G.S.T. ( Goods and services tax)

                                                           Goods and services tax

Arun Jaitley: System geared up for GST from July 1

NEW DELHI: The government has notified the implementation of the central goods and services tax (C-GST) from July 1, making it clear that the roll out of the new indirect tax regime is on course. “I don’t see much of a problem. Small issues will always arise whenever you make a change of any kind. But I’m sure the system is fully geared up and the system will eventually smoothen itself out,” finance minister Arun Jaitley said after a Cabinet meeting on Wednesday.

GST- 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 will be levied both on Goods and Services.This article is about Constitutional amendment act. For GST (tax), see Goods and Services Tax (India).

 Applied-
GST is a consumption based tax/levy. It is based on the “Destination principle.” GST is applied on goods and services at the place where final/actual consumption happens.
GST is collected on value-added goods and services at each stage of sale or purchase in the supply chain. GST paid on the procurement of goods and services can be set off against that payable on the supply of goods or services.The manufacturer or wholesaler or retailer will pay the applicable GST rate but will claim back through tax credit mechanism.

Let us understand the above supply chain of GST with an example:

                                   

Indian Government is opting for Dual System GST. This system will have two components which will be known as

Central Goods and Service Tax (CGST) and

State Goods and Service Tax (SGST).

Advantages-

Reduce the cascading effect of taxes on the final price of the product. Eliminate tax-on-tax effect. ...

Moderate prices and increase consumption.

Uniform and Stable Tax Regime. One-Country-One-Tax.

Simplify Tax Structure. ...

Increase GDP, tax-GDP ratio and revenue surplus.
Disadvantages-

Services will become expensive.e.g.Telecoms,banking,airline etc.

Being a new tax,it will take some time for the people to understand its implications.

It is easier said than done.There are always some complications attached. It is a consumption based tax,so in case of services the place where service is provided needs to be determined.

If actual benefit is not passed to consumer and seller increases his profit margin,the prices of goods can also see a rising trend.

However,GST is a long term strategy and the positive impact shall be seen in the long run only.This can happen if GST is introduced at a nominal rate (hope so)to reduce the overall tax burden of the final consumers.