Merger of taxes to improve compliance

Merger of taxes to improve compliance

What is GST?

The goods and services tax ( GST) will be a comprehensive nationwide indirect tax on manufacture, sale and consumption of goods and services. The aim is to make India a unified common market. GST will be levied and collected at each stage of sale or purchase of goods or services.

How will it work?

Credits of input taxes paid at each stage will be available in the subsequent stage of value addition, making it essentially a tax only on value addition at each stage. The final consumer will bear only the GST charged by the last dealer in the supply chain. At the central level, central excise duty, additional excise duty, service tax, countervailing duty and special additional duty of Customs will be subsumed. At the state value- added tax/ sales tax, entertainment tax, central sales tax, octroi and entry tax, purchase tax, luxury tax and taxes on lottery, betting and gambling will be subsumed.

How will GST be beneficial?

The indirect tax reform will amalgamate several central and state taxes and mitigate cascading or double taxation. The tax burden on inter- state logistics will be cheaper. Compliance will be easy and there will be uniformity of tax rates for industry. For governments, GST is expected to lead to easier administration and enforcement.

When will it be implemented?

If the Bill is passed in the monsoon session, GST will not be in force before April 1, 2017.

How would GST be administered?

There will be two components – Central GST and State GST. Both Centre and states will simultaneously levy GST across the value chain. Tax will be levied on every supply of goods and services. No cross- utilisation of credit would be permitted.

Business Standard New Delhi,04th August 2016