Understanding the Mechanics of Goods & Service Tax

The Goods and Services Tax (GST) is a comprehensive value added tax (VAT) on the supply of goods or services. It is levied and collected on value addition at each stage on sale or purchase of goods or supply of services based on input tax credit method but without state boundaries. There is no distinction between goods or services and they are taxed at a single rate in a supply chain of goods and services till the goods or services reach the ultimate consumer. Its main objective is to combine all indirect tax levies into a single tax thereby replacing multiple tax levies, overcoming the limitation of current indirect tax structure and creating efficiencies in tax administration. GST is levied at every stage of production-distribution chain. It will facilitate seamless credit flowing across the entire supply chain and across all States under a common tax base. Salient features of the proposed model are as follows: 1. DUAL GOODS AND SERVICE TAX The GST shall have two components: one levied by the Centre (hereinafter referred to as Central GST), and the other levied by the States (hereinafter referred to as State GST). Rates for Central GST and State GST would be prescribed appropriately, reflecting revenue considerations and acceptability. This dual GST model would be implemented through multiple statutes (one for CGST and SGST statute for every State). 2. APPLICABILITY OF GST TO ALL TRANSACTIONS The Central GST and the State GST would be applicable to all transactions of goods and services made for a consideration except the exempted goods and services, goods which are outside the purview of GST and... read more

Know about Goods and Services Tax- Latest News

What is the GST? GST or the Goods and Services Tax is an indirect tax that brings together most of the taxes that are imposed on all goods and services (except a few) under a single banner. This is in contrast to the current system, where taxes are levied separately on goods and services. The GST, however, is a comprehensive form of tax based on a uniform rate of tax for both goods and services. However, the GST is payable only at the final point of consumption. How will it work in India? The GST was first mentioned in India during the 2006-2007 budget and the latest budget too includes the need to take steps to make the implementation possible by April 1, 2010. Given the federal nature of the country, GST in India is expected to take the form of a dual GST including both a Central and a state GST. The Empowered Committee of the State Finance Ministers has been given the responsibility for creating a model and a roadmap for the GST. While there is very little clarity at present, it is expected that the central GST will subsume excise duty and service tax and the state GST may replace the VAT. What are the benefits of the GST? At the simplest level, the GST reduces the number of instances where taxes need to be paid thus reducing the possibility of manipulation on the part of tax authorities and is hence assumed to be a much transparent mode of administering taxes. It will alleviate the burden of cascading taxes for individuals. It is also expected to... read more

GST in the news

Industry body Assocham on Monday came out with a set of recommendations on the proposed Goods and Services Tax (GST), saying the rollout may lead to around 1 percent rise in India’s GDP growth. Goods & Services Tax (GST) will be a game changer for the Indian economy. The new tax regime can lead to efficient resource allocation within the economy, improve tax compliance and positively impact GDP growth. “More importantly, the projected boost to the manufacturing sector will make the proposed taxes a critical enabler to actualise benefits from ‘Make in India’ initiatives,” Assocham President Rana Kapoor said. The short-term recommendations include formulation of a clear and unambiguous definition of goods & services, a revenue Neutral Rate (RNR) suitably determined to rationalise tax burden and evolving a consensus on threshold limit for GST application to protect small businesses. “The implementation of GST would lead to a simplified tax regime and easier compliance norms. This is projected to increase GDP annually by 0.9-1.7 percent with an accompanying increase in tax revenues of around 0.2 percent of GDP”. “Twenty percent reduction in logistics costs of non-bulk goods is expected due to a rationalised tax framework. This would make domestic production of goods and services more cost effective with ensuing 3.2-6.3 percent annual gains in exports,” Kapoor said. The chamber also recommended formulation of clear ‘Place of Supply’ rules to avoid ambiguity in tax administration and a mechanism to compensate states for potential revenue loss from GST rollout without major distortion of its structure,... read more
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