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What is Goods and Service Tax (GST)

  • GST is a destination based tax levied on supply of goods and services
  • Proposed Dual GST in India is to be levied concurrently by states and central government on a common tax base
  • It will be levied on all stages of the supply chain till the final sale to consumers, providing ITC benefits on the basis of invoices issued at the previous stage of the supply chain

Definitions

  • CGST stands for Central Goods and Service Tax and SGST stands for State Goods and Service Tax both shall be on Intra – State supplies of goods or services in India
  • IGST stands for Integrated Goods and Service Tax shall be on Inter State supplies of goods or services in India‐ levied and collected by the Centre. (IGST shall be sum of CSGT and SGST)

Destination Based Consumption Tax

  • Destination based consumption tax means that state and central taxes levied at different stages of the supply chain will be totally shifted to the final destination, consumers, and the destination state will get the full SGST paid by its residents
  • Exports are zero rated
  • If credit of IGST levied on interstate movement of goods is set off against state GST by dealers in the consuming states, such credited IGST will be refunded to the consuming states
  • Similarly if SGST credit is utilized for payment of IGST, the concerned state which has collected the SGST should remit such credit to IGST account managed by Central Government.

Design of the Proposed GST

  • Center and States will levy CGST and SGST on the same tax base
  • CGST will replace all central indirect taxes ( Excise duty and Service Tax) on domestic goods/services excepting excise duty on tobacco products, motor fuels, and luxury goods
  • SGST is likely to replace the following state taxes: sales tax/VAT; entertainment taxes; entry tax; luxury tax; purchase tax; taxes on lottery, betting and gambling; cesses and surcharges
  • IGST to be levied on inter‐state supply
  • IGST will be levied on imports

Advantages of GST

Government:

  • Consolidation of multiple Centre & State taxes
  • Increased tax collection on wider tax base
  • Improved tax GDP ratio –revenue aligned to the economy
  • Better and effective administration

Business:

  • Ease of compliance
  • Reduction in effective tax rate on goods & services
  • Reduction in cascading effect of tax
  • Efficient deployment of resources

Consumer:

  • Reduction in incidence of tax on goods / services
  • Reduce double taxation

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