GST : Need of Present

The GST regime is proposed to avoid the cascading effect of taxes in India on goods and services and to simplify the present indirect tax system.

At present the two taxes that operate at Central level are the Central Excise and the service tax, both having a single rate as well as a collecting machinery The harmonization of these two taxes would remove the duality of goods and services at Federal level.

In proposed GST, the supply of goods and services will be treated as a taxable event and there will be concurrent imposition of CGST (Central Excise, Service tax etc) and SGST (Sales tax/Vat etc) on each such event.

The GST to be implemented will subsume the taxes such as Central Excise service tax CVD, SAD, Vat/ Sales tax, CST, Entry tax not in lieu of octroi, entertainment tax ( not collected by local bodies ), luxury tax, taxes on lottery, betting, gambling, as well as cesses and subcharges collected by Central and the States respectively. GST will be dual in nature and to be levied by both levels i.e. Central and State concurrently. The Central GST and the State GST would be applicable to all transactions of goods and services except the exempted goods and services. Goods which are outside the purview of GST and the transactions which are below the prescribed threshold limit. Taxes paid against Central GST shall be allowed to be taken as input tax credit for CGST  and could be utilized only against the payment of CGST. The same principle will be applicable for the State GST.

If we simplify the term GST, it is nothing but a tax on goods and services. GST is a tax on goods and services with comprehensive and continuous chain of set off benefits from the producerís point and service providerís point upto the retailerís level. In short, GST is charged by the last dealer and beared by the final consumer in the supply chain with set off benefits at all the previous stages.

More than 140 countries have introduced GST. France was the first country which introduced a comprehensive goods and service tax regime in 1954. The different rate of GST is prevailing in different countries. In Australia, the GST is @ 10% , in Singapore the rate of tax is 7%.In India, it has been decided to adopt a two rate structure, a lower rate for necessary items and items of basic importance and a standard rate for goods in general, a special rate for precious metals and a list of exempted items. No decision has yet been taken on the CGST and SGST rates, it will be known to us only after the appropriate legislative actions.

The new regime of GST will provide us a comparatively more transparent system through market mechanism. It will be a major blow for the underground economy. Hence, it is necessary to make an integral part of proposed GST, the reform of the present system of taxation of immovable property, transaction and real estate services. It will certainly reduce the tax burden on consumers.

The GST would entail remarkable changes for both Government and business/ economy and is set to become one of the Countryís biggest tax reforms forever.