New system of taxation of goods and services – GST

A new indirect tax, the Goods and Service Tax (GST) is a multi-stage, comprehensive tax act introduced to replace various indirect taxes that was collected at the federal level and by individual states of the Confederation. To put it in simple words, an indirect tax imposed on the supply of goods and service in the county. Though the act was passed in the Lok Sabha and Rajya Sabha on 29th March 2017, it was originally formulated in the year 2000.

The Goods and Service Tax (GST) will be imposed every time a transaction (sale) takes place and it consists of three components:

• SGST- Accrued by the State Government when an intra-state trade occurred (Within a particular state).
• CGST- Accrued by the Central Government when an intra-state trade occurred (Within a particular state).
• IGST- Accrued by the Central Government when an inter-state trade occurred (Between two states).

Why GST?

• The tax system that existed prior to GST was not very functional and penalized the productive specialization of cumulative non-deductible tax systems that affect every passage of goods and services from one person to another.
• Companies that sell or produce in India to save on tax burdens were forced to perform complex calculations.

In order to simplify this multilayered system, the Indian Government had to define a new system of co-participation in revenue between the federal state and individual states that had created long and heated debate that lasted for four years but not yet definitively resolved.

Highlights of the Success of GST:

• The new tax rolled out has bumped up the revenue significantly (from INR 83,000 crore in October to INR 86700 in December).
• Several surveys have estimated that the implementation of GST has inflated the indirect taxpayers base by nearly fifty percent and also an enormous increase was witness in the voluntary registrations.
• By embracing the Goods and Service Tax (GST), the Indian economy is expected to rise at 7-7.5 percent by 2019.
• Economic surveys have confirmed that with the advent of GST and demonetization in the country, the taxpayers base has increased significantly to tenfold ( 31 % greater ). Also this has also resulted in the augmented the household savings.

At present it seems likely that, each State may define different levels for its GST component, we had discussed earlier - we are talking about two GST - the one at the central (Federal) or CGST level, the one at the state level (SGST).

What has to be revised in the Goods and Service Tax?

Although the new tax system has brought a lot of advantages for the economy, some aspects of it are still making it difficult for the citizens to accept it completely. The Indian citizens are currently expecting the Indian government to stabilize the goods service tax implementation especially on sectors like exports for the betterment of the country. Moreover they also expect the GST council to reform the rates for small-scale sectors and household goods.