Goods and Services Tax (GST) – One Nation One Tax System

Introduction

Implementation of Goods and Services Tax (GST) is a very important step in the field of indirect tax reforms in India. By consolidating a large number of taxes into a single tax, GST will remove the cascading effect. GST is set to get implemented on 1st July 2017. It is destination- based tax that is levied on consumption of goods and services. Introduction of GST has a boosting impact on the Indian economy. The burden of paying the tax is borne by ultimate consumer. It is levied at each point of supply. The power to levy tax is derived from the constitution of India (Article 246) which states the provisions related to levy of taxes between central and state. This type of taxation system is prevalent in more than 140 countries across the world. GST was first implemented by France in 1954.

Various Countries follow different model of GST based upon their legislative requirements. By considering the federal nature of Indian constitution, dual model of GST was widely accepted where power to levy tax is upon the Centre as well as state. Brazil and Canada also follows the Dual GST Model.

GST Council

It is the main controlling body that has been formed to decide the comprehensive structure of GST. The GST Council comprises of Union Finance, is the Chairman of the Council, the Minister of State (revenue) and the State Finance Ministers. The duty of this council is to give directions to the Union and State.

Liability under Goods and Services Tax:

The liability to pay tax arises when any person exceeds the annual turnover threshold of Rs. 20 Lakhs. (Rs. 10 Lakhs for North Eastern & Special Category States*).  A Composition Scheme, which is formulated for small taxpayers, provides concessional rate of tax. To be entitled for registration under this scheme it is required that the aggregate turnover of a registered tax payer should not exceed Rs. 75, 00,000/- in preceding financial year. (The Limit is Rs. 50, 00,000/- for North Eastern & Special Category States).

*North Eastern and Special Category States are Assam, Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Tripura, Sikkim, and Himachal Pradesh.

Salient feature of Goods and Services Tax (GST) –

1. It is comprehensive destination based indirect tax levy of goods as well as services at the national level.
2. CGST, SGST & IGST would be levied at the rates to be collectively agreed upon by the Centre and the States. Such rates would be announced on the recommendation of the GST council.
3. The essence of GST is in removing the Cascading effects of Central and States taxes or Double taxation on goods and services.
4. It is levied on goods and services imposed at each point of supply.
5. It subsumes array of multiple indirect taxes into one single tax. Thus, promoting efficiency in Tax administration.
6. It is national level tax based on value added principle.
7. It is the most elegant method to eliminate distortions and to tax consumption.
8. There is sharing of GST by the Centre and the state at 50:50 ratio.
9. The Taxpayer is required to submit periodical returns to both Central and State Authorities at prescribed dates.