Blog Details

Author : Associate Megha Motwani

Goods and Service Tax (GST) Bill was made intending to remove the lacuna in the administrative structure of indirect taxes. There are several types of indirect taxes collected in India such as service tax charged on services, excise duties on manufacturing of goods, customs duty on imported goods, etc. to avoid further complexity, the Government intends to combine all these types and impose a uniform indirect tax with the introduction of GST all over India. The bill aims to substitute taxes imposed by the Central and State governments. The tax thus is to be levied and duly collected at each stage of purchase or sale of goods or services based on the input tax credit method which allows businesses that are GST-registered to claim tax credit to the value of GST they paid on the purchase of goods or services as part of their regular commercial activity. These assessable goods and services are not differentiated from one another and are assessed at a uniform rate in a supply chain until they get to the consumer. A single authority would deal with the administration of the taxation of these commodities. Exports would be zero-rated, whereas imports would be levied the same taxes as domestic goods and services adhering to the destination principle. GST would bring about a colossal reform in be hassle-free due to the simplicity of the tax. The tax burden on goods which is presently assessed at 25%-30%, would decrease, thereby relieving the consumers of some burden.

The reason the bill was put forward:

The introduction of GST is a historic reform in the Indian taxation system. GST bill aims to alleviate the cascading effects of the complex tax system and promote the economic growth of the Nation. India has enacted this new proposal to project itself as a beneficial market to international investments.

Impact of the bill

• The tax regime in India was very complex. It got simplified after the implementation of GST.

• The two types of taxes which are levied are direct tax and indirect tax, and these indirect taxes are enormous in number and GST has done away with them.

• GST does not differentiate between goods and services. Thus, now the tax is applied to services as well in a similar manner.

• The mitigation of double taxation or the elimination of the cascading effect of taxation is one of the most important benefits.

GST has paved the way for a common national market with respect to the initiative. Post GST, the competitive level of Indian goods in international as well as in domestic markets has risen comparatively. Moreover, the overall tax burdens have a 25% to 30% marked reduction from the viewpoint of the consumer and it's also easier to administer GST on an overall scale, due to its self-policing and transparent nature. However, it has faced certain limitations also in various countries wherever it has come into force, and India too is not an exception. But it would surely be beneficial for the economic growth of our Nation in the long run.