesses , State Value Added Tax or Sales Tax, Entertainment Tax, (excluding the tax charged by the local bodies), Entry and Octroi tax, Central Sales Tax (taxed by the Centre and collected by the State Government) , Purchase and surcharges involved in the supply and consumption of services and goods.
5. Government is going to impose additional tax of 1% on supply of goods in inter-State trade which will be collected by the Government of India for a period of two years and will be allocated to the states from where the supply comes.
6. Will levy integrated Goods and Services Tax on inter-State transactions of goods and services.
7. Petroleum and petroleum products and alcohol have been kept out of the reach of GST.
8. The GST Council will constitute of the Union Finance Minister as chairman followed by the Minister in charge of Finance or Taxation or any other Minister nominated by each State Government. The GST Council will function under the Chairmanship of the Union Finance Minister and it will be a joint forum of the Centre and the States.
9. A Goods and Services Tax Council will be created to address the issues relating to goods and services tax and give recommendations to the Union and the States on areas such as rates, exemption list and threshold limits.
10. Additional tax of 1% on inter-state trade in goods and services will be imposed and collected by the Centre and provided to the states for two years to compensate the loss ( of any) faced by the states for implementing the GST.
11. It will also include State Value Added Tax or Sales Tax, Entertainment Tax, (excluding the tax charged by the local bodies), Entry and Octroi tax, Central Sales Tax (taxed by the Centre and collected by the State Government) , Purchase Tax, Luxury tax, Taxes on betting, lottery and State cesses and surcharges involved in the supply and consumption of services and goods.


Advantages of GST

1. As of now, petroleum and petroleum products have been kept out of the GST regime until further notice.
2. This is a federal law, which means that the states will no longer have the right to make new laws on taxation towards goods and services.
3. Sale of newspapers and advertisements are also likely to fall under the GST regime, allowing the government to increase its revenue considerably.
4. It simplifies the tax system and makes it easier to understand as well as cheaper to implement at various levels.
5. While there will be central GST and state GST, the tax applicable on goods and services being exported and imported between states in India would fall under an Integrated GST (GST) system in order to avoid conflict of dominion.
6. It will be cheaper to buy input goods and services for production from other states.
7. Tax evasion at various stages will be eliminated as tax offsets can be collected only if taxes have been paid originally. You will also be able to buy raw materials or constituent materials for production only from those who have paid taxes, in order to claim benefits.
8. The current supply and distribution chain may undergo a change with a change in taxation system that does away with excise and customs duties.
9. The consumer will get the end-product at cheaper rates because of elimination of multiple taxes and the tax flows.


Disadvantage of GST

1. Stamp duty will not fall under the GST regime and will continue to be imposed by states.
2. The GST proposes to have minimal exemption list. Currently, higher taxes are levied on fewer items, but with GST, lower taxes will be levied on almost all items.
3. GST is not good news for all sectors, though. In the current system, many products are exempted from taxation.
4. GST is not applicable on liquor for human consumption. So alcohol rates will not get any advantage of GST.


Goods and Services Tax Bill

As per government record good and tax bill is known as the 127th amendment bill of constitution to bring single tax system in across the country and make this tax system easy and flexible. Main points of this bill are specified below.
1. The 2014 bill deleted the 2011 bill provision that imposed certain restrictions on the states on taxation of the products that are important for inter-state commerce and trade.
2. It is an indirect, uniform tax that is levied on the goods and services throughout a particular country. Several developed countries add tax on sale, manufacture and consumption using single comprehensive tax.
3. The primary objective of GST is eliminating the excessive taxation.
4. Entertainment tax, entry tax, purchase tax, central sales tax, VAT, etc. would be replaced by State Tax GST.


Impact of GST

This is one of the most significant step take by the government to reform the complicated tax system. It is expected that goods and sales tax will affect the various segment of Indian corporate sector. This system will merge all previous tax of state and central government and will create single market across the country. It is going to help in optimization of supply chain management. GST is going to change tax computation, credit utilization, tax frequency and tax structure. It is expected by the experts of this sectors and policy makers that GST will not only boost the economy of country but will be helpful in creating new employment opportunity for youngsters.


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