GST tax rate The Goods and Services Tax bill, touted to be India's biggest tax reform, will simplify the current system of taxation. The bill will convert the country into a unified market by replacing all indirect taxes with one tax. The current tax regime is riddled with indirect taxes which the GST aims to subsume with a single comprehensive tax, bringing it all under a single umbrella. The bill aims to eliminate the cascading effect of taxes on production and distribution prices on goods and services.
Goods and Services tax It has been long pending issue to streamline all the different types of indirect taxes and implement a “single taxation� system. This system is called as GST ( GST is the abbreviated form of Goods & Services Tax). The main expectation from this system is to abolish all indirect taxes and only GST would be levied. As the name suggests, the GST tax will be levied both on Goods and Services.
What is the cascading effect of taxation? Cascading effect of taxes is caused due to levy of different charges by state and union governments separately. In the current multi-staged tax-structure, the following taxes are levied by the centre and state separately: Taxes levied by the Centre include: Income tax, service tax, central sales tax, excise duty and security transaction tax.
Service Tax
Implications of GST GST will have a far-reaching impact on almost all the aspects of the business operations in the country, for instance, pricing of products and services, supply chain optimization, IT, accounting, and tax compliance systems . With GST rate, it is anticipated that the tax base will be comprehensive, as virtually all goods and services will be taxable, with minimum exemptions. This tax structure raises the tax-burden on Indian products, affecting their prices, and as a result, sales in the international market. The new tax regime will therefore, help boost exports.
How Will GST Work? • In India, GST would work on dual model which will include C-GST collected by Central Government + S-GST collected by State Government on intra-state sales. GST registration reform would also feature an Integrated GST (IGST) collected by Central government on inter-state sales, which is to-be divided between Central and States Government in a manner decided by the Parliament on recommendations by GST Council. • By doing away with several Central and State Taxes, GST would diminish the cascading effect of tax (or double taxation, whereby the same product is taxed at the stage of manufacturing as excise, then as VAT/ sales tax on sale and so on..) which is prevalent in the current tax framework. Being a consumption-destination-based tax, GST tax rate would be levied and collected at each stage of sale or purchase of goods or services based on the existing input tax credit method. Current tax structure works on production-origin-based system i.e. goods and services are taxed differently on each stage of production.
Challenges for implementing Goods and Services Tax system • The bill is yet to be tabled and passed in the Parliament • To implement the bill (if cleared by the Parliament) there has to be lot changes at administration level, Information Technology integration has to happen, sound IT infrastructure is needed, the state governments has to be compensated for the loss of revenues (if any) and many more.. • GST, being a consumption-based tax, states with higher consumption of goods and services will have better revenues. So, the co-operation from state governments would be one of the key factors for the successful implications of gst
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