GST is not a new word for whole world or also for India. It was first implemented in France in 1954, and since then many countries have implemented this unified taxation system to become part of a global world. Now India is Going to adopting this new tax rule, let us look back at the how and when of the Goods and Services Tax and its history in the nation.
In India, the discussion on GST Law was flagged off in the year 2000, when the then Prime Minister Atal Bihari Vajpayee (The NDA Govt.) brought the issue to the table.
What is GST?
The GST (Goods & Service Tax) – it is a unified indirect tax across the whole India on products and services. In the current system, tax is levied at each stage separately by the Union government and the States at varying rates, on the full value of the goods. But under the GST system, tax will be levied only on the value added at each stage. It is a single tax collected from multiple points with a full set-off for taxes paid earlier in the value chain.
Thus, the last or the final consumer will gain only the GST charge by the last dealer in the supply chain with set-off many advantages from all the previous stages.
3 DUAL MODEL of GST
We started by stating the dual GST model and the taxes levied on each kind of transaction. See these abbreviations before we understand them-
- CGST – Central GST, where the revenue will be collected by the Central Govt.
- SGST – State GST, where the revenue will be collected by the State Govt. for intra-state sales.
- IGST – Integrated GST, where revenue will be collected by the Central Govt. for inter-state sales.
Now look of tax structure under the new govt. rule at the chart that follows:
A shopkeeper in Bihar sold goods to a consumer in Bihar i.e. cost of Rs. 10,000. The GST rate is 18% containing CGST rate of 9% and SGST rate of 9%. In such cases the shopkeeper collects Rs. 1800 and of this amount, Rs. 900 will go to the central government and Rs. 900 will go to the BIhar government.
Now, let us assume the shopkeeper in Delhi had sold goods to a shopkeeper in Bihar i.e. cost of Rs. 10,000. The GST rate is 18% Containing of CGST rate of 9% and SGST rate of 9%. In such case the dealer has to charge Rs. 1800 as IGST. This IGST will go to the Centre. There will no longer be any need to pay CGST and SGST.
How it will help India and common man?
The impact of the GST on the prices of goods and services will largely depend on the item in question. It will also depend upon the respective State governments and their intervention with respect to controlling prices of essential commodities. Milk, for example, which is likely to see a spike in prices after GST is implemented, can still be sold at cheaper rates, if the State government offers a subsidy on it.
So essentially, Goods & Services Tax is going to have a two-pronged benefit. First, GST reduce the cascading effect of taxes, and second, by allowing input tax credit, it will reduce the burden of taxes and, hopefully, prices.
The idea behind having one consolidated indirect tax to subsume multiple currently existing indirect taxes is to benefit the Indian economy in a number of ways:
- It will help the country’s businesses gain.
- It will make us on equal with foreign nations who have a better structured tax system
- It will also translate into gains for the end consumer who not have to pay cascading taxes any more
- There will now be a single tax on goods and services
In addition to the above,
- The Goods and Services Tax Law aims at streamlining the indirect taxation rule. As mentioned above, GST will subsume all indirect taxes levied on goods and service, including State and Central level taxes. The mechanism of GST is advancement on the VAT system, the idea being that a cooperative GST Law will create a seamless nationwide market.
- It is also expected that Goods and Services Tax will improve the collection of taxes as well as boost the development of Indian economy by removing the indirect tax limit between states and integrating the country through a uniform tax rate.
For Further Reading Visit Wikipedia https://en.wikipedia.org/wiki/Goods_and_Services_Tax_(India)