What is GST?
GST stands for Goods and Services Tax which is concurrent levy of taxes on "Supply" of goods and services. GST in India will be dual system, where the Central and State together will levy tax on supply of goods and / or services, within the State (Intra-State) and Inter-State.
Why GST?
The current indirect tax system with multiplicity of taxes (Central levy-excise duty, service tax , various Cess and State Levies:- VAT, Entry Tax, Octroi, Luxury Tax, Entertainment taxes, purchase tax etx.) - at different rates - at multiple points at the time of manufacture, trade, rendering services etx. This has led to several ineficiencies and limitation. One of the major limitation is the cascading effect of tax. Under the current regime, excise charged by the manufacturer on billing to a dealer, the credit of input cannot be claimed by a dealer, and thus forming part of cost to dealer which leads to cascading of tax.
Under GST the credit utilization will be available across the supply chain till it reaches the end consumer. Secondly, tax on tax is eliminated. Example:- under the current tax regime, VAT is charged on the assessable value plus on excise duty.
GST stands for Goods and Services Tax which is concurrent levy of taxes on "Supply" of goods and services. GST in India will be dual system, where the Central and State together will levy tax on supply of goods and / or services, within the State (Intra-State) and Inter-State.
Why GST?
The current indirect tax system with multiplicity of taxes (Central levy-excise duty, service tax , various Cess and State Levies:- VAT, Entry Tax, Octroi, Luxury Tax, Entertainment taxes, purchase tax etx.) - at different rates - at multiple points at the time of manufacture, trade, rendering services etx. This has led to several ineficiencies and limitation. One of the major limitation is the cascading effect of tax. Under the current regime, excise charged by the manufacturer on billing to a dealer, the credit of input cannot be claimed by a dealer, and thus forming part of cost to dealer which leads to cascading of tax.
Under GST the credit utilization will be available across the supply chain till it reaches the end consumer. Secondly, tax on tax is eliminated. Example:- under the current tax regime, VAT is charged on the assessable value plus on excise duty.
- Simpler tax structure: As multiple taxes on a goods or service are eliminated and a single tax comes into place, the tax structure is expected to be uch simpler and easier to understand and administer.
- Eliminates cascading effect of taxes: One of the key feature of GST is seamless availability of input credit set-off mechanism. This helps in eliminating the cascading effect and benefit is passed on to consumer.
- Increased Revenue: a simpler tax structure can bring about greter compliance, thus increasing the number of tax payers and in turn tax revenues for the Government.
- Technology Driven System: GST compliance is going to be transaction based and with cross matching concept, where, outward supply and inward supply will be matched to determine the net tax liability for a given dealer. Millions of dealers and Billions of transaction need to be processed and 'Technology' will play a pivotal role in the successful implementation and administration of compliance.
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