GST (Goods and Services Tax) is a system of single taxation that was proposed to be indirect taxation merged with most of the taxes existing into single system of taxation. The act was introduced by The Constitution Act 2016. The said act came into force from 1 July 2017.
Goods and Services Tax is a system of comprehensive tax indirect in nature on sale, manufacture, as well as on consumption of goods and services within India. This will replace the existing system of taxes levied by the state governments and central government. Goods and Services Tax act has been levied and to be collected at each phase of purchase or sale of services or goods based on the credit of input tax method. This system will allow GST-registered business to claim input tax credit to the amount of GST they paid on buying of services or goods as part of their commercial activity.
Taxable services and goods are not clearly distinguished and will be taxed at a unique rate in a chain of supply till the services or goods reach the consumer. Responsibility of administration has been resting with a single authority to levy tax on services and goods. Exports of zero-rated and imports would be levied the same rates of taxes as domestic services and goods adhering to the destination principle.
The overview of Goods and Services Tax (GST)
The overview of Goods and Services Tax (GST) would be an important step in the improvement of indirect assessment in India. Combining of several State taxes and Central tax into a system of single tax is the primary motive of this tax system. This would mitigate the effect of cascading or double taxation that will be facilitating the common national market. Simplicity of this single system of tax should lead to easier enforcement and administration.
From the consumer point of view, the biggest advantage would be in terms of introduction of Goods and Services Tax (GST) would be a significant step in the reform of indirect taxation in India. Amalgamating and merger of several Central and State taxes into a scheme of single tax would definitely mitigate cascading or double taxation of services as well as goods from a state to another state without even getting stopped at state borders in order to wait for hours to make payment of entry tax or state tax and reduction in form-filling to a large extent.
What changes would be there with launching ofGST
You might be thinking what changes would be there with launching of GST? Here is the answer. The rate of tax under GST may be zero rated or nominal for the time being on things of basic necessity. This is to insulate the revenue of the State with the impact of GST, with the anticipation that in due sequence, GST has been charged on even on gas and petroleum products. The central government further assured various states of compensation for any losses of revenue incurred by them from the introduction of GST till a period of next five years. As the country India is a GST federal republic that would be implemented parallel by the state governments and central government.