Goods and Services Tax is an indirect tax which was introduced in India on 1 July 2017 and was applicable throughout India which replaced multiple cascading taxes levied by the central and state governments.
It was introduced as The Constitution (One Hundred and First Amendment) Act 2017,following the passage of Constitution 122nd Amendment Bill. The GST is governed by a GST Council and its Chairman is the Finance Minister of India. Under GST, goods and services are taxed at the following rates, 0%, 5%, 12% ,18% and 28%.There is a special rate of 0.25% on rough precious and semi-precious stones and 3% on gold.In addition a cess of 15% or other rates on top of 28% GST applies on few items like aerated drinks, luxury cars and tobacco products.GST was initially proposed to replace a slew of indirect taxes with a unified tax and was therefore set to dramatically reshape the country's 2 trillion dollar economy.The rate of GST in India is between double to four times that levied in other countries like Singapore.
Advantages of GST
The Goods & Service Tax or GST is one of the biggest fiscal reforms in India since Independence. All businesses, small or large, will be impacted by this new indirect tax regime. GST will be levied on both goods and services and will subsume and replace the current indirect taxes such as excise, VAT, and service tax.
Removing cascading tax effect:
An important benefit of the introduction of GST will be the removal of the cascading tax effect. In simple words, “cascading tax effect” means a tax on tax. Under the current regime, the service tax paid on input services cannot be set off against output VAT. Under GST, the input tax credit can be availed smoothly across the spectrum of goods and services, thus reducing the tax burden on the end user and removing cascading effect.
Higher threshold for registration:
As per the current VAT structure, any business with a turnover of more than Rs. 5 lakh (in most states) is liable to pay VAT (different rates in different states). Similarly, for service tax, service providers with turnover less than Rs. 10 lakhs are exempted. Under GST this threshold has been increased to Rs. 20 lakhs thus exempting many small traders and service providers.
Ease of business:
GST can bring one country one tax concept. This can avoid unhealthy competition among states. It will be useful to do interstate business.