What is the Goods and Services Tax (GST) ?
- The GST is levied both on goods (manufacturing) and services.
- A single, comprehensive tax that subsume all the other smaller indirect taxes on consumption like service tax, etc.
Structure of GST :-
- It have a dual structure, a Central component levied and collected by the Centre and a state component administered by states.
- At the Central level, it subsume Central excise duty, service tax and additional customs duties.
- At the state level, it subsume value-added tax(VAT), entertainment tax, luxury tax, lottery taxes and electricity duty.
- The central government have the exclusive power to levy and collect GST in the course of Interstate trade or commerce, or imports. This is known as Integrated GST(IGST).
Interstate trade means business, movement of goods or money, or transportation from one state to another.
- Tobacco and tobacco products are subject to GST. The centre may also impose excise duty on tobacco.
Which products are exempted from the purview of GST ?
- Alcohol for human consumption has been exempted.
Initially, GST will not apply to :-
- Petroleum crude
- High speed diesel
- Motor spirit (petrol)
- Natural gas
- Aviation turbine fuel(ATF)
The GST Council will decide when GST will be levied on them.
GST Council Body :-
The GST Council consist of :–
- Union Finance Minister (as Chairman)
- Union Minister of State in charge of Revenue or Finance.
- Minister in charge of Finance or any other Minister, nominated by each state government.
GST Council make recommendations on :–
- Taxes, cesses, and surcharges to be subsumed under the GST
- Goods and services which may be subject to, or exempt from GST
- The threshold limit of turnover for application of GST
- Rates of GST
- Model GST laws, principles of levy, apportionment of IGST and principles related to place of supply.
The GST Council may decide the mechanism for resolving disputes arising out of its recommendations.
What are the advantages of GST ?
- It speeds up economic growth of India, as it will add about 1% to India’s GDP growth.
- Replacing the cascading effect created by existing indirect taxes.
- Uniformity in tax regime with only one or two tax rates across the supply chain as against multiple tax structure as of present.
- Improvement in cost competitiveness of goods and services in the international market.
- Composition Schemes for Small businesses.
- Online Simpler Procedure under GST.
- Defined treatment for e-commerce.
- Regulating the unorganized sector.
What are the components of GST?
There are 3 taxes applicable under GST:
- CGST: Collected by the Central Government on an intra-state sale (Eg: Within Maharashtra)
- SGST: Collected by the State Government on an intra-state sale (Eg: Within Mahaashtra)
- IGST: Collected by the Central Government for inter-state sale (Eg: Maharashtra to Tamil Nadu)
Let’s look at the highlights of Constitution (122nd Amendment), GST Bill, 2014 :-
- The Bill amends the Constitution to introduce the goods and services tax (GST).
- Parliament and state legislatures will have concurrent powers to make laws on GST.
- The Bill empowers the centre to impose an additional tax of up to 1%, on the inter-state supply of goods for two years or more. This tax will accrue to states from where the supply originates.
- Parliament may, by law, provide compensation to states for any loss of revenue from the introduction of GST, up to a five year period.