दो बूंदे GST की…..
- Goods and service tax [GST] is in vogue and it is more likely that it will be implemented with effect from 1-Apr-2017.
- Winter session of Parliament will begin from 16-Nov-2016 and it is likely that GST will be a reality from 1-Apr-2017.
- GST is consolidation of various indirect taxes at two levels.
- By nature, any indirect tax is borne by an individual only. The amended regime of taxation will have impact on prices of various goods and / or services.
- Thus any and every person whether belonging to any of the following category, need to understand the GST for their respect purposes.
दो बूंदे GST की…..
the title means, two drops of GST. It is taken from an initiative of India for eradication of polio. The tag line was “two drops of life…”. Hence the title.
- It is a method of learning process. A very basic framework which is a pre-requisite for understanding this indirect tax regime is explained herein below.
- Rest it is planned that, on each day, you will receive one email with one small concept each day alongwith an example. We initially do not intend to write very technical stuff
- It will be updated on this web-page as well.
- The idea behind an email a day is that, though everybody understands the need of learning GST as per his / her requirements, one lags behind in doing it. one reason might be the quantum appears to be huge.
- one small concept with example a day is like an apple a day keeps doctor away.
- If you wish to receive these emails, please send an email to firstname.lastname@example.org
Basic framework for understanding GST
In India, indirect taxes are handled by Central Board of Excise and Customs under the Ministry of Finance, Government of India. It has put up the following literature in public domain
Model draft GST law – http://cbec.gov.in/resources//htdocs-cbec/deptt_offcr/model-gst-law.pdf
FAQ on GST – http://www.cbec.gov.in/resources//htdocs-cbec/deptt_offcr/faq-on-gst.pdf;jsessionid=8A4610FF2D51284B0AF2B7F8FB5FF331
What is Goods and Service Tax (GST)?
- It is a destination based tax on consumption of goods and services.
- It is proposed to be levied at all stages right from manufacture up to final consumption with credit of taxes paid at previous stages available as setoff.
- In a nutshell, only value addition will be taxed and burden of tax is to be borne by the final consumer.
- Tax policy of any country / state depends upon the economic situation in that country / state and the general philosophy or habitat of the society.
- Economic situation and general philosophy / habitat of the society is a floating phenomenon which keeps on changing. India is no exception to it.
- There is an increase in the population obviously increasing the quantum of consumption of goods and services.
- There is change in the patterns of consumption be it food habitats / travelling
- With the outburst of information technology, there is a paradigm shift in the way business is conducted.
- At least in city areas, one can assume that a consumer is using certain level of electro-magnetic goods / services like phone / TV / internet etc.
- Now a day, more of the goods are given on lease [long term lease] than sold to get out of taxing definition.
- Segregations and consolidation of some of the logistics / manufacturing processes as compared to a decade ago.
- Do you know that the contribution of service tax is more than the excise duty i.e. duty on manufacture of good?
Taxing power in India
- India is a federal country where both the Centre and the States have been assigned the powers to levy and collect taxes through appropriate legislation.
- Both the levels of Government have distinct responsibilities to perform according to the division of powers prescribed in the Constitution for which they need to raise resources.
- A dual GST will, therefore, be in keeping with the Constitutional requirement of fiscal federalism.
Names of the taxes
- The GST to be levied by the Centre on intra-State supply of goods and / or services would be called the Central GST (CGST).
- The GST to be levied by the States would be called the State GST (SGST).
- Similarly Integrated GST (IGST) will be levied and administered by Centre on every inter-state supply of goods and services.
What are the benefits which the Country will accrue from GST?
- It will subsume / merge large number of central and state taxes into a single tax allowing set-off of prior-stage taxes.
- It would mitigate the ill effects of cascading and pave the way for a common national market.
- For the consumers, the biggest gain would be in terms of a reduction in the overall tax burden on goods, which is currently estimated at 25%-30%.
- Introduction of GST would also make our products competitive in the domestic and international markets.
- Studies show that this would instantly spur economic growth. There may also be revenue gain for the Centre and the States due to widening of the tax base, increase in trade volumes and improved 10 tax compliance.
- Last but not the least, this tax, because of its transparent character, would be easier to administer.
Who will decide rates for levy of GST?
- The CGST and SGST would be levied at rates to be jointly decided by the Centre and States. The rates would be notified on the recommendations of the GST Council.