GST is known as Goods and Service Tax. GST is an indirect tax levied on the supply of goods and services. GST is a tax that paid or bears by the customer on buying goods and services like food, clothes, items of daily need or transportation etc. firstly GST introduced or proposed by the Atal Bihari Vajpayee Government in 2000, but it is launched by the Prime Minister Narendra Modi on 1st July 2017. GST cannot be implemented in 2000 because of political issues now we can understand why the government does not implement this before because the previous tax system is indirectly beneficial for officers or other ministers of political parties but not for an individual of the country. Corruption in tax administration leads to Black Money. In India, every individual knows that a minister and business have less money in form of income but have more black money but no one raised their voice in this matter and became the part of this corrupted system of tax or illegal tax system. Here in my article, I will discuss about GST, what kind of tax it is, Role of GST in the development of economy, why the government launched GST etc.
In India, as we know corruption increases rapidly in tax administration. Corrupted officers and individuals increase but the government never takes any strict actions against these cases, because government officers included in this tax administration corruption. How an individual corrupts in tax administration. Many of us or people did not pay tax for saving of money and we done this through not taking the bill from shopkeepers and does not pay any tax. But after implementing GST, all the tax included in the price of the goods so indirectly an individual pay tax to the government.
Tax policies plays a vital role in the development of the economy of any country. A good policy is that which take care of income distribution and also generates tax revenues for Central and State Government. GST is Goods and Service Tax, in many countries, it is also known as Value Added Tax (VAT). GST is a tax paid by consumer goods and services. The concept of GST inaugurated in France in 1954. But now, it is almost implemented or launched in the world. There are three types of GST in India:
• Central Goods and Services Tax (CGST) – It is imposed by the Central Government.
• State Goods and Services Tax (SGST) or Union Territory Goods and Services Tax (UTGST) – It is imposed by the State Government or Union Territory.
• Integrated Goods and Services Tax (IGST) – It is that tax that is levied on the import or inter-state supply of goods and services or both.
INDIAN TAXATION SYSTEM: BEFORE GST
GST includes sales tax, service tax, excise tax or service tax. Before GST, the Indian Tax System is very complex. There are different taxes like sales tax, excise tax or service tax etc., this taxation system establishes a cascading effect which means double taxation or double counting of tax. It cascades from the manufacturing level to the consumption level. The previous system of tax implies that tax paid on the value of goods and every stage of production which helps leads to higher cost of goods and services. This taxation system also leads corruption. Opportunities for corruption in revenue affected by the demand from companies and individual’s corrupt action and supply by tax officials of corrupt acts.
In this system, a businessman and shopkeepers show fewer sales in their account by showing their bills because many of us did not take bill in order to save money or this whole amount goes to the shopkeeper not the government and because of this they have to pay less sales tax. The complexity of system increases corruption more and this leads to less revenue to the government.
For example – When tax auditor positions in a revenue administration are “sold” instead of being filed through the proper selection process, the taxpayer directly not involved but a taxpayer bribes a revenue administration employer or officer to expedite processing of a tax refund. Here, the taxpayer is directly involved. Around 900 government and public sector firm employees were sacked or dismiss from employment and 19,000 hand out other punishments in 2015 for corruption and misconduct.
WHY GOVERNMENT TOOK THIS STEP (GST)?
There was more corruption in the taxation administration of India and also increases the cascading effect in taxation. GST was brought in as revolutionary change and biggest tax system or service after independence. GST is a unified tax that is paid by consumers. After the implementation of GST now every person will pay tax because tax included in the prices of goods and we know the tax is not directly involved but indirectly involved. The main objective of incorporating the GST was to eliminate on tax or double tax. GST reduces the inflation in the economy for long run and the price of goods and services will be lower. It helps in the growth of country.
The total gross GST revenue collected in the month of May, 2019 was 1,00,289 crore and in April 2019 it was 1,13,685 crore. The collection of GST increases 6.67% higher in comparison to May 2018 because GST in May 2018 was 24,016 crore. GST eliminates cascading effect because the whole tax included in final goods and services at the time of sold to the final consumer. After GST, the Indian taxation system is no more complex. Under GST, small business (with a turnover of Rs. 20 lakh to 75 lakh) can get benefit of composition scheme, which compliance burden on many small and reduce the tax. GST has simple registration procedures and this procedure is made only and for start-up, they do not need to register under many taxes such as VAT, excise and service tax.
After GST, an unorganized sector like textile or construction industries etc. are regulated in it. The real Indian GDP expands by 4.2% and growth in international and domestic trade also increases. The internal trade improves 29%. Barriers is also reduced, GST allowed requirements for fewer warehouses across several states. The main objective and reason of GST is corruption on the level of manufacturing to consumption. The enforcement of GST in India has made tax administration more transparent and reduced corruption.
There are many measures undertaken by the authorities:
• Syncing of GST registration and PAN
• Reporting and matching at the invoice level
• Reconciliation of credits
• Generation of e-way bills
• Tracking of movement of Goods
• Appointment of GST Commissioner of Investigation
• Directorate General of Analytics and Risk Management.
Here, some points mentioned in this article why India taken this step. GST is needed for tax revenue of government. In my opinion, GST is better than the previous tax system. Corruption in tax administration cannot be easily removed but it can be reduced by this Act. If the implementation of this act becomes successful in India, then the economic growth will increase rapidly. There are some products on which GST not imposed and State can differentiate the price according to them. Still, the fact is many of among did not pay GST also and the government also not taking any strict action against it. That’s why Indian economy is backward.
This article is written by Nishu Singh of BALLB student of 2nd year in Jagannath Institute of Management Science.