GST is a unified tax system that would eliminate multiple tax systems across the state and create a level playing field for businesses across the country, as in developed countries. It is a multi-level destination-based tax that will be collected at every stage from raw material collection to final product sales. Tax credits paid in the previous stage will be available for set-off in the next stage of supply. Being destination or consumption based, GST will eliminate multiple taxes levied by central and state governments such as central excise, service tax, VAT, central sales tax, excise, entry tax, luxury tax and entertainment tax. The industry will benefit from the overall tax burden on consumers and better cash flow and efficient capital management. Currently, 17 state and central tariffs are being levied on goods when moving from one state to another
Various estimates give the net advantage of total domestic products, up to two percentage points. The GST system is expected to result in better tax compliance, which will increase its revenue and narrow the budget deficit. All imported goods will be charged Integrated Goods and Services Tax (IGST) which is equivalent to Central GST + State GST. This will bring equality in taxation on domestic products.
Basically, the GST regime will have three types of taxes: Central Goods and Services Tax (CGST), State (or Union Territory) Goods and Services Tax (SGST) and Integrated Goods and Services Tax (IGST). The taxes levied by the Center on the inter-state supply of goods or services will be called CGST and the taxes levied by the States and Union Territories (UTs) will be called SGST respectively. The The Center will assign and procure IGST on inter-state supply of goods and services. The four supplementary laws approving the tax, namely the Central GST Bill, the Integrated GST Bill, the GST (Reimbursement of States) Bill and the Union GST Bill, were passed in the Lok Sabha in May this year, with effect from 1.St. The July, 2017 deadline is a reality.
All matters relating to GST are dealt with by the GST Council headed by the Union Finance Minister while all the Finance Ministers of the States become its members. There is also a provision for judging disputes arising out of the GST Council’s recommendation or its implementation.
The GST Council has defined four broad tax slabs under the new GST system – 5 per cent, 12 per cent, 18 per cent and 28 per cent. Above the top slab, there is a cess on luxury and unsuccessful products to compensate the states for revenue loss in the first five years of GST implementation. Most products and services are listed under four slabs, but a few, like gold and rough diamonds, have exclusive tax rates. Also, some items have been exempted from tax. Necessary items are kept in the minimum tax bracket, where luxury goods and tobacco products will invite higher taxes.
17 years long wait
Many countries in the world have moved to a unified tax system very soon. France was the first country to do so in 1954 and many followed, some applying GST and others using different forms of value added tax (VAT). In India, discussions on GST began in 2000, in the NDA government led by former Prime Minister Atal Bihari Vajpayee. Finally after 17 years the consensus averaged 101St. The Constitution Amendment Bill was passed by Parliament in 2016. States feared a reduction in their revenues and wanted to keep some lucrative products out of the GST basket, among other things, such as wine, petroleum and real estate.
Impact on consumers
From incense sticks to luxury cars – all of these products will be taxed under different slabs. Cinema tickets costing less than Rs 100 are kept in 18% GST slab whereas more than Rs 100 will be taxed at 28% under GST. Tobacco products are subject to higher taxes. Industries like textiles and gems and jewelery are subject to 5% GST rate
The government has shown its determination and stuck to implementing GST from 1St. July, 2017. The road ahead will require a lot of commitment from implementing agencies such as goods and services networks, states and industries. To navigate through the initial hiccups and successfully navigate the economy, the government must show the same determination and courage. Bold initiatives like GST for the welfare of the country will surely lead to a great success.